<PAGE>   1
                                                                    EXHIBIT 10.6


                                    GUARANTY


         This GUARANTY ("Guaranty") is given as of November 8, 2000 ("Effective
Date"), by ADVOCAT, INC., a Delaware corporation, whose address is 277 Mallory
Station Road, Suite 130, Franklin, Tennessee 37067 ("Advocat"), ADVOCAT FINANCE,
INC., a Delaware corporation ("Finance") whose address is 277 Mallory Station
Road, Suite 130, Franklin, Tennessee 37067 and DIVERSICARE MANAGEMENT SERVICES
CO., a Tennessee corporation ("Management") whose address is 277 Mallory Station
Road, Suite 130, Franklin, Tennessee 37067 (jointly and severally the
"Guarantors" and individually referred to herein as a "Guarantor"), in favor of
STERLING ACQUISITION CORP., a Kentucky corporation ("Lessor") whose address is
900 Victors Way, Suite 350, Ann Arbor, Michigan 48108, with reference to the
following facts:

                                    RECITALS

         A.       Diversicare Leasing Corp., a Delaware corporation (the
"Lessee"), has executed and delivered to Lessor a Consolidated Amended and
Restated Master Lease dated of even date herewith (the "Master Lease") pursuant
to which the Lessee is leasing from Lessor certain healthcare facilities
identified therein (the "Facilities").

         B.       By a guaranty dated May ___, 1994 and by an amended and
restated guaranty dated February 1, 1997, Advocat guaranteed certain obligations
of the Lessee and certain predecessors in interest as set forth therein.

         C.       By a guaranty dated February 1, 1997, Finance guaranteed
certain obligations of the Lessee and certain predecessors in interest as set
forth therein.

         D.       By a guaranty dated February 1, 1997, Management guaranteed
certain obligations of the Lessee and certain predecessors in interest as set
forth therein.

         E.       Pursuant to Section 19(B) of that certain Settlement and
Restructuring Agreement by and among Lessor, Omega Healthcare Investors, Inc., a
Maryland corporation, Advocat, Management, and Sterling Health Care Management
Corporation, a Kentucky corporation of even date herewith, and only to the
extent set forth therein, Lessor released Advocat, Finance and Management from
liability under those guarantees described above.

         F.       Each Guarantor continues to maintain a direct financial
interest in the Lessee and it is to the advantage of each Guarantor that Lessor
enter into the Master Lease.

<PAGE>   2

         G.       As a material inducement to Lessor to lease the Facilities
pursuant to the Master Lease, each Guarantor has agreed to jointly and severally
guarantee the payment of all amounts due from, and the performance of all
obligations undertaken by the Lessee under the Master Lease and any security
agreements, promissory notes, letter of credit agreements, guarantees or other
documents which evidence, secure or otherwise relate to the Master Lease (the
Master Lease and all such documents, and any and all amendments, modifications,
extensions and renewals thereof, are hereinafter referred to collectively as the
"Sterling Transaction Documents"), all as hereinafter set forth.

         WHEREFORE, the parties hereby agree as follows:

         1.       Defined Terms. All capitalized terms used herein and not
defined herein shall have the meaning for such terms set forth in the Master
Lease.

         2.       Guaranty. Guarantors hereby unconditionally and irrevocably,
jointly and severally, guarantee to Lessor (i) the payment when due of all Rent
and all other sums payable by the Lessee under the Master Lease, and (ii) the
faithful and prompt performance when due of each and every one of the terms,
conditions and covenants to be kept and performed by the Lessee under the
Sterling Transaction Documents, any and all amendments, modifications,
extensions and renewals of the Sterling Transaction Documents, including without
limitation all indemnification obligations, insurance obligations, and all
obligations to operate, rebuild, restore or replace any facilities or
improvements now or hereafter located on the real estate covered by the Master
Lease. In the event of the failure of Lessee to pay any such amounts owed, or to
render any other performance required of Lessee under the Sterling Transaction
Documents, when due, Guarantors shall forthwith perform or cause to be performed
all provisions of the Sterling Transaction Documents to be performed by Lessee
thereunder, and pay all damages that may result from the non-performance thereof
to the full extent provided under the Sterling Transaction Documents
(collectively, the "Obligations"). As to the Obligations, each Guarantor's
liability under this Guaranty is without limit.

