SETTLEMENT AGREEMENT

This Settlement Agreement (Agreement) is entered into among the United States of
America, acting through the United States Department of Justice and on behalf of
the Office of Inspector General (OIG-HHS) of the Department of Health and Human
Services (HHS), (collectively, the “United States”), the State of Tennessee,
acting through the Tennessee Attorney General and Reporter and on behalf of its
Medicaid program (Tennessee), Diversicare Healthcare Services, Inc.
(Diversicare), and Mary Haggard and Bryant Fitzmorris (collectively, “Relators”)
(hereafter collectively referred to as “the Parties”), through their authorized
representatives.
RECITALS
A.    Diversicare, a group of affiliated entities based in Franklin, Tennessee,
currently operates or formerly operated approximately 74 skilled nursing
facilities (SNFs) in Tennessee, Kentucky, Florida, Kansas, Missouri, Alabama,
Indiana, Ohio, Texas, Arkansas, and West Virginia. These SNFs are included in
the list of entities in Attachment A. Diversicare submits claims to Medicare and
Medicaid for the medical services provided at its SNFs to residents who are
beneficiaries of these federal healthcare programs. Diversicare’s claims to
Medicare were based, in part, on the rehabilitation therapy it provided to
beneficiaries, while claims to Tennessee’s Medicaid program, TennCare, required
physicians to certify on pre-admission evaluations (PAEs) that patients needed
care at a skilled nursing facility.
B.    On July 3, 2012, Mary Haggard filed a qui tam action in the United States
District Court for the Middle District of Tennessee captioned United States ex
rel. Mary Haggard v. Diversicare Management Services Co., et. al., Civil Action
No. 3:12-cv-00669, pursuant to the qui tam provisions of the False Claims Act,
31 U.S.C. § 3730(b) (the “Haggard Action”). On or about August 9, 2016, Bryant
Fitzmorris filed a qui tam action in the United States District Court for the
Western District of Texas captioned United States ex rel. Bryant Fitzmorris v.
Diversicare Health Services, Inc., Civil Action No. 5:16-cv-00813 (the
“Fitzmorris Action”). On November 28, 2016, the Fitzmorris Action was
transferred to the United States District Court for the Middle District of
Tennessee and assigned Civil Action No. 3:16-cv-03037. Among other things, the
Relators’ qui tam complaints alleged that Diversicare violated the False Claims
Act by submitting false claims and statements to Medicare, TRICARE, and Medicaid
for payment of services pursuant to the skilled nursing facility benefit that
were not reasonable or medically necessary. Concurrent with this Agreement, the
United States is intervening for settlement purposes in the Haggard Action and
Fitzmorris Action with regard to the Medicare Covered Conduct described below.
C.     The United States contends that Diversicare submitted or caused to be
submitted claims for payment to the Medicare Program, Title XVIII of the Social
Security Act, 42 U.S.C. §§ 1395-1395kkk-1 (Medicare), and the United States and
Tennessee contend that Diversicare submitted or caused to be submitted claims
for payment to TennCare, which is part of the Medicaid Program, 42 U.S.C. §§
1396-1396w‑5 (TennCare).
D.    The United States contends that it has certain civil claims against
Diversicare arising from its alleged submission of false claims to Medicare Part
A during the time period from January 1, 2010 through December 31, 2015 for
unreasonable, unnecessary, and/or unskilled rehabilitation therapy provided to
patients at Diversicare skilled nursing facilities where Medicare Part A was
billed for the patient’s stay at the highest reimbursement levels, namely, the
Ultra High Resource Utilization Group (RUG). The United States contends that
Diversicare’s corporate policies and practices encouraged the provision of such
unnecessary therapy untethered to the individual clinical needs of patients, and
caused false claims to be submitted. This conduct included submitting claims for
Ultra High therapy levels despite evidence that (1) the frequency and duration
of physical or occupational therapy were not reasonable or necessary for the
patient, (2) the intensity of the physical or occupational therapy was
inappropriate for the patient and not reasonable or necessary, (3) services did
not require the skills of a therapist to perform them, and (4) speech therapy
was medically unnecessary. This included specific instances of improper
co-treatment in order to achieve minute thresholds, repetitive and unskilled
exercises that did not match plan of care goals to obtain additional minutes,
engaging patients in activities contraindicated by underlying medical
conditions, inflating ADL scores and extending patient lengths of stay beyond
what was medically indicated, billing for services that were not provided, using
