Document:

Exhibit 10.1

 

Exhibit 10.1

SEVERANCE/CHANGE IN CONTROL AGREEMENT

               THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the “Agreement”), is made and entered into this
26th day of February 2008, by and between Hanesbrands Inc., a Maryland corporation (the
“Company”), and Howard Upchurch (“Executive”).

               WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;

               NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:

     1.      Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (“Execution Date”) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) including without limitation the
jurisdictional provisions of ERISA.

     2.      Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.

	 	(a)	 	Eligibility for Severance.

	 	(i)	 	Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances:

	 	(A)	 	Executive’s employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or

	 
	 	(B)	 	Executive terminates his employment at the
request of Company.

	 	(ii)	 	Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances:

-1-

 

	 	(A)	 	A termination for Cause. For purposes of this
Agreement, “Cause” means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company;

	 
	 	(B)	 	A termination as the result of Disability. For
purposes of this Agreement “Disability” shall mean a determination
under Company’s disability plan covering Executive that Executive is
disabled;

	 
	 	(C)	 	A termination due to death;

	 
	 	(D)	 	A termination due to Retirement. For purposes
of this Agreement “Retirement” shall mean Executive’s voluntary
termination of employment on or after Executive’s attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the “Retirement Plan”);

	 
	 	(E)	 	A voluntary termination of employment other
than at the request of Company;

	 
	 	(F)	 	A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board;

	 
	 	(G)	 	The transfer of Executive’s employment to a
subsidiary or affiliate of Company with his consent;

	 
	 	(H)	 	A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or

	 
	 	(I)	 	Any other termination of employment under
circumstances not described in subparagraph 2(a)(i).

	 	(iii)	 	Characterization of Termination. The characterization of
Executive’s termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding.

	 
	 	(iv)	 	Termination Date. For purposes of this section 2, Executive’s
“Termination Date” shall mean the date specified in the separation and release
agreement described under section 2(e) below.

	 	(b)	 	Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then in
lieu of any benefits payable under any other severance plan of the Company of

-2-

 

	 	 	 	any type and in consideration of the separation and release agreement and the
covenants contained herein, the following shall apply:

	 	(i)	 	Executive shall receive continued payment of his Base Salary
(the “Salary Portion of Severance”) during the “Severance Period”. The
“Severance Period” shall mean the number of months determined by multiplying
the number of Executive’s full years of employment with Company or any
subsidiary or affiliate of Company by two; provided, however, that in no
event shall the Severance Period be less than twelve months or more than
twenty-four months. “Base Salary” shall mean the annual salary in effect for
Executive immediately prior to his Termination Date. At the discretion of the
Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executive’s target bonus.

	 
	 	(ii)	 	Executive shall receive a pro-rata amount (determined based
upon the number of days from the first day of the Company’s current fiscal year
to Executive’s Termination Date divided by the total number of days in the
applicable performance period) of:

	 	(A)	 	The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year in
which the Termination Date occurs based on actual fiscal year
performance (the “Annual Incentive Portion of Severance”). “Annual
Incentive Plan” means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and

	 
	 	(B)	 	The long-term incentive payable under the
Omnibus Plan in effect on Executive’s Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executive’s Termination Date and which relates to
the period of his service prior to his Termination Date. The “Omnibus
Plan” means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (“Long-Term Cash
Incentive Plan”) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards.

	 	 	 	Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executive’s award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan during the Severance Period.

	 
	 	(iii)	 	Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, Company shall subsidize
the premium charged during the Severance Period so that the amount of such
premium payable by such Executive shall equal the

-3-

 

	 	 	 	amount payable by an active executive of Company for similar coverage as
adjusted from time to time; provided, however, that Executive’s right to
COBRA continuation coverage under any such group health plan shall be
reduced by the number of months of medical and dental coverage otherwise
provided pursuant to this subparagraph. The premium charged for any COBRA
continuation coverage after the end of the Severance Period shall be
entirely at Executive’s expense and shall be different (greater) than the
premium charged during the Severance Period. Executive’s COBRA continuation
coverage shall terminate in accordance with the COBRA continuation of
coverage provisions under Company’s group medical and dental plans. If
Executive is eligible for early retirement under the terms of the Retirement
Plan (or would become eligible if the Severance Period is considered as
employment), then, after exhausting any COBRA continuation coverage under
the group medical plan, Executive may elect to participate in any retiree
medical plan available to similarly situated senior executives in accordance
with the terms and conditions of such plan in effect on and after
Executive’s Termination Date; provided, that such retiree medical coverage
shall not be available to Executive unless he or she elects such coverage
within thirty (30) days following his Termination Date. The premium charged
for such retiree medical coverage may be different (greater) than the
premium charged an active employee for similar coverage;

	 
	 	(iv)	 	Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated senior
executives including but not limited to, qualified pension plans, stock
purchase plans, matching grant programs, 401(k) plans and ESOPs, personal
accident insurance, travel accident insurance, short and long term disability
insurance, and accidental death and dismemberment insurance, shall cease on
Executive’s Termination Date. During the Severance Period, Company shall
continue to maintain life insurance covering Executive under Company’s life
insurance program. If Executive is eligible for early retirement or becomes
eligible for early retirement during the Severance Period, then Company will
continue to pay the premiums (or prepay the entire premium) so that Executive
has a paid-up life insurance benefit equal to his annual salary on his
Termination Date.

	 	(c)	 	Payment of Severance. The Salary Portion of Severance shall be paid in
accordance with Company’s payroll schedule, unless the Committee shall elect to pay the
Salary Portion of Severance in a lump sum payment or a combination of regular payments
and a lump sum payment. Any lump sum payment shall be made as soon as practicable
following the Termination Date, but in no event later than the fifteenth day of the
third month after the date of termination), unless Company reasonably determines that
Section 409A of the United States Internal Revenue Code of 1986, as amended, and any
successors thereto (the “Code”) will result in the imposition of additional tax on
account of such payment before the expiration of the six-month period described in
Section 409A(a)(2)(B)(i) in which case, all missed payments will be paid on the date
that is six (6) months and one

-4-

 

	 	 	 	(1) day following the date of Executive’s separation from service (as defined in
Code Section 409A) or, if earlier, the date of death of Executive (the “Delayed
Payment Date”). The Annual Incentive Portion of Severance, if any, shall be paid in
cash on the same date the active participants under the Annual Incentive Plan are
paid. The Long-Term Cash Incentive Plan payout, if any, shall be paid in the same
form and on the same date the active participants under the Omnibus Plan are paid.
All payments hereunder shall be reduced by such amount as Company (or any subsidiary
or affiliate of Company) may be required under all applicable federal, state, local
or other laws or regulations to withhold or pay over with respect to such payment.

	 
	 	(d)	 	Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates.

	 
	 	(e)	 	Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive until Executive and Company have executed a separation and release
agreement and the payment of severance benefits under this section 2 shall be subject
to the terms and conditions of the separation and release agreement.

	 
	 	(f)	 	Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executive’s death.

     3.      Change in Control Benefits.

	 	(a)	 	Eligibility for Change in Control Benefits.

	 	(i)	 	Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executive’s employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executive’s employment is terminated by Company other than on account of
Executive’s death, disability or retirement and other than for Cause, or (C)
within twenty-four (24) months following a Change in Control Executive
voluntarily terminates his employment for Good Reason, Executive shall be
entitled to the Change in Control benefits as described in section 3(b) below.

	 
	 	(ii)	 	Good Reason. For purposes of this section 3, “Good Reason”
means the occurrence of any one or more of the following (without Executive’s
written consent after a Change in Control):

	 	(A)	 	A material adverse change in Executive’s duties
or responsibilities;

-5-

 

	 	(B)	 	A reduction in Executive’s annual base salary
except for any reduction of not more than ten (10) percent applicable
to all senior executives;

	 
	 	(C)	 	A material reduction in Executive’s level of
participation in any of Company’s short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives;

	 
	 	(D)	 	The failure of any successor to Company to
assume and agree to perform this Agreement;

	 
	 	(E)	 	Company’s requiring Executive to be based at an
office location which is at least fifty (50) miles from his office
location at the time of the Change in Control;

	 	 	 	The existence of Good Reason shall not be affected by Executive’s temporary
incapacity due to physical or mental illness not constituting a Disability.
Executive’s retirement shall constitute a waiver of his rights with respect
to any circumstance constituting Good Reason. Executive’s continued
employment shall not constitute a waiver of his rights with respect to any
circumstances which may constitute Good Reason; provided, however, that
Executive may not rely on any particular action or event described in clause
(A) through (E) above as a basis for terminating his employment for Good
Reason unless he delivers a Notice of Termination based on that action or
event within six months after its occurrence and Company has failed to
correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination.

	 
	 	(iii)	 	Change in Control. For purposes of this Agreement, a “Change
in Control” will occur:

	 	(A)	 	Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (“Voting Stock”); provided, however,
that the following acquisitions shall not constitute a Change in
Control:

	 	1)	 	Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible

-6-

 

	 	 	 	or exchangeable securities were acquired directly from
Company);

	 
	 	2)	 	Any acquisition by Company;

	 
	 	3)	 	Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or

	 
	 	4)	 	Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or

	 	(B)	 	Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction:

	 	1)	 	All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or indirectly (either by remaining outstanding or
by being converted into voting securities of the entity
resulting from such transaction), more than fifty (50) percent
of the combined voting power of the voting securities of the
entity resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Company’s property or assets, directly or indirectly) (the
“Resulting Entity”) outstanding immediately after such
transaction, in substantially the same proportions relative to
each other as their ownership immediately prior to such
transaction; and

-7-

 

	 	2)	 	No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Company’s then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and

	 
	 	3)	 	At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the “Board”) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or

	 	(C)	 	Upon the consummation of a plan of complete
liquidation or dissolution of Company; or

	 
	 	(D)	 	When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
“Initial Director” shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Company’s stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation by a Person (other than the Board)
made for the purpose of opposing a solicitation by the Board with
respect to the election or removal of directors; or (2) any other
actual or threatened solicitation of proxies or consents by or on
behalf of any Person (other than the Board).

	 	(iv)	 	Termination Date. For purposes of this section 3, “Termination
Date” shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executive’s termination were first met.

	 	(b)	 	Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply:

-8-

 

	 	(i)	 	In consideration of Executive’s covenant in section 4 below,
Company shall pay Executive:

	 	(A)	 	A lump sum payment equal to the unpaid portion
of Executive’s annual Base Salary and vacation accrued through the
Termination Date;

	 
	 	(B)	 	A lump sum payment equal to Executive’s
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above;

	 
	 	(C)	 	A lump sum payment equal to Executive’s
prorated Long-Term Cash Incentive Plan payment(as determined in
accordance with subparagraph 2(b)(ii)(B) above; and

	 
	 	(D)	 	A lump sum payment equal to two times the sum
of (1) Executive’s annual Base Salary; and (2) the greater of (i)
Executive’s target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executive’s average annual incentive calculated over the three fiscal
years immediately preceding the year in which the Change in Control
occurs ; and (3) an amount equal to the Company matching contribution
to the defined contribution plan in which Executive is participating at
the Termination Date (currently 4%).

	 	 	 	Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executive’s award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below.