         3.       Survival of Obligations. The obligations of Guarantors under
this Guaranty with respect to the Sterling Transaction Documents shall survive
and continue in full force and effect (until and unless all Obligations, the
payment and performance of which are hereby guaranteed, have been fully paid and
performed) notwithstanding:

         (a)      any amendment, modification, or extension of any Sterling
                  Transaction Document;

         (b)      any compromise, release, consent, extension, indulgence or
                  other action or inaction in respect of any terms of any
                  Sterling Transaction Document or any other guarantor;


                                       2
<PAGE>   3



         (c)      any substitution or release, in whole or in part, of any
                  security for this Guaranty which Lessor may hold at any time;

         (d)      any exercise or non-exercise by Lessor of any right, power or
                  remedy under or in respect of any Sterling Transaction
                  Document or any security held by Lessor with respect thereto,
                  or any waiver of any such right, power or remedy;

         (e)      any bankruptcy, insolvency, reorganization, arrangement,
                  adjustment, composition, liquidation, or the like of Lessee or
                  any other guarantor;

         (f)      any limitation of the Lessee's liability under any Sterling
                  Transaction Document or any limitation of the Lessee's
                  liability thereunder which may now or hereafter be imposed by
                  any statute, regulation or rule of law, or any illegality,
                  irregularity, invalidity or unenforceability, in whole or in
                  part, of any Sterling Transaction Document or any term
                  thereof;

         (g)      any sale, lease, or transfer of all or any part of any
                  interest in any Facility to any other person, firm or entity
                  other than to Lessor;

         (h)      any act or omission by Lessor with respect to any of the
                  security instruments given or made as a part of the Sterling
                  Transaction Documents or any failure to file, record or
                  otherwise perfect any of the same;

         (i)      any extensions of time for performance under the Sterling
                  Transaction Documents, whether prior to or after maturity;

         (j)      the release of any collateral from any lien in favor of
                  Lessor, or the release of Lessee from performance or
                  observation of any of the agreements, covenants, terms or
                  conditions contained in any Sterling Transaction Document by
                  operation of law or otherwise;

         (k)      the fact that Lessee may or may not be personally liable, in
                  whole or in part, under the terms of any Sterling Transaction
                  Document to pay any money judgment;

         (l)      the failure to give Guarantors any notice of acceptance,
                  default or otherwise;

         (m)      any other guaranty now or hereafter executed by Guarantors or
                  anyone else in connection with any Sterling Transaction
                  Document;


                                       3
<PAGE>   4



         (n)      any rights, powers or privileges Lessor may now or hereafter
                  have against any other person, entity or collateral; or

         (o)      any other circumstances, whether or not Guarantors had notice
                  or knowledge thereof, other than the payment or performance of
                  all of the Obligations.

         4.       Primary Liability. The liability of Guarantor with respect to
the Sterling Transaction Documents shall be joint and several, primary, direct
and immediate, and Lessor may proceed against any Guarantor: (i) prior to or in
lieu of proceeding against Lessee, its assets, any security deposit, or any
other guarantor; and (ii) prior to or in lieu of pursuing any other rights or
remedies available to Lessor. All rights and remedies afforded to Lessor by
reason of this Guaranty or by law are separate, independent and cumulative, and
the exercise of any rights or remedies shall not in any way limit, restrict or
prejudice the exercise of any other rights or remedies.

         In the event of any default under any Sterling Transaction Document, a
separate action or actions may be brought and prosecuted against the Guarantors,
or any one of them, whether or not Lessee is joined therein or a separate action
or actions are brought against Lessee. Lessor may maintain successive actions
for other defaults. Lessor's rights hereunder shall not be exhausted by its
exercise of any of its rights or remedies or by any such action or by any number
of successive actions until and unless all indebtedness and obligations the
payment and performance of which are hereby guaranteed have been paid and fully
performed.

         5.       Obligations Not Affected. In such manner, upon such terms and
at such times as Lessor in its sole discretion deems necessary or expedient, and
without notice to Guarantors, Lessor may: (a) amend, alter, compromise,
accelerate, extend or change the time or manner for the payment or the
performance of any obligation hereby guaranteed; (b) extend, amend or terminate
any of the Sterling Transaction Documents; or (c) release Lessee by consent to
any assignment (or otherwise) as to all or any portion of the obligations hereby
guaranteed. Any exercise or non-exercise by Lessor of any right hereby given
Lessor, dealing by Lessor with Guarantors or any other guarantor, Lessee or any
other person, or change, impairment, release or suspension of any right or
remedy of Lessor against any person including Lessee and any other guarantor
will not affect any of the obligations of Guarantors hereunder or give
Guarantors any recourse or offset against Lessor.