budgets, goals, and quotas to ensure Ultra High therapy was maximized, and
threatening or undertaking adverse actions against employees if they failed to
meet the budgets, goals, or quotas. The conduct described heretofore in this
Paragraph is hereafter referred to as the “Medicare Covered Conduct.”
The United States and Tennessee further contend that they have certain civil
claims against Diversicare arising from Diversicare’s alleged submission to
TennCare of PAEs with photocopied or forged physician signatures on
certifications required in the submission of claims for nursing facility
services rendered to TennCare beneficiaries in Tennessee Diversicare skilled
nursing facilities between January 1, 2010 and December 31, 2015 (the “TennCare
Covered Conduct”). The conduct in the entirety of Recital D (i.e., the Medicare
Covered Conduct and the TennCare Covered Conduct) is referred to collectively
below as the “Covered Conduct.”
E.    This Agreement is neither an admission of liability by Diversicare nor a
concession by the United States or Tennessee that their respective claims are
not well founded.
F.    Relators claim entitlement under 31 U.S.C. § 3730(d) to a share of the
proceeds of this Settlement Agreement and to Relators’ reasonable expenses,
attorneys’ fees and costs.
To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, and in consideration of the mutual promises and
obligations of this Settlement Agreement, the Parties agree and covenant as
follows:
TERMS AND CONDITIONS
1.    Pursuant to the Terms and Conditions outlined herein, Diversicare will pay
the United States $9.5 million (Settlement Amount), plus interest at 2.25
percent from June 20, 2019. Within ten days after the Effective Date of this
Agreement, Diversicare will pay the United States its first payment of $500,000,
plus interest that has accrued at 2.25 percent from June 20, 2019, until the
date of payment. Subsequent payments will be made to the United States in
accordance with the payment plan set forth in Attachment B (Settlement Payment
Schedule), and with other provisions set forth in this Agreement (e.g.,
provisions setting forth requirements for contingency payments and payments upon
default). All payments by Diversicare to the United States under this Agreement
will be made by electronic funds transfer pursuant to written instructions to be
provided to Diversicare by the United States Department of Justice.
Diversicare’s restitution, as described in Internal Revenue Code Section
162(f)(2), to the United States in this matter is $9,079,150, and Diversicare’s
restitution, as described in Internal Revenue Code Section 162(f)(2), to
Tennessee in this matter is $420,850.  Further, any interest and any portion of
the Contingency Payments paid pursuant to this Agreement are restitution, as
described in Internal Revenue Code Section 162(f)(2), allocated in the same
proportions between the United States and Tennessee. The period between the
Effective Date of this Agreement and the date of Diversicare’s final payment
under this Agreement shall be known as the Settlement Payment Period.
a.    Contingency Payments. Diversicare agrees to provide sixty (60) days
advance, written notice to the United States of the sale by any of the entities
listed on Attachment C of any of the real estate interests they own during the
Settlement Payment Period (Sale Event).
i.     The United States, at its sole discretion, may terminate this Agreement
if Diversicare fails to provide sixty (60) days advanced, written notice of a
Sale Event.
ii.    Upon the occurrence of a Sale Event, Diversicare shall make an additional
payment of fifty percent (50%) of the total net proceeds (Net Sale Proceeds)
from the Sale Event, to the United States by electronic funds transfer, pursuant
to written instructions to be provided to Diversicare by the United States
Department of Justice, within seven days of the closing on the Sale Event. Net
Sale Proceeds is defined as the gross sale price less any outstanding mortgage
balance, applicable federal, state, and local taxes or fees, real estate
commissions and closing costs owed by Diversicare and/or any of the entities
listed on Attachment C.
iii.    Any Contingency Payment made pursuant to this Paragraph 1(a) will be
divisible and payable by the United States to Tennessee and Relators pursuant to
the terms described in Paragraphs 2 and 3 below.
2.    Conditioned upon the United States receiving the required payments from
Diversicare under this Agreement, the United States agrees that it shall pay to
the State of Tennessee by electronic funds transfer 44.3 percent of the Medicaid
Share as soon as feasible after receipt of each payment. The Medicaid Share is
based on the TennCare Covered Conduct and is defined as 10 percent of each