	 
	 	(ii)	 	For a period of two months following Executive’s Termination
Date (the “CIC Severance Period”), Executive shall have the right to elect
continuation of the health insurance, life insurance, personal accident
insurance, travel accident insurance and accidental death and dismemberment
insurance coverages which insurance coverages shall be provided at the same
levels and the same costs in effect immediately prior to the Change in Control;
provided, however, that Executive’s right to COBRA continuation coverage under
any group health plan shall be reduced by the number of months of coverage
otherwise provided pursuant to this subparagraph. The premium charged for any
COBRA continuation coverage after the end of the CIC Severance Period shall be
entirely at Executive’s expense and may be different (greater) than the premium
charged during the CIC Severance Period. Executive’s COBRA continuation
coverage shall terminate in accordance with the COBRA continuation of coverage
provisions under Company’s group medical and dental plans. If Executive is
eligible for early retirement under the terms

-9-

 

	 	 	 	of the Retirement Plan (or would become eligible if the Severance Period is
considered as employment), then, after exhausting any COBRA continuation
coverage under the group medical plan, Executive may elect to participate in
any retiree medical plan available to similarly situated senior executives
in accordance with the terms and conditions of such plan in effect on and
after Executive’s Termination Date; provided, that such retiree medical
coverage shall not be available to Executive unless he or she elects such
coverage within thirty (30) days following his Termination Date. The
premium charged for such retiree medical coverage may be different from the
premium charged an active employee for similar coverage;

	 
	 	(iii)	 	If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be
provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the “Supplemental Plan”). In addition, for purposes of
determining Executive’s benefits under the Supplemental Plan and Executive’s
right to post-retirement medical benefits under Company’s retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date he
or she would otherwise be eligible to begin receiving benefits under such
plans;

	 
	 	(iv)	 	Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executive’s Termination Date.

	 	(c)	 	Termination for Disability. If Executive’s employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Company’s disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement.

	 
	 	(d)	 	Termination for Retirement or Death. If Executive’s employment is terminated
by reason of his retirement or death following a Change in Control, Executive’s
benefits shall be determined in accordance with Company’s retirement, survivor’s
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement.

	 
	 	(e)	 	Termination for Cause, or Other Than for Good Reason or Retirement. If
Executive’s employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued

-10-

 

	 	 	 	vacation through the Termination Date, at the rate then in effect, plus all other
amounts to which such Executive is entitled under any compensation plans of Company,
at the time such payments are due, and Company shall have no further obligations to
such Executive under this Agreement.

	 
	 	(f)	 	Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive until Executive and Company have executed a “Separation and
Release Agreement” (in substantially the form attached hereto as Exhibit A) and the
payment of change in control benefits under this section 3 shall be subject to the
terms and conditions of the Separation and Release Agreement.

	 
	 	(g)	 	Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executive’s termination.

	 
	 	(h)	 	Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive’s employment under the provision so indicated (a
“Notice of Termination”).

	 
	 	(i)	 	Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates.

	 
	 	(j)	 	Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid in cash to in a single lump
sum as soon as practicable following the Termination Date, but in no event later than
the fifteenth day of the third month after the date of termination, unless Company
reasonably determines that Code Section 409A will result in the imposition of
additional tax on account of such payment before the expiration of the six-month period
described in Code Section 409A(a)(2)(B)(i) in which case such payment will be paid on
the Delayed Payment Date as defined in section 2(c) of this Agreement.

	 
	 	(k)	 	Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the “Total
Payments”), if all or any part of the Total Payments will be subject to the tax (the
“Excise Tax”) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments

-11-

 

	 	 	 	and any federal, state and local income tax, penalties, interest and Excise Tax upon
the Gross-Up Payment provided for by this section 3 (including FICA and FUTA), shall
be equal to the Total Payments. Any such payment shall be made by Company to
Executive as soon as practical following the Termination Date, but in no event
beyond twenty (20) days from such date. Executive shall only be entitled to a
Gross-Up Payment under this section 3 if Executive’s “parachute payments” (as such
term is defined in Code Section 280G) exceed three hundred thirty percent (330%)
(the “Threshold”) of Executive’s “base amount” (as determined under Code Section
280G(b)). In the event Executive’s parachute payments do not exceed the Threshold,
the benefits provided to such Executive under this Agreement that are classified as
parachute payments shall be reduced such that the value of the Total Payments that
Executive is entitled to receive shall be one dollar ($1) less than the maximum
amount which such Executive may receive without becoming subject to the tax imposed
by Code Section 4999, or which Company may pay without loss of deduction under Code
Section 280G(a). For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax, the amounts of such Excise Tax and the amount of any
Gross Up Payment, the following shall apply:

	 	(i)	 	Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executive’s termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as “parachute payments” within the meaning of Code
Section 280G(b)(2), and all “excess parachute payments” within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Company’s tax counsel as supported by Company’s independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax;

	 
	 	(ii)	 	The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above);

	 
	 	(iii)	 	The value of any noncash benefits or any deferred payment or
benefit shall be determined by Company’s independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4);

	 
	 	(iv)	 	Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the

-12-

 

	 	 	 	highest marginal rate of taxation in the state and locality of Executive’s
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes;

	 
	 	(v)	 	In the event the Internal Revenue Service adjusts any item
included in Company’s computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section 3(j), Company shall reimburse Executive for the full amount necessary
to make Executive whole, plus a market rate of interest, as determined by the
Committee; and

	 
	 	(vi)	 	In the event the Internal Revenue Service adjusts any item
included in Company’s computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion.

	 	(l)	 	Company’s Payment Obligation. Company’s obligation to make the payments and
the arrangements provided in this section 3 shall be absolute and unconditional, and
shall not be affected by any circumstances, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which Company may have against
Executive or anyone else. All amounts payable by Company under this section 3 shall be
paid without notice or demand and each and every payment made by Company shall be
final, and Company shall not seek to recover all or any part of such payment from
Executive or from whomsoever may be entitled thereto, for any reason except as provided
in section 3(j) above.

	 
	 	(m)	 	Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Company’s obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement.

	 
	 	(n)	 	Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall pay all reasonable legal fees, costs of litigation or arbitration, prejudgment or
pre-award interest, and other expenses incurred in good faith by Executive as a result
of Company’s refusal to provide benefits under this section 3, or as a result of
Company contesting the validity, enforceability or interpretation of the provisions of
this section 3, or as the result of any conflict (including conflicts related to the
calculation of parachute payments or the characterization of Executive’s termination)
between Executive and Company;

-13-

 

	 	 	 	provided that the conflict or dispute is resolved in Executive’s favor and Executive
acts in good faith in pursuing his rights under this section 3.

	 
	 	(o)	 	Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys’ fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3.

     4.      Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executive’s obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.

     5.      Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the “Committee”). The Committee may delegate
any administrative duties, including, without limitation, duties with respect to the processing,
review, investigation, approval and payment of severance/Change in Control benefits, to designated
individuals or committees.

     6.      Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes he or she should have received such benefits. No

-14-

 

later than ninety (90) days after the receipt of the claim, the Committee shall either allow
or deny the claim in writing. A denial of a claim, in whole or in part, shall be written in a
manner calculated to be understood by Executive and shall include the specific reason or reasons
for the denial; specific reference to the pertinent provisions of this Agreement on which the
denial is based; a description of any additional material or information necessary for Executive to
perfect the claim and an explanation of why such material or information is necessary; and an
explanation of the claim review procedure. Executive (or his duly authorized representative) may
within sixty 60 days after receipt of the denial of his claim request a review upon written
application to the Committee; review pertinent documents; and submit issues and comments in
writing. The Committee shall notify Executive of its decision on review within sixty (60) days
after receipt of a request for review unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible, but not later than
one-hundred twenty (120) days after receipt of a request for review. Notice of the decision on
review shall be in writing. The Committee’s decision on review shall be final and binding on
Executive and any successor in interest. If Executive subsequently wishes to file a claim under
Section 502(a) of ERISA, any legal action must be filed within ninety (90) days of the Committee’s
final decision. Executive must exhaust the claims procedure provided in this section 6 before
filing a claim under ERISA with respect to any benefits provided under section 2 of this Agreement.

     7.      Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Company’s principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.

     8.      Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any state’s conflict of law principles.

     9.      Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.

     10.    Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.

     11.    Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the subject matter
hereof. In the event of any inconsistency between any provision of this Agreement and any
provision of any plan, employee handbook, personnel manual, program, policy, arrangement or
agreement of Company or any of its subsidiaries or affiliates, the provisions of this Agreement
shall control. This Agreement may be modified or amended only by an instrument in writing signed
by both parties.

-15-

 

     12.    Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.

     13.    Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executive’s employment.

     14.    Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Company’s
obligations hereunder and complies with its terms.

               IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.

	 	 	 
	EXECUTIVE

	 	HANESBRANDS INC.
	 
	 	 
	/s/
W. Howard Upchurch, Jr.

	 	By: /s/ Kevin W. Oliver
	 
	 	 
	 

	 	Title: Executive Vice President, Human Resources

-16-

 

Exhibit A

MODEL FORM

SEPARATION AND RELEASE AGREEMENT

     Hanesbrands Inc.(the “Company”) and [NAME           ] (“Executive”) enter
into this Separation and Release Agreement which was received by
Executive on the ___ day of
___, 200_, signed by Executive on the ___ day
of ___, 200_, and is effective on the ___ day
of ___, 200___ (the “Effective Date”). The Effective Date shall be no less than 7 days after
the date signed by Executive.

W I T N E S S E T H:

     WHEREAS, Executive has been employed by the Company as a ____________; and

     WHEREAS,
Executive’s employment with the Company is terminated as of ___, 200___ (the
“Termination Date”); and

     WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ___, 200___ (the “Change in Control Agreement”), upon a termination of
Executive’s employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to Change in Control benefits provided Executive executes a separation and
release agreement acceptable to Company; and

     WHEREAS, this separation and release agreement (the “Agreement”) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executive’s employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.

     NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:

     1. Termination Date. Executive agrees to resign Executive’s employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executive’s employment with the Company will conclude on the
close of business on the Termination Date.

     2. Change in Control Benefits. Executive and Company agree that Executive shall receive the
Change in Control benefits, less all applicable withholding taxes and other customary payroll
deductions, provided in the Change in Control Agreement.

     3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following the
Termination Date, Executive is not and will not be due any compensation, including, but not limited
to, compensation for unpaid salary (except for amounts unpaid and owing for Executive’s

-17-

 

employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein, Executive will not be eligible to
participate in any of the benefit plans of the Company after Executive’s Termination Date.
However, Executive will be entitled to receive benefits which are vested and accrued prior to the
Termination Date pursuant to the employee benefit plans of the Company. Any participation by
Executive (if any) in any of the compensation or benefit plans of the Company as of and after the
Termination Date shall be subject to and determined in accordance with the terms and conditions of
such plans, except as otherwise expressly set forth in the Change in Control Agreement or this
Agreement.

     4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).

     5. Executive’s Representation and Warranty. Executive hereby represents and warrants that,
during Executive’s period of employment with the Company, Executive did not willfully or
negligently breach Executive’s duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Company’s
business standards.

     6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement, Executive agrees that during Executive’s employment and for the duration of the Change
in Control Severance Period, Executive will not, without the prior written consent of Company,
either alone or in association with others, solicit for employment or assist or encourage the
solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates; and
will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a “Competing Business” shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executive’s employment.

     7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executive’s own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
of Executive’s accountants, attorneys, or spouse, and shall ensure that none of them discloses such
existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or

-18-

 

prepared or helped prepare in connection with Executive’s employment and Executive will not
retain any copies, duplicates, reproductions or excerpts thereof. The obligations of this
paragraph 7 shall survive the expiration of this Agreement.

     8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.

     9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.

