Restructuring Stock Issuance And Subscription Agreement

Exhibit 10.1 RESTRUCTURING STOCK ISSUANCE AND SUBSCRIPTION AGREEMENT This Restructuring Stock Issuance and Subscription Agreement (" Agreement" ) is entered into this 20th day of October, 2006 between Advocat Inc., a Delaware corporation (" Advocat" ), and Omega Healthcare Investors, Inc., a Maryland corporation (" Omega" ).RECITALS A. Advocat and Omega and certain of their affiliates have entered into that certain Settlement and Restructuring Agreement dated November 8, 2000 (the " 2000 Agreement" ) pursuant to which Advocat and Omega have agreed to restructure their relationship. B. Pursuant to the 2000 Agreement, on November 8, 2000, Advocat issued to Omega 393,658 shares of Series B Preferred Stock (the " Series B Preferred Stock" ) and delivered to Omega its Subordinated Note in the face amount of $1,700,000 (the " 2000 Note" ). C. Also pursuant to the 2000 Agreement, STERLING ACQUISITION CORP., a Kentucky corporation (" Lesso r" ), which is a wholly owned subsidiary of Omega, and DIVERSICARE LEASING CORPORATION, a Tennessee corporation (" Lessee" ), which is a wholly owned subsidiary of Advocat, entered into that certain Consolidated Amended and Restated Master Lease dated as of November 8, 2000, but effective as of October 1, 2000, which has subsequently been amended by a First Amendment to Consolidated Amended and Restated Master Lease dated as of September 30, 2001 and a Second Amendment to Consolidated Amended and Restated Master Lease dated as of June 15, 2005 (as amended, the " Master Lease" ). E. The parties desire to further restructure their relationship, including (i) the surrender for cancellation by Omega of the Series B Preferred Stock and the 2000 Note, (ii) the issuance to Omega by Advocat of shares of new Series C Preferred Stock Stock having the powers, preferences and rights as provided in the Certificate of Designation of Advocat (" Designation" ) as attached hereto as Exhibit A , (iii) the delivery to Omega by Advocat of a new subordinated promissory note substantially in the form attached as Exhibit B (the " New Note" ), and (iv) the amendment of the Master Lease by Lessor and Lessee to increase the rent payable under, and extend the term of, the Master Lease, all as set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Advocat and Omega agree as follows: 1. Restructuring Transactions . 1.1 Surrender of Series B Preferred Stock . Omega hereby surrenders to Advocat for cancellation the Series B Preferred Stock. On or before the date of this Agreement, Advocat shall pay accrued and unpaid dividends for the period of July 1, 2006 thru September 30, 2006. Except as set forth in the preceding sentence, upon the surrender of the Series B Preferred Stock, Omega releases Advocat from any obligation


to pay any accrued but unpaid dividends with respect to the Series B Preferred Stock. Advocat shall promptly cancel the Series B Preferred Stock. 1.2 Cancellation of 2000 Note . Omega hereby surrenders to Advocat for cancellation the 2000 Note. On or before the date of this Agreement, Advocat shall pay accrued and unpaid interest on the 2000 Note for the period of July 1, 2006 thru September 30, 2006. Except as set forth in the preceding sentence, Omega hereby releases Advocat from any obligation to pay any outstanding Principal or accrued interest with respect to the 2000 Note. 1.3 Issuance of New Shares . Advocat hereby issues to Omega and Omega accepts from Advocat, subject to the terms and conditions hereof, five thousand (5,000) shares of Advocat Series C Preferred Stock (the " New Shares" ). Advocat shall deliver to Omega concurrently with the execution and delivery of this Agreement a stock certificate evidencing its ownership of the New Shares and bearing a restrictive legend stating substantially the following:The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. Such shares have been acquired for investment and may not be offered for sale, sold, delivered after sale, transferred, pledged or hypothecated in the absence of an effective registration statement covering such shares under the Securities Act or an opinion of counsel satisfactory to the company that such registration is not required. 1.4 Delivery of New Note . Advocat hereby delivers to Omega the New Note. 1.5 Amendment of Master Lease . Omega hereby agrees to cause Lessor, and Advocat hereby agrees to cause Lessee, to deliver concurrently with the execution of this Agreement the Third Amendment to Consolidated Amended and Restated Master Lease substantially in the form of Exhibit C to this Agreement. 2. Termination of Registration Rights Agreement . Omega and Advocat hereby terminate the Registration Rights Agreement dated as of November 8, 2000. 3. Representations and Warranties of Advocat . Advocat hereby represents and warrants to Omega as of the date of this Agreement as follows: 3.1 Advocat is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 3.2 Advocat has the full right, power and authority to execute, deliver and carry out the terms of this Agreement and all documents and agreements necessary to

2


give effect to the provisions of this Agreement and to consummate the transactions contemplated hereby. 3.3 The execution, delivery and consummation of this Agreement have been duly and properly authorized by all necessary action on the part of Advocat. The Board of Directors of Advocat has duly and validly approved and taken all corporate action required to be taken by the Board of Directors for the consummation of the transactions contemplated by this Agreement including, but not limited to, all actions required to render the provisions of Section 203 of the Delaware General Corporation Act restricting business combinations with " interested shareholders" inapplicable to such transactions and to provide that none of Omega or any of its affiliates shall become an " interested shareholder" upon the execution and delivery of this Agreement or the acquisition of New Shares pursuant to this Agreement. 3.4 This Agreement, upon due execution and delivery thereof, will constitute the valid and binding obligation of Advocat, enforceable in accordance with its terms. 3.5 Upon the issuance of the New Shares, such New Shares will be duly authorized, validly issued, fully paid and nonassessable. 3.6 The execution and delivery of this Agreement, the consummation of the transactions contemplated by this Agreement and the compliance with the terms of this Agreement do not and will not: (a) conflict with or result in any breach of any provision of any agreement or other instrument to which Advocat is a party or by which it or any of its property may be bound, or conflict with or result in any breach of any provision of Advocat' s Charter, as amended by the attached Designation, Bylaws or the Amended and Restated Rights Agreement dated as of December 7, 1998 by and between Advocat and SunTrust Bank, as amended (the " Rights Plan" ); (b) conflict with, result in a breach of any provision of, constitute (with or without due notice or lapse of time or both) a default under, result in the modification or cancellation of, result in any increase in the obligations of Advocat or any of its subsidiaries under, or give rise to any right of termination or acceleration in respect of, any contract, agreement, commitment, understanding, arrangement or restriction of any kind to which Advocat is a party or to which Advocat or any of its property is subject; (c) result in the creation of any Lien (as defined in Section 10.7 below) upon, or any Person (as defined in Section 10.7 below) obtaining the right to acquire, any of the New Shares, any equity interest in Advocat or any of Advocat' s assets; (d) violate or conflict with any law, ordinance, code, rule, regulation, decree, order or ruling of any court or Governmental Entity (as defined in Section 10.7 below), to which Advocat or any of its assets is subject;

3


(e) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority (" Consent" ), other than (1) the filing of the Designation with the Delaware Secretary of State and (2) the filing of a Form D with the Securities and Exchange Commission; or (f) require any Consent of any Person to the execution, delivery or performance of this Agreement or to the consummation of the transactions contemplated hereby, including (but not limited to) Consents from parties to leases or other agreements or commitments, other than C ...