##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 CHECK ONE:
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended: March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission file No.: 1-12996
 Advocat Inc.
 (exact name of registrant as specified in its charter)
 Delaware
    
    62-1559667(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)
 1621 Galleria Boulevard, Brentwood, TN 37027
 (Address of principal executive offices) (Zip Code)
 (615) 771-7575
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and a smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer  o(Do not check if a smaller reporting company)
    
    Smaller reporting Company þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). 
Yes o No þ
 5,675,987
 (Outstanding shares of the issuers common stock as of May 1, 2009)




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TABLE OF CONTENTS  Part I. FINANCIAL INFORMATIONITEM 1    FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITSSIGNATURESEX-10.1EX-31.1EX-31.2EX-32    Table of Contents  
 Part I. FINANCIAL INFORMATION
 
 ITEM 1    FINANCIAL STATEMENTS
 ADVOCAT INC.
 INTERIM CONSOLIDATED BALANCE SHEETS
(in thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    8,420
    
    
    $
    7,598Receivables, less allowance for doubtful
accounts of $3,634 and $3,279, respectively
    
    
    24,553
    
    
    
    23,503Receivable for leased facility construction costs
    
    
    1,079
    
    
    
    228Current portion of note receivable
    
    
    480
    
    
    
    466Prepaid expenses and other current assets
    
    
    2,598
    
    
    
    1,748Income tax refundable
    
    
    1,384
    
    
    
    1,369Deferred income taxes
    
    
    3,967
    
    
    
    3,967Total current assets
    
    
    42,481
    
    
    
    38,879PROPERTY AND EQUIPMENT, at cost
    
    
    75,183
    
    
    
    73,517Less accumulated depreciation
    
    
    (39,869
    )
    
    
    (38,555
    )Construction in progress  leased facility
    
    
    3,157
    
    
    
    1,039Discontinued operations, net
    
    
    1,455
    
    
    
    1,455Property and equipment, net
    
    
    39,926
    
    
    
    37,456OTHER ASSETS:Deferred income taxes
    
    
    13,693
    
    
    
    13,899Note receivable, net of current portion
    
    
    3,460
    
    
    
    3,486Deferred financing and other costs, net
    
    
    926
    
    
    
    1,009Other assets
    
    
    2,031
    
    
    
    2,031Acquired leasehold interest, net
    
    
    10,052
    
    
    
    10,149Total other assets
    
    
    30,162
    
    
    
    30,574$
    112,569
    
    
    $
    106,909
  2




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ADVOCAT INC.
 INTERIM CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(continued)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)CURRENT LIABILITIES:Current portion of long-term debt
    
    $
    2,459
    
    
    $
    2,238Trade accounts payable
    
    
    5,384
    
    
    
    4,600Accrued construction costs  leased facility
    
    
    1,079
    
    
    
    228Accrued expenses:Payroll and employee benefits
    
    
    11,748
    
    
    
    9,545Current portion of self-insurance reserves
    
    
    7,864
    
    
    
    6,469Other current liabilities
    
    
    3,434
    
    
    
    4,914Total current liabilities
    
    
    31,968
    
    
    
    27,994NONCURRENT LIABILITIES:Long-term debt, less current portion
    
    
    29,398
    
    
    
    30,172Self-insurance reserves, less current portion
    
    
    9,774
    
    
    
    10,212Non-cash obligation for construction in progress  leased facility
    
    
    3,157
    
    
    
    1,039Other noncurrent liabilities
    
    
    12,676
    
    
    
    12,050Total noncurrent liabilities
    
    
    55,005
    
    
    
    53,473COMMITMENTS AND CONTINGENCIESSERIES C REDEEMABLE PREFERRED STOCK$.10 par value, 5,000 shares authorized, issued and
outstanding, including premium of $2,548 and $2,973 at
March 31, 2009 and December 31, 2008, respectively
    
    
    7,466
    
    
    
    7,891SHAREHOLDERS EQUITY:Series A preferred stock, authorized 200,000 shares,
$.10 par value, none issued and outstanding
    
    
    
    
    
    
    Common stock, authorized 20,000,000 shares, $.01 par
value, 5,908,000 and 5,903,000 shares issued, and
5,676,000 and 5,671,000 shares outstanding, respectively
    
    
    59
    
    
    
    59Treasury stock at cost, 232,000 shares of common stock
    
    
    (2,500
    )
    
    
    (2,500
    )Paid-in capital
    
    
    17,205
    
    
    
    16,903Retained earnings
    
    
    3,366
    
    
    
