Document:

exv10w4

Exhibit 10.4

Execution Copy

LEASE AGREEMENT

(WITH OPTION TO PURCHASE)

     This Lease Agreement (“Lease”) is made and entered into as of the 14th day of July 2010 (the
“Effective Date”), by and between A.B.E., LLC, a West Virginia limited liability company (herein
called the “Lessor”), and DIVERSICARE ROSE TERRACE, LLC, a Delaware limited liability company
(herein called the “Lessee”).

RECITALS

     WHEREAS, Lessor owns certain real property located in Milton, Cabell County, West Virginia, as
more particularly described on Exhibit A attached hereto (the “Land”); and

     WHEREAS, Lessor and Lessee have agreed to construct, furnish, and equip certain improvements
on the Land so as to qualify the improvements for licensure by the West Virginia Department of
Health (“WVDH”) as a fully licensed skilled nursing facility having ninety (90) licensed beds (the
“Facility”); and

     WHEREAS, upon completion of the Facility, Lessor desires to lease the hereinafter described
Leased Property to Lessee, and Lessee desires to lease the same from Lessor, upon the terms,
covenants and conditions hereinafter set forth.

     NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the
parties to this Lease hereby covenant and agree as follows:

ARTICLE 1

     1.1 Lease and Leased Property. Upon and subject to the covenants, stipulations, terms and
conditions hereinafter set forth, Lessor hereby leases, demises and lets to Lessee, and Lessee
hereby leases, rents and hires from Lessor, for the Term hereof (beginning on the Commencement Date
as more particularly set forth herein) the following described property (collectively, the “Leased
Property”):

          1.1.1 the real property more particularly described in Exhibit A attached hereto and
made a part hereof together with all easements, rights, hereditaments and appurtenances thereto
belonging or otherwise benefitting such real property (the “Land”);

          1.1.2 the Facility (as hereinafter defined), and all structures, Fixtures (as hereinafter
defined) and other improvements of every kind now or hereafter situated on the Land including, but
not limited to, alleyways, crosswalks, sidewalks, utility pipes, conduits and lines (on-site and
off-site), drainage and all above-ground and underground utility structures, drives, parking areas
and roadways appurtenant to such improvements (collectively, the “Leased Improvements”);

          1.1.3 to the extent owned and installed in the Leased Improvements by Lessor, all permanently
affixed equipment, machinery, fixtures, and other items of real and/or personal property, so
permanently affixed or attached to or incorporated into the Land or Leased Improvements such that
an interest in them arises under applicable real estate law and the same are deemed to be fixtures
and accessions to the land and a part thereof, including all components thereof, now and hereafter
located in, on or used in connection with, and permanently affixed to or incorporated into the Land
or Leased Improvements, including, without limitation, all furnaces, boilers, heaters, electrical
equipment, heating,

 

 

plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and apparatus (other than individual
units), sprinkler systems and fire and theft protection equipment, and built-in oxygen and vacuum
systems, together with all replacements, modifications, alterations and additions thereto
(collectively, the “Fixtures”), but specifically excluding all items included within the category
of Lessee’s Personal Property as defined below;

          1.1.4 to the extent owned and installed in the Leased Improvements by Lessor, all equipment,
machinery, furnishings, furniture, trade fixtures, appliances and other items of personal property
(excluding consumable inventory and supplies), and all components thereof, now or hereafter
installed on the Land by Lessor and used, maintained or operated in connection with the Leased
Improvements and specifically including the Facility FF&E defined herein (collectively, “Lessor’s
Personal Property”), but specifically excluding all items included within the category of “Lessee’s
Personal Property”; and

          1.1.5 to the extent permitted by law, all permits, approvals and other intangible property or
any interest therein now or hereafter owned or held by Lessor in connection with the Leased
Property or the use thereof or any business or businesses now or hereafter conducted by Lessee
therefrom, including all licenses, permits, contract rights, agreements, water rights and
reservations, zoning rights, business licenses and warranties (including those relating to
construction or fabrication) related to the Leased Property, or any part thereof, specifically
including the right to the use of (and Lessor hereby grants to Lessee the exclusive right to the
use of) the name Rose Terrace Health and Rehabilitation Center and any derivatives thereof
(collectively, “Permits and General Intangibles”).

     1.2 Definitions. For all purposes of this Lease, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with generally accepted
accounting principles as at the time applicable, consistently applied, (iii) all references in this
Lease to designated “Articles”, “Sections” and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease and (iv) the words “herein”, “hereof” and “hereunder”
and other words of similar import refer to this Lease as a whole and not to any particular Article,
Section or other subdivision. For purposes of this Lease, the following terms shall have the
meanings indicated:

     Affiliate: When used with respect to any corporation or partnership, the term
“Affiliate” shall mean any person which, directly or indirectly, controls or is controlled by or is
under common control with such corporation or partnership. For the purposes of this definition,
“control” (including the correlative meanings of the terms “controlled by” and “under common
control with”), as used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
person, through the ownership of voting shares, partnership interests or other equity interests.
The term “person” shall mean any natural person, trust, partnership, corporation, joint venture or
other legal entity.

     Architect: Jones & Jones Associates Architects PC, 6120 Peters Creek Road, Roanoke,
VA 24019.

     Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day
on which federally chartered banks located in the State of West Virginia, are authorized, or
obligated, by law or executive order, to close.

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     Citation: Any operational or physical plant deficiency set forth in writing with
respect to the Facility by any governmental body or agency, or Medicaid or Medicare intermediary,
having regulatory oversight over the Facility, with respect to which the scope and severity of the
penalty for such deficiency, if not cured, is one or more of the following: Loss of licensure or
certification of need, decertification of the Facility from participation in the Medicare and/or
Medicaid programs, appointments of a temporary manager or denial of payment for new admissions.

     Commencement Date: As defined in Section 2.1 hereof.

     Completion Date: The date on which the construction of the Improvements has been
substantially completed such that Lessor has received the following: (i) a Certificate of
Substantial Completion from the Architect, and (ii) a certificate of occupancy or its equivalent
issued by the appropriate Governmental Authority having jurisdiction over the Leased Property which
permits the occupancy of the Improvements for its Primary Intended Use. For purposes of this
Lease, “substantially completed” shall mean that the Improvements and other work which Developer is
obligated to perform hereunder have been completed in accordance with the Plans, notwithstanding
the fact that Punch List Items remain to be performed.

     Construction Contracts: The contracts between Lessor and its General Contractor or
any other contractor (including subcontractors) relating to rendering of services or furnishing of
materials in connection with the construction of the Improvements, contracts between the General
Contractor and any subcontractor and contracts between any of the foregoing and any other person
relating to rendering of services or furnishing of materials in connection with construction of the
Improvements.

     CPI: The United States Department of Labor, Bureau of Labor Statistics Revised
Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average, All Items, if that
index is not available at the time in question, the index designated by such Department as the
successor to such index, and if there is no index so designated, an index for an area in the United
States that most closely corresponds to the entire United States, published by such Department, or
if none, by any other instrumentality of the United States, calculated in this Lease as the CPI
attributable to the month three (3) months prior to the applicable date herein.

     Declaration: The Declaration of Easements and Restrictions to be made and executed by
A.B.E. LLC (“ABE”) and the New Entity described in Sec. 1.3 hereof imposing certain easements and
restrictions upon the property of ABE adjacent to the Land for the use and benefit of the Lessee
and any future owners and occupants of the Land in the form attached hereto as Exhibit F
and incorporated herein by this reference.

     Development Budget: The detailed budget for the cost of the construction and
development of the Improvements as agreed upon by Lessor and Lessee and containing such budget
information as Lessor and Lessee may request and approve.

     Development Costs: All costs and expenses of construction and development of the
Improvements and the Facility FF&E, in accordance with the Plans up to (but not to exceed without
the approval of both Lessor and Lessee) the total amount set forth in the Development Budget, plus
the value allocated to the Land of $750,000.00. Without limiting the foregoing, it is intended
that Development Costs include all amounts funded, advanced or accrued by Lessor hereunder in the
development of the Leased Property in accordance with the Development Budgets and the Plans, up to
but not to exceed without the approval of both Lessor and Lessee the total amount set forth in the
Development Budget.

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     Facility: The fully licensed skilled nursing facility located on the Land and known
as the Rose Terrace Health and Rehabilitation Center.

     Facility FF&E: The equipment, machinery, furnishings, furniture, trade fixtures,
appliances and other items of personal property necessary, appropriate or required for the
operation and occupancy of the Facility as a skilled nursing facility identified in the Plans, with
vendors and items to be selected by Lessee, and to be initially installed in the Facility by Lessor
in accordance with the Plans.

     General Contractor: AB Contracting, Inc., a West Virginia corporation, having an
address of 5521 Ohio River Road, Point Pleasant, West Virginia 25550.

     Governmental Authority: The United States, the state, county, city and political
subdivisions in which the Land is located or which exercise jurisdiction over the Land or the
construction or operation of the Improvements thereon, and any court administrator, agency,
department, commission, board, bureau or instrumentality of any of them which exercises
jurisdiction over the Land or the construction or operation of the Improvements thereon,
specifically including, without limitation, WVDH.

     Governmental Requirement: Any law, ordinance, order, rule, regulation, decree or
similar edict of a Governmental Authority, including environmental, occupational, health, safety,
zoning and other land use ordinances and regulations.

     Hazardous Materials: Any material or substance that is defined or classified under
any Hazardous Materials Laws as a hazardous or toxic substance, material, waste or pollutant, or
toxic or hazardous pursuant to regulations promulgated now or hereafter under any Hazardous
Materials Laws, or presents a risk to human health or the environment under other applicable
federal, state or local laws, ordinances, or regulations, as now in effect or as may be passed or
promulgated in the future. “Hazardous Materials” specifically includes asbestos or any substance
containing asbestos, the group of organic compounds known as polychlorinated biphenyls, flammable
explosives, radioactive materials, medical waste, chemicals known to cause cancer or reproductive
toxicity, pollutants, effluents, contaminants, emissions or related materials, petroleum and
petroleum based products, and urea formaldehyde.

     Hazardous Materials Law: Any federal, state or local law, regulation or ordinance
relating to environmental conditions, medical waste and industrial hygiene, including the Resource
Conservation and Recovery Act of 1976 (“RCRA”), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Safe Drinking Water Act, and any amendments, modifications or supplements thereto, and all
similar federal, state and local environmental statutes and ordinances, whether heretofore or
hereafter enacted or effective and all regulations, orders, or decrees heretofore or hereafter
promulgated thereunder.

     Improvements: The Facility and other improvements to be constructed in accordance
with the Plans, including any and all site preparation, landscaping and drainage work necessary to
construct and operate the Facility for its Primary Intended Use.

     Intangible Property: shall mean all licenses and permits now owned or hereinafter
acquired by Lessee, necessary or desirable for Lessee’s use of the Leased Property under this
Lease, including, without limitation, if applicable, any certificate of need or other similar
certificate; and the right to use any trade or other name now or hereafter associated with the
operation of the Leased Property by Lessee, including, without limitation, the name “Rose Terrace
Health and Rehabilitation Center”, but specifically excluding the name “Diversicare” or any
derivative thereof.

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     Lease Year: A period of twelve (12) successive calendar months commencing on the
Commencement Date (as defined in Article 2 hereof) and on the same date in each successive calendar
year during the Term of this Lease.

     Notice: Any notice given hereunder in accordance with Article 22 hereof.

     Offsite Improvements: The extension of the drive extending from Route 60 to the
boundary of the Property (the “Driveway Extension”), the extension to the boundary of the Land of
utility lines sufficient (by volume) and satisfactory to serve the Facility for its Primary
Intended Use, including any lift station for sewage disposal into the sewer system for the City of
Milton, and storm drainage facility of the flow of surface water to facilitate proper drainage of
water flow from the Property into storm water detention basins or retention pond areas located on
adjacent property (the “Utility Improvements”), all to be constructed by Lessor, at Lessor’s cost
and expense, pursuant to the Declaration.

     Overdue Rate: On any date, a rate of interest equal to two percentage points above
the Prime Rate, but in no event greater than the maximum rate then permitted under applicable law.

     Plans: (i) The final plans and specifications for the construction of the
Improvements and the Facility FF&E to be installed in the Facility, which have been prepared by the
Architect and approved by Lessor and Lessee and (ii) all amendments, modifications and supplements
thereto which do not require the approval of Lessor and Lessee or which have been approved by
Lessor and Lessee subsequent to the execution of this Lease.

     Primary Intended Use: As defined in Section 7.2.1 hereof.

     Prime Rate: On any date, a rate of interest equal to the annual rate of interest
published by The Wall Street Journal from time to time as the Prime Rate (such rate is currently
published in the column “Money Rates” as the “base rate on corporate loans posted by at least 75%
of the nation’s 30 largest banks”). If a range of rates is published as the Prime Rate by The Wall
Street Journal, then the “Prime Rate”, for the purposes of this Lease, shall be the highest rate in
such range. Each change in the Prime Rate as published by The Wall Street Journal shall be
effective, for the purposes of this Lease, to change the Interest Rate as of the date that such
change is published in The Wall Street Journal.

     Punch List Items: Minor details of construction, mechanical adjustments or
decorations which remain to be completed following the Completion Date that do not (i) prevent the
issuance of a certificate of use and occupancy (or the local equivalent thereof) for the
Improvements and/or (ii) materially interfere with the use of the Improvements for the Primary
Intended Use.

     Term; Term of this Lease; Lease Term; Term hereof: As and when used in this Lease, the
foregoing defined terms each shall mean and include the Initial Term of this Lease as defined in
Article 2 hereof, and, to the extent this Lease is extended and renewed as provided herein, the
Renewal Term of this Lease as defined in Article 2 hereof.

     Total Project Costs: The total amount of all Development Costs expended and actually
advanced and disbursed by Lessor in accordance with this Agreement, including the final advance of
proceeds representing retainage withheld for completion or correction of any particular items of
construction, in the total aggregate amount of up to $7,104,818.00, as set forth on Exhibit
B attached hereto.

     Unavoidable Delays: Delays due to strikes, slowdowns, lock-outs or similar labor
action; inability to procure equipment or materials; power failure; acts of God; delays, denials,
challenges, restrictions or regulations by any federal, state or local governmental,
quasi-governmental or regulatory

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authority or agency; enemy action, war, revolution, riot, terrorism, vandalism, civil
insurrection or commotion; fire; unavoidable casualty or other events, conditions or causes beyond
the reasonable control of the party responsible for performing an act or obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of either party hereto.

     WVDH: The West Virginia Department of Health and Human Resources, Office of Health
Facilities, Licensure and Certification.

     WVDH Approvals: All licenses, permits, certificates of need and other approvals of
WVDH necessary to operate the Primary Intended Use on the Leased Property.

     1.3 Lessor. The parties acknowledge that following the Effective Date hereof, Lessor
intends to and will form the single asset entity described in Sec. 3.9.6 hereof for the purpose of
owning, developing, constructing and leasing the Leased Property to Lessee in accordance with this
Lease (the “New Entity”). Lessor intends to and will assign its interest in this Lease to such New
Entity. Provided that (i) Lessor and such New Entity execute and deliver to Lessee a written
assignment and assumption agreement pursuant to which such New Entity expressly assumes all the
covenants, agreements, duties and obligations of the Lessor under this Lease and agrees to be bound
by all the terms and conditions of this Lease and (ii) the owner(s) of such New Entity execute the
Joinder with respect to Sec. 23.13 hereof, then such New Entity shall, as of the date of such
assignment, be deemed to be, and Lessee will recognize and attorn to such New Entity as, the Lessor
under and for purposes of this Lease. The parties agree that an addendum to this Lease shall be
executed evidencing such New Entity as the Lessor under this Lease once the same has been
established as provided herein.

ARTICLE 2

     2.1 Term; Commencement Date. The initial term of this Lease (the “Initial Term”) and the payment
of the Rent due hereunder shall commence on the Commencement Date (as herein defined) and shall
remain in effect for a period of twenty (20) years, expiring at midnight on the date that is two
hundred forty (240) calendar months from the Commencement Date, unless terminated sooner pursuant
to the provisions of this Lease. The Commencement Date shall be the date on which the last of the
following conditions occurs or is satisfied (i) the construction of the Facility has been completed
as evidenced by a Certificate of Substantial Completion by the Architect and the Facility FF&E for
the Facility has been installed, (ii) all means of access, ingress and egress to and from the
Facility, and the Offsite Improvements, have been substantially completed, are in good working
order and are available for use by Lessee, (iii) a final and permanent certificate of occupancy for
the Facility permitting the legal use and occupancy of the Leased Property as a fully licensed
skilled nursing facility having ninety (90) beds has been obtained from the applicable local
governmental authority having jurisdiction; and (iv) all physical plant inspections and regulatory
approvals of the Facility from the applicable governmental authorities necessary for the Facility
to be licensed by WVDH as a skilled nursing facility having ninety (90) beds have been obtained.
In all events, the Commencement Date shall be no later than the Outside Date specified in Section
3.4, below. The parties agree that an addendum to this Lease shall be executed evidencing the
Commencement Date once the same has been established as provided herein.

     2.2 Renewal. Provided that no Event of Default hereunder has occurred and is continuing at the
time, Lessee shall have the option and right to renew and extend the Term of this Lease for two (2)
additional successive periods of five (5) years each (each a “Renewal Term”). Lessee shall
exercise this option and right to renew and extend the Term of this Lease by giving Lessor written
notice of its intent and election to do so not less than six (6) months prior to the expiration of
the then existing Term. Lessee’s leasing of the Leased Property during such Renewal Term shall be
upon and subject to the same terms, covenants and conditions set forth in this Lease.

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ARTICLE 3

     3.1 Development Budget; Plans. For a period of forty-five (45) days after the Effective Date,
Lessor and Lessee will attempt to agree upon the Development Budget and the Plans. Lessee shall
submit the Plans to WVDH for its review and approval. The final Development Budget and the Plans,
as agreed to by Lessor and Lessee, and, as to the Plans, as approved by WVDH, may not be modified
or amended without approval of the other except as specifically provided herein. If, despite their
good faith efforts, Lessor and Lessee are unable to agree upon the Development Budget or the Plans
within such forty-five (45) day period, then Lessor and Lessee shall each have the right to
terminate this Lease upon Notice to the other provided, however, such right to terminate shall
expire if and when agreement is reached.

          3.1.1 Contracting for Construction. Lessor will engage the General Contractor to
construct the Improvements. Lessor is entitled to exercise its discretion in the allocation and
apportionment of the work on the Improvements and to engage such other contractors as Lessor deems
necessary and appropriate to construct the Improvements in a timely and cost-efficient manner.
Lessor will negotiate and prepare the Construction Contracts, and will fulfill all of the
responsibilities of the owner under such contracts. In connection with the negotiation of the
Construction Contracts with the General Contractor, Lessor will (unless Lessee otherwise consents)
cause the General Contractor at all times to maintain:

               3.1.1.1 Builder’s risk insurance covering the construction of the Improvements, in a face
amount of not less than the full insurable value of the Improvements and materials supplied in
connection with the Improvements;

               3.1.1.2 Liability insurance against claims for personal injury, death or property damage
suffered by members of the public or others in or about the Land or adjacent land used in
connection with the construction of the Improvements or occurring by reason of the ownership,
maintenance, use or operation by Lessor, the General Contractor or any subcontractor, agent or
employee thereof of any equipment, vehicles or other facilities in connection with the Property or
the construction of the Improvements, in amounts of at least $1,000,000.00 per occurrence and
$2,000,000.00 aggregate for personal injury or death and $100,000.00 for property damage.

               3.1.1.3 Workers’ compensation and employer’s liability insurance as may be required under any
Governmental Requirement;

               3.1.1.4 Fire, casualty and extended coverage insurance on the Improvements of an insurable
nature in a face amount of not less than the full insurable value thereof and such other insurance
customarily carried by persons engaged in holding or operating property similar to the Property,
such insurance to be obtained on or before the termination of the applicable builder’s risk
insurance.

     All such insurance maintained pursuant to subsections 3.1.1.1, 3.1.1.2 and 3.1.1.4 of this
Section 3.1.1 shall name Lessor and Lessee as an additional insured. All insurance maintained
pursuant to subsection 3.1.1.1 of this Section 3.1.1 shall name Lessor, Lessee and the General
Contractor, jointly, as loss payee and all insurance maintained pursuant to subsection 3.1.1.4 of
this Section 3.1.1 shall name Lessor and Lessee, jointly, as loss payee.

     If the Improvements are totally or partially destroyed from a risk/hazard covered by the
insurance described in this Section 3.1.1, Lessor shall cause such Improvements to be restored to
substantially the same condition as existed immediately before the damage or destruction. In the
case of any loss or damage to the Improvements, or any portion thereof, all insurance proceeds
payable under any policy of

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insurance required by this Section 3.1.1 shall be made available by the loss payees to Lessor
for reconstruction or repair, as the case may be.

     3.2 Construction of Improvements; Offsite Improvements. Lessor shall construct the Improvements,
in accordance with the Plans. The Facility will be equipped with the Facility FF&E in accordance
with the Plans, which property shall be and remain “Lessor’s Personal Property” hereunder. Lessee
shall have no responsibility for any costs associated with construction and equipping of the
Facility in accordance with the Plans, including without limitation any construction costs required
for site improvements necessary for construction of the Facility, installation of the Facility
FF&E, installation or extension of utilities, obtaining the licenses and approvals, and any
requirements of Owner’s construction lender. Lessor shall use its best efforts to cause the
Improvements to be completed and equipped with the Facility FF&E substantially in accordance with
the Plans for an amount not to exceed the Total Project Costs set forth on Exhibit B
attached hereto, and the Commencement Date to occur by the Anticipated Commencement Date set forth
in Sec. 3.6 hereof. Such work shall be performed by Lessor on a turnkey basis, at the sole cost
and expense of Lessor, pursuant to a guaranteed price contract with the General Contractor being
responsible for any and all cost overruns (distinguished, however, from any change orders requested
by Lessee after approval of the final Plans resulting in an increase in Lessor’s cost of
construction). If and to the extent the total amount of Development Costs shall exceed the Total
Project Costs as set forth on Exhibit B (other than as a result of any change orders
requested by Lessee after approval of the final Plans resulting in an increase in Lessor’s cost of
construction), Lessor shall pay and shall not be reimbursed by Lessee for such excess amount and
such excess amount shall not be included as a part of the Total Project Costs for purposes of
determining the amount of Rent under Sec. 4.1 or the amount of the Purchase Price under Sec. 23.1.
Lessor covenants and agrees that the Facility will be constructed with all new, good quality
material in a good and workmanlike manner, in accordance with good construction practices, and in
accordance with the approved final Plans (as the same may be modified or supplemented) and all
applicable codes, ordinances and laws, including, without limitation, the requirements of the
Americans with Disabilities Act, the zoning ordinances and building code of the city, county or
other political subdivision having jurisdiction in which the Facility is located, provided,
however, Lessee represents and warrants to Lessor that so long as the Facility is constructed in
substantial conformance with the Plans, it will comply with the requirements of WVDH for the
construction of a skilled nursing facility.

          3.2.1 Lessor and Lessee acknowledge that the Declaration contains covenants and obligations on
the part of Lessor relative to the construction of the Offsite Improvements. Lessor, at Lessor’s
cost and expense, will complete the Offsite Improvements. The Offsite Improvements shall not be
included as a part of the Plans. The cost and expense of the Offsite Improvements shall be
separately borne and paid for by Lessor and shall not be a part of the Development Costs hereunder.
As soon as reasonably practical after the Effective Date, Lessor, at its cost and expense, shall
commence and diligently pursue completion of the construction and installation of the Offsite
Improvements in a timely manner so as to facilitate the construction and completion of the
Improvements by the Anticipated Commencement Date. The Offsite Improvements shall be constructed
and installed as provided and set forth in the Declaration, in a good and workmanlike manner, and
in accordance with all applicable laws, rules, ordinances, regulations and standards. Lessor shall
be responsible for all costs and expenses in connection with the construction and installation of
the Offsite Improvements. As soon as reasonably practical after the Effective Date, Lessor shall
provide Lessee with detailed drawings which show the character, scope and location of the work to
be performed in constructing and extending the Offsite Improvements to the property line of the
Land.

          3.2.2 Lessor will keep accurate and complete books and records relating to the construction of
the Improvements and installation of the Facility FF&E. Lessee will have access thereto during
normal business hours upon 24 hours advance notice. Lessor will furnish or cause to be furnished

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to Lessee from time to time, promptly upon request, (i) copies and lists of all paid and
unpaid invoices for labor and materials with respect to the Improvements and the Facility FF&E,
(ii) construction budgets and revisions thereof showing the estimated cost of the Improvements and
the Facility FF&E, and the source of the funds required at any given time to complete and pay for
the same, (iii) receipted bills, releases and waivers of liens, or other evidence of payment with
respect to the cost of the Improvements and the Facility FF&E, and (iv) such other information
establishing the payment and satisfaction of Lessor’s obligations relating to the construction of
the Improvements and installation of the FF&E as Lessee may reasonable request.

          3.2.3 Lessor shall ensure that no construction liens or other liens or encumbrances shall be
filed or recorded against or shall otherwise affect the Leased Property or any part thereof, or the
Lessor’s interest therein, in respect of materials supplied or work done or to be done in
connection with the construction of the Improvements and installation of the FF&E by Lessor
hereunder. If any such lien is filed against the Leased Property, or any part thereof, or Lessor’s
interest therein, in respect of materials supplied or work done or to be done in connection with
the construction of the Improvements and installation of the FF&E by Lessor, then Lessor shall be
responsible for the prompt payment and/or discharge of such lien. If the Lessor fails to discharge
or cause any such lien to be discharged (by filing any bond required by law, payment or otherwise)
within thirty (30) days after receipt of notice from Lessee of the filing or recording of the lien,
then, in addition to any other rights or remedies of Landlord under this Lease or applicable law,
Lessee may (but shall not be obligated to) discharge the lien by paying the amount claimed into
court and the amount so paid, and all costs and expenses (including attorneys costs and expenses)
plus interest at the Overdue Rate from the date paid, shall be immediately due and payable by the
Lessor to Lessee upon demand.

     3.3 Change Orders. Lessor may not, without obtaining the prior written approval of Lessee, change
the Plans, permit the Plans to be changed or permit construction of the Improvements other than in
accordance with the Plans, which approval shall not be unreasonably withheld, delayed or
conditioned by Lessee provided that (i) any such change does not (A) change the basic structure or
character of the Facility; (B) materially increase or decrease in any manner the size of the
Facility, or any component thereof; (C) materially change the appearance of the Facility; (D)
result in the substitution of inferior materials or methods of construction; and (E) materially
change or reduce the quality of the basic building systems, including the mechanical, electrical,
sprinkler, plumbing, life-safety, heating, air conditioning and ventilation systems within the
Facility; (ii) does not delay or extend the Commencement Date; or (iii) does not increase the
financial commitment (including, without limitation, the amount of Rent) or obligations or risk of
legal liability on the part of Lessee under this Lease.

     3.4 Progress of Construction; Access to Improvements. Lessor shall consult with designated
representatives of Lessee during construction of the Improvements and with respect to furnishing
and installing the Facility FF&E. Lessee shall be responsible for selecting the vendors and items
of, and ordering through Lessee’s account, the Facility FF&E to be paid for and installed by Lessor
as part of the Development Costs. Prior to the commencement of construction of the Improvements,
Lessor shall provide Lessee with a complete set of stamped blueprints and the project manual for
the construction of the Improvements, stamped by the Architect, and written confirmation or other
acknowledgement from WVDH of its approval of the final Plans. Lessor and its General Contractor
will be available to meet with Lessee or its designated representatives (which may at Lessee’s
option, be by telephone conference call) not less often than monthly, or as needed, and will
provide Lessee with updates concerning the development and construction of the Improvements). Upon
request by Lessee from time to time, Lessor will provide Lessee a written report concerning the
development and construction of the Improvements and addressing any specific questions or concerns
raised by Lessee. Lessor shall provide Lessee with copies of (i) all architect’s certificates
submitted to Lessor or its mortgage lender and (ii) all approvals, permits, inspection reports, and
other governmental consents required to commence, perform

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and complete the work to be performed by Lessor when and as obtained by or submitted to
Lessor. Lessee and its agents and representatives shall, at all reasonable times, have access to
the Land and the Improvements in order to inspect the progress and performance of the construction
of the Improvements to determine compliance with the Plans and to conduct such other investigations
and inspections as Lessee deems reasonably necessary. Lessor will cause its General Contractor to
cooperate with Lessee and its designated representative during such inspections. If Lessee shall
in good faith give Lessor Notice of defective construction, change in the scope of work,
substitution of inferior materials or methods of construction, or other material deviation from,
the Plans approved by Lessee, Lessor agrees to cause its contractors to promptly make any necessary
corrections; provided, however, that the exercise or non-exercise by Lessor of its rights hereunder
shall not operate as a waiver of any right of Lessee to require good and workmanlike construction
of the Improvements in accordance with the Plans. In the event Lessor shall dispute the substance
of Lessee’s notice, Lessor and Lessee shall submit the matter to a mutually acceptable third party
architect for determination, whose decision shall be binding on both parties. On or before the
Commencement Date, Lessor shall provide Lessee with a complete set of the as-built blueprints of
the Improvements as constructed by Lessor together with manuals for (i) operation/maintenance data
and materials for equipment and (ii) spare materials and equipment as required by individual
sections of the project specifications manual.

     3.5 Lessee Furniture, Furnishings and Equipment. Lessor shall be responsible for equipping
the Facility with the Facility FF&E, which shall be installed in consultation with Lessee’s
designated representative. Lessee shall be responsible for furnishing and equipping the Facility
with such consumable inventory and supplies, and such other furniture, furnishings, equipment and
other personal property in addition to the Facility FF&E, if any, as may be necessary, appropriate
or required for the operation and occupancy of the Facility as a skilled nursing facility. Any
such inventory, supplies, furniture, furnishings and equipment to be supplied by Lessee shall fully
conform to the requirements of WVDH for occupancy of a skilled nursing facility shall be timely
installed on the Leased Property so as not to delay the Commencement Date. Lessor shall grant
Lessee and its contractors non-exclusive access to the Leased Property during the period prior to
the Commencement Date, at reasonable times, for the purpose of installing any such inventory,
supplies, furniture, furnishings and equipment to be supplied by Lessee; provided, however, that
(i) such period of early access to the Leased Property by Lessee shall not be construed as
possession or acceptance of the Leased Property by Lessee, (ii) such entry shall be at Lessee’s
sole risk and Lessee shall defend, indemnify and hold Lessor harmless from and against any claim,
loss or liability of any nature arising from Lessee’s activities at the Property prior to the
Commencement Date and (iii) such entry shall be completed at times and in a manner that does not
interfere with Lessor’s construction of the Facility.

     3.6 Commencement of Construction; Delay of Commencement Date; Termination by Lessee.
Construction of the Improvements will commence as soon as practical after Lessor and Lessee have
agreed upon the Development Budget and Plans and the Plans have been approved by WVDH and will be
diligently prosecuted to completion in a timely manner so that the Commencement Date shall occur on
a date that is on or before June 1, 2011 (the “Anticipated Commencement Date”) but not later than
the date that is on or before October 1, 2011 (the “Outside Date”). Such anticipated Completion
Date and Outside Date may be extended for each day of delay as a result of any Unavoidable Delay
not the fault of Lessor or Lessee. If construction of the Improvements has not commenced on or
before August 31, 2010 and such delay is not due to any fault on the part of Lessee or Unavoidable
Delays, then Lessee shall have the right to terminate this Lease by giving Lessor Notice of its
intent to terminate this Lease and this Lease shall be terminated and shall be null and void with
no further obligations between the parties. If the Commencement Date has not occurred on or before
the Outside Date and such delay is not due to any fault on the part of Lessee or Unavoidable
Delays, then Lessee shall have the right to terminate this Lease by giving Lessor Notice of its
intent to terminate this Lease whereupon this Lease shall be terminated and shall be null and void
with no further obligations between the parties.

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     3.7 Compliance with Governmental Requirements; Inspection by Licensing Authority. Lessor will
ensure that the physical plant aspects of the Facility fully comply in all respects with all
Governmental Requirements and all other requirements, including but not limited to the requirements
of the applicable Governmental Authority for the issuance of a permit for the operation of a
skilled nursing facility on the Land, and the requirements of all federal and state health and life
safety code agencies. Lessee will coordinate all necessary interim and final inspections and
approvals by WVDH. Lessor will coordinate all necessary interim and final inspections and
approvals by any other authorities required to inspect and approve the Facility. Applications for
and the procurement of all licenses, permits, and certificates (specifically including, but not
limited to, building permits and certificates of occupancy) that are required to develop and
construct or to occupy the Improvements are the responsibility of Lessor (other than the WVDH
Approvals required to operate a skilled nursing facility at the Land). Application for and the
procurement of the WVDH Approvals required to operate a skilled nursing facility at the Land shall
be the responsibility of Lessee. Lessor shall cooperate with and assist Lessee in obtaining such
WVDH Approvals for the Facility.

     3.8 Condition of Premises; Acceptance. Lessor shall provide Lessee with not less than ten (10)
Business Days advance notice of the date of the Completion Date of the construction and equipping
of the Facility in accordance with the Plans. Within ten (10) Business Days after such Completion
Date, Lessor and Lessee will conduct a walk-through inspection of the Improvements and Lessee shall
prepare and deliver a written list of any defects, omissions or other items not constructed or
furnished in conformance with the Plans. Lessee shall obtain any inspections required by WVDH upon
completion of the Facility. Lessee shall be entitled to be present when such inspection is made.
Lessee and Lessor shall likewise inspect the Offsite Improvements and Lessee shall prepare a
written list of any defects, omissions or other items of the Offsite Improvements not constructed
in conformance with the Declaration. Except for Punch List Items, Lessor shall cause all defects,
omissions or other items noted by Lessor and Lessee (as well as any defects noted by the applicable
Government Authority, including WVDH) to be promptly completed or repaired prior to the
Commencement Date. Upon Lessor curing the noted defects and/or omissions, or if no defects and/or
omissions have been pointed out as herein provided, Lessor shall deliver possession of the
Facility, and Lessee shall be deemed to have accepted the Facility in its then condition on the
Completion Date subject to Lessee’s repair or correction of the Punch List Items and any latent
defects (as defined in Sec. 8.1). All Punch List Items, other than those reasonably requiring more
than thirty (30) days to complete due to long scheduling or ordering time or other reasonable
factors, shall be completed by Lessor within thirty (30) days after the Completion Date. Any Punch
List Items reasonably requiring more than thirty (30) days to complete shall be diligently pursued
and completed by Lessor as promptly as practicable. Except for Punch List Items and latent
defects, Lessee accepts the Leased Property as of the Commencement Date on an “as-is” basis;
provided, however, Lessor will provide Lessee with a construction warranty as issued by Lessor’s
general contractor warranting the building structure for the Facility for a period of one (1) year
from the date of completion and a standard fifteen (15) year roof repair warranty, transferable to
Lessee or otherwise naming Lessee as an owner or beneficiary thereunder. All other transferable
warranties, operating manuals, guaranties or sureties of the materials and workmanship provided by
any contractors, subcontractors, suppliers or manufacturers, relating to the improvements,
fixtures and personal property constructed or installed upon the Leased Property shall be
transferred by Lessor to Lessee at the Commencement Date.

     3.9 Representations, Warranties and Covenants of Lessor. As a material inducement to Lessee to
enter into this Lease, Lessor represents, warrants and covenants to Lessee that as of Commencement
Date:

          3.9.1 The Improvements will have been constructed and equipped in accordance with the Plans,
as amended or supplemented with the provisions of this Article 3, and the Improvements will

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be in compliance in all material respects with all applicable statutes, rules, regulations and
requirements of all applicable governmental entities or agencies having jurisdiction over the
Improvements, and its operation including without limitation the Americans with Disabilities Act,
and the building code requirements of the city, county or other political subdivision in which the
Facility is located.

          3.9.2 The Improvements will be free from any material structural, electrical or mechanical
defects and there will be no physical condition of the Improvements that could reasonably be
expected to have a material adverse effect on the Lessee’s ability to use and operate the Leased
Property for its Primary Intended Use.

          3.9.3 There will be no physical condition of the Land or the Leased Improvements of which
Lessor is aware that could reasonably be expected to have a material adverse effect on Lessee’s
ability to use and operate the Leased Property for its Primary Intended Use.

          3.9.4 The Land will be zoned or classified under applicable zoning ordinances or other land
use regulations to permit the use and occupancy of the Leased Property as a skilled nursing
facility. The Leased Improvements will be in compliance with all zoning or other land use
regulations, public health, building code or other similar laws applicable thereto.

          3.9.5 Lessor will be the sole owner of and will have good and marketable fee simple title to
the Leased Property free and clear of all liens, encumbrances, rights or claims of other parties,
limitations or restrictions on use, or other matters except for (i) Taxes (as hereinafter defined)
for the year 2010 not yet due and payable, (ii) easements for the installation and maintenance of
public utilities serving the Leased Property and such other easements that do not adversely affect,
impede or hinder the use, occupancy and enjoyment of the Leased Property by Lessee for its Primary
Intended Use and (iii) those matters set forth on Exhibit C attached hereto (collectively
the “Permitted Exceptions”). The Declaration will have been recorded in the real estate records of
the Office of the County Clerk for Cabell County.

          3.9.6 Lessor will be a single asset entity that owns only the Leased Property. Lessor
covenants with Lessee that, at all times during the Term of the Lease, Lessor shall maintain its
status as a single asset entity and shall not acquire or own any material assets other than the
Leased Property or engage in any business or activity other than the ownership, operation and
maintenance of the Leased Property and activities incidental thereto.

          3.9.7 There will be no encroachments upon the Land and no encroachments of any Leased
Improvements onto adjacent property. None of the Leased Improvements will violate set-back,
building or side lines, nor will they encroach on any easements located on the Leased Property.
All utilities serving the Facility will be in accordance with the Plans.

          3.9.8 Lessor has complied with, and to the actual knowledge of Lessor without investigation,
all prior owners and occupants of the Land have complied with, all applicable Hazardous Materials
Laws. Except as duly licensed or authorized by appropriate governmental authorities or otherwise
permitted by such Hazardous Materials Laws, neither Lessor, its affiliates or agents have allowed
the use, generation, treatment, handling, release, emission, manufacture, discharge, voluntary
transmission, storage or removal of any Hazardous Materials on, at, over, in, from or upon the
Land, nor to the actual knowledge of Lessor without investigation, has the Land ever been used for
any of the foregoing. To the actual knowledge of Lessor without investigation, there are no
polychlorinated biphenyls or friable asbestos or any substance containing asbestos in condition or
amount deemed hazardous by any Hazardous Materials Laws present at the Leased Property. Lessor has
not at any time engaged in nor permitted, nor to the actual knowledge of Lessor without
investigation,, has any prior

12

 

owner or any tenant or other occupant of the Land engaged in or permitted, any dumping
discharge, disposal, spillage or leakage (whether legal or illegal, accidental or intentional) of
Hazardous Materials at, on, in, from or about the Land that would subject the Leased Property or
Lessee to any clean-up obligations imposed by any governmental authorities. Lessor has not
received or been issued any notice, demand, request for information, citation, summons, or
complaint regarding an alleged failure to comply with any Hazardous Materials Laws. To the actual
knowledge of Lessor without investigation,, the Leased Property is not subject to any existing,
pending or threatened investigation or inquiry by any governmental authority for failure to comply
with any Hazardous Materials Laws. To the actual knowledge of Lessor without investigation, there
are no underground storage tanks on the Land, and, to the actual knowledge of Lessor without
investigation, the Land is free of dangerous levels of naturally emitted radon. To the actual
knowledge of Lessor without investigation, no portion of the Land has ever been used as a landfill,
garbage or refuse dump site or waste disposal facility. Lessor will comply, or cause its
contractors to comply, with all applicable Hazardous Materials Laws in connection with the use,
storage, disposal or discharge of Hazardous Materials on or from the Land in the construction of
the Leased Improvements. During the Term, Lessor will indemnify and hold harmless Lessee from and
against all liabilities, obligations, claims, penalties, costs and expenses (including, without
limitation, reasonable attorneys fees and expenses) which may be imposed upon, or incurred,
suffered by, or asserted against Lessee by reason of the presence, use, maintenance, storage,
release, disposal or discharge of any Hazardous Materials on, in, under or from the Land prior to
the Commencement Date or any violation of any Hazardous Materials Laws arising out of or relating
to conditions, circumstances or events prior to the Commencement Date.

          3.9.9 Lessor shall provide and deliver to Lessee, prior to the Commencement Date, for Lessee’s
use and benefit in determining the accuracy of the representations, warranties and covenants of
Lessor set forth in this Section 3.5, copies of any surveys, title insurance commitments, title
insurance policies or title reports, environmental assessments, engineering reports, evidence of
compliance with zoning, building codes and other land use laws or regulations, and evidence of
utility availability with respect to the Leased Property issued or obtained in connection with
Lessor’s financing of construction of the Facility or otherwise in the possession or control of
Lessor; provided, however, such materials will be delivered “as is” for informational purposes
only, without representation or warranty of any nature from Lessor. Lessee, at Lessee’s cost and
expense, shall have the benefit of and may obtain, at Lessee’s option, the simultaneous issue of a
leasehold title policy, at the then standard simultaneous issue rates of the title insurance
company up to the full amount of the Facility Mortgage securing the financing of construction of
the Improvements, in connection with any mortgagee policy issued in favor of such Facility
Mortgagee, reflecting title to the Leased Property to be as represented in Section 3.9.5, above.

     3.10 Failure to Construct. If Lessor fails to construct or cause construction of the Improvements
in accordance with the Plans to be completed by the Outside Date, then Lessee, at Lessee’s option,
shall have the right (but shall not be obligated) to complete the Improvements in accordance with
the Plans and expend such sums as Lessee reasonably deems proper in order so to complete the
Improvements. The amount of any and all expenditures made by Lessee pursuant to this Section 3.9
shall be immediately due and payable by Lessor to Lessee, and Lessor agrees to pay the same to
Lessee, promptly upon written demand therefor, together with interest thereon from the date of such
expenditure to the date paid by Lessee at a daily rate equal to the Overdue Rate. Until so repaid
by Lessor to Lessee, the amount of such expenditures made by Lessee shall not be deemed to be or
included as a part of the Total Project Costs for purposes of this Lease. Upon any assumption by
Lessee of the obligation to complete the Improvements as provided herein, Lessor shall forthwith
surrender and deliver to Lessee, or Lessee’s designee, any funds which have been received from
Lessor’s lender but have not been disbursed by Lessor, and all records, plans, specifications,
permits and other governmental approvals, purchase agreements, contracts, receipts for deposits,
unpaid bills and all other records, papers and documents in the possession of Lessor relating to
the Improvements.

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     3.11 Conditions to Lease. The obligations of Lessor and Lessee to develop, construct and
lease the Facility as provided in this Lease are subject to and conditioned upon the satisfaction
of the following conditions on or before the date that is forty-five (45) days after the Effective
Date hereof (the “Satisfaction Date”):

          3.11.1 Lessee, at Lessee’s cost and expense, shall have obtained the approval of the West
Virginia Health Care Authority, and any extension of the Certificate of Need previously approved
for the Facility, necessary or required for the development, construction and lease of the Facility
contemplated by this Lease. Lessee agrees to use its best efforts to obtain such approval and
extension.

          3.11.2 Lessor, at Lessor’s cost and expense, shall have obtained a valid and binding
commitment for a loan from the Existing Facility Mortgagee identified in Sec. 17.1 hereof for the
financing of the cost of construction of the Improvements on terms reasonably acceptable to Lessor.
Lessor agrees to use its best efforts to obtain such loan.

     If either of the foregoing conditions have not been satisfied on or before the Satisfaction
Date, then either of Lessor or Lessee may and shall have the right to terminate this Lease by
giving written notice thereof to the other party within fifteen (15) days after the Satisfaction
Date, in which event all rights and obligations of the parties under this Lease shall cease and
this Lease shall terminate and be of no further force and effect.

ARTICLE 4

     4.1 Rent. Lessee covenants and agrees to pay to Lessor, as rental (“Rent”) for the Leased
Property during each lease year of the Term of this Lease, in lawful money of the United States of
America, at Lessor’s address set forth herein or at such other address as Lessor may from time to
time designate in writing, annual Rent in an amount equal to the Total Project Costs times 10.25%,
such annual amount to be paid in twelve (12) equal monthly installments without demand, setoff or
other reduction of any manner, except as otherwise expressly provided for herein, each due and
payable, in advance beginning on the Commencement Date and, subject to adjustment commencing with
the Second Lease Year as provided in Section 4.2 hereof, continuing on the same day of each
calendar month thereafter for the remainder of the Term. Promptly following the Completion Date,
Lessor and Lessee will execute an addendum to this Lease setting forth the amount of Rent to be
paid hereunder beginning on the Commencement Date based upon the Total Project Costs as provided
herein.