payment received by the United States from Diversicare under this Agreement.
Diversicare shall have no responsibility or liability as to payment, or
remission of payments, between the United States and Tennessee.
3.    Conditioned upon the United States receiving the required payments from
Diversicare under this Agreement for the Medicare Covered Conduct, the United
States agrees that it shall pay to Relator Mary Haggard by electronic funds
transfer 18.5 percent of 90 percent of each such payment received under the
Settlement Agreement related to the Medicare Covered Conduct (Haggard Relator’s
Share), and the United States shall pay to Relator Bryant Fitzmorris by
electronic funds transfer 17 percent of 10 percent of each such payment received
under the Settlement Agreement related to the Medicare Covered Conduct
(Fitzmorris Relator’s Share), as soon as feasible after receipt of each payment.
Diversicare shall have no responsibility or liability as to payment, or
remission of payments, between the United States and either Relator.
4.    The terms of any payments by Diversicare to Relators or their counsel for
expenses and attorneys’ fees and costs due under 31 U.S.C. § 3730(d) shall be
made in accordance with a separate agreement between Diversicare, Relators, and
their counsel.
5.    Subject to the exceptions in Paragraph 8 and 9 (concerning reserved
claims) below, and subject to Paragraph 12 (concerning disclosure of assets),
Paragraph 21 (concerning default), and Paragraph 22 (concerning bankruptcy)
below, and conditioned upon the United States’ receipt of the full Settlement
Amount plus all accrued interest, the United States releases Diversicare from
any civil or administrative monetary claim the United States has for the Covered
Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary
Penalties Law, 42 U.S.C. § 1320a-7a; the Program Fraud Civil Remedies Act, 31
U.S.C. §§ 3801-3812; or the common law theories of payment by mistake, unjust
enrichment, and fraud, and Tennessee releases Diversicare from any
administrative action seeking exclusion under applicable TennCare rules or
regulations and from any civil or administrative monetary claim Tennessee has
for the TennCare Covered Conduct under the Tennessee Medicaid False Claims Act,
Tenn. Code Ann. §§ 71-5-181, to -185, or the common law theories of payment by
mistake, unjust enrichment, and fraud.
6.    Subject to the exceptions in Paragraph 8 and 9 (concerning reserved
claims) below, and subject to Paragraph 12 (concerning disclosure of assets),
Paragraph 21 (concerning default), and Paragraph 22 (concerning bankruptcy)
below, and conditioned upon the United States’ receipt of full payment of the
Settlement Amount related to the Medicare Covered Conduct plus all accrued
interest, Relators, for themselves and for their heirs, successors, attorneys,
agents, and assigns, release Diversicare from any civil monetary claim Relators
have on behalf of the United States for the Medicare Covered Conduct under the
False Claims Act, 31 U.S.C. §§ 3729-3733 and from any and all claims either may
have personally against Diversicare, its officers, employees or agents as of the
date hereof.
7.    In consideration of the obligations of Diversicare in this Agreement and
the Corporate Integrity Agreement (“CIA”), entered into between OIG-HHS and
Diversicare, and conditioned upon the United States’ receipt of full payment of
the Settlement Amount, the OIG-HHS agrees to release and refrain from
instituting, directing, or maintaining any administrative action seeking
exclusion from Medicare, Medicaid, and other Federal health care programs (as
defined in 42 U.S.C. § 1320a-7b(f)) against Diversicare under 42 U.S.C. §
1320a-7a (Civil Monetary Penalties Law), 42 U.S.C. § 1320a-7(b)(6)(B)
(permissive exclusion for unnecessary services), 42 U.S.C. § 1320a-7(b)(7)
(permissive exclusion for fraud, kickbacks, and other prohibited activities),
for the Covered Conduct, except as reserved in this paragraph and in Paragraph 8
(concerning reserved claims), below. The OIG-HHS expressly reserves all rights
to comply with any statutory obligations to exclude Diversicare from Medicare,
Medicaid, and other Federal health care programs under 42 U.S.C. § 1320a-7(a)
(mandatory exclusion) based upon the Covered Conduct. Nothing in this paragraph
precludes the OIG-HHS from taking action against entities or persons, or for
conduct and practices, for which claims have been reserved in Paragraph 8,
below.
8.    Notwithstanding the releases given in Paragraphs 5, 6, and 7 of this
Agreement, or any other term of this Agreement, the following claims and rights
of the United States are specifically reserved and are not released:
a.
Any liability arising under Title 26, U.S. Code (Internal Revenue Code);