     10. Release.

	 	(a)	 	Executive on behalf of Executive, Executive’s heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and all current and former parents, subsidiaries, related companies,
successors, assigns and past, present and future directors, officers, employees,
trustees and shareholders (the “Released Parties”) from and against any and all
complaints, claims, cross-claims, third-party claims, counterclaims, contribution
claims, liabilities, obligations, promises, agreements, controversies, damages,
actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of
any nature whatsoever, known or unknown, suspected or unsuspected, foreseen or
unforeseen, matured or unmatured, which, at any time up to and including the date on
which Executive signs this Agreement, exists, have existed, or may arise from any
matter whatsoever occurring, including, but not limited to, any claims arising out of
or in any way related to Executive’s employment with Company or its subsidiaries or
affiliates and the conclusion thereof, which Executive, or any of Executive’s heirs,
executors, administrators, assigns, affiliates, and agents ever had, now has or at any
time hereafter may have, own or hold against any of the Released Parties based on any
matter existing on or before the date on which Executive signs this Agreement. Nothing
in this Agreement releases any claims that the law does not permit Executive to
release, including claims for vested pension benefits accrued by Executive under any
tax-qualified pension plan of the Corporation. Executive acknowledges that in exchange
for this release, Company is providing Executive with total consideration, financial or
otherwise, which exceeds what Executive would have been given without the release. By
executing this Agreement, Executive is waiving, without limitation, all claims (except
for the filing of a charge with an administrative agency) against the Released Parties
arising under federal, state and local labor and antidiscrimination laws, any
employment related claims under the employee Retirement Income Security Act of 1974, as
amended, and any other restriction on the right to terminate employment, including,
without limitation, Title VII of the Civil Rights Act of 1964, as amended, the
Americans with Disabilities Act of 1990, as amended, and the North Carolina Equal
Employment Practices Act, as amended [ADD ANY ADDITIONAL STATE LAW REFERENCES].
Nothing herein shall release any party from any

-19-

 

	 	 	 	obligation under this Agreement. Executive acknowledges and agrees that this
release and the covenant not to sue set forth in paragraph (c) below are essential
and material terms of this Agreement and that, without such release and covenant not
to sue, no agreement would have been reached by the parties and no benefits under
the Change in Control Agreement would have been paid. Executive understands and
acknowledges the significance and consequences of this release and this Agreement.

	 
	 	(b)	 	EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (“ADEA”). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVE’S WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVE’S WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVE’S EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT.

	 
	 	(c)	 	Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executive’s behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement.

-20-

 

	 	(d)	 	The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys’ fees incurred by or on behalf of Executive.

     11. Executive’s Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executive’s attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.

     12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the other’s agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.

     13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.

     14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.

     15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.

     16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any state’s conflict of law
principles.

-21-

 

     17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.

     18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:

To Executive at:

[add address]

To the Company at:

Hanesbrands Inc.

Attention: General Counsel

1000 East Hanes Mill Road

Winston-Salem, NC 27105

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

	 	 	 	 	 
	EXECUTIVE

	 	HANESBRANDS INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

-22-EX-10.1 Sixth Amendment to Consolidated Amended

 

EXHIBIT 10.1

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

     This Sixth Amendment to Consolidated Amended and Restated Master Lease (this
“Amendment”) is executed and delivered as of March 14, 2008 by and between STERLING
ACQUISITION CORP., a Kentucky corporation (“Lessor”), the address of which is 9690 Deereco
Road, Suite 100, Timonium, MD 21093, and DIVERSICARE LEASING CORP., a Tennessee corporation, the
address of which is 1621 Galleria Boulevard, Brentwood, TN 37027.

RECITALS:

     A. Lessee has executed and delivered to Lessor a Consolidated Amended and Restated Master
Lease dated as of November 8, 2000, but effective as of October 1, 2000, as amended by a First
Amendment to Consolidated Amended and Restated Master Lease dated as of September 30, 2001, a
Second Amendment to Consolidated Amended and Restated Master Lease dated as of June 15, 2005 (the
“Second Amendment”), a Third Amendment to Consolidated Amended and Restated Master Lease
dated as of October 20, 2006 (the “Third Amendment”), a Fourth Amendment to Consolidated
Amended and Restated Master Lease dated as of April 1, 2007, and a Fifth Amendment to Consolidated
Amended and Restated Master Lease dated as of August 10, 2007 (the “Existing Master Lease”)
pursuant to which Lessee leased from Lessor certain healthcare facilities.

     B. Pursuant to that certain Unimproved Property Contract (the “Paris Purchase
Agreement”) dated as of September 4, 2007 between Haynes, Haynes and Jones, a general
partnership, and Omega Healthcare Investors, Inc., a Maryland corporation (“Omega”), Omega
has the right to acquire that certain parcel of unimproved land described on attached Exhibit A and
located in Paris, Texas (the “Paris Land”).

     C. Omega is the parent corporation of Lessor and intends to assign its right to purchase the
Paris Land to Lessor.

     D. Lessor and Lessee desire to have a skilled nursing facility constructed on the Paris Land
(the “Paris Facility”) and for Lessee to lease the Paris Facility from Lessor pursuant to
the Existing Master Lease.

     E. Lessee and Lessor desire to amend the Existing Master Lease to add the Paris Facility to
the Existing Master Lease on the terms and conditions of this Amendment.

     NOW THEREFORE, the parties agree as follows:

     1. Definitions. 

          (a) Any capitalized term used but not defined in this Amendment will have the meaning assigned
to such term in the Master Lease. From and after the date of this Amendment, each reference in the
Existing Master Leases or the other Transaction Documents to the “Lease” or “Master Lease” means,
as applicable, the Existing Master Lease or Existing Master Leases as modified by this Amendment.

 

 

          (b) In addition to the other definitions contained herein, when used in this Amendment the
following terms shall have the following meanings:

     “Acquisition Date” means the date that the Land described in Exhibit A
to this Amendment is acquired by Lessor or its Affiliates.

     “Actual Funded Amount” means (i) the amount actually expended for the
acquisition of the Paris Land by Lessor and the amount actually advanced and disbursed by
Lessor for completion of the Paris Facility in accordance with this Amendment, as of a given
date, plus (ii) the allocated bed costs set forth in the Construction Budget.

     “Closing Date” means the date that Lessor acquires the Paris Facility.

     “Construction Budgets” means the detailed budget for the construction of the
Paris Facility attached as Schedule 1, which sets forth Lessee’s good faith estimate
of the Project Costs on an itemized basis and designates each item by amount, whether such
item constitutes an item of Hard Costs or Soft Costs and the amount of proceeds, if any, of
the Maximum Funded Amount allocable to each item of Hard Costs and Soft Costs.

     “Developer’s Fees” means the fees and commissions, including Developer’s
Overhead, payable to Lessee or any Affiliate of Lessee for services rendered in connection
with the development, construction management or leasing of the Paris Facility, as set forth
on the Construction Budget.

     “Developer’s Overhead” means costs incurred by Lessee and set forth on the
Construction Budget for developer’s overhead and profit.

     “Event of Force Majeure” is any event or condition of Force Majeure, not
existing as of the Closing Date, not reasonably foreseeable as of such date and not
reasonably within the control of Lessee, that prevents in whole or in material part the
performance by Lessee of its obligations under this Amendment or that renders the
performance of such obligations so difficult as to make such performance commercially
unreasonable.

     “Funded Amount” means (i) the amount actually expended for the acquisition of
the Paris Land and completion of the Paris Facility as of a given date, plus (ii) the
allocated bed costs set forth in the Construction Budget.

     “Hard Costs” means costs paid to renovate and complete the Paris Facility,
including without limitation, demolition costs, site preparation costs, contractor’s fees,
and costs of labor and material paid or necessarily incurred by Lessee in connection with
the construction of the Paris Facility, but excluding Developer’s Fees, Developer’s Overhead
and Contractor’s Overhead, and the contingency reserve, if any, set forth on the
Construction Budget.

     “Initial Paris Base Rent” means an annual amount equal to (i) the Actual Funded
Amount as of the first day of the applicable month during the applicable Lease Year
multiplied by (ii) ten and one quarter percent (10.25%).

2

 

     “In Service Date” shall be the date of completion of construction and licensing
of the Paris Facility for its intended use as a skilled nursing facility.

     “Joinder Agreement” means the Joinder Agreement and Amendment to Texas
Collateral Documents from the Paris Sublessee, the Texas Sublessees, and Lessor dated as of
the date of this Amendment.

     “Maximum Funded Amount” means Seven Million Dollars ($7,000,000).

     “Plans and Specifications” means the written plans and specification for the
construction of the Paris Facility submitted by Lessee and approved by Lessor, as such plans
and specifications may be amended as set forth in this Amendment.

     “Paris Base Rent Commencement Date” shall be the earlier of (i) the
15th day of the calendar month following the In Service Date or (ii) August 15,
2009.

     “Paris Base Rent” shall be:

          (a) During the first Renewal Term, the Paris Base Rent shall be:

     (1) Prior to the Paris Base Rent Commencement Date, no Paris Base Rent shall be
due and owing;

     (2) During the twelve month period commencing on the Paris Base Rent
Commencement Date, the Initial Paris Base Rent;

     (3) Subject to sub-sections (a)(4) of this defined term, during each subsequent
twelve month period commencing on the anniversary of the Paris Base Rent
Commencement Date (the “Adjustment Date”), until the end of the Term
(including any Renewal Terms), the Paris Base Rent for the previous Lease Year,
increased by the product of (i) the Paris Base Rent during the immediately preceding
Lease Year and (ii) the lesser of one (1) times the increase, if any, in the CPI
(expressed as a percentage) from the Paris Base Rent Commencement Date to the
applicable Adjustment Date and two and one-half percent (2.5%).

     Under no circumstances will the Paris Base Rent in any twelve month period be
less than the Paris Base Rent during the preceding twelve month.

     (4) If, after the Paris Rent Reset Date, the Paris Formula Rent is greater than
the Paris Scheduled Rent, then

     (A) for the twelve month period after the Paris Rent Reset Date, the
Paris Base Rent shall be equal to the Paris Formula Rent; and

     (B) during each subsequent twelve month period commencing on the
anniversary of the Paris Rent Reset Date (the “Adjustment Date”), until the
end of the Term (including any Renewal Terms), Paris Base Rent for the
previous Lease Year, increased by the product of (i) the Paris Base Rent
during the immediately preceding Lease Year and (ii) the lesser of

3

 

one (1) times the increase, if any, in the CPI (expressed as a
percentage) from the Paris Rent Reset Date to the applicable Adjustment Date
and two and one-half percent (2.5%).

     Under no circumstances will the Paris Base Rent in any Lease Year be
less than the Paris Base Rent during the preceding Lease Year.

     Under no circumstances will the Paris Base Rent in any Lease Year during the
Renewal Term be less than the Paris Base Rent during the preceding Lease Year.

          Paris Cash Flow: For any period, the sum of (a) Net Income of Lessee arising
solely from the operation of the Paris Facility for the applicable period, and (b) the
amounts deducted in computing Lessee’s Net Income for the period for (i) the provision for
self-insured, professional and general liability, (ii) depreciation, (iii) amortization,
(iv) Paris Base Rent, (v) interest (including payments in the nature of interest under
Capitalized Leases and interest on any Purchase Money Financing for personal property used
in connection with the Paris Facility), (vi) income taxes (or, if greater, income tax
actually paid during the period attributable to the Paris Facility), and (vii) management
fees payable in connection with the Paris Facility, and less (c) an imputed management fee
equal to six percent (6%) of Gross Revenues for the Paris Facility, and less (d) the Cash
Cost of Self-Insured Professional and General Liability attributable to the Paris Facility.
The Cash Cost of Self-Insured Professional and General Liability shall mean: For any
period, the average total per bed cash expenditure associated with professional and general
liability related settlements, judgments, legal fees or administration for skilled nursing
facilities in the State of Texas as from time to time estimated and published by Aon Risk
Consultants, or its successors, for the American Health Care Association, multiplied by the
average number of occupied beds in the Paris Facility.