    3,089Total shareholders equity
    
    
    18,130
    
    
    
    17,551$
    112,569
    
    
    $
    106,909
  3




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts, unaudited)
 Three Months Ended March 31,2009
    
    
    2008PATIENT REVENUES, net
    
    $
    73,758
    
    
    $
    71,466EXPENSES:Operating
    
    
    58,230
    
    
    
    55,536Lease
    
    
    5,776
    
    
    
    5,704Professional liability
    
    
    3,242
    
    
    
    (1,043
    )General and administrative
    
    
    4,573
    
    
    
    4,559Depreciation and amortization
    
    
    1,409
    
    
    
    1,242Total expenses
    
    
    73,230
    
    
    
    65,998OPERATING INCOME
    
    
    528
    
    
    
    5,468OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    (85
    )
    
    
    (229
    )Other income
    
    
    549
    
    
    
    Interest income
    
    
    75
    
    
    
    160Interest expense
    
    
    (482
    )
    
    
    (831
    )57
    
    
    
    (900
    )INCOME FROM CONTINUING OPERATIONS
    BEFORE INCOME TAXES
    
    
    585
    
    
    
    4,568PROVISION FOR INCOME TAXES
    
    
    (222
    )
    
    
    (1,467
    )NET INCOME FROM CONTINUING OPERATIONS
    
    
    363
    
    
    
    3,101NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS:Operating loss, net of taxes of $0 and $(7), respectively
    
    
    
    
    
    
    (12
    )Loss on sale, net of taxes of $0 and $0, respectively
    
    
    
    
    
    
    DISCONTINUED OPERATIONS
    
    
    
    
    
    
    (12
    )NET INCOME
    
    
    363
    
    
    
    3,089PREFERRED STOCK DIVIDENDS
    
    
    (86
    )
    
    
    (86
    )NET INCOME FOR COMMON STOCK
    
    $
    277
    
    
    $
    3,003NET INCOME PER COMMON SHARE:Per common share  basicContinuing operations
    
    $
    0.05
    
    
    $
    0.52Discontinued operations
    
    
    
    
    
    
    $
    0.05
    
    
    $
    0.52Per common share  dilutedContinuing operations
    
    $
    0.05
    
    
    $
    0.50Discontinued operations
    
    
    
    
    
    
    $
    0.05
    
    
    $
    0.50WEIGHTED AVERAGE COMMON SHARES:Basic
    
    
    5,672
    
    
    
    5,754Diluted
    
    
    5,730
    
    
    
    6,017
  4




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands and unaudited)
 Three Months Ended March 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    363
    
    
    $
    3,089Discontinued operations
    
    
    
    
    
    
    (12
    )Net income from continuing operations
    
    
    363
    
    
    
    3,101Adjustments to reconcile net income from continuing
operations to net cash provided by operating activities:Depreciation and amortization
    
    
    1,409
    
    
    
    1,242Provision for doubtful accounts
    
    
    804
    
    
    
    556Deferred income tax provision (benefit)
    
    
    206
    
    
    
    (198
    )Provision for (benefit from) self-insured professional
liability, net of cash payments
    
    
    1,017
    
    
    
    (1,413
    )Stock based compensation
    
    
    224
    
    
    
    178Amortization of deferred balances
    
    
    95
    
    
    
    129Provision for leases in excess of cash payments
    
    
    328
    
    
    
    466Non-cash
gain on settlement of contingent liability
    
    
    (549
    )
    
    
    Foreign currency transaction loss
    
    
    85
    
    
    
    229Non-cash interest income
    
    
    (24
    )
    
    
    (33
    )Changes in other assets and liabilities affecting operating
activities:Receivables, net
    
    
    (1,903
    )
    
    
    (323
    )Prepaid expenses and other assets
    
    
    (864
    )
    
    
    328Trade accounts payable and accrued expenses
    
    
    1,996
    
    
    
    (1,765
    )Net cash provided by continuing operations
    
    
    3,187
    
    
    
    2,497Discontinued operations
    
    
    
    
    
    
    (12
    )Net cash provided by operating activities
    
    
    3,187
    
    
    
    2,485CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,665
    )
    
    
    (2,067
    )Payment for
construction in progress-leased facility
    
    
    (1,267
    )
    
    
    Deposits and other deferred balances
    
    
    
    
    
    
    (150
    )Net cash used by continuing operations
    
    
    (2,932
    )
    
    
    (2,217
    )Discontinued operations
    
    
    
    
    
