Exhibit 10.4
TERMINATION OF LEASE AND SUBLEASES
(Senior Care Florida Master Lease and Subleases)
     THIS TERMINATION OF LEASE AND SUBLEASES is made and entered into as of the
1st day of April, 2010 (the “Execution Date”) by and among (i) SENIOR CARE
FLORIDA LEASING, LLC, a Delaware limited liability company (“Lessee”);
(ii) SENIOR CARE GOLFVIEW, LLC, a Delaware limited liability company; SENIOR
CARE GOLFCREST, LLC, a Delaware limited liability company; SENIOR CARE SOUTHERN
PINES, LLC, a Delaware limited liability company; SENIOR CARE CEDAR HILLS, LLC,
a Delaware limited liability company (each being sometimes referred to
individually as a “Sublessee” and collectively as “Sublessees”); (iii) OHI ASSET
II (FL), LLC, a Delaware limited liability company (“OHI”), as the successor by
assignment to EMERALD-CEDAR-HILLS, INC., a Florida corporation,
EMERALD-GOLFVIEW, INC., a Florida corporation, EMERALD-GOLFCREST, INC., a
Florida corporation, and EMERALD-SOUTHERN PINES, INC., a Florida corporation
(each being sometimes referred to individually as an “Emerald Lessor” and
collectively as the “Emerald Lessors”); (iii) OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation (“Omega”); and (iv) FLORIDA LESSOR-EMERALD, INC., a
Maryland corporation.
RECITALS
     A. Lessee and the Emerald Lessors entered into that certain Master Lease
Agreement dated April 1, 2003, whereby Lessee leased from the Emerald Lessors
certain premises (the “Florida Facilities”) designated in said Master Lease
Agreement and known as the Golfview Healthcare Center, St. Petersburg, Florida;
Golfcrest Healthcare Center, Hollywood, Florida; Cedar Hills Healthcare Center,
Jacksonville, Florida; and Southern Pines Healthcare Center, New Port Richey,
Florida, which Master Lease Agreement has been amended by First Amendment to
Master Lease Agreement dated December 31, 2005 and Second Amendment to Master
Lease Agreement dated March 2, 2010 (as so amended, the “Existing Lease”). The
Sublessees currently lease each of the Facilities from the Lessee pursuant to
separate Subleases each dated as of April 1, 2003 (the “Subleases”), which
Subleases are co-terminus with the Existing Master Lease.
     B. In connection with the execution of the Existing Lease on April 1, 2003:
          (i) Lessee, the Sublessees, the Emerald Lessors, Omega and certain
affiliates of the Lessee made and entered into the collateral security documents
of even date therewith listed and described on Schedule 1 attached hereto (each
an “Existing Lease Security Document” and collectively the “Existing Lease
Security Documents”);
          (ii) Lessee, the Sublessees, the Replacement Lessor and certain
affiliates of Lessee made and entered into the Amended and Restated Master Lease
Agreement dated as of April 1, 2003 (the “Replacement Lease”) and the collateral
security documents of even date therewith (the “Replacement Lease Security
Documents”) listed and described on Schedule 2 attached hereto, whereby, if and
in the event Omega were to foreclose upon, or accept a deed in lieu of
foreclosure upon, its mortgage of the Facilities (an “Omega Foreclosure”), the
Existing Lease and Existing Lease Security Documents would automatically and
without further action be

 

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amended and restated in their entirety as set forth in, and would be replaced
by, the Replacement Lease and Replacement Lease Security Documents; and
          (iii) Lessee, the Sublessee, Omega and certain affiliates of Lessee
entered into certain Security Documents each dated as of April 1, 2003 as listed
and described on Schedule 3 attached hereto as collateral security for the
payment of any funds advanced by Omega to Lessee pursuant to that certain
Working Capital Loan Agreement dated as of April 3, 2003. The obligation of
Omega to advance funds to Lessee and Sublessees under the Working Capital Loan
Agreement expired on December 31, 2005 and there is no outstanding indebtedness
of Lessee or Sublessees to Omega thereunder.
     C. OHI has taken title to the Facilities and, pursuant to an Assignment of
Lease dated February 1, 2010, is the assignee of all of the right, title and
interest of the Emerald Lessors in and to the Existing Lease and all documents
which evidence, secure and otherwise relate to the Existing Lease.
     D. Pursuant to the Second Amendment to Master Lease dated as of March 2,
2010 made by and between Lessee and OHI, the term of the Existing Lease was
extended to the earlier of (i) August 31, 2010 or (ii) the date that a new
tenant is prepared and authorized to take over and operate all of the Facilities
covered by the Existing Lease.
     E. On the Effective Date (as defined below), OHI will enter into a lease
agreement, or lease agreements, with a new tenant pursuant to which such new
tenant will lease all the Facilities covered by the Existing Lease and, in
connection therewith, Lessee and the Sublessees will transfer operational
control of the Facilities to a new operator designated by such new tenant.
     F. Lessee, the Sublessees, OHI, Replacement Lessor and Omega hereby desire
to terminate the Existing Lease and Subleases, the Replacement Lease and other
documents as set forth on the terms and conditions of this Agreement.
     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:
     1. Effective Date. The “Effective Date” shall be April 1, 2010.
     2. Termination of Existing Lease and Subleases. As of the Effective Date,
the Existing Lease and each of the Subleases are terminated; provided, however,
that the obligations of Lessee under Section 18.1 (Indemnification) of the
Existing Lease shall survive the termination of the Existing Lease for three
(3) years following the date of this termination; provided further, that
Lessee’s obligation to indemnify Lessor with respect to environmental matters
shall continue for six (6) years after such termination (as applicable to a
given claim, the “Indemnity Survival Period”). Further as of the Effective Date,
each of the Existing Lease Security Documents listed and described on Schedule 1
attached hereto are terminated. Notwithstanding anything in this or any other
Agreement to the contrary, the Guaranty (the “Surviving Guaranty”) given as of
April 1, 2003 by Advocat Inc., a Delaware corporation, Diversicare Management
Services Co., a Tennessee corporation, and Advocat Finance, Inc., a Delaware
corporation, in favor of OHI, as successor in interest to the Emerald Lessors,
shall