          “Paris Formula Rent” means the sum of:

          (a) the Paris Scheduled Rent; plus

          (b) one half of (i) the average annual Paris Cash Flow for the twenty four
month period ending prior to the Paris Rent Reset Date, less (ii) the Paris
Scheduled Rent multiplied by 1.2.

     “Paris Rent Reset Date” means the first day of the sixth full Lease Year after
the Paris Base Rent Commencement Date.

     “Paris Scheduled Rent” means the Paris Base Rent as of the Paris Rent Reset
Date as calculated pursuant to subsection (a)(3) of the definition of Paris Base Rent.

     “Paris Sublessee” means Diversicare Paris, LLC, a Delaware limited liability
company.

     “Project Costs” means all Hard Costs, Soft Costs, Developer’s Fees,
Contractor’s Overhead and other costs and fees associated with the construction of the
Construction Facilities.

4

 

     “Soft Costs” means premiums for title, casualty and other insurance required by
Lessor under the Paris Purchase Agreement or this Lease; the cost of recording and filing
the closing documents under the Paris Purchase Agreement and any tax levied upon such
filing; real estate taxes and other assessments that Lessee is obligated to pay; fees and
disbursements of the Lessor’s attorneys, architects and engineers, appraisers, environmental
engineers and surveyors; architectural design and monitoring fees; permit fees; all fees and
expenses payable under that certain Development Agreement dated as of October 31, 2007
between OHI Asset (TX) Paris, LLC, a Delaware limited liability company, and LMG
Development, LLC, a Texas limited liability company; allocated best costs as set forth in
the Construction Budget; and interest (including any reserve for interest set forth on the
Construction Budgets), fees and miscellaneous transaction closing costs and charges payable
by Lessee to Lessor as they become due and payable.

     “Survey Requirements” means the survey requirements set forth in Exhibit B to
this Amendment.

     “Target Completion Date” means July 1, 2009.

     “Title Company” means a title company selected by Lessor and reasonably
acceptable to Lessee.

          (c) The following definitions defined in §2.1 of the Existing Master Lease and §1 of the Fifth
Amendment are hereby amended in their entirety as follows:

          (1) §2.1 of the Existing Master Lease:

     Base Rent: means the sum of (i) the Non-Texas Base Rent, (ii) the Texas Base
Rent, and (iii) subject to Section 1(c) of this Amendment, the Paris Base Rent.

     Commencement Date: October 1, 2000 for the Non-Texas Facilities (other than
the Paris Facility), August 11, 2007 for the Texas Facilities, and the Closing Date for the
Paris Facility.

     Expiration Date: means the First Renewal Term Expiration Date, the Second
Renewal Term Expiration Date, the First Texas Renewal Term Expiration Date, or the Second
Texas Renewal Term Expiration Date, as applicable.

     Facilit(y)(ies): Each health care facility on the Land, including the Leased
Property associated with such Facility, and together, all such facilities on the Leased
Properties; all of which Facilities are collectively listed on Exhibit C to this
Amendment.

     Land: The real property described in listed on attached Exhibit A to
the Existing Master Lease, Exhibit A to the Fifth Amendment and Exhibit A to
this Amendment.

     Lease Year: October 1, 2000 through September 30, 2001, and each twelve month
period thereafter, except that for purposes of determining the Texas Base Rent and the Paris
Base Rent, “Lease Year” shall mean (i) with respect to the Texas Base Rent, the twelve month
period commencing on February 1 and ending January 31, and each twelve month period
thereafter, and (ii) with respect to the Paris Base Rent, the twelve month

5

 

period commencing on the Paris Base Rent Commencement Date, and each twelve month
period thereafter commencing on the anniversary of the Paris Base Rent Commencement Date.

     Leased Property: The portion of the Land on which a Facility is located, the
legal description of which is set forth beneath the Facility’s name on Exhibits A-1
through A-28 to the Existing Master Lease, Exhibit A-1 through A-7 to the Fifth
Amendment, and Exhibit A to this Amendment, the Leased Improvements on such portion of the
Land, the Related Rights with respect to such portion of the land, and Lessor’s Personal
Property with respect to such Facility.

     Permitted Encumbrances: Encumbrances listed on attached Exhibit B to
the Existing Master Lease, Exhibit C to the Fifth Amendment, and Exhibit D
to this Amendment.

     (2) §1 of the Fifth Amendment:

     Pre-Existing Hazardous Substances: means Hazardous Substances located on,
under, about or with respect to the Treemont Facility prior to February 1, 2003, or the Katy
Facility prior to July 1, 2003, or the Humble Facility prior to July 1, 2003, or the Paris
Facility prior to the Acquisition Date for the Paris Facility.

     Pre-Existing Environmental Conditions: means any Contamination or other
environmental condition on, under, about or with respect to the Treemont Facility prior to
February 1, 2003, or the Katy Facility prior to July 1, 2003, or the Humble Facility prior
to July 1, 2003, or the Paris Facility prior to the Acquisition Date for the Paris Facility.

     Texas Facilities: means, except as otherwise expressly provided herein with
respect to the Paris Facility, the Facilities located on the real property described in
Exhibits A-1 through A-7 to the Fifth Amendment and Exhibit A to
this Amendment.

     Texas Pledge Agreements: means the Pledge Agreements dated as of the same date
as the Fifth Amendment, as amended by the Joinder Agreement, from the equity owners of the
Texas Sublessees in favor of Lessor.

     Texas Sublessees: means (i) the Master Texas Sublessee, (ii) Diversicare
Ballinger, LLC, Diversicare Doctors, LLC, Diversicare Estates, LLC, Diversicare Humble, LLC,
Diversicare Katy, LLC, Diversicare Normandy Terrace, LLC, and Diversicare Treemont, LLC,
each a Delaware limited liability company, and (iii) the Paris Sublessee.

     Texas Sublessees Guaranty: means the Guaranty dated as of the same date as the
Fifth Amendment, as joined in by Paris Sublessee pursuant to the Joinder Agreement, in favor
of Lessor.

     Texas Sublessee Security Agreement: means the Security Agreement dated as of
the same date as the Fifth Amendment, as joined in by Paris Sublessee pursuant to the
Joinder Agreement, in favor of Lessor.

6

 

          (d) For purposes of the adjustments to Texas Base Rent provided for in subparagraphs (3) and
(4) of the definition of Texas Base Rent set forth in Section 1 of the Fifth Amendment, the
“change” or “increase” in CPI referred to therein shall be deemed to mean the “change” or increase”
in CPI from the Commencement Date to the commencement of the twelve month period (being February 1
through January 31) for which the adjustment in Texas Base Rent, if any, is to be made.

     2. Paris Base Rent; Rent Reset; Termination Option; a “Texas Facility”; Delay. 

          (a) Paris Base Rent Commencement Date. Commencing as of the Paris Base Rent
Commencement Date, Lessee shall pay the Paris Base Rent pursuant to the terms and conditions of
Article III of the Master Lease. Notwithstanding anything in this Amendment to the contrary,
Lessor shall have no obligation to make further advances of the Funded Amount on or after the Paris
Base Rent Commencement Date.

          (b) Paris Base Rent Reset. As soon as reasonably possible after the fifth anniversary
of the Paris Base Rent Commencement Date, Lessor and Lessee shall calculate the Paris Formula Rent.
If the Paris Formula Rent is greater than the Paris Scheduled Rent, then the Paris Base Rent shall
be reset to the Paris Formula Rent effective as of the Paris Rent Reset Date.

          (c) Paris Termination Option. Pursuant to written notice delivered to Lessor not more
than thirty (30) days prior to, nor later than, the fifth anniversary of the Paris Base Rent
Commencement Date (“Paris Termination Notice”), Lessee may elect to terminate the Master
Lease as to the Paris Facility only. After delivery of the Paris Termination Notice, this Lease
shall be terminated as to the Paris Facility only effective on the earlier of (i) a date set by
written notice given by Lessor at least thirty (30) days prior to the effective date, and (ii) the
first day of the sixth month after fifth anniversary of the Paris Base Rent Commencement Date (the
“Paris Termination Date”). If the Paris Termination Notice is delivered, then Lessee shall
have no further obligation to pay Paris Base Rent for periods from and after the Paris Termination
Date.

          (d) For all purposes under this Lease other than the calculation of Base Rent, the Paris
Facility shall constitute a Texas Facility.

          (e) In the event that Lessee is unable to obtain completion of the Paris Facility as described
in Section 6(a) below by the Target Completion Date due to an Event of Force Majeure or Lessor
Delay, then the Target Completion Date and the Paris Base Rent Commencement Date shall each be
extended by one (1) day for each one (1) day of delay in the completion of the Paris Facility
caused by such Event of Force Majeure or Lessor Delay. For purposes of this Amendment, the term
“Lessor Delay” shall mean any delay in achieving completion of the Paris Facility as described in
Section 6(a) below arising solely and directly as a result of:

               (i) Lessor’s failure to furnish any information or documents in accordance with this Amendment
and the continuation of such failure after the receipt of written notice from Lessee to Lessor, to
the extent such failure causes a delay in completion;

               (ii) Lessor’s failure or delay in giving approval or consent (or comments or corrections)
where Lessor’s approval or consent (or comments or corrections), as

7

 

applicable, is required herein and has been requested in writing by Lessee, to the extent such
failure or delay causes a delay in completion; and

               (iii) Lessor’s failure to perform or comply with its obligations under this Amendment and the
continuation of such failure after the receipt of written notice from Lessee to Lessor, to the
extent such failure causes a delay.

     3. Accrual of Financing Costs. During the period from the Closing Date until the Base
Rent Commencement Date, financing costs on the Actual Funded Amount shall accrue monthly at the
rate of ten and one-quarter percent (10.25%) per annum. In the month such financing costs accrues,
such financing costs shall be deemed to have been advanced as part of the Actual Funded Amount for
all purposes under this Amendment.

     4. Sublease; Management. Lessee may sublease the Paris Facility to the Master Texas
Sublessee and the Master Texas Sublessee may sublease the Facility to the Paris Sublessee. The
Paris Sublessee shall guaranty this Lease and provide the same collateral to secure this Lease as
are provided by all other Sublessees under this Lease. The form of sublease between Lessee and the
Paris Sublessee (the “Paris Sublease”) shall be subject to Lessor’s reasonable approval.
All equity owners of the Paris Sublessee shall (i) pledge their interests in the Sublessee to
secure the Lease and the other Transaction Documents, and (ii) subordinate any management,
consulting or other agreements between the Paris Sublessee and such equity owners (or any of their
affiliates) to the Paris Sublease, this Lease and the other Transaction Documents. Pursuant to
Section 8.4 of the Existing Master Lease, Lessor hereby consents to the management of the Paris
Facility by Diversicare Management Services Co., an Affiliate of Lessee, under its current form of
Management Agreement with the Lessee or Sublessee, as the case may be, of the other Facilities
covered by the Existing Master Lease. 

     5. Regulatory Approvals. Lessee will be required to, or to cause Paris Sublessee to,
apply for, and to diligently pursue at its own expense, all licenses and regulatory approvals to
operate the Paris Facility as a skilled nursing facility (the “Licenses”). Lessee represents and
warrants that it knows of no facts or circumstances that would make it unlikely that the Licenses
will be issued. Lessor covenants and agrees that it will cooperate in good faith with Lessee and
use commercially reasonable efforts, where necessary or required from Lessor as owner of the Paris
Land, to enable and assist Lessee to obtain the Licenses.