     4.2 Adjustment to Rent. The annual Rent payable during each Lease Year of the Term of this Lease,
including each Renewal Term, shall be adjusted as follows:

          4.2.1 Commencing on the anniversary date of the Commencement Date that is the beginning of the
second Lease Year, and continuing on each anniversary of the Commencement Date thereafter during
each Lease Year of the Term of this Lease (each an “Adjustment Date”), the annual Rent payable
hereunder shall be increased by the product of (i) the amount of the annual Rent payable during the
initial Lease Year and (ii) the lesser of one (1) times the increase, if any, in CPI (expressed as
a percentage) between the Commencement Date and each Adjustment Date and two and one-half percent
(2.5%). In no event shall the Rent in any Lease Year during the Term of this Lease be less than
the Rent payable during the preceding Lease Year as a result of the adjustment provided for in this
Section 4.2.1.

     4.3 Security Deposit. Concurrent with the Commencement Date, Lessee shall deposit with Lessor a
sum equal to three (3) monthly installments of Rent (the “Security Deposit”) which shall be held by
Lessor as security for the full and faithful performance by Lessee of each and every term,
provision, covenant and condition of this Lease. Lessee may satisfy the Security Deposit
obligation in whole or in

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part by providing an irrevocable, unconditional letter of credit issued by a national bank or
financial institution reasonably acceptable to Lessor naming Lessor as beneficiary (the “Letter of
Credit”). The Letter of Credit, if any, meeting the requirements of this Section 4.3 shall be
maintained in full force and effect by Lessee for the benefit of Lessor for the full Term of this
Lease. Within thirty (30) days prior to any expiration of the Letter of Credit, Lessee shall cause
the same to be renewed and shall deliver the renewed Letter of Credit to Lessor. If Lessee
defaults in respect of any of the terms, provisions, covenants and conditions of this Lease,
including, but not limited to, payment of any Rent and other sums of money payable by Lessee,
Lessor may, but shall not be required to, in addition to and not in lieu of any other rights and
remedies available to Lessor use, apply or retain the whole or any part of the Security Deposit to
the payment of any sum in default, or any other sum, including but not limited to, any damages or
deficiency in reletting the Leased Property, which Lessor may expend or be required to expend by
reason of Lessee’s default. Whenever, and as often as, Lessor has used the Security Deposit to
cure Lessee’s default hereunder, Lessee shall, within thirty (30) days after Notice from Lessor,
deposit additional money (or additional or substitute Letter of Credit) with Lessor sufficient to
restore the Security Deposit to the full amount originally paid. Upon delivery of a substitute
Letter of Credit to Lessor, Lessor shall return the existing Letter of Credit to Lessee for
cancellation. In the event there exists no uncured Event of Default on the part of Lessee
hereunder at the time, the full amount of the Security Deposit (or the original of the Letter of
Credit) then on deposit with Lessor shall be returned to Lessee promptly upon the expiration or
earlier termination of this Lease.

     4.4 Late Payment. If any installment of Rent owing by Lessee to Lessor under this Lease shall not
be paid within ten (10) days of the date when due, such unpaid amount shall thereafter bear
interest at the Overdue Rate from the due date thereof until the date of payment, which Lessee
shall pay to Lessor on demand as a late charge (to the extent permitted by law) and, in such event,
the parties hereby agree that such late charge will represent a fair and reasonable estimate of the
costs Lessor will incur by reason of the late payment by Lessee.

     4.5 Proration for Partial Periods. The Rent for any month during the Term which begins or ends on
other than the first or last day of a calendar month shall be prorated based on actual days
elapsed.

ARTICLE 5

     5.1 Property Taxes. Subject to Article 10 relating to permitted contests, Lessee will pay, or
cause to be paid, all real and personal property taxes and assessments levied or assessed against
the Leased Property and applicable to the periods of time within the Term of this Lease
(collectively “Taxes”) before any fine, penalty, interest or cost may be added for non-payment,
such payments to be made directly to the taxing authorities where feasible or required, and will
promptly, upon request, furnish to Lessor copies of receipts or other satisfactory proof evidencing
such payments. If any such Taxes may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of such Taxes), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid balance of such Taxes)
in installments and in such event, shall pay such installments during the Term hereof as the same
respectively become due and before any fine, penalty, premium, further interest or cost may be
added thereto. Lessee may, at Lessee’s sole cost and expense, protest, appeal or institute such
other proceedings as Lessee may deem appropriate to effect a reduction of Taxes and Lessor, at
Lessee’s expense as aforesaid, shall cooperate with Lessee in such protest, appeal or other action.
Lessee shall reimburse Lessor for Lessor’s direct costs of cooperating with Lessor in such
protest, appeal or other action. If Lessee elects not to contest Taxes, Lessor shall have the
right to do so in its own name and at its sole cost and expense. If any refund shall be due from
any taxing authority in respect of any Taxes paid by Lessee, the same shall be paid over to or
retained by Lessee. In case any person or entity to whom any sum is directly payable by Lessee
under any of the provisions of this Lease shall

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refuse to accept payment of such sum from Lessee, Lessee shall thereupon give written notice
of such fact to Lessor and shall pay such sum directly to Lessor, and Lessor shall thereupon pay
such sum to such person or entity. To the extent Lessee so pays any Taxes to Lessor, Lessee shall
be relieved of its obligation under this Lease to pay such Taxes to the entity to which such Taxes
would otherwise be due. Lessor and Lessee shall, upon request of the other, provide such data and
information as is maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports with any taxing
authorities.

     5.2 Notice of Taxes. Lessor shall promptly upon its receipt thereof deliver to Lessee any and all
notices of assessments, valuations for purposes of assessments, invoices, bills or other notices
regarding Taxes which it may from time to time receive relating to the Leased Property or any part
thereof; provided that Lessor’s failure to do so shall in no way diminish Lessee’s obligation
hereunder to pay such Taxes, but such failure shall obviate any default hereunder for a reasonable
time after Lessee receives notice of any Taxes that it is obligated to pay.

     5.3 Proration of Taxes. Taxes imposed in respect of the tax-fiscal period during which the Term
of this Lease commences and terminates shall be adjusted and prorated between Lessor and Lessee,
whether or not such Taxes is imposed before or after such commencement or termination, so that
Lessor shall be responsible for Taxes assessed and imposed on the Leased Property prior to the
Commencement Date and after the termination of the lease Term. Lessee’s obligation to pay its
prorated share thereof after termination shall survive such termination.

     5.4 License Fees and Business Taxes. Lessee shall pay directly to the applicable taxing or
governmental authority having jurisdiction all license fees (including all application fees) and
business occupation taxes or bed tax charged or assessed by the State of West Virginia and any
political subdivision thereof for the licensing and operation of a skilled nursing facility
applicable to periods of time within the Term of this Lease which are levied, rated, charged or
assessed against or in respect of the business carried on in the Leased Property by Lessee or in
respect of the use, operation or occupancy thereof or any part thereof by Lessee (provided,
however, that Lessor shall pay all building permit and other fees for the initial construction of
the Facility).

     5.5 Utility Charges. Lessee will pay or cause to be paid when due, to the appropriate supplier,
all charges and deposits for electricity, power, gas, oil, water and all other utilities used in,
on or by the Leased Property during the Term.

     5.6 Insurance Premiums. Lessee will contract for, in its own name, and will pay or cause to be
paid all premiums for the insurance coverage required to be maintained by Lessee pursuant to
Article 11 during the Term.

     5.7 Absolute Net Lease. All rent payments shall be absolutely net to Lessor free of real property
taxes and assessments, sales and use taxes, and other taxes, assessments, utility charges,
operating expenses, refurnishings, insurance premiums or any other charge or expense in connection
with the Leased Property. All expenses and charges, whether for upkeep, maintenance, repair,
refurnishing, refurbishing, restoration, replacement, insurance premiums, taxes, utilities,
occupational licenses and other permits and other operating or other charges of a like nature or
otherwise, shall be paid by Lessee. This provision is not in derogation of the specific provisions
of this Lease, but in expansion thereof and as an indication of the general intentions of the
parties hereto. Lessee shall at all times remain obligated under this Lease without any right of
set off, counterclaim, abatement, deduction, reduction or defense of any kind, except as otherwise
specifically set forth in this Lease.

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ARTICLE 6

     6.1 Ownership of the Leased Property. Lessee acknowledges that the Leased Property is the
property of Lessor and that Lessee has only the right to the exclusive possession and use of the
Leased Property upon the terms and conditions of this Lease.

     6.2 Lessee’s Personal Property. All machinery, equipment, furniture, furnishings, inventory,
supplies, movable walls or partitions, computers (and all associated software), trade fixtures or
other personal property at the Leased Property now or hereafter owned by Lessee (or leased by
Lessee from parties other than Lessor), if any, and located at or used in connection with the
business operated by Lessee on the Leased Property, together with all replacements, alterations,
additions and accessions thereto, shall belong to Lessee and be a part of “Lessee’s Personal
Property.” Lessee may, at its expense, from time to time during the Term of this Lease install,
affix or assemble or place on the Land or in the Leased Improvements any items of the Lessee’s
Personal Property and may remove, replace or substitute for the same from time to time in the
ordinary course of Lessee’s business. Such property shall at all times remain the personal
property of Lessee. Upon the expiration or earlier termination of this Lease, Lessee may and shall
have the right to remove all of Lessee’s Personal Property from the Leased Property subject,
however, to the provisions of Article 28 below. Lessee shall, at its expense, repair all damage to
the Leased Property caused by any removal of Lessee’s Personal Property, and Lessor may prevent
such removal until proof, reasonably satisfactory to Lessor, is presented by Lessee reflecting its
ability to repair any damage caused by such removal. Anything herein to the contrary
notwithstanding, Lessee may not remove Lessee’s Personal Property from the Leased Property during
or after the Lease Term if an Event of Default on the part of Lessee shall have occurred and be
continuing at the time or in the event such removal is in accordance with a plan of Lessee to
discontinue business operations from the Leased Property prior to the expiration of the Term of
this Lease, except in the case of early termination of this Lease by Lessee as allowed and provided
for elsewhere in this Lease.

     6.3 Landlord’s Security Interest. For the purpose of securing the payment and performance of
Lessee’s obligations under this Lease, Lessee, as debtor, hereby grants to Lessor, as secured
party, a security interest in and an express contractual lien upon, all of Lessee’s right, title
and interest in and to Lessee’s Personal Property and in and to the Intangible Property and any and
all products and proceeds thereof, in which Lessee now owns or hereafter acquires an interest or
right, including any leased Lessee’s Personal Property. This Lease constitutes a security
agreement covering all such Lessee’s Personal Property and the Intangible Property. The security
interest granted to Lessor in this Section 6.3 is intended by Lessor and Lessee to be subordinate
to any security interest granted in connection with the financing or leasing of all or any portion
of Lessee’s Personal Property or to any working capital lender of Lessee so long as (i) the lessor
or financier of such Lessee’s Personal Property agrees to give Lessor written notice of any default
by Lessee under the terms of such lease or financing arrangement, to give Lessor a reasonable time
following such notice to cure any such default and to consent to Lessor’s written assumption of
such lease or financing arrangement upon Lessor’s curing of any defaults thereunder or (ii) Lessor
and Lessee’s working capital lender execute an intercreditor agreement reasonably acceptable to
Lessor. This security agreement and the security interest created herein shall survive the
termination of this Lease if such termination results from the occurrence of an Event of Default,
otherwise the security agreement and the security interest herein shall automatically terminate
upon the expiration or sooner termination of this Lease.

     6.4 Financing Statements. If required by Lessor at any time during the Term, Lessee will execute
and deliver to Lessor, in form reasonably satisfactory to Lessor, additional security agreements,
financing statements, fixture filings and such other documents as Lessor may reasonably require to
perfect or continue the perfection of Lessor’s security interest in Lessee’s Personal Property and
the Intangible Property and any and all products and proceeds thereof now owned or hereafter
acquired by

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Lessee. Lessee shall pay all fees and costs that Lessor may incur in filing such documents in
public offices where required to perfect the security interest of Lessor and in obtaining such
record searches as Lessor may reasonably require. In the event Lessee fails to execute any
financing statements or other documents for the perfection or continuation of Lessor’s security
interest, Lessee hereby appoints Lessor as its true and lawful attorney in fact to execute any such
documents on its behalf, which power of attorney shall be irrevocable and is deemed to be coupled
with an interest.

     6.5 Excluded Lessee’s Personal Property. Anything in this Lease to the contrary
notwithstanding, Lessor acknowledges and agrees that for purposes of Lessor’s security interest in
Lessee’s Personal Property under Section 6.3, Lessee’s Personal Property shall not be deemed to
include the following (the “Excluded Lessee’s Personal Property”): (i) Lessee’s continuous quality
improvement program, manuals and materials; management information systems; policy, procedure and
educational manuals and materials and similar proprietary property, and (ii) computer hardware and
related equipment which is integrated with the computer system maintained by Lessee’s Affiliates
and related computer software, provided, however, that Lessee shall cause all data that is
reasonably necessary for the continuing operation of the Facility following the termination or
expiration of this Lease, and which may be assessed through such computers or software, to be made
available to Lessor in a reasonably accessible form without material cost to Lessor.

ARTICLE 7

     7.1 Licenses and Permits. Lessee shall make timely application to WVDH as soon as practical
following commencement of construction of the Facility and thereafter to such other governmental
regulatory bodies as may be required for the issuance of a license to operate the Facility as a
skilled nursing facility and provide to Lessor written confirmation of filing by Lessee of its
application for licensure and status thereof, together with acknowledgment by WVDH that said
application is under consideration or that it is prepared to issue a license to Lessee upon
completion of construction of the Facility. Lessee shall diligently pursue the issuance of the
license, including any necessary amendment, transfer or cancellation of the existing license for
the Facility as may be required by WVDH. Lessor shall cooperate with and use commercially
reasonable efforts, where necessary or required, to assist Lessee in obtaining the license. Lessor
shall commit no act that would hinder Lessee’s ability to obtain licensure to operate the Facility
as a skilled nursing facility having ninety (90) licensed beds. At no time during the Term of this
Lease or any option period shall Lessee surrender its license or the certificate of need to operate
the Leased Property as a skilled nursing facility, nor transfer or make any attempt to transfer its
license or the certificate of need to operate the Leased Property as a skilled nursing facility,
either in whole or in part, to any other location, facility, entity or person for operation of a
skilled nursing facility other than the Leased Property. Lessor covenants that during the Term of
this Lease it will cooperate with Lessee and use commercially reasonable efforts, where necessary
or required from Lessor as the owner of the Leased Property, to enable Lessee to obtain and
maintain any licenses, permits and approvals needed by Lessee to use and operate the Leased
Property for its Primary Intended Use under applicable local, state and federal law, and will
obtain and maintain in force and effect any licenses, or certificates of need, permits and
approvals necessary or required to be obtained and maintained by the owner of the Leased Property
in order to use and operate the Leased Property for its Primary Intended Use.

     7.2 Use of the Leased Property.

          7.2.1 Permitted Use. Lessee shall use or cause the Leased Property to be used as a skilled
nursing facility having ninety (90) beds licensed by WVDH for the provision of skilled nursing
services to the elderly and/or other health-care oriented services for the elderly, and, in
connection therewith, may use the Leased Property for the provision of food services, recreational
services,

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rehabilitative and/or health care services and for such other uses as may be necessary or
incidental to such use (such use is herein referred to as the “Primary Intended Use”). Lessee shall
not use the Leased Property or any portion thereof for any other use without the prior written
consent of Lessor, which consent will not be unreasonably withheld. No use shall be made or
permitted to be made of the Leased Property by Lessee, and no acts shall be done, which will cause
the cancellation of any insurance policy covering any Leased Property, or any part thereof, nor
shall Lessee sell or otherwise provide to residents or patients therein, or permit to be kept, used
or sold in or about the Leased Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter’s regulations. Lessee shall not use the Leased Property for any
unlawful purposes or cause or permit any nuisance thereon.

          7.2.2 No Impairment of Title. Lessee shall neither suffer nor permit the Leased Property or
any portion thereof, to be used in such a manner as (i) might reasonably tend to impair Lessor’s
title thereto or to any portion thereof, or (ii) may reasonably make possible a claim or claims for
adverse possession.

          7.2.3 Compliance. Lessee shall at all times during the Term hereof comply with the rules and
regulations of the State of West Virginia, and particularly WVDH, with regard to the operation of
the skilled nursing facility on the Leased Property. Lessee shall cause all licenses, permits,
certificates of need and any other governmental authorizations necessary to operate the skilled
nursing facility on the Leased Property to be validly maintained and in good standing at all times;
provided, however, that Lessee shall not be deemed to be in breach of this obligation so long as it
remedies any condition causing the same not to be valid and in good standing within any cure period
allowed therefor by the applicable Governmental Authority, and in any event prior to a final,
non-appealable revocation or suspension of any such license, permit, certificate of need or other
governmental authorization. In conjunction with Lessee’s compliance, it agrees to provide Lessor
upon request therefor, with copies of all annual surveys, follow-up survey, special surveys and all
correspondence between Lessee and the State of West Virginia concerning those surveys of the Leased
Property. Lessee shall notify Lessor within ten (10) Business Days of its receipt in writing from
any federal or state governmental or regulatory agency having jurisdiction of any termination or
enforcement notice of any kind pertaining to the operation of the Facility as a skilled nursing
facility. Notwithstanding anything in this Lease to the contrary, except in the case of the
failure of Lessor to construct the Improvements and equip the Facility as provided in Article 3 or
the failure of Lessor to cooperate as provided in Sec. 7.1, Lessee shall bear the risk of obtaining
and maintaining all certificates of need, licenses, operating permits and other governmental
authorizations of every nature and all contracts, including contracts with governmental or quasi
governmental entities (collectively the “Permits and Authorizations”), which may be necessary for
the use or operation of the Leased Property for the Primary Intended Use. Lessee acknowledges and
agrees that loss or termination of any such Permits and Authorizations, regardless of cause or
fault (other than the failure of Lessor to construct the Improvements and equip the Facility as
provided in Article 3 or the failure of Lessor to cooperate as provided in Sec. 7.1) shall not
excuse Lessee from its obligations hereunder nor constitute “impossibility of performance” by
Lessee since Lessee may continue to use the Leased Property for a use permitted hereby with or
without the Permits and Authorizations.

          7.2.4 Easements. In addition to the easements provided for in the Declaration, Lessor will,
from time to time, at the request of Lessee and at Lessee’s cost and expense, but subject to the
approval of Lessor and any Facility Mortgagee (a) grant easements and other rights in the nature of
easements, (b) release existing easements or other rights in the nature of easements which are for
the benefit of the Leased Property, (c) dedicate or transfer unimproved portions of the Leased
Property for road, highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e) execute amendments to any
covenants and restrictions affecting the Leased Property, and (f) execute and deliver to any person
such instruments as may be

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necessary or appropriate to conform or effect such grants, releases, dedications and transfers
(to the extent of its interest in the Leased Property), provided that such grant, release,
dedication, transfer, petition or amendment is required or beneficial for and not detrimental to
the proper conduct of the business of Lessee on the Leased Property and does not reduce the value
thereof or of Lessor’s adjacent land.

     7.3 Environmental Matters. Lessee will not store (except in compliance with all statutes,
laws, ordinances, rules and regulations) and will not dispose of any medical waste, hazardous
waste, contaminants, oil, radioactive or other material (“Hazardous Materials”) the removal of
which is required or the maintenance of which is prohibited or penalized by any applicable federal,
state or municipal statutes, laws, ordinances, rules or regulations (“Hazardous Materials Laws”) on
the Leased Property or otherwise, (except in compliance with all statutes, laws, ordinances, rules
and regulations) and will not directly or indirectly transport or arrange for the transportation of
any Hazardous Materials (except in compliance with all statutes, laws, ordinances, rules and
regulations). Lessee covenants and agrees to maintain all of the Leased Property at all times free
of any Hazardous Materials, (except in compliance with all statutes, laws, ordinances, rules and
regulations). As to the Leased Property, Lessee agrees promptly: (i) to observe and comply with any
and all statutes, laws, ordinances, rules and regulations, licensing requirements or conditions
relating to the use, maintenance and disposal of Hazardous Materials and all orders or directives
from any official, court or agency of competent jurisdiction relating to the use or maintenance or
requiring the removal, treatment, remediation, containment or other disposition thereof, and (ii)
to pay or otherwise dispose of any fine or charge related thereto which, if unpaid, would
constitute a lien on the Leased Property (other than any fine or charge that Lessee establishes was
caused by Lessor, its predecessors in interest or those for whom Lessor is in law responsible),
unless contested in good faith by appropriate proceedings and in accordance with the provisions of
Article 10, and the right to use and the value of the Leased Property is not materially and
adversely affected thereby.

     Lessee will protect, indemnify and save harmless Lessor, its principals, officers, directors,
agents and employees from and against all liabilities, obligations, claims, damages, penalties,
costs and expenses (including, without limitation, reasonable attorneys fees and expenses) which
may be imposed upon or incurred by or asserted against any of them by reason of any failure on the
part of Lessee to perform or comply with any of the terms of this Section 7.3. Anything herein to
the contrary notwithstanding, Lessor acknowledges and agrees that the terms of this Section 7.3,
and the representations, warranties, agreements and indemnity set forth herein, shall not be deemed
to apply to (i) any Hazardous Materials present or suspected to be present in, on or under the
Leased Property, or any portion thereof, including the soil, groundwater or soil vapor, as a result
of any use, maintenance, storage, discharge, dumping, release or spillage (accidental or otherwise)
of any Hazardous Materials on, upon or onto the Leased Property, or any portion thereof, prior to
the Commencement Date, or (ii) any violation of any Hazardous Materials Laws by Lessor or Lessor’s
predecessors in interest or those for whom Lessor is in law responsible, their respective officers,
employees, contractors and agents, prior to the Commencement Date or (iii) any violation of any
Hazardous Materials Laws occurring during the Term of this Lease which arises out of the presence,
release or discharge of Hazardous Materials in, on, under or from the Leased Property prior to the
Commencement Date (each a “Prior Environmental Condition”). Lessor agrees to promptly observe and
comply with all orders or directives from any official, court or agency of competent jurisdiction
requiring the removal treatment, remediation, containment or other disposition of any Prior
Environmental Condition and to pay or otherwise dispose of any fine or charge related to any Prior
Environmental Condition which, if unpaid, would constitute a lien on the Leased Property, unless
contested in good faith by appropriate proceedings and the right to use and the value of the Leased
Property is not materially and adversely affected thereby.

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ARTICLE 8

     8.1 Maintenance and Repair. Lessee, at its expense, will keep the Leased Property and all
fixtures thereon and all landscaping, sidewalks and curbs appurtenant thereto and which are under
Lessee’s control in good order and repair (whether or not the need for such repairs occurs as a
result of Lessee’s use, the elements or the age of the Leased Property, or any portion thereof, or
any cause whatever), and, except as otherwise provided in Article 12 and Article 13, Lessee will
make all necessary and appropriate repairs thereto of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen or unforeseen.
Lessee’s repair and maintenance obligations provided for hereunder shall include, without
limitation, the roof, foundation, plumbing and utility service lines within the Facility, air
conditioning, and heating equipment, ceiling, floors, floor coverings, plate glass and walls,
structural or non-structural and exterior or interior, of the Facility and those repairs and
maintenance necessary to keep the Leased Property in substantial compliance with all requirements
for the operation of a duly licensed ninety (90) bed skilled nursing facility in the State of West
Virginia and certification for participation in the Medicare and/or Medicaid programs. Anything
herein to the contrary notwithstanding, Lessor acknowledges and agrees that (i) the terms of this
Section 8.1.1 shall not be deemed to be breached by Lessee maintaining the Leased Property in good
order and repair in at least the same condition in all material respects as on the Commencement
Date, ordinary wear and tear excepted and (ii) Lessee’s repair and maintenance obligations
hereunder shall not include Punch List Items required to be completed by Lessor under Section 3.6
or “latent defects” discovered in the first full lease year following the Commencement Date, or any
maintenance or repair caused or necessitated by the negligence or willful misconduct of or breach
of this Lease by Lessor or those for whom it may in law be responsible, all of which shall be the
obligation of Lessor to correct. For purposes of this Lease, a “latent defect” shall be deemed to
mean any hidden or concealed defect in the initial construction of the Leased Improvements which
could not have been discovered by a reasonable and customary inspection as would be made in the
exercise of ordinary care and prudence prior to acceptance of the Leased Improvements and which
defect is discovered by Lessee within one (1) full Lease Year after the Commencement Date. Lessor,
at Lessor’s cost and expense, will cause the repair or correction of any latent defect discovered
by Lessee to be promptly and diligently prosecuted to completion.

     8.2 Surrender. Upon termination of this Lease other than as a result of the purchase of the
Leased Property by Lessee in accordance with Article 23 hereof, Lessee shall peaceably vacate and
surrender the Leased Property to Lessor in the state of repair required of it pursuant to this
Lease, ordinary wear and tear, loss or damage due to casualty or taking by condemnation, excepted.
It is the specific intent of Lessor and Lessee that, upon termination of this Lease for any reason
other than as a result of the purchase of the Leased Property by Lessee in accordance with Article
23 hereof, the Leased Property may continue to be used by Lessor or its designee as a skilled
nursing facility, licensed by WVDH and all other relevant governmental bodies. In furtherance of
this objective, and to the extent not then prohibited by applicable law, upon such vacation and
surrender of the Leased Property, Lessee shall, execute all documents reasonably necessary or
required to transfer the operator’s skilled nursing facility’s license for the Leased Property and
any other relevant permits, licenses, certificates of need and other approvals to Lessor, or its
designee, provided that the reasonable out of pocket costs and expenses of any such transfer or the
processing of any application shall be paid by Lessor or its designee. In addition, Lessee shall
cooperate with Lessor and assist with Lessor’s efforts to acquire new licenses, permits and
approvals from WVDH and such other governmental bodies as may be required in order to operate the
Facility as a skilled nursing facility.

     8.3 Replacement Property. As part of Lessee’s obligations under this Article 8, Lessee shall
be responsible to maintain all Lessor Personal Property and all Lessee Personal Property in good
condition, ordinary wear and tear excepted. Subject to the foregoing, Lessee shall repair and
replace such property consistent with prudent industry practice for licensed skilled nursing
facilities. If any of Lessor

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Personal Property is replaced as a result of its (i) having been taken in condemnation, Lessee
shall be entitled to that portion of any award made for the replaced property or (ii) having been
lost, stolen, damaged, or destroyed, Lessee shall be entitled to that portion of any insurance
proceeds paid with respect to the replaced property. Any replaced property may be removed from the
Leased Property. The proceeds of the sale of any replaced Lessor Personal Property shall be paid
to Lessee and Lessee may trade in any worn out, obsolete or unusable replaced Lessor Personal
Property on the purchase of any replacement property. Lessor shall execute, upon written request
from Lessee, any and all bills of sale, assignments or other documents necessary or required to
dispose of any replaced Lessor Personal Property in accordance with this Section 8.4. Anything
herein to the contrary notwithstanding, Lessee shall have no obligation to replace, and Lessee may
from time to time during the Term of this Lease discard and not replace, any inadequate, obsolete,
worn out, unsuitable, undesirable or unnecessary Lessee Personal Property or Lessor Personal
Property forming a non-essential part of the Leased Property if in the reasonable business judgment
of Lessee it is not cost effective to do so.

     8.4 Signage. Lessee may, at its own expense, erect and maintain identification signs at the
Leased Property, including, without limitation, the entrance sign to be erected within the signage
easement along Route 60 granted to Lessee by Lessor pursuant to the Declaration, provided Lessee
shall first obtain the written consent of Lessor of all elements of such signs and such signs
comply with all applicable laws, ordinances and regulations and further provided that Lessee shall
restore any damage to the Leased Property caused by the removal of such signs.

ARTICLE 9

     9.1 Improvements, Alterations and Additions by Lessee. Subject to Section 28.1.8 hereof,
Lessee shall have the right to and may make, at its sole cost and expense, such alterations,
additions and improvements to the Leased Property from time as it may, in its reasonable business
judgment, determine are necessary or reasonably desirable for the continuing and proper use,
operation and maintenance of the Leased Property for its Primary Intended Use, provided however,
that any alterations, additions or improvements in excess (individually and not in the aggregate)
of One Hundred Thousand Dollars ($100,000.00) or which effect a structural change in the Facility
shall not be made unless and until Lessee shall have caused plan and specifications therefor to
have been prepared, at Lessee’s expense, by a licensed architect, and shall have obtained the prior
written approval of Lessor, which approval Lessor shall not unreasonably withhold. Lessor shall,
within ten (10) Business Days of request therefore, advise Lessee of its approval or disapproval of
the proposed alteration, improvement or addition. If not approved, then Lessor shall specify such
alternative conditions, if any, upon which Lessor will approve of the proposed alteration,
improvement or addition. Lessee shall cause the work on any alterations, improvements or additions
permitted to be made hereunder (the “Permitted Alteration”) to be performed, at its expense,
promptly, in a good and workmanlike manner by a licensed general contractor, in accordance with
good construction practices, and in compliance with all existing codes and regulations applicable
to the Leased Property, which improvements shall in any event constitute a complete architectural
unit in keeping with the character of the Leased Property and the area in which the Leased Property
is located and which will not change the Primary Intended Use of the Leased Property. For any
proposed alteration, improvement or addition the cost of which is in excess of One Hundred Thousand
Dollars ($100,000.00), Lessee shall, if reasonably requested by Lessor, provide Lessor with a
payment and performance bond, with a surety reasonably acceptable to Lessor, in an amount equal to
the estimated cost of the work and naming Lessor as a joint obligee on such bond. Each and every
such improvement, alteration or addition shall immediately become a part of the Leased Property and
shall belong to Lessor subject to the terms and conditions of this Lease. All materials which are
scrapped or removed in connection with the making of any Permitted Alteration, or any other
alteration, addition or improvement to the Leased Property shall be removed from the Leased
Property at Lessee’s expense and disposed of by Lessee in accordance with all applicable laws.

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     9.2 Liens. Lessee shall ensure that no construction liens or other liens or encumbrances shall
be registered against or shall otherwise affect the Leased Property or any part thereof or Lessor’s
interest therein in respect of material supplied or work done or to be done by Lessee or on behalf
of Lessee. Lessee agrees to obtain and deliver to Lessor written waivers of mechanic’s liens
against the Leased Property for all work, labor and services performed and materials furnished in
connection with any alternations, additions or improvements made to the Leased Property by Lessee
or on behalf of Lessee, in form reasonably satisfactory to Lessor’s attorney, the same to be
executed by all contractors, subcontractors, materialmen, laborers and workmen involved in such
work having a right or claim of lien therefore under applicable law. Notwithstanding the foregoing
if any mechanic’s lien is filed against the Leased Property, Lessee shall be responsible for the
reasonably timely payment and/or discharge of such lien. If Lessee fails to discharge or cause any
such lien to be discharged (by filing any bond required by law, payment or otherwise) within thirty
(30) days after receipt of Notice from Lessor of the filing of the lien, then, in addition to any
other rights or remedies of Lessor, Lessor may (shall not be obligated to) discharge the lien by
paying the amount claimed and the amount so paid and all costs and expenses (including attorneys
costs and expenses) plus interest at the Overdue Rate, shall be immediately due and payable by
Lessee to Lessor forthwith upon demand.

ARTICLE 10

     10.1 Permitted Contests. Lessee, after ten (10) days’ prior written notice to Lessor, on its
own or on Lessor’s behalf (or in Lessor’s name), but at Lessee’s expense, may contest, protest or
appeal by appropriate legal or administrative proceedings conducted in good faith and with due
diligence, the amount, determination, validity, assessment, imposition or application, in whole or
in part, of any Taxes, legal requirements, lien, attachment, levy, encumbrance, charge or claim
(collectively “Charge”) which is required to be paid, discharged, observed or complied with by
Lessee under this Lease; provided that (a) in the case of an unpaid Charge, the commencement and
continuation of such proceedings or the posting of a bond as may be permitted by applicable law
shall suspend the collection thereof from Lessor and from the Leased Property; (b) neither the
Leased Property nor any Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; (c) Lessor would not be in any
immediate danger of civil or criminal liability for failure to comply therewith pending the outcome
of such proceedings; (d) in the case of any legal requirement, compliance may legally be delayed
pending such contest and pending such contest no license, permit, approval, certificate of need,
certificate of reimbursement or other authorization necessary to operate the Facility as a skilled
nursing facility having not less than ninety (90) beds may be irrevocably suspended or revoked, or
its right to so operate the Facility or to accept patients irrevocably suspended; and (e) if such
contest be finally resolved against Lessor or Lessee, Lessee shall promptly pay the amount required
to be paid, together with all interest and penalties accrued thereon, or otherwise comply with the
applicable Charge. Lessor, at Lessee’s expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such action and, if
reasonably requested by Lessee or if Lessor so desires and then at its own expense, Lessor shall
join as a party therein. If at any time Lessor reasonably determines that payment of any charge or
claim, or compliance with any legal requirement, being contested by Lessee is necessary in order to
prevent loss of any of the Leased Property or Rent or civil or criminal penalties or other damage
(including the irrevocable revocation or suspension of any license, permit, approval, certificate
of need, certificate of reimbursement or other authorization necessary to operate the Facility or
right to accept patients), upon such prior notice to Lessee as is reasonable in the circumstances,
Lessor may pay such amount, require Lessee to comply with such legal requirement or take such other
action as it may deem necessary to prevent such penalties or damage. If reasonably necessary, upon
Lessee’s written request, Lessor, at Lessee’s expense, shall cooperate with Lessee in a permitted
contest hereunder, provided Lessee upon demand makes arrangements satisfactory to Lessor to assure
the reimbursement of any and all Lessor’s costs incurred in cooperating with Lessee in such
contest. For purposes of this Section 10.1, “legal requirement” shall mean all federal, state,
county,

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municipal and other governmental or quasi-governmental authority or agency, statutes, laws,
rules, orders, waivers, regulations, ordinances, judgments, decrees and injunctions applicable to
the Leased Property or any portion thereof, or the use of the Leased Property, or any portion
thereof, whether enacted and in force before, after or on the Commencement Date, and all permits,
licenses and authorizations relating thereto, including, but not limited to, (i) those relating to
certificates of need or health-care licenses and (ii) those authorizing the current number of
licensed beds and the level of services delivered from the Leased Property. Lessee shall indemnify
and save Lessor harmless against any liability, cost or expense of any kind that may be imposed
upon Lessor in connection with any such action.

ARTICLE 11

     11.1 General Insurance Requirements. During the Term of this Lease, Lessee, at its sole cost
and expense, shall at all times keep the Leased Property insured with the kinds and amounts of
insurance described below. This insurance shall be written by reputable companies authorized to do
insurance business in the State of West Virginia rating as measured by Best’s Key Rating Insurance
Guide of not less than “A-”. The policies must name Lessor as an additional insured. Losses shall
be payable to Lessor and Lessee as provided in Article XII. In addition, the policies shall name as
an additional insured the holder of any mortgage, charge, deed of trust or other security agreement
or encumbrance on the Leased Property or Lessor’s interest therein as to which Lessee has been
given written notice identifying such holder and the nature of its interest (all of the aforesaid
being referred to as a “Facility Mortgage” and the holder thereof being referred to as a “Facility
Mortgagee”) by way of a standard form of mortgagee’s loss payable clause. If available, each of
the insurance policies required of Lessee hereunder shall contain an agreement, by endorsement on
the policy or by independent instrument furnished to Lessor, that the insurer will endeavor to give
to Lessor (and to any Facility Mortgagee, if required by the same) at least thirty (30) days
written notice before the policy or policies in question shall be materially altered, allowed to
expire or canceled. In the event any insurance company becomes bankrupt or is placed in
receivership, such event shall not relieve Lessee of its liability to provide insurance as required
hereunder. Evidence of insurance shall be deposited with Lessor and, if requested of Lessee in
writing, with any Facility Mortgagee. The policies on the Leased Property, including the Leased
Improvements, shall insure against the following risks:

          11.1.1 Loss of or damage to the Leased Improvements and Lessor’s Personal Property by fire,
vandalism and malicious mischief, extended coverage perils known as “all risk” property insurance
coverage, and all physical loss perils as are normally covered under an extended coverage
endorsement, including but not limited to sprinkler leakage, in an amount not less than one hundred
percent (100%) of the then full replacement cost thereof (as defined in Section 11.2, below);

          11.1.2 Loss of rental under a blanket earnings and expense coverage endorsement covering risk
of loss during reconstruction necessitated by the occurrence of any of the hazards described in
Section 11.1.1. (but in no event for a period more than twelve (12) months) in an amount sufficient
to prevent Lessor and Lessee from becoming a co-insurer;

          11.1.3 Claims for personal injury, including death, and property damage occurring upon, in or
about the Leased Property under one or more policies of comprehensive general liability insurance,
written on a broad form comprehensive basis including limits, with a combined single limit per
occurrence of not less than Two Hundred Fifty Thousand Dollars ($250,000.00) and an aggregate
limitation of Seven Hundred Fifty Thousand Dollars ($750,000.00) in respect of bodily injury and
death for one or more persons or property damage;

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          11.1.4 Claims arising out of professional malpractice in an amount not more than Two Hundred
Fifty Thousand Dollars ($250,000.00) per occurrence and an annual aggregate limit of Seven Hundred
Fifty Thousand Dollars ($750,000.00);

          11.1.5 Lessee shall at all times during the Term of this Lease maintain adequate worker’s
compensation insurance coverage for all persons employed by Lessee on the Leased Property, if
required by law. Such worker’s compensation insurance shall be in accordance with the requirements
of applicable local, state, and federal law. Lessee may self insure for worker’s compensation in
strict compliance with the laws of the State of West Virginia.

     11.2 Replacement Cost. The term “full replacement cost” as used herein, shall mean the actual
replacement cost of the Leased Improvements requiring replacement from time to time of like kind
and quality, less exclusions normally provided in the standard form of All Risk Broad Form Policy.
In all events full replacement cost shall be an amount sufficient that neither Lessor nor Lessee is
deemed a co-insurer of the Leased Property.

     11.3 Waiver of Subrogation. Each party hereto waives any and every claim which arises or may
arise in its favor against the other party hereto during the Term of this Lease for any and all
loss of or damage to any of its property located within or upon or constituting a part of the
Leased Property, which loss or damage is required by terms of this Lease to be covered by valid and
collectible fire and extended coverage insurance policies to the extent that such loss or damage is
recoverable under said insurance policies. Said mutual waivers shall be in addition to, and not in
limitation or derogation of, any other waiver or release contained in this Lease with respect to
any loss of, or damage to, property of the parties hereto. Inasmuch as the above mutual waivers
will preclude the assignment of the aforesaid claim by way of subrogation, or otherwise, to an
insurance company, or to any other person, each party hereby agrees immediately to give each
insurance company which has issued to it or them policies of fire and extended coverage insurance,
written notice of the terms of said mutual waivers. All fire and casualty and property damage
insurance policies required to be carried by Lessee covering the Leased Property shall expressly
waive any right of subrogation on the part of the insurer against the other party.

     11.4 Lessee’s Personal Property. Lessee shall be solely responsible for keeping Lessee’s
Personal Property located upon the Leased Property insured against loss or damage by fire or other
casualty.

     11.5 Blanket Policy. Notwithstanding anything to the contrary contained in this Article 11,
Lessee’s obligations to carry the insurance provided for herein may be brought within the coverage
of a so-called blanket policy or policies of insurance carried and maintained by Lessee; provided,
however, that the coverage afforded Lessor will not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other requirements of
this Lease by reason of the use of such blanket policy of insurance, and provided further that the
requirements of this Article 11 are otherwise satisfied and provided further that Lessee maintains
specific allocations acceptable to Lessor.

ARTICLE 12

     12.1 Insurance Proceeds Payable on Damage or Destruction. Except as provided in Section 12.3
below, all proceeds payable by reason of any loss or damage to the Leased Property, or any portion
thereof, and insured under any policy of insurance required by Article 11 of this Lease shall be
paid to Lessor and held by Lessor in accordance with the provisions of this Article 12. Lessor
shall, unless this Lease is terminated by Lessee pursuant to this Article 12 (in which event Lessor
shall be entitled to retain such proceeds), apply the proceeds solely to the construction and
completion of any

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restoration or repair, as the case may be, of any damage to or destruction of the Leased
Property, or any portion thereof, as provided herein.

     12.2 Restoration in the Event of Damage or Destruction Covered.

          12.2.1 In the event the Leased Property, or any part thereof, is totally or partially
destroyed or damaged by fire or other casualty such that the Facility is rendered untenantable or
otherwise cannot be operated on a commercially practicable basis for its Primary Intended Use
(“Unsuitable for Its Primary Intended Use”), and it is reasonably anticipated that the necessary
repair or restoration of such damage or destruction cannot be sufficiently completed within one
hundred fifty (150) days after the date of the destruction or damage so as to make the Leased
Property fully tenantable and allow Lessee to use and occupy the same for its Primary Intended Use
with at least the same number of licensed skilled nursing beds as existed immediately prior to such
damage or destruction, then Lessee shall have the option to terminate this Lease upon such date as
is set forth in a Notice given to Lessor within sixty (60) days after the date of such destruction
or damage, which termination shall be deemed effective and Rent shall abate as of the date of such
casualty. Lessee shall promptly pay to Lessor any Rent or other charges due Lessor under this
Lease and Lessor shall promptly refund to Lessee any Rent or other charges theretofore paid by
Lessee, each prorated as of such date. As soon as possible, but not later than forty-five (45)
days after the destruction or damage, Lessor shall furnish to Lessee its good faith estimate of the
cost and time required to so restore or repair the Leased Property.

          12.2.2 In all other events in which the Leased Property, or any part thereof, is destroyed or
damaged by fire or other casualty, this Lease shall continue in full force and effect and Lessor,
at Lessor’s cost and expense, shall within thirty (30) days of such casualty commence and proceed
with reasonable diligence to restore the Leased Property so damaged to substantially the same or
better condition with at least the same number of licensed skilled nursing beds as existed
immediately prior to such casualty and complete such repair or restoration within one hundred fifty
(150) days of the casualty. In performing such restoration or repair, and as a condition to
Lessor’s obligation to restore and repair the Leased Property, Lessor (or its Facility Mortgagee)
shall receive insurance proceeds payable as the result of such fire or other casualty, in an amount
sufficient to effect such restoration and repair, and Lessee shall promptly deliver to Lessor (or
its Facility Mortgagee) any insurance proceeds it receives pertaining to the Leased Property,
except as provided in Section 12.3.

          12.2.3 If the Lease is not terminated pursuant to Section 12.2.1, the Rent payable under this
Lease thereafter shall be reduced during the period required for repair or restoration in direct
proportion that the number of skilled nursing beds remaining useable by Lessee bears to the number
of skilled nursing beds existing at the time of such fire or other casualty until such time as the
required repairs to the Leased Property have been completed.

     12.3 Lessee’s Personal Property; Business Interruption. All insurance proceeds payable by
reason of any loss of or damage to any of Lessee’s Personal Property shall be paid to Lessee and
Lessee shall hold such proceeds in trust to be used to restore and replace Lessee’s Personal
Property in the event that Lessor repairs or restores the Leased Property as herein provided. All
insurance proceeds payable by reason of the interruption of Lessee’s business during repair or
restoration of the Leased Property shall be paid to and belong to Lessee, provided that Lessee
shall use such proceeds to pay Rent to the extent due hereunder.

     12.4 Excess Proceeds. If there remains any surplus of insurance proceeds after completion of
the repair or restoration of the Leased Property, such surplus shall belong and be paid to Lessee.

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     12.5 Standard of Work. All work commenced by Lessor under this Article 12 to repair or restore
the Facility or other Leased Improvements shall be diligently prosecuted to completion in a good
and workmanlike manner, using materials of comparable quality as used in the original construction
of the Facility or other Leased Improvements requiring repair or restoration.

     12.6 Effect of Termination. Anything herein to the contrary notwithstanding, in the event of
any termination of this Lease as a result of fire or other casualty as provided in this Article 12,
any and all insurance proceeds payable as a result of such fire or other casualty in respect of the
Leased Improvements and Lessor’s Personal Property shall belong to and be the property of Lessor
and the Rent and other charges payable under this Lease shall be adjusted as of the date of such
damage or destruction. Lessee shall promptly pay to Lessor any Rent or other charges due Lessor
under this Lease and Lessor shall promptly refund to Lessee any Rent or other charges theretofore
paid by Lessee, each prorated as of such date.

