Exhibit 10.3
AMENDED AND RESTATED GUARANTY
     THIS AMENDED AND RESTATED GUARANTY (“Guaranty”) dated as of February 28,
2011, by ADVOCAT INC., a Delaware corporation (“Guarantor”), is to and for the
benefit of THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation in
its capacity as administrative agent for the Lenders identified below (together
with its successors and assigns, the “Administrative Agent”).
R E C I T A L S:
     A. DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation, (together
with each (i) of the other borrowers set forth on Schedule 1 to the Loan
Agreement (as defined below) and (ii) additional borrowers from time to time
party to the Loan Agreement (whether pursuant to an amendment, written joinder
or otherwise), individually and collectively referred to herein as, “Borrower”,
has requested that the Administrative Agent on behalf of the Lenders make
certain revolving loans (individually and collectively, the “Loan”) to Borrower
pursuant to and in accordance with that certain Amended and Restated Revolving
Loan and Security Agreement dated of even date herewith by and among Borrower,
the lenders party thereto (collectively, the “Lenders”), and the Administrative
Agent (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the “Loan Agreement”); capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the Loan
Agreement.
     B. As security for repayment of the Loan, in addition to this Guaranty,
certain other loan and security documents have been executed and delivered to
the Administrative Agent. The Loan Agreement, the Amended and Restated Revolving
Credit Notes, the Amended and Restated Pledge Agreements, the Amended and
Restated Blocked Account Agreements, this Guaranty, each other guaranty
delivered in favor of the Administrative Agent on behalf of the Lenders in
connection with the Loan Agreement, and any and all other instruments,
agreements, and documents executed in conjunction herewith and therewith
(including, without limitation, each of the “Financing Agreements” (as defined
in the Loan Agreement)) are hereinafter sometimes collectively referred to
herein as the “Loan Documents.”
     C. The Guarantor and Borrower are Affiliates of each other. Guarantor will
derive substantial direct and indirect benefit (financial and otherwise) from
the Loan made to Borrower under the Loan Agreement. The Guarantor desires to
induce the Administrative Agent on behalf of the Lenders to make the Loan to
Borrower.
     D. Administrative Agent on behalf of the Lenders is unwilling to make the
Loan pursuant to the Loan Agreement unless Guarantor guarantees the payment of
the principal and interest and all other amounts due or owing to the
Administrative Agent and Lenders provided in the Loan Agreement and other Loan
Documents and the performance by Borrower of all of the covenants on Borrower’s
part to be performed and observed pursuant to the terms thereof, and Guarantor
has agreed to execute and deliver this Guaranty to Administrative Agent (for the
ratable benefit of Lenders and Administrative Agent).

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     NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION RECEIVED, the adequacy
and sufficiency of which is hereby acknowledged, and in further consideration of
any advances, credit or other financial accommodation heretofore, now or that
may hereafter at any time be extended to Borrower by Administrative Agent on
behalf of Lenders under, pursuant to or in connection with the Loan Documents,
(a) Guarantor hereby, jointly and severally, together with each Other Guarantor
(as defined in Section 3 below), and, unconditionally and irrevocably,
guarantees, irrespective of the validity or enforceability of any instrument,
writing or agreement relating to or the subject of any such advances, financial
accommodation or loans (including, but not limited to, the Loan Documents), and
whether or not due or to become due before or after any bankruptcy or insolvency
proceeding involving Borrower or would have become due but for Borrower’s
bankruptcy proceeding, (i) the full and prompt payment to Administrative Agent
and Lenders at maturity, whether by acceleration or otherwise, and at all times
thereafter of any and all “Liabilities” (as defined in the Loan Agreement) of
every kind and nature of Borrower to Administrative Agent and Lenders (arising
out of or in connection with the Loan, the Loan Agreement, and each of the other
Loan Documents to which Borrower (or any of its Affiliates) is a party,
including, without limitation, for principal, interest, default interest,
charges, fees, indemnification, costs, expenses, reasonable attorneys’ fees, or
otherwise), and whether or not due or to become due before or after any
bankruptcy or insolvency proceeding involving Borrower or would have become due
but for Borrower’s bankruptcy proceeding, howsoever evidenced, whether now
existing or hereafter created or arising, directly or indirectly, primary or
secondary, absolute or contingent, due or to become due, and howsoever owned,
held or acquired, whether through discount, overdraft, purchase, direct loan or
as collateral, or otherwise, and (ii) the prompt, full and faithful performance
and discharge by Borrower of each and every of the terms, conditions,
agreements, covenants, representations and warranties on the part of Borrower
contained in any agreement, the Loan Agreement and each of the other Loan
Documents to which Borrower is a party, and any other promissory notes, loan
agreements, or security agreements, or in any modification or addenda thereto or
substitution thereof in connection with any advance, credit or financial
accommodation afforded by Administrative Agent on behalf of Lenders to Borrower
(collectively the “Guaranteed Liabilities”); and (b) Guarantor further agrees to
pay all costs and expenses, legal and/or otherwise (including, but not limited
to, court costs and reasonable attorneys’ fees and expenses), paid or incurred
by Administrative Agent on behalf of Lenders in endeavoring to collect the
Guaranteed Liabilities, the Extraordinary Claims (as hereinbelow defined), or in
either case, any part thereof, or in enforcing this Guaranty or in defending any
suit based on any act of commission or omission of Administrative Agent or
Lenders with respect to the Indebtedness, the Collateral (as defined in the Loan
Agreement), or this Guaranty or in connection with any Recovery Claim (as
hereinbelow defined) (the “Enforcement Costs”); and (c) Guarantor further agrees
to pay any and all costs, losses, damages and reasonable attorney’s fees
incurred by the Administrative Agent in connection with any of the following:
(i) misapplication or misappropriation of any insurance or condemnation
proceeds; and (ii) Borrower or Guarantor institutes or becomes by virtue of a
counterclaim a party to any case, action, suit, or proceeding which reduces,
impedes or impairs Administrative Agent’s right of recourse to the Collateral or
any part thereof or Borrower or Guarantor engages in any act, omission, or
misrepresentation which has the effect of suspending, delaying, reducing,
impeding, or impairing the Administrative Agent’s right of recourse to the
Collateral or any part thereof (each of the aforesaid are collectively referred
to as an “Extraordinary Claims”). The