b.
Any criminal liability;

c.
Except as explicitly stated in this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs;

d.
Any liability to the United States (or its agencies) for any conduct other than
the Covered Conduct;

e.
Any liability based upon obligations created by this Agreement;

f.
Any liability of individuals;

g.
Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services;

h.
Any liability for failure to deliver goods or services due; and

i.
Any liability for personal injury or property damage or for other consequential
damages arising from the Covered Conduct.

9.    Notwithstanding the releases given in Paragraphs 5, 6, and 7 of this
Agreement, or any other term of this Agreement, the following claims of
Tennessee are specifically reserved and are not released:
a.
Any criminal, civil, or administrative liability arising under the State of
Tennessee’s revenue codes;

b.    Any criminal liability;
c.
Any liability to Tennessee for any conduct other than the TennCare Covered
Conduct;

d.    Any liability based upon obligations created by this Agreement;
e.
Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services;

f.    Any liability for failure to deliver goods or services due;
g.     Any liability for personal injury or property damage or for other
consequential damages arising from the TennCare Covered Conduct;
h.
Any liability of individuals; or

i.
Any liability to the State of Tennessee individual consumers or state program
payers for claims involving unfair and/or deceptive acts or practices and/or
violations of consumer protection laws.

10.    Relators and their heirs, successors, attorneys, agents, and assigns
shall not object to this Agreement but agree and confirm that this Agreement is
fair, adequate, and reasonable under all the circumstances, pursuant to 31
U.S.C. § 3730(c)(2)(B). Conditioned upon Relators’ receipt of the Relators’
Share, Relators and their heirs, successors, attorneys, agents, and assigns
fully and finally release, waive, and forever discharge the United States and
Tennessee, their agencies, officers, agents, employees, and servants, from any
claims arising from the filing of the Haggard Action and/or Fitzmorris Action or
under 31 U.S.C. § 3730, and from any claims to a share of the proceeds of this
Agreement and/or the Haggard Action and/or Fitzmorris Action.
11.    Relators, for themselves, and for their heirs, successors, attorneys,
agents, and assigns, release Diversicare, and its officers, agents, and
employees, from any liability to Relators arising from the filing of the Haggard
Action and/or Fitzmorris Action. Relators’ claims for expenses or attorneys’
fees and costs pursuant to 31 U.S.C. § 3730(d) are the subject of a separate
agreement between each Relator and Diversicare, and are not released by this
Agreement.
12.    Diversicare has provided sworn financial disclosure statements (Financial
Statements) to the United States and the United States has relied on the
accuracy and completeness of those Financial Statements in reaching this
Agreement. Diversicare warrants that the Financial Statements were complete,
accurate, and current as of the date provided. If the United States learns of
asset(s) in which Diversicare had an interest of any kind at the time of this
Agreement that were not disclosed in the Financial Statements, or if the United
States learns of any false statement or misrepresentation by Diversicare on, or
in connection with, the Financial Statements, and if such nondisclosure, false
statement, or misrepresentation increases the estimated net worth set forth in
the Financial Statements by $1,000,000.00 or more, the United States or
Tennessee may at its option: (a) rescind this Agreement and reinstate its suit
or file suit based on the Covered Conduct or (b) collect the full Settlement
Amount in accordance with the Agreement plus one hundred percent (100%) of the
value of the net worth of Diversicare’s previously undisclosed assets.
Diversicare agrees not to contest any collection action undertaken by the United
States pursuant to this provision, and agrees that it will immediately pay the
United States the greater of (i) a ten-percent (10%) surcharge of the amount
collected, as allowed by 28 U.S.C. § 3011(a), or (ii) the United States’
reasonable attorneys’ fees and expenses incurred in such an action. In the event
that the United States or Tennessee, pursuant to this paragraph, rescinds this
Agreement, Diversicare waives and agrees not to plead, argue, or otherwise raise
any defenses under the theories of statute of limitations, laches, estoppel, or
similar theories, to any civil or administrative claims that (a) are filed by
the United States or Tennessee within 120 calendar days of written notification
to Diversicare that this Agreement has been rescinded, and (b) relate to the
Covered Conduct, except to the extent these defenses were available as of July
3, 2012 with respect to the Haggard Action and as of August 9, 2016 with respect
to the Fitzmorris Action.
13.    Diversicare waives and shall not assert any defenses Diversicare may have
to any criminal prosecution or administrative action relating to the Covered
Conduct that may be based in whole or in part on a contention that, under the
Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment of the Constitution, this
Agreement bars a remedy sought in such criminal prosecution or administrative
action.
14.    Diversicare fully and finally releases the United States and Tennessee,
their respective agencies, officers, agents, employees, and servants, from any
claims (including attorneys’ fees, costs, and expenses of every kind and however
denominated) that Diversicare has asserted, could have asserted, or may assert
in the future against the United States and/or Tennessee, their respective
agencies, officers, agents, employees, and servants, related to the Covered
Conduct and the United States’ and Tennessee’s investigation and prosecution
thereof.
15.    Diversicare fully and finally releases Relators and their attorneys from
any claims (including attorneys’ fees, costs, and expenses of every kind and
however denominated) that Diversicare has asserted, could have asserted, or may
assert in the future against Relators, related to the Haggard Action and/or the
Fitzmorris Action and Relators’ investigation and prosecution thereof, and from
any and all claims Diversicare may have personally against Relators as of the
date hereof.
16.    The Settlement Amount shall not be decreased as a result of the denial of
claims for payment now being withheld from payment by any Medicare contractor
(e.g., Medicare Administrative Contractor, fiscal intermediary, carrier) or any
state payer, related to the Covered Conduct; and Diversicare agrees not to
resubmit to any Medicare contractor or any state payer any previously denied
claims related to the Covered Conduct, agrees not to appeal any such denials of
claims, and agrees to withdraw any such pending appeals.
17.    Diversicare agrees to the following:
a.    Unallowable Costs Defined: All costs (as defined in the Federal
Acquisition Regulation, 48 C.F.R. § 31.205-47; and in Titles XVIII and XIX of
the Social Security Act, 42 U.S.C. §§ 1395-1395kkk-1 and 1396-1396w-5; and the
regulations and official program directives promulgated thereunder) incurred by
or on behalf of Diversicare, its present or former officers, directors,
employees, shareholders, and agents in connection with:    
(1)
the matters covered by this Agreement;