     12.7 Failure to Repair. Anything herein to the contrary notwithstanding, in the event that any
damage or destruction to the Leased Property, total or partial, the repair or restoration of which
is commenced by Lessor hereunder, cannot be or is not repaired or restored so as to make the Leased
Property fully tenantable and allow Lessee to use and occupy the same for its Primary Intended Use
with the same number of licensed skilled nursing beds as existed immediately prior to such damage
or destruction within one hundred fifty (150) days of the occurrence of the damage or destruction,
then Lessee may elect to terminate this Lease upon thirty (30) days Notice to Lessor; provided,
however, if Lessor is in the process of repairing the Leased Premises when it receives Lessee’s
Notice of termination, Lessor may negate such termination by completing its repair so as to make
the Leased Premises again tenantable for the Primary Intended Use within sixty (60) days after
Lessee’s Notice of termination. In such event Lessee’s Notice of termination shall be deemed
rescinded and Lessee’s termination right shall be deemed expired.

     12.8 Unavoidable Delays. Provided that Lessor is proceeding diligently and in good faith, all
periods of time for restoration and repair of the Leased Property shall be extended for any delays
caused by acts or omissions to act of Lessee and for any Unavoidable Delays, provided that any such
extension shall not extend the time for completion of restoration and repair of the Leased Property
beyond twelve (12) months from the date of the damage or destruction requiring such restoration and
repair.

ARTICLE 13

     13.1 Condemnation.

          13.1.1 If during the Term of this Lease, the whole of the Leased Property or a substantial
portion thereof rendering the remaining portion Unsuitable for Its Primary Intended Use, is taken
or condemned by any competent public or quasi-public authority, this Lease shall terminate upon
such taking by the condemning authority. Lessee’s obligations for the payment of Rent under this
Lease shall be prorated as to the date of such termination.

          13.1.2 In the event such taking or condemnation results in a taking of less than a substantial
part of the Leased Property so that the Leased Property can continue to be licensed as a skilled
nursing facility and used for its Primary Intended Use, this Lease shall continue in full force and
effect excepting that Rent shall be reduced from the date of such taking in direct proportion that
the number of skilled nursing facility beds remaining useable by Lessee after such taking bears to
the number of skilled nursing facility beds existing at the time of the taking. In such case,
Lessor, shall, within thirty (30) days of such taking, commence and proceed with reasonable
diligence to repair or restore the Leased Property to a complete architectural unit of the same
general character and condition (as nearly as may be practical

27

 

under the circumstances) as existed immediately prior to such taking such that the Leased
Property can be occupied and used for its Primary Intended Use. Lessor shall complete such repair
or restoration within one hundred fifty (150) days of such taking. In the event that during such
repair or restoration the number of skilled nursing facility beds usable by Lessee is reduced, the
Rent shall be reduced during the period of such repair or restoration in the proportion that the
reduction bears to the number of skilled nursing facility beds existing at the time of the taking.
Lessor shall refund to Lessee any Rent paid by Lessee to which Lessee may be entitled as a result
of the abatement provided for herein. Lessor shall contribute to the cost of restoration and
repair the amount of any and all awards of damages resulting from such taking payable to Lessor.
Anything herein to the contrary notwithstanding, if the expense of repair and restoration exceeds
the condemnation award received by Lessor, then Lessor shall have thirty (30) days after such
partial taking within which to decide whether to make the repair and restoration or terminate this
Lease. If within this period, Lessor gives written notice of termination to Lessee, then this
Lease shall terminate as of the date of such taking and Lessee’s obligations for the payment of
Rent shall be prorated as of the date of such termination. If Lessor fails to give Lessee written
notice of termination within this period, then Lessor shall proceed to make the required
restoration and repair as herein provided.

     13.2 Awards. All compensation awarded upon any taking or condemnation of the Leased Property,
or any part thereof shall belong to Lessor, and Lessee shall have no claim thereto, except that if
and only to the extent that the award includes such items, Lessee may make its claim against the
condemning authority and shall be entitled to receive and retain that portion of the award, if any,
for moving expenses, business dislocation damages, the cost of Lessee’s Personal Property and
leasehold improvements. Nothing contained herein, however, shall be construed to preclude Lessee
from prosecuting any claim directly against the condemning authority for any award to which Lessee
may at law be entitled provided that any such claim does not diminish the award to Lessor.

     13.3 Standard of Work. All work commenced by Lessor under this Section 13 to repair or restore
the Leased Property shall be diligently prosecuted to completion in a good and workmanlike manner
using materials of comparable quality as used in the original construction of the Leased Property.

     13.4 Failure to Repair. Anything herein to the contrary notwithstanding, in the event that any
partial taking of the Leased Property, the repair or restoration of which as been commenced by
Lessor hereunder, cannot be restored within one hundred fifty (150) days of the date of such
partial taking so as to make the portion of the Leased Property not so taken fully tenantable and
allow Lessee to occupy and use the Leased Property for its Primary Intended Use with the same
number of licensed skilled nursing beds as existed immediately prior to such taking, then Lessee
may elect to terminate this Lease upon thirty (30) days Notice given to Lessor.

     13.5 Unavoidable Delays. Provided that Lessor is proceeding diligently and in good faith, all
periods of time for restoration and repair of the Leased Property shall be extended for any delays
caused by acts or omissions to act of Lessee and for any Unavoidable Delays, provided that any such
extension shall not extend the time for completion of any required restoration and repair of the
Leased Property beyond twelve (12) months from the date of taking by the condemning authority.

ARTICLE 14

     14.1 Events of Default. The occurrence of any one or more of the following events shall
constitute an event of default (individually, an “Event of Default” and, collectively or more than
one, “Event of Default”) under this Lease:

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          14.1.1 If Lessee shall fail to make payment of Rent payable by Lessee under this Lease when
the same becomes due and payable and such failure is not cured by Lessee within a period of ten
(10) days after Notice thereof from Lessor; provided, Lessor shall not be required to send more
than one notice of non-payment within any twelve (12) month time period with respect to the
non-payment of Rent. After the receipt of a notice of non-payment, any failure to pay within ten
(10) days of the date when due any subsequent payment of Rent required of Lessee during said twelve
(12) month period shall be an Event of Default; or

          14.1.2 If Lessee shall:

               14.1.2.1 admit in writing its inability to pay its debts generally as they become due,

               14.1.2.2 file a petition seeking reorganization or relief under any applicable laws relating
to the bankruptcy or insolvency,

               14.1.2.3 make a general assignment for the benefit of its creditors,

               14.1.2.4 consent to the appointment of a receiver of itself or of the whole or any substantial
part of its property,

               14.1.2.5 institute proceedings to be adjudicated a bankrupt or insolvent, or

               14.1.2.6 consent to the institution of bankruptcy or insolvency proceedings against it, or

          14.1.3 If Lessee shall, on a petition in bankruptcy filed against it, be adjudicated a
bankrupt or have an order for relief thereunder entered against it or a court of competent
jurisdiction shall enter an order or decree appointing, without the consent of Lessee, a receiver
of Lessee, or of the whole or substantially all of its property, or approving a petition filed
against Lessee, seeking reorganization or arrangement of Lessee, under the federal bankruptcy laws
or any other applicable law, and such judgment, order or decree shall not be vacated or set aside
or stayed within sixty (60) days from the date of the entry thereof; or

          14.1.4 If Lessee shall voluntarily surrender or attempt to surrender its license to operate
the Leased Property as a skilled nursing facility; transfer or attempt to transfer the license to
operate the Leased Property as a skilled nursing facility to any other location; or voluntarily
discontinue the operations of the Leased Property as a skilled nursing facility for a period in
excess of one hundred eighty (180) days (except in connection with fire or other casualty or
restoration of the Leased Property following fire or other casualty or condemnation); or

          14.1.5 If Lessee shall fail to observe or perform any other term, covenant or condition of
this Lease, and such failure is not cured by Lessee within a period of thirty (30) days after
Notice thereof from Lessor, unless such failure cannot with due diligence be cured within a period
of thirty (30) days, in which case such failure shall not be deemed to continue if Lessee proceeds
promptly and with due diligence to cure the failure and diligently prosecutes such cure to
completion;

          14.1.6 If (i) Lessee has any license, permit, approval, certificate of need, certificate of
reimbursement or other authorization necessary to operate the Facility as a provider of health care
services in accordance with its Primary Intended Use suspended or revoked, or its right to so
operate the Facility or to accept patients suspended, and Lessee fails to remedy any condition
causing such revocation

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or suspension within any cure period allowed therefore by the applicable agency or authority
or, if no such cure period is allowed or specified by the applicable agency or authority, Lessee
fails to remedy the condition promptly and diligently following Lessee’s receipt of notice of such
condition and, in any event, prior to the final, nonappealable revocation or suspension of any such
license, permit, approval, certificate of need, certificate of reimbursement, other authorization
or right to operate the Facility or to accept patients at the Facility, or (ii) receives a Citation
with respect to the Facility and fails to cure the condition that is the subject of the Citation
within the period of time required for such cure by the issuer of the Citation or, but in any event
prior to the final, nonappealable revocation or suspension of any license, permit, approval,
certificate of need, certificate of reimbursement or other authorization necessary to operate the
Facility as a provider of health care services in accordance with its Primary Intended Use or to
receive Medicare or Medicaid payments with respect to residents of the Facility, or prior to the
appointment of a temporary manager by the applicable agency or authority, as the case may be. No
notice shall be required to immediately terminate this Lease in the event of an Event of Default
under this subsection 14.1.6.

     14.2 Remedies. If an Event of Default shall have occurred and be continuing, Lessor shall have
the right, at its election, then or at any time thereafter, to pursue any one or more of the
following remedies, in addition to any remedies which may be permitted by law or by other
provisions of this Lease, without further notice or demand, except as hereinafter provided:

          14.2.1 Without any notice or demand whatsoever, Lessor may take any one or more actions
permissible at law to ensure performance by Lessee of Lessee’s covenants and obligations under this
Lease. In this regard, it is agreed that Lessor may enter upon and take possession of such Leased
Property with or without terminating this Lease and thereupon continue to demand from Lessee the
monthly rentals and other charges provided in this Lease. Lessor shall use reasonable efforts in
the circumstances but shall have no absolute obligation to relet the Leased Property. If Lessor
does, at its sole discretion, elect to relet the Leased Property, such action by Lessor shall not
be deemed as an acceptance of Lessee’s surrender of the Leased Property unless Lessor expressly
notifies Lessee of such acceptance in writing pursuant to subsection 14.2.2 of this Section 14.2,
Lessee hereby acknowledging that Lessor shall otherwise be reletting as Lessee’s agent. It is
further agreed in this regard that in the event of any Event of Default described in Section
14.1.5, Lessor shall have the right to enter upon the Leased Property and do whatever Lessee is
obligated to do under the terms of this Lease; and Lessee agrees to reimburse Lessor on demand for
any reasonable expenses which Lessor may incur in thus effecting compliance with Lessee’s
obligations under this Lease, and further agrees that Lessor shall not be liable for any damages
resulting to Lessee from such action provided that Lessor is not negligent.

          14.2.2 Lessor may terminate this Lease by Notice to Lessee, in which event Lessee shall
immediately surrender the Leased Property to Lessor, and if Lessee fails to do so, Lessor may,
without prejudice to any other remedy which Lessor may have for possession or arrearage in Rent
(including any interest at the Overdue Rate which may have accrued thereon), enter upon and take
possession of the Leased Property, expel or remove Lessee, and, at Lessor’s option, or if required
by law in mitigation of Lessor’s damages (provided, however, that Lessor does not undertake to
mitigate damages except to the extent so required by law), relet or operate the Leased Property;
provided, however, Lessor shall have no absolute obligation to relet the Property. In addition,
Lessee agrees to pay to Lessor on demand the amount of all loss and damage which Lessor may suffer
by reason of any termination effected pursuant to subsection 14.1.5. Lessee shall pay to Lessor
the difference between the Rent and other charges provided in this Lease for each calendar month
and the monthly rentals and other charges or net income from the operation of the Leased Property
actually collected by Lessor for such month. If it is necessary for Lessor to bring suit in order
to collect any deficiency, Lessor shall have a right to allow such deficiencies to accumulate and
to bring an action on several or all of the accrued deficiencies at one time. Any such suit shall
not prejudice in any way the right of Lessor to bring a similar action for any subsequent
deficiency

30

 

or deficiencies. Any amount collected by Lessor from subsequent tenants for any calendar
month or from the operation of the Leased Property in excess of the Rent and other charges provided
in this Lease shall be credited to Lessee in reduction of Lessee’s liability for any calendar month
for which the amount collected by Lessor will be less than the monthly rentals and other charges
provided in this Lease; but Lessee shall have no right to such excess other than the above
described credit.

          14.2.3 The rights and remedies of Lessor hereunder are cumulative, and pursuit of any of the
above remedies shall not preclude pursuit of any other of the above remedies, any other remedies
prescribed in other Sections of this Lease, or any other remedies provided by law or equity.
Forbearance by Lessor to enforce one or more of the remedies herein provided upon an Event of
Default shall not be deemed or construed to constitute a waiver of such Event of Default.

     14.3 Additional Expenses. In addition to payments required pursuant to subsections 14.2.2 and
14.2.2 above, Lessee shall compensate Lessor for all reasonable expenses incurred by Lessor in
repossessing the Leased Property (including any increase in insurance premiums caused by the
vacancy of the Leased Property) and all reasonable expenses incurred by Lessor in reletting
(including repairs, remodeling, replacements, advertisements and brokerage fees).

     14.4 Legal Expenses. In case suit shall be brought for recovery of possession of the Leased
Property, for the recovery of Rent or any other amount due under the provisions of this Lease, or
because of the breach of any other covenant herein contained on the part of Lessee to be kept or
performed and a breach shall be established, Lessor shall be entitled to recover from Lessee its
attorneys’ fees and other legal expenses incurred in connection therewith.

     14.5 Waiver of Appraisement, Valuation, etc. In the event Lessee should default under any of
the provisions of this Lease, Lessee agrees to waive, to the extent it may lawfully do so, the
benefit of all appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, and all right of appraisement and redemption to which it may be entitled.

     14.6 Overdue Sums. If Lessee should fail to timely pay any sum due Lessor hereunder, such
amount shall bear interest at the Overdue Rate from the date due until paid.

ARTICLE 15

     15.1 Lessor’s Right to Cure Lessee’s Default. If Lessee shall fail to make any payment or to
perform any act required to be made or performed under this Lease, and to cure the same within the
relevant time periods provided in Section 14.1, Lessor, without further Notice to or demand upon
Lessee, and without waiving or releasing any obligation of Lessee, and without waiving or releasing
any obligation or default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee, and may, to the
extent permitted by law, enter upon the Leased Property for such purpose and take all such action
thereon as, in Lessor’s sole opinion, reasonably exercised, may be necessary or appropriate
therefor. Provided, however, that should Lessor reasonably determine that the giving of such Notice
as is provided for in Section 14.1 would risk loss to the Leased Property or cause damage to
Lessor, then Lessor shall give such Notice as is practical under the circumstances. No such entry
shall be deemed an actual or constructive eviction of Lessee. All sums so paid by Lessor and all
costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses, in each
case, to the extent permitted by law) so incurred, together with an administrative charge (to the
extent permitted by law) equal to 15% of such amount paid by Lessor, shall be paid by Lessee to
Lessor on demand. The obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.

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ARTICLE 16

     16.1 Holding Over. If Lessee shall for any reason (other than the exercise by Lessee of its
option to purchase as provided in Article 23 or in connection with the transfer of operational
control of the Facility upon termination as provided for in Article 28) hold over and remain in
possession of the Leased Property after the expiration of the Term hereof, such possession shall be
as a month-to-month tenant during which time Lessee shall pay as rental each month an amount equal
to one hundred twenty five per cent (125%) of the then prevailing monthly Rent under this Lease
pursuant to the provisions of this Lease with respect to the Leased Property. During such period of
month-to-month tenancy, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to
the extent given by law to month-to-month tenancies, to continue its occupancy and use of the
Leased Property. Nothing contained herein shall constitute the consent, express or implied, of
Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease.

ARTICLE 17

     17.1 Subordination, Non-Disturbance and Attornment. Lessor may, subject to the terms and
conditions set forth in this Article 17, from time to time create or otherwise cause to exist any
Facility Mortgage upon the Leased Property to secure any borrowing or other means of financing or
refinancing. Any such Facility Mortgage (i) shall contain the right to prepay (whether or not
subject to a prepayment penalty), (ii) shall be placed with or held by a commercial bank or savings
and loan association, trust company, insurance company, pension or retirement fund, real estate
investment trust, college, university, charitable or religious organization or other similar
institutional lenders authorized to make loans in the State of West Virginia, (iii) shall cover
only the Leased Property, (iv) shall be for such amounts and provide terms of payment such that the
aggregate principal balance from time to time outstanding under all Facility Mortgages on the
Leased Property from time to time shall not exceed the amount of the Purchase Price to be paid for
the Leased Property by Lessee during months 12-23 of the Term pursuant to Article 23, below. The
parties acknowledge that as of the Commencement Date the Leased Property will be subject to an
existing Facility Mortgage (the “Existing Facility Mortgage”) in favor of the Ohio Valley Bank (the
“Existing Facility Mortgagee”) and that such Existing Facility Mortgage (and one or more
refinancings thereof) may provide for the financing of the cost of the construction of the Facility
and other purposes during all or a portion of the Lease Term. Provided that Lessor shall have
first obtained and delivered to Lessee a Non-Disturbance Agreement (as hereinafter defined and
described) from the Facility Mortgagee of any such Facility Mortgage, and in the case of the
Existing Facility Mortgage shall have delivered such Non-Disturbance Agreement to Lessee on or
before the Commencement Date, this Lease and all the rights of Lessee hereunder will be subordinate
to such Facility Mortgage and to all modifications, extensions, substitutions and refinancings
thereof and all advances made or hereafter to be made thereunder. This clause shall be
self-operative and no further instrument of subordination shall be required in order to effect such
subordination but Lessee agrees to execute and deliver such additional instruments as Lessor or its
lender may reasonably require in order to confirm such subordination or otherwise carry out the
intent of this section. In connection with and as a condition precedent to any subordination on
the part of Lessee to any Facility Mortgage, including the Existing Facility Mortgage, Lessor shall
provide Lessee with a non-disturbance agreement (the “Non Disturbance Agreement”) reasonably
acceptable to Lessee executed by the Facility Mortgagee and providing that should such Facility
Mortgagee (or a purchaser at a judicial or non-judicial sale or foreclosure) acquire title or
control of or sell the Land and Leased Improvements, or any part thereof, of which the Leased
Property is a part by way of the exercise of a power of sale, foreclosure or deed in lieu of power
of sale or foreclosure, or otherwise, that such Facility Mortgagee, or any purchaser at such sale
or other grantee or transferee of the Land and Leased Improvements, or any part thereof, shall
acquire or hold the same subject to this Lease and will not disturb Lessee’s possession under this
Lease for the remainder of the Term hereof. Such

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Non-Disturbance Agreement will recognize Lessee’s rights under this Lease, including without
limitation its purchase rights as provided under Article 23 hereof, and will permit insurance
proceeds or condemnation awards to be used for any restoration or repair required by the provisions
of Section 3.1.1 and Articles 12 and 13 of this Lease. In such event, Lessee hereby agrees to
attorn to and reorganize such purchaser or other grantee or transferee as Lessor under this Lease.

     17.2 Facility Mortgage Agreements. So long as Lessee has timely paid all Rent due hereunder,
Lessor covenants that it will timely and properly remit all mortgage payments in accordance with
the terms and provisions of any Facility Mortgage. Lessor will utilize its best efforts to obtain
a commitment from each Facility Mortgagee to notify Lessee of any default under its Facility
Mortgage and to grant Lessee the same opportunity to cure any default as that afforded to Lessor
(but Lessee shall not be obligated to do so). If Lessor is unable to obtain such a commitment,
Lessor will give Lessee notice of each such default and afford Lessee an opportunity to cure such
default (but Lessee shall not be obligated to do so) if Lessor is unable to cure the same within
the applicable cure period, if any. Provided that Lessee is given the Non-Disturbance Agreement
provided for herein, Lessee, will afford the Facility Mortgagee a party thereto with a copy of any
Notice of default given by Lessee to Lessor and an opportunity to cure any default of Lessor under
this Lease, such cure right to be the same as that afforded to Lessor and to run concurrently with
the cure rights of Lessor under this Lease.

     17.3 Estoppel Certificates. Each party hereto, within ten (10) Business Days after request
therefor by the other party, shall execute and deliver to the requesting party, in contemplation of
the sale or mortgage of the Leased Property, an estoppel certificate which shall, at a minimum,
state to the extent true: (1) that the Lease provided to the lender or purchaser is a true and
correct copy of the Lease and that it has not been modified or terminated except as set forth, (2)
that the Rent in the Lease has not been modified, (3) that there are no disputes between Lessor and
Lessee existing as to the Lease, (4) that to the best of Lessee’s knowledge Lessor has complied
with the terms of this Lease to the date of the certificate, (5) that there has been no Rental paid
more than thirty (30) days in advance, and (6) such other statements, acknowledgments and
information as is customarily called for in estoppel certificates delivered in connection with
commercial tenancies.

ARTICLE 18

     18.1 Indemnification. To the fullest extent permitted by applicable law, Lessee will protect,
indemnify, save harmless and defend Lessor, from and against all liabilities, obligations, claims
(including, without limitation, professional malpractice claims), damages, penalties, fines,
deficiencies, causes of action, costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses), imposed upon or incurred by or asserted against Lessor by reason of:
(i) any accident, injury to or death of persons or loss of or damage to property occurring on or
about the Leased Property during the Lease Term, (ii) any failure on the part of Lessee to perform
or comply with any of the terms of this Lease to be performed or complied with by Lessee and (iii)
any business or other activity carried on, permitted or suffered with respect to the Leased
Property by Lessee during the Term or thereafter during any time in which Lessee is in possession
of the Leased Property; provided, however, that such indemnity will not apply to the extent that
any of the foregoing is caused by or attributable to the negligence or willful misconduct of Lessor
or those for whom it may in law be responsible, or the breach or default by Lessor of its
covenants, agreements or obligations under this Lease.

     To the fullest extent permitted by applicable law, Lessor will protect, indemnify, save
harmless and defend Lessee, from and against any and all liabilities, obligations, claims, damages,
penalties, fines, deficiencies, causes of action, costs and expenses (including reasonable
attorneys’ fees and expenses) imposed upon, suffered or incurred by, or asserted against Lessee by
reason of, or arising out of, or related to: (i) the use or operation of, or any activity conducted
on or from, the Leased Property prior to

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the Commencement Date, (ii) the breach or untruth of the representations, warranties and
covenants as to the condition of the Leased Property made in Article 3 hereof, (iii) any accident,
injury to or death of persons or loss of property occurring on or about the Leased Property, prior
to the Commencement Date, or (iv) any breach by Lessor or failure on the part of Lessor to perform
or comply with any of its obligations, covenants or agreements under this Lease; provided, however,
that such indemnity will not apply to the extent that any of the foregoing is caused by or
attributable to the negligence or willful misconduct of Lessee or those for whom it may in law be
responsible, or the breach or default by Lessee of its covenants agreements or obligations under
this Lease.

ARTICLE 19

     19.1 Assignment and Subletting. Lessee shall not be entitled to assign all or any part of
Lessee’s interest in this Lease or sublet or part with the possession of the whole or any part of
any Leased Property without the prior written consent of Lessor, which consent shall be in Lessor’s
sole discretion. As a condition to any permitted assignment or sublease, Lessee shall remain and
continue to be obligated for all of the terms and provisions of this Lease, including the payment
of Rent, unless specifically released therefrom in writing by Lessor. In the event of any
permitted assignment of this Lease, said assignee shall assume in writing all obligations of Lessee
under this Lease which shall accrue after such assignment. For the purposes of this Lease, the
following shall be considered an assignment of this Lease by Lessee: (a) a management or similar
agreement relating to the operation and/or control of the Leased Property (other than any
management agreement or similar agreement between Lessee and an Affiliate of Lessee), and (b) the
transfer, assignment, sale, hypothecation or other disposition of any stock or membership interests
in Lessee (voluntary or involuntary, by operation of law or otherwise, but specifically excluding
any change resulting from the transfer, assignment, sale, hypothecation or other disposition of
publicly traded shares of stock) which results in a change in the person or entity that ultimately
exerts effective control over the management of the affairs of Lessee as of the date hereof.

     19.2 Permitted Assignments. Anything herein to the contrary notwithstanding, Lessor’s consent
shall not be required for (i) an assignment of all (but not a portion) of Lessee’s right, title and
interest in and to this Lease to an Affiliate of Lessee, or (ii) a transfer, in a single
transaction, of all (but not a portion) of the ownership and voting interests in Lessee to an
Affiliate of Lessee (a “Permitted Assignment”), provided that (a) at the time that such assignment
becomes effective, no Event of Default on the part of Lessee then exists under the Lease, (b) such
assignment is made by a written assignment and assumption agreement in form reasonably satisfactory
to Lessor and no such assignment shall be valid and no such transferee shall take possession of the
Leased Property until an executed counterpart of such assignment has been delivered to Lessor; (c)
the use of the Leased Property remains unchanged, (d) Lessee shall not be released from its
obligations under this Lease by virtue of such assignment and (d) if the Affiliate ceases to be an
Affiliate of Lessee, the cessation shall be deemed a separate transaction requiring Lessee to
obtain the consent of Lessor. Notwithstanding the foregoing, in no event shall an initial public
offering of Lessee be deemed to be an assignment of the Lease; provided, however, that after such
initial public offering of Lessee, any transfer, assignment, sale, hypothecation or other
disposition of the voting stock of Lessee which results in twenty-five percent (25%) or more of the
voting stock of Lessee being held by any person or entity or related group of persons or entities
who did not have such ownership after the initial public offering shall be deemed to be an
assignment of the Lease.

ARTICLE 20

     20.1 Lessor’s Right to Inspect. Lessee shall permit Lessor and its authorized representatives,
upon reasonable prior Notice, to inspect the Leased Property during usual business hours subject to
any security, health, safety or confidentiality requirements of any governmental agency or
insurance requirement relating to the Leased Property, or imposed by law or applicable regulations.
Lessor agrees

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to exercise its privilege in such a way that there will be no unreasonable interference with
the business conducted by Lessee from the Leased Property. Lessee shall have the right to have a
representative present at all times during any such inspection.

ARTICLE 21

     21.1 Quiet Enjoyment. Lessor covenants that Lessor is lawfully seized and possessed of the
Leased Property, has the full power, right and authority to execute and deliver this Lease and to
perform its obligations hereunder without the necessity of the consent or joinder of any other
person or party, and that the Leased Property is free and clear of any liens, encumbrances, rights,
interests or claims of any other parties or limitations or restrictions on its use, of any kind or
nature, other than the Permitted Exceptions. So long as there is no Event of Default on the part
of Lessee hereunder which has not been timely cured, Lessor covenants and agrees that Lessee shall
peaceably and quietly have, hold and enjoy the exclusive right to the Leased Property for the full
Term of this Lease, free from any hindrance, disturbance, interference, or claim by any other
person or party.

     21.2 No Encumbrance by Lessor. In furtherance of Lessee’s right to quiet enjoyment of the
Leased Property during the Term hereof and in consideration of the purchase and sale rights
provided for in Article 23 hereof, Lessor agrees that it will not, without Lessee’s prior written
consent, grant, convey, create, suffer, or permit or allow to be created or incurred or to exist,
any lien, restriction, encumbrance or other exception to its title to and interest in the Leased
Property, or any part thereof, other than the Permitted Exceptions and Facility Mortgages in
compliance with Article 17 hereof.

ARTICLE 22

     22.1 Notices. All notices, demands, requests, consents, approvals and other communications
required or permitted to be made or given hereunder shall be in writing and (i) personally
delivered or (ii) sent by facsimile transmission or by certified or registered mail (postage
prepaid), return receipt requested, or by a recognized national courier service, addressed to the
respective parties as follows:

          22.1.1 if to Lessee:

Diversicare Rose Terrace, LLC

1621 Galleria Boulevard

Brentwood, Tennessee 37027

Attn: L. Glynn Riddle

Telefax No.: (615) 771-7409

          22.1.2 if to Lessor:

A.B.E., LLC

5521 Ohio River Road

Point Pleasant, West Virginia 25550

Attn: Edward A. Bell

Telefax No.: (304) 674-0103

or to such other address as any party may hereafter designate in writing to the other party. Notice
shall be deemed effectively delivered when personally delivered, when actually received by
facsimile transmission or overnight courier if such facsimile transmission or delivery is made on a
Business Day, or if not, on the first Business Day after delivery or facsimile transmission, or
four (4) Business Days after being deposited in the United States mail, with postage prepaid, by
certified or registered mail, return

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receipt requested. If the postal service is interrupted or is substantially delayed, any Notice
must be given by personal delivery, courier service or facsimile transmission.

ARTICLE 23

     23.1 Option to Purchase. Provided that no Event of Default on the part of Lessee hereunder has
occurred and is then continuing, Lessor hereby grants and conveys unto Lessee an option to purchase
the Leased Property in its entirety beginning on the first day of the twelfth (12th)
month of the Initial Term of this Lease and ending on the last day of the sixtieth (60th) month of
this Lease (the “Option Period”) for a purchase price equal to a percentage of the Total Project
Costs (the “Purchase Price”) as follows:

	 	 	 
	Month of Exercise	 	Percentage of
	Of Option	 	Total Project Costs
	 
	12 — 23
	 	110%
	24 — 35
	 	112%
	36 — 47
	 	114%
	48 — 60
	 	120%

Upon the final determination of Total Project Costs, Lessor and Lessee will execute an addendum to
this Lease setting forth the amount of the Purchase Price to be paid by Lessee.

     23.2 Notice of Election. Lessee shall notify Lessor in writing, by certified mail, return
receipt requested, addressed to Lessor at the address specified herein for Notice or at such other
address specified in writing by Lessor to Lessee, of its election to exercise this option to
purchase. Such written notice must be after the commencement of but no later than the expiration
of the Option Period. Upon the giving of such Notice by Lessee, this Lease shall become a binding
agreement of purchase and sale.

     23.3 Title Insurance. Within twenty (20) days of the exercise by Lessee of its option to
purchase provided for herein, Lessee shall obtain an owner’s title insurance commitment from a
nationally recognized title insurance company acceptable to Lessee for the full amount of the
Purchase Price, reflecting a good and marketable fee simple and insurable title in and to the Land
and Leased Improvements in Lessor, subject only to any existing Facility Mortgages, this Lease,
standard and general printed exceptions, zoning, land use and subdivision regulations of the
municipality and/or state governing the Leased Property, liens for ad valorem taxes not yet due and
payable, the Permitted Exceptions set forth on Exhibit C attached hereto and matters caused
by or consented to by Lessee, all of which, except for any Facility Mortgage and the standard and
general printed exceptions, shall be deemed “Permitted Exceptions” for purposes of this Article 23.
Lessee shall then have twenty (20) days within which to have the title insurance commitment
examined and notify Lessor in writing of any objections to title. If any objections to title
(other than Permitted Exceptions) are noted by Lessee, then Lessor shall have a reasonable period
of time within which to cure such defect in title; provided, however, Lessor shall not be obligated
to pay any sums to cure such title defects except for liens against the Leased Property caused by
Lessor. In the event the defect in title cannot be or is not cured to the reasonable satisfaction
of Lessee, then Lessee may, as applicable, (i) elect to rescind its exercise of the option to
purchase and the Term of this Lease shall continue in full force and effect subject to Lessee’s
option to purchase set forth in this Article 23 or (ii) if such defect causes Lessor’s title in the
Leased Property to be unmarketable and uninsurable by national title insurance company, elect to
cancel and rescind its agreement to purchase the Leased Property, in which event such agreement
shall terminate and Lessee shall have no further obligation to purchase the Leased Property. Title
insurance shall be upon the standard ALTA Owner’s Policy form in existence at that time and if
requested by Lessee, a combination owner’s/mortgagee’s policy shall be issued. The title
commitment will provide for and the title insurance policy when issued

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will include extended coverage deleting all standard and general printed exceptions and such
ALTA form endorsements, if available, or their available equivalents, as Lessee may reasonably
require, all at Lessee’s sole cost and expense.

     23.4 Survey. Within twenty (20) days of the exercise by Lessee of its option to purchase
provided for hereby, Lessee shall obtain a current as-built survey reflecting the boundaries of the
Leased Property, the location of the improvements thereon and the location of any easements,
rights-of-way or other matters affecting the property prepared by a registered professional land
surveyor licensed in the jurisdiction where the Leased Property is located in accordance with the
then Minimum Standard Detail Requirements established and adopted by ALTA and ASCM (or their
successors), certified to Lessor and Lessee by the surveyor as directed by Lessee, and in a form
sufficient to remove from the title insurance policy to be issued under Paragraph 23.3 the
so-called standard printed survey exceptions. Lessee shall then have twenty (20) days within which
to have the survey examined and to notify Lessor in writing of any matters affecting title to the
Land and Leased Improvements shown by the survey to which Lessee reasonably objects. If any
objections to title (other than Permitted Exceptions) are noted by Lessee, then Lessor shall have a
reasonable period of time within which to cure such objection. In the event such objection cannot
be or is not cured to the reasonable satisfaction of Lessee, then Lessee may, as applicable, (i)
elect to rescind its exercise of the option to purchase and the Term of this Lease shall continue
in full force and effect subject to Lessee’s option to purchase set forth in this Article 23 or
(ii) if such defect causes Lessor’s title to be unmarketable and uninsurable by a national title
insurance company, elect to cancel and rescind its agreement to purchase the Leased Property, in
which event such agreement shall terminate and Lessee shall have no further obligation to purchase
the Leased Property.

     23.5 Lessor’s Costs. At Closing, Lessor shall pay for any curative title work undertaken by
Lessor, the payment of any transfer, stamp or deed conveyance tax, state and local sales tax, and
its own attorney’s fees incurred in connection with the transactions provided for in this Article
23.

     23.6 Lessee’s Costs. At Closing, Lessee shall pay for the cost of the title insurance, the
survey, recording fees, and its own attorney’s fees incurred in connection with the transactions
provided for in this Article 23.

     23.7 Closing. Closing shall be held as soon as practical, but in all events on or before
ninety (90) days following the exercise date specified in the Notice provided by Lessee to Lessor
at a location that is mutually agreed upon between the parties. The leasehold interest created by
this Lease shall merge with the title to the Leased Property conveyed by Lessor and this Lease
shall terminate as of the date of closing. As a condition precedent of Lessor’s obligations and a
delivery item on the part of Lessee, Lessee shall pay to Lessor any and all amounts due Lessor
outstanding or accrued under the Lease or by reason of Lessee’s undertakings pursuant hereto.
Lessee shall be entitled to receive a credit against the Purchase Price for the amount of the
Security Deposit held by Lessor (if cash) and any and all amounts due Lessee outstanding or accrued
under the Lease. At closing, Lessee shall pay the full amount of the Purchase Price due for the
purchase of the Leased Property, subject to any adjustments provided for herein. At closing,
Lessor shall deliver to Lessee the following:

          23.7.1 A warranty deed, with general warranties of title, duly executed and acknowledged by
Lessor sufficient to convey to Lessee, or its designee, good and marketable fee simple title to the
Land and Leased Improvements, together with all rights and easements running with and appurtenant
to the Land under the Declaration, free and clear of all liens and encumbrances (including any
Facility Mortgage) except for Permitted Exceptions (other than the Existing Facility Mortgage, it
being intended that the Leased Property will be conveyed free and clear of all Facility Mortgages);

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          23.7.2 A bill of sale and assignment duly executed and acknowledged by Seller, with
special warranties of title, conveying all of Lessor’s Personal Property, Lessor’s Permits and
General Intangibles, and all other personal property and interests therein owned or held by Lessor
and used in connection or located in or on the Leased Property;

          23.7.3 Assignment of any and all service, maintenance or operating agreements or contracts in
favor of Seller, if any, accepted by Lessee, existing in connection with the Leased Property;

          23.7.4 Assignment of any and all warranties in favor of Seller, as owner of the Leased
Property, pertaining to any part of the Leased Property;

          23.7.5 A full release of all Facility Mortgages;

          23.7.6 A non-foreign affidavit from Lessor, or its appropriate officer, duly executed and
acknowledged, to the effect that Lessor is not a “foreign person” as that term is used in Section
1445 of the Internal Revenue Code of 1986, as amended;

          23.7.7 Certified copies of the resolutions of Lessor authorizing the sale of the Leased
Property and setting forth the individuals authorized to bind Lessor; and

          23.7.8 Any other documents reasonably requested by Lessee in connection with closing the sale
of the Leased Property.

     23.8 Risk of Loss. Until the closing, risk of loss of the Leased Property shall be that of Lessor. In the
event the Leased Property, or any part thereof, is totally or partially destroyed or damaged by
fire or other casualty prior to the date of closing, Lessor shall be obligated to repair the same
in accordance with Article 12 hereof before the date of closing. In the event such damage or
destruction is not or cannot be repaired within such time, then Lessee, at is option, may elect
either (i) to terminate its purchase of the Leased Property or (ii) to carry out its purchase of
the Leased Property in its entirety despite such damage or destruction, in which event Lessee shall
be entitled to and shall receive all insurance proceeds or other awards payable as a result of or
in connection with such damage or destruction and Lessor shall immediately pay to Lessee any such
proceeds or awards then received by Lessor. At Closing, Lessor shall transfer and assign to Lessee
all rights of Lessor with respect to payments by or from and with respect to recovery against, any
party whomsoever for damages or compensation on account of such damage or destruction and shall
also receive a credit against the purchase price in an amount equal to the deductible amount of
the insurance.

     23.9 Condemnation. In the event that any condemnation proceedings affecting the Land or Leased Improvements,
or any part thereof, shall be commenced or threatened prior to closing, Lessee may, at its option,
elect (i) to terminate its purchase of the Leased Property or (ii) to carry out its purchase of the
Leased Property in its entirety despite such condemnation, in which event Lessee shall be entitled
to receive, and at closing Lessor shall transfer and assign to Lessee all of its right, title and
interest in and to, any and all condemnation proceeds, awards or other sums payable or to be paid
(and Lessor shall pay to Lessee any such proceeds, awards or sums then received by Lessor) on
account of or in lieu of such condemnation or taking of the Leased Property, or any part thereof.

     23.10 Default. If either Lessor or Lessee fails or refuses to consummate the sale or purchase
of the Leased Property for reasons other than a permitted termination or cancellation, the other
party may, at its option, (i) terminate the sale or purchase in which event neither party shall
have any further rights or obligations under this Article 23 or (ii) enforce specific performance
of the obligations of the other party

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under this Article 23. However, in the event specific
performance is not an available remedy, either party may bring suit, in law or equity, for damages.

     23.11 Prorated Rent. The Rent due under this Lease shall continue until closing and shall be prorated based upon
the date thereof, unless closing is canceled as herein provided in which event Rent shall abate as
of the date of such cancellation.

     23.12 Expiration. In the event Lessee does not exercise its option to purchase the Leased Property during the
Option Period as herein provided, then the option to purchase provided for herein shall terminate
and become null and void.

     23.13 Election to Acquire Lessor. In the event Lessee exercises its option to purchase the
Leased Property during the Option Period as herein provided, Lessee may, if Lessee determines in
its reasonable business judgment that it is more economically beneficial to Lessee, elect to
purchase all of the legal and equitable ownership interest in the Lessor (the “Ownership Interest”)
from the owners and holders thereof (the “Owners”), for the Purchase Price and by mutually
agreeable documents of transfer with such Owners, in lieu of purchasing the Leased Property by deed
and bill of sale as provided in Sec. 23.7 hereof. In the event Lessee elects to do so, Lessor
shall cause the Owners to transfer and convey the Ownership Interest in Lessor to Lessee at Closing
in satisfaction of Lessee’s purchase option in accordance with Sec. 23.7 hereof. In the event that
Lessee fails or elects not to purchase the Ownership Interest from the Owners, then Lessee shall
close its purchase of the Leased Property by deed and bill of sale conveyance from Lessor in
accordance with Sec. 23.7 hereof. Once Lessee has elected to exercise its option to purchase the
Leased Property during the Option Period as herein provided, the failure or election of Lessee not
to purchase the Ownership Interest of Lessor shall not permit Lessee to cancel or terminate its
purchase of the Leased Property in accordance with Sec. 23.7 hereof.

ARTICLE 24

     24.1 Lessor’s Event of Default. Lessor shall be in default (“Lessor’s Event of Default”) under this Lease if Lessor shall
breach or fail to keep, observe or perform any term, provision, agreement, representation, warranty
or covenant of this Lease to be kept, observed or performed by Lessor, and Lessor does not cure
such breach or failure within thirty (30) days (or such shorter period of time as may be necessary
to protect the health or welfare of any patient or other resident of the Leased Property) after
Notice thereof from Lessee to Lessor and any Facility Mortgagee with respect to which Lessor has
notified Lessee (or if such breach or failure cannot be cured within thirty (30) days, or the above
described shorter time period, Lessor does not commence to cure said breach or failure prior to the
expiration of said thirty (30) day period, or the above described shorter time period, and
diligently pursue such cure to completion). Any Facility Mortgagee to whom a Notice of Lessor’s
Event of Default is given shall have the same periods of time as Lessor within which to cure such
breach or default on the part of Lessor. All payments made, and all acts performed by such
Facility Mortgagee shall be effective as if the payments and acts were performed by Lessor instead
of by the Facility Mortgagee. The time periods within which Lessor (or such Facility Mortgagee)
shall be
required to cure any such breach or default shall be subject to extension of time due to the
occurrence of any Unavoidable Delay. If Lessor (or such Facility Mortgagee) fails to commence and
diligently prosecute such cure to completion as provided herein, in addition to any other rights or
remedies to which it may be entitled under applicable law, all of which shall be cumulative, Lessee
shall have the right upon further Notice to Lessor and any such Facility Mortgagee to cure or
attempt to cure such Lessor’s Event of Default, and Lessor shall reimburse Lessee for all
reasonable costs and expenses actually incurred and paid by Lessee in doing so on written demand
therefor, together with interest thereon at the Overdue Rate from the due date until paid. If
Lessor shall fail to so reimburse Lessee within thirty (30) days following such written demand
therefor, then Lessee shall have the right to and may set off against and deduct from up to 50% of
each

39

 

one of the next successive monthly installments of Rent due under this Lease the amount of
such costs and expenses together with interest thereon until such time as the entire amount has
been paid to Lessee in full; unless the remaining number of installments of Rent due under this
Lease are insufficient for Lessee to recover the entire amount due by setting off against only up
to 50% of each remaining installment, in which event Lessee shall have the right and may deduct
from the full amount of each one of the next successive monthly installments of Rent due under
Lessee this Lease such costs and expenses, together with interest thereon, until such time as
Lessee has been paid in full.

     24.2 No Lessor’s Event of Default. No Lessor’s Event of Default (other than a failure to make payment of money) shall be
deemed to exist under Section 24.1 during any time the curing thereof is prevented by an
Unavoidable Delay, provided that upon the cessation of such Unavoidable Delay, Lessor shall remedy
such default without further delay.

     24.3 Legal Expenses. In the event it becomes necessary for Lessee to employ an attorney to enforce the terms,
covenants and conditions of this Lease to be observed or performed by Lessor, or to cure any
default by Lessor with respect thereto, then Lessor will pay and reimburse Lessee, on demand
therefore, the reasonable attorney’s fees, costs and expenses, including court costs, incurred by
Lessee in connection therewith.

ARTICLE 25

     25.1 Miscellaneous.

          25.1.1 Choice of Law. This Lease shall be governed by and construed in accordance with the
laws of the State of West Virginia.

          25.1.2 Consents. Whenever the consent or approval of Lessor or Lessee is required hereunder,
such consent or approval shall, unless otherwise specifically provided for herein, not be
unreasonably withheld or delayed.

          25.1.3 Amendments in Writing. No amendment or modification of this Lease shall be binding or
valid unless expressed in a writing executed by both parties hereto.

          25.1.4 Severability. If any provision of this Lease or the application of such provision to
any person, entity or circumstance is found invalid or unenforceable by a court of competent
jurisdiction, such determination shall not affect the other provisions of this Lease and all other
provisions of this Lease shall be deemed valid and enforceable.

          25.1.5 Successors. All rights and obligations of the parties under this Lease shall extend to
and bind the respective legal representatives, successors and permitted assigns of the parties
hereto.

          25.1.6 No Waiver. No failure by Lessor or Lessee to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy consequent upon a breach thereof, and no
acceptance of full or partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term.

