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                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

         This Agreement made effective as of March 28, 2003 by and between
ADVOCAT INC., a Delaware corporation (the "Company"), and William R. Council III
(the "Executive").

         In consideration of the mutual covenants contained in this Agreement,
the parties hereby agree as follows:

                                    SECTION I
                                   EMPLOYMENT

         The Company agrees to employ the Executive and the Executive agrees to
be employed by the Company for the Period of Employment as provided in Section
III.A. below and upon the terms and conditions provided in the Agreement.

                                   SECTION II
                          POSITION AND RESPONSIBILITIES

         During the Period of Employment, the Executive agrees to serve as Chief
Executive Officer of the Company and to be responsible for the typical
management responsibilities expected of an officer holding such positions and
such other responsibilities as may be assigned to Executive from time to time by
the Board of Directors of the Company.

                                   SECTION III
                                TERMS AND DUTIES

         A.       Period of Employment

                  The period of Executive's employment under this Agreement will
commence as of the date hereof and shall continue through March 31, 2005,
subject to extension or termination as provided in this Agreement ("Period of
Employment"). On each anniversary of the commencement of the Period of
Employment, the period of Executive's employment shall be extended for
additional one (1) year periods, unless either party gives notice thirty (30)
days in advance of the expiration of the then current period of employment of
such party's intent not to extend the Period of Employment.

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         B.       Duties

                  During the Period of Employment, the Executive shall devote
all of his business time, attention and skill to the business and affairs of the
Company and its subsidiaries. The Executive will perform faithfully the duties
which may be assigned to him from time to time by the Board of Directors.

                                   SECTION IV
                            COMPENSATION AND BENEFITS

         A.       Compensation

                  For all services rendered by the Executive in any capacity
during the Period of Employment, the Executive shall be compensated as follows:

                  1.       Base Salary

                           The Company shall pay the Executive a base salary
("Base Salary") as follows: Two Hundred Seventy Five Thousand Dollars ($275,000)
per annum.

                           Base Salary shall be payable according to the
customary payroll practices of the Company but in no event less frequently than
once each month. The base salary shall be reviewed annually and shall be subject
to increase according to the policies and practices adopted by the Company from
time to time.

         B.       Annual Incentive Awards

                  The Company will pay the Executive annual incentive
compensation awards as may be granted by the Board or a Compensation Committee
to the Executive under any executive bonus or incentive plan in effect from time
to time.

         C.       Additional Benefits

                  The Executive will be entitled to participate in all
compensation or employee benefit plans or programs and receive all benefits and
perquisites for which any salaried employees are eligible under any existing or
future plan or program established by the Company for salaried employees. The
Executive will participate to the extent permissible under the terms and
provisions of such plans or programs in accordance with program provisions.
These may include group hospitalization, health, dental care, life or other
insurance, tax qualified pension, car allowance, savings, thrift and profit
sharing plans, termination pay programs, sick leave plans, travel or accident
insurance, disability insurance, and contingent compensation plans including
capital accumulation programs, Restricted Stock programs, stock purchase
programs and stock option plans. Nothing in this Agreement will preclude the
Company from amending or terminating any of the plans or programs applicable to
salaried or senior executives as long as

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such amendment or termination is applicable to all salaried employees or senior
executives. The Executive will be entitled to an annual four-week paid vacation.

                                    SECTION V
                                BUSINESS EXPENSES

         The Company will reimburse the Executive for all reasonable travel and
other expenses incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement.

                                   SECTION VI
                                   DISABILITY

         A.       In the event of disability of the Executive during the Period
of Employment, the Company will continue to pay the Executive according to the
compensation provisions of this Agreement during the period of his disability,
until such time as Executive's long term disability insurance benefits are
available. However, in the event the Executive is disabled for a continuous
period of six (6) months after the Executive first becomes disabled, the Company
may terminate the employment of the Executive. In this case, normal compensation
will cease except for earned but unpaid Base Salary and Incentive Compensation
Awards which would be payable on a pro-rated basis for the year in which the
disability occurred. In the event of such termination, all unvested stock
options held by Executive shall be deemed fully vested on the date of such
termination.

         B.       During the period the Executive is receiving payments of
either regular compensation or disability insurance described in this Agreement
and as long as he is physically and mentally able to do so, the Executive will
furnish information and assistance to the Company and from time to time will
make himself available to the Company to undertake assignments consistent with
his prior position with the Company and his physical and mental health. If the
Company fails to make a payment or provide a benefit required as part of the
Agreement, the Executive's obligation to fulfill information and assistance will
end.

         C.       The term "disability" will have the same meaning as under any
disability insurance provided pursuant to this Agreement or otherwise.