    
    (49
    )Net cash used by investing activities
    
    
    (2,932
    )
    
    
    (2,266
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of debt obligations
    
    
    (553
    )
    
    
    (493
    )Financing costs
    
    
    (12
    )
    
    
    (4
    )Repurchase of common stock
    
    
    
    
    
    
    (1,106
    )Construction
allowance receipts-leased facility
    
    
    1,267
    
    
    
    Proceeds from exercise of stock options
    
    
    2
    
    
    
    224Issuance of restricted share units
    
    
    76
    
    
    
    Payment of preferred stock dividends
    
    
    (86
    )
    
    
    (86
    )Payment for preferred stock restructuring
    
    
    (127
    )
    
    
    (123
    )Net cash
provided (used) by financing activities
    
    
    567
    
    
    
    (1,588
    )
  5




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ADVOCAT INC.
 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands and unaudited)
(continued)
 Three Months Ended March 31,2009
    
    
    2008NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    $
    822
    
    
    $
    (1,369
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    7,598
    
    
    
    11,658CASH AND CASH EQUIVALENTS, end of period
    
    $
    8,420
    
    
    $
    10,289SUPPLEMENTAL INFORMATION:Cash payments of interest, net of amounts capitalized
    
    $
    398
    
    
    $
    733Cash payments of income taxes
    
    $
    67
    
    
    $
    435
  6




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ADVOCAT INC.
 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2009 AND 2008
 BUSINESS
   BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
   ACQUISITION
  7




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AMENDMENT TO MASTER LEASE AGREEMENT FOR REPLACEMENT FACILITY
    INSURANCE MATTERS
 Professional Liability and Other Liability Insurance-
   8




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Reserve for Estimated Self-Insured Professional Liability Claims-
     Accrual atMarch 31,
    
    
    December 31,2009
    
    
    2008Policy Year End:May 31, 2010
    
    $
    319,000
    
    
    $
    March 9, 2009
    
    
    5,639,000
    
    
    
    3,837,000March 9, 2008
    
    
    5,662,000
    
    
    
    5,769,000March 9, 2007
    
    
    2,536,000
    
    
    
    3,202,000March 9, 2006
    
    
    859,000
    
    
    
    1,102,000March 9, 2005 and earlier
    
    
    961,000
    
    
    
    1,049,000$
    15,976,000
    
    
    $
    14,959,000
  9




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Other Insurance
      STOCK-BASED COMPENSATION
   10




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DISCONTINUED OPERATIONS
   11




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EARNINGS PER COMMON SHARE
  Three Months EndedMarch 31,2009
    
    
    2008Net income per common share:Per common share  basicIncome from continuing operations
    
    $
    0.05
    
    
    $
    0.52Income (loss) from discontinued operationsOperating loss, net of taxes
    
    
    
    
    
    
    Loss on sale, net of taxes
    
    
    
    
    
    
    Discontinued operations, net of taxes
    
    
    
    
    
    
    Net income
    
    $
    0.05
    
    
    $
    0.52Per common share  dilutedIncome from continuing operations
    
    $
    0.05
    
    
    $
    0.50Income (loss) from discontinued operationsOperating loss, net of taxes
    
    
    
    
    
    
    Loss on sale, net of taxes
    
    
    
    
    
    
    Discontinued operations, net of taxes
    
    
    
    
    
    
    Net income
    
    $
    0.05
    
    
    $
    0.50
  NOTE RECEIVABLE
  GAIN ON SETTLEMENT WITH CMS
  12




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RECENT ACCOUNTING PRONOUNCEMENTS
    13




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AMENDMENT TO MASTER LEASE FOR ADDITIONAL CAPITAL IMPROVEMENT FUNDS
  14




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Basis of Financial Statements.
 Critical Accounting Policies and Judgments
 
 Health Care Industry
  15




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Medicare and Medicaid Reimbursement
       16




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Licensure and other Health Care Laws
  Contractual Obligations and Commercial Commitments
  Lessthan
    
    
    1 to 3
    
    
    3 to 5
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    34,663
    
    
    $
    3,659
    
    
    $
    27,609
    
    
    $
    3,395
    
    
    $
    Settlement Obligations (2)
    
    $
    1,826
    
    
    $
    1,826
    
    
    $
    
    
    
    $
    
    
    
    $
    Series C Preferred Stock (3)
    
    $
    5,434
    
    
    $
    344
    
    
    $
    5,090
    
    
    $
    
    
    
    $
    Elimination of Preferred Stock Conversion feature (4)
    