          25.1.7 Remedies Cumulative. To the extent permitted by law, each legal, equitable or
contractual right, power and remedy of Lessor or Lessee now or hereafter provided either in this
Lease or by statute or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power and remedy and the exercise or beginning of the exercise by Lessor or
Lessee of any one or more

40

 

of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Lessor or Lessee of any or all of such other rights, powers and remedies.

          25.1.8 No Merger of Title. There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same person, firm, corporation or other entity may
acquire, own or hold, directly or indirectly, (i) this Lease or the leasehold estate created hereby
or any interest in this Lease or such leasehold estate and (ii) the fee simple in the Leased
Property.

          25.1.9 No Partnership. Nothing contained in this Lease shall be deemed or construed to create
a partnership or joint venture between Lessor and Lessee or to cause either party to be responsible
in any way for the debts or obligations of the other or any other party, it being the intention of
the parties that the only relationship hereunder is that of lessor and lessee.

          25.1.10 Recordation of Lease. Upon the request of either party hereto, the other party shall
join in the execution of a memorandum or so-called “short form” of this Lease for the purpose of
registration of notice of this Lease, in form suitable for recording, in which reference to this
Lease shall be made as required or permitted by applicable law. Said memorandum or short form of
this Lease shall be prepared and registered at the expense of the party requesting registration in
form satisfactory to the other party, acting reasonably.

          25.1.11 Time. Time is of the essence of this Lease.

          25.1.12 Headings. The descriptive headings used in this Lease are for convenience only and
shall not control or affect the meaning or construction of any of its provisions.

          25.1.13 Sale by Lessor. In the event of any sale or conveyance by Lessor (or its Facility
Mortgagee) of the Leased Property or any part thereof, the sale or conveyance shall be made subject
to this Lease, including Lessee’s option to purchase under Article 23, and shall operate to release
Lessor (and any such Facility Mortgagee) from any obligations under any of the terms, covenants,
and conditions contained in this Lease, express or implied, which shall accrue after the date
thereof and Lessee shall look solely to the purchaser with respect to any such obligation accruing
after such date.

          25.1.14 Guaranty of Advocat, Inc. Lessee shall procure for Lessor a lease guaranty (the
“Advocat Guaranty”) from Advocat, Inc., a publicly held corporation of which Lessee is a direct or
indirect subsidiary. The Advocat Guaranty shall guarantee the payment and performance of all of
the obligations of Lessee under the Lease, and shall be in the form attached hereto as Exhibit
D and incorporated herein by this reference.

          25.1.15 Guaranty of Lessor’s Obligation. Lessor shall procure for Lessee a lease guaranty
(the “Lessor Guaranty”) from Alan Bell and Larry Wills guaranteeing the payment and performance of
all the obligations of Lessor under the Lease in the form attached hereto as Exhibit E and
incorporated herein by this reference.

          25.1.16 Attorney’s Fees. In the event any party is required to engage or employ legal counsel
in order to enforce any of the terms, covenants or conditions of this Lease, all costs and
expenses, including, without limitation, attorneys’ fees and costs incurred by the prevailing party
in enforcing any of the terms, covenants or conditions of this Lease shall be paid by the
non-prevailing party. The terms, “attorneys’ fees” or “attorneys’ fees and costs”, shall also
include without limitation, all such fees and expenses incurred with respect to appeals,
arbitrations, and bankruptcy proceedings or whether or not any action or proceeding is brought with
respect to the matter for which said fees and expenses were incurred.

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ARTICLE 26

     26.1 Financial, Management and Regulatory Reports. Lessee agrees to provide Lessor the following reports during the Term of this Lease:

          26.1.1 Quarterly unaudited financial statements of Lessee prepared in accordance with
generally accepted accounting principles consistently applied, within forty-five (45) days after
the end of each calendar quarter (other than Lessee’s fiscal year end, for which such reports shall
be provided within seventy-five (75) days after the end thereof), which statements shall include a
balance sheet, statement of earnings, statement of expenses, statement of cash flows and census for
the year through the quarter then ended setting forth in comparative form and details the figures
for the corresponding period of the previous fiscal year and shall be certified by the chief
financial officer or other comparable officer of Lessee to be true and correct in all materials
respects.

          26.1.2 Within thirty-five (35) days after the end of each month, internal monthly facility
operating detail reports with census, rate, and financial statement including a current balance
sheet.

          26.1.3 Upon Lessor’s request but not more than one (1) time per calendar quarter, an aged
accounts receivable report of the Facility in sufficient detail to show amounts due from each class
of patient-mix and monthly census information of the Facility in sufficient detail to show
patient-mix on a daily average basis for such month, in the account age classification of 30 days,
60 days, 90 days, 120 days and over 120 days, within ten (10) Business Days of such request.

          26.1.4 Upon Lessor’s request, all Medicare and Medicaid cost reports and any amendments
thereto filed or received with respect to the Facility and all responses, audit reports, rate
letter, correspondence or inquiries with respect to such cost reports, within ten (10) Business
Days of such request.

          26.1.5 Upon Lessor’s request, copies of all licensure and certification survey reports and
statements of deficiencies (with plans of correction attached hereto) within ten (10) Business Days
of receiving such request, and within ten (10) Business Days of receipt thereof, copies of all
notices (regardless of form) from any and all licensing and/or certifying agencies that the skilled
nursing facility license and/or the Medicare and/or Medicaid certification of the Facility is being
downgraded to a substandard category, revoked, or suspended, or that action is pending or being
considered to downgrade to a substandard category, revoke, or suspend that Facility’s license or
certification.

     26.2 Lessee further agrees to use its best efforts to correct any deficiency (identified
pursuant to sections 26.2.5 and 26.2.6 above) within the date required by the licensure and
certification agency, if such deficiency could adversely affect either the right to continue
participation in Medicare and Medicaid for existing patients or the right to admit new Medicare and
Medicaid patients but in no event later than six (6) months (unless the date required by the
licensure and certification agency is later).

     All financial statements must be in such form and detail as Lessor and its Facility Mortgagee
shall from time to time reasonably request and Lessee agrees to promptly provide same as well as
any other financial information of Lessee or the Facility reasonably requested by Lessor or its
Facility Mortgagee, provided that Lessee shall not be required to prepare any information that it
does not usually prepare for this Facility or any other facility operated by Lessee or its
Affiliates. Except for statements or information which are already public, Lessor shall not
disclose the contents of any such statements, except to a Facility Mortgagee, proposed Facility
Mortgagee, prospective investor of Lessor, prospective purchaser of Lessor, or Lessor’s attorneys
and accountants. Lessee agrees that Lessor may include financial and other information concerning
the Facility operation on an anonymous basis in an offering

42

 

memorandum, prospectus or other public
securities offering disclosures made by Lessor, provided, however, Lessor will hold Lessee and its
affiliates, harmless from any damage, liability, cost or expense (including all attorneys’ fees)
incurred by Lessee as a result of Lessor’s or its agents, violation of any state or federal
securities law or regulation. Lessor’s right to the information required under this Section 26.3
shall be subject to any prohibitions or limitations on disclosure of any such data under applicable
laws or regulations, including, without limitation, any duly enacted “Patients’ Bill of Rights” or
any similar legislation, including such limitations as may be necessary to preserve the
confidentiality of the facility-patient relationship and the physician-patient privilege.

     26.3 Lessor Financial Statements. Lessor acknowledges that Lessee may be required to include
the Lessor’s financial statements in Lessee’s consolidated financial statements prepared in
accordingly with generally accepted accounting principles in the United States. During the Term of
this Lease, Lessor will provide such financial statements to Lessee within forty-five (45) days of
the end of each calendar month, and will cooperate with inquiries by Lessee as to the amounts
included in Lessor’s financial statements to the extent necessary for Lessee to remain in
compliance with the requirements of generally accepted accounting principles in the United States
and the requirements of the Sarbanes-Oxley Act of 2002. Lessor will also furnish or cause to be
furnished to Lessee from time to time, promptly upon request, key documents required by Lessee for
its accounting purposes, including but not limited to, Lessee’s articles of formation and other
organizational documents, and the loan documents, other material contracts and invoices (including
invoices from subcontractors to the general contractor) for the construction of the Improvements
and installation of the Facility FF&E.

ARTICLE 27

     27.1 Covenant Not to Compete. As a material part of the consideration inducing Lessee to execute this Lease and to make
the necessary expenditures to perform its obligations under this Lease, Lessor hereby covenants and
agrees with Lessee, that during the “Noncompete Period” within the “Noncompete Area” neither Lessor
nor any Affiliate of Lessor shall establish or authorize or approve the establishment of, acquire,
lease, operate, engage in, manage, consult for, finance, own any part of (whether directly or as a
member, shareholder or partner of any entity), or otherwise have any interest in, any skilled
nursing or healthcare facility which provides any services similar to the services provided by or
at the Facility. The “Noncompete Period” shall commence on the date hereof and terminate on the
expiration or earlier termination of the Lease. The “Noncompete Area” shall mean the area within a
ten (10) mile radius of the Facility. Ownership of
less than five percent (5%) of the stock of a publicly held company shall not be deemed a
breach of this covenant.

     27.2 Enforceability; Lessee Right to Terminate. In the event of a breach of Section 27.1 hereof, Lessor recognizes that monetary damages
shall be inadequate to compensate Lessee and Lessee, shall be entitled, without the posting of a
bond, to an injunction restraining such breach, with the costs including attorneys fees of securing
such injunction to be borne by Lessor and its affiliates, jointly and severally. Nothing herein
contained shall be construed as prohibiting Lessee from pursuing any other remedy available to it
for such breach, including termination of this Lease.

     Lessor hereby acknowledges the necessity of protection against the competition restricted
hereby and that the nature and scope of such protection has been carefully considered by the
parties in entering into this Lease. The period provided and the area covered are hereby expressly
represented and agreed to be fair, reasonable and necessary. The Rent provided for herein is
deemed to be sufficient and adequate to compensate Lessor for agreeing to the restrictions
contained in Section 27.1 hereof. If, however, any court of competent jurisdiction determines that
the forgoing restrictions are not reasonable, or that the restrictions provided for in Section 27.1
are otherwise unenforceable, at Lessee’s option, (i) such restrictions shall be modified, rewritten
or interpreted to include as much of their nature and scope as will

43

 

render them enforceable or (ii)
Lessee shall have the right to terminate this Lease upon giving written notice of its election to
terminate this Lease to Lessor specifying a termination date which shall be not less than thirty
(30) days but not more than ninety (90) days from the date of such notice, in which event this
Lease shall terminate on the date so specified. If Lessee terminates this Lease pursuant to this
Section 27.2, all Rent and other charges paid or payable by Lessee hereunder shall be apportioned
as of the date of termination.

ARTICLE 28

     28.1 Transfer of Operations Upon Termination.

          28.1.1 Surrender of Possession. Lessee shall, on or before the last day of the Term,
or upon earlier termination of this Lease, surrender to Lessor the Leased Property (including all
patient charts and resident records along with appropriate patient and resident consents if
necessary) in good condition and repair, reasonable and ordinary wear and tear excepted.

          28.1.2 Removal of Personal Property. If no Event of Default shall have occurred and
be continuing at the time, Lessee shall have the right in connection with the surrender of the
Leased Property to remove from the Leased Property all Lessee Personal Property but not the Lessor
Personal Property (including the Lessor Personal Property replaced by the Leased Property or
required by the State of West Virginia or any other governmental entity to operate the Leased
Property for its Primary Intended Use. Any such removal shall be done in a workmanlike manner
leaving the Leased Property in good and presentable condition and appearance, including repair of
any damage caused by such removal. At the end of the Term or upon the earlier termination of this
Lease, Lessee shall return the Leased Property to Lessor with the Lessor Personal Property (or
replacements thereof) in the same condition and utility as was delivered to Lessee at the
commencement of the Term, reasonable and ordinary wear and tear excepted.

          28.1.3 Title to Personal Property Not Removed. Title to any of Lessee Personal
Property which is not removed by Lessee within thirty (30) days of the expiration or earlier
termination of the Term shall, at Lessor’s election, vest in Lessor; provided, however, that Lessor
may remove and
dispose at Lessee’s expense of any or all of such Lessee Personal Property which is not so
removed by Lessee without obligation or accounting to Lessee.

          28.1.4 Lessor’s Option to Purchase Lessee’s Personal Property. Effective upon not
less than ninety (90) days prior written notice, or such shorter notice as shall be appropriate if
this Lease is terminated prior to the end of the Lease Term, and subject to the consent of any
lender of Lessee having a security interest therein, Lessor shall have the option to purchase
Lessee’s Personal Property and vehicles utilized in connection with the Leased Property, if any,
and excluding from the foregoing the Excluded Lessee Personal Property and any licensed software or
other assets not subject to transfer at the expiration or termination of the Lease Term, for an
amount equal to the fair market value of such property, and with appropriate price adjustments for
all equipment leases, conditional sales contracts, UCC-1 financing statements and other
encumbrances which encumber Lessee’s Personal Property. This Section 28.4 shall further not apply
to any copyrighted or other protected materials owned by Lessee. In addition to copyrighted
materials, the concept of “protected” materials means: plans and specifications, patient lists,
patient records, and other information that has been developed or prepared specifically for either
Lessee or its Affiliates that would be considered to be a “trade secret” or “confidential
information” under applicable law. Notwithstanding the foregoing, Lessor’s option to purchase
Lessee’s Personal Property and other assets used in connection with the Leased Premises shall not
arise in the event this Lease is terminated due to the close of Lessee’s purchase of the Leased
Property pursuant to Lessee’s option to purchase the Leased Property set forth in Article 23
hereof.

44

 

          28.1.5 Management of Leased Property. Upon the expiration or earlier termination of
the Term, Lessor or its designee, upon written notice to Lessee, may elect to assume the
responsibilities and obligations for the management and operation of the Primary Intended Use upon
the Leased Property and Lessee agrees to cooperate fully with Lessor or its designee to accomplish
the transfer of such management and operation without interrupting the operation of the Leased
Property. Lessee shall not commit any act or be remiss in the undertaking of any act that would
jeopardize any licensure or certification of the facility, and Lessee shall comply with all
requests for an orderly transfer of the skilled nursing facility license, Medicare and Medicaid (or
any successor program) certifications and possession of the Facility at the time of any such
surrender. Upon the expiration or earlier termination of the Term, Lessee shall promptly deliver
copies of all of Lessee’s books and records relating to the Leased Property (except for “protected
materials” and Excluded Lessee Personal Property as described in Section 28.4, above) and its
operations to Lessor.

          28.1.6 Correction of Deficiencies. Upon termination or cancellation of this Lease,
Lessee shall indemnify Lessor for any loss, damage, cost or expense incurred by Lessor to correct
all deficiencies of a physical nature existing at the time of such termination or cancellation and
identified by WVDH or any other government agency or Medicare or Medicaid (or any successor
programs) providers in the course of the change of ownership inspection and audit.

          28.1.7 Change of Ownership and Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall cooperate with Lessor or Lessor’s nominee in connection with
the processing by Lessor or Lessor’s nominee of any applications for all certificates of need,
licenses, operating permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities, which may be necessary for the
operation of the Leased Property for the Primary Intended Use; provided, however, so long as the
Lease Term has not been terminated or Lessee’s occupancy of the Leased Property terminated pursuant
to an Event of Default, the costs and expenses of any such transfer or the processing of any such
application shall be paid by Lessor or Lessor’s nominee.

          28.1.8 Licensure and Certificate of Need. Lessee shall not modify, delicense,
decertify or otherwise change the licensed capacity or certificate of need for the Leased Property
without specific written approval of Lessor. Lessee shall have no right to voluntarily alter the
Leased Property which would make it impractical or unfeasible to operate at least ninety (90)
skilled nursing beds at the Facility without specific written approval of Lessor, which approval
Lessor may withhold in its sole discretion if such alteration would result in there being less than
ninety (90) skilled nursing beds at the Facility. If the certificates of need or licenses to
operate the Leased Property are issued to Lessee, Lessee agrees that it will cooperate with Lessor
to turn over or cause to be turned over to Lessor or its designee, upon the expiration or earlier
termination of the Term, all of Lessee’s rights in connection with the certificates of need and/or
licenses.

          28.1.9 Management or Supervisory Employees. Lessee hereby covenants and agrees that
for a period of one (1) year following the expiration or earlier termination of this Lease, neither
Lessee nor any of its Affiliates shall, without prior written consent of Lessor, hire, engage or
otherwise employ any management or supervisory personnel working on or in connection with the
Leased Property.

          28.1.10 Transfer of Residents. Except as required for medically appropriate reasons,
at the time of and for a period of one (1) year following the expiration or earlier termination of
this Lease, neither Lessee nor any of its Affiliates will recommend or solicit the removal or
transfer of any resident or patient from the Leased Property to any other nursing or health care
facility, or to any senior housing or retirement housing facility.

45

 

     IN WITNESS WHEREOF, the parties have executed this Lease by their duly authorized officers as
of the date first above written.

	 	 	 	 	 
	 	LESSOR:

A.B.E., LLC

 	 
	 	By:  	/s/ Edward A. Bell
 	 
	 	 	Its: Member 	 

	 	 	 	 	 
	 	LESSEE:

DIVERSICARE ROSE TERRACE, LLC

 	 
	 	By:  	Diversicare Leasing Corp., its sole member

 	 
	 	By:  	/s/ William R. Council, III
 	 
	 	 	Its: President and CEO 	 

JOINDER

     The undersigned, being the owners of all of the legal and equitable ownership interests in the
Lessor, hereby execute this Joinder solely for the purpose of acknowledging and consenting to the
provisions of Section 23.13 of the Lease regarding the right of the Lessee to acquire their
ownership interests in the Lessor as provided therein and agree to be bound by the provisions
thereof.

	 	 	 	 	 
	 	 	 
	 	                                                  /s/ Edward A. Bell
 	 
	 	Edward A. Bell, Member 	 
	 	 	 
	 	                                                   /s/ Larry W. Wills
 	 
	 	Larry W. Wills, Member 	 
	 	 	 
	 

46

 

EXHIBIT A

Description of Land

The 217,668 sq. ft. or 5.0 acre parcel or tract of land shown on the ALTA/ACSM Title Survey for
Diversicare Leasing Corporation prepared by Randolph Engineering dated 7/22/08, Project No.
2008100, Sheet 1 of 1, more particularly described as follows:

Beginning at a 5/8” rebar pin set in the southerly property line of Bruce P. Bannerman (Deed Book
162 Page 70), said rebar being located S 65°47’44” E a distance of 211.51 feet from a 1/2” rebar pin
found marking the most northerly corner of the properties of A.B.E., LLC. (Deed Book 1166 Page 610)
of which this 5.00 acres is a part., thence;

Leaving said 5/8” rebar and with the line of said Bannerman S 65°47’44” E a distance of 258.49 feet
to a 5/8” rebar pin set in the southerly right of way line of Interstate 64, thence;

Leaving said Bannerman and with said right of way line S 55°18’39” E a distance of 201.45 feet to a
5/8” rebar pin set, thence;

Leaving the right of way line of Interstate 64 and severing the lands of said A.B.E., LLC. with the
following eight (8) lines:

1) S 08°31’14” W a distance of 87.74 feet to a 5/8” rebar pin set, thence;

2) S 32°43’23” E a distance of 114.00 feet to a 5/8” rebar pin set, thence;

3) S 85°08’03” E a distance of 50.86 feet to a 5/8” rebar pin set, thence;

4) S 05°30’57” W a distance of 107.25 feet to a 5/8” rebar pin set, thence;

5) S 72°47’24” W passing a 5/8” rebar pin set marking a corner for a hereinafter described access
and utility right of way at 104.21 feet and continuing for a total distance of 343.67 feet to a
5/8” rebar pin set, thence;

6) N 63°07’19” W a distance of 207.75 feet to a 5/8” rebar pin set said rebar also marking a corner
to the aforementioned access and utility right of way, thence;

7) N 26°52’00” W a distance of 51.14 feet to a 5/8” rebar pin set, thence;

8) N 05°32’53” E a distance of 478.76 feet to the POINT OF BEGINNING containing 5.00 acres.

 

 

EXHIBIT B

Total Project Costs

	 	 	 	 	 

	LAND COST FOR PROJECT, net of escrow deposits previously paid
	 	$	750,000	 
	 
	Building construction cost
	 	 	4,935,000	 
	 
	Equipment to stock and operate facility
	 	 	620,000	 
	 
	 	 	 	 
	INTEREST CARRY FOR 10 MONTHS
	 	 	144,818	 
	 
	ARCHITECT FEES ( includes $42,750 already paid by Lessee)
	 	 	165,000	 
	 
	LEGAL FEES
	 	 	50,000	 
	 
	ENGINEERING FEES
	 	 	40,000	 
	 
	PERMITS
	 	 	5,000	 
	 
	CONTINGENCY FUND
	 	 	395,000	 
	 
	TOTAL PROJECT COST BEFORE ADVOCAT CON COSTS
	 	$	7,104,818	 

 

 

EXHIBIT C

Permitted Exceptions

	1.	 	Real property taxes for the year in which the Commencement Date occurs, not yet due and
payable, and subsequent years.

	2.	 	Forty (40) foot easement to Virginia Power Company granted by the following deeds: (1) from
J. H. Sunderland, dated August 27, 1920 of record in Bond, Contract and Lease Book 50 at page
457; and (2) from W. M. Sunderland, dated October 20, 1920 of record in Bond, Contract and
Lease Book 51 at page 303, Cabell County Clerk’s Office and as shown on the survey entitled
ALTA/ACSM Survey Diversicare Management Services prepared by Randolph Engineering dated June
22, 2008, Project No. 2008100, Sheet 1 of 1.

	3.	 	The Existing Facility Mortgage.

 

 

EXHIBIT D

Guaranty of Lease

     THIS GUARANTY OF LEASE (“Guaranty”) is made and entered into as of the date set forth below by
and between ADVOCAT INC., a Delaware corporation (“Guarantor”) in favor of A.B.E., LLC, a West
Virginia limited liability company (“Lessor”).

WITNESSETH:

     WHEREAS, Lessor is, contemporaneously herewith executing and delivering a Lease Agreement
(With Option to Purchase) (the “Lease”), of even date herewith, with Diversicare Rose Terrace, LLC,
a Delaware limited liability company and an indirect subsidiary of Guarantor (“Lessee”), for
certain Property (herein so called) more fully described in the Lease, which Property consists of a
skilled nursing facility located in Milton, Cabell County, West Virginia, which will have ninety
(90) beds upon completion of the improvements described in the Lease.

     WHEREAS, Lessor is willing to lease the Property to Lessee under and pursuant to the Lease if
Guarantor agrees to guarantee the payment and performance of, and compliance with, all the
covenants and conditions on Lessee’s part to be paid or performed under the Lease and Guarantor is
willing to so agree; and

     WHEREAS, Guarantor will benefit from the execution and delivery of the Lease to Lessee.

     NOW, THEREFORE, in order to induce Lessor to execute, deliver and perform the Lease, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged
by Guarantor, Guarantor hereby covenants and agrees with Lessor as follows:

ARTICLE 1.

GUARANTY

     1.1. Guarantor hereby absolutely and unconditionally guarantees to Lessor the full, timely and
faithful performance and compliance by Lessee of and with all the monetary terms, covenants and
conditions of the Lease (collectively, the “Payment Obligations”), including, but not limited to,
the payment when and as due of any and all rents, fees or other charges due, owing or payable to
Lessor by or from Lessee under the Lease.

     1.2. Guarantor hereby further absolutely and unconditionally guarantees to Lessor the full,
timely and faithful performance by Lessee of each and every non-monetary covenant, agreement,
obligation, term or condition of the Lease to be kept, performed, observed or discharged by Lessee
thereunder including, without limitation, Lessee’s obligations and covenants as to use,
maintenance, repair and insurance, and other items of a like or similar nature (collectively, the
“Performance Obligations”; the Performance Obligations and the Payment Obligations are herein
collectively called the “Obligations”).

     1.3. In the event of any default on the part of Guarantor to pay or perform the Obligations as
herein provided, Guarantor further agrees to pay all expenses (including, without limitation,
reasonable attorneys’ fees) incurred by Lessor in endeavoring to collect the Payment Obligations,
or any part thereof,

 

 

from Guarantor or in obtaining the performance of the Performance Obligations by Guarantor or
in otherwise enforcing this Guaranty against Guarantor.

ARTICLE 2.

GENERAL COVENANTS AND WAIVERS OF

GUARANTOR; REMEDIES AND RIGHTS OF LESSOR

     2.1. This is a guaranty of payment and performance and not of collection. The liability of
Guarantor hereunder is primary, direct, immediate and joint and several with Lessee. Neither: (a)
the exercise or the failure to exercise by Lessor of any rights or remedies conferred on it under
the Lease, hereunder or existing at law or otherwise; (b) the commencement of an action at law or
the recovery of a judgment at law against Lessee and the enforcement thereof through levy or
execution or otherwise; (c) the taking or institution or any other action or proceeding against
Lessee; nor (d) any delay in taking, pursuing or exercising any of the foregoing actions, rights,
powers or remedies by Lessor or anyone acting for Lessor shall extinguish or affect the obligations
of Guarantor hereunder, but Guarantor shall be and remain liable for all Obligations until fully
paid or performed.

     2.2. Guarantor hereby expressly waives: (a) notice of the acceptance by Lessor of this
Guaranty; (b) notice of the existence, creation or nonpayment of all or any of the Obligations; (c)
presentment, protest, demand, notice of dishonor, protest and all other notices or demands
whatsoever; and (d) all diligence in collection or realization on the Obligations or any part
thereof, any obligation hereunder or any guarantee of any of the foregoing.

     2.3. Anything else contained herein to the contrary notwithstanding, Lessor, from time to time
and without notice to Guarantor, may take all or any of the following actions without in any manner
affecting or impairing the liability of Guarantor hereunder: (a) receive or accept a lien or a
security interest in any property to secure any of the Obligations or any obligation hereunder; (b)
receive or accept the primary or secondary liability of any party or parties, in addition to
Guarantor, with respect to any of the Obligations; (c) renew, extend or otherwise change the Term
of the Lease or the time for payment due thereunder or any portion thereof for any period; (d)
resort to Guarantor for payment of any Obligations, whether or not Lessor shall proceed against any
other party primarily or secondarily liable on any of the Obligations.

     2.4. No delay on the part of Lessor in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Lessor of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this Guaranty be binding on Lessor except as
expressly set forth in writing, duly signed and delivered on behalf of Lessor. No action of Lessor
permitted hereunder shall in any way affect or impair the rights of Lessor and the obligations of
Guarantor under this Guaranty.

     2.5. This is an unconditional, absolute and continuing Guaranty of the Obligations and it
shall remain in full force and effect until all of the Obligations have been fully paid and
performed or otherwise released and discharged at which time this Guaranty shall terminate and be
of no further force and effect.

ARTICLE 3.

MISCELLANEOUS PROVISIONS

     3.1. All the covenants, stipulations, promises and agreements contained in this Guaranty by or
on behalf of Guarantor are for the benefit of Lessor, its successors or assigns, and shall bind
Guarantor

 

 

and Guarantor’s legal representatives, successors and assigns. If Lessor disposes of its
interest in the Property, the term “Lessor”, as used in this Guaranty, shall mean Lessor’s
assignee, transferee or successor in interest as the “Lessor” under the Lease provided that such
assignee, transferee or successor in interest assumes all of Lessor’s covenants, agreements, duties
and obligations as Lessor under the Lease and agrees to be bound by all of the terms and conditions
thereof.

     3.2. This Guaranty has been delivered and accepted in the State of West Virginia. This
Guaranty shall in all respects be governed by and construed and enforced in accordance with the
internal substantive laws of the State of West Virginia (without reference to choice of law
principles).

     3.3. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and no such prohibition or
unenforceability shall invalidate or render unenforceable such provision in any other jurisdiction.

     IN WITNESS WHEREOF, the
Guarantor has executed this Guaranty to be effective as of the ______ day of July, 2010.

	 	 	 	 	 
	 	“GUARANTOR”

ADVOCAT INC

 	 
	 	By:  	 	 
	 	 	Its: 	 	 
	 	 	
 	 

 

 

	 	 	 	 	 

EXHIBIT E

Guaranty of Lease

     THIS GUARANTY OF LEASE (“Guaranty”) is made and entered into as of the date set forth below by
EDWARD A. BELL, an individual citizen and resident of West Virginia, and LARRY W. WILLS, an
individual citizen and resident of Ohio (jointly and severally, “Guarantor”) in favor of
DIVERSICARE ROSE TERRACE LLC, a Delaware limited liability company (“Lessee”).

WITNESSETH:

     WHEREAS, Lessee is, contemporaneously herewith executing and delivering a Lease Agreement
(With Option to Purchase) (the “Lease”), of even date herewith, with A.B.E., LLC, a West Virginia
limited liability company, as Lessor, for certain Property (herein so called) more fully described
in the Lease, which Property consists of a skilled nursing facility located in Milton, Cabell
County, West Virginia, which will have ninety (90) beds upon completion of the improvements
described in the Lease.

     WHEREAS, Lessee is willing to lease the Property from Lessor under and pursuant to the Lease
if Guarantor agrees to guarantee the payment and performance of, and compliance with, all the
covenants and conditions on Lessor’s part to be paid or performed under the Lease and Guarantor is
willing to so agree; and

     WHEREAS, Guarantor will benefit from the execution and delivery of the Lease by Lessee to
Lessor.

     NOW, THEREFORE, in order to induce Lessee to execute, deliver and perform the Lease, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged
by Guarantor, Guarantor hereby covenants and agrees with Lessee as follows:

ARTICLE 1.

GUARANTY

     1.1. Guarantor hereby absolutely and unconditionally, jointly and severally, guarantees to
Lessee the full, timely and faithful performance by Lessor of each and every covenant, agreement,
obligation, term or condition of the Lease to be kept, performed, observed or discharged by Lessor
thereunder (collectively, the “Obligations”).

     1.2. In the event of any default on the part of Guarantor to pay or perform the Obligations as
herein provided, Guarantor jointly and severally further agrees to pay all expenses (including,
without limitation, reasonable attorneys’ fees) incurred by Lessee in obtaining the performance of
the Obligations by Guarantor or in otherwise enforcing this Guaranty against Guarantor.

ARTICLE 2.

GENERAL COVENANTS AND WAIVERS OF

GUARANTOR; REMEDIES AND RIGHTS OF LESSOR

     2.1. This is a guaranty of payment and performance and not of collection. The liability of
Guarantor hereunder is primary, direct, immediate and joint and several with Lessee. Neither: (a)
the

 

 

exercise or the failure to exercise by Lessee of any rights or remedies conferred on it under
the Lease, hereunder or existing at law or otherwise; (b) the commencement of an action at law or
the recovery of a judgment at law against Lessor and the enforcement thereof through levy or
execution or otherwise; (c) the taking or institution or any other action or proceeding against
Lessor; nor (d) any delay in taking, pursuing or exercising any of the foregoing actions, rights,
powers or remedies by Lessee or anyone acting for Lessee shall extinguish or affect the obligations
of Guarantor hereunder, but Guarantor shall be and remain liable for all Obligations until fully
paid or performed.

     2.2. Guarantor hereby expressly waives: (a) notice of the acceptance by Lessee of this
Guaranty; (b) notice of the existence, creation or nonpayment of all or any of the Obligations; (c)
presentment, protest, demand, notice of dishonor, protest and all other notices or demands
whatsoever; and (d) all diligence in collection or realization on the Obligations or any part
thereof, any obligation hereunder or any guarantee of any of the foregoing.

     2.3. Anything else contained herein to the contrary notwithstanding, Lessee, from time to time
and without notice to Guarantor, may take all or any of the following actions without in any manner
affecting or impairing the liability of Guarantor hereunder: (a) receive or accept a lien or a
security interest in any property to secure any of the Obligations or any obligation hereunder; (b)
receive or accept the primary or secondary liability of any party or parties, in addition to
Guarantor, with respect to any of the Obligations; (c) renew, extend or otherwise change the Term
of the Lease or the time for payment due thereunder or any portion thereof for any period; (d)
resort to Guarantor for payment of any Obligations, whether or not Lessee shall proceed against any
other party primarily or secondarily liable on any of the Obligations.

     2.4. No delay on the part of Lessee in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Lessee of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this Guaranty be binding on Lessee except as
expressly set forth in writing, duly signed and delivered on behalf of Lessee. No action of Lessee
permitted hereunder shall in any way affect or impair the rights of Lessee and the obligations of
Guarantor under this Guaranty.

     2.5. This is an unconditional, absolute and continuing Guaranty of the Obligations and it
shall remain in full force and effect until all of the Obligations have been fully paid and
performed or otherwise released and discharged at which time this Guaranty shall terminate and be
of no further force and effect.

ARTICLE 3.

MISCELLANEOUS PROVISIONS

     3.1. All the covenants, stipulations, promises and agreements contained in this Guaranty by or
on behalf of Guarantor are for the benefit of Lessee, its successors or assigns, and shall bind
Guarantor and Guarantor’s legal representatives, successors and assigns. If Lessee disposes of its
interest in the Property, the term “Lessee”, as used in this Guaranty, shall mean Lessee’s
assignee, transferee or successor in interest as the “Lessee” under the Lease provided that such
assignee, transferee or successor in interest assumes all of Lessee’s covenants, agreements, duties
and obligations as Lessee under the Lease and agrees to be bound by all of the terms and conditions
thereof. In the event that more than one person or entity is a Guarantor hereunder, then all
references to Guarantor shall be deemed to refer equally to each of said persons or entities, all
of whom shall be jointly and severally liable for all of the obligations of Guarantor hereunder.
Guarantor expressly acknowledges and agrees that the term “Lessor”, as and where used in this
Guaranty, shall be deemed to mean and include any assignee, transferee or successor to the interest
of the Lessor in, to and under the Lease.

 

 

     3.2. This Guaranty has been delivered and accepted in the State of West Virginia. This
Guaranty shall in all respects be governed by and construed and enforced in accordance with the
internal substantive laws of the State of West Virginia (without reference to choice of law
principles).

     3.3. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and no such prohibition or
unenforceability shall invalidate or render unenforceable such provision in any other jurisdiction.

     IN WITNESS WHEREOF, this Guaranty as been executed by Guarantor to be effective as of the
______ day of July, 2010.

	 	 	 	 	 
	 	GUARANTOR

 	 
	 	By:  	 	 
	 	 	Edward A. Bell 	 
	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Larry W. Wills 	 
	 	 	 	 

 

 

	 	 	 	 	 

EXHIBIT F

Declaration of Easements and Restrictions

This Instrument prepared by and when

recorded return to

Harwell Howard Hyne Gabbert & Manner, P.C.

315 Deaderick Street, Suite 1800

Nashville, Tennessee 37238-1800

DECLARATION OF EASEMENTS AND RESTRICTIONS

     This DECLARATION OF EASEMENTS
AND RESTRICTIONS (“Declaration”) is made as the ___ day of
                    , 2010 (the “Effective Date”) by and between A.B.E., LLC, a West Virginia limited
liability company (“Grantor”) and [New entity to be formed by ABE], a Delaware limited
liability company (“Grantee”).

RECITALS

     WHEREAS, Grantor is the owner of a certain 20 acre, more or less, tract or parcel of real
property located at Lees Creek Road and West Virginia State Route 60 (“Route 60”) near Milton,
Cabell County, West Virginia, being that portion of the real property more particularly described
on Exhibit A attached hereto remaining after the conveyance to Grantee of the Grantee’s
Property described herein (“Grantor’s Property”); and

     WHEREAS, Grantor has simultaneously herewith conveyed to Grantee, and Grantee has acquired
from Grantor, fee simple title to that certain 5.0 acre, more or less, tract or parcel of land more
particularly described on Exhibit B attached hereto (“Grantee’s Property”) for the
construction, development and use of Grantee’s Property as a skilled nursing home facility with
associated parking (“Grantee’ s Intended Use”). Grantee will be the general contractor in charge
of construction of the skilled nursing facility on Grantee’s Property, and upon completion of the
construction of the skilled nursing facility, Grantee’s Property will be leased to Diversicare Rose
Terrace, LLC (“DRT”) pursuant to a Lease Agreement (With Option to Purchase) of even date herewith
(the “Lease”); and

     WHEREAS, as a condition to the acquisition by Grantee from Grantor of Grantee’s Property for
Grantee’s Intended Use and lease to DRT, Grantor has agreed (i) to provide and convey to Grantee an
access easement over, across and upon the Grantor’s Property for the purpose of passage, ingress,
egress and access to and from the Grantee’s Property and Route 60, together with easements over,
across and upon Grantor’s Property for utilities to serve Grantee’s Property, and an easement for
the location of Grantee’s signage so as to be visible from Route 60, (ii) to impose certain
restrictions on the use of Grantor’s Property for the benefit and protection of Grantee’s Property,
and (iii) at Grantor’s cost and expense, to (a) construct and complete a common shared drive within
the access easement to provide sufficient ingress and egress to and from the Grantee’s Property and

 

 

Route 60 for Grantee’s Intended Use and for the use of Grantor’s Remaining Property and (b)
install and extend utility lines and facilities to the boundaries of the Grantor’s Property
sufficient (by volume) and satisfactory for Grantee’s Intended Use. As of the Effective Date
hereof, the access drive has not been constructed and completed and the utilities have not been
installed and extended.

     NOW, THEREFORE, in consideration of the foregoing premises, the purchase of Grantee’s Property
by Grantee from Grantor, and the covenants, agreements, promises and easements contained and set
forth herein, and other good and valuable consideration, the receipt and adequacy of all of which
are hereby acknowledged, Grantor and Grantee hereby covenant and agree as follows:

ARTICLE I

ACCESS DRIVE EASEMENT

     1.1 Grant and Description of Easements. Grantor hereby grants and conveys to Grantee,
its successors and assigns who become owners of the Grantee’s Property, the right, title and
privilege of a permanent non-exclusive easement and right of way for vehicular and pedestrian
traffic (the “Access Easement”) in, on, over, across, upon, along and through that certain parcel
of land more particularly described on Exhibit C attached hereto (the “Access Easement
Parcel”) extending from Route 60 to the boundary of Grantee’s property as more particularly shown
on the survey drawing attached hereto as Exhibit D.

     1.2 Purpose of Access Easement. The purpose of the Access Easement shall be to
provide Grantee, its successors and assigns who become owners of the Grantee’s Property, and their
employees, tenants, licensees, invitees, patients, residents and business guests with, and the
Access Easement shall be used for, passage, access, ingress and egress by vehicular and pedestrian
traffic to, from, and between the Grantee’s Property and Route 60. The Access Easement shall be
used in accordance with all applicable laws and ordinances, consistent with good traffic control,
and such use shall not include the right to park or otherwise allow vehicles to stand (except
momentarily) in the Easement Parcel.

     1.3 Non-Exclusive Use. The Access Easement shall be non-exclusive with the right of
the Grantor, and its successors and assigns who become owners of all or any part of the Grantor’s
Property, their employees, tenants, licensees, invitees and business guests, to make use of the
Access Easement parcel for any purpose not inconsistent with Grantee’s rights under Access Easement
as set forth herein including, without limitation, for passage, access, ingress and egress by
vehicular and pedestrian traffic to and from the Grantor’s Property and Route 60, in accordance
with applicable laws and ordinances and consistent with good traffic control; provided that such
use shall not include the right to park or otherwise allow vehicles to stand (except momentarily)
in the Access Easement Parcel.

     1.4 Maintenance of Access Easement. Grantor shall keep and maintain any and all
improvements and facilities made or placed on or within the Access Easement Parcel in good
condition and state of repair, and, if required by law, in accordance with the standards necessary
to comply with all applicable laws, codes and ordinances, specifically including, without
limitation, those applicable to the use of Grantee’s Property for Grantee’s Intended Use, and shall
make all repairs, replacements and renewals in order to maintain the same in such condition and
repair, as and when such maintenance or repair is necessary or required. All such work shall be
commenced and performed expeditiously following notice to Grantor (or Grantor’s first learning) of
the need therefore and diligently prosecuted to completion in accordance with good construction
practices and

 

 

all applicable laws, ordinances, codes, rules and regulations, subject to interruptions caused
by weather, strikes, material shortages or other matters beyond Grantor’s control. Without
limiting the foregoing, the standards of maintenance to be followed with respect to such
improvements and facilities shall include, but not be limited to:

     (i) Maintaining all paved surfaces in a smooth and evenly covered condition;

     (ii) Removal of all trash, debris, ice and/or snow; and

     (iii) Placing, keeping in repair and replacing any appropriate or required directional
signs, markers and lines.

Grantor shall pay all ad valorem taxes and assessments with respect to the area of Grantor’s
Property on which the Access Easement Parcel is located.

     1.5 Work and Construction.

          (a) In connection with any work performed by Grantor on or within the Access Easement Parcel,
Grantor agrees to perform the work or cause such work to be performed (i) in a good and workmanlike
manner, in accordance with good construction practices and all applicable laws, ordinances, codes,
rules and regulations, and to diligently prosecute the work to completion as quickly as possible
except for interruptions caused by weather, strikes, material shortages or other matters beyond
Grantor’s control, and (ii) in a manner so as not to unreasonably interfere with the use, occupancy
or enjoyment of the Grantee’s Property.

          (b) With respect to any work initiated by Grantor on or within the Access Easement Parcel,
Grantor shall promptly pay when due all costs incurred in connection with the work. In the event
any mechanics’ liens are filed against any portion of the Grantee’s Property as a result of
services performed or materials furnished by or at the instance of Grantor, then Grantor hereby
covenants to cause such lien to be discharged of record within thirty (30) days after notice to
Grantor of such claim of lien, either by paying the indebtedness which gave rise to such lien, or
by posting such bond or other securities as shall be required by law to obtain such release and
discharge, and further agrees to indemnify, defend and hold harmless Grantee against all liability,
loss, damage, costs or expenses, including attorneys fees, on account of such claim of lien.

          (c) In connection with any work performed by Grantor on or within the Access Easement Parcel,
Grantor shall have a temporary construction license for ingress and egress over and onto the
Grantee’s Property to the limited extent and for the time periods reasonably necessary to perform
such work.

     1.6 Grantor’s Reservation of Rights. In conjunction with the creation of the Access
Easement under this Declaration, Grantor hereby reserves and shall have the right:

          (a) at Grantor’s sole cost and expense, to install, maintain, service, repair, replace and
relocate within the area of the Access Easement Parcel any equipment, fixture, line or facility
used in connection with any utility which services the Grantor’s Property;

          (b) at Grantor’s sole cost and expense, to construct, maintain, repair, replace and locate on
or within the Access Easement Parcel any driveways, curb cuts or other means of access, ingress and
egress to and from any portion of the Grantor’s Property and the Access Easement Parcel

 

 

for the sole and limited purpose of permitting Grantor, and its successors and assigns who
become owners of the Grantor’s Property or any portion thereof , to make use of the Access Easement
for access, ingress and egress by vehicular and pedestrian traffic to and from the Grantor’s
Property and Route 60; provided that such use is permitted by applicable laws, codes and ordinances
and is consistent with good traffic control and further provided that such use shall not include
the right to park or otherwise allow vehicles to stand (except momentarily) in the Access Easement
Parcel;

          (c) from time to time and at any time, to dedicate the Access Easement and the access drive
located therein as a public road or right of way to the appropriate municipality or other political
subdivision or governmental body or agency having jurisdiction (the “Governmental Authority”);
provided, however, that such Governmental Authority accepts such dedication and the obligation to
maintain, repair or replace the improvements and facilities located within the Access Easement
Parcel, and that passage, ingress and egress to and from Grantee’s Property and Route 60 is not
altered or impaired or otherwise adversely affected as a result of such dedication. Upon
acceptance of the Access Easement and access drive located therein by the Governmental Authority
and its dedication as a public road or right of way providing passage, access, ingress and egress
to and from Grantee’s Property, Grantor’s Property and Route 60, the Access Easement granted herein
and Grantor’s obligations with respect thereto shall automatically terminate and be of no further
force and effect; and

          (d) to take such other actions and/or grant such other rights in the Access Easement Parcel as
are not inconsistent with Grantee’ s rights under the Access Easement as set forth herein.

Grantor shall not exercise any of the foregoing rights reserved to it in a manner which
unreasonably impairs, interferes with or affects the use by Grantee of the Access Easement. All
work performed by the Grantor in exercising its rights under subparagraphs (a) and (b), above,
shall be performed in a good and workmanlike manner, in accordance with good construction practices
and all applicable laws, codes, ordinances, rules and regulations, and diligently prosecuted to
completion except for interruptions caused by weather, strikes, material shortages or other matters
beyond Grantor’s control. In the event that the surface of the ground or any improvements or
facilities located on or within the Access Easement Parcel, including any paving, are damaged or
disturbed in the course of Grantor exercising any of the rights reserved to it in subparagraphs (a)
and (b) above, Grantor shall, at its sole cost and expense, promptly repair all damage or
disturbance to the surface of the ground or to improvements and facilities, including any paving,
to substantially the same condition existing prior to such damage or disturbance.

