ADVOCAT INC
PROMISSORY NOTE
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>12
<FILENAME>g71016ex10-10.txt
<DESCRIPTION>PROMISSORY NOTE
<TEXT>
<PAGE>   1

                                                                  EXHIBIT 10.10




                                 PROMISSORY NOTE

$4,709,000.00                                               Nashville, Tennessee
                                                            March 29, 2001


        FOR VALUE RECEIVED, the undersigned DIVERSICARE WINDSOR HOUSE, LLC, a
Delaware limited liability company, having an address at 277 Mallory Station
Road, Suite 130, Franklin, Tennessee 37067 (the "Borrower"), hereby promises to
pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, having an address at 200 Witmer Road, Horsham, Pennsylvania 19044
(the "Lender"), its successors and assigns as holder of this Note or, if this
Note has then been endorsed "to bearer," to the bearer of this Note (the Lender,
its said successors and assigns, and any such bearer, being hereinafter
sometimes referred to collectively as the "Holder"), at the Lender's said
address or at such other place or to such other person as may be designated in
writing to the Borrower by the Lender, the principal sum of Four Million Seven
Hundred Nine Thousand and No/100 Dollars ($4,709,000.00) (the "Loan"), together
with interest on the unpaid balance thereof at the rate hereinafter set forth.

        ON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:

        Section 1. Interest Rate and Payment Dates.

        1.1 Initial Rate and Initial Payment. Interest shall accrue on the
outstanding balance of the principal amount outstanding hereunder from time to
time from and after the date hereof at the rate of 8.5838 percent per annum
until the first Rate Adjustment Date (as defined below). On each successive Rate
Adjustment Date, the rate of interest at which interest accrues shall be
adjusted to the then applicable Note Rate (as defined below). Interest for the
period beginning on the date of this Note and ending on and including the last
day of the month in which this Note is dated shall be payable on the date
hereof. Interest shall be paid in arrears and shall be computed on the basis of
a 360-day year and actual number of days elapsed for any whole or partial month
in which interest on the loan is being calculated and shall be charged on the
principal balance outstanding from time to time.

        1.2 Rate Adjustment Date and Payment Adjustment Dates. The interest rate
shall be adjusted on the dates (each being a "Rate Adjustment Date") described
in this paragraph. The first Rate Adjustment Date shall be April 1, 2001, and
subsequent Rate Adjustment Dates shall fall on the first day of each subsequent
one month anniversary thereafter. The first payment adjustment date shall be May
1, 2001, and subsequent payment adjustment dates shall fall on the first day of
each calendar month thereafter during the term of the Loan.

        1.3 Default Interest Rate. If the Borrower fails to make any payment of
principal, interest or fees on the date on which such payment becomes due and
payable (including applicable grace periods) whether at maturity or by
acceleration or on any other date, such payment shall accrue interest from the
date on which such payment was due (and not the date of the payment


<PAGE>   2


default) until paid at the fluctuating rate ("Default Rate") which is the lesser
of (a) five (5) percentage points above the then applicable LIBOR Rate (as
defined below) and (b) the maximum rate permitted by applicable law.

        1.4 LIBOR Rate. The LIBOR Rate shall mean the average of London
Interbank Offered Rates ("LIBOR") for a term of one month determined solely by
Holder as of each Rate Adjustment Date plus three hundred fifty (350) basis
points per annum, determined in the manner herein set forth below. On each Rate
Adjustment Date, Holder will obtain the one month LIBOR (in U.S. Dollar
deposits) from the appropriate Bloomberg display page available as of the close
of business announced on the last business day of the month immediately
preceding the Rate Adjustment Date. In the event Bloomberg ceases publication or
ceases to publish the one month LIBOR, Holder shall select a comparable
publication to determine the one month LIBOR and provide notice thereof to
Borrower. LIBOR may or may not be the lowest rate based upon the market for U.S.
Dollar deposits in the London Interbank Eurodollar Market at which the Holder
prices loans on the date on which the LIBOR Rate is determined by Holder as set
forth above.