    $
    6,525
    
    
    $
    687
    
    
    $
    1,374
    
    
    $
    1,374
    
    
    $
    3,090Operating leases
    
    $
    603,158
    
    
    $
    22,441
    
    
    $
    43,847
    
    
    $
    45,974
    
    
    $
    490,896Required capital expenditures under mortgage loans (5)
    
    $
    490
    
    
    $
    163
    
    
    $
    245
    
    
    $
    82
    
    
    $
    Required capital expenditures under operating leases (6)
    
    $
    27,400
    
    
    $
    639
    
    
    $
    1,290
    
    
    $
    1,338
    
    
    $
    24,133Total
    
    $
    679,496
    
    
    $
    29,759
    
    
    $
    79,455
    
    
    $
    52,163
    
    
    $
    518,119
 
 (1)
    
    Long-term debt obligations include scheduled future payments of principal and
interest of long-term debt.(2)
    
    Settlement obligations relate to professional liability cases that will be
paid in installments through March 2010. The liabilities are included in our current
portion of self insurance reserves.(3)
    
    Series C Preferred Stock includes quarterly dividend payments and redemption
value at preferred shareholders earliest redemption date. 17




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(4)
    
    Payments for the elimination of preferred stock conversion feature.(5)
    
    Includes annual expenditure requirements for capital maintenance under mortgage loan covenants.(6)
    
    Includes annual capital expenditure requirements under operating leases.  Results of Operations
  Three Months Ended March 31,(in thousands)
    
    2009
    
    
    2008
    
    
    Change
    
    
    %PATIENT REVENUES, net
    
    $
    73,758
    
    
    $
    71,466
    
    
    $
    2,292
    
    
    
    3.2EXPENSES:Operating
    
    
    58,230
    
    
    
    55,536
    
    
    
    2,694
    
    
    
    4.9Lease
    
    
    5,776
    
    
    
    5,704
    
    
    
    72
    
    
    
    1.3Professional liability
    
    
    3,242
    
    
    
    (1,043
    )
    
    
    4,285
    
    
    
    410.8General and administrative
    
    
    4,573
    
    
    
    4,559
    
    
    
    14
    
    
    
    0.3Depreciation and amortization
    
    
    1,409
    
    
    
    1,242
    
    
    
    167
    
    
    
    13.4Total expenses
    
    
    73,230
    
    
    
    65,998
    
    
    
    7,232
    
    
    
    11.0OPERATING INCOME
    
    
    528
    
    
    
    5,468
    
    
    
    (4,940
    )
    
    
    (90.3
    )OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    (85
    )
    
    
    (229
    )
    
    
    144
    
    
    
    62.9Other income
    
    
    549
    
    
    
    
    
    
    
    549
    
    
    
    100.0Interest income
    
    
    75
    
    
    
    160
    
    
    
    (85
    )
    
    
    (53.1
    )Interest expense
    
    
    (482
    )
    
    
    (831
    )
    
    
    349
    
    
    
    42.057
    
    
    
    (900
    )
    
    
    957
    
    
    
    106.3INCOME FROM
CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    585
    
    
    
    4,568
    
    
    
    (3,983
    )
    
    
    (87.2
    )PROVISION FOR INCOME TAXES
    
    
    (222
    )
    
    
    (1,467
    )
    
    
    (1,245
    )
    
    
    (84.9
    )NET INCOME FROM CONTINUING OPERATIONS
    
    $
    363
    
    
    $
    3,101
    
    
    $
    (2,738
    )
    
    
    (88.3
    )
 18




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Three Months EndedMarch 31,Percentage of Net Revenues
    
    2009
    
    
    2008PATIENT REVENUES, net
    
    
    100.0
    %
    
    
    100.0
    %EXPENSES:Operating
    
    
    78.9
    
    
    
    77.7Lease
    
    
    7.8
    
    
    
    8.0Professional liability
    
    
    4.4
    
    
    
    (1.5
    )General and administrative
    
    
    6.2
    
    
    
    6.4Depreciation and amortization
    
    
    1.9
    
    
    
    1.7Total expenses
    
    
    99.2
    
    
    
    92.3OPERATING INCOME
    
    
    0.8
    
    
    
    7.7OTHER INCOME (EXPENSE):Foreign currency transaction loss
    
    
    (0.1
    )
    
    
    (0.3
    )Other income
    
    
    0.7
    
    
    
    Interest income
    
    
    0.1
    
    
    
    0.2Interest expense
    
    
    (0.7
    )
    
    
    (1.2
    )0.0
    
    
    
