EX-1 2 bristol_advocat13da4-ex1.txt EXHIBIT 1 BRISTOL INVESTMENT FUND LTD. c/o Bristol Capital Advisors, LLC 10990 Wilshire Blvd, Suite 1410 Los Angeles, CA 90024 March 17, 2009 BY FACSIMILE AND EXPRESS MAIL ----------------------------- ADVOCAT INC. 1621 Galleria Blvd. Brentwood, TN 37027 Attention: L. Glynn Riddle, Jr., Secretary Dear Mr. Riddle: This letter shall serve as notice to Advocat, Inc., a Delaware corporation (the "Company") as to the nomination by Bristol Investment Fund, Ltd. ("Bristol") of two (2) nominees for election to the Board of Directors of the Company at the 2009 annual meeting of stockholders of the Company, or any other meeting of stockholders held in lieu thereof, and any adjournments, postponements, reschedulings or continuations thereof (the "Annual Meeting"). Bristol is the holder of record of 100 shares of the Company's common stock and the beneficial owner of 389,850 shares (inclusive of its record shares). Bristol intends to hold such shares through the date of the Annual Meeting. Paul Kessler, a director of Bristol, shall appear in person as Bristol's representative at the Annual Meeting to submit the business specified in this Notice. Bristol hereby nominates Paul Kessler and Richard McKilligan for election to the Board of the Company. If there is only one seat on the Board for election at the Annual Meeting, Bristol's nomination is limited to Mr. Kessler. Mr. Kessler and Mr. McKilligan are referred to below as "the Nominees." The following information relating to Mr. Kessler and Mr. McKilligan is provided in accordance with Section 1.4(b) of the Company's Bylaws: (i) NAME, AGE, BUSINESS ADDRESS AND RESIDENCE ADDRESS OF EACH OF THE NOMINEES: NAME AGE BUSINESS ADDRESS RESIDENCE ADDRESS ---- --- ---------------- ----------------- Paul Kessler 48 10990 Wilshire Boulevard 10936 Chalon Road Suite 1410 Los Angeles, CA 90077 Los Angeles, CA 90024 Richard McKilligan 45 10990 Wilshire Boulevard 1226 N. Laurel Ave. #208 Suite 1410 West Hollywood, CA 90046 Los Angeles, CA 90024 (ii) PRINCIPAL OCCUPATION OR EMPLOYMENT OF EACH OF THE NOMINEES: PAUL KESSLER. Since March 2000, Mr. Kessler has been the Principal and Manager of Bristol Capital Advisors, LLC, the investment advisor to Bristol. Mr. Kessler specializes in identifying and structuring investment transactions with emerging growth public companies and directing trading in portfolio securities. Bristol is not an affiliate of the Company. RICHARD MCKILLIGAN serves as the General Counsel, Chief Financial Officer and Secretary of Derycz Scientific, Inc. He has held these positions since January 2007. Mr. McKilligan has been a director of Bristol since February 2008, and served as Counsel to Bristol Capital Advisors, LLC from January 2006 to September 2008. Mr. McKilligan was an associate attorney with Morgan, Lewis & Bockius, LLP in their New York and London offices from 1999 until December 2005. Mr. McKilligan earned his law degree from Cornell Law School, his MBA from the University of Chicago and his undergraduate degree in Accountancy from the University of Illinois at Urbana-Champaign. Mr. McKilligan is admitted to the Bars of California, New York and Florida. Derycz Scientific is not an affiliate of the Company. (iii) CLASS AND NUMBER OF SHARES OF STOCK OF THE COMPANY'S WHICH ARE BENEFICIALLY OWNED BY EACH OF THE NOMINEES: BENEFICIAL OWNERSHIP OF NAME COMMON STOCK* ---- ------------ Paul Kessler 389,850 Richard McKilligan None (iv) OTHER INFORMATION RELATING TO EACH OF THE NOMINEES THAT IS REQUIRED TO BE DISCLOSED IN SOLICITATIONS OF PROXIES FOR THE ELECTION OF DIRECTORS PURSUANT TO REGULATION 14A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED: Each of the Nominees has consented to be named as a nominee in any proxy statement filed by Bristol in connection with the solicitation of proxies or written consents for the election of the Nominees to the Company's Board and to serve as a director of the Company, if so elected. Such consents are attached hereto as Exhibit B. Each of the Nominees is a U.S. citizen. Please see Exhibit A for information regarding purchases and sales during the past two years by Bristol in securities of the Company. All of these transactions were open market transactions. Prices are net of brokerage commissions. The Nominees have not purchased or sold any securities in the Company in the past two years, except to the extent that Mr. Kessler may be deemed to beneficially own shares purchased or sold by Bristol. Because the Company has not yet publicly announced a record date, all information regarding share ownership in this Notice as of the date of the Notice. _________________________ * As the manager for Bristol Capital Advisors, LLC, investment manager of Bristol, Mr. Kessler is deemed to beneficially own the 389,750 Shares owned by Bristol. Mr. Kessler disclaims beneficial ownership of the Shares held by Bristol. -2- Except as set forth in this Notice (including the Exhibits attached hereto), (i) during the last 10 years, no Nominee has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); (ii) no Nominee directly or indirectly beneficially owns any securities of the Company; (iii) no Nominee owns any securities of the Company which are owned of record but not beneficially; (iv) no Nominee has purchased or sold any securities of the Company during the past two years; (v) no part of the purchase price or market value of the securities of the Company owned by any Nominee is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities; (vi) no Nominee is, or within the past year was, a party to any contract, arrangements or understandings with any person with respect to any securities of the Company, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies; (vii) no associate of any Nominee owns beneficially, directly or