                                   SECTION VII
                                      DEATH

         In the event of the death of the Executive during the Period of
Employment, the Company's obligation to make payments under this Agreement shall
cease as of the date of death, except for earned but unpaid Base Salary and
Incentive Compensation Awards which will be paid on a pro-rated basis for that
year. The Executive's designated beneficiary will be entitled to

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receive the proceeds of any life or other insurance or other death benefit
programs provided in this Agreement.

                                  SECTION VIII
                       EFFECT OF TERMINATION OF EMPLOYMENT

         A.       If the Executive's employment terminates due to either a
Without Cause Termination or a Constructive Discharge, as defined later in this
Agreement, the Company will pay the Executive in a lump sum upon such
Termination or Constructive Discharge an amount equal to 250% of his Base Salary
as in effect at the time of the termination. Earned but unpaid Base Salary and
Incentive Compensation Awards will be paid in a lump sum at such time. The
benefits and perquisites described in this Agreement as in effect at the date of
termination of employment will be continued for eighteen (18) months. If the
Executive's employment terminates due to either a Without Cause Termination or a
Constructive Discharge, or pursuant to Section XI, all stock options ("Options")
granted to the Executive under the Company's 1991 Non-Qualified Stock Option
Plan or other stock option program or plan (the "Plan") shall be deemed vested,
and the Company shall cause the Options to remain exercisable for eighteen (18)
months from the date of termination.

         B.       If the Executive's employment terminates due to a Termination
for Cause, earned but unpaid Base Salary will be paid on a pro-rated basis for
the year in which the termination occurs. No other payments will be made or
benefits provided by the Company.

         C.       Upon termination of the Executive's employment other than for
reasons due to death, disability, or pursuant to Paragraph A of this Section or
Section XI, the Period of Employment and the Company's obligation to make
payments under this Agreement will cease as of the date of the termination
except as expressly defined in this Agreement.

         D.       For this Agreement, the following terms have the following
meanings:

                  1. "Termination for Cause" means termination of the
Executive's employment by the Company's Board of Directors acting in good faith
by the Company by written notice to the Executive specifying the event relied
upon for such termination, due to the Executive's serious, willful misconduct
with respect to his duties under this Agreement, including but not limited to
conviction for a felony or perpetration of a common law fraud, which has
resulted or is likely to result in material economic damage to the Company.

                  2. "Constructive Discharge" means termination of the
Executive's employment by the Executive due to a failure of the Company to
fulfill its obligations under this Agreement in any material respect including
any reduction of the Executive's Base Salary or other compensation other than
reductions applicable to all employees of the Company or failure to appoint or
reappoint the Executive to the position specified in Section II hereof, or other
material change by the Company in the functions, duties or responsibilities of
the position which

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would reduce the ranking or level, responsibility, importance or scope of the
position. The Executive will provide the Company a written notice which
describes the circumstances being relied on for the termination with respect to
the Agreement within ninety (90) days after the event giving rise to the notice.
The Company will have thirty (30) days to remedy the situation prior to the
Termination for Constructive Dismissal.

                  3. "Without Cause Termination" means termination of the
Executive's employment by the Company (a) other than due to death, disability,
Termination for Cause or pursuant to Section XI; or (b) upon expiration of the
Period of Employment as a result of the giving of notice by the Company of its
intent not to extend the Period of Employment as provided in Section III.A.

         E.       Stock Option Repurchase.

                  If the Executive's employment terminates due to either a
Without Cause Termination or a Constructive Discharge or pursuant to Section XI,
Executive may require the Company to repurchase any Options for an amount equal
to the difference between the fair market value of a share of the Company's
common stock on the date of termination and the per share exercise price set
forth in the Options, times the number of shares (whether vested or unvested)
granted to the Executive under the Options.

                                   SECTION IX
                      OTHER DUTIES OF THE EXECUTIVE DURING
                       AND AFTER THE PERIOD OF EMPLOYMENT

         A.       The Executive will, with reasonable notice during or after the
Period of Employment, furnish information as may be in his possession and
cooperate with the Company as may reasonably be requested in connection with any
claims or legal actions in which the Company is or may become a party.

         B.       The Executive recognizes and acknowledges that all information
pertaining to the affairs, business, clients, customers or other relationships
of the Company, as hereinafter defined, is confidential and is a unique and
valuable asset of the Company. Access to and knowledge of this information are
essential to the performance of the Executive's duties under this Agreement. The
Executive will not during the Period of Employment or after except to the extent
reasonably necessary in performance of the duties under this Agreement, give to
any person, firm, association, corporation or governmental agency any
information concerning the affairs, business, clients, customers or other
relationships of the Company except as required by law. The Executive will not
make use of this type of information for his own purposes or for the benefit of
any person or organization other than the Company. The Executive will also use
his best efforts to prevent the disclosure of this information by others. All
records, memoranda, etc. relating to the business of the Company whether made by
the Executive or otherwise coming into his possession are confidential and will
remain the property of the Company.