     1.7 Traffic Control; Unimpeded Access. Grantor may erect on or within the Access
Easement Parcel such curbing, directional lines and markers, traffic signals, speed limit signs,
stop signs, speed bumps and other forms of traffic control devices as are consistent with good
traffic control; provided, however, that Grantor shall not construct or maintain any gates, fences,
walls, curbs, barricades or other installations on the Access Easement Parcel which impair or
prevent the full and intended use of the Access Easement by Grantee provided for herein. The
foregoing provision shall not prohibit temporary, short-term barricades erected and reasonably
necessary in connection with the construction or repair and maintenance of improvements and
facilities on Grantor’s Property which may cause inconvenience while such work is being performed
but do not unreasonably interfere with or impede passage, ingress, egress and access by vehicular
and pedestrian traffic to and from Grantee’s Property and Route 60 so long as such work is
conducted in

 

 

the most expenditures manner reasonably possible to minimize interference with Grantee’s use
of the Access Easement and Grantee’s Property.

ARTICLE II

UTILITY EASEMENTS

     2.1 Grant of Utility Easements. Grantor hereby grants and conveys unto Grantee, its
successors and assigns who become owners of the Grantee’s Property, the right, title and privilege
of permanent non-exclusive easements (hereinafter referred to as the “Utility Easements”) in, on,
upon, over, across, along and through those portions of the Grantor’s Property described on
Exhibit E attached hereto (the “Utility Easements Parcels”), as more particularly shown on
the survey drawing attached hereto as Exhibit F.

     2.2 Purpose of Utility Easements. The Utility Easements are for the purpose of giving
Grantee, its successors and assigns who become owners of the Grantee’s Property, and any tenant or
other person or entity from time to time entitled to the use and occupancy of Grantee’s Property,
the right to construct, install, tap on to, use, inspect, maintain, repair, operate and extend any
and all utility lines, poles, wires, pipes and other utility facilities over, under, across and
through the Utility Easements Parcels, as necessary, appropriate or required for the transmission,
distribution, flow and delivery of electricity, gas, water, sanitary and storm sewer, telephone,
cable television and other utility services, sufficient (by volume) and satisfactory to serve
Grantee’s Property, including any lift station for sewage disposal into the sewer system for the
City of Milton.

     2.3 Storm Drainage Easement. Grantor hereby grants and conveys to Grantee, its
successors and assigns who become owners of the Grantee’s Property, and declares for the benefit
of the Grantee’s Property, a permanent and non-exclusive easement (the “Storm Drainage Easement”)
for the flow of naturally created surface water on, over, upon, across and through the Grantor’s
Property to facilitate proper drainage of naturally created water flow into the storm water
detention basins or retention pond area or areas to be located and maintained on the Grantor’s
Property as storm water detention basins or retention pond areas to serve the Grantor’s Property
and the Grantee’s Property as shown and described on Exhibit G attached hereto, together
with any replacement of such storm water detention basins or retention pond areas hereafter located
and maintained on the Grantor’s Property (the “Storm Drainage Facilities”).

     2.4 Maintenance of Utilities.

          (a) Grantor shall maintain the area in which the Utility Easements Parcels are located on
Grantor’s Property and the Storm Drainage Facilities in good condition and repair, and if required
by law, in accordance with the standards necessary to comply with all applicable laws, codes and
ordinances, and shall pay when due, all costs and expenses of such maintenance and repair, and all
ad valorem taxes and assessments with respect to the area of Grantor’s Property on which the
Utilities Easements Parcels are located.

          (b) Grantor, at Grantor’s cost and expense, shall maintain, repair and replace the utility
lines and facilities located and installed by Grantor within the Utility Easements Parcels to the
boundaries of Grantee’s Property. Any such utility lines and facilities shall be serviced,
maintained, repaired and replaced by Grantor in accordance with the terms and provisions of this
Agreement.

 

 

          (c) Grantee shall be responsible for the maintenance, repair and replacement of any utility
lines and facilities installed and located on Grantee’s Property, including that portion of any
lines or facilities located within the Utility Easement Parcels that extend across Grantee’s
Property from the boundaries of Grantee’s Property to the buildings and improvements located on
Grantee’s Property. Grantee shall pay the costs and expenses of such maintenance, repair and
replacement, unless such maintenance, repair or replacement is required as a result of damage to or
destruction of such lines or facilities by the negligence or willful misconduct of Grantor, its
successors-in-interest, and their agents, representatives, employees, tenants, licensees, invitees
and business guests, in which event, to the extent that the cost and expense thereof is not covered
by insurance proceeds, Grantor shall reimburse Grantee for the amount actually expended by Grantee
in making such maintenance, repair or replacement in excess of any insurance proceeds, promptly
upon demand therefore by Grantee.

          (d) In connection with any work initiated and performed by Grantor or Grantee hereunder, each
party hereby grants to the other party a temporary construction license for ingress and egress on,
over, upon, across and through the granting party’s property to the limited extent and for the time
periods reasonably necessary to perform such work.

     2.5 Work and Construction.

          (a) In connection with any work performed by Grantor on or within the Utility Easements
Parcels or the Storm Drainage Facilities, Grantor agrees to perform or cause such work to be
performed: (i) in a good and workmanlike manner, in accordance with all applicable building and
construction laws, ordinances, codes, rules and regulations, and to diligently prosecute such work
to completion as quickly as possible, except for interruptions caused by weather, strikes, material
shortages or other matters beyond Grantor’s control; (ii) so as not to unreasonably interfere with
any construction work being performed on the Grantee’s Property; (iii) so as not to unreasonably
interfere with the use, occupancy or enjoyment of the Grantee’s Property by the owner or occupant
thereof; and (iv) so as to minimize any damage to or interference with any buildings or
improvements that may now or hereafter be located on the Grantee’s Property. Grantor shall pay all
costs and expenses of such work, unless such work is required as a result of damage to or
destruction of the lines and facilities that is caused by the negligence or willful misconduct of
Grantee, its successors in interest, and their agents, representatives, employees, tenants,
licensees, invitees and business guests, in which event, to the extent that the cost and expense
thereof is not covered by insurance proceeds, Grantee shall reimburse Grantor for the amount
actually expended by Grantor in performing such work in excess of any insurance proceeds promptly
upon demand therefor by Grantor. Grantor shall promptly after completion of such work, grade and
pave or reseed or sod and replace any landscaping bushes, or trees with respect to any portions of
the Grantee’s Property that shall have been affected by said work and shall take such other
reasonable actions as may be necessary or appropriate to restore any paving or curbing to its
condition immediately prior to the commencement of the work and to establish a sufficient stand of
grass or other suitable ground cover thereon to prevent soil erosion. In the event any mechanics’
liens are filed against any portion of the Grantee’s Property as a result of services performed or
materials furnished by or at the instance of Grantor, then Grantor hereby covenants to cause such
lien to be immediately discharged of record, either by paying the indebtedness which gave rise to
such lien, or by posting such bond or other securities as shall be required by law to obtain such
release and discharge, and further agrees to indemnify, defend and hold harmless Grantee against
all liability, loss, damage, costs or expenses, including attorneys fees, on account of such claim
of lien.

 

 

ARTICLE III

INITIAL INSTALLATION OF ACCESS DRIVE AND UTILITIES

     3.1 Initial Extension of Access Drive and Utilities to Grantee’s Property. As soon as
practical after the Effective Date, Grantor, at Grantor’s cost and expense, shall (i) construct and
complete such extension of the drive, road, curb cuts, paving and other improvements and facilities
on and within the Access Easement Parcel as necessary, appropriate or required to provide passage,
access, ingress and egress to and from, and between the Grantee’s Property and Route 60 sufficient
for Grantee’s Intended Use (the “Access Drive Extension”) and (ii) construct, install and extend
any and all utility lines, poles, wires, pipes and other utility facilities to the boundaries of
Grantee’s Property as necessary, appropriate, or required for the transmission, distribution, flow
and delivery of electricity, gas, water, sanitary and storm sewer, telephone, cable television and
other utility services, including any lift station for sewage disposal into the sewer system for
the City of Milton, sufficient (by volume) and satisfactory to serve Grantee’s Property for
Grantee’s Intended Use (the “Utilities Extension” and, collectively with the Access Drive
Extension, the “Initial Extension Work”). Grantor shall diligently pursue completion and
construction of the Initial Extension Work as required by Sections 1.5 and 2.5 hereof so as to
facilitate the construction and completion of the Improvements (as defined in the Lease) in
accordance with the terms and provisions of the Lease.

ARTICLE IV

SIGNAGE EASEMENT AND RESTRICTIONS

     4.1 Sign Easement. Grantor does hereby declare, create, establish, grant and impose,
for the benefit of Grantee, and its successors and assigns who become owners of the Grantee’s
Property, a permanent and exclusive easement (the “Sign Easement”) over and upon a portion of the
Access Easement Parcel being more particularly depicted on the drawing attached hereto as
Exhibit H. The purpose of the Sign Easement shall be to allow Grantee, its successors and
assigns who become owner’s of the Grantee’s Property, and any tenant or other person or entity
entitled to the use and occupancy of Grantee’s Property, to construct, operate, maintain, repair,
replace and inspect an entrance sign and/or its appurtenances (the “Entrance Sign”) within the
limits of the Sign Easement so as to be visible from Route 60. Grantee covenants that the Entrance
Sign will at all times comply with all applicable rules and regulations for signage adopted by the
applicable Governmental Authority having jurisdiction. Grantee covenants and agrees to cause the
Entrance Sign and any improvements appurtenant thereto to be maintained and kept in good condition
and state of repair. Grantee shall pay promptly when due all costs incurred in connection with the
Entrance Sign. In the event any mechanics’ or materialmens’ liens are filed against any portion of
Grantor’s property as a result of services performed or materials furnished by or at the instance
of Grantee, then Grantee hereby covenants to cause such lien to be immediately discharged of
record, either by paying the indebtedness which gave rise to such lien, or by posting such bond or
other securities as shall be required by law to obtain such release and discharge, and further
agrees to indemnify, defend and hold harmless Grantor against all liability, loss, damage, costs or
expenses, including attorneys fees, on account of such claim of lien.

     4.2 Restrictions on Grantor’s Property. For so long as Grantee’s Property is being
used for Grantee’s Intended Use or other senior housing facility, the Grantor’s Property, or any
portion thereof, shall not be used or operated for any of the purposes or uses listed on
Exhibit I attached hereto (the “Restrictions”) and incorporated herein by this reference.
The Grantor’s Property is hereby declared to be and shall hereafter be held, transferred, sold,
leased, conveyed and occupied subject to the Restrictions, all of which are for and shall inure to
the benefit of the

 

 

Grantee’s Property. Each deed, lease or other conveyance or disposition of any interest in
Grantor’s Property shall contain a reference to the Restrictions and that such sale, lease or other
conveyance or disposition is made subject to the Restrictions. Anything contained in the
Restrictions notwithstanding, Grantee acknowledges and agrees that the use of Grantor’s Property,
or any portion thereof, for a complimentary independent living senior housing apartment shall not
be deemed to be a violation of and shall be specifically excepted from the Restrictions.

ARTICLE V

TERM AND EFFECT; QUIET ENJOYMENT

     5.1 Term; Binding Effect; Covenants Running With The Land. Except as otherwise
expressly stated in Paragraph 1.6(e) in the case of the dedication and acceptance of the Access
Easement as a public right of way, the Access Easement, the Utility Easements, the Storm Drainage
Easement, and the Sign Easement (together, the “Easements”) granted herein shall be permanent and
perpetual and shall be considered covenants running with and appurtenant to the Grantee’s Property
and the Grantor’s Property, and both the benefits and burdens thereof shall be binding upon and
inure to the benefit of Grantor, Grantee, and their respective successors and assigns who become
the owners of the tracts of land described herein or any portion thereof. The limitations on the
use of the Easements provided for herein shall be binding upon any tenant, licensee, invitee or
other person or entity from time to time entitled to the use and occupancy of, or access to, any
portion of the Grantee’s Property. Subject to the condition expressly provided in Paragraph 4.2
with respect to the continued use of Grantee’s Property, the Restrictions imposed upon Grantor’s
Property shall be permanent and perpetual and shall be considered covenants running with and a
burden upon Grantor’s Property for the benefit of Grantee’s Property, and shall be binding upon
and inure to the benefit of Grantor, Grantee, and their respective successors and assigns who
become owners of the tracts of land described herein or any portion thereof.

     5.2 Subdivision. In the event that any part of the Grantor’s Property or the
Grantee’s Property is subdivided and partially sold or conveyed to another owner, so that there
exist more than one owner of the Grantor’s Property or the Grantee’s Property, all of the benefits
and burdens of the Easements and the Restrictions shall run with each individual new tract created
by the subdividing of the old tract of which each new tract was formerly a part, and shall be
enforceable between and among all of the newly created tracts.

     5.3 Not a Public Dedication; Ownership and Control. Nothing herein contained shall be
deemed to be a gift or dedication to the general public or for the general public or for any public
use or purpose whatsoever, it being the intention and understanding of the parties hereto that,
except as otherwise expressly stated in Paragraph 1.6(e) in the case of the dedication and
acceptance of the Access Easement as a public right of way, this Declaration shall be strictly
limited to and for the purposes herein expressed, solely for the benefit of the parties hereto and
their respective successors and assigns who become owners of the tracts of land described herein,
employees, tenants, licensees, invitees and business guests. Nothing contained in this
Declaration, express or implied, shall confer upon any other person or entity any rights or
remedies under or by reason of this Agreement. In the case of the Easements granted herein, the
owner of the Grantee’s Property shall acquire only the limited rights to use the Easements as set
forth herein. Subject to and consistent with the Easements granted and Restrictions imposed
herein, the owner of the Grantor’s Property burdened by such Easements and Restrictions shall
retain the sole and exclusive ownership and control of the burdened property.

 

 

     5.4 Quiet Enjoyment. Grantor hereby covenants that Grantor is lawfully seized of the
Grantor’s Property and has good right to grant the Easements to Grantee, free and clear of all
liens, mortgages and encumbrances, except for ad valorem taxes which are not delinquent and except
for covenants, conditions and restrictions of record, if any, and the mortgages, if any, made
subordinate to this Declaration pursuant to Paragraph 6.9 hereof, for which a consent to this
Declaration by the holder of such mortgage holder is attached, and that Grantor will warrant and
defend Grantee’s use, enjoyment and possession of the Easements in accordance with the terms of
this Declaration against the claims of all persons except as limited above.

ARTICLE VI

CONDEMNATION OR CASUALTY

     6.1 Condemnation. In the event that all or any portion of the Easements, or any of
them, is taken by the exercise of the power of eminent domain or is transferred or conveyed to the
condemning authority in lieu thereof, then the Grantee, its successors and assigns who become
owners of the Grantee’s Property, shall be entitled to such portion of any award or other
compensation payable with respect to any such taking or conveyance for the lost value of the
Easements and improvements located on or within the Easements owned by Grantee. The Grantee, its
successors or assigns who become owners of the Grantee’s Property, shall be entitled to join in any
condemnation proceeding for the purpose of making its claim as to the lost value of the Easements
and such improvements and any additional or further compensation or damages to which it may be
entitled as a result of such taking.

     6.2 Casualty Loss. In the event the improvements or facilities within the Easements
are damaged or destroyed by fire or other casualty, Grantor shall promptly cause the repair,
restoration or rebuilding of the improvements or facilities to the extent necessary to restore the
Easements to their previously improved condition, restore the Access Drive and the Utilities to
their previous condition and service capabilities, and restore such other areas of Grantor’s
Property to the extent necessary to avoid interference with the use of the Easements.

ARTICLE VII

INDEMNITY

     7.1 Indemnity. Grantee hereby agrees to indemnify and hold Grantor harmless from and
against any liabilities, causes of action, suits, claims, or expenses (including reasonable
attorneys’ fees) asserted against, or incurred or suffered by, Grantor arising out of or resulting
from the use or misuse of the Easements by Grantee, its successors in interest, and their agents,
employees, tenants, invitees, licensees, patients and business guests to the extent not covered by
insurance proceeds actually received by Grantor; provided, however, that Grantee shall have no
obligation to indemnify and hold Grantor harmless from and against any liabilities, causes of
action, suits, claims, or expenses (including reasonable attorneys’ fees) that are the result of
the negligence or willful misconduct of Grantor, its agents, employees, tenants, invitees,
licensees, and business guests. Grantor hereby agrees to indemnify and hold Grantee harmless from
and against any liabilities, causes of action, suits, claims, or expenses (including reasonable
attorneys’ fees) resulting or arising from the use or misuse of the Easements, or the breach or
violation of the Restrictions, by Grantor, its successors in interest, and their employees,
tenants, agents, invitees, customers and licensees, provided, however, that Grantor shall have no
obligation to hold Grantee harmless from and against any liabilities, causes of action, suits,
claims, or expenses (including reasonable attorneys’ fees)

 

 

resulting or arising from the negligence or willful misconduct of Grantee, its agents,
employees, tenants, invitees, licenses and business guests.

ARTICLE VIII

BREACH

     8.1 Breach; Remedies.

          (a) Self Help. If any party shall fail to perform or breach any obligation imposed
upon it pursuant to the provisions, covenants, conditions and restrictions of this Declaration
(such party being herein called a “Defaulting Owner”), then, in any such event, any party not in
default (an “Affected Party”), in addition to all other remedies it may have at law or in equity,
after thirty (30) days’ prior written notice to the Defaulting Owner (or in the event of an
emergency, after such shorter notice as is practical under the circumstances), shall have the right
to perform such obligation on behalf of the Defaulting Owner. In such event, the Defaulting Owner
shall promptly reimburse the Affected Party the cost thereof, together with interest thereon from
the date of outlay at a rate equal to two percent (2%) in excess of the prime rate from time to
time published in the Wall Street Journal, adjusted as and when said rate is adjusted.

          (b) Injunctive Relief and Other Remedies. The parties acknowledge that it may be
difficult to compensate an Affected Party with monetary damages in the event of a violation or
breach of any restriction, covenant or right occurs under this Declaration. In the event of a
violation or breach by any party of any of the provisions, covenants, conditions and restrictions
of this Declaration, the Affected Party shall be entitled to seek and obtain temporary, preliminary
and permanent injunctive relief to enforce any of the provisions of this Declaration and the
parties hereto hereby acknowledge the inadequacy of legal remedies and the irreparable harm which
would be caused by any such violation or breach. In any such action for temporary, preliminary and
permanent injunctive relief, an Affected Party shall be entitled to recover all incidental and
consequential damages.

          (c) Lien. Any amount not reimbursed as provided in subparagraph (a), above, to an
Affected Party who has performed the obligations of a Defaulting Owner in accordance with the
provisions thereof shall constitute a lien on the property of the Defaulting Owner, such lien to be
effective from the date of the recording of the Lien Notice thereinafter described, provided that
written notice of such lien has been sent to the Defaulting Owner and the Defaulting Owner has
failed to pay the amount due within twenty (20) days of the date of the giving of such notice. To
evidence such lien, the Affected Party shall prepare a written notice (the “Lien Notice”) setting
forth (i) the amount owing and a brief statement of the nature thereof, (ii) the name of the
Defaulting Owner, (iii) a description of the property owned by such Defaulting Owner to which such
lien will attach, and (iv) reference to this Declaration as the source and authority for such lien.
The Lien Notice shall be signed and acknowledged by the Affected Party and shall be filed in the
appropriate records for the filing of liens against real property in the records of Cabell County,
West Virginia. A copy of such Lien Notice shall be mailed to the Defaulting Owner within thirty
(30) days after such recording. Such lien may be enforced by judicial foreclosure in like manner
as other liens in accordance with the laws of the State of West Virginia.

     8.2 Remedies Not Exclusive. The remedies of an Affected Party provided for herein
shall be non-exclusive and cumulative with all remedies available at law or equity and an Affected
Party shall not be restrained by any doctrine of election of remedies.

 

 

     8.3 Attorneys’ Fees. In the event any party shall institute any legal action or
arbitration or proceeding against the other party for the enforcement of this Declaration with
respect to any breach or default of the rights, duties and obligations of the parties under this
Declaration, or any default thereunder, the prevailing party in such action or proceeding shall be
entitled to recover from the unsuccessful party therein reimbursement for the costs, expenses and
reasonable attorneys’ fees incurred by the prevailing party in prosecuting such action or
proceeding in addition to any relief to which it may be entitled. The term “prevailing party”
means the party obtaining substantially the relief sought, whether by compromise, settlement or
judgment.

ARTICLE IX

MISCELLANEOUS

     9.1 Singular and Plural. Whenever required by the context of this Declaration, the
singular number shall include the plural, and vice versa, and the masculine gender shall include
the feminine and neuter genders, and vice versa.

     9.2 Invalidity of Particular Provisions. If any provision of this Declaration or the
application thereof to any person or circumstance shall to any extent be invalid or unenforceable,
the remainder of this Declaration, or the application of such provision to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be affected thereby, and
each provision of this Declaration shall be valid and be enforced to the fullest extent permitted
by law.

     9.3 Controlling Law. This Declaration shall be construed, interpreted and enforced in
accordance with the laws of the State of West Virginia.

     9.4 No Waiver. Neither the failure nor any delay on the part of any party hereto in
exercising any rights, power or remedy hereunder shall operate as a waiver thereof, or of any other
right, power or remedy; nor shall any single or partial exercise of any right, power or remedy
preclude any further or other exercise thereof, or the exercise of any other right, power or
remedy. A waiver by any party of a breach of, or default in, any of the terms and conditions of
this Declaration by any other party shall not be construed to be a waiver of any subsequent breach
of or default in the same or any other provisions of this Declaration.

     9.5 Negation of Partnership. None of the terms or provisions of this Declaration
shall be deemed to create a partnership between or among Grantee and Grantor, and nor shall it
cause them to be deemed joint venturers or members of any joint enterprise.

     9.6 Mortgages. Any mortgage or deed of trust (a “Mortgage”) now or hereafter
encumbering all or any portion of the Grantor’s Property, or any portion thereof, shall at all
times be subordinate to all of the terms and provisions of this Declaration and the rights and
easements granted, and restrictions imposed, herein. If any portion of such property subject to
any Mortgage is sold under a foreclosure of any mortgage, or is conveyed to the mortgagee, deed of
trust holder or any other person or party in lieu of foreclosure, any purchaser at such sale or any
such grantee shall acquire and hold such property subject to all of the terms and provisions of
this Declaration and the rights and easements granted herein.

     9.7 Amendments. Amendments to this Declaration to be effective must be in writing,
and must be signed by all owners of any of the tracts of land described herein affected by such
amendment and duly recorded in the real estate records for Cabell County, West Virginia.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Declaration to be duly executed
on the ______ day of                     , 2010.

	 	 	 	 	 
	 	GRANTOR:

A.B.E., LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its: 	 	 
	 
	 	GRANTEE:

[_________________________________]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its: 	 	 
	 

 

 

STATE OF WEST VIRGINIA)

COUNTY OF _____________)

     On this _____ day of __________________, 2010, before me, the undersigned, a Notary Public of
said County and State, personally appeared Edward A. Bell, Member of A.B.E., LLC, and known to me
to be a member or designated agent of the limited liability company that executed the writing
hereto annexed and acknowledged said writing to be the free act and voluntary deed of the limited
liability company, by authority of statute, its articles of organization or operating agreement,
for the uses and purposes therein mentioned, and on oath stated that he is authorized to execute
said writing and in fact executed said writing on behalf of said limited liability company.

     Given under my hand and seal
this _______ day of __________________, 2010.

	 	 	 	 	 

	 
	 	 	 	 
	 
 

	 	 

Notary Public 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	My Commission Expires: 

	 	 	 	 
	
 

	 	 	 	 

STATE
OF ___________     )

COUNTY OF _________     )

     On
this ______ day of _______________, 2010, before me, the undersigned, a Notary Public of
said County and State, personally appeared __________________, Member of
____________, and known to me to be a member or designated agent of the limited liability
company that executed the writing hereto annexed and acknowledged said writing to be the free act
and voluntary deed of the limited liability company, by authority of statute, its articles of
organization or operating agreement, for the uses and purposes therein mentioned, and on oath
stated that he is authorized to execute said writing and in fact executed said writing on behalf of
said limited liability company.

     Given under my hand and
seal this ______ day of ____________, 2010.

	 	 	 	 	 

	 
	 	 	 	 
	 
 

	 	 

Notary Public 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	My Commission Expires: 

	 	 	 	 
	
 

	 	 	 	 

 

 

CONSENT OF MORTGAGE HOLDER

     The undersigned, being the owner and holder of the indebtedness evidenced and secured by that
certain
______________________ (“Mortgage”) does hereby acknowledge, consent and agree to the
granting of the rights and easements and imposing of the restrictions contained and set forth in
that certain Declaration of Easements and Restrictions by and between A.B.E., LLC, a West Virginia
limited liability company, and _______________, a _________, to which this
Consent is attached and does hereby acknowledge and agree that said _______________
shall be and is subordinate to said Declaration of Easements and Restrictions.

     EXECUTED this
______ day of ____________, 2010.

	 	 	 	 	 
	 	[_______________________________________]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

STATE OF WEST VIRGINIA)

COUNTY OF ____________)

     The undersigned, _____________________, a Notary Public of said County, do certify that
__________________,
who signed the writing hereto annexed, bearing the date on the ___ day
of _________, 2010,
for __________________,
a __________________, has this day, in my
county, before me, acknowledged the said writing to be the act and deed of said corporation.

     Given under my hand and seal
this ___ day of _________, 2010.

	 	 	 	 	 

	 
	 	 	 	 
	 
 

	 	 

Notary Public 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	My Commission Expires: 

	 	 	 	 
	 

	 	 	 	 

 

 

EXHIBIT A

GRANTOR’S PROPERTY

All that certain lot, piece or parcel of land situate in Grant District, Cabell County, West
Virginia on the waters of Lee’s Creek, a tributary of the Mud River, and is located on West
Virginia State Local Service Route 19, commonly known as Lee’s Creek Road, near its intersection
with West Virginia State Route 60, and being more particularly described as follows:

Beginning at a 1/2 inch rebar (found) corner to Beatrice C. Bannerman, Emmitt C. Nicholas, and Jesse
Napier; thence, leaving Nicholas and Napier and with Bannerman, S. 65° 47’ 44” E., a distance of
470.00 feet to a 1 1/2 inch pipe (set) corner to Bannerman; thence, with Bannerman, S. 55° 18’ 39”
E., a distance of 601.77 feel to a 1 1/2 inch pipe (set corner to Bannerman); thence, with Bannerman,
S. 36° 25’ 50” E., passing a 1 1/2 inch pipe at 370.00 feet and a total distance of 400.00 feet to
the center of the said Lee’s Creek, corner to Willard C. Dailey in the line of Bannerman; thence,
leaving Bannerman and with the said creek, S. 48° 25’ 28” W., a distance of 43.02 feet; thence, S.
26° 50’ 34” W., a distance of 45.48 feet; thence, S. 65° 46’ 40” W., a distance of 110.78 feet;
thence, S. 12° 30’ 06” W., a distance of 38.50 feet; thence, S. 44° 42’ 43” W., a distance of
157.18 feet, corner to Nadeen Dotson; thence, with Dotson and the center of said Lee’s Creek S. 65’
32’ 31” W., a distance of 207.24 feet; thence, N. 42° 14’ 12” W., a distance of 117.34 feet;
thence, N. 83° 14’ 49” W., a distance of 40.52 feet; thence, S. 80° 19’ 25” W., a distance of 25.49
feet; thence, S. 62° 35’ 19” W., a distance of 105.64 feet; thence, S. 61° 32’ 01” W., and passing
at 22.72 feet the northeast corner of a 0.74 acre parcel of land designated and conveyed separately
as a right at way for the land described herein and a total distance of 63.02 feet; thence, S, 72°
04’ 48” W., and passing at 22.52 feet the northwest corner of a 0.74 acre parcel of land designated
and conveyed separately as a right of way for the land described herein and a total distance of
140.69 feet; thence, S, 80° 56’ 40” W., a distance of 112.11 feet; thence, S. 81° 10’ 43” W., a
distance of 93.93 feet; thence, N. 28° 01’ 21” W., a distance of 16.75 feet; thence, N. 11° 20’ 21”
W., a distance of 160.50 feet to a 1 1/2 inch pipe (set); thence, N. 42° 48’ 48” W., a distance of
188.84 feet to a 1/2 inch rebar (found) corner to Salamacha and with Conveyor Manufacturing Supply
Company; thence, leaving Salamacha and with Conveyor Manufacturing Supply Company, N. 25° 02’ 53”
W., a distance of 302.13 feet to the center of the said Lee’s Creek, corner to Mary L. Malone from
which a 3/4 inch iron pipe (found), on the north line of said Route 60 bears S. 58° 43’ 15’W., a
distance of 283.60 feet; thence, leaving Conveyor Manufacturing Company and with Malone, N. 32° 20’
56” W., a distance of 61.78 feet to a steel angle (found, corner to Malone and Lyndall Williams);
thence, leaving Malone and with Williams, N. 13° 52’ 07’ W., a distance of 46.18 feet to a 1/2 inch
rebar (found), comer to Williams and Jesse Napier, from which 2 inch pipe (found) in the line
between Williams and Napier bears N. 67° 00’ 30’ W., a distance of 24.04 feet; thence, leaving
Williams and with Napier N. 22° 20’ 03” E., a distance of 666.01 feet. to the BEGINNING, containing
24.60 acres, of land, more or less.

LESS AND EXCEPT, that certain 5.0 acre tract, more or less, conveyed to the Grantee and more
particularly described as Grantee’s Property on Exhibit B attached to this Declaration of Easements
and Restrictions

 

 

EXHIBIT B

GRANTEE’S PROPERTY

The 217,688 sq. ft. or 5.0 acre parcel or tract of land shown on the ALTA/ACSM Title Survey for
Diversicare Leasing Corporation prepared by Randolph Engineering dated 7/22/08, Project No.
2008100, Sheet 1 of 1, more particularly described as follows:

Beginning at a 5/8” rebar pin set in the southerly property line of Bruce P. Bannerman (Deed Book
162 Page 70), said rebar being located S 65°47’44” E a distance of 211.51 feet from a 1/2” rebar pin
found marking the most northerly corner of the properties of A.B.E., LLC. (Deed Book 1166 Page 610)
of which this 5.00 acres is a part., thence;

Leaving said 5/8” rebar and with the line of said Bannerman S 65°47’44” E a distance of 258.49 feet
to a 5/8” rebar pin set in the southerly right of way line of Interstate 64, thence;

Leaving said Bannerman and with said right of way line S 55°18’39” E a distance of 201.45 feet to a
5/8” rebar pin set, thence;

Leaving the right of way line of Interstate 64 and severing the lands of said A.B.E., LLC. with the
following eight (8) lines:

1) S 08°31’14” W a distance of 87.74 feet to a 5/8” rebar pin set, thence;

2) S 32°43’23” E a distance of 114.00 feet to a 5/8” rebar pin set, thence;

3) S 85°08’03” E a distance of 50.86 feet to a 5/8” rebar pin set, thence;

4) S 05°30’57” W a distance of 107.25 feet to a 5/8” rebar pin set, thence;

5) S 72°47’24” W passing a 5/8” rebar pin set marking a corner for a hereinafter described access
and utility right of way at 104.21 feet and continuing for a total distance of 343.67 feet to a
5/8” rebar pin set, thence;

6) N 63°07’19” W a distance of 207.75 feet to a 5/8” rebar pin set said rebar also marking a corner
to the aforementioned access and utility right of way, thence;

7) N 26°52’00” W a distance of 51.14 feet to a 5/8” rebar pin set, thence;

8) N 05°32’53” E a distance of 478.76 feet to the POINT OF BEGINNING containing 5.00 acres.

 

 

EXHIBIT C

DESCRIPTION OF ACCESS EASEMENT PARCEL

Variable Width Non-Exclusive Right of Way for Ingress, Egress from U.S. Route 60 to the boundary of
Grantee’s Property as shown on the ALTA/ACSM Title Survey for Diversicare Leasing Corporation
prepared by Randolph Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of 1, more
particularly described as follows:

Beginning at a 5/8” rebar pin set marking a corner to the hereinbefore described 5.00 acre parcel,
said rebar being located S 05°32’53” W a distance of 478.76 feet and S 26°52’00” E a distance of
51.14 feet from the beginning corner of the 5.00 acre parcel, thence;

With the line of said 5.00 acre parcel S 63°07’19” E a distance of 207.75 feet to a 5/8” rebar pin
set, thence;

N 72°47’24” E a distance of 239.24 feet to a 5/8” rebar pin set, thence;

Leaving the line of said 5.00 acre parcel and severing the lands of A.B.E., LLC. (Deed Book 1166
Page 610 with the following six (6) lines:

1) S 50°07’26” W a distance of 103.80 feet to a 5/8” rebar pin set, thence;

2) S 72°47’24” W a distance of 102.70 feet to a 5/8” rebar pin set, thence;

3) With a curve to the left having a radius of 50 feet the chord of which bears S 36°09’44” W a
distance of 59.66 feet to a 5/8” rebar pin set, thence;

4) S 01°11’53” E a distance of 236.50 feet to a 5/8” rebar pin set, thence;

5) S 10°51’59” E a distance of 60.57 feet to a 5/8” rebar pin set, thence;

6) S 20°33’08” E a distance of 124.02 feet to a point in the middle of Lee Creek and in the line of
the property of Connie D. Sunderland (Deed Book 1159 Page 572), thence;

With the line of said Sunderland and the center of Lee Creek N 61°32’01” E a distance of 2.85 feet
to a point marking a corner to the property of Carroll G. Dotson (Deed Book 1129 Page 403), thence;

With the division line of said Dotson and Sunderland S 20°33’11” E a distance of 132.70 feet to a
5/8” rebar pin found, thence;

Leaving the line of said Dotson and through the
lands of said Sunderland S 22°26’56” W a distance of 123.50 feet to a 5/8” rebar pin found, thence;

Continuing with said Sunderland S 14°17’35” E a distance of 281.22 feet to a 3/4” pipe found marking
a corner to the property of Evelyn Erlewine (Deed Book 872 Page 632), thence;

With the division line of said Sunderland and Erlewine S 53°15’48” W a distance of 68.94 feet to a
3/4” pipe found, thence;

Continuing with said division line S 53°12’13” W a distance of 46.33 feet to a 5/8” rebar found in
the northerly right of way line of U.S. Route 60, thence;

 

 

Leaving the line of said Erlewine and with the line of said Route 60 N 56°01’47” W a distance of
69.07 feet to a 5/8” rebar pin found, thence;

Leaving the line of U.S. Route 60 and through the land of said Sunderland the following four (4)
lines:

1) N 36°50’00” E a distance of 138.08 feet to a 5/8” rebar pin found, thence;

2) N 14°17’35” W a distance of 202.01 feet to a 5/8” rebar pin found, thence;

3) N 22°26’56” E a distance of 120.72 feet to a 5/8” rebar pin found, thence;

4) N 20°33’11” W a distance of 112.88 feet to a point in the center of Lee Creek, said point being
in the line of the property of A.B.E., LLC., thence;

With the line of said A.B.E., LLC. and the center of said creek N 72°04’48” E a distance of 2.18
feet to a point, thence;

Leaving the line of said Sunderland and said creek and through the lands of said A.B.E., LLC. the
following six (6) lines:

1) N 20°33’08” W a distance of 125.82 feet to a 5/8” rebar pin set, thence;

2) N 10°51’59” W a distance of 74.03 feet to a 5/8” rebar pin set, thence;

3) N 01°11’53” W a distance of 249.57 feet to a 5/8” rebar pin set, thence;

4) With a curve to the left having a radius of 50 feet the chord of which bears N 32°09’05” W a
distance of 51.46 feet to a 5/8” rebar pin set, thence;

5) N 63°07’19” W a distance of 115.00 feet to a 5/8” rebar pin set, thence;

6) N 26°52’00” W a distance of 67.83 feet to the POINT OF BEGINNING.

 

 

EXHIBIT D

LOCATION OF ACCESS EASEMENT 

As shown on the ALTA/ACSM Title Survey for Diversicare Leasing Corporation prepared by Randolph
Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of 1, attached hereto.

 

 

EXHIBIT E

DESCRIPTION OF UTILITY EASEMENTS PARCEL

Right of Way for Utilities

Variable Width Non-Exclusive Right of Way for Ingress, Egress and Utilities from U.S. Route 60 to
the boundary of Grantee’s Property, as shown on the ALTA/ACSM Title Survey for Diversicare Leasing
Corporation, prepared by Randolph Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of 1,
more particularly described as follows:

Beginning at a 5/8” rebar pin set marking a corner to the hereinbefore described 5.00 acre parcel,
said rebar being located S 05°32’53” W a distance of 478.76 feet and S 26°52’00” E a distance of
51.14 feet from the beginning corner of the 5.00 acre parcel, thence;

With the line of said 5.00 acre parcel S 63°07’19” E a distance of 207.75 feet to a 5/8” rebar pin
set, thence;

N 72°47’24” E a distance of 239.24 feet to a 5/8” rebar pin set, thence;

Leaving the line of said 5.00 acre parcel and severing the lands of A.B.E., LLC. (Deed Book 1166
Page 610 with the following six (6) lines:

1) S 50°07’26” W a distance of 103.80 feet to a 5/8” rebar pin set, thence;

2) S 72°47’24” W a distance of 102.70 feet to a 5/8” rebar pin set, thence;

3) With a curve to the left having a radius of 50 feet the chord of which bears S 36°09’44” W a
distance of 59.66 feet to a 5/8” rebar pin set, thence;

4) S 01°11’53” E a distance of 236.50 feet to a 5/8” rebar pin set, thence;

5) S 10°51’59” E a distance of 60.57 feet to a 5/8” rebar pin set, thence;

6) S 20°33’08” E a distance of 124.02 feet to a point in the middle of Lee Creek and in the line of
the property of Connie D. Sunderland (Deed Book 1159 Page 572), thence;

With the line of said Sunderland and the center
of Lee Creek N 61°32’01” E a distance of 2.85 feet
to a point marking a corner to the property of Carroll G. Dotson (Deed Book 1129 Page 403), thence;

With the division line of said Dotson and
Sunderland S 20°33’11” E a distance of 132.70 feet to a
5/8” rebar pin found, thence;

Leaving the line of said Dotson and through the lands of said Sunderland S 22°26’56” W a distance of 123.50 feet to a 5/8” rebar pin found, thence;

Continuing with said Sunderland S 14°17’35” E a distance of 281.22 feet to a 3/4” pipe found marking
a corner to the property of Evelyn Erlewine (Deed Book 872 Page 632), thence;

With the division line of said Sunderland and Erlewine S 53°15’48” W a distance of 68.94 feet to a
3/4” pipe found, thence;

Continuing with said division line S 53°12’13” W a distance of 46.33 feet to a 5/8” rebar found in
the northerly right of way line of U.S. Route 60, thence;

 

 

Leaving the line of said Erlewine and with the line of said Route 60 N 56°01’47” W a distance of
69.07 feet to a 5/8” rebar pin found, thence;

Leaving the line of U.S. Route 60 and through the land of said Sunderland the following four (4)
lines:

1) N 36°50’00” E a distance of 138.08 feet to a 5/8” rebar pin found, thence;

2) N 14°17’35” W a distance of 202.01 feet to a 5/8” rebar pin found, thence;

3) N 22°26’56” E a distance of 120.72 feet to a 5/8” rebar pin found, thence;

4) N 20°33’11” W a distance of 112.88 feet to a point in the center of Lee Creek, said point being
in the line of the property of A.B.E., LLC., thence;

With the line of said A.B.E., LLC. and the center of said creek N 72°04’48” E a distance of 2.18
feet to a point, thence;

Leaving the line of said Sunderland and said creek and through the lands of said A.B.E., LLC. the
following six (6) lines:

1) N 20°33’08” W a distance of 125.82 feet to a 5/8” rebar pin set, thence;

2) N 10°51’59” W a distance of 74.03 feet to a 5/8” rebar pin set, thence;

3) N 01°11’53” W a distance of 249.57 feet to a 5/8” rebar pin set, thence;

4) With a curve to the left having a radius of 50 feet the chord of which bears N 32°09’05” W a
distance of 51.46 feet to a 5/8” rebar pin set, thence;

5) N 63°07’19” W a distance of 115.00 feet to a 5/8” rebar pin set, thence;

6) N 26°52’00” W a distance of 67.83 feet to the POINT OF BEGINNING.

Sanitary Sewer Easement:

15-foot Sanitary Sewer Easement extending to/from the Variable Width Non-Exclusive Right of Way for
Ingress, Egress and Utilities to the Lift Station Site as shown on the ALTA/ACSM Title Survey for
Diversicare Leasing Corporation prepared by Randolph Engineering dated 7/22/08, Project No.
2008100, Sheet 1 of 1, for which a more particular description will be prepared by Randolph
Engineering and made a part of this Exhibit E.

 

 

EXHIBIT F

LOCATION OF UTILITY EASEMENTS

As shown on the ALTA/ACSM Title Survey for Diversicare Leasing Corporation prepared by Randolph
Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of 1, attached hereto.

 

 

EXHIBIT G

STORM DRAINAGE FACILITIES

15 foot Drainage Easement as shown on the ALTA/ACSM Title Survey for Diversicare Leasing
Corporation prepared by Randolph Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of 1,
more particularly described as follows:

Beginning at a point in the southerly line of the hereinbefore described 5.00 acre parcel, said
point being located S 72°47’24” W a distance of 133.17 feet from the most southeasterly corner of
said 5.00 acre parcel, thence;

Leaving the line of said 5.00 acre parcel and through the lands of A.B.E., LLC. (Deed Book 1166
Page 610) S 05°34’04” E a distance of 479.29 feet to a point in the center of Lee Creek and in the
line of the property of Carroll Dotson (Deed Book 1129 Page 403), thence;

With the line of said Dotson and the center of said Lee Creek N 83°14’49” W a distance of 15.35
feet to a point, thence;

Leaving the line of said Dotson and Lee Creek and through the lands of said A.B.E., LLC. N
05°34’04” W a distance of 472.93 feet to a point in the southerly line of the aforementioned 5.00
acre parcel, thence;

With the line of said 5.00 acre parcel N 72°47’24” E a distance of 15.32 to the POINT OF BEGINNING.

 

 

EXHIBIT H

SIGN EASEMENT

Easement area located within Variable Width Non-Exclusive Right of Way for Ingress, Egress and
utilities at entrance to/from U.S. Route 60 as shown on the ALTA/ACSM Title Survey for Diversicare
Leasing Corporation prepared by Randolph Engineering dated 7/22/08, Project No. 2008100, Sheet 1 of
1, attached hereto, for which a more particular description will be prepared by Randolph
Engineering and made a part of this Exhibit H.

 

 

EXHIBIT I

RESTRICTIONS

	1.	 	Nursing home;
	 
	2.	 	Assisted living facility;
	 
	3.	 	Any establishment that would produce strong odors or excessive noise or that creates a fire,
explosive or other hazard (does not include a service station or convenience store providing
gasoline pumps);
	 
	4.	 	Any land use involving temporary structure;
	 
	5.	 	Mobile home or trailer park;
	 
	6.	 	Sex industry establishments;
	 
	7.	 	Mortuary or funeral home;
	 
	8.	 	Cemetery;
	 
	9.	 	Factory;
	 
	10.	 	Flea Market;
	 
	11.	 	Public swimming pool;
	 
	12.	 	Liquor store (does not include a restaurant whose primary business is the sale of food with
the incidental sale of alcohol for consumption on the premises or a convenience store whose
primary business is the sale of food, beverages or other household supplies to customers of
which the sale of alcoholic beverages is an incidental part;
	 
	13.	 	Automobile, truck, trailer, motorbike, farm or construction equipment, boat or recreational
vehicle repair facility;
	 
	14.	 	Veterinary hospital or animal raising facilities (does not prohibit pet supply shops);
	 
	15.	 	Mining operations;
	 
	16.	 	Head shop store;
	 
	17.	 	Gun range or for the sale of fireworks;
	 
	18.	 	Junkyard or stockyard.exv10w2

Exhibit 10.2

Execution Copy

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

AMENDED AND RESTATED LICENSE AGREEMENT

     This Amended and Restated License Agreement (the “Agreement”) is entered into as of
June 20, 2010 (the “Execution Date”) between Cypress Bioscience, Inc., a corporation
organized and existing under the laws of the State of Delaware and having its principal place of
business at 4350 Executive Drive, Suite 325, San Diego, CA 92121 (“Cypress”), and BioLineRx
Ltd., a corporation organized and existing under the laws of the State of Israel and
having a principal place of business at 19 Hartum Street, P.O. Box 45158, Jerusalem 91450, Israel
(collectively, “BioLineRx”). BioLineRx and Cypress are sometimes referred to herein individually
as a “Party” and collectively as the “Parties.”