        1.5 LIBOR Rate Adjustments. This Note shall bear interest at the rate
set forth above or at the applicable LIBOR Rate until a new LIBOR Rate is
determined on each Rate Adjustment Date in accordance with the provisions
hereof; provided, however, that, if Holder at any time determines, in the sole
but reasonable exercise of its discretion, that it has miscalculated the amount
of the monthly payment of principal and/or interest (whether because of a
miscalculation of the LIBOR Rate or otherwise), then Holder shall give notice to
Borrower of the corrected amount of such monthly payment (and the corrected
amount of the LIBOR Rate, if applicable) and (a) if the corrected amount of such
monthly payment represents an increase thereof, then Borrower shall, within ten
(10) calendar days thereafter, pay to Holder any sums that Borrower would have
otherwise been obligated under this Note to pay to Holder had the amount of such
monthly payment not been miscalculated, or (b) if the corrected amount of such
monthly payment represents a decrease thereof and Borrower is not otherwise in
breach or default under any of the terms and provisions of the Note or the Loan
Agreement, then Borrower shall, within (10) calendar days thereafter be paid the
sums that Borrower would not have otherwise been obligated to pay to Holder had
the amount of such monthly payment not been miscalculated.

        1.6 LIBOR Unascertainable. If (a) on any date on which the LIBOR Rate
would otherwise be set, Holder shall have determined in good faith (which
determination shall be conclusive) that (i) adequate and reasonable means do not
exist for ascertaining the one month LIBOR, or (ii) a contingency has occurred
which materially and adversely affects the London Interbank Eurodollar Market at
which Holder prices loans on the date on which the LIBOR Rate is determined by
Holder as set forth above, or (b) at any time Holder shall have determined in
good faith (which determination shall be conclusive) that the making,
maintenance or funding of any part of the Loan has been made impracticable or
unlawful by compliance by Holder in good faith with any Law or guideline or
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof or with any request or
directive of any such Governmental Authority (whether or not having the force of
law) then, and in any such event, Holder may notify Borrower of such
determination. Upon such date as shall be specified in such notice (which shall
not be earlier than the date such notice is given) the obligation of Holder to




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charge interest to Borrower at the LIBOR Rate shall be suspended until Holder
shall have later notified Borrower of Holder's determination in good faith
(which determination shall be conclusive) that the circumstances giving rise to
such previous determination no longer exist.

        1.7 U.S. Treasury Securities. If Holder notifies Borrower of a
determination under subsection 1.6 hereof for purposes of calculating the LIBOR
Rate, the one month LIBOR shall automatically be converted to the "Index" of the
weekly average yield on United States Treasury Securities adjusted to a constant
maturity of one year, as made available by the Federal Reserve Board 45 days
prior to the Rate Adjustment Date.

        1.8 Reimbursement for Increased Costs. If any law or guideline or
interpretation or application thereof by any Governmental Authority charged with
the interpretation or administration thereof or compliance with any request or
directive of any Governmental Authority (whether or not having the force of law)
now existing or hereafter adopted (a) subjects Holder to any tax or changes the
basis of taxation with respect to this Note, the Loan or payments by Borrower of
principal, interest or other amounts due from Borrower hereunder or thereunder
(except for taxes on the overall net income or overall gross receipts of Holder
imposed as a result of a present or former connection between the jurisdiction
of the Governmental Authority imposing such tax on Holder, provided, that this
exclusion shall not apply to a connection arising solely from Holder having
executed, delivered, performed its obligations under or received a payment
under, or enforced any of the Loan Documents (as defined in Section 8.1.1
below)), or (b) imposes upon Holder any other condition or expense with respect
to this Note, the Loan or its making, maintenance or funding of any part of the
Loan or any security therefor, and the result of any of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
(including, without limitation, loss of margin) upon Holder with respect to the
Note, or the making, maintenance or funding of any part of the Loan, by an
amount which Holder deems to be material, Holder may from time to time notify
Borrower of the amount determined in good faith (using any averaging and
attribution methods) by Holder (which determination shall be conclusive) to be
necessary to compensate Holder for such increase, reduction or imposition and,
if Borrower is by law prohibited from paying any such amount, Holder may elect
to declare the unpaid principal balance hereof and all interest accrued thereon
immediately due and payable. Such amount shall be due and payable by Borrower to
Holder ten (10) days after such notice is given.

        Section 2. Payments.