(2)
the United States’ audit(s) and civil and any criminal investigation(s) of the
matters covered by this Agreement;

(3)
Diversicare’s investigation, defense, and corrective actions undertaken in
response to the United States’ audit(s) and civil and any criminal
investigation(s) in connection with the matters covered by this Agreement
(including attorneys’ fees);

(4)
the negotiation and performance of this Agreement;

(5)
the payment Diversicare makes to the United States pursuant to this Agreement
and any payments that Diversicare may make to Relators, including costs and
attorneys’ fees; and

(6)
the negotiation of, and obligations undertaken pursuant to the CIA to: (i)
retain an independent review organization to perform annual reviews as described
in Section III of the CIA; and (ii) prepare and submit reports to the OIG-HHS

are unallowable costs for government contracting purposes and under the Medicare
Program, Medicaid Program, TRICARE Program, and Federal Employees Health
Benefits Program (FEHBP) (hereinafter referred to as Unallowable Costs).
However, nothing in paragraph 17.a.(6) that may apply to the obligations
undertaken pursuant to the CIA affects the status of costs that are not
allowable based on any other authority applicable to Diversicare.
b.    Future Treatment of Unallowable Costs: Unallowable Costs shall be
separately determined and accounted for by Diversicare, and Diversicare shall
not charge such Unallowable Costs directly or indirectly to any contracts with
the United States or any State Medicaid program, or seek payment for such
Unallowable Costs through any cost report, cost statement, information
statement, or payment request submitted by Diversicare or any of its
subsidiaries or affiliates to the Medicare, Medicaid, TRICARE, or FEHBP
Programs.
c.    Treatment of Unallowable Costs Previously Submitted for Payment:
Diversicare further agrees that within 90 days of the Effective Date of this
Agreement it shall identify to applicable Medicare and TRICARE fiscal
intermediaries, carriers, and/or contractors, and Medicaid and FEHBP fiscal
agents, any Unallowable Costs (as defined in this paragraph) included in
payments previously sought from the United States, or any State Medicaid
program, including, but not limited to, payments sought in any cost reports,
cost statements, information reports, or payment requests already submitted by
Diversicare or any of its subsidiaries or affiliates, and shall request, and
agree, that such cost reports, cost statements, information reports, or payment
requests, even if already settled, be adjusted to account for the effect of the
inclusion of the Unallowable Costs. Diversicare agrees that the United States,
at a minimum, shall be entitled to recoup from Diversicare any overpayment plus
applicable interest and penalties as a result of the inclusion of such
Unallowable Costs on previously-submitted cost reports, information reports,
cost statements, or requests for payment.
Any payments due after the adjustments have been made shall be paid to the
United States pursuant to the direction of the Department of Justice and/or the
affected agencies. The United States and Tennessee reserves their rights to
disagree with any calculations submitted by Diversicare or any of its
subsidiaries or affiliates on the effect of inclusion of Unallowable Costs (as
defined in this paragraph) on Diversicare or any of its subsidiaries or
affiliates’ cost reports, cost statements, or information reports.
d.    Nothing in this Agreement shall constitute a waiver of the rights of the
United States and Tennessee to audit, examine, or re-examine Diversicare’s books
and records to determine that no Unallowable Costs have been claimed in
accordance with the provisions of this paragraph.
18.    Diversicare agrees to cooperate fully and truthfully with the United
States’ and Tennessee’s investigation of individuals and entities not released
in this Agreement. Upon reasonable notice, Diversicare shall encourage, and
agrees not to impair, the cooperation of its directors, officers, and employees,
and shall use its best efforts to make available, and encourage, the cooperation
of former directors, officers, and employees for interviews and testimony,
consistent with the rights and privileges of such individuals. Diversicare
further agrees to furnish to the United States and Tennessee, upon request,
complete and unredacted copies of all non-privileged documents, reports,
memoranda of interviews, and records in its possession, custody, or control
concerning any investigation of the Covered Conduct that it has undertaken, or
that has been performed by another on its behalf.
19.    This Agreement is intended to be for the benefit of the Parties only. The
Parties do not release any claims against any other person or entity, except to
the extent provided for in Paragraph 20 (waiver for beneficiaries paragraph),
below.
20.    Diversicare agrees that it waives and shall not seek payment for any of
the health care billings covered by this Agreement from any health care
beneficiaries or their parents, sponsors, legally responsible individuals, or
third party payors based upon the claims defined as Covered Conduct.
21.    The Settlement Amount represents the amount the United States and
Tennessee are willing to accept in compromise of their civil claims arising from
the Covered Conduct due solely to Diversicare’s financial condition as reflected
in the Financial Statements referenced in Paragraph 12.
a.    In the event that Diversicare fails to pay the Settlement Amount as
provided in the payment schedule set forth in Paragraph 1 above, Diversicare
shall be in Default of Diversicare’s payment obligations (“Default”).  The