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         C.       During the Period of Employment and for a twelve (12) month
period thereafter, the Executive will not use his status with the Company to
obtain loans, goods or services from another organization on terms that would
not be available to him in the absence of his relationship to the Company.
During the Period of Employment and for a twelve (12) month period following
termination of the Period of Employment, other than termination due to a Without
Cause Termination, a Constructive Discharge or termination pursuant to Section
XI: the Executive will not make any statements or perform any acts intended to
advance the interest of any existing or prospective competitors of the Company
in any way that will injure the interest of the Company; the Executive without
prior express written approval by the Board of Directors of the Company will not
directly or indirectly own or hold any proprietary interest in or be employed by
or receive compensation from any party engaged in the same or any similar
business in the same geographic areas the Company does business; and the
Executive without express prior written approval from the Board of Directors,
will not solicit any members of the then current clients of the Company or
discuss with any employee of the Company information or operation of any
business intended to compete with the Company. For the purposes of the
Agreement, proprietary interest means legal or equitable ownership, whether
through stock holdings or otherwise, of a debt or equity interest (including
options, warrants, rights and convertible interests) in a business firm or
entity, or ownership of more than 5% of any class of equity interest in a
publicly-held company. The Executive acknowledges that the covenants contained
herein are reasonable as to geographic and temporal scope. For a twelve (12)
month period after termination of the Period of Employment for any reason, the
Executive will not directly or indirectly hire any employee of the Company or
solicit or encourage any such employee to leave the employ of the Company.

         D.       The Executive acknowledges that his breach or threatened or
attempted breach of any provision of Section IX would cause irreparable harm to
the Company not compensable in monetary damages and that the Company shall be
entitled, in addition to all other applicable remedies, to a temporary and
permanent injunction and a decree for specific performance of the terms of
Section IX without being required to prove damages or furnish any bond or other
security.

         E.       The Executive shall not be bound by the provisions of Section
IX in the event of the default by the Company in its obligations under this
Agreement which are to be performed upon or after termination of this Agreement.

                                    SECTION X
                           INDEMNIFICATION, LITIGATION

         The Company will indemnify the Executive to the fullest extent
permitted by the laws of the state of incorporation in effect at that time, or
certificate of incorporation and by-laws of the Company whichever affords the
greater protection to the Executive. The Executive will be entitled to any
insurance proceeds related to any award, or any fees or expenses incurred in

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connection with any action, suit or proceeding to which he may be made a party
by reason of being a director or officer of the Company.

                                   SECTION XI
                                CHANGE IN CONTROL

         In the event there is a Change in Control of the ownership of the
Company, the Executive may at any time immediately resign upon written notice to
the Company. In this event, the Company shall pay to the Executive in a lump sum
upon such resignation an amount equal to 250% of his Base Salary as in effect at
the time of such resignation. In addition, earned but unpaid Base Salary and
Incentive Compensation Awards will be paid on a pro-rated basis for the year in
which resignation occurs. Any stock options granted to the Executive prior to
termination pursuant to the Plan, but subject to vesting restrictions, will be
fully vested upon a Change in Control whether or not the Executive resigns. The
benefits and perquisites described in this Agreement as in effect at the date of
termination of employment will also be continued for eighteen (18) months from
the effective date of termination pursuant to Change of Control.

         A "Change in Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of more than 50% of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, as the same shall have existed immediately prior to
such merger or consolidation, (iii) the Company shall sell all or substantially
all of its assets to another corporation which is not a wholly-owned subsidiary,
or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
(as in effect on the date hereof) of the Securities and Exchange Act of 1934
("Exchange "Act")), shall acquire more than 50% of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange
Act.

                                   SECTION XII
                                WITHHOLDING TAXES

         The Company may directly or indirectly withhold from any payments under
this Agreement all federal, state, city or other taxes that shall be required
pursuant to any law or governmental regulation.

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                                  SECTION XIII
                           EFFECTIVE PRIOR AGREEMENTS

         This Agreement contains the entire understanding between the Company
and the Executive with respect to the subject matter and supersedes any prior
employment or severance agreements between the Company and its affiliates, and
the Executive.