        2.1 Intentionally Deleted.

        2.2 Principal and Interest Payments. Commencing on May 1, 2001 and
continuing on the first day of each calendar month thereafter through and
including the Maturity Date (defined below) monthly payments of principal and
interest in installments in such amount as is necessary, taking into account the
then effective LIBOR Rate to fully amortize the unpaid principal balance of the
Note over an assumed period of 25 years; provided, however, the entire unpaid
principal balance together with interest thereon shall be due and payable in
full on April 1, 2006.




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<PAGE>   4

        Section 3. Application of Payments. Payments made by Borrower on account
hereof shall be applied, first, toward any Late Fees (hereinafter defined) or
other fees and charges due hereunder, second, toward payment of any interest due
at the Default Rate, third, toward payment of any interest due at the then
applicable LIBOR Rate set forth in Section 1.4 above, and fourth, toward payment
of principal. Notwithstanding the foregoing, if any advances made by Holder
under the terms of any instruments securing this Note have not been repaid, any
payments made may, at the option of Holder, be applied, first, to repay such
advances, and interest thereon, with the balance, if any, applied as set forth
in the preceding sentence.

        Section 4. Maturity. Anything in this Note to the contrary
notwithstanding, the entire unpaid balance of the principal amount hereof and
all interest accrued thereon, to and including the Maturity Date (as defined
below), (including interest accruing at the Default Rate) and all Late Fees (as
defined below) shall, unless sooner paid, and except to the extent that payment
thereof is sooner accelerated, be and become due and payable on April 1, 2006
(the "Maturity Date"). Notwithstanding anything contained herein, if repayment
of the Loan is funded from the proceeds of any refinancing of the Loan pursuant
to which Holder does not receive a contractually agreed upon sum for the
arrangement thereof, then Borrower shall pay to Holder a premium equal to one-
half of one percent (.05%) of the outstanding principal balance of the Note on
the date of such prepayment.

        Section 5. Prepayment.

        Prepayment of the Loan in full or in part shall be permitted at any time
during the term of the Loan without penalty, upon not less than thirty (30) and
not greater than forty (40) days prior written notice to Lender specifying the
date on which prepayment is to be made. Any such prepayment shall be credited,
first, toward any Late Fees due hereunder, second, toward payment of any
interest due at the Default Rate, third, toward payment of any interest due
hereunder at the LIBOR Rate, and, fourth, toward payment of principal; provided,
however, that if any advances made by Holder under the terms of any instruments
securing this Note have not been repaid, any payments made may, at the option of
Holder, be applied, first, to repay such advances, and interest thereon, with
the balance, if any, applied as set forth in the preceding sentence.
Notwithstanding anything contained herein, if such prepayment set forth herein
is funded from the proceeds of any refinancing of the Loan pursuant to which the
Holder does not receive a contractually agreed upon sum for the arrangement
thereof, then Borrower shall pay to Holder a repayment in full as premium equal
to one half of one percent (.05%) of the outstanding principal balance of the
Note on the date of such prepayment (which balance shall be calculated exclusive
of any voluntary partial prepayment).

        Section 6. Method of Payment.

        Each payment of the Loan Obligations (as defined in the Loan Agreement)
shall be paid directly to the Holder in lawful tender of the United States of
America. Each such payment shall be paid by 1:00 p.m. Horsham, Pennsylvania,
time on the date such payment is due, except if such date is not a Business Day
(as defined in the Loan Agreement) such payment shall then be due on the first
Business Day after such date. Any payment received after 1:00 p.m. Horsham,




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<PAGE>   5


Pennsylvania, time shall be deemed to have been received on the immediately
following Business Day.

        Section 7. Security.

        The debt evidenced by this Note is to be secured by, among other things,
(a) a Mortgage and Security Agreement (the "Mortgage") of even date herewith by
and between Borrower and Holder, and intended to be recorded in the office of
the Judge of Probate of Madison County, Alabama and covering all of that real
property in the said Madison County, Alabama, which is described in Exhibit "A"
thereto (the "Property"), and (b) a Guaranty Agreement of even date herewith
("Guaranty Agreement"), given by Advocat Inc., a Delaware corporation (the
"Guarantor"), for the benefit of Holder.

        Section 8. Default.