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Guaranteed Liabilities, the Enforcement Costs, and the Extraordinary Claims are
collectively referred to as the “Guaranteed Obligations.” Capitalized terms used
herein and not otherwise defined herein shall have the meaning given to them in
the Loan Agreement.
     Guarantor hereby further agrees as follows:
     1. Continuing Guaranty. This Guaranty includes any and all Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Guaranteed Obligations after
prior Guaranteed Obligations have been satisfied in whole or in part. To the
maximum extent permitted by law, Guarantor hereby waives any right to revoke
this Guaranty as to future Liabilities. If such a revocation is effective
notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that
(a) no such revocation shall be effective until written notice thereof has been
received by Administrative Agent, (b) no such revocation shall apply to any
Guaranteed Obligations in existence on such date (including, but not limited to,
any subsequent continuation, extension, or renewal thereof, or change in the
interest rate, payment terms, or other terms and conditions thereof), (c) no
such revocation shall apply to any Guaranteed Obligations made or created after
such date to the extent made or created pursuant to a legally binding commitment
of Administrative Agent in existence on the date of such revocation, (d) no
payment by Guarantor, Borrower, or from any other source, prior to the date of
such revocation shall reduce the maximum obligation of Guarantor hereunder, and
(e) any payment by Borrower or from any source other than Guarantor, subsequent
to the date of such revocation, shall first be applied to that portion of the
Guaranteed Obligations as to which the revocation is effective and which are
not, therefore, guaranteed hereunder, and to the extent so applied shall not
reduce the maximum obligation of Guarantor hereunder.
     2. Performance Under This Guaranty. If Borrower fails to make any payment
of any Guaranteed Obligations on or before the due date thereof and after the
expiration of the applicable notice and cure period, if any, or if Borrower
shall fail, after the expiration of the applicable notice and cure period, if
any, to perform, keep, observe, or fulfill any other obligation, covenant or
agreement referred to or contained in any instrument, writing, document or
agreement relating to the Guaranteed Obligations, Guarantor immediately shall
cause such payment to be made or each of such obligations to be performed, kept,
observed, or fulfilled to the extent such obligations constitute Guaranteed
Obligations.
     3. Primary Obligations. This Guaranty is a primary and original obligation
of Guarantor, is not merely the creation of a surety relationship, and is an
absolute, unconditional, and continuing guaranty of payment and performance and
not of collection which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the issuance of any instrument, writing or
agreement relating to the Guaranteed Obligations. Guarantor agrees that
Guarantor is directly and severally with any other guarantors of the Guaranteed
Obligations liable to Administrative Agent and Lenders, that the obligations of
Guarantor hereunder are independent of the obligations of Borrower or any other
guarantor, and that a separate action may be brought against Guarantor whether
such action is brought against Borrower or any other guarantor of Borrower’s
Indebtedness, obligations or liabilities to Administrative Agent and Lenders
(each an “Other