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remain in full force and effect until the later of (i) the expiration of the
Indemnity Survival Period, and (ii) the final resolution of all claims made
prior to the expiration of the Indemnity Survival Period.
     3. Bill of Sale. Pursuant to Section 6.2 of the Existing Lease, Lessee
hereby assigns, sets over and transfers to Lessor all of Lessee’s personal
property (as defined in the Existing Lease), except for those items of Personal
Property listed on Exhibit D attached to the Existing Lease.
     4. Termination of Replacement Lease. As of the Effective Date, the
Replacement Lease and each of the Replacement Lease Security Documents listed
and described on Schedule 2 attached hereto are terminated.
     5. Termination of Working Capital Loan Security Documents. As of the
Effective Date, each of the Working Capital Loan Security Documents listed and
described on Schedule 3 attached hereto are terminated.
     6. Release of Liens. OHI and Omega hereby expressly authorize counsel for
Lessee and the Sublessees to file or record UCC-3 termination statements for all
UCC-1 financing statements set forth on Schedule 4 attached hereto. OHI and
Omega further authorize counsel for Lessee and the Sublessees to prepare for
execution by the parties and recording with the appropriate public records a
termination of each of the Memorandums of Lease listed on Schedule 4 attached
hereto.
     7. Pro-rations. OHI and Lessee hereby agree that the pro-ration of real
property taxes by Lessee pursuant to an operations transfer agreement with the
new operator of the Facilities shall satisfy the parties obligation to pro-rate
real property taxes pursuant to Section 5.3 of the Existing Lease.
     8. Amendment; Waiver. This Agreement may not be modified or amended except
in writing signed by the parties hereto. No waiver of any term, provision or
condition of this Agreement in any one or more instances, shall be deemed to be
or be construed as a further or continuing waiver of any such term, provision or
condition of this Agreement. No failure to act shall be construed as a waiver of
any term, provision, condition or rights granted hereunder.
     9. Captions. The section headings contained herein are for convenience only
and shall not be considered or referred to in resolving questions of
interpretation.
     10. Assigns. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
     11. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which shall constitute one
and the same instrument. Delivery of an executed signature page of this
Agreement by facsimile or electronic transmission shall be effective as a
delivery of a manually executed counterpart thereof.

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     12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to principles
of conflicts of law.
     13. Costs and Attorneys’ Fees. In the event of a dispute between the
parties hereto with respect to the interpretation or enforcement of the terms
hereof, the prevailing party shall be entitled to collect from the other its
reasonable costs and attorneys fees, including its costs and fees on appeal.
     14. Construction. All parties acknowledge and agree that they have
participated in the drafting and negotiation of this Agreement. Accordingly, in
the event of a dispute between the parties hereto with respect to the
interpretation or enforcement of the terms hereof no provision shall be
construed so as to favor or disfavor either party hereto.
Signatures on following pages.

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Signature Page to
TERMINATION OF LEASE AND SUBLEASES
(Senior Care Master Lease and Subleases)
SENIOR CARE FLORIDA, LLC
SENIOR CARE GOLFVIEW, LLC
SENIOR CARE GOLFCREST, LLC
SENIOR CARE CEDAR HILLS, LLC
SENIOR CARE SOUTHERN PINES, LLC

                  By:   /s/ Glynn Riddle         Name:   Glynn Riddle       
Title:   EVP & CFO   

Signature Page 1 of 3

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Signature Page to
TERMINATION OF LEASE AND SUBLEASES
(Senior Care Master Lease and Subleases)

            OHI ASSET II (FL), LLC
      By:   Omega Healthcare Investors, Inc.,         its sole member           
By:   /s/ Daniel J. Booth         Name:   Daniel J. Booth        Title:   Chief
Operating Officer        FLORIDA LESSOR-EMERALD, INC.
      By:   /s/ Daniel J. Booth         Name:   Daniel J. Booth        Title:  
Chief Operating Officer        OMEGA HEALTHCARE INVESTORS, INC.
      By:   /s/ Daniel J. Booth         Name:   Daniel J. Booth        Title:  
Chief Operating Officer   

Signature Page 2 of 3

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Signature Page to
TERMINATION OF LEASE AND SUBLEASES
(Senior Care Master Lease and Subleases)
RATIFICATION
     The undersigned hereby consent to the transactions contemplated by this
Termination of Lease and Subleases and ratify and affirm the Surviving Guaranty.

            ADVOCAT, INC. a Delaware corporation
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Title:   EVP &
CFO        DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Title:   EVP &
CFO        ADVOCAT FINANCE INC., a Delaware corporation
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Title:   EVP &
CFO     

Signature Page 3 of 3