     6. Construction of the Paris Facility.

          (a) Commencement and Completion of Construction. Lessee shall commence substantial
on-site construction of the Paris Facility within sixty (60) days of the Closing Date and, subject
to a temporary suspension of performance pursuant to Section 16 below, or Lessor Delay, will
continue diligently to complete the Paris Facility on or before the Target Completion Date (or as
soon thereafter as reasonably possible) and will supply such moneys and perform such duties as may
be necessary in connection therewith. The Paris Facility will be complete for purposes of this
Section only at such time as (i) all improvements to the Paris Facility called for in the Plans and
Specifications have been installed or completed in a manner satisfactory to Lessor and (ii) the
local public authority has issued a final certificate of occupancy for the Paris Facility subject
only to such conditions as may be acceptable to Lessor.

8

 

          (b) Lessor’s Architect; Approval of Plans. Lessor may retain the services of
architects and engineers, including architects and engineers employed by Lessor (the “Lessor’s
Architect”), to act as Lessor’s agent in reviewing the Plans and Specifications and the progress of
construction and in making such certifications and performing such other tasks and duties as Lessor
deems appropriate. Lessee will pay all reasonable fees, costs and expenses of the Lessor’s
Architect within ten (10) days after demand by Lessor, accompanied by a reasonably detailed invoice
or statement of the amount due from Lessor’s Architect. Lessee, at Lessee’s option, may utilize
and retain the services of Lessor’s Architect or may retain the services of its own architects and
engineers (the “Lessee’s Architect”) to develop and prepare the Plans and Specifications
for construction of the Paris Facility. Whether Lessee utilizes Lessor’s Architect or Lessee’s
Architect as the “Project Architect” to develop and prepare the Plans and Specifications, Lessee
shall be responsible for payment of the fees, costs and expenses of the Project Architect in
developing and preparing the Plans and Specifications. Lessor and Lessee shall cooperate with each
other in developing the Plans and Specifications. Lessee shall cause the Project Architect to
deliver to Lessor the Plans and Specifications for review and approval by Lessor. The Plans and
Specifications shall be subject to Lessor’s approval within ten (10) Business Days of receipt by
Lessor of a complete set of the Plans and Specifications. Lessor’s approval shall not be
unreasonably withheld, delayed or conditioned. If Lessor does not approve the same, Lessor shall
advise Lessee in writing specifically of the changes required in the Plans and Specifications so
that they will meet with Lessor’s approval. If Lessor provides Lessee comments as to the Plans and
Specifications, Lessee shall provide revised Plans and Specifications to Lessor within ten (10)
Business Days and Lessor shall review such revised Plans and Specifications and within ten (10)
Business Days of receipt give its approval or provide the changes required for approval to be
given. This process shall continue in accordance with these time frames until such time as Lessor
and Lessee have finally approved the Plans and Specifications. The review by Lessor of the Plans
and Specifications is for Lessor’s benefit only, and Lessor’s approval of any such Plans and
Specifications shall impose no liability on Lessor, express or implied, including without
limitation any representation or warranty that such Plans and Specifications are complete or
accurate, or that such Plans and Specifications comply with zoning or other land use laws, local
building department requirements, or any applicable public or private covenants, conditions or
restrictions, and shall not in any way relieve Lessee of its obligation to perform its work in
accordance with this Amendment and all applicable laws and requirements.

          (c) Plans and Specifications. Lessee will deliver to Lessor accurate and complete
copies of the approved Plans and Specifications and all other contract documents requested by
Lessor, including all modifications thereof. Lessee represents and warrants that the Plans and
Specifications and construction of the Paris Facility pursuant to thereto comply and will comply
with all applicable governmental laws and regulations and requirements, zoning and subdivision
ordinances, and standards and regulations of all governmental bodies exercising jurisdiction over
the Paris Facility, including health care licensing. Lessee agrees to provide to Lessor a
certification of the Project Architect to such effect as well as the approvals of any governmental
body or agency exercising jurisdiction of the Paris Facility. Except as provided below, Lessee
will not make, or cause or permit to be made, any change to the Plans and Specifications unless a
request for the change has been submitted in writing to Lessor and approved in writing by the
construction manager or general contractor, as the case may be, any tenants whose approval is
required, Lessor and such other parties as Lessor may require. Lessor’s approval may be subject to
such terms and conditions as Lessor reasonably may

9

 

prescribe. Under no circumstances will any failure by Lessor to respond to a request for
approval of a change in the Plans and Specifications be deemed to constitute approval of the
request. Lessee will deliver promptly to Lessor copies of all bulletins, addenda, change orders
and modifications to the Plans and Specifications. Lessor has the right at all times to require
strict compliance with the original Plans and Specifications, but Lessee may effect changes in the
Plans and Specifications from time to time, without first obtaining Lessor’s approval, if (i) the
changes do not impair the structural integrity, design concept or architectural appearance of the
Paris Facility or change the useable area of the Paris Facility in any way, (ii) the changes will
not result in a default in any other obligation to any other party or authority and (iii) the
changes will not result in a net increase or decrease in the total Project Costs of TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000.00) or more in the aggregate for all changes. Notwithstanding the
foregoing, to the extent that the cost to complete the Paris Facility exceeds the Maximum Funded
Amount (whether or not as a result of any such changes in the Plans and Specifications), Lessee
will be responsible for payment of the excess.

          (d) Character of Construction. All construction will be in accordance with the Plans
and Specifications, of sound materials, in good and workmanlike manner, free and clear of all
liens, claims and encumbrances (other than the liens and security interests securing the
obligations of the Lessee under this Lease), and in compliance with all laws, ordinances,
regulations and restrictions affecting the Paris Facility and all requirements of all governmental
authorities having jurisdiction over the Paris Facility and of the appropriate board of fire
underwriters or other similar body, if any, and any applicable health care authority related to the
Licenses. Lessee will furnish Lessor with evidence of such compliance as Lessor requires from time
to time.

          (e) Construction Contract and Architectural/Engineering Agreement.

               (i) The identity of the construction manager(s) or general contractor(s), as the case may be,
and the Project Architect, and the contracts under which each is retained in connection with the
Paris Facility must be approved by Lessor in writing prior to the commencement of construction,
which approval shall not be unreasonably withheld. Any change to the construction manager(s) or
general contractor(s), as the case may be, and the Project Architect in connection with the Paris
Facility must be approved by Lessor in writing. Lessee will execute the construction management
agreement or general contract(s) between Lessee and the construction manager or general
contractor(s) covering all work to be done in connection with the Paris Facility. Upon request of
Lessor, Lessee will promptly furnish to Lessor executed copies of the construction management,
general contracts, and all subcontracts between the construction manager or general contractor(s)
and all of their subcontractors and suppliers. Upon request of Lessor, Lessee will promptly
furnish to Lessor any amendments or modifications (including change orders) to any of the
foregoing. Lessee will not modify or amend or permit to be modified or amended (including by way
of change order) any construction management agreement, construction contract or construction
subcontract without Lessor’s prior written approval; provided, however, that Lessor’s prior
approval need not be obtained with respect to any change order that results from a change in the
Plans and Specifications with respect to which Lessor’s consent is not required pursuant to Section
1(g) above. Upon request of Lessor, Lessee will also furnish to Lessor an executed copy of the
architectural and/or engineering agreement between Lessee and the Project Architect with respect to
the Paris Facility.

10

 

               (ii) Lessee will perform its obligations under the contracts described in subparagraph (i)
above, and will use reasonable best efforts to cause each other party to such contracts to perform
its obligations under such contracts.

               (iii) Lessee will enforce or cause to be enforced the prompt performance of the contracts
described in subparagraph (i) above and will allow Lessor to take advantage of all rights and
benefits of such contracts. In addition, effective upon the expiration or termination of this
Lease as to the Paris Facility, Lessee hereby assigns to Lessor all warranties given to Lessee
under the contracts described in subparagraph (i) above. Lessee shall deliver such further
documents and agreements as may be reasonably requested by Lessor in connection with the assignment
of warranties provided for in this Section.

          (f) Records and Reports. Lessee will keep accurate and complete books and records
relating to the construction of the Paris Facility, and Lessor will have access thereto during
usual business hours upon 24 hours advance notice. Lessee will furnish or cause to be furnished to
Lessor from time to time, promptly upon request, (i) copies and lists of all paid and unpaid bills
for labor and materials with respect to the Paris Facility, (ii) Construction Budgets and revisions
thereof showing the estimated cost of the Paris Facility and the source of the funds required at
any given time to complete and pay for the same, (iii) receipted bills or other evidence of payment
with respect to the cost of the Paris Facility, and (iv) such reports as to other matters relating
to the Paris Facility as Lessor may request. This paragraph will supplement any similar provision
in this Lease.

          (g) Access. Notwithstanding anything to the contrary contained in this Lease, Lessee
will, and will cause the Paris Sublessee to, permit Lessor’s representatives to have access to the
Paris Facility at all reasonable times and to conduct such investigations and inspections thereof
as Lessor shall determine necessary, including without limitation in connection with inspecting the
Paris Facility and all work done, labor performed and materials furnished in connection with the
construction thereof. Lessee will, and will cause the Paris Sublessee to, cooperate and cause the
construction manager or general contractor, as the case may be, to cooperate with Lessor and its
representatives and agents during such inspections. Notwithstanding the foregoing, Lessee will,
and will cause the Paris Sublessee to, be responsible for making inspections as to the Paris
Facility during the course of construction and will determine to their own satisfaction that the
work done or materials supplied by the contractors and subcontractors has been properly supplied or
done in accordance with applicable contracts. All inspections that may be performed by Lessor and
its agents will be exclusively for the benefit of Lessor and will impose no obligation whatever
upon Lessor for the benefit of any person. Lessee will, and will cause the Paris Sublessee to,
hold Lessor harmless from, and Lessor will have no liability or obligation of any kind to Lessee,
the Paris Sublessee or creditors of any of them in connection with, any defective, improper or
inadequate workmanship or materials brought in or related to the Paris Facility, or any
construction lien arising as a result of such workmanship or materials. No inspection by Lessor
will create any obligation on Lessor or relieve Lessee or the Paris Sublessee of any obligation.

          (h) Damage by Fire or Other Casualty. If the Paris Facility is partially or totally
damaged or destroyed by fire or other casualty or taken under the power of eminent domain, proceeds
of such event will be applied as provided in this Lease.

11

 

               (i) Payment of Costs. Lessee will pay when due all obligations incurred by Lessee, or
the Paris Sublessee for the Paris Facility, including any cost for restoration.

     7. Disbursements of Funded Amount. Upon satisfaction of the conditions set forth in
subparagraphs (a) and (b) below, Lessor will disburse from time to time (but no more frequently
than once per month) to Lessee advances of the Funded Amount, subject to the limitations set forth
in Section 7 below.