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Guarantor”) or whether Borrower or any such Other Guarantor is joined in such
action. Guarantor agrees that Guarantor’s liability hereunder shall be immediate
and shall not be contingent upon the exercise or enforcement of any lien,
security interest, mortgage or realization upon any security or collateral
Administrative Agent may at any time possess. Guarantor agrees that any release
which may be given by Administrative Agent to Borrower or any Other Guarantor
shall not release Guarantor. Guarantor consents and agrees that Administrative
Agent shall be under no obligation to marshal any assets of Borrower or any
Other Guarantor in favor of said Guarantor, or against or in payment of any or
all of the Guaranteed Obligations.
     4. Return of Payments. Guarantor agrees that, if at any time all or any
part of any payment theretofore applied by Administrative Agent to any amounts
due under the Loan or the Loan Agreement is rescinded or returned by
Administrative Agent or any Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, liquidation or reorganization of any
party), such amounts shall, for the purposes of this Guaranty, be deemed to have
continued in existence to the extent of such payment, notwithstanding such
application by Administrative Agent and this Guaranty shall continue to be
effective or be reinstated, as the case may be, as to such amounts due under the
Loan and the Loan Agreement, all as though such application by Administrative
Agent or Lenders had not been made.
     5. Waivers.
     (a) Guarantor hereby waives: (1) notice of acceptance hereof; (2) notice of
any Loan or other financial accommodations made or extended to Borrower or the
creation or existence of any Guaranteed Obligations; (3) notice of the amount of
the Guaranteed Obligations, subject, however, to Guarantor’s right to make
inquiry of Administrative Agent to ascertain the amount of the Guaranteed
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of Borrower or of any other fact that might increase
Guarantor’s risk hereunder; (5) notice of presentment for payment, demand,
protest, and notice thereof as to any promissory notes or other instruments,
writing or agreements evidencing Guaranteed Obligations; (6) notice of any event
of default by Borrower under any instrument, writing or agreement with
Administrative Agent or any Lender including the Loan Documents; and (7) all
other notices (except if such notice is specifically required to be given to
Guarantor hereunder) and demands to which Guarantor might otherwise be entitled.
     (b) Guarantor hereby waives the right by statute or otherwise to require
Administrative Agent or any Lender to institute suit against Borrower or under
any other guaranty; or to exhaust any rights and remedies which Lender has or
may have against Borrower or under any other guaranty; provided, however, that
nothing herein contained shall prevent Administrative Agent from suing on the
Loan Agreement or foreclosing any security interest or lien created by any of
the other Loan Documents, or from exercising any other rights thereunder, and if
such commercial code sale or other remedy is availed of, only the net proceeds
therefrom, after deduction of all charges and expenses of every kind and nature
whatsoever relating to the proceedings or sale, shall be applied in reduction of
the amount due on the Loan Agreement and other Loan Documents, and
Administrative Agent shall not be required to institute or prosecute proceedings
to cover any deficiency as a condition of any payment hereunder or enforcement
hereof. At any sale of the security or collateral for the Loan, or any part
thereof, whether by

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commercial code sale or otherwise, Administrative Agent may, at its discretion,
purchase all or any part of such collateral offered for sale, for its own
account (on behalf of the Lenders and itself), and may apply against the amount
bid therefore the balance due it pursuant to the terms of the Loan Agreement and
other Loan Documents. Guarantor further agrees that Guarantor is bound to the
payment of all Guaranteed Obligations, whether now existing or hereafter
accruing, as fully as if such Guaranteed Obligations were directly owing to
Administrative Agent and Lenders by Guarantor. Guarantor further waives any
defense arising by reason of any disability or other defense (other than the
defense that the Guaranteed Obligations shall have been fully and finally
performed and indefeasibly paid) of Borrower or by reason of the cessation from
any cause whatsoever of the liability of Borrower in respect thereof. Guarantor
consents to any and all forbearances and extensions of the time of payment of
the Loan Agreement or any of the other Loan Documents, and to any and all
changes in the terms, covenants and conditions thereof hereafter made or
granted, and to any part of the collateral therefor; it being the intention and
agreement hereof that Guarantor shall remain unconditionally liable as a
principal as, to and until the Guaranteed Obligations shall have been fully
repaid to Administrative Agent on behalf of the Lenders, and the terms,
covenants and conditions of the Loan Agreement and of the other Loan Documents
and all other notes, instruments, writing or agreements evidencing or securing
the Guaranteed Obligations shall have been fully performed and observed,
notwithstanding any act, omission or thing which might otherwise operate as a
legal or equitable discharge of Borrower or Guarantor.
     (c) Guarantor hereby waives: (1) any rights to assert against
Administrative Agent or Lenders any defense (legal or equitable), setoff,
counterclaim, or claim which Guarantor may now or at any time hereafter have
against Borrower or any other party liable to Administrative Agent or Lenders
(other than the defense that the Guaranteed Obligations shall have been fully
and finally performed and indefeasibly paid); and (2) any defense, setoff,
counterclaim, or claim, of any kind or nature, arising directly or indirectly
from the present or future lack of perfection, sufficiency, validity, or
enforceability of the Guaranteed Obligations or any security therefor
(including, but not limited to, any of the Loan Documents). Without limiting the
generality of the foregoing or any other provisions of this Guaranty, Guarantor
agrees that this Guaranty shall not be discharged, limited, impaired or affected
by: (a) the transfer of all or any part of the personal property or real
property described in any of the Loan Documents; (b) any sale, pledge,
surrender, indulgence, alteration, substitution, exchange, modification or other
disposition of any of the Guaranteed Obligations, all of which Lender is
expressly authorized to make from time to time; (c) any failure, neglect or
omission on the part of Administrative Agent or Lenders to realize or protect
any of the Guaranteed Obligations, or any personal property or real property or
lien security given as security therefor, or to exercise any lien upon or right
of appropriation of monies, credits or property of Borrower toward liquidation
of the Indebtedness, or performance of the covenants guaranteed hereby; and
(d) any proceedings with respect to the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets,
the marshaling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement, imposition
or readjustment of, or other similar proceedings affecting Borrower or any Other
Guarantor or any of their respective assets, it being expressly understood and
agreed that no such proceeding shall affect, modify, limit or discharge the
liability or obligation of Guarantor hereunder in any manner whatsoever, and
that Guarantor shall continue to remain absolutely liable under this Guaranty to
the same extent, and in the same manner, as if such proceedings had not been
instituted.(d) Guarantor hereby waives any right of