        8.1 Events of Default. Anything in this Note to the contrary
notwithstanding, on the occurrence of any of the following events (each of which
is hereinafter referred to as an "Event of Default"), the Holder may, in the
exercise of its sole and absolute discretion, accelerate the debt evidenced by
this Note, in which event the entire outstanding principal balance and all
interest and fees accrued thereon shall immediately be and become due and
payable without further notice:

            8.1.1 Failure to Pay or Perform. If (a) the Borrower fails in making
any payment to the Holder of any or all sums due hereunder within ten (10) days
after such payment becomes due or on the Maturity Date or (b) there exists an
uncured default under any other document or instrument evidencing or securing
the Loan (collectively, the "Loan Documents") which has been executed by
Borrower and/or Guarantor, and such default is not cured within the grace or
cure period, if any, provided in any of such Loan Documents.

            8.1.2 Bankruptcy.

                  (a) If the Borrower or Guarantor (i) applies for or consents
to the appointment of a receiver, trustee or liquidator of the Borrower or
Guarantor, as the case may be, or of all or a substantial part of its assets,
(ii) files a voluntary petition in bankruptcy, or admits in writing its
inability to pay its debts as they come due, (iii) makes an assignment for the
benefit of creditors, (iv) files a petition or an answer seeking a
reorganization or an arrangement with creditors or seeking to take advantage of
any insolvency law, (v) performs any other act of bankruptcy, or (vi) files an
answer admitting the material allegations of a petition filed against the
Borrower or Guarantor in any bankruptcy, reorganization or insolvency
proceeding; or

                  (b) if (i) an order, judgment or decree is entered by any
court of competent jurisdiction adjudicating the Borrower or Guarantor a
bankrupt or an insolvent, or approving a receiver, trustee or liquidator of the
Borrower or Guarantor or of all or a substantial part of its assets, or (ii)
there otherwise commences with respect to the Borrower or Guarantor or any of
its assets any proceeding under any bankruptcy, reorganization, arrangement,
insolvency, readjustment, receivership or like law or statute, and if such
order, judgment, decree or proceeding



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continues unstayed for any period of sixty (60) consecutive days after the
expiration of any stay thereof.

            8.1.3 Judgments. If any judgment for the payment of money in excess
of $100,000.00 hereafter awarded against the Borrower or Guarantor by any court
of competent jurisdiction remains unsatisfied or otherwise in force and effect
for a period of thirty (30) days after the date of such award.

            8.1.4 Cross-Defaults. Pursuant to that certain
Cross-Collateralization and Cross-Default Agreement of even date herewith by
and among the Borrower, Diversicare Pinedale, LLC, a Delaware limited liability
company ("Pinedale") and the Lender, the Loan shall be cross-defaulted with a
loan made by the Lender to Pinedale.

        8.2 No Impairment of Rights. Nothing in this Section shall be deemed in
any way to alter or impair any right which the Holder has under this Note or the
Mortgage, or any of the other Loan Documents or at law or in equity, to
accelerate such debt on the occurrence of any other Event of Default provided
herein or therein, whether or not relating to this Note.

        8.3 Late Fees. Without limiting the generality of the foregoing
provisions of this Section, if any payment of interest or principal is not made
prior to ten (10) days after the date on which it becomes due, the Borrower
shall thereupon automatically become obligated immediately to pay to the Holder
a late charge equal to the lesser of five percent (5%) of the amount of such
payment or the maximum amount permitted by applicable law ("Late Fees") to
defray the expenses incurred by Holder in handling and processing such
delinquent payment and to compensate Holder for the loss of use of such
delinquent payment, which sum shall be due and payable immediately thereupon.

        Section 9. Costs of Enforcement.

        The Borrower shall pay to the Holder on demand by the latter the amount
of any and all expenses incurred by the Holder (a) in enforcing its rights
hereunder or under the Mortgage and/or the Loan Documents, (b) as the result of
a default by the Borrower in performing its obligations under this Note,
including but not limited to the expense of collecting any amount owed
hereunder, and of any and all reasonable attorneys' fees incurred by Holder in
connection with such default, whether suit be brought or not, or (c) in
protecting the security hereof. Such expenses shall be added to the principal
amount hereof, shall be secured by the Mortgage and shall accrue interest at the
Default Rate.