          (a) Lessor has received:

               (i) a request for disbursement, in the form of AIA 706 (the “Request”), executed by an
executive officer of Lessee and setting forth, among other things, the portion of the Funded Amount
that Lessee then is requesting be disbursed, the amount that Lessee in good faith believes to be
the cost to complete construction (after disbursement of the portion of the Funded Amount then
being requested), a detailed breakdown of the costs and expenses incurred in the construction of
the Paris Facility to the date of Request, a detailed cost breakdown of the percentage of
completion of the construction of the Paris Facility (including both Hard Costs and Soft Costs) to
the date of the Request, the amounts then due and unpaid with respect to such construction, such
other information or documentation as may be required by the Title Company and the date upon which
the disbursement is desired, provided that the date of the payment must not be less than seven (7)
Business Days after the date upon which the Lessor receives the Request and the other items set
forth in clauses (ii) through (vi) below;

               (ii) A certification from Lessee that, as of the date of the Request, no Event of Default
exists under this Amendment or any of the Transaction Documents, all representations and warranties
set forth in this Amendment and all of the other Transaction Documents are accurate and complete,
and there are no actions, suits or proceedings pending, or to the knowledge of the person making
the certification, threatened or involving (or that could involve) Lessee, the Paris Sublessee or
all or any part of the Facilities and that could impair the Facilities or the ability of Lessee and
the Paris Sublessee to perform under this Amendment or any of the other Transaction Documents;

               (iii) Certificates of the Project Architect, Lessor’s Architect (if not the Project Architect)
and Lessee, certified to Lessor and Lessee and certifying that (a) the Request is correct and, to
the best of its knowledge, all work on the Paris Facility up to the date thereof has been done in
substantial compliance with the Plans and Specifications therefor; (b) to the date thereof, there
has been no material deviation from the budgeted cost of the Paris Facility or construction
progress schedule, except as authorized by Lessee and approved by Lessor; and (c) the undisbursed
portion of the Funded Amount will be sufficient to meet all known costs to complete the work
covered by the Plans and Specifications, after giving effect to all amounts previously disbursed,
plus the amount then requested; and

               (iv) Evidence that Lessee have delivered the items described in (i) – (iii) above to Lessor.

          (b) Upon the request of Lessor, the Title Company is prepared, without condition, to issue to
Lessor a date-down endorsement, dated as of the date of the disbursement, insuring Lessor’s title
to the Paris Facility subject to no other exceptions than are set forth on the Title Policies
delivered to Lessor at closing.

12

 

     8. Limitation on Disbursements. In no event will Lessor pay amounts in excess of the
lesser of: (i) the amounts actually paid in acquiring the Paris Land and for labor, services or
materials incorporated into the Paris Facility; and (ii) the Maximum Funded Amount.

     9. Sufficiency of Funded Amount. Lessor shall be entitled to not make a disbursement,
or to make a disbursement in an amount less than the amount requested, if Lessor is not satisfied
in its sole discretion that following the requested disbursement the undisbursed proceeds of the
Funded Amount budgeted for the construction of the Paris Facility will be at least equal to the sum
of 100% of the estimated Project Costs to complete the Paris Facility in accordance with the Plans
and Specifications (including all costs incurred in connection with changes in the Plans and
Specifications). If at any time it appears to Lessor that the undisbursed balance of the Funded
Amount is less than the amount required by this Section, Lessor may give written notice to Lessee
specifying the amount of the deficiency and Lessee immediately will deposit with Lessor the amount
of the deficiency, which will be expended first in the same manner as the Funded Amount before any
further payment of the Funded Amount will be made by Lessor. Lessor may reasonably determine the
cost of construction of the Paris Facility and Lessee will be obligated to pay any sums so
determined in excess of the Funded Amount prior to any payment under this Amendment.

     10. Payments to Contractor, Subcontractors and Suppliers. In order to induce the
Title Company to insure Lessor’s title to the Paris Facility without exception for the construction
or mechanics’ liens, Lessor may make payments either through the Title Company or directly to any
contractor, subcontractor or supplier furnishing labor or materials to the Paris Facility.

     11. Lessor’s Right to Cure. If Lessee fails to perform any of Lessee’s undertakings
set forth in this Amendment or in any other Transaction Document and fails to cure the same within
any grace or cure period applicable thereto, upon such Notice as may be expressly required herein
or therein (or, if Lessor reasonably determines that the giving of such Notice would risk loss to
the Paris Facility or cause damage to Lessor, upon such Notice as is practical under the
circumstances), and without waiving or releasing any obligation of Lessee, Lessor may, but will not
be required to, perform the same, and Lessee will reimburse Lessor any amounts expended by Lessor
in so doing.

     12. Application of Advances. Lessee will apply each payment of Funded Amount against
amounts due and payable for construction of the Paris Facility or obligations in connection
therewith as set forth in each Request. Nothing contained in this Amendment will impose upon
Lessor any obligation to see to the proper application of the advances by Lessee or any other
party.

     13. Construction or Other Liens. In the event any construction or other lien or
encumbrance is filed or attached against the Paris Facility or any part thereof without the prior
written consent of Lessor, and the same is not being contested by Lessee in accordance with Article
XII of the Existing Master Lease, Lessor may, at its option and without regard to the priority of
such construction or other lien or encumbrance, and without regard to any defenses that Lessee may
have with respect to the lien or encumbrance, pay the same, and Lessee will reimburse all amounts
expended by Lessor for such purpose within ten (10) days of written notice thereof.

13

 

     14. Conditions to Final Payment. Lessor shall be entitled to withhold the final
payment of the Funded Amount unless and until all of the following conditions have been fulfilled
to Lessor’s satisfaction:

          (a) All conditions for all previous disbursements have been, and, as of the date of the final
disbursement continue to be, fulfilled.

          (b) Lessor have received, at least seven (7) Business Days prior to the final payment, the
following items, all of which Lessee agree to obtain and submit to Lessor at Lessee’ sole expense:

               (i) A final “as built” survey prepared and certified in accordance with the Survey
Requirements;

               (ii) Certificates of the Project Architect, Lessor’s Architect (if not the Project Architect),
and Lessee certified to both Lessor and Lessee and certifying that (a) to the best of its
knowledge, the Paris Facility are complete in accordance with the Plans and Specifications
therefor; (b) to the date thereof, there has been no material deviation from the budgeted cost of
the Paris Facility or construction progress schedule, except as authorized by Lessee and approved
by Lessor; and (c) the amount of the final payment will be sufficient to meet all known costs to
complete the work covered by the Plans and Specifications; and

               (iii) A final, unconditional certificate of occupancy for the Paris Facility.

     15. Guaranty of Completion. Subject to a temporary suspension of performance pursuant
to Section 16 or Lessor Delay, but regardless of whether the cost thereof exceeds the amount of the
Maximum Funded Amount, Lessee will diligently and continuously carry out or cause to be carried out
the construction of the Paris Facility so as to insure the completion of construction of the Paris
Facility, the opening of the Paris Facility and the acquisition of all Licenses for the Paris
Facility, all by the applicable Target Completion Date. Regardless of whether the cost thereof
exceeds the amount of the Funded Amount, Lessee will be responsible for payment of all costs of
completing, opening and licensing the Paris Facility, including the payment of all costs in excess
of the Construction Budgets. Promptly following receipt of written notice from Lessor specifying
the defect or departure, Lessee will correct any structural defects in the Paris Facility or any
departure from the Plans and Specifications not previously approved by Lessor. The approval or
absence of disapproval by Lessor of any payment of Funded Amount shall not constitute a waiver of
Lessor’s right to require compliance with this Section.

     16. Force Majeure. Upon the occurrence and during the continuance of an Event of
Force Majeure and the giving of written notice thereof to Lessor, Lessee shall be temporarily
released without any liability on its part from the performance of its obligations to construct the
Paris Facility under this Amendment, except for the obligation to pay any amounts due and owing
thereunder, but only to the extent and only for the period that its performance of each such
obligation is prevented by the Event of Force Majeure. Such notice shall include a description of
the nature of the Event of Force Majeure, and its cause and possible consequences. Lessee shall
promptly notify Lessor of the termination of such event. Upon the request of Lessor, Lessee shall
provide confirmation of the existence of the circumstances constituting an Event of Force

14

 

Majeure. Such evidence may consist of a statement of an appropriate governmental department
or agency where available, or a statement describing in detail the facts claimed to constitute an
Event of Force Majeure. During the period that the performance by Lessee has been suspended by
reason of an Event of Force Majeure, Lessor may likewise suspend the performance of all or part of
its obligations under this Amendment to the extent that such suspension is commercially reasonable
and, notwithstanding anything in this Amendment to the contrary, Lessor shall have no obligation to
make disbursements of the Funded Amount.

     17. Expenses of Lessor. All costs incurred by Lessor in connection with the
acquisition and construction of the Paris Facility and this Amendment, including, but not limited
to, Lessor’s legal counsel and due diligence costs, title insurance, survey, appraisal, UCC
searches and filing fees, environmental and building assessments, consulting fees and brokers’
fees, if any, shall be added to the Funded Amount; provided, however, to the extent the Maximum
Funded Amount has been funded by Lessor, such costs shall be paid (or reimbursed) to Lessor by
Lessee.

     18. Amendments to Certain Provisions of Existing Master Lease. Section 8.3 of the
Existing Master Lease is hereby amended to add the following new Section 8.3.3 as follows:

     8.3.3 Paris Facility Capital Expenditures. Notwithstanding the provisions of
Section 8.3.2 and as an exception thereto, Lessee shall not be required to expend any
Minimum Qualified Capital Expenditures during the first three (3) Lease Years, following the
Paris Base Rent Commencement Date. During such period, the number of licensed beds in the
Paris Facility shall be excluded from and not used in the calculations for determining the
Minimum Qualified Capital Expenditures under Section 8.3.2. During the fourth Lease Year
following the Paris Base Rent Commencement Date, Lessee shall expend with respect to the
Paris Facility at least One Hundred Fifty Dollars ($150.00) per-licensed-bed as Minimum
Qualified Capital Expenditures to improve the Paris Facility. During the fifth Lease Year
following the Paris Base Rent Commencement Date, Lessee shall expend with respect to the
Paris Facility at least Two Hundred Dollars ($200.00) per-licensed bed as Minimum Qualified
Capital Expenditure to improve the Paris Facility. Beginning with the sixth Lease Year
following the Paris Base Rent Commencement Date and continuing for the remainder of the
Term, Lessee shall expend with respect to the Paris Facility at least the amount of Minimum
Qualified Capital Expenditures per-licensed-bed to improve the Paris Facility as may be
required from time to time under Section 8.3.2, above.

     19. Single, indivisible Lease. The Master Lease constitutes one indivisible lease of
the Leased Properties, and not separate leases governed by similar terms. The Leased Properties
constitute one economic unit, and the Base Rent and all other provisions have been negotiated and
agreed to based on a demise of all of the Leased Properties as a single, composite, inseparable
transaction and would have been substantially different had separate leases or a divisible lease
been intended. Except as expressly provided herein for specific, isolated purposes (and then only
to the extent expressly otherwise stated), all provisions of this Lease apply equally and uniformly
to all the Leased Properties as one unit. An Event of Default with respect to any Leased Property
is an Event of Default as to all of the Leased Properties. The parties intend that the provisions
of this Lease shall at all times be construed, interpreted and applied so as to carry out their
mutual objective to create an indivisible lease of all the Leased Properties and, in

15

 

particular but without limitation, that for purposes of any assumption, rejection or
assignment of this Lease under 11 U.S.C. 365, this is one indivisible and non-severable lease and
executory contract dealing with one legal and economic unit which must be assumed, rejected or
assigned as a whole with respect to all (and only all) the Leased Properties covered hereby.

     20. Conditions to Commencement of Construction and Obligations of Lessor and Lessee under
this Amendment. Lessee shall not commence construction unless and until the the Acquisition
Date has occurred (the “Commencement Conditions”). If the Commencement Conditions have not
occurred on or before June 30, 2008, as such date may be extended by mutual agreement of Lessor and
Lessee, then either Lessor or Lessee may terminate their obligations under this Amendment by
written notice to other and this Amendment shall be of no further force or effect. If the
Commencement Conditions have not been satisfied on or before April 15, 2008, then the Target
Completion Date and the Rent Commencement Date shall each be extended one day for each day after
April 15, 2008 that the Commencement Conditions have not been satisfied.