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subrogation Guarantor has or may have as against Borrower until all preference
periods under all applicable laws have expired. In addition, Guarantor hereby
waives any right to proceed against Borrower, now or hereafter for contribution,
indemnity, reimbursement and any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which Guarantor may now have or
hereafter have as against Borrower. Until the Guaranteed Obligations are
indefeasibly paid in full hereunder, Guarantor also hereby waives any right to
recourse to or with respect to any asset of Borrower. Guarantor agrees that in
light of the immediately foregoing waivers, the execution of the Guaranty shall
not be deemed to make Guarantor a “creditor” of Borrower, and that for purposes
of Sections 547 and 550 of the Bankruptcy Code, Guarantor shall not be deemed a
“creditor” of Borrower.
     6. Releases. No release or discharge of the Other Guarantor, or of any
other person or entity, whether primarily or secondarily liable for or obligated
with respect to the Guaranteed Obligations, or the institution of bankruptcy,
receivership, insolvency, reorganization, dissolution or liquidation proceedings
by or against the Other Guarantor or any other person or entity, or the entry of
any restraining or other order in any such proceeding, shall release or
discharge Guarantor, unless and until all of the Guaranteed Obligations shall
have been fully paid. Notwithstanding anything to the contrary contained herein,
Administrative Agent agrees that the obligations of Guarantor under this
Guaranty shall terminate, subject to Sections 4 and 8 hereof, at the earlier of
such time as (a) Administrative Agent on behalf of Lenders and itself shall have
received indefeasible payment in full in cash of all Guaranteed Liabilities and
all other Guaranteed Obligations under this Guaranty and all financing
arrangements and accommodations by and among Borrower, Administrative Agent and
Lenders shall have been irrevocably terminated and Administrative Agent and
Lenders have no obligations to make any loans, financial accommodations or
advance any funds to Borrower which could constitute Liabilities. Release of
this Guaranty, if it occurs, however, shall not affect, in any respect, the Loan
or any other instrument securing or guarantying the Loan.
     7. Right of Setoff. Guarantor agrees that Administrative Agent and Lenders
have all rights of setoff and banker’s liens provided by applicable law.
Following any default by Guarantor hereunder or an Event of Default by Borrower
under the Loan Agreement, any and all moneys, credits, deposits, accounts, or
other property belonging to the Guarantor in transit to or in the possession or
under the control of Administrative Agent or any Lender, or any agent or bailee
thereof, may, without notice and opportunity to be heard, be setoff against, and
appropriated and applied against and towards the payment of any and all of the
liabilities of Guarantor under this Guaranty. Following any default by Guarantor
hereunder or an Event of Default by Borrower under the Loan Agreement, subject
to the terms of any Intercreditor Agreement, Guarantor does hereby assign and
transfer to Administrative Agent (for the ratable benefit of Lenders and itself)
any and all cash, negotiable instruments, documents of title, chattel paper,
securities, certificates of deposit, deposit accounts, other cash equivalents
and other assets of said Guarantor in transit to, or in the possession or
control of Administrative Agent, or any agent or bailee of Administrative Agent
for any purpose and to apply the same on any or all of the Guaranteed
Obligations. The rights of the Administrative Agent and Lenders under this
Section are in addition to all other rights and remedies which the
Administrative Agent and Lenders may otherwise have in equity or at law.