United States will provide a written Notice of Default, and Diversicare shall
have an opportunity to cure such Default within seven (7) business days from the
date of receipt of the Notice of Default by making the payment due under the
payment schedule and paying any additional interest accruing under the
Settlement Agreement up to the date of payment.  Notice of Default will be
delivered to (1) Diversicare, c/o CEO, 1621 Galleria Blvd, Brentwood, Tennessee
37027 and (2) Bass Berry & Sims PLC, c/o Mark Manner, Glenn Rose, and Jeff
Gibson, 150 Third Avenue South, Suite 2800, Nashville, Tennessee 37201.  If
Diversicare fails to cure the Default within seven (7) business days of
receiving the Notice of Default, and in the absence of an agreement with the
United States to a modified payment schedule (“Uncured Default”), the remaining
unpaid balance of the Settlement Amount shall become immediately due and
payable, and interest on the remaining unpaid balance shall thereafter accrue at
the rate of 12% per annum, compounded daily from the date of Default, on the
remaining unpaid total (principal and interest balance). 
b.    In the event of Uncured Default, Diversicare agrees that the United
States, at its sole discretion, may (i) declare this Agreement breached and
proceed against Diversicare for any claims, including those to be released by
this agreement; (ii) take any action to enforce this Agreement in a new action
or by reinstating the Haggard Action or Fitzmorris Action; (iii) offset the
remaining unpaid balance from any amounts due and owing to Diversicare and/or
affiliated companies by any department, agency, or agent of the United States at
the time of Default or subsequently; and/or (iv)  exercise any other right
granted by law, or under the terms of this Agreement, or recognizable at common
law or in equity.  At its sole option, the United States may retain any payments
previously made, rescind this Agreement and pursue the Haggard Action and/or the
Fitzmorris Action or bring any civil and/or administrative claim, action, or
proceeding against Diversicare for the claims that would otherwise be covered by
the releases provided in Paragraphs 5, 6, and 7 above, with any recovery reduced
by the amount of any payments previously made by Diversicare to the United
States under this Agreement. The United States shall be entitled to any other
rights granted by law or in equity by reason of Default, including referral of
this matter for private collection.  In the event the United States pursues a
collection action, Diversicare agrees immediately to pay the United States the
greater of (i) a ten-percent (10%) surcharge of the amount collected, as allowed
by 28 U.S.C. § 3011(a), or (ii) the United States’ reasonable attorneys’ fees
and expenses incurred in such an actions.  In the event that the United States
opts to rescind this Agreement pursuant to this Paragraph, Diversicare waives
and agrees not to plead, argue, or otherwise raise any defenses of statute of
limitations, laches, estoppel or similar theories, to any civil or
administrative claims that are (i) filed by the United States against
Diversicare within 120 days of written notification that this Agreement has been
rescinded, and (ii) relate to the Covered Conduct, except to the extent these
defenses were available on July 3, 2012 with respect to the Haggard Action and
August 9, 2016 with respect to the Fitzmorris Action. Diversicare agrees not to
contest any offset, recoupment, and/or collection action undertaken by the
United States pursuant to this Paragraph, either administratively or in any
state or federal court, except on the grounds of actual payment to the United
States.    
c.    In the event of Uncured Default, OIG-HHS may exclude Diversicare from
participating in all Federal health care programs until Diversicare pays the
Settlement Amount, with interest, and reasonable costs as set forth above.
OIG-HHS will provide written notice of any such exclusion to Diversicare.
Diversicare waives any further notice of the exclusion under 42 U.S.C. §
1320a-7(b)(7), and agrees not to contest such exclusion either administratively
or in any state or federal court. Reinstatement to program participation is not
automatic. If at the end of the period of exclusion, Diversicare wishes to apply
for reinstatement, it must submit a written request for reinstatement to OIG-HHS
in accordance with the provisions of 42 C.F.R. §§ 1001.3001-.3005. Diversicare
will not be reinstated unless and until OIG-HHS approves such request for
reinstatement. The option for Exclusion for Default as defined in this paragraph
is in addition to, and not in lieu of, the options identified in this Agreement
or otherwise available.  
22.     In exchange for valuable consideration provided in this Agreement,
Diversicare acknowledges the following.
a.    In evaluating whether to execute this Agreement, the Parties intend that
the mutual promises, covenants, and obligations set forth herein constitute a
contemporaneous exchange for new value given to Diversicare, within the meaning
of 11 U.S.C. § 547(c)(1), and the Parties conclude that these mutual promises,
covenants, and obligations do, in fact, constitute such a contemporaneous
exchange.
b.     The mutual promises, covenants, and obligations set forth herein are
intended by the Parties to, and do in fact, constitute a reasonably equivalent
exchange of value.
c.    The Parties do not intend to hinder, delay, or defraud any entity to which
Diversicare was or became indebted to on or after the date of any transfer
contemplated in this Agreement, within the meaning of 11 U.S.C. § 548(a)(1).
d.    If Diversicare’s obligations under this Agreement are avoided for any
