EXHIBIT 10.42

RETENTION BONUS AGREEMENT

THIS RETENTION BONUS AGREEMENT is made and entered into as of December 20, 2011,
by and between ADVOCAT INC., a Delaware corporation (hereinafter, the
“Company”), and L. Glynn Riddle, Jr. (“Riddle”).

WHEREAS, Riddle is employed by the Company pursuant to that certain employment
agreement dated March 31, 2006 (the “Employment Agreement”) pursuant to which
Riddle is the Chief Financial Officer of the Company and is considered by the
Company to be critical to its on-going business operations; and

WHEREAS, the Company understands that Riddle desires to resign his position with
the Company and has stated that he intends to resign his position and employment
with the Company on or before December 31, 2011

WHEREAS, pursuant to the Employment Agreement between Riddle and the Company,
upon Riddle’s voluntary termination, he would be entitled to his unpaid Base
Salary and the Company would have no further obligation to him; and

WHEREAS, the Company is presently in the process of replacing its Chief
Financial Officer (“CFO”), and dealing with the end of the year audit and other
issues and desires Riddle stay through the audit period in order to have a
better transition; and

WHEREAS, subject to Riddle’s continued satisfactory job performance, the Company
is willing to enter into this agreement to induce Riddle to remain with the
Company in order to assist the Company with its 2011 fiscal year audit,
preparation and filing of its Form 10-K for the year ended December 31, 2011 and
ongoing operations during the period while the Company engages in a search for a
replacement CFO and Riddle is willing to remain employed by the Company during
such time on the terms provided herein;

NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements made herein, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:

1. Retention. The Company hereby retains Riddle in the position of Chief
Financial Officer and Riddle hereby accepts said retention by the Company on the
terms and conditions specified herein.

2. Term. The term of this Agreement shall commence on the date hereof and,
unless earlier terminated in accordance with the provisions set forth herein
below, shall expire on March 31, 2012 (the “Retention Period”). Notwithstanding
anything to the contrary in this Section 2, the provisions of Section 9 will
survive the expiration or earlier termination of this Agreement.

3. Duties of Riddle. Riddle shall continue to perform the duties of CFO and
those duties which are assigned to him by the Board of Directors or Chief
Executive Officer of the Company through the Retention Period. Riddle agrees to
devote his full time, attention and skill to his duties hereunder throughout the
Retention Period and to be in a position to sign the certifications required to
be filed with the Form 10-K. In connection herewith, the Company agrees to
ensure that Riddle remains connected and has access to all information of the
Company required to enable Riddle to be in a position to sign the
certifications.

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4. Compensation.

(a) As compensation for the duties and services performed by Riddle, the Company
will continue Riddle’s annual base salary as provided in the Employment
Agreement as such may be increased in the ordinary course by the Board of
Directors, subject to federal and state withholding allowances and in accordance
with the Company’s standard payroll practices.

(b) The Company acknowledges that Riddle will be entitled to his full bonus for
the 2011 fiscal year and that such bonus shall be paid at the same time the
other officers of the Company are paid their bonuses, but in any event, on or
before March 15, 2012.

(c) Upon the filing of the Company’s annual report on Form 10-K, with the CFO
certifications signed by Riddle, the Company will pay Riddle a bonus of Fifty
Thousand Dollars ($50,000).

(d) In addition, the Company acknowledges that Riddle is performing his job for
the benefit of the Company at a time when he has expressed a desire to resign.
Thus, the Company agrees that, in addition to, and without limitation of, any
other compensation contemplated hereby, the Company will continue to pay Riddle
his annual base salary pursuant to the Company’s regular payroll periods,
through December 31, 2012, if Riddle continues to work through the end of the
Retention Period, and fulfills his other obligations under this agreement.

5. Options, SARs and Restricted Stock. As a further inducement for Riddle to
remain through the Retention Period, one hundred percent (100%) of all unvested
options, SOSARs, and restricted stock granted to Riddle under the Company’s 1994
Non-Qualified Stock Option Plan, 2005 Long Term Incentive Plan, or 2010 Long
Term Incentive Plan or any other equity plan shall be deemed vested as of the
last day of the Retention Period, if Riddle continues to work through the end of
the Retention Period, and fulfills his other obligations under this agreement.
The Company shall cause the options and SOSARs vested prior to the end of the
Retention Period pursuant to the terms of the agreements under which they were
granted and those vested pursuant to this Section 5 to remain exercisable until
December 31, 2012 or such shorter period that does not constitute an extension
under Treasury Regulation Section 1.409A-1(b)(5)(v)(C)(1). All Restricted Stock
that vests prior to the end of the Retention Period and those shares that vest
as a result of this Section 5 shall be promptly issued to Riddle at the end of
the Retention Period.