     21. Representations and Warranties of Lessee. Lessee hereby represents and warrants
to Lessor that (i) it has the right and power and is duly authorized to enter into this Amendment;
and (ii) the execution of this Amendment does not and will not constitute a breach of any provision
contained in any agreement or instrument to which Lessee is or may become a party or by which
Lessee is or may be bound or affected.

     22. Execution and Counterparts. This Amendment may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but
when taken together shall constitute one and the same Amendment.

     23. Headings. Section headings used in this Amendment are for reference only and
shall not affect the construction of the Amendment.

     24. Enforceability. Except as expressly and specifically set forth herein, the
Existing Master Lease remains unmodified and in full force and effect. In the event of any
discrepancy between the Existing Master Lease and this Amendment, the terms and conditions of this
Amendment will control and the Existing Master Lease is deemed amended to conform hereto.

[SIGNATURE PAGES AND ACKNOWLEDGEMENTS FOLLOW]

16

 

Signature Page to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 

	 	LESSOR:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	STERLING ACQUISITION CORP.,
	 	 	a Kentucky corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Taylor Pickett	 	 
	 

	 	Name:
	 	 

Taylor Pickett
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

STATE OF
MARYLAND    )

COUNTY OF BALTIMORE )

This instrument was acknowledged before me on the 14th day of March, 2008, by Taylor Pickett, the
CEO of STERLING ACQUISITION CORP., a Kentucky corporation, on behalf of said company.

	 	 	 	 	 
	 

	 	/s/ Judith A. Jacobs	 	 
	 

	 	 

Notary Public, Baltimore County, MD
	 	 
	 

	 	My commission expires: May 1, 2008	 	 

Signature Page 1 of 2

 

 

Signature Page to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 

	 	LESSEE:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	DIVERSICARE LEASING CORP.,
	 	 	a Tennessee corporation
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Glynn Riddle
 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP and CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

This instrument was acknowledged before me on the 14th day of March, 2008, by Glynn Riddle, the EVP
& CFO of DIVERSICARE LEASING CORP., a Tennessee corporation, on behalf of said company

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed	 	 
	 

	 	 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My commission expires: 1/24/2010	 	 

Signature Page 2 of 2

 

 

Acknowledgment to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

     The undersigned hereby consent to the transactions contemplated by this Sixth Amendment to
Consolidated Amended and Restated Master Lease (the “Sixth Amendment”), ratify and affirm
their respective Guaranties, Pledge Agreements, Security Agreements, Subordination Agreements and
other Transaction Documents, and acknowledge and agree that the performance of the Master Lease
and obligations described therein are secured by their Guaranties, Pledge Agreements, Security
Agreement, Subordination Agreement and other Transaction Documents on the same terms and conditions
in effect prior to this Amendment.

	 	 	 	 	 	 	 
	 	 	ADVOCAT, INC. a Delaware corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Glynn Riddle	 	 
	 

	 	Name:
	 	 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP & CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

The foregoing instrument was acknowledged before me this 14th day of March, 2008, by Glynn Riddle,
who is EVP & CFO of ADVOCAT, INC. a Delaware corporation, on behalf of the corporation, who
acknowledged the same to be his or her free act and deed and the free act and deed of the
corporation.

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed	 	 
	 

	 	 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My Commission Expires: 1/24/2010	 	 

Acknowledgment Page 1 of 5

 

 

Acknowledgment to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 	 	DIVERSICARE MANAGEMENT SERVICES CO.,
	 	 	a Tennessee corporation
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Glynn Riddle
 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP & CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

The foregoing instrument was acknowledged before me this 14th day of March, 2008, by Glynn Riddle,
who is EVP & CFO of DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation, on behalf of the
corporation, who acknowledged the same to be his or her free act and deed and the free act and deed
of the corporation.

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed	 	 
	 

	 	 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My Commission Expires: 1/24/2010	 	 

Acknowledgment Page 2 of 5

 

 

Acknowledgment to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 	 	ADVOCAT FINANCE INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Glynn Riddle	 	 
	 

	 	Name:
	 	 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP & CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

The foregoing instrument was acknowledged before me this 14th day of March, 2008, by Glynn Riddle,
who is EVP & CFO of ADVOCAT FINANCE INC., a Delaware corporation, on behalf of the corporation, who
acknowledged the same to be his or her free act and deed and the free act and deed of the
corporation.

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed	 	 
	 

	 	 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My Commission Expires: 1/24/2010	 	 

Acknowledgment Page 3 of 5

 

 

Acknowledgment to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 	 	STERLING HEALTH CARE
	 	 	MANAGEMENT, INC., a Kentucky corporation
	 
	 

	 	By:
	 	/s/ Glynn Riddle	 	 
	 

	 	Name:
	 	 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP & CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

The foregoing instrument was acknowledged before me this 14th day of March, 2008, by Glynn Riddle,
who is EVP & CFO of STERLING HEALTH CARE MANAGEMENT, INC., a Kentucky corporation, on behalf of the
corporation, who acknowledged the same to be his or her free act and deed and the free act and deed
of the corporation.

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed
 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My Commission Expires: 1/24/2010	 	 

Acknowledgment Page 4 of 5

 

 

Acknowledgment to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 
	 	 	DIVERSICARE TEXAS I, LLC
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Glynn Riddle	 	 
	 
	 	 	 	
 
	 	 
	 
	 	Name:	 	Glynn Riddle	 	 
	 

	 	Title:
	 	EVP & CFO	 	 
	 
	 	 	 	 	 	 
	 	 	DIVERSICARE BALLINGER, LLC
	 	 	DIVERSICARE DOCTORS, LLC
	 	 	DIVERSICARE ESTATES, LLC
	 	 	DIVERSICARE HUMBLE, LLC
	 	 	DIVERSICARE KATY, LLC
	 	 	DIVERSICARE NORMANDY TERRACE, LLC
	 	 	DIVERSICARE TREEMONT, LLC
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	DIVERSICARE TEXAS I, LLC,

its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Glynn Riddle	 	 
	 

	 	Name:
	 	 

Glynn Riddle
	 	 
	 

	 	Title:
	 	EVP & CFO	 	 

STATE OF TENNESSEE         )

COUNTY OF WILLIAMSON )

The foregoing instrument was acknowledged before me this 14th day of March, 2008, by Glynn Riddle,
who is EVP & CFO of DIVERSICARE TEXAS I, LLC, on behalf of itself and as the sole member of each of
DIVERSICARE BALLINGER, LLC, DIVERSICARE DOCTORS, LLC, DIVERSICARE ESTATES, LLC, DIVERSICARE HUMBLE,
LLC, DIVERSICARE KATY, LLC, DIVERSICARE NORMANDY TERRACE, LLC, and DIVERSICARE TREEMONT, LLC, each
a Delaware limited liability company, on behalf of the limited liability companies, who
acknowledged the same to be his or her free act and deed and the free act and deed of the limited
liability companies.

	 	 	 	 	 
	 

	 	/s/ Jacqueline S. Reed
 

Notary Public, Tenn. County, Williamson
	 	 
	 

	 	My Commission Expires: 1/24/2010	 	 

Acknowledgment Page 5 of 5

 

 

List of Exhibits and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 
	Exhibit A

	 	Legal Description of Paris Facility
	 
	 	 
	Exhibit B

	 	Survey Requirements
	 
	 	 
	Exhibit C

	 	List of Facilities and Facility Trade Names
	 
	 	 
	Exhibit D

	 	Permitted Encumbrances for Paris Facility
	 
	 	 
	Schedule 1

	 	Construction Budget

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

EXHIBIT A

     Situated within the Limits of the City of Paris, County of
Lamar,
and State of Texas, part of the Reddin Russell Survey #786, and being part of a called and being a part of a
called 172.5 acre tract of land conveyed to May Belle Dunagan by deed recorded in Vol. 208, Page 316, of the Deed Records of said County and State.

     Beginning
at a 1/2”
iron pin (f) for corner at the
Easterly Northeast corner of a called 31.61 acre tract of land conveyed to North Lamar Independent
School District by deed recording in Vol. 714, Page 748, of
said Deed Records, said North Lamar ISD 31.61 acre tract originally being a part of said Dunagan 172.5 acre tract.

     Thence North
26’57’07” West a distance of 798.43 feet to a 1/2”
capped (NELSON SURVEYING) iron pin (f)
for corner at the Northerly Northeast corner of said North Lamar ISD 31.61 acre tract;

     Thence
South 86’45’33” East a distance of 505.04 feet to a
1/2”
capped (NELSON SURVEYING) iron pin (s) for corner;

     Thence South
35’43’12” East a distance of 448.76 feet to a
1/2”
capped (NELSON SURVEYING) iron pin (s) for corner;

     Thence along the Northwesterly Boundary Line of said Stillhouse Road / Lamar County Road 41100
as follows:
South 54’43’04” West a distance of 43.45 feet to a
1/2”
capped (NELSON SURVEYING) iron pin (f);
South 55’2’33” West a distance of 162.05 feet to a
1/2”
a capped (NELSON SURVEYING) iron pin (f);
South 51’44’20” West a distance of 98.92 feet to a
1/2”
capped (NELSON SURVEYING) iron pin (f);
South 48’17’45” West a distance of 105.04 feet to a
1/2”
capped (NELSON SURVEYING) iron pin (f);
South 48’54’59” West a distance of 106.10 feet to the place of beginning and containing 286,255.28 square feet, or 6.5708 acres of land.

Note: Legal description will be revised as appropriate to match legal description of deed delivered
to Lessor on the Acquisition Date.

Exhibit A – Page 1 of 1

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED
AMENDED AND RESTATED MASTER LEASE

Exhibit B

SURVEY REQUIREMENTS

A staked, boundary survey of the property (including a legally adequate property description and a
statement of acreage). The survey shall be prepared by a surveyor or engineer duly licensed to
practice as such in the State of ___, acceptable to the Lessor and the title company,
shall be certified to the lender and the title company, and shall be a [specify either “Urban”,
“Suburban”, “Rural” or “Mountain”] “ALTA/ACSM LAND TITLE SURVEY” meeting the currently effective
Accuracy Standards adopted by ALTA and ACSM. The survey shall also incorporate items 1, 2, 3, 4,
6, 7, 8, 9, 10, 11, 13, 14, 16, 17 and 18 listed in Table A of the Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and ACSM in
2005.

SURVEY CERTIFICATION

                                         certify to (name of lessor) and (name of title company) that this map
or plat and the survey on which it is based were made (i) in accordance with the “Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys” jointly established and adopted by ALTA and
ACSM in 2005, and incorporates items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 13, 14, 16, 17 and 18 listed
in Table A thereof, (ii) pursuant to the Accuracy Standards adopted by ALTA and ACSM and in effect
on the date of this certification for a(n) [insert either “Urban”, “Suburban”, “Rural”, or
“Mountain”] Survey, and (iii) after a review of (name of title company) Commitment No. ___,
effective date                     , 200___and the instruments referred to therein as exceptions to title.

	 	 	 	 	 
	Date:                    

	 	                                                             
	 	 
	 

	 	(signature of surveyor)	 	 

Exhibit B — Page 1 of 1

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

EXHIBIT C

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Name	 	Street Address	 	City	 	County	 	State	 	Zip
	1.

	 	Arbor Oaks Health & Rehab

Center (Stillmeadow)
	 	105 Russellville Road,

Route 2, Highway 67 South
	 	Malvern
	 	Hot Spring
	 	AR
	 	 	72104	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2.

	 	Ash Flat Nursing & Rehab

Center
	 	66 Ozbirn Lane
	 	Ash Flat
	 	Sharp
	 	AR
	 	 	72513	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3.

	 	Best Care, Inc.
	 	2159 Dogwood Ridge
	 	Wheelersburg
	 	Scioto
	 	OH
	 	 	45694	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4.