    (1.3
    )INCOME FROM
CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    0.8
    
    
    
    6.4PROVISION FOR INCOME TAXES
    
    
    (0.3
    )
    
    
    (2.1
    )NET INCOME
FROM CONTINUING OPERATIONS
    
    
    0.5
    %
    
    
    4.3
    %
 Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008
 Patient Revenues
  Three Months EndedMarch 31,2009
    
    2008Skilled nursing occupancy
    
    
    75.9
    %
    
    
    75.1
    %Medicare census as percent of total
    
    
    13.4
    %
    
    
    13.9
    %Medicare revenues as percent of total
    
    
    31.6
    %
    
    
    32.5
    %Medicaid revenues as percent of total
    
    
    53.2
    %
    
    
    52.6
    %Managed care census as a percent of total
    
    
    1.3
    %
    
    
    1.0
    %Medicare average rate per day
    
    $
    400.08
    
    
    $
    382.35Medicaid average rate per day
    
    $
    142.54
    
    
    $
    138.02Managed care average rate per day
    
    $
    372.71
    
    
    $
    317.12
  Operating expense
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Lease expense
 Professional liability.
 General and administrative expense
 Depreciation and amortization
 Foreign currency transaction loss
 Other
income
 Interest expense
 Income from continuing operations before income taxes; income from continuing operations per common
share
 20




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
    Note Receivable
  Professional Liability
  21




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##### Table of Contents



Capital Resources
    New Facility Construction
 Texas Facility .
  West Virginia Facility.
 22




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##### Table of Contents



Facility Renovations
    Receivables
    23




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Inflation
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
    24




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##### Table of Contents



Forward-Looking Statements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   25




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ITEM 4. CONTROLS AND PROCEDURES
   26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
      27




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ITEM 6. EXHIBITS
  28




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##### Table of Contents



SIGNATURES
  May 6, 2009
    
    ADVOCAT INC.By:
    /s/ William R. Council, IIIWilliam R. Council, IIIPresident and Chief Executive Officer, Principal Executive
Officer and
An Officer Duly Authorized to Sign on Behalf of the RegistrantBy:
    /s/ L. Glynn Riddle, Jr.L. Glynn Riddle, Jr.Executive Vice President and Chief Financial Officer, Secretary,

Principal Accounting Officer and

An Officer Duly Authorized to Sign on Behalf of the Registrant 29




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits3.1
    
    Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to
the Companys Registration Statement No. 33-76150 on Form S-1).3.2
    
    Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.5 to the
Companys quarterly report on Form 10-Q for the quarter ended September 30, 2006).3.3
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Companys Registration
Statement No. 33-76150 on Form S-1).3.4
    
    Bylaw Amendment adopted November 5, 2007 (incorporated by reference to Exhibit 3.4 to the
Companys annual report on Form 10-K for the year ended December 31, 2007).3.5
    
    Amendment to Certificate of Incorporation dated March 23, 1995 (incorporated by reference to
Exhibit A of Exhibit 1 to the Companys Form 8-A filed March 30, 1995).3.6
    
    Certificate of Designation of Registrant (incorporated by reference to Exhibit 3.4 to the
Companys quarterly report on Form 10-Q for the quarter ended March 31, 2001).4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4 to the Companys
Registration Statement No. 33-76150 on Form S-1).4.2
    
    Rights Agreement dated March 13, 1995, between the Company and Third National Bank in
Nashville (incorporated by reference to Exhibit 1 to the Companys Current Report on Form 8-K
dated March 13, 1995).4.3
    
    Summary of Shareholder Rights Plan adopted March 13, 1995 (incorporated by reference to
Exhibit B of Exhibit 1 to Form 8-A filed March 30, 1995).4.4
    
    Rights Agreement of Advocat Inc. dated March 23, 1995 (incorporated by reference to Exhibit 1
to Form 8-A filed March 30, 1995).4.5
    
    Amended and Restated Rights Agreement dated as of December 7, 1998 (incorporated by reference
to Exhibit 1 to Form 8-A/A filed December 7, 1998).4.6
    
    Second Amendment to Amended and Restated Rights Agreement, dated as of August 15, 2008,
between Advocat, Inc. and Computershare Trust Company, N.A., a federally chartered trust
company, as successor to SunTrust Bank, (incorporated by reference to the Companys
Registration Statement on Form 8-A/A filed on August 19, 2008).10.1
    
    Amendment No. 1 effective March 9, 2009 to Amended and Restated Employment Agreement by and
between Advocat Inc. and Raymond L. Tyler.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b).