RECITALS

     Whereas, BioLineRx is a clinical-stage biopharmaceutical company developing clinical
and pre-clinical candidates for central nervous system diseases, oncology, cardiovascular,
auto-immune and metabolic diseases; and

     Whereas, Cypress has substantial expertise in the research, development, manufacture,
distribution, sales and marketing of pharmaceutical products; and

     Whereas, BioLineRx controls certain intellectual property covering BL-1020, a first
in class antipsychotic that combines dopamine antagonism with GABAergic activity, and is engaged in
the development of BL-1020 for central nervous system diseases; and

     Whereas, BioLineRx desires to grant to Cypress, and Cypress desires to obtain,
exclusive rights to pre-commercialize, manufacture and commercialize product(s) containing BL-1020,
all on the terms and conditions set forth herein; and

     Whereas, the Parties executed that certain License Agreement on June 20, 2010 and now
wish to amend and restate that License Agreement as set out herein;

     Now Therefore, in consideration of the foregoing premises and the mutual promises,
covenants and conditions contained in this Agreement, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

     As used in this Agreement, the following initially capitalized terms, whether used in the
singular or plural form, shall have the meanings set forth in this Article 1.

     1.1 “Acceptance” has the meaning set forth in Section 8.2(b).

     1.2 “Acquisition” has the meaning set forth in Section 15.5.

1

 

     1.3 “Affiliate” means, with respect to a particular Party, a person, corporation, partnership,
or other entity that controls, is controlled by or is under common control with such Party. For
the purposes of this definition, the word “control” (including, with correlative meaning, the terms
“controlled by” or “under the common control with”) means the actual power, either directly or
indirectly through one or more intermediaries, to direct or cause the direction of the management
and policies of such entity, whether by the ownership of fifty percent (50%) or more of the voting
stock of such entity, or by contract or otherwise.

     1.4 “BioLineRx Indemnitees” has the meaning set forth in Section 11.2.

     1.5 “BioLineRx Know-How” means all Information that is Controlled by BioLineRx or its
Affiliates as of the Effective Date or at any time during the Term (including BioLineRx’s interest
in any Joint Inventions) and is necessary or useful for the Pre-Commercialization,
Commercialization or manufacture of the Products in the Field in accordance with the terms of this
Agreement. For clarity, BioLineRx Know-How excludes the BioLineRx Patents. Notwithstanding the
foregoing, BioLineRx Know-How shall not include Information controlled by an acquiror or merger
partner of BioLineRx that: (a) such acquiror or merger partner of BioLineRx controlled prior to the
date of closing of such acquisition or merger; or (b) was developed after the date of closing of
such acquisition or merger without using BioLineRx Know-How, Cypress Know-How, Joint Know-How or
inventions claimed in BioLineRx Patents, Cypress Patents or Joint Patents, and in the case of (b)
is not used in connection with Pre-Commercialization or Commercialization.

     1.6 “BioLineRx Patents” means all Patents in the Cypress Territory (a) that are Controlled by
BioLineRx or its Affiliates as of the Effective Date or at any time during the Term (including
BioLineRx’s interest in any Joint Patents), and (b) directed to the Pre-Commercialization,
Commercialization or manufacture of the Products in the Field in the Cypress Territory.
Notwithstanding the foregoing, BioLineRx Patents shall not include Patents controlled by an
acquiror or merger partner of BioLineRx that: (i) such acquiror or merger partner of BioLineRx
controlled prior to the date of closing of such acquisition or merger; or (ii) were developed after
the date of closing of such acquisition or merger without using BioLineRx Know-How, Cypress
Know-How, Joint Know-How or inventions claimed in BioLineRx Patents, Cypress Patents or Joint
Patents, and in the case of (ii) are not used in connection with Pre-Commercialization or
Commercialization. The BioLineRx Patents existing as of the Effective Date are set forth on
Exhibit B attached hereto, listed under UA Patents and BioLineRx Patents, as applicable.

     1.7 “BioLineRx Pre-Commercialization Activities” has the meaning set forth in Section 4.3(a).

     1.8 “BioLineRx Pre-Commercialization Expenses” has the meaning set forth in Section 4.7(c).

     1.9 “BioLineRx Regulatory Data” means Regulatory Data generated by or on behalf of BioLineRx
(or its Affiliates, licensees or sublicensees) after the Effective Date, and Controlled by
BioLineRx during the Term.

2

 

     1.10 “BioLineRx Prosecuted Patents” has the meaning set forth in Section 9.4(b).

     1.11 “BioLineRx Technology” means the BioLineRx Patents and BioLineRx Know-How.

     1.12 “BL-1020” means BioLineRx’s proprietary compound known as BL-1020, having the chemical
structure set forth on Exhibit A, or salt, solvate, polymorph, or other non-covalent derivate
thereof.

     1.13 “Commercialization,” with a correlative meaning for “Commercialize” and
“Commercializing,” means all activities in the Cypress Territory undertaken before and after
obtaining Regulatory Approvals relating specifically to the pre-launch, launch, promotion,
detailing, medical education and medical liaison activities, marketing, pricing, reimbursement,
sale, and distribution of the Products in the Cypress Territory, including: (a) strategic
marketing, sales force detailing, advertising, medical education and liaison, and market and
Product support; (b) any post-marketing clinical studies (other than those included in
Pre-Commercialization) for use in generating data to be submitted to Regulatory Authorities (and
all associated reporting requirements); and (c) all customer support, Product distribution,
invoicing and sales activities.

     1.14 “Commercialization Plan” has the meaning set forth in Section 6.1(a).

     1.15 “Commercially Reasonable Efforts” means carrying out of obligations or tasks by a Party
using a level of efforts consistent with the exercise of good faith and prudent scientific and
business judgment in an active and ongoing program as applied by a Party to the
pre-commercialization and commercialization of its own pharmaceutical products at a similar stage
of development and with similar market potential.

     1.16 “Confidential Information” means, with respect to a Party, all reports and other
Information of such Party that is disclosed to the other Party under this Agreement, whether in
oral, written, graphic, or electronic form. All Information disclosed by a Party pursuant to the
Mutual Non Disclosure Agreement between the Parties dated January 28, 2010, as amended through the
Effective Date, shall be deemed to be such Party’s Confidential Information disclosed hereunder.

     1.17 “Control” means, with respect to any material, Information, or intellectual property
right, that a Party owns or has a license to such material, Information, or intellectual property
right and, in each case, has the ability to grant to the other Party access, a license, or a
sublicense (as applicable) to the foregoing on the terms and conditions set forth in this
Agreement.

     1.18 “Cypress Indemnitees” has the meaning set forth in Section 11.1.

     1.19 “Cypress Know-How” means all Information that is Controlled by Cypress or its Affiliates as of
the Effective Date or at any time during the Term (including Cypress’ interest in any Joint
Inventions) and is necessary or useful for the Pre-Commercialization, Commercialization or
manufacture of the Products in the Field in accordance with the terms of

3

 

this Agreement. For clarity, Cypress Know-How excludes the Cypress Patents. Notwithstanding the
foregoing, Cypress Know-How shall not include Information controlled by an acquiror or merger
partner of Cypress that: (a) such acquiror or merger partner of Cypress controlled prior to the
date of closing of such acquisition or merger; or (b) was developed after the date of closing of
such acquisition or merger without using BioLineRx Know-How, Cypress Know-How, Joint Know-How or
inventions claimed in BioLineRx Patents, Cypress Patents or Joint Patents, and in the case of (b)
is not used in connection with Pre-Commercialization or Commercialization.

     1.20 “Cypress Patents” means all Patents (a) that are Controlled by Cypress or its Affiliates
as of the Effective Date or at any time during the Term (including Cypress’ interest in any Joint
Patents) and (b) with a Valid Claim covering the Pre-Commercialization, Commercialization or
manufacture of the Products in the Field in the Cypress Territory. Notwithstanding the foregoing,
Cypress Patents shall not include Patents controlled by an acquiror or merger partner of Cypress
that: (i) such acquiror or merger partner of Cypress controlled prior to the date of closing of
such acquisition or merger; or (ii) were developed after the date of closing of such acquisition or
merger without using BioLineRx Know-How, Cypress Know-How, Joint Know-How or inventions claimed in
BioLineRx Patents, Cypress Patents or Joint Patents, and in the case of (ii) are not used in
connection with Pre-Commercialization or Commercialization.

     1.21 “Cypress Pre-Commercialization Activities” has the meaning set forth in Section 4.4(b).

     1.22 “Cypress Pre-Commercialization Expenses” has the meaning set forth in Section 4.7(b).

     1.23 “Cypress Regulatory Data” means Regulatory Data generated by or on behalf of Cypress (or
its Affiliates, licensees or sublicensees) after the Effective Date, and Controlled by Cypress
during the Term.

     1.24 “Cypress Prosecuted Patents” has the meaning set forth in Section 9.4(a)(2).

     1.25 “Cypress Technology” means the Cypress Patents and Cypress Know-How.

     1.26 “Cypress Territory” means the United States, Canada and Mexico, including each of their
territories, possessions and provinces, as the case may be.

     1.27 “Dollar” means a U.S. dollar, and “$” shall be interpreted accordingly.

     1.28 “Effective Date” means the date on which the written consent of the OCS with respect to
this Agreement has been obtained in accordance with Section 2.1 (whether such OCS consent is
granted for an associated form of Agreement modified in accordance with Section 2.1 or for the
Execution Date Agreement).

     1.29 “Excluded Claim” has the meaning set forth in Section 14.4.

4

 

     1.30 “Execution Date Agreement” has the meaning set forth in Section 2.1.

     1.31 “Executives” has the meaning set forth in Section 3.1(d).

     1.32 “FDA” means the United States Food and Drug Administration and any successors thereof.

     1.33 “Field” means the use of the Product for the prevention, diagnosis and treatment of all
human diseases.

     1.34 “First Commercial Sale” means the first sale of a Product by Cypress or its sublicensees
to a Third Party in a given regulatory jurisdiction within the Cypress Territory after Regulatory
Approval for such Product has been obtained in such jurisdiction.

     1.35 “Generic Product” means, with respect to a Product in the Field in the Cypress Territory,
another pharmaceutical product that is: (a) a Product; (b) is bioequivalent to such Product with
respect to pharmacokinetic properties; and (c) is (i) either approved for use in the Cypress
Territory by the Regulatory Authority, or (ii) launched by a Third Party in the Cypress Territory
pursuant to Paragraph IV of the Drug Price Competition and Patent Term Restoration Act of 1984, as
amended, or any successor regulations (or its comparable regulation in a jurisdiction within the
Cypress Territory).

     1.36 “Governmental Authority” means any multi-national, federal, state, local, municipal,
provincial or other government authority of any nature (including any governmental division,
prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or
other tribunal).

     1.37 “Indemnify” has the meaning set forth in Section 11.1.

     1.38 “Indication” means Initial Indication or Additional Indication. As used herein, “Initial
Indication” means a class of human disease or condition listed in The Diagnostic and Statistical
Manual of Mental Disorders, 4th Edition (“DSM-IV”) within the DSM-IV defined class of
“Schizophrenia and Other Psychotic Disorders” (as the DSM-IV may be amended or updated during the
Term), for which a Product has been approved by a Regulatory Authority; and “Additional Indication”
means a separately defined, well-categorized class of human disease or condition, other than the
Initial Indication, for which a Product has been approved by a Regulatory Authority. For clarity,
pediatric extension of the Initial Indication is not an Additional Indication.

5

 

     1.39 “Information” means any data, results, technology, business information and information of any
type whatsoever, in any tangible or intangible form, including know-how, trade secrets, practices,
techniques, methods, processes, inventions, developments, specifications, formulations, formulae,
materials or compositions of matter of any type or kind (patentable or otherwise), software,
algorithms, marketing reports, expertise, test data (including pharmacological, biological,
chemical, biochemical, toxicological, preclinical and clinical test data), manufacturing know-how
and data, analytical and quality control data, stability data, other study data and procedures.

     1.40 “Initiation” has the meaning set forth in Section 8.2(b).

     1.41 “JAMS Rules” has the meaning set forth in Section 14.3.

     1.42 “Joint Inventions” has the meaning set forth in Section 9.1(b).

     1.43 “Joint Patents” has the meaning set forth in Section 9.1(b).

     1.44 “Joint Steering Committee” or “JSC” has the meaning set forth in Section 3.1(a)

     1.45 “Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements
having the effect of law of any federal, national, multinational, state, provincial, county, city
or other political subdivision, domestic or foreign.

     1.46 “Losses” has the meaning set forth in Section 11.1.

     1.47 “Major Country” means any one of the following countries: France, Germany, Italy, Spain
and the United Kingdom.

     1.48 “[...***...] Study” means the ongoing
pre-clinical study which is being conducted by [...***...] for BioLineRx, which is BioLineRx’s only
ongoing pre-clinical study concerning the Product as of the Execution Date.

     1.49 “NDA” means a new drug application as defined in the United States Federal Food,
Drug, and Cosmetic Act (and any successor acts thereto), as amended from time to time.

     1.50 “Net Sales” means, with respect to a particular time period, the total amounts invoiced
by Cypress and its Affiliates or sublicensees for sales of Products made during such time period to
unrelated Third Parties in the Cypress Territory, less the following deductions to the extent
actually allowed or incurred with respect to such sales:

          (a) trade discounts, credits or allowances including cash and quantity discounts provided by
means of chargebacks, rebates and administrative fees charged by customers or health care
organizations determined based upon sales;

          (b) credits or allowances additionally granted for damaged, outdated, spoiled, returned or
rejected Products, including in connection with recalls;

 

			
	***	 	Confidential Treatment Requested

6

 

          (c)freight, shipping and insurance charges, to the extent included in the invoiced amount;

          (d) Taxes, tariffs, duties or other governmental charges (other than income taxes) levied on,
absorbed or otherwise imposed on sales of the Products in the Cypress Territory, as adjusted by any
refunds, provided that such Taxes, tariffs, duties and other governmental charges are included in
the applicable invoiced amount and identified in the applicable invoice; and

          (e) rebates, discounts or other payments on sales of Products that are mandated by a
Governmental Authority.

Notwithstanding the foregoing, amounts invoiced by Cypress and its Affiliates or sublicensees for
the sale of Products between Cypress and its Affiliates or sublicensees for resale shall not be
included in the computation of Net Sales hereunder. For purposes of determining Net Sales, a
“sale” shall not include reasonable transfers or dispositions, at no cost, as samples or for
charitable purposes, or transfers or dispositions at no cost for preclinical, clinical or
regulatory purposes.

Each of the deductions set forth above shall be reasonable and customary, and in accordance with
United States Generally Accepted Accounting Principles (“GAAP”).

If Cypress proposes to Commercialize a Product as part of a Bundled Product (as defined below),
Cypress shall inform BioLineRx of such proposal and the Parties will discuss in good faith whether,
and under what conditions, such Bundled Product should be Commercialized. For purposes of this
paragraph, “Bundled Product” means products (including one or more Products) that are either (A)
packaged together for sale or shipment as a single unit or sold at a single price or (B) marketed
or sold collectively as a single product. For clarity, a Bundled Product is not a Combination
Product (as defined below).

For the purpose of determining royalties due to BioLineRx, Cypress shall calculate Net Sales of
Combination Products (as defined below) by multiplying Net Sales of such Combination Product by a
fraction A/A+B, where A is the sale price of the Product portion of such Combination Product when
sold separately and B is the sale price of the other active ingredient(s) in such Combination
Product when sold separately; provided, however, that if the Product portion of such Combination
Product or any of the other active ingredients in such Combination Product is not then sold
separately, then Cypress shall calculate Net Sales of such Combination Products by the fraction
C/C+D, where C is a reasonable estimate of the fair market value of the Product portion of such
Combination Product, D is a reasonable estimate of the fair market value of the other active
ingredients in such Combination Product, and the estimates of C and D are determined by mutual
agreement of the Parties. As used in this Section 1.50, “Combination Product” means a product in
which one or more active ingredients that are not Products are sold in a single formulation with a
Product.

7

 

     1.51 “Non-Breaching Party” has the meaning set forth in Section 13.2(a).

     1.52 “Notified Party” has the meaning set forth in Section 13.2(a).

     1.53 “OCS” has the meaning set forth in Section 2.1.

     1.54 “Ordinary Shares” has the meaning set forth in Section 8.2(a).

     1.55 “Patents” means (a) pending patent applications, issued patents, utility models and
designs; (b) reissues, renewals, substitutions, confirmations, registrations, validations,
re-examinations, additions, extensions, continuations, continued prosecution applications,
continuations-in-part, or divisions of or to any patent applications, issued patents, utility
models or designs; and (c) the equivalent or counterpart of the foregoing.

     1.56 “Pharmacovigilance Agreement” has the meaning set forth in Section 5.3.

     1.57 “Phase 3 Clinical Trial” means a pivotal human clinical trial on sufficient numbers of
patients which is designed to (a) establish that a Product is safe and efficacious for its intended
use; (b) define warnings, precautions and adverse reactions that are associated with such Product
in the dosage range to be prescribed; and (c) support Regulatory Approval of such Product, as
further defined in 21 C.F.R. 312.21(c), as amended from time to time, or the corresponding
regulation in jurisdictions within the Cypress Territory other than the United States. For
clarity, a Phase 2/3 Clinical Trial shall be considered to be a Phase 3 Clinical Trial if it is
considered by a Regulatory Authority to be a pivotal clinical trial for the Product as determined
at the time of Acceptance by the FDA of an NDA for a Product in the United States.

     1.58 “Pre-Commercialization,” with a correlative meaning for “Pre-Commercialize” and
“Pre-Commercializing,” means all activities in the Cypress Territory relating to preparing and
conducting preclinical testing, toxicology testing, human clinical studies, and regulatory
activities (e.g., regulatory applications) with respect to the Products, together with the
formulation and manufacturing of the Products for the purpose of conducting the foregoing
activities and manufacturing scale-up of the Product necessary for Commercialization, all for the
purpose of obtaining, maintaining or expanding Regulatory Approval. This includes preparation,
submission, review, and development of data or information for the purpose of submission to a
Governmental Authority in the Cypress Territory to obtain Regulatory Approval of Products.
Pre-Commercialization shall include clinical development and regulatory activities for additional
dosage forms or formulations of a Product after Regulatory Approval of such Product, including
clinical trials initiated following receipt of Regulatory Approval for the purpose of maintaining
or expanding Regulatory Approval or any clinical trial to be conducted after Regulatory Approval
which was mandated by the applicable Regulatory Authority as a condition of such Regulatory
Approval.

     1.59 “Pre-Commercialization Costs” has the meaning set forth in Section 4.6.

     1.60 “Pre-Commercialization Plan” has the meaning set forth in Section 4.2(a).

8

 

     1.61 “Prime” means the then-current prime rate reported by JPMorgan Chase in New York City.

     1.62 “Product(s)” means BL-1020 in any dosage form or formulation or mode of administration,
alone or in combination with other therapeutically active ingredients.

     1.63 “Regulatory Data” means data and filings generated and prepared for the purpose of
obtaining, maintaining or expanding regulatory approvals in a jurisdiction, including analytical
and manufacturing data, data generated from preclinical, clinical and non-clinical trials and other
studies, and clinical data relating to the Products. For the avoidance of doubt, Regulatory Data
shall not include Product Inventions.

     1.64 “Regulatory Data Costs” means direct and indirect costs incurred or paid by a Party and
reasonably attributable to the generation of Regulatory Data, including, by way of example, costs
incurred or paid in the conduct of associated clinical trials, statistical analysis of clinical
data, manufacturing scale-up and patient recruitment. The Parties shall consult with each other
and mutually agree on an appropriate mechanism for establishing Regulatory Data Costs, which
mechanism shall be approved by the JSC (or directly by the Parties if the JSC is disbanded).

     1.65 “Product Infringement” has the meaning set forth in Section 9.5(a).

     1.66 “Product Inventions” has the meaning set forth in Section 9.3.

     1.67 “Product Marks” has the meaning set forth in Section 6.3.

     1.68 “Regulatory Approval” means, with respect to a Product in any country or jurisdiction in
the Cypress Territory, all approvals, registrations, licenses or authorizations from the relevant
Regulatory Authority in such country or jurisdiction that is specific to such Product and necessary
to manufacture or market and sell such Product in such country or jurisdiction.

     1.69 “Regulatory Authority” means, in a particular country or regulatory jurisdiction in the
Cypress Territory, any applicable Governmental Authority responsible for granting Regulatory
Approval.

     1.70 “Regulatory Exclusivity” means market exclusivity granted by a Governmental Authority in
the Cypress Territory designed to prevent the entry of Generic Product(s) onto the market in the
Field, including new chemical entity exclusivity, new use or indication exclusivity, new
formulation exclusivity, orphan drug exclusivity and pediatric exclusivity, or any equivalent of
the foregoing in the Cypress Territory.

     1.71 “Regulatory Filings” means, with respect to the Products, any submission to a Regulatory
Authority of any appropriate regulatory application specific to Products, and shall include any
submission to a regulatory advisory board in the Cypress Territory and any supplement or amendment
thereto.

9

 

     1.72 “Retained Territory” means all countries and territories in the world outside the Cypress
Territory.

     1.73 “Royalty Term” has the meaning set forth in Section 8.3(b).

     1.74 “SEC” has the meaning set forth in Section 12.4(a).

     1.75 “Share Amount” has the meaning set forth in Section 8.2(a).

     1.76 “Sole Inventions” has the meaning set forth in Section 9.1(a).

     1.77 “Sublicense Agreement” has the meaning set forth in Section 2.4.

     1.78 “Successful Completion” has the meaning set forth in Section 8.2(b).

     1.79 “TASE’s Approval” has the meaning set forth in Section 8.2(a).

     1.80 “Taxes” means taxes (other than income taxes), duties, tariffs or other governmental
charges levied on the sale of Products, including consumption taxes.

     1.81 “Term” means the term of this Agreement, as determined in accordance with Article 13.

     1.82 “Territory” means the Cypress Territory or the Retained Territory, as applicable.

     1.83 “Third Party” means any person or entity other than BioLineRx or Cypress or an Affiliate
of either of them.

     1.84 “Third-Party Claim” has the meaning set forth in Section 11.1.

     1.85 “Third Party Data” has the meaning set forth in Section 4.7(e).

     1.86 “Third Party Partner” has the meaning set forth in Section 4.7(e).

     1.87 “Third-Party Payment” has the meaning set forth in Section 8.3(c).

     1.88 “UA Patents” has the meaning set forth in Section 9.4(a).

     1.89 “Upfront Fee” has the meaning set forth in Section 8.1.

     1.90 “Upstream Agreement” means that certain Research and License Agreement between BioLineRx
Ltd. and Bar-Ilan Research and Development Company Ltd. and Ramot at Tel-Aviv University Ltd.
(collectively, the latter two parties are referred to herein as the “Upstream Licensors”) dated
April 15, 2004, as amended through the Execution Date.

     1.91 “Valid Claim” means, with respect to any country in the Cypress Territory: (a) a claim of
an issued and unexpired patent (as may be extended through supplementary protection

10

 

certificate or patent term extension or the like) included within the BioLineRx Patents, the
Cypress Patents or the Joint Patents to the extent such claim has not been (i) held invalid or
unenforceable by a non-appealed or un-appealable decision of a court or government agency or other
appropriate body of competent jurisdiction and has not been admitted invalid through disclaimer or
dedication to the public, and (ii) has not expired, been determined to be unenforceable, been
cancelled, withdrawn, abandoned, or (b) a claim of a pending patent application included within the
BioLineRx Patents, the Cypress Patents or the Joint Patents.

     1.92 Construction. Except where expressly stated otherwise in this Agreement, the following
rules of interpretation apply to this Agreement: (a) “include,” “includes” and “including” are not
limiting and shall be deemed to be followed by “without limitation”; (b) definitions contained in
this Agreement are applicable to the singular as well as the plural forms of such terms; (c)
references to an agreement, statute or instrument mean such agreement, statute or instrument as
from time to time amended, modified or supplemented; (d) references to a Person are also to its
permitted successors and assigns; (e) the plain meaning of the description for a defined term, and
other headings to this Agreement are for convenience only, and shall have no force or effect in
construing or interpreting any of the provisions of this Agreement or any other legal effect; (f)
references to “Parties”, “Article”, “Section”, “Exhibit” or “Schedule” refer to the Parties to, an
Article or Section of, or any Exhibit or Schedule to, this Agreement, unless otherwise indicated;
(g) the word “will” shall be construed to have the same meaning and effect as the word “shall” and
vice versa; (h) the word “or” has, except where otherwise indicated or where the context otherwise
requires, the inclusive meaning represented by the phrase “and/or”; and (i) references to dollars
are references to U.S. Dollars.

ARTICLE 2

LICENSES AND EXCLUSIVITY

     2.1 Effective Date. The Parties acknowledge that the Office of the Chief Scientist of the
Ministry of Industry, Trade and Labor of the State of Israel (the “OCS”) must consent to this
Agreement before this Agreement is made effective. BioLineRx shall use its best efforts to obtain
the written consent of the OCS to this Agreement in the form executed by the Parties as of the
Execution Date (“Execution Date Agreement”) within [...***...] days after the Execution Date. If the OCS has not provided such consent
during such [...***...] days, then BioLineRx shall have the right, and Cypress shall have the right to
require BioLineRx, to continue to use best efforts to obtain such consent. In addition, (i)
Cypress shall have the right to have a representative present at all meetings, conference calls and
any other interactions between BioLineRx’s representatives and the OCS relating to such consent,
and (ii) BioLineRx shall (A) provide Cypress with a reasonable opportunity to review and approve
any communications related to the request for consent submitted to the OCS or prepared in
anticipation of an in-person meeting, conference call or any other such interactions and (B) keep
Cypress fully informed as to the progress of such request for consent and shall consult with
Cypress in good faith with respect thereto. The Parties acknowledge that it may be necessary prior
to the Effective Date to modify the Execution Date Agreement to comply with the specific, formal

 

			
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written requests of the OCS and the Parties shall consider any such proposed modifications in good
faith; provided that (a) all financial obligations that may be imposed by the OCS as a
pre-condition to obtaining OCS consent to this Agreement shall be the sole responsibility of
BioLineRx; (b) the Parties will cooperate in good faith to minimize financial and non-financial
obligations (which obligations must be commercially reasonable) that may be imposed by the OCS as a
pre-condition to obtaining OCS consent to this Agreement; and (c) after the Parties have considered
any such proposed modifications in good faith, Cypress shall not be required to agree to any
modifications to the Execution Date Agreement that would have, or would be likely to have, a
material adverse impact on Cypress’ rights or obligations as set forth in the Execution Date
Agreement. Notwithstanding anything herein to the contrary, the provisions of this Execution Date
Agreement other than this Section 2.1 and Sections 8.1 and 13.5 shall not be effective until the
Effective Date. From and after the Effective Date, the entire Agreement shall be in full force and
effect.

     2.2 Licenses to Cypress. Subject to the terms of this Agreement, BioLineRx hereby grants to
Cypress:

          (a) an exclusive (even as to BioLineRx), royalty-bearing license, with the right to grant
sublicenses (through multiple tiers) subject to Section 2.4 below, under the BioLineRx Technology,
to Pre-Commercialize, use (solely for the purpose of carrying out its obligations and exercising
its rights under this Agreement), sell, offer for sale, have sold, import and otherwise
Commercialize the Products in the Field in the Cypress Territory, and subject to Section 7.1, to
make and have made Products for Commercialization in the Cypress Territory (provided that Cypress
shall not be deemed to have exceeded the scope of this right and license to the extent that
Commercialization activities conducted by or on behalf of Cypress in compliance with applicable
Law, internal policies and procedures and using Commercially Reasonable Efforts via the Internet or
other global electronic means or methods targeted to persons within the Field in the Cypress
Territory may reach persons outside of the Field or the Cypress Territory); and further provided
that BioLineRx retains all rights to make and have made Products, and to license manufacture of
Products, outside of the Cypress Territory;

          (b) a non-exclusive, fully-paid, royalty-free license, with the right to grant sublicenses
(through multiple tiers) subject to Section 2.4 below, under Product Inventions, to use any Product
Inventions for the pre-commercialization, manufacture and commercialization of products other than
the Products in the Cypress Territory; and

          (c) subject to Section 4.7(c), an exclusive, fully-paid, royalty-free license, with the right
to grant sublicenses (through multiple tiers) subject to Section 2.4 below, to use BioLineRx
Regulatory Data to Pre-Commercialize, Commercialize or manufacture the Products in the Cypress
Territory, including the right to use any and all such BioLineRx Regulatory Data in any Regulatory
Filings.

     2.3 Licenses to BioLineRx. Subject to the terms of this Agreement, Cypress hereby grants to
BioLineRx:

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          (a) a non-exclusive, fully-paid, royalty-free license under the Cypress Technology to perform
BioLineRx’s obligations under this Agreement (with the right to grant sublicenses to a mutually
agreed-upon Third Party service provider or agent, in accordance with the then-effective
Pre-Commercialization Plan; provided that the service provider to be used in the conduct of the
[...***...]Study is hereby mutually agreed-upon); and

          (b) subject to Section 4.7(b), an exclusive, fully-paid, royalty-free license, with the right
to grant sublicenses (through multiple tiers) subject to Section 2.4 below, to use Cypress
Regulatory Data to research, develop, make, have made, use, sell, offer for sale and import
Products in the Retained Territory, including the right to use any and all Cypress Regulatory Data
in any regulatory filings in the Retained Territory.

     2.4 Sublicenses. Each Party shall have the right to grant sublicenses under the licenses in
Section 2.2 or 2.3, as applicable, to its Affiliates or Third Parties, in the case of BioLineRx,
without the prior written consent of Cypress, and in the case of Cypress, only with the prior
written consent of BioLineRx (not to be unreasonably withheld, conditioned or delayed). The
sublicensing Party shall remain primarily responsible for the performance of the obligations
hereunder by each of its sublicensees. The sublicensing Party shall, within [...***...] days after
granting any sublicense, notify the other Party of the grant of such sublicense and provide the
other Party with a true and complete copy of such sublicensing agreement. Each sublicense
agreement shall be consistent with the terms and conditions under this Agreement, and, to the
extent applicable to the UA Patents or to the BioLineRx Know-How licensed under the Upstream
Agreement and sublicensed to Cypress hereunder, each sublicense agreement entered into by Cypress
shall be in compliance and not inconsistent with the terms and conditions of the Upstream Agreement
(including the limitation on Cypress’ ability to sublicense as set forth in Section 5.2.2.3 of the
Upstream Agreement and the requirement to obtain BioLineRx’s prior written consent as set forth in
Section 5.2.2.5 of the Upstream Agreement). Each Party shall, in each agreement under which it
grants a sublicense under the licenses set forth in Section 2.2 or 2.3, as applicable (each, a
“Sublicense Agreement”), include the following terms and conditions: (i) the sublicensee is
required to provide the following to the sublicensing Party if such Sublicense Agreement
terminates: (A) the assignment and transfer of ownership and possession of all Regulatory Filings
and Regulatory Approvals held or possessed by such sublicensee, and (B) the assignment of, or a
freely sublicenseable exclusive license to, all intellectual property Controlled by such
sublicensee with a Valid Claim covering the Pre-Commercialization, Commercialization or manufacture
of the Products in the Field in the applicable Territory and was created by or on behalf of such
sublicensee during the exercise of its rights or fulfillment of its obligations pursuant to such
Sublicense Agreement; and (ii) upon the reasonable request of a Cypress sublicensee in good
standing under its Cypress sublicense which wishes to retain its continuous rights granted to it by
Cypress under such sublicense, BioLineRx and such sublicensee shall enter into a direct license
agreement, the terms of which shall be substantially similar to the terms of this Agreement
(adjusted to take into account any differences in territory or field in such sublicense).

 

			
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     2.5 Negative Covenants.

          (a) Cypress Negative Covenants. Cypress covenants that it will not, and it will not permit
any of its Affiliates or sublicensees to, use or practice any BioLineRx Technology outside the
scope of the license granted to it under Section 2.2 above.

          (b) BioLineRx Negative Covenants.

               (1) BioLineRx covenants that it will not, and it will not permit any of its Affiliates or
sublicensees to, use or practice any Cypress Technology outside the scope of the license granted to
it under Section 2.3.

               (2) BioLineRx covenants that, with respect to Cypress’ or its sublicensees’ under this
Agreement acts of making, having made, using, selling, offering for sale or importing of or
otherwise Commercializing Products in the Field in the Cypress Territory in accordance with this
Agreement during the Term, BioLineRx will not bring suit against Cypress or such sublicensees to
enforce Patents that BioLineRx owns or Controls as of the Effective Date or during the Term and
that claims priority to a common priority document in the priority chain of any BioLineRx Patent
set forth in Exhibit B. The covenant not to sue described in this Section 2.5(b)(2) shall bind any
assignee, licensee or transferee of BioLineRx with respect to such Patents.

     2.6 BioLineRx Retained Rights; No Implied License.

          (a) Retained Rights. BioLineRx retains the right to practice and license the BioLineRx
Technology outside the scope of the license granted to Cypress in Section 2.2(a) above.

          (b) No Implied License. Except as set forth herein, neither Party shall acquire any license
or other intellectual property interest, by implication or otherwise, under any trademarks, patents
or patent applications Controlled by the other Party. For clarity, (a) BioLineRx shall not have
any license rights to Cypress Regulatory Data, Cypress Patents or Cypress Know-How in the Cypress
Territory, and (b) Cypress shall not have any license rights to BioLineRx Regulatory Data, Product
Inventions or BioLineRx Technology in the Retained Territory.

     2.7 Upstream Agreement. Subject to this Section 2.7, BioLineRx shall have sole responsibility
for exercising its rights and discharging its obligations under the Upstream Agreement.

          (a) Copy. On or before the Execution Date, BioLineRx has delivered to Cypress a true and
complete copy of the Upstream Agreement. Cypress acknowledges and agrees that the sublicense
granted in Section 2.2(a) under the BioLineRx Technology which has been licensed to BioLineRx under
the Upstream Agreement is subject to the terms and conditions of the Upstream Agreement.

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          (b) Cypress Covenants. Cypress covenants not to take or fail to take any action that violates a
material term of the Upstream Agreement applicable to Cypress as a sublicensee of BioLineRx under
the Upstream Agreement, or that would cause BioLineRx to be in breach of any of the material terms
of the Upstream Agreement. The Parties agree and acknowledge that BioLineRx shall remain
responsible for payments due under the Upstream Agreement.

          (c) BioLineRx Covenants.

               (1) BioLineRx will not modify, amend or waive any provision of the Upstream Agreement in such
a manner that could reasonably be expected to have an adverse impact on Pre-Commercialization,
manufacture or Commercialization hereunder, without the prior written consent of Cypress, such
consent not to be unreasonably withheld, conditioned or delayed.

               (2) BioLineRx will immediately (but in no event later than [...***...] business days) notify Cypress if BioLineRx fails to meet any of its
obligations, including any payment obligations, under the Upstream Agreement or receives notice
from the Upstream Licensors alleging any such failure.

          (d) Cypress Step-in Rights. If a failure described in Section 2.7(c)(2) above occurs, the
Executives shall promptly meet and confer on how best to proceed to effect a cure of such failure.
BioLineRx will keep Cypress timely informed of its efforts to cure or remedy such failure. Cypress
will have the right to step-in and meet the failed obligations, including the right to make payment
on behalf of BioLineRx, and BioLineRx will take all necessary steps such that the Upstream
Licensors accepts performance by Cypress on behalf of BioLineRx for such obligations. Before
Cypress exercises its right to step-in under this Section 2.7(d), Cypress shall deliver to
BioLineRx written notice of its intent to exercise such “step-in” right, which exercise shall not
occur sooner than [...***...] days after receipt by Cypress of written notice of any such failure. Any
amounts owed by BioLineRx and paid by Cypress pursuant to the immediately preceding sentence will
be credited towards any amount due to BioLineRx from Cypress under this Agreement.

     2.8 Further Cooperation by the Parties. The Parties shall cooperate in good faith to
effectively and efficiently implement the objectives of this Agreement, which shall include
cooperation to coordinate the implementation of the arrangements contemplated in this Article 2.
Following the Effective Date, BioLineRx will reasonably make available to Cypress BioLineRx
personnel with appropriate skill and experience, at BioLineRx’s expense, for this purpose.
BioLineRx and Cypress will cooperate to minimize the expenses associated with such activities.

     2.9 Restrictive Covenants. As to such countries outside of their respective Territory, each
Party (i) shall not, and will ensure that its sublicensees will not, engage in any advertising or
promotional activities relating to the Product directed primarily to prospective purchasers of the
Product located in the other Party’s Territory, and shall use Commercially Reasonable Efforts to
ensure that Commercialization activities conducted by or on behalf of such Party via the Internet
or other global electronic means or methods are only targeted to persons within the Field

 

			
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and in its Territory, and (ii) shall not, and will ensure that its sublicensees will not, take
orders from any prospective purchaser of the Product located in countries in the other Party’s
Territory. If a Party or its sublicensees receives any order from a prospective purchaser of
Product located in a country in the other Party’s Territory, such Party or sublicensee shall
immediately refer that order to the other Party and shall not accept any such order or deliver or
tender (or cause to be delivered or tendered) any Product under such order. If either Party has a
reasonable basis to conclude that its customer, sublicensee or distributor, or a customer,
sublicensee or distributor of the other Party, is engaged in the sale or distribution of Products
outside of the selling Party’s Territory, then the selling Party shall take all reasonable steps
(including cessation of sales to such customer, sublicensee or distributor) necessary to limit such
sale or distribution outside such Party’s Territory.

ARTICLE 3

OVERVIEW; MANAGEMENT

     3.1 Joint Steering Committee.

          (a) Formation. With thirty (30) days after the Effective Date, the Parties will establish a
joint steering committee (the “Joint Steering Committee” or “JSC”) to oversee and coordinate the
Parties’ activities under this Agreement with respect to Pre-Commercialization, Commercialization
and manufacture activities with respect to the Products in the Field in the Cypress Territory.

          (b) Members. Each Party shall initially appoint three (3) representatives to the JSC, each of
whom will have sufficient seniority and expertise within the applicable Party to make decisions
arising with the scope of the JSC’s responsibilities. The JSC may change its size from time to
time by mutual consent of the Parties, provided that the JSC shall at all times consist of an equal
number of representatives of each of BioLineRx and Cypress. Each Party may replace its JSC
representatives at any time upon written notice to the other Party. The JSC may invite non-members
to participate in the discussions and meetings of the JSC, provided that such participants shall
have no voting authority at the JSC. The JSC shall have a chairperson, who shall serve for a term
of one year, and who shall be selected alternately, on an annual basis, by BioLineRx or Cypress.
The initial chairperson shall be selected by Cypress. The role of the chairperson shall be to
convene and preside at meetings of the JSC and to ensure the preparation of minutes, but the
chairperson shall otherwise have no additional powers or rights beyond those held by the other JSC
representatives.

          (c) Meetings. The JSC shall meet at least quarterly during the Term unless the Parties
mutually agree in writing to a different frequency for such meetings. No later than
[...***...] business days prior to any regularly scheduled
meeting of the JSC, the chairperson of the JSC shall prepare and circulate an agenda for such
meeting and, as soon as practicable, materials for the meeting; provided, however, that either
Party may propose additional topics to be included on such agenda prior to such meeting. The JSC
may meet in person, by videoconference or by teleconference. Each Party will bear the expense of
its respective JSC members’ participation in JSC meetings. Meetings of the JSC shall be effective
only if at least

 

			
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one (1) representative of each Party is present or participating in such meeting. The chairperson
of the JSC will be responsible for preparing reasonably detailed written minutes of all JSC
meetings that reflect, without limitation, material decisions made at such meetings. The JSC
chairperson shall send draft meeting minutes to each member of the JSC for review within
[...***...] business days after each JSC meeting. The
members of the Committee shall have [...***...] to provide comments. The JSC chairperson shall
incorporate timely received comments and distribute revised minutes to all members of the JSC for
their final review and approval within the later of [...***...] days after the relevant meeting or the
next regularly scheduled meeting of the JSC. For clarity, if the JSC is not able to approve any
minutes, it shall thereafter be deemed to be a dispute and shall be subject to the dispute
resolution set forth in Section 3.1(d).

          (d) JSC Actions. Unless otherwise set forth in this Agreement, the JSC will take action by
unanimous consent, with each Party’s representatives’ having a single vote on the JSC, irrespective
of the number of representatives actually in attendance at a meeting. In the event of a
disagreement between the BioLineRx members and Cypress members of the JSC, either Party may refer
the matter to one senior executive of each Party (i.e., the Chief Executive Officer of such Party
or the chairman of the Board of Directors of such Party, the “Executives”) for resolution. If such
Executives cannot resolve the matter within [...***...] business days, then such Executive of Cypress
shall have the final decision making authority on such matter, provided that any final
determination made by such Executive of Cypress shall be consistent with the terms of this
Agreement; further provided that, within the first [...***...] months following the date on which the
Pre-Commercialization Plan is incorporated by reference herein pursuant to Section 4.2, Cypress
shall not make any decision with respect to the Pre-Commercialization Plan so as to materially
delay the anticipated Pre-Commercialization schedule or commercial launch of the Products without
the consent of BioLineRx.

     3.2 Costs of Governance. The Parties agree that the costs incurred by each Party in
connection with its participation in the JSC shall be borne solely by such Party.

     3.3 Discontinuation of JSC. The JSC shall continue to exist throughout the Term unless (a)
the Parties mutually agree to disband the JSC, or (b) a Party provides to the other Party written
notice of its intention to disband and no longer participate in such JSC. Once a Party has
provided written notice as referred to in subclause (b) above, the JSC will be disbanded and the
JSC shall have no further authority under this Agreement. Thereafter, direct interaction of the
Parties shall be substituted for the JSC’s roles, responsibilities and actions. For example, the
Parties thereafter shall consult (as set forth in Section 4.1(b)) and keep each other informed (as
set forth in Section 4.4(c)) on a regular basis on pre-commercialization activities conducted for
their respective Territories, and the Parties shall consult and keep each other informed on
commercialization activities conducted in their respective Territories (as set forth in Section
6.1(b)), with Cypress retaining sole responsibility for Pre-Commercialization and
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ARTICLE 4

PRE-COMMERCIALIZATION

     4.1 Overview of Pre-Commercialization.

          (a) Overview. The Parties desire and intend to collaborate with respect to the
Pre-Commercialization in the Cypress Territory in the Field, under the oversight of the JSC (or if
the JSC is disbanded, as set forth in Section 3.3), as and to the extent set forth in this
Agreement. As described in more detail in this Article 4, Cypress shall be solely responsible for
the conduct of Pre-Commercialization with the goal of obtaining Regulatory Approval, in accordance
with the Pre-Commercialization Plan. In addition, BioLineRx shall be responsible for the BioLineRx
Pre-Commercialization Activities.

          (b) Consultation. Each Party shall provide advice, suggestions and constructive feedback on
the other Party’s pre-commercialization strategy, plans and activities in its respective Territory
(especially in view of such Party’s rights outside the other Party’s Territory, and the Parties’
desire to achieve (to the extent appropriate) global harmonization of Product pre-commercialization
activities worldwide), either through the JSC or directly if the JSC is disbanded. The other Party
will reasonably and in good faith consider any advice, suggestions, constructive feedback, comments
and recommendations that such Party may have with respect to the other Party’s
pre-commercialization of the Product in its respective Territory.

     4.2 Pre-Commercialization Plan.

          (a) General. Within [...***...] days of the
Execution Date, Cypress shall propose a draft plan for the initial Pre-Commercialization of the
Products in the United States. Such draft plan shall thereafter be reviewed and mutually agreed by
the Parties within [...***...] days of the Execution Date and upon such agreement shall be incorporated
by reference herein (as the same may be further updated from time to time as set forth in Section
4.2(b), the “Pre-Commercialization Plan”). The Pre-Commercialization Plan shall describe (i) the
proposed overall program of Pre-Commercialization in the Cypress Territory, including clinical
trials and associated timelines; (ii) timelines for key Regulatory Authority meetings, filing of
applications for Regulatory Approval, and receipt of Regulatory Approvals, (iii) the anticipated
tasks and responsibilities of Cypress and BioLineRx under the Pre-Commercialization Plan, and (iv)
an associated comprehensive budget for all Pre-Commercialization Costs. In the event of any
inconsistency between the Pre-Commercialization Plan and this Agreement, the terms of this
Agreement shall prevail.