reason, including, but not limited to, through the exercise of a trustee’s
avoidance powers under the Bankruptcy Code, or if, before the Settlement Amount
is paid in full, Diversicare or a third party commences a case, proceeding, or
other action under any law relating to bankruptcy, insolvency, reorganization,
or relief of debtors (i) seeking any order for relief of Diversicare’s debts, or
to adjudicate Diversicare as bankrupt or insolvent; or (ii) seeking appointment
of a receiver, trustee, custodian, or other similar official for Diversicare or
for all or any substantial part of Diversicare’s assets, the United States (a)
may rescind the releases in this Agreement and bring any civil and/or
administrative claim, action, or proceeding against Diversicare for the claims
that would otherwise be covered by the releases provided in Paragraphs 5, 6 and
7; and (b) the United States has an undisputed, noncontingent, and liquidated
allowed claim against Diversicare in the amount of Fifty-Six Million dollars
($56 million), less any payments received pursuant to this agreement, provided,
however, that such payments are not otherwise avoided and recovered by
Diversicare, a receiver, trustee, custodian, or other similar official for
Diversicare. Notwithstanding any bankruptcy or other insolvency proceeding by or
against Diversicare, however, if Diversicare fully complies with the payment
obligations set forth in Paragraph 1 of this agreement and if no payment made
under Paragraph 1 is avoided or otherwise recovered from the United States
within the applicable statutes of limitations for such avoidance and/or recovery
actions, including without limitation the statutes of limitations set forth in
11 U.S.C. §§ 546(a), 549(d) and 550(f), and as extended by any court of
competent jurisdiction, the United States shall not rescind the releases
provided in Paragraphs 5, 6, and 7 pursuant to this Paragraph.
e.    Diversicare agrees that any such civil and/or administrative claim,
action, or proceeding brought by the United States is not subject to an
“automatic stay” pursuant to 11 U.S.C. § 362(a) because it would be an exercise
of the United States’ police and regulatory power. Diversicare shall not argue
or otherwise contend that the United States’ claim, action, or proceeding is
subject to an automatic stay and, to the extent necessary, consents to relief
from the automatic stay for cause under 11 U.S.C. § 362(d)(1). Diversicare
waives and shall not plead, argue, or otherwise raise any defenses under the
theories of statute of limitations, laches, estoppel, or similar theories, to
any such civil or administrative claim, action, or proceeding brought by the
United States within 120 days of written notification to Diversicare that the
releases have been rescinded pursuant to this Paragraph, except to the extent
such defenses were available on July 3, 2012 with respect to the Haggard Action
and August 9, 2016 with respect to the Fitzmorris Action.
23.    Upon receipt of the first payment described in Paragraph 1, above, the
United States and Relators shall promptly sign and file in the Civil Action a
Joint Stipulation of Dismissal of the Civil Action pursuant to Rule 41(a)(1):
(1) dismissing with prejudice all claims asserted on behalf of the United States
against Diversicare in the Haggard Action and Fitzmorris Action for the Medicare
Covered Conduct as set forth in this Agreement, and (2) dismissing with
prejudice to the Relators and without prejudice to the United States any
remaining claims asserted on behalf of the United States against Diversicare in
the Haggard Action and Fitzmorris Action.
24.    Except as provided in Paragraph 4 of the Terms and Conditions, above,
each Party shall bear its own legal and other costs incurred in connection with
this matter, including the preparation and performance of this Agreement.
25.    Each Party and signatory to this Agreement represents that it freely and
voluntarily enters into this Agreement without any degree of duress or
compulsion.
26.    This Agreement is governed by the laws of the United States. The
exclusive venue for any dispute relating to this Agreement is the United States
District Court for the Middle District of Tennessee, Nashville Division. For
purposes of construing this Agreement, this Agreement shall be deemed to have
been drafted by all Parties to this Agreement and shall not, therefore, be
construed against any Party for that reason in any subsequent dispute.
27.    This Agreement constitutes the complete agreement between the Parties.
This Agreement may not be amended except by written consent of the Parties.
Forbearance by the United States from pursuing any remedy or relief available to
it under this Agreement shall not constitute a waiver of rights under this
Agreement.
28.    The undersigned counsel represent and warrant that they are fully
authorized to execute this Agreement on behalf of the persons and entities
indicated below.
29.    This Agreement may be executed in counterparts, each of which constitutes
an original and all of which constitute one and the same Agreement.
30.    This Agreement is binding on Diversicare’s successors, transferees,
heirs, and assigns.
31.    This Agreement is binding on Relators’ successors, transferees, heirs,
and assigns.
32.    All Parties consent to the United States’ and Tennessee’s disclosure of
this Agreement, and information about this Agreement, to the public.
33.    This Agreement is effective on the date of signature of the last
signatory to the Agreement (Effective Date of this Agreement). Facsimiles and
electronic transmissions of signatures shall constitute acceptable, binding
signatures for purposes of this Agreement.