        Section 10. Borrower's Waiver of Certain Rights.

        The Borrower and any endorser, guarantor or surety hereby waives the
exercise of any and all exemption rights which it holds at law or in equity with
respect to the debt evidenced by this Note, and of any and all rights which it
holds at law or in equity to require any valuation, appraisal or marshalling, or
to have or receive any presentment, protest, demand and notice of dishonor,



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protest, demand and nonpayment as a condition to the Holder's exercise of any of
its rights under this Note or the Loan Documents.

        Section 11. Extensions.

        The Maturity Date and/or any other date by which any payment is required
to be made hereunder may be extended by the Holder from time to time in the
exercise of its sole discretion, without in any way altering or impairing the
Borrower's or Guarantor's liability hereunder.

        Section 12. General.

        12.1 Applicable Law. This Note shall be given effect and construed by
application of the laws of the State of Alabama (without regard to the
principles thereof governing conflicts of laws), and any action or proceeding
arising hereunder, and each of Holder and Borrower submits (and waives all
rights to object) to non-exclusive personal jurisdiction in the State of
Alabama, for the enforcement of any and all obligations under the Loan Documents
except that if any such action or proceeding arises under the Constitution, laws
or treaties of the United States of America, or if there is a diversity of
citizenship between the parties thereto, so that it is to be brought in a United
States District Court, it shall be brought in the United States District Court
for the Northern District of Alabama or any successor federal court having
original jurisdiction.

        12.2 Headings. The headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.

        12.3 Construction. As used herein, (a) the term "person" means a natural
person, a trustee, a corporation, a limited liability company, a partnership and
any other form of legal entity, and (b) all references made (i) in the neuter,
masculine or feminine gender shall be deemed to have been made in all such
genders, (ii) in the singular or plural number shall be deemed to have been
made, respectively, in the plural or singular number as well, and (iii) to any
Section, subsection, paragraph or subparagraph shall, unless therein expressly
indicated to the contrary, be deemed to have been made to such Section,
subsection, paragraph or subparagraph of this Note.

        12.4 Severability. No determination by any court, governmental body or
otherwise that any provision of this Note or any amendment hereof is invalid or
unenforceable in any instance shall affect the validity or enforceability of (a)
any other such provision or (b) such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.

        12.5 No Waiver. The Holder shall not be deemed to have waived the
exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing. No delay or omission by the Holder in exercising any
such right (and no allowance by the Holder to the Borrower of an opportunity to
cure a default in performing its obligations hereunder) shall be deemed a waiver
of its future exercise. No such waiver made as to any instance involving the
exercise of any such right



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shall be deemed a waiver as to any other such instance, or any other such right.
Further, acceptance by Holder of all or any portion of any sum payable under, or
partial performance of any covenant of, this Note, the Mortgage or any of the
other Loan Documents, whether before, on, or after the due date of such payment
or performance, shall not be a waiver of Holder's right either to require prompt
and full payment and performance when due of all other sums payable or
obligations due thereunder or hereunder or to exercise any of Holder's rights
and remedies hereunder or thereunder.

        12.6 Waiver of Jury Trial; Service of Process; Court Costs. BORROWER
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER
AND THE HOLDER MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH, OR IN ANY WAY
PERTAINING TO, THIS NOTE AND/OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED
AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL
CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, UPON CONSULTATION WITH COUNSEL
OF BORROWER'S CHOICE, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS
OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF
TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER
FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF
ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL. BORROWER HEREBY IRREVOCABLY DESIGNATES NATIONAL REGISTERED AGENTS,
I NC. (THE "AGENT"), 9 EAST LOOCKERMAN STREET, DOVER, DELAWARE 19901 AS ITS
REGISTERED AGENT FOR THE PURPOSE OF RECEIVING SERVICE OF ALL LEGAL NOTICES AND
PROCESS ISSUED BY ANY COURT IN THE STATE OF ALABAMA AS WELL AS SERVICE OF ALL
PLEADINGS AND OTHER DOCUMENTS RELATED TO ANY LEGAL PROCEEDING OR ACTION ARISING
OUT OF THIS NOTE. BORROWER AGREES THAT SERVICE UPON THE AGENT SHALL BE VALID
REGARDLESS OF BORROWER'S WHEREABOUTS AT THE TIME OF SUCH SERVICE AND REGARDLESS
OF WHETHER BORROWER RECEIVES A COPY OF SUCH SERVICE, PROVIDED THAT THE HOLDER
SHALL HAVE MAILED A COPY TO BORROWER IN ACCORDANCE WITH THE NOTICE PROVISIONS
HEREIN. BORROWER AGREES TO PAY ALL COURT COSTS AND REASONABLE ATTORNEY'S FEES
INCURRED BY HOLDER IN CONNECTION WITH ENFORCING ANY PROVISION OF THIS NOTE.
NOTWITHSTANDING THE FOREGOING, HOLDER AGREES TO USE REASONABLE EFFORTS TO
PROVIDE BORROWER WITH NOTICE OF THE FILING OF ANY LAWSUIT BY HOLDER AGAINST
BORROWER.