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     8. Recovery Claim. Should a claim (“Recovery Claim”) be made upon
Administrative Agent or Lenders at any time for recovery of any amount received
by Administrative Agent or Lenders in payment of the Guaranteed Obligations
(whether received from Borrower, Guarantor pursuant hereto, or otherwise) and
should Administrative Agent or any Lender repay all or part of said amount by
reason of (a) any judgment, decree, or order of any court or administrative body
having jurisdiction over Administrative Agent or any Lender or any of its
respective property; or (b) any reasonable settlement or compromise of any such
Recovery Claim effected by Administrative Agent or such Lender with the claimant
(including Borrower), Guarantor shall remain liable to Administrative Agent and
Lenders for the amount so repaid to the same extent as if such amount had never
originally been received by Administrative Agent and Lenders, notwithstanding
any termination hereof or the return of this document to Guarantor or the
cancellation of any note or other instrument evidencing any of the Indebtedness.
     9. Assignments. In the event Administrative Agent shall sell, assign or
transfer the Guaranteed Obligations, or any part hereof, or grant participations
therein, each and every immediate or remote successive assignee, transferee,
holder of or participant or other interests therein, of all or any part of the
Guaranteed Obligations shall have the right to enforce this Guaranty by suit or
otherwise for the benefit of such assignee, transferee, holder or participant,
as fully as if such assignee, transferee, holder or participant were herein by
name specifically given such rights, powers and benefits; but Administrative
Agent (for the ratable benefit of the Lenders and itself) shall have an
unimpaired, prior and superior right to enforce this Guaranty for Administrative
Agent’s benefit as to so much of the guaranteed debt as it has not sold,
assigned or transferred.
     10. Representations and Warranties. Guarantor agrees that the following
shall constitute representations and warranties of Guarantor to Administrative
Agent (for the benefit of Lenders and itself), which shall survive the execution
and delivery hereof, and that Administrative Agent on behalf of the Lenders
intends to make the Loan and other financial accommodations, if any, guaranteed
hereby in reliance thereon:
     (a) Guarantor is not in default under any agreement to which Guarantor is a
party, the effect of which will materially impair performance by the Guarantor
of Guarantor’s obligations pursuant to and as contemplated by the terms of this
Guaranty, and neither the execution and delivery of this Guaranty nor compliance
with the terms and provisions of this Guaranty, will violate any law or any
presently existing regulation, order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality,
will conflict or will be inconsistent with, or will result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, instrument, document, agreement
or contract of any kind which creates, represents, evidences or provides for any
lien, charge or encumbrance upon any of the property or assets of the Guarantor,
or any other indenture, mortgage, deed of trust, instrument, document, agreement
or contract of any kind to which Guarantor is a party or by which Guarantor may
be bound of which the Guarantor is a party or by which Guarantor may be bound,
or in the event of any such conflict, the required consent or waiver of the
other party or parties thereto has been validly granted, is in full force and
effect and is valid and sufficient therefor. This Guaranty is the legal, valid
and binding obligation of the Guarantor and is enforceable against the Guarantor
in accordance with its terms.

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     (b) Except as set forth on Schedule 10(b) hereof, there are no actions,
suits or proceedings pending or to the best of Guarantor’s knowledge threatened
against the Guarantor before any court or any governmental, administrative,
regulatory, adjudicatory or arbitrational body or agency of any kind which will
materially adversely affect performance by the Guarantor of Guarantor’s
obligations pursuant to and as contemplated by the terms and provisions of this
Guaranty.
     (c) Neither this Guaranty nor any document, financial statement, credit
information, written certificate or written statement heretofore furnished or
required herein to be furnished to Lender by the Guarantor contains any untrue
statement of material fact or omits to state a fact material to this Guaranty.
     (d) Guarantor is currently informed of the financial condition of Borrower
and of all other circumstances which a diligent inquiry would reveal and which
would bear upon the risk of nonpayment of the Guaranteed Obligations. Guarantor
will continue to keep informed of the financial condition of Borrower and of all
other circumstances which bear upon the risk of nonpayment or nonperformance of
the Guaranteed Obligations.
     (e) As of the date hereof, the present fair saleable value of Guarantor’s
assets is greater than the amount required to pay Guarantor’s total Indebtedness
(contingent or otherwise), and is greater than the amount that will be required
to pay such Indebtedness as it matures and as it becomes absolute and matured.
The transactions contemplated hereby were effectuated without actual intent to
hinder, delay or defraud present or future creditors of Guarantor; it is
Guarantor’s express intention that Guarantor will maintain a Solvent financial
condition, giving effect to the Guaranteed Obligations incurred hereunder, as
long as any of the Guaranteed Obligations remain outstanding or Guarantor is
obligated to Administrative Agent or any Lender in any other manner whatsoever.
At all times until the Guaranteed Obligations remain satisfied and paid in full,
the Guarantor shall keep and maintain assets sufficient to honor and pay any and
all of the Guaranteed Obligations as and when due, subject to any express
monetary limitation set forth herein.
     11. Subordination. Any rights of Guarantor, whether now existing or later
arising, to receive payment on account of any Indebtedness (including interest)
owed to Guarantor by Borrower, or to withdraw capital invested by Guarantor in
Borrower, if any, or to receive and retain distributions from Borrower if and
solely as expressly provided in the Loan Agreement, shall at all times be
subordinate as to Lien and time of payment, and in all other respects to the
full and prior repayment to Administrative Agent and Lenders of all of the
Liabilities owing to Administrative Agent and Lenders pursuant to the Loan
Agreement and the other Loan Documents (including, without limitation, the
Loan). Except for dividends or distributions permitted by Section 9.9 of the
Loan Agreement, Guarantor shall not be entitled to enforce or receive payment of
any sums hereby subordinated until the Loan have been paid and performed in
full, and any such sums received in violation of this Guaranty shall not be
commingled with other monies of Guarantor and shall be received by Guarantor in
trust for Administrative Agent on behalf of Lenders and itself.
     12. Payments; Application. All payments to be made hereunder by Guarantor
shall be made in lawful money of the United States of America at the time of
payment, shall be made