6. Restricted Stock Units. All of the restricted share units in the account of
Riddle under the 2008 Stock Purchase Plan For Key Personnel (“2008 Stock Plan”),
shall be deemed vested as of the last day of the Retention Period, if Riddle
continues to work through the end of the Retention Period, and fulfills his
other obligations under this agreement. The delivery to Riddle by the Company of
unrestricted shares of common stock of the Company equal to the number of
restricted shares units held by Riddle under the 2008 Stock Plan adjusted for
dividends through the Delayed Payment Date (defined below), rounded down to the
nearest whole share, shall be made six months from the end of the Retention
Period (the “Delayed Payment Date”) and the Company will make a payment to
Riddle in amount representing the value of any remaining fractional restricted
share units held by Riddle using the value per share as determined under
Section 2(p) of the 2008 Stock Plan.

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7. Benefits. Riddle shall also be entitled to participate in all benefit plans
and programs through the Retention Period that are available to Riddle as of the
date of this Agreement, provided such are continued after the date hereof. If
Riddle elects to continue COBRA benefits at the end of the Retention Period,
each month through December 31, 2012, the Company shall reimburse Riddle for the
cost of group health and dental insurance premiums under COBRA, subject to any
required withholding. In addition, should Riddle elect to continue any
disability insurance or life insurance under the Company’s plans, the Company
shall reimburse Riddle through December 31, 2012, for the cost of such
disability insurance premiums, and life insurance premiums, subject to any
required withholding. Note that the Company shall not continue EIRP payments to
Riddle following the end of the Retention Period. Any reimbursements under this
Section 7 shall be made to Riddle on a monthly basis, but in all events before
the end of the limited period described in Treasury Regulation
Section 1.409A-1(b)(9)(v)(E).

8. Termination.

(a) The Company shall have the right at any time, by written notice to Riddle to
terminate this Agreement if one of the following events occurs:

(i) a Termination for Cause as defined in the Employment Agreement; or

(ii) Riddle’s disability as defined in Section 10 below; or

(iii) Riddle’s death.

Notwithstanding the above, it is the intent of the Company at all times to
comply with the Americans With Disabilities Act, the Family and Medical Leave
Act and any other applicable federal and state employment laws. This Agreement
shall be terminable without cause by Riddle upon two (2) weeks written notice to
the Company. In the case of termination under this Section 8 (a), all
obligations of the parties under this Agreement shall cease, except for the
Company’s obligations under Sections 4, 5, and 7 herein through the date of
Riddle’s separation, to the extent earned and vested as of the date of Riddle’s
separation, and Riddle’s obligations under Section 9 hereof. In addition,
notwithstanding the above, if, prior to the end of the Retention Period, the
Company should terminate Riddle’s employment due to a Without Cause Termination
or Riddle should terminate his employment due to a Constructive Discharge, each
as defined in the Employment Agreement or his employment shall be terminated by
Riddle’s death or disability, Riddle shall be entitled to the compensation
provided in the Employment Agreement instead of the provisions of this
Agreement.

(b) This Agreement shall be terminable by Riddle upon thirty (30) days written
notice to the Company, if the Company breaches any material terms of this
Agreement and provided such breach has not been cured by the Company within such
thirty (30) day period after notice by Riddle. In the case of termination under
this Section 8(b), such termination shall be deemed a Constructive Discharge and
Riddle shall be entitled to the compensation provided in the Employment
Agreement in lieu of any payment that would otherwise have been due under this
Agreement.

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9. Confidential Information. In consideration of the covenants of the Company
contained herein, Riddle agrees that the provisions of Section IX of the
Employment Agreement will remain in full force and effect during and after the
Retention Period and that for purposes of Section IX of the Employment Agreement
Riddle will be deemed to have submitted his voluntary resignation at the end of
the Retention Period. Provided Riddle maintains the confidentiality of Company
information, the Company acknowledges that it will consent to Riddle’s
employment as chief financial officer, or other financial position with a
company operating in the nursing home industry.