         6.       Waiver. With respect to the Sterling Transaction Documents,
each Guarantor hereby waives and relinquishes all rights and remedies accorded
by applicable law to sureties and/or guarantors or any other accommodation
parties, under any statutory


                                       4
<PAGE>   5


provisions, common law or any other provision of law, custom or practice, and
agrees not to assert or take advantage of any such rights or remedies including,
but not limited to:

         (a)      any right to require Lessor to proceed against Lessee or any
                  other person or to proceed against or exhaust any security
                  held by Lessor at any time or to pursue any other remedy in
                  Lessor's power before proceeding against any Guarantor or to
                  require that Lessor cause a marshaling of Lessee's assets or
                  the assets, if any, given as collateral for this Guaranty or
                  to proceed against Lessee and/or any collateral, including
                  collateral, if any, given to secure Guarantors' obligation
                  under this Guaranty, held by Lessor at any time or in any
                  particular order;

         (b)      any defense that may arise by reason of the incapacity or lack
                  of authority of any other person or persons;

         (c)      notice of the existence, creation or incurring of any new or
                  additional indebtedness or obligation or of any action or
                  non-action on the part of Lessee, Lessor, any creditor of
                  Lessee or any Guarantor or on the part of any other person
                  whomsoever under this or any other instrument in connection
                  with any obligation or evidence of indebtedness held by Lessor
                  or in connection with any obligation hereby guaranteed;

         (d)      any defense based upon an election of remedies by Lessor which
                  destroys or otherwise impairs the subrogation rights of
                  Guarantors or the right of Guarantors to proceed against
                  Lessee for reimbursement, or both;

         (e)      any defense based upon any statute or rule of law which
                  provides that the obligation of a surety must be neither
                  larger in amount nor in other respects more burdensome than
                  that of the principal;

         (f)      any duty on the part of Lessor to disclose to Guarantors any
                  facts Lessor may now or hereafter know about the Lessee,
                  regardless of whether Lessor has reason to believe that any
                  such facts materially increase the risk beyond that which each
                  Guarantor intends to assume or has reason to believe that such
                  facts are unknown to Guarantors or has a reasonable
                  opportunity to communicate such facts to Guarantors, it being
                  understood and agreed that each Guarantor is fully responsible
                  for being and keeping informed of the financial condition of
                  the Lessee and of all circumstances bearing on the risk of
                  non-payment or non-performance of any obligations or
                  indebtedness hereby guaranteed;


                                       5
<PAGE>   6



         (g)      any defense arising because of Lessor's election, in any
                  proceeding instituted under the federal Bankruptcy Code, of
                  the application of Section 1111 (b)(2) of the federal
                  Bankruptcy Code; and

         (h)      any defense based on any borrowing or grant of a security
                  interest under Section 364 of the federal Bankruptcy Code.

         (i)      any extension of time conferred by any law now or hereafter in
                  effect and any requirement or notice of acceptance of this
                  Guaranty or any other notice to which the undersigned may now
                  or hereafter be entitled to the extent such waiver of notice
                  is permitted by applicable law.

         7.       Warranties. With respect to the Sterling Transaction
Documents, each Guarantor warrants that: (a) this Guaranty is executed at
Lessee's request; and (b) Guarantor has established adequate means of obtaining
from Lessee on a continuing basis financial and other information pertaining to
the Lessee's financial condition. Guarantors agree to keep adequately informed
from such means of any facts, events or circumstances which might in any way
affect any Guarantor's risks hereunder, and Guarantors further agree that Lessor
shall have no obligation to disclose to Guarantors information or material
acquired in the course of Lessor's relationship with Lessee.

         8.       No-Subrogation. Guarantors shall have no right of subrogation
and waive any right to enforce any remedy which Lessor now has or may hereafter
have against Lessee and any benefit of, and any right to participate in, any
security now or hereafter held by Lessor with respect to the Master Lease.

         9.       Subordination. Upon the occurrence of an Event of Default
under any Sterling Transaction Document, which is not cured by Guarantor, the
indebtedness or obligations of Lessee to any Guarantor shall not be paid in
whole or in part nor will Guarantors accept any payment of or on account of any
amounts owing, without the prior written consent of Lessor and at Lessor's
request, Guarantors shall cause the Lessee to pay to Lessor all or any part of
the subordinated indebtedness until the obligations under the Sterling
Transaction Documents have been paid in full. Any payment by Lessee in violation
of this Guaranty shall be received by Guarantors in trust for Lessor, and
Guarantors shall cause the same to be paid to Lessor immediately on account of
the amounts owing from the Lessee to Lessor. No such payment will reduce or
affect in any manner the liability of Guarantors under this Guaranty.