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in immediately available funds, and shall be made without deduction (whether for
taxes or otherwise) or offset. All payments made by Guarantor hereunder shall be
applied as follows; first, to all costs and expenses (including, but not limited
to, reasonable attorneys’ fees, expenses and court costs) incurred by
Administrative Agent in enforcing this Guaranty or in collecting the Guaranteed
Obligations; second, to all accrued and unpaid interest and fees owing to
Administrative Agent and Lenders constituting Guaranteed Obligations; and third,
to the balance of the Guaranteed Obligations, all subject to the terms of the
Loan Agreement.
     13. [Intentionally Omitted]
     14. Notices. Any notice or other communication required or permitted under
this Guaranty shall be in writing and personally delivered, mailed by registered
or certified U.S. mail (return receipt requested and postage prepaid), sent by
telecopier (with a confirming copy sent by regular mail), or sent by prepaid
nationally recognized overnight courier service, and addressed to the relevant
party at its address set forth below, or at such other address as such party
may, by written notice, designate as its address for purposes of notice under
this Guaranty:
If to Administrative Agent, at:
The PrivateBank and Trust Company
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Adam Panos
Telephone No.: 312-564-1278
Facsimile No.: 312-564-6889
With a copy to:
Duane Morris LLP
190 South LaSalle Street — Suite 3700
Chicago, Illinois 60603
Attention: Brian P. Kerwin
Telephone No: 312-499-6737
Facsimile No: 312-499-6701
If to Guarantor, at:
Advocat Inc.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Attention: Glynn Riddle
Telephone No.: 615-771-7575
Facsimile No.: 615-771-7409
With a copy to:
Harwell Howard Hyne Gabbert & Manner
315 Deaderick Street, Suite 1800
Nashville, Tennessee 37238
Attention: John N. Popham IV
Telephone No.: 615-251-1093
Facsimile No.: 615-251-1059

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If mailed, notice shall be deemed to be given three (3) days after being sent,
and if sent by personal delivery, telecopier, or prepaid courier, notice shall
be deemed to be given when delivered. If any notice is tendered to an addressee
and delivery thereof is refused by such addressee, such notice shall be
effective upon such tender unless expressly set forth in such notice.
     15. Cumulative Remedies. No remedy under this Guaranty is intended to be
exclusive of any other remedy, but each and every remedy shall be cumulative and
in addition to any and every other remedy given hereunder and those provided by
law or in equity. No delay or omission by Administrative Agent to exercise any
right under this Guaranty shall impair any such right nor be construed to be a
waiver thereof. No failure on the part of Administrative Agent to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right.
     16. Financial Information. Without limiting anything contained in this
Guaranty, Guarantor agrees that, so long as any of the Guaranteed Obligations
remain outstanding, Guarantor shall deliver to Administrative Agent, upon
Administrative Agent’s written request and to the extent not included in the
Guarantor’s public filings with the United States Securities and Exchange
Commission, on at least an annual basis, and at such other times as
Administrative Agent may reasonably request, (i) financial statements (showing
all changes in Guarantor’s financial condition which occurred during the
preceding fiscal year and Guarantor’s current financial position), (ii) federal
and state tax returns of Guarantor, as applicable, and (iii) such other
financial information as Administrative Agent or the Lenders may reasonably
request. Copies of annual tax returns shall be delivered to Administrative Agent
upon Administrative Agent’s written request therefore. The failure of Guarantor
to perform or observe any of its obligations hereunder within the period of time
specified in any notice from Administrative Agent to Guarantor, which notice
shall in no event be less than five (5) business days, advising Guarantor of
such failure, shall constitute a default under this Guaranty and an Event of
Default under the Loan Agreement and the other Loan Documents.
     17. Books and Records. Guarantor agrees that Administrative Agent’s books
and records showing the Liabilities among Administrative Agent on behalf of
Lenders and Borrower shall be admissible in any action or proceeding and shall
be binding upon Guarantor for the purpose of establishing the items therein set
forth and shall constitute prima facie proof thereof absent manifest error.
     18. Interpretation and Severability of Provisions. The headings of sections
and paragraphs in this Guaranty are for convenience of reference only and shall
not be construed in any way to limit or define the content, scope or intent of
the provisions hereof. As used in this Guaranty, the singular shall include the
plural, and masculine, feminine and neuter pronouns shall be fully
interchangeable, where the context so requires. Whenever the words “including”,