	 	Boone Health Care Center,
Inc.
	 	Lick Creek Road, P.O. Box
605
	 	Danville
	 	Boone
	 	WV
	 	 	25053	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	5.

	 	Boyd Nursing and Rehab
Center
	 	12800 Princeland Drive
	 	Ashland
	 	Boyd
	 	KY
	 	 	41102	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	6.

	 	Canterbury Health Center
	 	1720 Knowles Road
	 	Phenix City
	 	Russell
	 	AL
	 	 	36867	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	7.

	 	Carter Nursing & Rehab

Center
	 	250 McDavid Boulevard,
P.O. Box 904
	 	Grayson
	 	Carter
	 	KY
	 	 	41143	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	8.

	 	Conway Health & Rehab

Center (Faulkner)
	 	2603 Dave Ward Drive
	 	Conway
	 	Faulkner
	 	AR
	 	 	72032	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	9.

	 	Des Arc Nursing & Rehab

Center
	 	2216 West Main, P.O. box
143B
	 	Des Arc
	 	Prairie
	 	AR
	 	 	72040	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	10.

	 	Elliott Nursing & Rehab

Center
	 	Howard Creek Road, P.O.
Box 694, Route 32 East
	 	Sandy Hook
	 	Elliott
	 	KY
	 	 	41171	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	11.

	 	Garland Nursing & Rehab
Center and Apts.
	 	610 Carpenter Dam Road
	 	Hot Springs
	 	Garland
	 	AR
	 	 	71901	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	12.

	 	Hardee Manor Care Center
	 	401 Orange Place
	 	Wauchula
	 	Hardee
	 	FL
	 	 	33873	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	13.

	 	Laurel Manor Health Center
	 	902 Buchanan Road, P.O.
Box 505
	 	New Tazewell
	 	Claiborne
	 	TN
	 	 	37825	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	14.

	 	Laurel Nursing & Rehab

Center
	 	HC 75, Box 153, Clinic Road
	 	Ivydale
	 	Clay
	 	WV
	 	 	25113	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	15.

	 	Lynwood Nursing Home
	 	4164 Halls Mill Road
	 	Mobile
	 	Mobile
	 	AL
	 	 	36693	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	16.

	 	Manor House of Dover
	 	537 Spring Street, P.O.
Box 399
	 	Dover
	 	Stewart
	 	TN
	 	 	37058	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	17.

	 	Mayfield Rehab and Special
Care Center
	 	200 Mayfield Drive
	 	Smyrna
	 	Rutherford
	 	TN
	 	 	37167	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	18.

	 	Northside Health Care
	 	700 Hutchins Ave
	 	Gadsden
	 	Etowah
	 	AL
	 	 	35901	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	19.

	 	Ouachita Nursing /Pine
Manor Apts.
	 	1411 Country Club Road
	 	Camden
	 	Ouachita
	 	AR
	 	 	71701	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20.

	 	Pocahontas Nursing & Rehab

Center
	 	105 Country Club Road
	 	Pocahontas
	 	Randolph
	 	AR
	 	 	72455	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	21.

	 	Rich Mountain Nursing &

Rehab Center
	 	306 Hornbeck
	 	Mena
	 	Polk
	 	AR
	 	 	71953	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	22.

	 	Sheridan Nursing & Rehab

Center
	 	113 South Briarwood Drive
	 	Sheridan
	 	Grant
	 	AR
	 	 	72150	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	23.

	 	South Shore Nursing &

Rehab Center
	 	James Hannah Drive, P.O.
box 489
	 	South Shore
	 	Greenup
	 	KY
	 	 	41175	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	24.

	 	The Pines Nursing & Rehab

Center
	 	524 Carpenter Dam Road
	 	Hot Springs
	 	Garland
	 	AR
	 	 	71901	 
	 
	25.

	 	Walnut Ridge Nursing &

Rehab Center
	 	1500 West Main
	 	Walnut Ridge
	 	Lawrence
	 	AR
	 	 	72476	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	26.

	 	West Liberty Nursing &

Rehab Center
	 	774 Liberty Road, P.O. Box
219, Route 5 Wells Hill
	 	West Liberty
	 	Morgan
	 	KY
	 	 	41472	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	27.

	 	Westside Health Care Center
	 	4320 Judith Lane
	 	Huntsville
	 	Madison
	 	AL
	 	 	35805	 

Exhibit C – Page 1 of 2

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Name	 	Street Address	 	City	 	County	 	State	 	Zip
	28.

	 	Wurtland Nursing & Rehab

Center
	 	100 Wurtland Avenue, P.O.
Box 677
	 	Wurtland
	 	Greenup
	 	KY
	 	 	41144	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	29.

	 	Doctors Healthcare
	 	9009 White Rock Trail
	 	Dallas
	 	Dallas
	 	TX
	 	 	75238	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	30.

	 	Estates at Ft. Worth
	 	201 Sycamore School Road
	 	Fort Worth
	 	Tarrant
	 	TX
	 	 	76134	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	31.

	 	Heritage Oaks Estates
	 	2001 N. 6th Street
	 	Ballinger
	 	Runnels
	 	TX
	 	 	76821	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	32.

	 	Humble
	 	8450 Will Clayton Parkway
	 	Humble
	 	Harris
	 	TX
	 	 	77338	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	33.

	 	IHS of Dallas at Treemont
	 	5550 Harvest Hill Road
	 	Dallas
	 	Dallas
	 	TX
	 	 	75230	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	34.

	 	Katy
	 	1525 Tull Drive
	 	Katy
	 	Harris
	 	TX
	 	 	77499	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	35.

	 	Normandy Terrace
	 	841 Rice Road
	 	San Antonio
	 	Bexar
	 	TX
	 	 	78220	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	36.

	 	Paris Facility
	 	### Stillhouse Road
	 	Paris
	 	Lamar
	 	TX	 	 	 	 

Exhibit C – Page 2 of 2

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

EXHIBIT D

Permitted Exceptions

	1.	 	Easement to Texas Power & Light Co. dated 07/08/52 and recorded in Book 327, Page 397, Lamar
County Deed Records.
	 
	2.	 	Easement to Texas Power & Light Co., dated 05/09/56 and recorded in Book 349, Page 456, Lamar
County Deed Records.
	 
	3.	 	Easement to Texas Power & Light Co., dated 05/12/66 and recorded in Book 443, Page 175, Lamar
County Deed Records.
	 
	4.	 	Easement to Texas Power & Light Co, dated 03/21/68 and recorded in Book 469, Page 237, Lamar
County Deed Records.
	 
	5.	 	Right of Way Easement to Lamar County Water Supply dated 02/09/83, and recorded in Book 655,
Page 112, Lamar County Deed Records.
	 
	6.	 	Easement and Right of Way to Texas Power & Light Co., dated 05/17/49, and recorded in
Book 308, Page 600, Lamar County Deed Records.

Exhibit D – Page 1 of 1

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

SCHEDULE 1

Construction Budget

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Omega/Paris
	 	 	 	 	 	 	 	 	 	 	Estimated Project Cost
	FACILITY DESCRIPTION
	 	 	 	 	 	 	 	 	 	 	 	 
	Size in Square Feet
	 	 	 	 	 	 	 	 	 	 	45,000	 
	Stories
	 	 	 	 	 	 	 	 	 	 	1	 
	Units
	 	 	 	 	 	 	 	 	 	 	70	 
	Beds
	 	 	 	 	 	 	 	 	 	 	120	 
	Medicaid Beds
	 	 	 	 	 	 	 	 	 	 	 	 
	Double Occupancy (Units)
	 	 	 	 	 	 	 	 	 	 	50	 
	 
	Approximate Land Size (Acres)
	 	 	 	 	 	 	 	 	 	 	6.489	 
	Approximate Land Size (SF)
	 	 	 	 	 	 	 	 	 	 	282,661	 
	Units per Acre
	 	 	 	 	 	 	 	 	 	 	11	 
	Beds per Acre
	 	 	 	 	 	 	 	 	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	DEVELOPMENT COST ANALYSIS
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Development Cost
	 	 	 	 	 	 	 	 	 	 	6,841,902	 
	Total Development Cost per Sq. Ft.
	 	 	 	 	 	 	 	 	 	 	152.04	 
	Total Development Cost per Unit
	 	 	 	 	 	 	 	 	 	 	97,741	 
	Total Development Cost per Bed
	 	 	 	 	 	 	 	 	 	 	57,016	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Land Cost [1]
	 	 	 	 	 	 	 	 	 	 	175,203	 
	Land Cost per Sq. Ft.
	 	 	 	 	 	 	 	 	 	 	0.62	 
	Land Cost per Acre
	 	 	 	 	 	 	 	 	 	 	27,000	 
	Land Cost per Unit
	 	 	 	 	 	 	 	 	 	 	2,503	 
	Land Cost per Bed
	 	 	 	 	 	 	 	 	 	 	1,460	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Building Cost
	 	 	 	 	 	 	 	 	 	 	4,000,635	 
	Building Cost per Sq. Ft.
	 	 	 	 	 	 	 	 	 	 	88.90	 
	Building Cost per Unit
	 	 	 	 	 	 	 	 	 	 	57,152	 
	Building Cost per Bed
	 	 	 	 	 	 	 	 	 	 	33,339	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	FF& E
	 	 	 	 	 	 	 	 	 	 	552,500	 
	FF& E per Sq. Ft.
	 	 	 	 	 	 	 	 	 	 	12.28	 
	FF& E per Unit
	 	 	 	 	 	 	 	 	 	 	7,893	 
	FF& E per Bed
	 	 	 	 	 	 	 	 	 	 	4,604	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Ach. & Eng. Fees
	 	 	 	 	 	 	 	 	 	 	184,500	 
	Site Work
	 	 	 	 	 	 	 	 	 	 	602,000	 
	Interest Expense [2]
	 	 	 	 	 	 	 	 	 	 	315,000	 
	Contingency [3]
	 	 	2.90	%	 	 	10.0	%	 	 	400,064	 

Schedule 1 – Page 1 of 2

 

 

Exhibit and Schedules to

SIXTH AMENDMENT TO CONSOLIDATED

AMENDED AND RESTATED MASTER LEASE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Omega/Paris
	 	 	 	 	 	 	 	 	 	 	Estimated Project Cost
	Medicaid Bed Contract [4]
	 	$	4,167	 	 	$	4,000	 	 	 	408,000	 
	Title
	 	 	 	 	 	 	 	 	 	 	35,000	 
	Misc. Administrative Project Exp.
	 	 	 	 	 	 	 	 	 	 	7,500	 
	Closing Fee
	 	 	 	 	 	 	 	 	 	 	5,000	 
	Property Tax
	 	 	 	 	 	 	 	 	 	 	25,000	 
	Developer’s Fee
	 	 	 	 	 	 	 	 	 	 	80,000	 
	Points [5]
	 	 	1.15	%	 	 	0.00	%	 	 	0	 
	Appraisal
	 	 	 	 	 	 	 	 	 	 	4,500	 
	Insurance Premium
	 	 	 	 	 	 	 	 	 	 	12,000	 
	Legal (Transaction Specific)
	 	 	 	 	 	 	 	 	 	 	35,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL CONSTRUCTION COSTS
	 	 	 	 	 	 	 	 	 	 	6,841,902	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cost per Bed
	 	 	140	 	 	 	 	 	 	 	48,871	 
	Cost per Bed
	 	 	120	 	 	 	 	 	 	 	57,016	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Resulting Annual Rent at 10.25%
	 	 	 	 	 	 	 	 	 	 	701,294.90	 

Schedule 1 – Page 2 of 2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]