indirectly, any securities of the Company; (viii) no Nominee owns beneficially, directly or indirectly, any securities of any parent or subsidiary of the Company; (ix) no Nominee or any of his associates was a party to any transaction, or series of similar transactions, since the beginning of the Company's last fiscal year, or is a party to any currently proposed transaction, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $120,000; and (x) no Nominee or any of his associates has any arrangement or understanding with any person with respect to any future employment by the Company or its affiliates, or with respect to any future transactions to which the Company or any of its affiliates will or may be a party. There are no material proceedings to which any Nominee or any of his associates is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. With respect to each of the Nominees, none of the events enumerated in Item 401(f)(1)-(6) of Regulation S-K of the Exchange Act ("Reg. S-K") occurred during the past five years. Each of the Nominees is independent under the independence standards set forth in Item 407(a)(1) of Reg. S-K. Because the Nominees have not served on the Board of the Company, the disclosure contemplated by Items 407(b)-(e) of Reg. S-K does not apply. Information concerning Bristol Investment Fund, Ltd. is set forth below. (i) NAME AND ADDRESS, AS BELIEVED TO APPEAR ON THE COMPANY'S BOOKS, OF THE STOCKHOLDER GIVING THE NOTICE IS AS FOLLOWS: NAME ADDRESS ---- ------- Bristol Investment Fund, Ltd. c/o Bristol Capital Advisors, LLC 10990 Wilshire Boulevard, Suite 1410 Los Angeles, CA 90024 -3- (ii) CLASS AND NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY WHICH ARE OWNED BENEFICIALLY AND OF RECORD BY THE STOCKHOLDER GIVING THE NOTICE: NAME BENEFICIAL OWNERSHIP ---- -------------------- Bristol Investment Fund, Ltd. 389,850 shares of Common Stock, 100 shares held of record (iii) REPRESENTATION BY THE STOCKHOLDER GIVING THE NOTICE. Bristol hereby represents that it (i) is a holder of record of 100 shares of Common Stock of the Company, (ii) is entitled to vote at the Annual Meeting and (iii) intends to appear in person or by proxy to nominate the Nominees at the Annual Meeting. Bristol does not have a substantial interest in any matters to be acted upon at the Annual Meeting except as otherwise set forth herein. Please address any correspondence to our counsel, Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, New York 10022, Attention: Thomas J. Fleming, Esq., telephone (212) 451-2289, facsimile (212) 451-2222. The giving of this Notice is not an admission that any procedures for notice concerning the nomination of directors to the Company Board are legal, valid or binding, and Bristol reserves the right to challenge their validity. BRISTOL INVESTMENT FUND, LTD. By: /s/ Paul Kessler --------------------------- Paul Kessler Director -4- EXHIBIT A --------- TRANSACTION IN SECURITIES OF THE COMPANY DURING THE PAST TWO YEARS ----------------- ---------------- --------------- Date Shares Cost / Share ----------------- ---------------- --------------- 4/11/2007 4,700 $12.83360 ----------------- ---------------- --------------- 7/26/2007 1,700 $10.09880 ----------------- ---------------- --------------- 7/27/2007 15,000 $9.72100 ----------------- ---------------- --------------- 7/31/2007 4,217 $10.30440 ----------------- ---------------- --------------- 1/28/2008 12,270 $10.96710 ----------------- ---------------- --------------- 8/7/2008 22,200 $6.75110 ----------------- ---------------- --------------- 8/8/2008 8,700 $6.75800 ----------------- ---------------- --------------- 8/11/2008 6,900 $6.75190 ----------------- ---------------- --------------- 8/12/2008 8,600 $6.91690 ----------------- ---------------- --------------- 8/13/2008 5,000 $6.95740 ----------------- ---------------- --------------- 8/14/2008 2,500 $7.20000 ----------------- ---------------- --------------- 10/6/2008 938 $3.92000 ----------------- ---------------- --------------- 10/28/2008 3,500 $3.15320 ----------------- ---------------- --------------- 11/12/2008 498 $2.50000 ----------------- ---------------- --------------- 11/20/2008 5,000 $2.40000 ----------------- ---------------- --------------- 11/24/2008 1,400 $2.10710 ----------------- ---------------- --------------- 11/25/2008 895 $1.85640 ----------------- ---------------- --------------- 11/26/2008 5,300 $2.24290 ----------------- ---------------- --------------- 11/28/2008 4,400 $2.50090 ----------------- ---------------- --------------- 12/3/2008 3,970 $2.53980 ----------------- ---------------- --------------- 12/5/2008 1,900 $2.50470 ----------------- ---------------- --------------- 12/8/2008 1,585 $2.50570 ----------------- ---------------- --------------- 2/19/2009 6,004 $3.35650 ----------------- ---------------- --------------- 2/27/2009 1,286 $2.25000 ----------------- ---------------- --------------- 3/3/2009 2,440 $2.25000 ----------------- ---------------- --------------- 3/11/2009 1,000 $2.25000 ----------------- ---------------- --------------- 3/12/2009 1,000 $2.00000 ----------------- ---------------- --------------- A-1 EXHIBIT B --------- I, Paul Kessler, hereby consent to being named as a nominee for election as a director of Advocat Inc. (the "Company") in the proxy statement for the next annual meeting of the Company's stockholders and to serve as a director of the Company if elected. /s/ Paul Kessler -------------------------- PAUL KESSLER I, Richard McKilligan, hereby consent to being named as a nominee for election as a director of Advocat Inc. (the "Company") in the proxy statement for the next annual meeting of the Company's stockholders and to serve as a director of the Company if elected. /s/ Richard McKilligan -------------------------- RICHARD MCKILLIGAN B-1