          (b) Updates to Pre-Commercialization Plan. From time to time during the Term, and at least on
a [...***...] basis, Cypress shall propose updates and amendments, as appropriate, to the then-current
Pre-Commercialization Plan, subject to BioLineRx’s consent (if applicable) as set forth in Section
3.1(d). Each updated or amended Pre-Commercialization Plan shall become effective and supersede
the previous Pre-Commercialization Plan.

          (c) Rationalization with Upstream Agreement. BioLineRx shall promptly update or amend the
Development Plan (as defined in the Upstream Agreement) to ensure that such Development Plan is
consistent with the Pre-Commercialization Plan. In addition, Cypress hereby agrees that BioLineRx
may provide a copy of the Pre-Commercialization Plan (as it may be updated from time to time) to
the Upstream Licensors, which shall constitute the

 

			
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Development Plan related to the Products for the Cypress Territory.

     4.3 BioLineRx Pre-Commercialization Activities

          (a) BioLineRx shall use Commercially Reasonable Efforts to diligently continue and complete
the [...***...] Study (the “BioLineRx
Pre-Commercialization Activities”). Upon the reasonable request of Cypress that BioLineRx conduct
additional Pre-Commercialization activities in the Cypress Territory, and with the written
agreement of BioLineRx to undertake such additional Pre-Commercialization activities, such
additional Pre-Commercialization activities performed by BioLineRx shall be added to the BioLineRx
Pre-Commercialization Activities. BioLineRx shall conduct all BioLineRx Pre-Commercialization
Activities in accordance with the Pre-Commercialization Plan and standard scientific principles and
under the oversight of the JSC (or if the JSC is disbanded as set forth in Section 3.3).

          (b) For as long as BioLineRx is conducting BioLineRx Pre-Commercialization Activities, the
status, progress and results of BioLineRx Pre-Commercialization Activities shall be discussed in
detail at meetings of the JSC, and BioLineRx shall provide the JSC with a written summary report on
the status and progress of such BioLineRx Pre-Commercialization Activities at least [...***...]
business days prior to each scheduled JSC meeting, or, if the JSC meeting occurs less frequently
than once per calendar quarter, on a quarterly basis. If the JSC has been disbanded, such
BioLineRx Pre-Commercialization Activities shall be discussed directly with Cypress, and such
written summary reports and requested information shall be provided directly to Cypress (with the
costs associated with such activities being borne by the Party incurring them). In addition,
BioLineRx shall make available to Cypress such information about BioLineRx Pre-Commercialization
Activities as may be requested by Cypress from time to time.

          (c) Beginning on the Effective Date and continuing through receipt of first Regulatory
Approval, BioLineRx shall have the right to have one representative of BioLineRx at the Cypress
facility located in San Diego, California, for the purpose of visiting such facility, meeting with
Cypress personnel involved in Pre-Commercialization, or accessing Product-related information
available at this facility. In the event that BioLineRx places such representative at the Cypress
facility, such BioLineRx representative may be made available to reasonably assist Cypress as a
participant in the Pre-Commercialization in the Field in the Cypress Territory; provided that
BioLineRx has no obligation to provide such representative/participant. The costs and expenses
associated with such representative, including relocation, housing, per diem and other expenses,
shall be borne solely by BioLineRx. In addition, such representative shall comply with Cypress’
standard policies applicable to consultants, including undertaking his or her participant
activities at the Cypress facility under Cypress’ direction.

     4.4 Cypress Pre-Commercialization Activities

          (a) Cypress shall use Commercially Reasonable Efforts to conduct Pre-Commercialization
activities necessary to seek and obtain Regulatory Approval for the Products in the Field
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          (b) Without limiting the generality of Section 4.4(a), Cypress shall diligently conduct all
Pre-Commercialization activities, including seeking Regulatory Approval in the Field, other than
the BioLineRx Pre-Commercialization Activities (the “Cypress Pre-Commercialization Activities”).
Cypress shall conduct all Cypress Pre-Commercialization Activities in accordance with the
Pre-Commercialization Plan and standard scientific principles. Without limiting the foregoing,
Cypress shall first seek Regulatory Approval for the Product in the Initial Indication.

          (c) The status, progress and results of Cypress’s Pre-Commercialization Activities shall be
discussed in detail at meetings of the JSC, and Cypress shall provide the JSC with a written
summary report on the status and progress of such Cypress Pre-Commercialization Activities at least
[...***...] business days prior to each scheduled
JSC meeting, or, if the JSC meeting occurs less frequently that once per calendar quarter, on a
quarterly basis. If the JSC has been disbanded, such status, progress and results shall be
reviewed directly between the Parties on at least a quarterly basis (with the costs associated with
any such review being borne by the Party incurring them). In addition, Cypress shall make
available to BioLineRx such information about Cypress Pre-Commercialization Activities as may be
reasonably requested by BioLineRx from time to time.

     4.5 Compliance.

          (a) Each Party agrees that in performing its obligations under this Agreement: (i) it shall
comply in all material respects with all applicable Laws; and (ii) it will not employ or engage any
Person who has been debarred by any regulatory authority, or, to such Party’s knowledge, is the
subject of debarment proceedings by a regulatory authority. Cypress shall have the right to engage
subcontractors for the performance of its obligations under the Pre-Commercialization Plan, and
shall cause the subcontractor(s) engaged by it to be bound by written obligations of
confidentiality and invention assignment consistent with those contained herein. Cypress remains
primarily responsible for the performance of such subcontractor(s). For clarity, BioLineRx shall
not have the right to engage subcontractors for the performance of the BioLineRx
Pre-Commercialization Activities without the prior written consent of Cypress, not to be
unreasonably withheld, conditioned or delayed; provided that, as of the Execution Date, Cypress has
consented to the engagement of [...***...] for the [...***...] Study.

          (b) Each Party shall maintain complete, current and accurate records of all work conducted by
it under the Pre-Commercialization Plan (including activities relating to chemistry, manufacture
and control), and all data and other Information resulting from such work. Such records shall
fully and properly reflect all work done and results achieved in the performance of the
Pre-Commercialization activities in good scientific manner appropriate for regulatory and patent
purposes. Each Party shall have the right to review all records maintained by the other Party at
reasonable times, upon a reasonable written request.

     4.6 Pre-Commercialization Costs. Cypress shall bear all costs incurred in carrying out
Pre-Commercialization activities (including BioLineRx Pre-Commercialization Activities) in
accordance with the approved Pre-Commercialization Plan (“Pre-Commercialization Costs”).

 

			
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     4.7 Access to Data.

          (a) The Parties acknowledge each other’s interests in global harmonization of Product
pre-commercialization activities worldwide, including in connection with generating Regulatory
Data. Notwithstanding Section 2.9, each Party has the right to conduct clinical trials and other
studies in the other Party’s portion of the Territory for the purpose of generating Regulatory Data
in support of regulatory submissions to the regulatory authorities in its own portion of the
Territory as follows: (i) Cypress may perform Product clinical trials outside of the Cypress
Territory in accordance with the Pre-Commercialization Plan, but such clinical trials may only be
used in connection with obtaining Regulatory Approval and Commercialization in the Field in the
Cypress Territory; and (ii) BioLineRx may perform Product clinical trials inside the Cypress
Territory, but such clinical trials may only be used in connection with obtaining regulatory
approval and commercialization of Products outside of the Cypress Territory. In the event that
either Party performs clinical trials in the other Party’s Territory and such clinical trials
require the submission of regulatory filings with a regulatory authority in the other Party’s
Territory, then the Parties shall coordinate and determine which Party shall file such regulatory
filing in the applicable Territory.

          (b) Subject to the reimbursement of Cypress Pre-Commercialization Expenses as set forth in
this Section 4.7(b), Cypress shall, in a timely manner and compliant with all applicable Laws
provide BioLineRx with the right to use any and all Cypress Regulatory Data in accordance with
Section 2.3(b). BioLineRx shall reimburse Cypress for [...***...] of the Regulatory Data Costs incurred or paid by Cypress (or its
Affiliates, licensees or sublicensees) plus interest accrued at Prime from the date any such
Regulatory Data Costs are incurred (such [...***...] share of Regulatory Data Costs plus interest,
the “Cypress Pre-Commercialization Expenses”) as follows: (A) in the event BioLineRx or its
Affiliates enter into a definitive agreement with a Third-Party granting any rights in the Cypress
Regulatory Data for use in either the European Union or the Retained Territory as a whole,
BioLineRx shall pay to Cypress a lump sum amount equal to [...***...] of the Cypress
Pre-Commercialization Expenses; provided, however, that in no event shall such amount exceed
[...***...] of any upfront payment received by BioLineRx or its Affiliates upon the execution of
such definitive agreement; provided, further, that BioLineRx shall carry forward any unpaid amounts
due under this subsection (A) to the payment described in subsection (B); (B) in the event such
Third-Party includes any Cypress Regulatory Data in a regulatory filing for regulatory approval of
a Product in the Retained Territory, BioLineRx shall pay to Cypress a lump sum amount equal to
[...***...] of the Cypress Pre-Commercialization Expenses plus any amounts carried forward from the
payment described in subsection (A) above, provided, however, that in no event shall such amount
exceed [...***...] of any milestone payment received by BioLineRx in connection with such
regulatory filing under such Third Party agreement; and (C) BioLineRx shall pay to Cypress any
remaining unpaid Cypress Pre-Commercialization Expenses upon receipt of regulatory approval in a
jurisdiction in the Retained Territory. Notwithstanding the foregoing, in the event that BioLineRx
solely by itself (or with its Affiliates) develops, manufactures or sells the Products in the
Retained Territory, in any Major Country or in [...***...], BioLineRx shall reimburse Cypress for
the Cypress Pre-Commercialization Expenses in accordance with subsection (C) above (but in such
event shall owe no payments under subsections (A) and (B) above).

 

			
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          (c) Subject to the reimbursement of BioLineRx Pre-Commercialization Expenses set forth in this
Section 4.7(c), BioLineRx shall, in a timely manner and compliant with all applicable Laws provide
Cypress with the right to use any and all BioLineRx Regulatory Data in accordance with Section
2.2(c). Cypress shall reimburse BioLineRx for [...***...] of the Regulatory Data Costs incurred or paid by BioLineRx (or its
Affiliates, licensees or sublicensees) plus interest accrued at Prime from the date any such
Regulatory Data Costs are incurred ([...***...]) share of Regulatory Data Costs plus interest, the
“BioLineRx Pre-Commercialization Expenses”) as follows: (A) Cypress shall pay to BioLineRx a lump sum
amount equal to [...***...] of the BioLineRx Pre-Commercialization Expenses upon submission of an
NDA in the United States by Cypress or its sublicensees which NDA includes any BioLineRx Regulatory
Data; and (B) Cypress shall pay to BioLineRx any remaining unpaid BioLineRx Pre-Commercialization
Expenses upon receipt of Regulatory Approval of such NDA in the United States.

          (d) Each Party shall provide to the other Party summary reports generated in the conduct of
pre-commercialization activities in such Party’s Territory, as well as written summaries of the
regulatory filings regarding the Products in such Party’s Territory, upon completion of each phase
of clinical trials or completion of tests within pre-clinical and non-clinical studies (such
summary reports shall not be deemed Regulatory Data). All such Information exchanged hereunder
(including such summary reports and written summaries) shall include sufficient information to
enable the recipient Party to understand each study and its results. In addition, upon reasonable
request by a Party in writing in advance, the other Party shall provide access at its facility(ies)
to the extent necessary to enable the requesting Party to review on-site the study-specific
portions of detailed Product-related analyses, raw data generated by a Party related to Products,
Information, written Product-related reports, and regulatory filings that are made a part of, are
related to, or are quoted in such summary reports or such written summaries. Except as provided in
this Section 4.7(d), the requesting Party shall not make or remove any copies of any Regulatory
Data or other documentation to which the requesting Party was given access. Any out-of-pocket
costs that are incurred by the Party granting such access to the requesting Party shall be fully
reimbursed by the requesting Party promptly after receipt of invoice(s) for such out-of-pocket
costs. If the requesting Party decides that it wishes to obtain a copy of the full report
regarding such Regulatory Data, the requesting Party shall provide written notice of such decision
to the other Party. The Parties will discuss the manner in which such full report copy (which
shall constitute Regulatory Data) will be produced and provided to the requesting Party, with the
expenses of copying such full report to be paid by the requesting Party.

          (e) Each Party acknowledges and understands that the other Party may license or sublicense (as
the case may be) rights to the Products in the Field in their respective Territory to one or more
Third Party licensees or sublicensees (as applicable), for Pre-Commercialization and
Commercialization (each a “Third Party Partner”), and pursuant to such arrangements, such Party or
such Third Party Partner will generate additional Regulatory Data for use in seeking regulatory
approval in such Party’s Territory (the “Third Party Data”). Each Party must include in its
contractual agreement(s) with such Third Party Partners the right to transfer to the other Party
for its use in its respective Territory any Third Party Data, subject to the requesting Party
reimbursing the other Party as set forth in this Section 4.7, as applicable.

 

			
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          (f) Confidentiality. All pre-clinical, analytical, non-clinical, and clinical data and
associated reports disclosed by one Party to the other under this Agreement shall be deemed
Confidential Information of the disclosing Party, subject to the permitted uses and disclosures
described in this Section 4.7 (including pursuant to the licenses granted under Section 2.2).

ARTICLE 5

REGULATORY MATTERS

     5.1 Initial Transfer. Within [...***...] days
after the Effective Date, BioLineRx shall transfer to Cypress ownership of IND No. [...***...].
BioLineRx will provide Cypress with an electronic copy of such IND and copies of all material
Regulatory Filings submitted to Regulatory Authorities. BioLineRx and Cypress shall execute such
documents and take such actions as are reasonably necessary to effectuate the foregoing transfers.

     5.2 Cypress Regulatory Responsibilities.

          (a) Cypress shall own all Regulatory Filings and Regulatory Approvals, and shall be solely
responsible for preparing any and all Regulatory Filings at its sole expense in accordance with the
Pre-Commercialization Plan, subject to the terms of this Article 5. BioLineRx shall consult with
Cypress as Cypress may reasonably request in connection with the preparation and filing of such
Regulatory Filings.

          (b) Cypress shall keep BioLineRx informed of material regulatory developments specific to
Products throughout the Cypress Territory, and BioLineRx may contribute to the regulatory plans and
strategies for the Products in the Cypress Territory, in each case through the JSC or directly if
the JSC has been disbanded.

          (c) Cypress shall be solely responsible for any discussions with any Regulatory Authority
related to any Pre-Commercialization in the Field, provided that Cypress will inform BioLineRx of
any material discussions in advance to the extent practicable, and will reasonably consider any
input from BioLineRx in preparation for such discussions.

          (d) To the extent permitted by the applicable Regulatory Authority and as requested by
BioLineRx, Cypress shall allow representatives of BioLineRx to participate in any material
scheduled conference calls and meetings between Cypress and the Regulatory Authority. If BioLineRx
elects not to participate in such calls or meetings, Cypress shall keep BioLineRx reasonably
apprised of the discussions between Cypress and the Regulatory Authority that take place during
such calls or meetings.

          (e) Cypress shall be responsible to ensure, at its sole expense, that the
Pre-Commercialization, manufacture and Commercialization of the Products in the Cypress Territory
are in compliance with applicable Laws in all material respects, including all rules and
regulations promulgated by applicable Regulatory Authorities. Specifically and without limiting
the foregoing, Cypress shall file all compliance filings, certificates and safety reporting
(subject to Section 5.2(a)) in the Cypress Territory at its sole expense.

 

			
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          (f) With respect to all Regulatory Filings, Cypress shall, and shall ensure that its sublicensees
will: (i) submit only data and information that are free from fraud or material falsity; (ii) not
use bribery or the payment of illegal gratuities in connection with its Regulatory Filings for the
Products; and (iii) submit only data and information that are accurate in all material respects for
purposes of supporting Regulatory Approval.

     5.3 Adverse Events. Within [...***...] of the
Execution Date, the Parties shall discuss in good faith and enter into a pharmacovigilance and
adverse event reporting agreement setting forth the worldwide pharmacovigilance procedures for the
Parties with respect to such Product, such as safety data sharing, adverse events reporting and
prescription events monitoring (the “Pharmacovigilance Agreement”).

     5.4 Additional Regulatory Negative Covenants. If either Party believes that the other Party,
as the case may be, is taking or intends to take any action with respect to the Products that would
reasonably be expected to have a material adverse impact upon the regulatory status of the Products
in the Retained Territory or the Cypress Territory, as applicable, such Party shall have the right
to bring the matter to the attention of the JSC (or directly to the other Party if the JSC is
disbanded). Without limiting the foregoing, with respect to the Products, unless the Parties
otherwise agree: (a) Cypress shall not communicate with any regulatory authority having
jurisdiction in the Retained Territory, unless so ordered by such regulatory authority, in which
case Cypress shall provide immediately to BioLineRx written notice of such order; (b) Cypress shall
not submit any regulatory filings or seek regulatory approvals for the Products in the Retained
Territory (other than in connection with clinical trials as permitted pursuant to Section 4.1); (c)
BioLineRx shall not communicate with any Regulatory Authority, unless so ordered by such Regulatory
Authority, in which case BioLineRx shall provide immediately to Cypress written notice of such
order; and (d) BioLineRx shall not submit any Regulatory Filings or seek Regulatory Approvals
(other than in connection with clinical trials as permitted pursuant to Section 4.1).

     5.5 Recalls. If any regulatory authority issues or requests a recall or takes a similar
action in connection with the Product in a Party’s Territory, or if a Party determines that an
event, incident or circumstance has occurred that may result in the need for a recall or market
withdrawal of Product in such Party’s Territory, such Party will notify the other Party thereof by
telephone or facsimile and use Commercially Reasonable Efforts to discuss such event, incident or
circumstance with the other Party in order to jointly determine the appropriate course of action
(except in the case of a recall mandated by a regulatory authority in the applicable Territory, in
which case a Party may act without such advance notice but will notify the other Party as soon as
possible), and shall provide to the other Party copies of all relevant correspondence, notices and
the like. Subject to the foregoing sentence, Cypress will retain ultimate responsibility for
deciding whether to conduct a recall of Product in the Field in the Cypress Territory and the
manner in which any such recall will be conducted.

 

			
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ARTICLE 6

COMMERCIALIZATION

     6.1 Overview of Commercialization in the Cypress Territory.

          (a) Overview. Cypress will be solely responsible for all aspects of the Commercialization in
the Field, which shall be conducted in material compliance with all applicable Laws and in
accordance with a Commercialization plan for the United States to be prepared by Cypress and
provided to BioLineRx reasonably in advance of the First Commercial Sale (the “Commercialization
Plan”). Such Commercialization Plan shall include the activities and timelines in preparation for
the launch of each such Product and after such Product launch, and shall be updated on at least
[...***...] basis by Cypress. As between the Parties,
Cypress shall book sales for the Products in the Cypress Territory.

          (b) Consultation. Each Party may provide advice, suggestions and constructive feedback on the
other Party’s commercialization strategy, plans and activities (especially in view of such Party’s
rights outside the other Party’s Territory, and the Parties’ desire to achieve (to the extent
appropriate) global harmonization of Product commercialization activities worldwide), either
through the JSC or directly once the JSC is disbanded. The other Party will reasonably and in good
faith consider any advice, suggestions, constructive feedback, comments and recommendations that
such Party may have with respect to the other Party’s commercialization of the Product. For
clarity, as between the Parties, each Party shall be solely responsible for commercialization of
the Product in its respective Territory.

     6.2 Cypress Performance.

          (a) Commercial Diligence. Cypress shall use Commercially Reasonable Efforts to Commercialize
in the Field throughout the Cypress Territory. Without limiting the generality of the foregoing,
Cypress shall conduct all Commercialization activities in accordance with the Commercialization
Plan, with a level of effort that is consistent with industry standards and is designed to maximize
the overall commercial opportunity for the Product, and shall use Commercially Reasonable Efforts
to launch the first Product in the Cypress Territory within [...***...] after obtaining Regulatory
Approval and to market Products following such launch.

          (b) Reports. From and after the date that is [...***...] months before the anticipated date
of First Commercial Sale, Cypress shall update BioLineRx at least [...***...] in each calendar
quarter regarding Cypress’s Commercialization activities, including at BioLineRx’s reasonable
request providing annual sales guidance forecasts. In addition, from and after the date that is
[...***...] months before the anticipated date of First Commercial Sale, Cypress shall present a
written quarterly report to BioLineRx summarizing Cypress’s Commercialization activities pursuant
to this Agreement, at a level of detail reasonably requested by BioLineRx and sufficient to enable
BioLineRx to determine Cypress’s compliance with its diligence obligations pursuant to this Section
6.2. In addition to such quarterly updates and written reports, upon the reasonable request of
BioLineRx, Cypress shall provide to BioLineRx on an interim basis then-current Commercialization
figures and data of Cypress and its sublicensees that are reportable to

 

			
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BioLineRx under this Agreement. For clarity, all reports and information shared with BioLineRx
pursuant to this Section 6.2(b) shall be deemed Cypress Confidential Information.

     6.3 Trademark. As soon as a Party determines the trademarks to be used in commercializing the
Products in its respective Territory, such Party shall promptly notify the other Party and
thereafter, as between the Parties, shall have the sole right to use such trademark(s) throughout
the Territory. Cypress shall have the right to brand the Products using Cypress related trademarks
and any other trademarks and trade names it determines appropriate for the Products after
good-faith consideration of any comments from BioLineRx related thereto (“Product Marks”). Cypress
shall own all rights in the Product Marks and will be responsible for filing, prosecution,
maintenance and defense of all registrations of the Product Marks, and will be responsible for the
payment of any costs relating to filing, prosecution, maintenance and defense of all Product Marks
in the Territory. BioLineRx shall not, and shall ensure that its Affiliates and sublicensees will
not make any use of any trademark similar to any of the Product Marks. Cypress shall not, and
shall ensure that its Affiliates and sublicensees will not, make any use of any trademark similar
to the trademark used by BioLineRx in commercializing the Products in the Retained Territory.
Notwithstanding the foregoing, Cypress may use, as required by applicable Law, the corporate
trademark or logo of BioLineRx in connection with Commercialization; provided that each such usage
shall be in compliance with BioLineRx’s then-current guidelines for such trademark or logo usage
(which shall be provided to Cypress upon its request and thereafter upon each update or amendment).

ARTICLE 7

MANUFACTURING

     7.1 Manufacture by or on Behalf of Cypress. Cypress shall be solely responsible for
manufacture and supply of Product for use in the Pre-Commercialization and Commercialization after
the Effective Date of the Agreement, for pre-clinical, clinical and commercial purposes.
Manufacture of Products for use in the Pre-Commercialization and Commercialization will be
performed in the Cypress Territory, and may be performed by Cypress itself or on behalf of Cypress
by a Third Party. Notwithstanding the foregoing, if Cypress wishes to engage a Third Party to
manufacture Product outside the Cypress Territory, BioLineRx must consent to Cypress’ engagement of
Cypress’ intended Third-Party manufacturer, which consent shall not be unreasonably withheld or
delayed. If BioLineRx consents to Cypress’ use of a Third-Party manufacturer outside the Cypress
Territory, all Product manufactured outside of the Cypress Territory shall be solely for use in
Pre-Commercialization and Commercialization. Cypress shall bear all costs and expenses incurred by
the Parties in connection with the manufacturing and supply of the Products for the Cypress
Territory after the Effective Date, including all clinical manufacturing costs, the cost of
qualifying its facilities, and the cost of qualifying a Third Party supplier for manufacture of the
Products.

     7.2 Coordination of Manufacturing. As appropriate, the Parties will discuss the most
efficient structure for the manufacture and supply of Product for the Parties’
Pre-Commercialization and Commercialization. If the Parties determine that coordination in Product
manufacturing is appropriate, the Parties will establish a joint manufacturing committee to

26

 

coordinate such manufacturing efforts. Each Party shall designate as its committee representatives
individuals who have the requisite experience and knowledge to discuss the manufacture of Products.
Such coordinated manufacturing efforts may include, for example, an agreement among the Parties
and a Third-Party contract manufacturer in Israel, or an agreement between Cypress and a
Third-Party contract manufacturer that grants to BioLineRx a right to obtain a supply of Product
from such Third-Party contract manufacturer.

     7.3 Manufacturing Technology Transfer. In accordance with Section 7.2, the Parties shall
cooperate to expedite transfer of Product manufacturing Know-How Controlled by BioLineRx to a
facility designated by Cypress, where manufacturing will be conducted by or on behalf of Cypress.
BioLineRx will make available to Cypress to facilitate such transfer up to [...***...] FTE with appropriate skill and experience during a consecutive
[...***...] month period at an appropriate time, at BioLineRx’s expense. BioLineRx and Cypress
will cooperate to minimize the expenses associated with such transfer and to ensure that the
transfer of such Product manufacturing is effectively coordinated.

ARTICLE 8

FINANCIAL PROVISIONS

     8.1 Upfront Fee. Within one business day after the Execution Date, Cypress shall deposit with
a mutually agreed-upon escrow agent Thirty Million dollars ($30,000,000) (the “Upfront Fee"),
pursuant to the terms and conditions set forth in an Escrow Agreement (in a form reasonably
acceptable to both Parties; provided that, in the event of a conflict between the Escrow Agreement
and this Agreement, this Agreement shall govern) providing for the release to BioLineRx from the
escrow established under the Escrow Agreement of the Upfront Fee on the Effective Date and also
providing that in the event of termination of this Agreement pursuant to Section 13.5, the Upfront
Fee shall be released to Cypress from the escrow established under the Escrow Agreement on the
effective date of termination. Upon release to BioLineRx, the Upfront Fee shall be non-refundable
and non-creditable.

     8.2 Milestone Payments. Cypress shall make the following non-refundable and non-creditable
milestone payments to BioLineRx within [...***...] days after the first achievement of each
milestone event for a Product in the Field in the Cypress Territory as set forth in this Section
8.2 by Cypress or its Affiliates or sublicensees. Each milestone payment by Cypress to BioLineRx
hereunder shall be payable only once, regardless of the number of times achieved by the Products,
provided that, if more than one sales milestones that are triggered by annual aggregate Net Sales
that have not been previously paid are triggered at the end of any particular calendar year, then
each and every of such sales milestones shall be deemed to have been achieved upon the end of such
calendar year and the corresponding milestone payments triggered by each and every of such sales
milestones shall become due at the end of such calendar year; provided, however, that if such
cumulative milestone payments imposes a financial burden upon Cypress, the timing of such payments
may be reasonably adjusted by up to [...***...].

 

			
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	Milestone Event	 	Milestone Payment	 
	
Regulatory Milestones
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	
Sales Milestones
	[...***...]
	 	 	[...***...]	 

 

			
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	Milestone Event	 	Milestone Payment	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 

          (a) The [...***...] regulatory milestone #1 may be paid as follows, in Cypress’ sole
discretion: (i) [...***...] in cash; or (ii) subject to the approval of the Tel Aviv Stock
Exchange (“TASE’s Approval”), [...***...] in cash and [...***...] in consideration of the purchase
of that number of ordinary shares of BioLineRx (the “Ordinary Shares") equal to the lower of (A)
[...***...] divided by the average of the closing price of the Ordinary Shares on the [...***...]
days preceding the date on which regulatory milestone #1 (Initiation of the first Phase 3 Clinical
Trial for a Product) occurs, and (B) [...***...] of BioLineRx’s issued share capital (where such
number of Ordinary Shares (as set forth in (A) or (B), as applicable) is referred to as the “Share
Amount”). If the value represented by the Share Amount is less than [...***...], then the cash
consideration will be adjusted so that the total consideration in respect of regulatory milestone
#1 will equal [...***...]. Upon the reasonable request of Cypress following the occurrence of
regulatory milestone #1, BioLineRx will provide to Cypress all documentation and information
related to the Ordinary Shares, including any restrictions or limitations on such Ordinary Shares.
Cypress shall make its election under this Section 8.2(a) within [...***...] days following the
achievement of regulatory milestone #1. If Cypress elects to receive Ordinary Shares, BioLineRx
shall issue Cypress the Share Amount following the receipt of the consideration in respect of the
Share Amount. In addition, to the extent necessary to permit Cypress to re-sell the Share Amount
without restriction, BioLineRx shall, promptly following the issuance of the Share Amount, use its
best efforts to complete the registration for re-sale of the Share Amount issued hereunder within
[...***...] days of the issuance of the Share Amount to Cypress. BioLineRx shall use its best
efforts to receive TASE’s Approval promptly following the Execution Date.

          (b) For purposes of this Section 8.2, the following definitions shall apply: (i) [...***...];
(ii) [...***...]; and (iii) [...***...].

          (c) For clarity, if an [...***...] (as

 

			
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described in regulatory milestone #3) is not required for [...***...] (regulatory milestone #4) [...***...], then upon such [...***...], Cypress
shall be deemed to have achieved both regulatory milestones #3 and #4, and Cypress shall pay
BioLineRx [...***...] ([...***...] for achievement of regulatory milestone #3 and [...***...] for
achievement of regulatory milestone #4).

     8.3 Royalties.

          (a) Royalty Rates. Cypress shall pay to BioLineRx a running royalty at the following royalty
rates, on Net Sales in the Cypress Territory during the Royalty Term.

	 	 	 	 	 
	Aggregate Annual Net Sales of the	 	Royalty Rate Applicable to Such Net	 
	Products in the Cypress Territory	 	Sales	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 

For example, if the aggregate annual Net Sales to which the royalty obligations in this Section
8.3(a) apply were [...***...], the [...***...] royalty rate would apply to the first [...***...] of
such Net Sales, the [...***...] royalty rate would apply to the next [...***...] of such Net Sales,
and the [...***...] royalty rate would apply to the final [...***...] of such Net Sales.

          (b) Royalty Term. The royalty payment obligation under Section 8.3 shall apply, on a
country-by-country and Product-by-Product basis in the Cypress Territory, during the period of time
beginning upon the First Commercial Sale of such Product in such country, and ending upon the later
of: (i) the expiration of the last-to-expire Valid Claim of a BioLineRx Patent covering the use,
import, manufacture or Commercialization of such Product in such country; provided that, for
purposes of this Section 8.3(b)(i) only, such “last-to-expire Valid Claim” shall not be a claim of
a pending patent application within the BioLineRx Patents if such claim has been on file with the
applicable patent office in such country for more than [...***...] years from the earlier of its
date of filing or earliest claim of priority under 35 U.S.C. §119 or §120 (and its successors in
the United States) or its equivalent in the applicable country in the Cypress Territory; (ii) the
expiration of Regulatory Exclusivity covering such Product in such country; and (iii) the date on
which sales of Generic Products in such country are (on a unit basis) at least [...***...] of the
total units sold of both Products and such Generic Products in such country; provided that, in the
event that a pending (but not an issued) Valid Claim of a BioLineRx Patent exists in such country
on the date described in this clause (iii), only

 

			
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the later of clauses (ii) and (iii) will be used to determine the end of Cypress’ royalty payment
obligation (such period, the “Royalty Term”).

          (c) Royalty and Milestone Adjustments for Third Party Intellectual Property. BioLineRx shall
be responsible for any and all royalties and other payments made prior to the Effective Date or
that become due after the Effective Date under any Third Party agreements in effect as of the
Effective Date with respect to the Products in the Cypress Territory. Following the Effective
Date, if it is necessary for Cypress to obtain a license to Know-How or Patents from any Third
Party that claim or cover the composition of matter, manufacture, use, handling, storage, sale or
other disposition of Products in the Cypress Territory in order for Cypress or its sublicensees to
Pre-Commercialize or Commercialize (in the reasonable opinion of an independent patent attorney)
and Cypress pays such Third Party any up-front fee, milestone, royalty, or other payment in
consideration of obtaining such license (each, a “Third Party Payment”), then Cypress shall have
the right to deduct from royalty payments due BioLineRx under Section 8.3(a), [...***...] of any such Third Party Payments made by Cypress; provided,
however, that in no event shall such credit cause any royalty amounts payable to BioLineRx for any
particular calendar quarter, to be reduced by more than [...***...] of the royalty amounts that
would otherwise be payable for such period; provided, further, that Cypress may deduct from royalty
payments in future calendar quarters any amounts that it did not deduct due to the foregoing
limitations.

          (d) Royalty Reduction. For a particular Product and in a particular country in the Cypress
Territory, if a Generic Product is launched and sales of such Generic Product are: (i) at least
[...***...] but less than [...***...] of the total units sold of both Products and such Generic
Products in such country during a calendar quarter, thereafter the royalties due to BioLineRx shall
be reduced by [...***...] from what would otherwise have been due under Section 8.3(a); and (ii) at
least [...***...] but less than [...***...] of the total units sold of both Products and such
Generic Products in such country during a calendar quarter, thereafter the royalties due to
BioLineRx shall be reduced by [...***...] from what would otherwise have been due under Section
8.3(a).

          (e) Royalty Payments and Reports. Subject to 8.3(b) above, within [...***...] days after the
end of each calendar quarter, Cypress shall deliver to BioLineRx a report containing the following
information for the prior calendar quarter: (i) the gross sales associated with each Product sold
by Cypress and its sublicensees; (ii) a calculation of Net Sales of each Products that are sold by
Cypress and (if applicable) sublicensees; and (iii) a calculation of payments due to BioLineRx with
respect to the foregoing. Concurrent with these reports, Cypress shall remit to BioLineRx any
royalty payment due for the applicable calendar quarter. If no royalties are due to BioLineRx for
such reporting period, the report shall so state. Any extension of time in which BioLineRx is
required to report/pay under the Upstream Agreement shall similarly extend the time for delivery of
reports and payments under this Section 8.3(e).

     8.4 Foreign Exchange. Net Sales made in currencies other than dollars will be converted into
dollars using the closing exchange rates reported in The Wall Street Journal (U.S., Western
Edition) on the last business day of the applicable calendar quarter.

 

			
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     8.5 Payment Method; Late Payments. All payments due hereunder shall be made by wire transfer of
immediately available funds into an account designated by a Party. If a Party does not receive
payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on
the sum due to such Party until the date of payment at the per annum rate of [...***...] over Prime or the maximum rate allowable by applicable Law,
whichever is lower.

     8.6 Records; Audits. Each Party will maintain complete and accurate records in sufficient
detail to permit the other Party to confirm the accuracy of the calculation of payments under this
Agreement, as well as to confirm Pre-Commercialization Costs and Regulatory Data Costs. Upon
reasonable prior notice, such records shall be available during regular business hours for a period
of [...***...] years from the end of the calendar year to which they pertain for examination at the
expense of the applicable Party, and not more often than [...***...] each calendar year, by an
independent certified public accountant selected by such Party and reasonably acceptable to the
other Party, for the sole purpose of verifying the accuracy of the financial reports or payments
furnished by the other Party pursuant to this Agreement. Any such auditor shall not disclose to
the other Party a Party’s Confidential Information. Any amounts shown to be owed but unpaid shall
be paid within [...***...] days from the accountant’s report, plus interest (as set forth in
Section 8.5) from the original due date. The auditing Party shall bear the full cost of such audit
unless such audit discloses an underpayment by the audited Party of more than [...***...] of the
amount due, in which case the audited Party shall bear the full cost of such audit.

     8.7 Taxes.

          (a) Payments to BioLineRx. Cypress acknowledges that under current US law, regulatory
interpretations, and treaties it will not be required to deduct and withhold, nor will it deduct
and withhold, any United States Tax from any payments made to BioLineRx pursuant to Sections 8.1 or
8.2 (solely with respect to regulatory milestone payments). If any of the payments required to be
made by Cypress to BioLineRx under Section 8.2 (other than with respect to Regulatory Milestones)
or Section 8.3 is subject to a deduction of Tax or withholding Tax, then, subject to Section 8.7(b)
below, the sum payable by Cypress (in respect of which such deduction or withholding is required to
be made) shall be made to BioLineRx after deduction of the amount required to be so deducted or
withheld, which deducted or withheld amount shall be remitted in accordance with applicable Laws.
In all events, it is acknowledged that Cypress may deduct and withhold the required Taxes from
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changes in Tax law, administrative interpretations or treaties that may change current rules as
applicable to such payments, subject to providing BioLineRx with at least sixty (60) days’ advance
notification of the intention to withhold such Taxes and giving BioLineRx an opportunity to provide
a written Tax opinion or other form of evidence that such Taxes should not be withheld, which will
be given reasonable consideration by Cypress.

          (b) Tax Cooperation. The Parties shall use all reasonable and legal efforts to reduce or
eliminate Tax withholding or similar obligations in respect of royalties, milestone payments, and
other payments made by Cypress to BioLineRx under this Agreement. To the extent Cypress is
required to deduct and withhold taxes on any payment to BioLineRx, Cypress shall pay the amounts of
such Taxes to the proper Governmental Authority in a timely manner and promptly transmit to
BioLineRx an official Tax certificate or other documentation of the payment of any such withholding
Taxes, including copies of receipts or other evidence reasonably required and sufficient to enable
BioLineRx to document such tax withholdings adequately for purposes of claiming foreign tax credits
and similar benefits. BioLineRx shall provide Cypress any Tax forms that may be reasonably
necessary in order for Cypress to not withhold tax or to withhold Tax at a reduced rate under an
applicable bilateral income Tax treaty. BioLineRx shall use reasonable efforts to provide any such
tax forms to Cypress at least thirty (30) days prior to the due date for any payment for which
BioLineRx desires that Cypress apply a reduced withholding rate. Each Party shall provide the
other with reasonable assistance to enable the recovery, as permitted by applicable law, of
withholding Taxes, value added taxes, or similar obligations resulting from payments made under
this Agreement, such recovery to be for the benefit of the Party bearing such withholding Tax or
value added Tax. Cypress shall require its sublicensees in the Cypress Territory to cooperate with
BioLineRx in a manner consistent with this Section 8.7(b).

ARTICLE 9

INTELLECTUAL PROPERTY

     9.1 Ownership of Inventions. Following the Effective Date:

          (a) Each Party shall own any inventions made solely by its own employees, agents, or
independent contractors in the course of conducting its activities under this Agreement, together
with all intellectual property rights therein, that cover or claim the Products (“Sole
Inventions”); and

          (b) The Parties shall jointly own any inventions that are made jointly by employees, agents,
or independent contractors of each Party in the course of conducting its activities under this
Agreement, together with all intellectual property rights therein, that cover or claim the Products
(“Joint Inventions”). All Patents claiming patentable, jointly owned Joint Inventions shall be
referred to herein as “Joint Patents.” Except to the extent otherwise set forth in this Agreement,
each Party shall be entitled to practice and exploit the Joint Inventions without the duty of
accounting or seeking consent from the other Party consistent with the terms of this Agreement.

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Inventorship shall be determined in accordance with U.S. patent laws. For clarity, all BioLineRx
Sole Inventions which come within the definition of BioLineRx Technology shall be subject to the
licenses set forth in this Agreement.

     9.2 Disclosure of Inventions. Each Party shall promptly disclose to the other Party any
invention disclosures, or other similar documents, submitted to it by its employees, agents or
independent contractors describing inventions that are either Sole Inventions or Joint Inventions,
and all Information relating to such inventions to the extent necessary for the preparation, filing
and maintenance of any Patent with respect to such invention.

     9.3 Assignment of Product Inventions. Notwithstanding anything to the contrary in Section
9.1, and subject to the license set forth in Section 2.2(b), Cypress hereby assigns and shall
assign to BioLineRx, for no additional consideration, all right, title and interest in and to any
Sole Inventions owned by Cypress that cover or claim the Products (“Product Inventions”). Cypress
shall execute, and cause its employees, agents and subcontractors to execute (directly or through
assignment to Cypress and assignment by Cypress to BioLineRx), assignments to BioLineRx of all
right, title and interest in and to any such Product Inventions, and any Patents directed to such
assigned Product Inventions shall be BioLineRx Patents, subject to the licenses set forth in this
Agreement. BioLineRx shall consult with Cypress regarding the advisability of seeking patent
protection for any Product Invention. Should the Parties determine that such protection is
advisable, BioLineRx shall prosecute and reasonably maintain in the Retained Territory all of the
patents and patent applications with claims covering such Product Inventions. BioLineRx shall
provide Cypress with a reasonable opportunity to comment on all draft filings for the Product
Inventions in the Retained Territory prior to their submission to the relevant patent authority.
Should BioLineRx decide that it is no longer interested in maintaining or prosecuting a particular
Patent with claims covering a Product Invention in a country or other jurisdiction in the Retained
Territory, it shall promptly advise Cypress, and Cypress may assume such prosecution and
maintenance at its sole expense. Any such Product Invention shall be the sole and exclusive
property of BioLineRx. Cypress shall require any sublicensee to assign any Product Inventions to
Cypress in accordance with the terms of this Section 9.3 as applicable to Cypress.

     9.4 Prosecution of Patents.

          (a) Cypress Prosecuted Patents. The Parties shall cooperate with each other to achieve (to
the extent appropriate) global harmonization of filing, prosecution and maintenance of BioLineRx
Patents, recognizing that Cypress shall be pursuing BioLineRx Patent-related activities in the
Cypress Territory and BioLineRx shall be pursuing BioLineRx Patent related activities in the
Retained Territory. The Parties acknowledge that certain BioLineRx Patents have been licensed to
BioLineRx under the Upstream Agreement and are sublicensed to Cypress in the Cypress Territory
under this Agreement (the “UA Patents”). With respect to these UA Patents, Cypress and BioLineRx
shall consult regarding the preparation, filing, prosecution and maintenance of such UA Patents in
the Cypress Territory in accordance with Section 4.1 of the Upstream Agreement.

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               (1) Subject to Section 9.4(a)(3) below, all UA Patents shall be prepared, filed, prosecuted and
maintained through a law or patent attorney firm mutually agreed upon by Cypress and BioLineRx, at
[...***...]. Such firm shall take into account the
Parties’ intention that Cypress will prepare, file, prosecute, obtain and maintain the UA Patents
in a manner that will provide the maximum economic advantage and return to the Parties. Further,
counsel shall confer with Cypress and BioLineRx regarding the content of patent applications
contained within the UA Patents, the prosecution of the UA Patents and the content of
communications with the relevant patent agencies in the Cypress Territory regarding the UA Patents,
prior to any communications with such agencies. Without limiting the generality of the foregoing,
Cypress shall have the first right to conduct Patent-related activities in the Cypress Territory
regarding such UA Patents, and Cypress shall ensure that BioLineRx is provided with (i) a
reasonable opportunity to review and comment on such UA Patent-related activities regarding such UA
Patents, and (ii) a copy of communications from any patent authority in the Cypress Territory
regarding such UA Patents, and shall provide drafts of any substantive filings, responses or other
communications to be made to such patent authorities a reasonable amount of time in advance of
submitting such filings, responses or other communications for BioLineRx’s review and comment.
Cypress shall reasonably consider comments by BioLineRx in connection with the UA Patent-related
activities regarding the UA Patents so long as such comments are received by Cypress a reasonable
amount of time in advance of any filing deadlines.

               (2) Subject to Section 9.4(a)(3) below, all BioLineRx Patents (other than UA Patents),
including all Patents with claims covering Product Inventions, and all Joint Patents in the Cypress
Territory (collectively, the “Cypress Prosecuted Patents”) shall be prepared, filed, prosecuted and
maintained by Cypress, at Cypress’ sole expense.

               (3) If Cypress decides to cease the Patent-related activities regarding any UA Patent or
Cypress Prosecuted Patent, it shall notify BioLineRx in writing sufficiently in advance so that
BioLineRx may, at its discretion, assume the responsibility for such Patent-related activities
regarding such UA Patent or such Cypress Prosecuted Patent, at BioLineRx’s sole expense. Joint
Patents which constitute such Cypress Prosecuted Patents shall be assigned to BioLineRx.
Thereafter, such UA Patents or such Cypress Prosecuted Patents shall be included in the BioLineRx
Prosecuted Patents and the terms of Section 9.4(b) shall apply to such Patents.

          (b) BioLineRx Prosecuted Patents. BioLineRx shall have the sole right to prepare, file,
prosecute and maintain all UA Patents and Cypress Prosecuted Patents for which the responsibility
for Patent-related activities regarding such UA Patents or Cypress Prosecuted Patents has
transferred to BioLineRx pursuant to Section 9.4(a)(3) above (the “BioLineRx Prosecuted Patents”).

          (c) Cooperation in Prosecution. Each Party shall provide the other Party all reasonable
assistance and cooperation in the efforts provided above in this Section 9.4, including providing
any necessary powers of attorney and executing any other required documents or instruments for such
efforts (without charge to the other Party).

 

			
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     9.5 Infringement of Patents by Third Parties.