         10.      No Delay. Any payments required to be made by Guarantors
hereunder shall become due on demand in accordance with the terms hereof
immediately upon the happening of an Event of Default under any Sterling
Transaction Document.


                                       6
<PAGE>   7




         11.      Application of Payments. With respect to the Sterling
Transaction Documents, and with or without notice to Guarantors, Lessor, in
Lessor's sole discretion and at any time and from time to time and in such
manner and upon such terms as Lessor deems appropriate, may (a) apply any or all
payments or recoveries from Lessee or from any other guarantor under any other
instrument or realized from any security, in such manner and order of priority
as Lessor may determine, to any indebtedness or other obligation of Lessee with
respect to the Sterling Transaction Documents and whether or not such
indebtedness or other obligation is guaranteed hereby or is otherwise secured or
is due at the time of such application, and (b) refund to Lessee any payment
received by Lessor under the Sterling Transaction Documents.

         12.      Guaranty Default.

         (a)      As used herein, the term Guaranty Default shall mean one or
more of the following events (subject to applicable cure periods):

                  (i)      the failure of any Guarantor to pay the amounts
                           required to be paid hereunder at the times specified
                           herein;

                  (ii)     the failure of any Guarantor to observe and perform
                           any covenants, conditions or agreement on its part to
                           be observed or performed, other than as referred to
                           in Subsection (i) above, for a period of thirty (30)
                           days after written notice of such failure has been
                           given to Guarantors by Lessor, unless Lessor agrees
                           in writing to an extension of such time prior to its
                           expiration;

                  (iii)    the occurrence of a default under any other guaranty
                           between Lessor and any Guarantor.

         (b)      Upon the occurrence of a Guaranty Default, Lessor shall have
the right to bring such actions at law or in equity, including appropriate
injunctive relief, as it deems appropriate to compel compliance, payment or
deposit, and among other remedies to recover its attorneys' fees in any
proceeding, including any appeal therefrom and any post- judgement proceedings.

         13.      Financial Statements. Each Guarantor shall deliver those
Consolidated Financial Statements and other certificates as required by Article
XXIII of the Master Lease in the form and at the times set forth therein.


         14.      Miscellaneous.


                                       7
<PAGE>   8



         (a)      No term, condition or provision of this Guaranty may be waived
except by an express written instrument to that effect signed by Lessor. No
waiver of any term, condition or provision of this Guaranty will be deemed a
waiver of any other term, condition or provision, irrespective of similarity, or
constitute a continuing waiver of the same term, condition or provision, unless
otherwise expressly provided.

         (b)      If any one or more of the terms, conditions or provisions
contained in this Guaranty is found in a final award or judgment rendered by any
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining terms,
conditions and provisions of this Guaranty shall not in any way be affected or
impaired thereby, and this Guaranty shall be interpreted and construed as if the
invalid, illegal, or unenforceable term, condition or provision had never been
contained in this Guaranty.

         (c)      THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MICHIGAN, EXCEPT THAT THE LAWS OF THE STATE IN
WHICH A FACILITY IS LOCATED SHALL GOVERN THIS AGREEMENT TO THE EXTENT NECESSARY
(i) TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH
RESPECT TO SUCH FACILITY, AND (ii) FOR PROCEDURAL REQUIREMENTS WHICH MUST BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH SUCH FACILITY IS LOCATED. EACH
GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL
COURTS OF MICHIGAN AND AGREES THAT ALL DISPUTES CONCERNING THIS GUARANTY BE
HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OR STATES IN WHICH
THE FACILITY OR FACILITIES ARE LOCATED OR IN MICHIGAN. EACH GUARANTOR AGREES
THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE
UNDER THE LAWS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE
LOCATED OR MICHIGAN AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE
AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE FACILITY OR FACILITIES
ARE LOCATED AND OF MICHIGAN.

         (d)      EACH GUARANTOR AND LESSOR HEREBY WAIVE TRIAL BY JURY AND THE
RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON, UNDER, OUT OF,
BY REASON OF OR RELATING IN ANY WAY TO THIS GUARANTY OR THE INTERPRETATION,
BREACH OR ENFORCEMENT THEREOF.