        12.7 Offset. Upon the occurrence of an Event of Default, the Holder may
set-off against any principal and interest owing hereunder, any and all credits,
money, stocks, bonds or other



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security or property of any nature whatsoever on deposit with, or held by, or in
the possession of, the Holder, to the credit of or for the account of the
Borrower, without notice to or consent of the Borrower or Guarantor.

        12.8 Non-Exclusivity of Rights and Remedies. None of the rights and
remedies herein conferred upon or reserved to Holder is intended to be exclusive
of any other right or remedy contained herein or in any of the other Loan
Documents and each and every such right and remedy shall be cumulative and
concurrent, and may be enforced separately, successively or together, and may be
exercised from time to time as often as may be deemed necessary or desirable by
Holder.

        12.9 Incorporation by Reference. All of the agreements, conditions,
covenants and provisions contained in each of the Loan Documents are hereby made
a part of this Note to the same extent and with the same force and effect as if
they were fully set forth herein. Borrower covenants and agrees to keep and
perform, or cause to be kept and performed, all such agreements, conditions,
covenants and provisions strictly in accordance with their terms.

        12.10 Joint and Several Liability. If Borrower consists of more than one
person and/or entity, each such person and/or entity agrees that its liability
hereunder is joint and several.

        12.11 Business Purpose. Borrower represents and warrants that the Loan
evidenced by this Note is being obtained solely for the purpose of acquiring or
carrying on a business, professional or commercial activity and is not for
personal, agricultural, family or household purposes.

        12.12 Interest Limitation. Notwithstanding anything to the contrary
contained herein or in the Mortgage or in any other of the Loan Documents, the
effective rate of interest on the obligation evidenced by this Note shall not
exceed the lawful maximum rate of interest permitted to be paid. Without
limiting the generality of the foregoing, in the event that the interest charged
hereunder results in an effective rate of interest higher than that lawfully
permitted to be paid, then such charges shall be reduced by the sum sufficient
to result in an effective rate of interest permitted and any amount which would
exceed the highest lawful rate already received and held by the Holder shall be
applied to a reduction of principal and not to the payment of interest. Borrower
agrees that for the purpose of determining highest rate permitted by law, any
non-principal payment (including, without limitation, Late Fees and other fees)
shall be deemed, to the extent permitted by law, to be an expense, fee or
premium rather than interest. This provision shall control every other provision
of this Note and the other Loan Documents with respect to the changing,
collecting and payment of interest on the indebtedness evidenced hereby.

        12.13 Modification. This Note may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of such modification, amendment, discharge or waiver is sought.

        12.14 Time of the Essence. Time is strictly of the essence of this Note.




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        12.15 Negotiable Instrument. The Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note may not otherwise qualify,
under applicable law, absent this paragraph, as a negotiable instrument.

        12.16 Interest Rate After Judgment. If judgment is entered against the
Borrower on this Note, the amount of the judgment entered (which may include
principal, interest, fees, Late Fees and costs) shall bear interest at the
Default Rate, to be determined on the date of the entry of the judgment.

        12.17 Relationship. Borrower and Holder intend that the relationship
between them shall be solely that of creditor and debtor. Nothing contained in
this Note or in any of the other Loan Documents shall be deemed or construed to
create a partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between Borrower and Holder.