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“include or includes” are used in this Guaranty, they should be interpreted in a
non-exclusive manner as though the words “, without limitation,” immediately
followed the same. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law. If
any provision of this Guaranty is prohibited or unenforceable under applicable
law, such provision shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. As used
herein, except in circumstances where under the Loan Documents the term is
intended to mean or refer to all of the Borrowers or all of the Credit Parties
on a consolidated basis, the term “Borrower” refers to any one or all of the
Borrowers under the Loan Agreement, as applicable, provided, however, in the
event of any disagreement between Administrative Agent and Guarantor as to
whether or not a reference to Borrower means any or all of such Borrower(s)
individually or collectively herein, and the circumstances are not covered by
the Loan Documents, the Administrative Agent shall in reasonable good faith make
such determination.
     19. Bankruptcy. So long as any Guaranteed Obligations shall be owing to
Administrative Agent or Lenders, Guarantor shall file in any bankruptcy or other
proceeding against Borrower in which the filing of claims is required or
permitted by law all claims which Guarantor may have against Borrower relating
to any Indebtedness of Borrower to Guarantor and will assign to Administrative
Agent (for the ratable benefit of Lenders and itself) all rights of Guarantor
thereunder. If Guarantor does not file any such claim, Administrative Agent, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in Administrative Agent’s discretion, to assign the claim to a
nominee and to cause proof of claim to be filed in the name of Administrative
Agent’s nominee. The foregoing power of attorney is coupled with an interest and
cannot be revoked. Administrative Agent or its nominee shall have the sole right
to accept or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such cases,
whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Administrative Agent the amount
payable on such claim and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Administrative Agent (for the ratable benefit of
Lenders and itself) all of Guarantor’s rights to any such payments or
distributions to which Guarantor would otherwise be entitled; provided, however,
Guarantor’s obligations hereunder shall not be satisfied except to the extent
that Administrative Agent receives cash by reason of any such payment or
distribution. If Administrative Agent receives anything hereunder other than
cash, the same shall be held as collateral for amounts due under this Guaranty.
At such time as all Guaranteed Obligations have been fully paid, any sums or
other collateral received by Administrative Agent pursuant to this Section 19
remaining in the possession of Administrative Agent shall be paid or delivered
to Guarantor.
     20. Additional and Independent Obligations. Guarantor’s obligations under
this Guaranty are in addition to Guarantor’s obligations under any other
existing or future guaranties, each of which shall remain in full force and
effect until it is expressly modified or released in a writing signed by
Administrative Agent. Guarantor’s obligations under this Guaranty are
independent of those of Borrower and any Other Guarantor. Administrative Agent
may bring a separate action against Guarantor without first proceeding against
Borrower, any Other Guarantor, any other person or entity or any security that
Administrative Agent may hold, and without pursuing any other remedy.
Administrative Agent’s rights under this Guaranty shall not be exhausted by any
action by Administrative Agent until all of the Indebtedness, liabilities and

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obligations owing to Administrative Agent and Lenders pursuant to the Loan
Agreement and the other Loan Documents (including, without limitation, the Loan
and other Liabilities) have been indefeasibly paid in full in cash and otherwise
performed in full and all financing arrangements and accommodations among
Borrower, Administrative Agent and Lenders shall have been irrevocably
terminated and Administrative Agent and Lenders have no obligations to make any
loans, financial accommodations or advance any funds to Borrower which could
constitute Liabilities.
     21. Costs and Expenses. If any lawsuit is commenced which arises out of or
which relates to this Guaranty, the Loan Documents or the Loan, including,
without limitation, any insolvency, bankruptcy or similar proceeding, Guarantor
agrees to pay all of Administrative Agent’s costs and expenses, including,
without limitation, reasonable attorneys’ fees which may be incurred in any
effort to collect or enforce any term of this Guaranty. From the time(s)
incurred until paid in full to Administrative Agent on behalf of Lenders, all
sums shall bear interest at the “Default Rate” set forth in the Loan Agreement.
     22. Entire Agreement; Amendments; Other Agreements. This Guaranty
constitutes the entire agreement between Guarantor and Administrative Agent
pertaining to the subject matter contained herein, and may not be altered,
amended, or modified, nor may any provision hereof be waived or noncompliance
therewith consented to, except by means of a writing executed by Guarantor as to
which such consent or waiver is applicable and by Administrative Agent. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which it is
given. No course of dealing and no delay or waiver of any right or default under
this Guaranty shall be deemed a waiver of any other similar or dissimilar right
or default or otherwise prejudice the rights and remedies hereunder. The
Guarantor shall not enter into any agreement containing any provision which
would be violated or breached by the performance of Guarantor’s obligations
hereunder or which would violate or breach any provision hereof, or that would
or is reasonably likely to adversely affect the Administrative Agent’s interests
or rights under this Guaranty. Time is of the essence for the payment and
performance of this Guaranty. The recitals hereto are hereby made a part of and
incorporated into this Guaranty by this reference thereto. A signature delivered
or sent by facsimile or other electronic transmission shall be as legally
binding and enforceable as a signed original for any and all purposes.
     23. Successors and Assigns. This Guaranty shall be binding upon Guarantor’s
representatives, heirs, legal beneficiaries, successors, and assigns, as
applicable, and shall inure to the benefit of the successors and assigns of
Administrative Agent; provided, however, Guarantor shall not be permitted to
assign this Guaranty or any of Guarantor’s rights, liabilities or obligations
hereunder without the prior written consent of the Administrative Agent. In the
event of the dissolution, bankruptcy or failure to maintain a Solvent financial
condition, as applicable, of the Guarantor, the Loan Agreement and any and all
sums due thereunder, along with all of the other Guaranteed Obligations, shall
at once, without any notice or demand from Administrative Agent, be due and
payable.
     24. SUBMISSION OF JURISDICTION. THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:

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     (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT HEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF ILLINOIS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF ILLINOIS AND APPELLATE COURTS FROM ANY THEREOF;
     (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION WITH ANY
SUCH ACTION OR PROCEEDING (i) ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION
OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME, (ii) THE RIGHT TO ASSERT OR IMPOSE ANY CLAIM, NONCOMPULSORY
SET-OFF, COUNTERCLAIM OR CROSS-CLAIM IN RESPECT THEREOF IN SUCH PROCEEDING;
PROVIDED, HOWEVER, THIS WAIVER DOES NOT PRECLUDE THE RIGHT TO ASSERT A DEFENSE
IN SUCH ACTION OR PROCEEDING OR TO ASSERT OR IMPOSE ANY CLAIM, COUNTERCLAIM OR
CROSS-CLAIM WHICH THE GUARANTOR WISHES TO PURSUE IN A SEPARATE PROCEEDING AT ITS
SOLE COST AND EXPENSE, AND (iii) ALL STATUTES OF LIMITATIONS WHICH MAY BE
RELEVANT THERETO; AND
     (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE
GUARANTOR AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER ADDRESS OF WHICH THE
LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE GUARANTOR AGREES THAT SUCH
SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE GUARANTOR IN ANY SUIT, ACTION OR
PROCEEDING, AND (ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON
AND PERSONAL DELIVERY TO THE GUARANTOR. NOTHING HEREIN SHALL AFFECT THE LENDER’S
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT THE
LENDER’S RIGHT TO BRING PROCEEDINGS AGAINST THE GUARANTOR OR ITS PROPERTY IN ANY
COURT OR ANY OTHER JURISDICTION.
     25. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH, AND ENFORCED AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
     26. JURY TRIAL. THE GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY
IRREVOCABLY AND KNOWINGLY WAIVE (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT
LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS GUARANTY OR ANY OTHER

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AGREEMENTS OR TRANSACTIONS RELATED HERETO, INCLUDING, WITHOUT LIMITATION, ANY
ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS GUARANTY OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (B) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS GUARANTY. THE
ADMINISTRATIVE AGENT AND THE GUARANTOR AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT A JURY.
     27. No Pledge of Equity. Guarantor agrees that, so long as any of the
Guaranteed Obligations remain outstanding, Guarantor shall remain the owner
(either directly or through one of its Subsidiaries) of 100% of the equity in
each Borrower; and without the prior written consent of Administrative Agent,
Guarantor shall not assign, sell, convey, gift, transfer, pledge, hypothecate,
grant a security interest in, encumber or in any other manner permit any lien
(other than Permitted Liens) to exist in or on, all or any portion of the equity
in or of any Borrower, except for those pledges to the Omega Senior Lessor in
effect on the date hereof.
     28. REVIEW BY GUARANTOR. The Guarantor acknowledges that Guarantor has
thoroughly read and reviewed the terms and provisions of this Guaranty, and that
such terms and provisions are clearly understood by the Guarantor, and has been
fully and unconditionally consented to by the Guarantor with the full benefit
and advice of counsel chosen by the Guarantor.
[Signature Page Follows]

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Amended and
Restated Guaranty as of the date set forth in the first paragraph hereof.

            Guarantor:

ADVOCAT INC.
      By:   /s/ Glynn Riddle         Name:   Glynn Riddle        Title:   EVP &
CFO   

[Signature Page — Amended and Restated Guaranty]

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Exhibit 10.3
SCHEDULE 10(b)

Guaranty of Advocat, Inc.

LITIGATION
See attached list of pending or threatened litigation against Advocat, Inc.