10. Section 409A Compliance.

(a) This Agreement and any payments or benefits provided pursuant to the
Employment Agreement shall be interpreted, operated and administered in a manner
intended to avoid the imposition of additional taxes under Section 409A of the
Code. Further, the parties acknowledge and agree that the form and timing of the
payments and benefits to be provided pursuant to this Agreement are intended
comply with Section 409A of the Code or to be exempt from, or to comply with,
one or more exceptions to the requirements of Section 409A of the Code.
Notwithstanding any provision of this Agreement to the contrary, the Company,
its affiliates, subsidiaries, successors, and each of their respective officers,
directors, employees and representatives, neither represent nor warrant the tax
treatment under any federal, state, local, or foreign laws or regulations
thereunder (individually and collectively referred to as the “Tax Laws”) of any
payment or benefits contemplated by this Agreement including, but not limited
to, when and to what extent such payments or benefits may be subject to tax,
penalties and interest under the Tax Laws.

(b) If and to the extent required to comply with Section 409A, no payment or
benefit required to be paid under this Agreement on account of termination of
Riddle’s employment shall be made unless and until Riddle incurs a “separation
from service” within the meaning of Section 409A.

(c) Notwithstanding the applicable provisions of this Agreement entered into
pursuant thereto regarding the timing of payments in order for the Plan to
comply with Section 409A, to the extent any such payment is subject to the
provisions of Section 409A, the following special rules shall apply to any
payment due under this Agreement as a result of such separation from service:
(a) to the extent Riddle is a “Specified Employee” (as defined under
Section 409A at the time of Separation from Service and to the extent such
applicable provisions of Section 409A of the Code and the regulations thereunder
require a delay of such payment for a six-month period after the date of such
Riddle’s Separation from Service, no such payment shall be made prior to the
earlier of (i) the death of Riddle or (ii) the date that is six months after the
date of Riddle’s separation from service, and (b) any delayed payment shall be
paid to Riddle, as otherwise provided in this Agreement, promptly after the end
of the applicable six-month delay.

(d) Disability shall mean a medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than twelve months, where such impairment causes
Riddle to be unable to perform the duties under this Agreement or any
substantially similar position of employment.

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11. Assignments; Successors and Assigns. The rights and obligations of Riddle
hereunder are not assignable or delegable and any prohibited assignment or
delegation will be null and void. The Company may assign and delegate this
Agreement to a successor in interest to the Company’s business. Any such
assignment shall expressly include the obligations herein and shall not relieve
the Company of same. The provisions hereof shall inure to the benefit of and be
binding upon the permitted successors and assigns of the parties hereto.

12. Governing Law/Arbitration. This Agreement shall be interpreted under,
subject to and governed by the substantive laws of the State of Tennessee
without giving effect to provisions thereof regarding conflict of laws, and all
questions concerning its validity, construction, and administration shall be
determined in accordance thereby.

13. Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original but all of which will
together constitute one and same instrument.

14. Invalidity. The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provision hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision was
omitted. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.

15. Exclusiveness. This Agreement and the Employment Agreement constitute the
entire understanding and agreement between the parties with respect to the
retention by the Company of Riddle and supersedes any and all other agreements,
oral or written, between the parties. Except as otherwise provided herein, the
Employment Agreement continues in full force and effect.

16. Modification. This Agreement may not be modified or amended except in
writing signed by the parties. No term or condition of this Agreement will be
deemed to have been waived except in writing by the party charged with waiver. A
waiver shall operate only as to the specific term or condition waived and will
not constitute a waiver for the future or act on anything other than that which
is specifically waived.

17. Notices. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid by registered mail, return receipt requested,
or when delivered if by hand, overnight delivery service or confirmed facsimile
transmission, to the following:

(a) If to the Company, at 1621 Galleria Boulevard, Brentwood, TN 37027,
Attention: CEO, or at such other address as may have been furnished to Riddle by
the Company in writing; or

(b) If to Riddle, at the address stated below, or such other address as may have
been furnished to the Company by Riddle in writing.

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18. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall
preclude the Company from consolidating or merging in to or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertaking of the Company
hereunder. No such consolidation, merger or transfer shall affect the rights of
Riddle or the obligations of the Company hereunder.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

“COMPANY” ADVOCAT INC. By:   /s/ Kelly Gill Title:   President & CEO

 

“RIDDLE” /s/ L. Glynn Riddle, Jr. L. Glynn Riddle, Jr. Riddle’s Principal
Address: 1203 Signature Court Franklin, Tennessee 37064