THE UNITED STATES OF AMERICA

DATED: 2/7/2020         BY:     /s/ Yolonda Campbell        
Yolonda Campbell
Trial Attorney
Commercial Litigation Branch
Civil Division
United States Department of Justice
                    

DATED: 2/14/2020         BY:    /s/ Sarah K. Bogni            
Sarah K. Bogni
Assistant United States Attorney
United States Attorney’s Office
Middle District of Tennessee

DATED: 2/5/2020         BY:    /s/ Lisa M. Re                
Lisa M. Re
Assistant Inspector General for Legal Affairs
Office of Counsel to the Inspector General
Office of Inspector General
U.S. Department of Health and Human Services

TENNESSEE

DATED: 2/14/2020         BY:    /s/ Herbert H. Slatery III        
Herbert H. Slatery III
Attorney General and Reporter
                    

DIVERSICARE ENTITIES

DATED: 1/31/2020         BY:    /s/ James R. McKnight, Jr.        
James R. McKnight, Jr.
Chief Executive Officer,
Diversicare Healthcare Services, Inc.

DATED: 1/31/2020         BY:    /s/ Jeff Gibson                
Glenn Rose
Jeff Gibson
Bass, Berry & Sims, PLC
Counsel for Diversicare Healthcare Services, Inc.

RELATORS

DATED: 2/3/2020         BY:    /s/ Mary Haggard            
Mary Haggard

DATED: 1/31/2020         BY:    /s/ Anna Dover            
Anna Dover
Kreindler & Associates
Counsel for Relator Mary Haggard

DATED: 1/31/2020         BY:    /s/ William Michael Hamilton, Esq    
William Michael Hamilton, Esq.
Provost, Umphrey Law Firm, LLP
Counsel for Relator Mary Haggard

DATED: 2/3/2020         BY:    /s/ Bryant Fitzmorris            
Bryant Fitzmorris

DATED: 2/3/2020         BY:    /s/ William Hurlock            
William Hurlock
Christopher Furlong
Mueller Law LLC
Counsel for Relator Fitzmorris

DATED: 2/3/2020         BY:    /s/ Edmund J. Schmidt, III        
Edmund J. Schmidt, III
Law Office of Eddie Schmidt
Counsel for Relator Fitzmorris

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DIVERSICARE SETTLEMENT AGREEMENT