          (a) Notification. Each Party shall promptly notify the other Party in writing of any existing
or threatened infringement of the BioLineRx Patents in the Cypress Territory through the
Pre-Commercialization or Commercialization in the Field by a Third Party, of which such Party
becomes aware, including any equivalent filing in the Cypress Territory to a “patent certification”
filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2), and of any
declaratory judgment, opposition, or similar action alleging the invalidity, unenforceability or
non-infringement of any of the BioLineRx Patents in the Cypress Territory (collectively “Product
Infringement”).

          (b) Product Infringement.

               (1) For any Product Infringement, each Party shall share with the other Party all Information
available to it regarding such alleged infringement. With respect to any UA Patent, the Parties’
rights and obligations recited in this Section 9.5 are subject to BioLineRx’s obligations under
Section 10.1 of the Upstream Agreement; BioLineRx shall exercise its rights thereunder to the
extent requested by Cypress under this Section 9.5. Cypress shall have the first right, but not
the obligation, to bring an appropriate suit or other action in the Cypress Territory against any
person or entity engaged in such Product Infringement, subject to Section 9.5(b)(2) through
9.5(b)(4), below. If Cypress fails to institute and prosecute an action or proceeding in the
Cypress Territory to abate the Product Infringement within a period of [...***...] days after the first notice is delivered under Section 9.5(a),
then BioLineRx (or one of the Upstream Licensors, if Section 10.1.3 of the Upstream Agreement is
applicable) shall have the right, but not the obligation, to commence a suit or take action in the
Cypress Territory to enforce the applicable BioLineRx Patents against such Third Party perpetrating
such Product Infringement, at its own cost and expense. In the event that BioLineRx (or an
Upstream Licensor, if applicable) exercises such right to commence such suit or to take action in
the Cypress Territory regarding such Product Infringement, Cypress shall reasonably cooperate with
BioLineRx (or the Upstream Licensor, if applicable) in connection with such BioLineRx Patent
enforcement efforts.

               (2) Each Party shall provide to the Party enforcing any such rights under this Section 9.5(b)
reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including
joining such action as a party plaintiff if required by applicable Law to pursue such action. The
enforcing Party shall keep the other Party regularly informed of the status and progress of such
enforcement efforts and shall reasonably consider the other Party’s comments on any such efforts.

               (3) Each Party shall bear all of its own internal costs incurred in connection with its
activities under this Section 9.5(b). In the event a Party commences a Product Infringement action
in the Cypress Territory, it shall bear all external costs and expenses for such action.

               (4) The Party not bringing an action with respect to Product Infringement under this Section
9.5(b) shall be entitled to separate representation in such matter

 

			
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by counsel of its own choice, but such Party shall at all times cooperate fully with the Party
bringing such action.

          (c) Infringement Other Than a Product Infringement. For any and all infringement of any
BioLineRx Patent other than a Product Infringement (including the enforcement of BioLineRx Patents
against infringement in the Retained Territory), as between the Parties, BioLineRx shall have the
sole and exclusive right to bring an appropriate suit or other action against any person or entity
engaged in such other infringement, in its sole discretion, and as between the Parties shall bear
all related expenses and retain all related recoveries. BioLineRx shall keep Cypress regularly
informed of the status and progress of such enforcement efforts and shall reasonably consider
Cypress’ comments on any such efforts.

          (d) Settlement. Cypress shall not settle any claim, suit or action that it brought under this
Section 9.5 involving BioLineRx Patents in any manner that would negatively impact such Patents or
that would limit or restrict the ability of BioLineRx to pre-commercialize, make, import, use,
offer for sale, sell or otherwise commercialize Products anywhere in the Retained Territory or to
make or have made Product anywhere in the world for such pre-commercialization, use, sale or import
anywhere in the Retained Territory, without the prior written consent of BioLineRx, which consent
shall not be unreasonably withheld or delayed. Nothing in this Article 9 shall require BioLineRx
to consent to any settlement that would have a material adverse impact upon any BioLineRx Patent in
the Retained Territory, or to the pre-commercialization, commercialization, manufacture, use,
importation, offer for sale or sale of the Products in the Retained Territory.

          (e) Allocation of Proceeds. The enforcing Party shall retain monetary damages recovered from
any Third Party in a suit or action brought by it under this Section 9.5 after first reimbursing
the Parties for any expenses incurred by the Parties in such litigation (including, for this
purpose, a reasonable allocation of expenses of internal counsel); provided that, in the event
Cypress is the Party bringing suit, the amount of such recovery which is lost profits (but not
including any other damages) and which is retained by Cypress after such reimbursement shall be
included in Net Sales and shall be subject to the royalty payment by Cypress to BioLineRx under
Section 8.3.

     9.6 Infringement of Third Party Rights in the Cypress Territory. Subject to the
indemnification obligation as set forth in Article 11, if any Product used or sold by Cypress or
its sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a
Third Party Patent granted by a jurisdiction within the Cypress Territory, Cypress shall promptly
notify BioLineRx of such event and the Parties shall promptly meet to properly handle the claim or
assertion and take the appropriate course of action.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

     10.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the
other Party that, as of the Effective Date:

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          (a) Corporate Existence and Power. It is a company or corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction in which it is incorporated, and
has full corporate power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as contemplated in this
Agreement, including the right to grant the licenses granted by it hereunder.

          (b) Authority and Binding Agreement. It has the corporate power and authority and the legal
right to enter into this Agreement and perform its obligations hereunder; it has taken all
necessary corporate action on its part required to authorize the execution and delivery of the
Agreement and the performance of its obligations hereunder; and the Agreement has been duly
executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding
obligation of such Party that is enforceable against it in accordance with its terms, subject to
and limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
generally applicable to creditors’ rights; and (ii) judicial discretion in the availability of
equitable relief.

          (c) No Conflict. The execution and delivery of this Agreement, and the performance by such
Party of its obligations under this Agreement, including the grant of rights to the other Party
pursuant to this Agreement, does not and will not: (i) conflict with, nor result in any violation
of or default under any instrument, judgment, order, writ, decree, contract or provision to which
such Party is otherwise bound; (ii) give rise to any lien, charge or encumbrance upon any assets of
such Party or the suspension, revocation, impairment, forfeiture or non-renewal of any material
permit, license, authorization or approval that applies to such Party, its business or operations
or any of its assets or properties; or (iii) conflict with any rights granted by such Party to any
Third Party or breach any obligation that such Party has to any Third Party.

          (d) Required Consents. It has obtained, or is not required to obtain, the consent, approval,
order, or authorization of any Third Party, or has completed, or is not required to complete, any
registration, qualification, designation, declaration or filing with, any Governmental Authority,
in connection with the execution and delivery of this Agreement and the performance by such Party
of its obligations under this Agreement, including any grant of rights to the other Party pursuant
to this Agreement.

     10.2 Additional Representations and Warranties of BioLineRx. For purposes of this Section
10.2, the phrase “the knowledge of BioLineRx” means the actual knowledge of BioLineRx’s executive
officers (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as
amended from time to time (or any successor rule)) and the senior employee of BioLineRx responsible
for patent matters, in each case after reasonable inquiry. BioLineRx represents and warrants to
Cypress that, as of the Execution Date:

          (a) It has not received any written notice from any Third Party asserting or alleging that
research or development of any Product by BioLineRx infringed or misappropriated the intellectual
property rights of such Third Party.

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          (b) There are no actual, pending, or to BioLineRx’s knowledge, alleged or threatened adverse
actions, suits, claims, interferences or formal governmental investigations involving the Products
or the BioLineRx Technology relating to the Products by or against BioLineRx in or before any
court, governmental or regulatory authority.

          (c) To the knowledge of BioLineRx, there are no asserted claims, interferences, oppositions or
demands of any Third Party against the BioLineRx Technology in the Territory.

          (d) BioLineRx owns or otherwise Controls the BioLineRx Know-How; BioLineRx is the exclusive
licensee under the Upstream Agreement of the BioLineRx Patents.

          (e) There are no liens or security interests currently existing on or to the BioLineRx
Technology that could reasonably be expected to adversely affect Cypress’ rights and licenses under
this Agreement.

          (f) To the knowledge of BioLineRx, there is not any pending claim or litigation which alleges
that its activities under the Upstream Agreement or its use of the BioLineRx Technology have
violated the intellectual property rights of any Third Party.

          (g) The Upstream Agreement is in full force and effect, subject to bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and to equitable
principles.

          (h) Exhibit B to this Agreement sets forth all of the “Licensor Patent Rights” under the
Upstream Agreement which claim the Product, or methods of making or using the Product, in the Field
in the Cypress Territory, as the term “Licensor Patent Rights” is defined in the Upstream
Agreement.

          (i) To the knowledge of BioLineRx, no event has occurred which, after the giving of notice or
the lapse of time or both, would constitute a material breach by BioLineRx under the Upstream
Agreement or would constitute a material breach by the Upstream Licensors.

          (j) BioLineRx has not received notice of any potential Licensed Product proposed by one or
both of the Upstream Licensors that incorporates BL-1020.

          (k) To the knowledge of BioLineRx, no license from a Third Party is required to practice the
rights granted to BioLineRx under the Upstream Agreement with respect to the Products in the Field
in the Cypress Territory.

          (l) All of the studies and tests of the Products conducted by or on behalf of BioLineRx prior
to the Execution Date were conducted in all material respects in accordance with (i) applicable
Laws of the jurisdiction where conducted at the time such studies and test were conducted; and (ii)
the prevailing scientific standards applicable to the conduct of such studies and activities.

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BioLineRx shall update the representations and warranties in this Section 10.2 as of the Effective
Date. Any revision of a BioLineRx representation or warranty in such updated Section 10.2 shall
not be grounds for termination by Cypress for BioLineRx’s breach of Section 10.2. Notwithstanding
the foregoing sentence, if prior to the Effective Date, the representations and warranties set
forth in Sections 10.2(a), (b), (c), (g) or (i) above with respect to the Cypress Territory are no
longer true and correct, then BioLineRx shall notify Cypress in writing, and in such event either
Cypress or BioLineRx may terminate this Agreement prior to the Effective Date.

     10.3 Covenants.

          (a) No Debarment. In the course of the Pre-Commercialization or Commercialization, each Party
shall not use any employee or consultant who has been debarred by any Regulatory Authority, or, to
the best of such Party’s knowledge, is the subject of debarment proceedings by a Regulatory
Authority.

          (b) Amendment of Upstream Agreement. Promptly following the Effective Date but in all events
at least [...***...] prior to the anticipated date of
First Commercial Sale, the Parties will diligently work to amend certain provisions of the Upstream
Agreement to enable them to more efficiently progress the pre-commercialization and
commercialization of the Product throughout the Territory, including Sections 8.1.1 and 13.3.2 of
the Upstream Agreement.

     10.4 Disclaimer. Cypress understands that the Products are the subject of ongoing clinical
research and development and that BioLineRx cannot assure the safety or efficacy of the Products,
or that the Products will be approved by any Regulatory Authority in the Cypress Territory.

     10.5 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS
ARTICLE 10, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR
NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, IS MADE OR GIVEN BY OR ON BEHALF
OF A PARTY.

ARTICLE 11

INDEMNIFICATION

     11.1 Indemnification by BioLineRx. BioLineRx hereby agrees to defend, hold harmless and
indemnify (collectively, “Indemnify”) Cypress or its Affiliates, agents, directors, officers and
employees (the “Cypress Indemnitees”) from and against any and all liabilities, expenses or losses,
including reasonable legal expenses and attorneys’ fees (collectively “Losses”) in each case
resulting from Third Party suits, claims, actions and demands (each, a “Third Party Claim”) arising
directly or indirectly out of (a) a breach of any of BioLineRx’s obligations under this Agreement,
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forth in Article 10, (b) the research, development, manufacture, use, handling, storage or other
disposition of Products by or on behalf of BioLineRx in the conduct of BioLineRx
Pre-Commercialization Activities, or (c) the research, development, manufacture, use, handling,
storage, sale or other commercialization or disposition of Products in the Retained Territory by
BioLineRx, its Affiliates or agents. BioLineRx’s obligation to Indemnify the Cypress Indemnitees
pursuant to this Section 11.1 shall not apply to the extent that (i) the Cypress Indemnitees fail
to comply with the indemnification procedures set forth in Section 11.3 and BioLineRx’s defense of
the relevant Losses is materially prejudiced by such failure, or (ii) any Losses arise from, are
based on, or result from the negligence or willful misconduct of any Cypress Indemnitee or
sublicensee or from any activity for which Cypress is obligated to Indemnify the BioLineRx
Indemnitees under Section 11.2.

     11.2 Indemnification by Cypress. Cypress hereby agrees to Indemnify BioLineRx or its
Affiliates, licensees, agents, directors, officers, employees and the Licensor Indemnitees (as
defined in the Upstream Agreement) (the “BioLineRx Indemnitees”) from and against any and all
Losses in each case resulting from Third Party Claims arising directly or indirectly out of (a) a
breach of any of Cypress’ obligations under this Agreement, including Cypress’ representations and
warranties set forth in Article 10; or (b) the Pre-commercialization, manufacture, use, handling,
storage, sale or other Commercialization or disposition of Products in the Cypress Territory by or
on behalf of Cypress or its sublicensees, including as a result of any infringement claims or
product liability claims. Cypress’ obligation to Indemnify the BioLineRx Indemnitees pursuant to
this Section 11.2 shall not apply to the extent that (i) the BioLineRx Indemnitees fail to comply
with the indemnification procedures set forth in Section 11.3 and Cypress’ defense of the relevant
Losses is materially prejudiced by such failure, or (ii) any Losses arise from, are based on, or
result from the negligence or willful misconduct of any BioLineRx Indemnitee or from any activity
for which BioLineRx is obligated to Indemnify the Cypress Indemnitees under Section 11.1.

     11.3 Procedure. The indemnified Party shall provide the indemnifying Party with prompt notice
of the Third Party Claim which might give rise to an indemnification obligation pursuant to this
Article 11 indicating the nature of the claim and the basis therefore. The indemnifying Party
shall have the right, at its option, to assume the defense of, at its own cost and by its own
counsel, any such Third Party Claim involving the asserted liability of the indemnified Party. If
any indemnifying Party shall undertake to compromise or defend any such asserted liability, it
shall promptly notify the indemnified Party of its intention to do so, and the indemnified Party
shall agree to cooperate with the indemnifying Party and its counsel in the compromise of, or
defense against, any such asserted liability; provided, however, that the indemnifying Party shall
not, as part of any settlement or other compromise, admit to liability for which the indemnifying
Party is not fully indemnifying the indemnified Party or agree to an injunction with respect to
activities of the indemnified Party without the written consent of the indemnified Party, not to be
unreasonably withheld, conditioned or delayed. Notwithstanding an election by the indemnifying
Party to assume the defense of any Third Party Claim as set forth above, such Indemnified Party
shall have the right (at its own cost if the indemnifying Party has elected to assume such defense)
to employ separate counsel and to participate in the defense of any Third Party Claim. All costs
incurred by an indemnified Party in connection with enforcement of its rights under Sections 11.1
or 11.2, as applicable, shall also be reimbursed by

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the indemnifying Party promptly after final determination that such indemnified Party is entitled to such indemnification by the indemnifying Party.

     11.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES OR LOSS OF PROFITS ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH
DAMAGES. NOTWITHSTANDING THE FOREGOING NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT
OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTIONS 11.1 OR 11.2, OR
DAMAGES AVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 12.

     11.5 Insurance. Each Party shall procure and maintain insurance, including product liability
insurance, adequate to cover its obligations hereunder and which are consistent with normal
business practices of prudent companies similarly situated at all times during which any Product is
being clinically tested in human subjects or commercially distributed or sold by such Party. It is
understood that such insurance shall not be construed to create a limit of either Party’s liability
with respect to its indemnification obligations under this Article 11. Each Party shall provide
the other Party with written evidence of such insurance upon request. Each Party shall provide the
other Party with written notice at least thirty (30) days prior to the cancellation, non-renewal or
material change in such insurance or self-insurance which materially adversely affects the rights
of the other Party hereunder.

ARTICLE 12

CONFIDENTIALITY

     12.1 Confidentiality. Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing by the Parties, each Party agrees that, for the Term and for a period
of five (5) years thereafter, it shall keep confidential and shall not publish or otherwise
disclose and shall not use for any purpose other than as provided for in this Agreement (which
includes the exercise of any rights or the performance of any obligations hereunder) any
Confidential Information of the other Party. The foregoing confidentiality and non-use obligations
shall not apply to any portion of the Confidential Information that the receiving Party can
demonstrate by competent written proof:

          (a) was already known to the receiving Party, other than under an obligation of
confidentiality, at the time of disclosure by the other Party;

          (b) was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;

          (c) became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;

42

 

          (d) is subsequently disclosed to the receiving Party by a Third Party who has a legal right to
make such disclosure; or

          (e) is subsequently independently discovered or developed by the receiving Party without the
aid, application, or use of the disclosing Party’s Confidential Information, as evidenced by a
contemporaneous writing.

     12.2 Authorized Disclosure. Notwithstanding the obligations set forth in Section 12.1, a
Party may disclose the other Party’s Confidential Information and the terms of this Agreement
(which terms shall be the Confidential Information of both Parties) to the extent:

          (a) such disclosure: (i) is reasonably necessary for filing or prosecuting Patent rights as
contemplated by this Agreement; (ii) is reasonably necessary for prosecuting or defending
litigation as contemplated by this Agreement or (iii) is reasonably necessary in connection with
the obtaining of the consent of the OCS to this Agreement; or

          (b) such disclosure is reasonably necessary: (i) to such Party’s directors, attorneys,
independent accountants or financial advisors for the sole purpose of enabling such directors,
attorneys, independent accountants or financial advisors to provide advice to the receiving Party,
provided that in each such case on the condition that such directors, attorneys, independent
accountants and financial advisors are bound by confidentiality and non-use obligations consistent
with those contained in this Agreement; or (ii) to actual or potential investors or acquirors
solely for the purpose of evaluating an actual or potential investment or acquisition; provided
that in each such case on the condition that such actual or potential investors or acquirors are
bound by confidentiality and non-use obligations consistent with those contained in the Agreement;

          (c) such disclosure is required by judicial or administrative process, provided that in such
event such Party shall promptly inform the other Party of such required disclosure and provide the
other Party an opportunity to challenge or limit the disclosure obligations. Confidential
Information that is disclosed by judicial or administrative process shall remain otherwise subject
to the confidentiality and non-use provisions of this Article 12, and the Party disclosing
Confidential Information pursuant to law or court order shall take all steps reasonably necessary,
including seeking of confidential treatment or a protective order, to ensure the continued
confidential treatment of such Confidential Information; and

          (d) such disclosure is reasonably necessary to its collaborators in its respective Territory
(including CROs, hospitals, doctors, consultants, subcontractors and Affiliates) for the purpose of
the Pre-Commercialization, Commercialization or manufacture, solely for the purpose of carrying out
such collaboration, on the condition that such collaborators are bound by confidentiality and
non-use obligations consistent with those contained in the Agreement.

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     12.3 Publication. Each Party to this Agreement recognizes that the publication of papers
containing results of and other information regarding pre-commercialization of Products in the
Field (except as provided hereinafter), including oral presentations and abstracts, may be
beneficial to both Parties provided such publications are subject to reasonable controls to protect
Confidential Information. In particular, it is the intent of the Parties to maintain the
confidentiality of any Confidential Information included in any Patent Controlled by a Party until
such Patent has been published. Accordingly, the other Party shall have the right and obligation
to review and approve any paper proposed for publication or other public disclosure by the other
Party, including oral presentations and abstracts. Before either Party may submit any paper, oral
presentation or abstract for publication or other public disclosure, the Party proposing
publication shall deliver a complete copy of such materials or proposed public disclosure to the
other Party prior to submitting the paper to a publisher or the date set for presentation. The
other Party shall review any such paper and give its comments to the publishing Party within
[...***...] days of the delivery of such paper or
proposed public disclosure to the other Party. With respect to oral presentation materials, the
other Party shall make reasonable efforts to expedite review of such materials, and shall return
such items as soon as practicable to the publishing Party with appropriate comments, if any, but in
no event later than [...***...] days from the date of delivery to the other Party. With respect to
abstracts, the other Party shall make reasonable efforts to expedite review of such abstracts, and
shall return such items as soon as practicable to the publishing Party with appropriate comments,
if any, but in no event later than [...***...] days from the date of delivery to the other Party.
The publishing Party shall comply with the other Party’s request to delete references to the
non-publishing Party’s Confidential Information in any such paper, proposed public disclosure or
other materials. Notwithstanding anything to the contrary in this Agreement, neither Party shall
have the right to publish in any form any Confidential Information of the other Party without such
other Party’s prior written consent.

     12.4 Publicity; Use of Names. Subject to Section 12.2 and the rest of this Section 12.4, no
disclosure of the terms of this Agreement may be made by either Party or its Affiliates, and no
Party shall use the name, trademark, trade name or logo of the other Party, its Affiliates or their
respective employee(s) in any publicity, promotion, news release or other public disclosure
relating to this Agreement or its subject matter, without the prior express written permission of
the other Party, except as may be required by Law.

          (a) A Party may disclose this Agreement and its terms in securities filings with the
Securities Exchange Commission or other regulatory agency (“SEC”) (or equivalent foreign agency,
including the Israel Securities Authority or the Tel Aviv Stock Exchange) to the extent required by
Law after complying with the procedure set forth in this Section 12.4. In such event, the Party
seeking such disclosure will prepare a draft confidential treatment request and a proposed redacted
version of this Agreement to request confidential treatment for this Agreement, and the other Party
agrees to promptly (and in any event, no more than seven (7) days after receipt of such
confidential treatment request and proposed redactions (or such lesser period of time as required
by Law)) give its input in a reasonable manner in order to allow the Party seeking disclosure to
file its request within the time lines proscribed by applicable SEC regulations or equivalent
foreign agency regulations. The Party seeking such disclosure shall exercise Commercially
Reasonable Efforts to obtain confidential treatment of the Agreement

 

			
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from the SEC or equivalent foreign agency as represented by the redacted version reviewed by
the other Party.

          (b) Further, each Party acknowledges that the other Party may be legally required to make
public disclosures (including in filings with the SEC or other agency) of the execution and
delivery of this Agreement as well as certain material developments or material information
generated under this Agreement and agrees that each Party may make such disclosures as required by
Law, provided that the Party seeking such disclosure first provides the other Party a copy of the
proposed disclosure, and provided further that (except to the extent that the Party seeking
disclosure is required to disclose such information to comply with applicable Law) if the other
Party demonstrates to the reasonable satisfaction of the Party seeking disclosure, within
[...***...] business days of such Party’s providing
the copy, that the public disclosure of previously undisclosed information will materially
adversely affect the pre-commercialization or commercialization of a Product being
pre-commercialized or commercialized in the applicable Territory, the Party seeking disclosure will
remove from the disclosure such specific previously undisclosed information as the other Party
shall reasonably request to be removed.

          (c) Notwithstanding the foregoing, and subject to BioLineRx’s obligations under Section 9.1 of
the Upstream Agreement (if applicable), the Parties will agree on language of one or more press
releases announcing this Agreement.

          (d) During the Term, and subject to Section 14.2 of the Upstream Agreement and Section 12.4(c)
above, each Party shall have the right to issue a press release or make a public announcement
concerning the material terms of this Agreement or the Pre-Commercialization or Commercialization
under this Agreement, such as announcing the commencement and completion of clinical studies for
the Products in countries of the Cypress Territory, the filing and obtaining of Regulatory
Approvals for the Products in countries of the Cypress Territory, the First Commercial Sale of the
Products in countries of the Cypress Territory, and the publication of data and results in
accordance with Section 12.3. If a Party desires to issue such a press release or make such a
public announcement, it shall provide the other Party with reasonable advance notice of the content
thereof. The other Party shall have the right to review and comment on such proposed press release
or announcement and the Party proposing such press release or public announcement shall take into
consideration and incorporate when appropriate the comment from the other Party.

          (e) The Parties agree that after a public disclosure pursuant to Sections 12.4(a). (b), (c) or
(d) has been reviewed and approved by the other Party, the disclosing Party may make subsequent
public disclosures or issue a press release disclosing the same content as was contained in such
public disclosure without having to obtain the other Party’s prior consent and approval.

          (f) Cypress acknowledges that BioLineRx is required to furnish the Upstream Licensors a fully
executed copy of this Agreement, promptly after the Execution Date, pursuant to Section 5.2.3 of
the Upstream Agreement.

 

			
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     12.5 Equitable Relief. Each Party acknowledges that a breach of this Article 12 may not
reasonably or adequately be compensated in damages in an action at law and that such a breach shall
cause the other Party irreparable injury and damage. By reason thereof, each Party agrees that the
other Party may be entitled, in addition to any other remedies it may have under this Agreement or
otherwise, to seek preliminary and permanent injunctive and other equitable relief to prevent or
curtail any breach of the obligations relating to Confidential Information set forth herein by the
other Party.

ARTICLE 13

TERM AND TERMINATION

     13.1 Term. The Term of this Agreement will commence on the Effective Date and, unless earlier
terminated pursuant to this Article 13, shall remain in effect until the cessation of all
Commercialization in the Cypress Territory. Upon the expiration of the Royalty Term in a given
country in the Cypress Territory, (a) the license granted to Cypress under the BioLineRx Technology
in such country shall become fully-paid, royalty-free and non-exclusive, and (b) BioLineRx and the
Upstream Licensors shall be free to use the BioLineRx Technology to develop, make and have made,
use, offer to sell, sell, have sold, import, export, otherwise transfer physical possession of or
otherwise transfer title to Products and to grant others licenses under the BioLineRx Technology to
do the same in such country.

     13.2 Termination for Breach.

          (a) Notice. If either Party believes that the other Party is in material breach of this
Agreement, then the Party holding such belief (the “Non-breaching Party”) may deliver notice of
such breach to the other Party (the “Notified Party”). The Notified Party shall have thirty (30)
days after receipt of such notice to cure such breach, or, if such breach is not susceptible of
cure within the stated 30-day period and the Notified Party uses diligent good faith efforts to
cure such breach, the stated 30-day period shall be extended by an additional thirty (30) days.

          (b) Failure to Cure. If the Notified Party fails to cure a material breach of this Agreement
as provided for in Section 13.2(a), then the Non-Breaching Party may terminate this Agreement
immediately upon written notice to the Notified Party.

          (c) Disputes. If a Party gives notice of termination under this Section 13.2 and the other
Party disputes whether such termination is proper under this Section 13.2, then the issue of
whether this Agreement may properly be terminated (i.e., whether a material breach occurred or
whether a material breach was cured) shall be resolved in accordance with Article 14. If as a
result of such dispute resolution process it is determined that the notice of termination was
proper, then such termination shall be deemed to have been effective thirty (30) days following the
date of the notice of breach (or such other time period applicable pursuant to Section 13.2(a)).
If, as a result of such dispute resolution process, it is determined that the notice of termination
was improper, then no termination shall have occurred and this Agreement shall remain in effect.

46

 

     13.3 Termination for Convenience or for Adverse Regulatory Actions. Cypress shall have the right
to terminate this Agreement in its entirety for any reason or no reason at all by providing
BioLineRx with at least one hundred eighty (180) days prior written notice to BioLineRx of such
termination. In addition, Cypress may, in its sole discretion, terminate this Agreement in its
entirety, upon at least thirty (30) days written notice to BioLineRx in the event of any
significant adverse clinical events or other adverse toxicity, safety or efficacy data relating to
a Product or if Cypress determines that there is no basis for filing an NDA for a Product.

     13.4 Termination for Patent Challenge. BioLineRx shall have the right to terminate this
Agreement in its entirety upon at least thirty (30) days prior written notice to Cypress if (a)
Cypress or any of its Affiliates or sublicensees files a lawsuit or brings any other legal or
administrative proceeding, or knowingly assists or supports any Third Party in filing a lawsuit or
bringing any other legal or administrative proceeding, challenging any of the BioLineRx Patents
licensed hereunder, including any action in connection with an opposition, re-examination,
revocation, invalidation or cancellation proceeding, or requests a declaration of an interference
against or otherwise attacks the validity or enforceability of any BioLineRx Patents licensed
hereunder, or contests or disputes BioLineRx’s entitlement to or ownership of any BioLineRx Patents
licensed hereunder, and (b) Cypress or its Affiliate or sublicensee (as applicable) fails to cease
such lawsuit, proceeding, action, request, attack, contest or dispute within the thirty (30) day
period following Cypress’ receipt of such notice from BioLineRx. In such event, the Agreement
shall terminate upon expiration of the thirty (30) day notice period (and the cure and dispute
provisions set forth above in Section 13.2 shall not apply).

     13.5 Termination Prior to Effective Date. Notwithstanding anything to the contrary in this
Article 13, (a) Cypress may terminate this Agreement following a response from the OCS and each
Party’s discharge of its obligations under Section 2.1, with no liability to BioLineRx or Cypress,
if (i) Cypress exercises its right to withhold agreement to modifications to the Execution Date
Agreement in accordance with Section 2.1(c); or (ii) the OCS does not grant its consent to the
Execution Date Agreement or a modified Execution Date Agreement, as such modified Execution Date
Agreement and the process for modification are described in Section 2.1; or (b) either Party may
terminate this Agreement as set forth in the last paragraph of Section 10.2. The provisions of
Section 8.1 (including the Escrow Agreement) and this Section 13.5 shall survive such termination,
but all other terms, provisions, representations, rights and obligations contained in this
Agreement shall terminate.

     13.6 Termination of Upstream Agreement. The Parties acknowledge that, upon termination of the
Upstream Agreement (in whole or in part), pursuant to Section 5.2.2.2 of the Upstream Agreement,
Cypress has the right to request that the Upstream Licensors enter into a new agreement with
Cypress on substantially the same terms as those contained in this Agreement.

     13.7 Effect of Termination of the Agreement.

          (a) Upon any termination of this Agreement the following shall apply:

               (1) Regulatory Filings; Data. To the extent permitted by

47

 

applicable Laws, Cypress shall transfer and assign to BioLineRx all Regulatory Filings, Regulatory
Approvals, and Cypress Regulatory Data.

               (2) Cypress License and Assignment. Cypress hereby grants to BioLineRx an exclusive,
royalty-free license, with the right to grant multiple tiers of sublicenses, under Cypress
Technology to Pre-Commercialize, make, have made, use, sell, offer for sale, have sold, import and
otherwise Commercialize the Products in the Cypress Territory, which license shall be effective as
of the date of such termination. Cypress hereby assigns to BioLineRx, effective only (A) in the
event of such termination, (B) upon BioLineRx’s confirmation that BioLineRx desires such assignment
at the date of termination, and (C) after reimbursement of all out-of-pocket costs related to such
Product Marks, all of its rights and interests in and to the Product Marks (other than the
corporate names of Cypress).

               (3) Transition Assistance. Cypress shall provide such assistance, at BioLineRx’s request and
cost, as may be reasonably necessary for BioLineRx to commence or continue developing,
Pre-Commercializing or Commercializing Products in the Cypress Territory, to the extent Cypress is
then performing or has performed such activities, including transferring or amending, as
appropriate, upon request of BioLineRx, any agreements or arrangements with Third Party vendors to
sell Products in the Cypress Territory. To the extent that any such contract between Cypress and a
Third Party is not assignable to BioLineRx, Cypress shall arrange a transition period in which to
provide such services with the goal of promptly transitioning the arrangement to BioLineRx.

               (4) Licenses. The licenses granted in Article 2 shall terminate, and the other rights and
obligations of the Parties under this Agreement also shall terminate.

          (b) Accrued Obligations. In any event, expiration or termination of this Agreement shall not
relieve the Parties of any liability which accrued hereunder prior to the effective date of such
expiration or termination or to which a Party may be contractually committed as of such effective
date nor preclude either Party from pursuing all rights and remedies it may have hereunder or at
law or in equity with respect to any breach of this Agreement, nor prejudice either Party’s right
to obtain performance of any obligation.

     13.8 Bankruptcy. All rights and licenses granted under this Agreement by one Party to the
other Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101(35A) of
the Bankruptcy Code. The Parties agree that a Party shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code in the event of a bankruptcy by the other Party.
The Parties further agree that in the event of the commencement of a bankruptcy proceeding by or
against one Party under the Bankruptcy Code, the other Party shall be entitled to complete access
to any such intellectual property pertaining to the rights granted in the licenses hereunder of the
Party by or against whom a bankruptcy proceeding has been commenced and all embodiments of such
intellectual property.

     13.9 Survival. The following provisions shall survive any expiration or termination of this
Agreement for the period of time specified: The provisions of Article 1, to the extent

48

 

definitions are embodied in the following listed Articles and Sections of this Agreement; Articles
11, 12, 14 (with respect to a dispute arising prior to the effective date of termination or
expiration) and 15; and Sections 2.4 (with respect to any direct license requested by a
sublicensee), 4.7 (with respect to Regulatory Data generated prior to the effective date of
termination or expiration), 5.5 (with respect to Product dispositions prior to the effective date
of termination or expiration), Sections 8.2 and 8.3 (with respect to milestones achieved, and
royalty payments and reports concerning Net Sales made, prior to the effective date of termination
or expiration), 8.4 through 8.7, 9.1 through 9.3, 10.5, 13.7, and this 13.9. In addition, any
other provisions either required to interpret and enforce the Parties’ rights and obligations under
this Agreement shall also survive, but only to the extent required for the full observation and
performance of this Agreement, or which by their express terms, survive such expiration or
termination of this Agreement.

ARTICLE 14

DISPUTE RESOLUTION

     14.1 Disputes. The Parties recognize that disputes as to certain matters may from time to
time arise during the Term which relate to either Party’s rights or obligations hereunder. It is
the objective of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation and without resort to
litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in
this Article 14 to resolve any controversy or claim arising out of, relating to or in connection
with any provision of this Agreement, if and when a dispute arises under this Agreement, other than
a dispute related to an alleged breach of this Agreement or the Upstream Agreement by BioLineRx, as
to which Cypress may elect to pursue any available legal or equitable remedy, subject to the
limitation on liability set forth in this Agreement.

     14.2 Internal Resolution. With respect to all disputes arising between the Parties under this
Agreement, including any alleged breach under this Agreement or any issue relating to the
interpretation or application of this Agreement, if the Parties are unable to resolve such dispute
within [...***...] days after such dispute is first
identified by either Party in writing to the other, the Parties shall refer such dispute to the
Executives of the Parties for attempted resolution by good faith negotiations within [...***...]
days after such notice is received.

     14.3 Binding Arbitration. If the Executives are not able to resolve such disputed matter
within [...***...] days and either Party wishes to pursue the matter, each such dispute,
controversy or claim that is not an Excluded Claim (defined in Section 14.4 below) shall be finally
resolved by binding arbitration administered by JAMS pursuant to JAMS’ Streamlined Arbitration
Rules and Procedures then in effect (the “JAMS Rules”), and judgment on the arbitration award may
be entered in any court having jurisdiction thereof. The Parties agree that:

          (a) The arbitration shall be conducted by a panel of three persons experienced in the
pharmaceutical business: within [...***...] days after initiation of arbitration, each Party shall
select one person to act as arbitrator and the two Party-selected arbitrators shall select a third
arbitrator within [...***...] days of their appointment. If the arbitrators selected by the

 

			
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Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be
appointed by JAMS. The place of arbitration shall be New York, New York U.S.A., and all
proceedings and communications shall be in English. The panel of arbitrators shall decide the
issue within [...***...] days after appointment of the
third arbitrator, and shall render this decision in writing and provide reasons for the decision
and any award.

          (b) Either Party may apply to the arbitrators for interim injunctive relief until the
arbitration award is rendered or the controversy is otherwise resolved. Either Party also may,
without waiving any remedy under this Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the rights or property of that Party pending
the arbitration award. The arbitrators shall have no authority to award punitive or any other type
of damages not measured by a Party’s compensatory damage. Each Party shall bear its own costs and
expenses and attorneys’ fees and an equal share of the arbitrators’ fees and any administrative
fees of arbitration regardless of the outcome of such arbitration.

          (c) A Party shall be entitled to deduct or otherwise offset any damage finally awarded under a
proceeding initiated under Section 14.3 against payments due under this Agreement.

          (d) Except to the extent necessary to confirm an award or as may be required by law, neither a
Party nor an arbitrator may disclose the existence, content, or results of an arbitration without
the prior written consent of both Parties. In no event shall an arbitration be initiated after the
date when commencement of a legal or equitable proceeding based on the dispute, controversy or
claim would be barred by the applicable New York statute of limitations.

     14.4 Excluded Claim. As used in Section 14.3, the term “Excluded Claim” shall mean a dispute,
controversy or claim that concerns (a) the scope, validity, enforceability, inventorship or
infringement of a patent, patent application, trademark or copyright; or (b) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory.

ARTICLE 15

MISCELLANEOUS

     15.1 Entire Agreement; Amendment. This Agreement, including the Exhibits hereto, sets forth
the complete, final and exclusive agreement and all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties hereto with respect
to the subject matter hereof and supersedes, as of the Effective Date, all prior agreements and
understandings between the Parties with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding upon the Parties
unless reduced to writing and signed by an authorized officer of each Party.

 

			
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     15.2 Force Majeure. Each Party shall be excused from the performance of its obligations under this
Agreement to the extent that such performance is prevented by force majeure and the nonperforming
Party promptly provides notice of the prevention to the other Party. Such excuse shall be
continued so long as the condition constituting force majeure continues and the nonperforming Party
takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure
shall include conditions beyond the reasonable control of the nonperforming Party, including an act
of God or terrorism, involuntary compliance with any regulation, law or order of any government,
war, civil commotion, epidemic, failure or default of public utilities or common carriers,
destruction of production facilities or materials by fire, earthquake, storm or like catastrophe.
Notwithstanding the foregoing, a Party shall not be excused from making payments owed hereunder
because of a force majeure affecting such Party. If a force majeure persists for more than ninety
(90) days, then the Parties will discuss in good faith the modification of the Parties’ obligations
under this Agreement in order to mitigate the delays caused by such force majeure.

     15.3 Notices. Any notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate
Party at the address specified below or such other address as may be specified by such Party in
writing in accordance with this Section 15.3, and shall be deemed to have been sufficiently given
for all purposes when received, if in writing and personally delivered, facsimile transmission
(receipt verified) or overnight express courier service (signature required), prepaid, to the Party
for which such notice is intended, at the address set forth for such Party below.

	 	 	 	 	 

	 

	 	If to BioLineRx:
	 	BioLineRx Ltd.
	 

	 	 	 	19 Hartum Street
	 

	 	 	 	PO Box 45158
	 

	 	 	 	Jerusalem, 91450, Israel
	 

	 	 	 	Attention: Dr. Kinneret Savitsky
	 

	 	 	 	With a copy to: CFO
	 

	 	 	 	FAX: +972 (2) 548-9101
	 
	 	 	 	 
	 	 	With copies to (which shall not constitute notice):
	 
	 	 	 	 
	 

	 	 	 	Cooley LLP
	 

	 	 	 	11951 Freedom Drive
	 

	 	 	 	Reston, VA 20190-5656
	 

	 	 	 	Attention: Ken Krisko, Esq.
	 

	 	 	 	Fax: 703-456-8100
	 
	 	 	 	 
	 

	 	If to Cypress:
	 	Cypress Bioscience, Inc.
	 

	 	 	 	4350 Executive Drive, Suite 325
	 

	 	 	 	San Diego, California 92121
	 

	 	 	 	Attention: Dr. Jay D. Kranzler
	 

	 	 	 	With a copy to: Legal Department
	 

	 	 	 	Fax: +1 (858) 452-1222

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	 	With copies to (which shall not constitute notice):
	 

	 	 	 	Latham & Watkins LLP
	 

	 	 	 	12636 High Bluff Drive, Suite 400
	 

	 	 	 	San Diego, California 92130
	 

	 	 	 	Attention: Faye H. Russell, Esq.
	 

	 	 	 	Fax: +1 (858) 523-5450

     15.4 No Strict Construction; Headings. This Agreement has been prepared jointly and shall not
be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have authored the
ambiguous provision. The headings of each Article and Section in this Agreement have been inserted
for convenience of reference only and are not intended to limit or expand on the meaning of the
language contained in the particular Article or Section.

     15.5 Assignment. Neither Party may assign or transfer this Agreement or any rights or
obligations hereunder without the prior written consent of the other, except that a Party may make
such an assignment without the other Party’s consent to Affiliates or to a successor to
substantially all of the business of such Party to which this Agreement relates (whether by merger,
sale of stock, sale of assets or other transaction) (the “Acquisition”). Any permitted successor
or assignee of rights or obligations hereunder shall, in writing to the other Party, expressly
assume performance of such rights or obligations. Any permitted assignment shall be binding on the
successors of the assigning Party. Any assignment or attempted assignment by either Party in
violation of the terms of this Section 15.5 shall be null, void and of no legal effect.

     15.6 Performance by Affiliates. Each Party may discharge any obligations and exercise any
right hereunder through any of its Affiliates, and when any such Affiliate is discharging such
obligations or exercising such right, the terms and conditions of this Agreement applicable to such
Party also shall be applicable to such Affiliate. Each Party hereby guarantees the performance by
its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to
comply with the provisions of this Agreement in connection with such performance. Any breach by a
Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach
by such Party, and the other Party may proceed directly against such Party without any obligation
to first proceed against such Party’s Affiliate.

     15.7 Further Actions. Each Party agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be necessary or appropriate in order to carry
out the purposes and intent of this Agreement.

     15.8 Severability. If any one or more of the provisions of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is
taken, the provision shall be considered severed from this Agreement and shall not serve to
invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace

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any invalid or unenforceable provision with a valid and enforceable one such that the objectives
contemplated by the Parties when entering this Agreement may be realized.

     15.9 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as
to a particular default or other matter shall not constitute a waiver of such Party’s rights to the
future enforcement of its rights under this Agreement, except with respect to an express written
and signed waiver relating to a particular matter for a particular period of time.

     15.10 Independent Contractors. Each Party shall act solely as an independent contractor, and
nothing in this Agreement shall be construed to give either Party the power or authority to act
for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the
relationship of partners, principal and agent, or joint-venture partners between the Parties.

     15.11 No Third Party Beneficiaries. Except for rights and obligations specifically referred
to herein that apply to Affiliates, sublicenses or licensees of the Parties, nothing in this
Agreement is intended to confer on any Person other than BioLineRx or Cypress any rights or
obligations under this Agreement, and there are no intended Third Party beneficiaries to this
Agreement.

     15.12 English Language. This Agreement was prepared in the English language, which language
shall govern the interpretation of, and any dispute regarding, the terms of this Agreement. To the
extent this Agreement requires a Party to provide to the other Party Information, correspondence,
notice or other documentation, such Party shall provide such Information, correspondence, notice or
other documentation in the English language.

     15.13 Governing Law. This Agreement and all disputes arising out of or related to this
Agreement or any breach hereof shall be governed by and construed under the laws of the State of
New York, without giving effect to any choice of law principles that would require the application
of the laws of a different state.

     15.14 Counterparts. This Agreement may be executed in one (1) or more counterparts by
original or facsimile signature, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

53

 

     In Witness Whereof, the Parties have executed this Agreement in duplicate originals
by their duly authorized officers as of the Execution Date.

	 	 	 	 	 	 	 	 	 	 	 

	BioLineRx Ltd.	 	 	 	Cypress Bioscience, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By: 

Name:

	 	/s/ Kinneret Livnat-Savitsky
 

Kinneret Livnat-Savitsky, PhD
	 	 	 	By:

Name:
	 	/s/ Jay D. Kranzler
 

Jay D. Kranzler, MD, PhD
	 	 
	Title:

	 	Chief Executive Officer
	 	 	 	Title:
	 	Chief Executive Officer	 	 

 

 

Exhibit A

Chemical Structure of BL-1020

[...***...]

 

			
	***	 	Confidential Treatment Requested

 

 

Exhibit B

BioLineRx Patents

(all of the BioLineRx Patents set forth in Exhibit B as of the Execution Date are UA Patents)

Family I

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Our Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

Family II

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

 

			
	***	 	Confidential Treatment Requested

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

Family III

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	 	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

Family IV

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	 	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

 

			
	***	 	Confidential Treatment Requested

 

 

Family V

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Filing Date	 	 	Issue Date	 	 	 	 
	Ref	 	Title	 	 	Country	 	 	Earliest Priority	 	 	Entry Date	 	 	Application No.	 	 	Patent No.	 	 	Status	 
	[...***...]
	 	 	[...***...]	 	 	 	[...***...]	 	 	 	 	 	 	 	 	 	 	 	[...***...]	 	 	 	 	 	 	 	[...***...]	 

 

			
	***	 	Confidential Treatment Requested

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]