         (e)      In the event of any suit, action, arbitration or other
proceeding to interpret this Guaranty, or to determine or enforce any right or
obligation created hereby, the prevailing party in the action shall recover such
party's actual costs and expenses reasonably incurred in connection therewith,
including, but not limited to, attorneys' fees and costs of appeal, post
judgment enforcement proceedings (if any) and bankruptcy proceedings (if



                                       8
<PAGE>   9




any). Any court, arbitrator or panel of arbitrators shall, in entering any
judgment or making any award in any such suit, action, arbitration or other
proceeding, in addition to any and all other relief awarded to such prevailing
party, include in such-judgment or award such party's costs and expenses as
provided in this paragraph.

         (f)      Each Guarantor (i) represents that it has been represented and
advised by counsel in connection with the execution of this Guaranty; (ii)
acknowledges receipt of a copy of the Sterling Transaction Documents; and (iii)
further represents that Guarantor has been advised by counsel with respect
thereto. This Guaranty shall be construed and interpreted in accordance with the
plain meaning of its language, and not for or against Guarantors or Lessor, and
as a whole, giving effect to all of the terms, conditions and provisions hereof.

         (g)      Except as provided in any other written agreement now or at
any time hereafter in force between Lessor and Guarantors, this Guaranty shall
constitute the entire agreement of Guarantors with Lessor with respect to the
subject matter hereof, and no representation, understanding, promise or
condition concerning the subject matter hereof will be binding upon Lessor or
Guarantors unless expressed herein.

         (h)      All stipulations, obligations, liabilities and undertakings
under this Guaranty shall be binding upon Guarantors and their respective
successors and assigns and shall inure to the benefit of Lessor and to the
benefit of Lessor's successors and assigns.

         (i)      The term "Guarantor" as used in this Guaranty shall mean the
"Guarantor and each of them, jointly and severally.

         (j)      Whenever the singular shall be used hereunder, it shall be
deemed to include the plural (and vice-versa) and reference to one gender shall
be construed to include all other genders, including neuter, whenever the
context of this Guaranty so requires. Section captions or headings used in the
Guaranty are for convenience and reference only, and shall not affect the
construction thereof.

                            [signatures on next page]


                                       9
<PAGE>   10



         IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first written above.

                                        GUARANTORS:

                                        ADVOCAT, INC.


                                        By:  /s/ James F. Mills, Jr.
                                             ------------------------------
                                             James F. Mills, Jr.
                                        Its: Senior Vice President



                                        ADVOCAT FINANCE, INC.


                                        By:  /s/ James F. Mills, Jr.
                                             ------------------------------
                                             James F. Mills, Jr.
                                        Its: Senior Vice President


                                        DIVERSICARE MANAGEMENT SERVICES CO.


                                        By   /s/ James F. Mills, Jr.
                                             ------------------------------
                                             James F. Mills, Jr.
                                        Its: Senior Vice President

STATE OF  TENNESSEE)
          ---------
                   ) ss.
COUNTY OF DAVIDSON )
          --------

         The foregoing instrument was acknowledged before me this 8th day of
November, 2000, by James F. Mills, Jr., the Senior Vice President of Advocat,
Inc. known to me to be the person who executed this Guaranty.


                                             /s/ Andrea Neiderland
                                             ---------------------------------

             [SEAL]                          Notary Public, Davidson County, TN

                                             My Commission Expires:
                                             March 23, 2002
                                             --------------------------


                                       10
<PAGE>   11


STATE OF  TENNESSEE)
          ---------
                   ) ss.
COUNTY OF DAVIDSON )
          --------

         The foregoing instrument was acknowledged before me this 8th day of
November, 2000, by James F. Mills, Jr., the Senior Vice President of Advocat,
Inc. known to me to be the person who executed this Guaranty.


                                             /s/ Andrea Neiderland
                                             ---------------------------------

             [SEAL]                          Notary Public, Davidson County, TN

                                             My Commission Expires:
                                             March 23, 2002
                                             --------------------------


STATE OF  TENNESSEE)
          ---------
                   ) ss.
COUNTY OF DAVIDSON )
          --------

         The foregoing instrument was acknowledged before me this 8th day of
November, 2000, by James F. Mills, Jr., the Senior Vice President of Advocat,
Inc. known to me to be the person who executed this Guaranty.


                                             /s/ Andrea Neiderland
                                             ---------------------------------

             [SEAL]                          Notary Public, Davidson County, TN

                                             My Commission Expires:
                                             March 23, 2002
                                             --------------------------


                                       11