                                   SECTION XIV
                     CONSOLIDATION, MERGER OR SALE OF ASSETS

         Nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a Consolidation, Merger or Sale
of Assets, the term "the Company" as used will mean the other corporation and
this Agreement shall continue in full force and effect. This Section XIV is not
intended to modify or limit the rights of the Executive hereunder, including
without limitation, the rights of Executive under Section XI.

                                   SECTION XV
                                  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.

                                   SECTION XVI
                           GOVERNING LAW; ARBITRATION

         This Agreement has been executed and delivered in the State of
Tennessee and its validity, interpretation, performance and enforcement shall be
governed by the laws of that state.

         Any dispute among the parties hereto shall be settled by arbitration in
Nashville, Tennessee, in accordance with the rules then obtaining of the
American Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof.

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                                  SECTION XVII
                                     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 if delivered by hand, overnight delivery service or confirmed facsimile
transmission, to the following:

                  (a) If to the Company, at 277 Mallory Station Road, Suite 130,
Franklin, Tennessee 37067, Attention: President or Chief Executive Officer, or
at such other address as may have been furnished to the Executive by the Company
in writing; or

                  (b) If to the Executive, at 5161 Ravens Glen, Nashville,
Tennessee 37211, or such other address as may have been furnished to the Company
by the Executive in writing.

                                  SECTION XVIII
                                BINDING AGREEMENT

         This Agreement shall be binding on the parties' successors, heirs and
assigns.

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

                                       ADVOCAT INC.

                                       By: /s/ Wally Olson
                                           -------------------------------------
                                       Title: Chairman
                                              ----------------------------------

                                       EXECUTIVE:

                                       /s/ William R. Council, III
                                       -----------------------------------------
                                       William R. Council III<PAGE>

                                                                    Exhibit 10.2

                       THIRD AMENDMENT TO PROMISSORY NOTE

         THIS THIRD AMENDMENT TO PROMISSORY NOTE (this "Third Amendment") is
entered into as of the 1st day of December, 2002, by and between DIVERSICARE
ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited liability company (the
"Borrower"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
(the "Lender").

                                    RECITALS

             A. The Borrower executed to the order of the Lender that certain
Promissory Note dated June 4, 1999, in the principal amount of $12,480,000, as
amended by that certain First Amendment to Promissory Note dated July 1, 2002,
and as further amended by that certain Second Amendment to Promissory Note dated
as of October 1, 2002 (the "Note"). Unless otherwise defined herein, capitalized
terms shall have the meaning assigned to them in the Note.

             B. The Borrower has requested that the Lender extend the Maturity
Date of the Note, and the Lender has agreed, upon certain conditions, one of
which is the execution of this Third Amendment.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the above Recitals and other good
and valuable consideration, the Borrower and the Lender hereby amend the Note as
follows:

             1. Section 4 of the Note, Maturity Date, is hereby amended to
extend the Maturity Date from December 1, 2002, until January 1, 2003. All
references in the Note to the "Maturity Date" are hereby amended to mean January
1, 2003.

         Except as expressly amended herein, the Note shall remain in full force
and effect in accordance with its terms and conditions.

         Notwithstanding the execution of this Third Amendment, the indebtedness
evidenced by the Note shall remain in full force and effect, and nothing
contained herein shall be interpreted or construed as resulting in a novation of
such indebtedness. The Borrower acknowledges and agrees that there are no
offsets or defenses to payment of the obligations evidenced by the Note, as
hereby amended, and hereby waives any defense, claim or counterclaim of the
Borrower regarding the obligations of the Borrower under the Note, as hereby
amended. The Borrower represents that there are no conditions of default or
facts or consequences which will or could lead to a default under the
obligations due from the Borrower under the Note, as amended herein, except as
disclosed by Borrower and Diversicare Management Services Co. in that certain
Quarterly Compliance Statement & Census Data report and that certain Compliance
Certificate,

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each for the period ending September 30, 2002, dated November 12, 2002, and
signed by Borrower's Chief Financial Officer and Executive Vice President.

                                       2
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        IN WITNESS WHEREOF, the Borrower and Lender have caused this Third
Amendment to be executed by their respective duly authorized representatives, as
of the date first set forth above.

                                BORROWER:

                                DIVERSICARE ASSISTED LIVING SERVICES NC II, LLC,
                                a Delaware limited liability company

                                By: Diversicare Assisted Living Services NC, LLC
                                Its: Sole Member

                                By:    /s/ William R. Council, III
                                       ---------------------------
                                       Name: William R. Council, III
                                       Title: Executive Vice President and Chief
                                       Financial Officer

                                LENDER:

                                GMAC COMMERCIAL MORTGAGE CORPORATION,
                                a California corporation

                                By: Laura Y. McDonald
                                    ----------------------
                                Its: Senior Vice President
                                     ---------------------

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