        12.18 WAIVER OF AUTOMATIC STAY. BORROWER HEREBY AGREES THAT, IN
CONSIDERATION OF LENDER'S AGREEMENT TO MAKE THE LOAN AND IN RECOGNITION THAT THE
FOLLOWING COVENANT IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN, IN THE
EVENT THAT BORROWER SHALL (A) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT
JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER ANY SECTION OR CHAPTER OF
TITLE 11 OF THE UNITED STATES CODE, AS AMENDED ("BANKRUPTCY CODE"), OR SIMILAR
LAW OR STATUTE; (B) BE THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER THE
BANKRUPTCY CODE OR SIMILAR LAW OR STATUTE; (C) FILE OR BE THE SUBJECT OF ANY
PETITION SEEKING ANY REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT,
LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL
OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER RELIEF FOR
DEBTORS; (D) HAVE SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY
TRUSTEE, RECEIVER, CONSERVATOR, OR LIQUIDATOR; OR (E) BE THE SUBJECT OF AN
ORDER, JUDGMENT OR DECREE ENTERED BY ANY COURT OF COMPETENT JURISDICTION
APPROVING A PETITION FILED AGAINST ANY BORROWER FOR ANY REORGANIZATION,
ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR
RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO
BANKRUPTCY, INSOLVENCY OR RELIEF FOR DEBTORS, THEN, SUBJECT TO COURT APPROVAL,
HOLDER SHALL THEREUPON BE ENTITLED AND BORROWER HEREBY IRREVOCABLY CONSENTS TO,
AND WILL NOT CONTEST, AND AGREES TO STIPULATE TO RELIEF FROM ANY AUTOMATIC STAY
OR OTHER INJUNCTION IMPOSED BY SECTION 362 OF THE BANKRUPTCY CODE, OR SIMILAR
LAW OR STATUTE (INCLUDING, WITHOUT LIMITATION, RELIEF FROM ANY EXCLUSIVE PERIOD
SET FORTH IN SECTION 1121 OF THE BANKRUPTCY CODE) OR OTHERWISE, ON OR AGAINST
THE EXERCISE OF THE RIGHTS AND REMEDIES OTHERWISE AVAILABLE TO HOLDER AS
PROVIDED IN THE LOAN DOCUMENTS, AND AS OTHERWISE PROVIDED BY LAW, AND BORROWER
HEREBY IRREVOCABLY WAIVES ITS RIGHTS TO OBJECT TO SUCH RELIEF.




                                       10
<PAGE>   11




        12.19 Acknowledgment By Guarantor. Guarantor has acknowledged this Note
below for purposes of confirming its obligations all as more specifically set
forth in the Guaranty Agreement.







              [REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]





                                       11

<PAGE>   12


        IN WITNESS WHEREOF, the Borrower has executed and sealed this Note or
caused it to be executed and sealed on its behalf by its duly authorized
representatives, the day and year first above written, and the obligations under
this Note shall be binding upon Borrower's successors and assigns.


WITNESS:                                BORROWER:

                                        DIVERSICARE WINDSOR HOUSE, LLC, a
                                        Delaware limited liability company
------------------------------
                                        By:  Diversicare Leasing Corp., a
                                             Tennessee corporation, its sole m
                                             member

[Print Name]                               By:
                                              ----------------------------------
                                              James F. Mills, Jr., Senior Vice
                                              President

ACKNOWLEDGED BY GUARANTOR:

GUARANTOR:

ADVOCAT INC.


------------------------------


By:___________________________ (SEAL)
Its:__________________________


STATE OF TENNESSEE )

_________   COUNTY )

        I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that James F. Mills, Jr., whose name as Senior Vice
President of Diversicare Leasing Corp., a Tennessee corporation and the sole
member of Diversicare Windsor House, LLC, a Delaware limited liability company,
is signed to the foregoing instrument and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument,
he, as such officer and with full authority, executed the same voluntarily for
and as the act of said limited liability company.

        Given under my hand and official seal this the ____ day of March, 2001.


                                                     -------------------------
                                                     Notary Public


AFFIX SEAL
My commission expires:
                      -----------





                                       12


</TEXT>
</DOCUMENT>
