##### 



Amendment Lessor
  Second Amendment Third Amendment Existing Master Lease
 Paris Purchase
Agreement Omega Paris Land
  Paris Facility
   Definitions.




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##### 



Acquisition Date Exhibit A
 Actual Funded Amount
 Closing Date
 Construction Budgets Schedule 1
 Developers Fees
 Developers Overhead
 Event of Force Majeure
 Funded Amount
 Hard Costs
 Initial Paris Base Rent multiplied by
 2




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##### 



In Service Date
 Joinder Agreement
 Maximum Funded Amount
 Plans and Specifications
 Paris Base Rent Commencement Date th
 Paris Base Rent
    Adjustment Date lesser
     3




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##### 



Paris Cash Flow
 Paris Formula Rent
  multiplied by
 Paris Rent Reset Date
 Paris Scheduled Rent
 Paris Sublessee
 Project Costs
 4




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##### 



Soft Costs
 Survey Requirements
 Target Completion Date
 Title Company
   Base Rent
 Commencement Date
 Expiration Date
 Facilit(y)(ies) Exhibit C
 Land Exhibit A Exhibit A Exhibit A
 Lease Year
 5




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##### 



Leased Property Exhibits A-1
through A-28 Exhibit A-1 through A-7
 Permitted Encumbrances Exhibit B Exhibit C Exhibit D
  Pre-Existing Hazardous Substances
 Pre-Existing Environmental Conditions
 Texas Facilities Exhibits A-1 A-7 Exhibit A
 Texas Pledge Agreements
 Texas Sublessees
 Texas Sublessees Guaranty
 Texas Sublessee Security Agreement
 6




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##### 



Paris Base Rent; Rent Reset; Termination Option; a Texas Facility; Delay.
 Paris Base Rent Commencement Date
 Paris Base Rent Reset
 Paris Termination Option Paris Termination Notice Paris Termination Date
     7




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##### 



Accrual of Financing Costs
 Sublease; Management Paris Sublease
 Regulatory Approvals
 Construction of the Paris Facility.
 Commencement and Completion of Construction
 8




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##### 



Lessors Architect; Approval of Plans Lessees Architect
 Plans and Specifications
 9




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##### 



Character of Construction
 Construction Contract and Architectural/Engineering Agreement
  10




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##### 



Records and Reports
 Access
 Damage by Fire or Other Casualty
 11




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##### 



Payment of Costs
 Disbursements of Funded Amount
  Request
     12




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##### 



Limitation on Disbursements lesser
 Sufficiency of Funded Amount
 Payments to Contractor, Subcontractors and Suppliers
 Lessors Right to Cure
 Application of Advances
 Construction or Other Liens
 13




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##### 



Conditions to Final Payment
      Guaranty of Completion
 Force Majeure
 14




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##### 



Expenses of Lessor
 Amendments to Certain Provisions of Existing Master Lease
 Paris Facility Capital Expenditures
 Single, indivisible Lease
 15




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##### 



Conditions to Commencement of Construction and Obligations of Lessor and Lessee under
this Amendment Commencement Conditions
 Representations and Warranties of Lessee
 Execution and Counterparts
 Headings
 Enforceability
  16




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##### 



Signature Page to
 LESSOR:STERLING ACQUISITION CORP.,a Kentucky corporationBy:
    
    /s/ Taylor PickettName:
    
    Taylor PickettTitle:
    
    Chief Executive Officer
    /s/ Judith A. JacobsNotary Public, Baltimore County, MDMy commission expires: May 1, 2008




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##### 



Signature Page to
 LESSEE:DIVERSICARE LEASING CORP.,a Tennessee corporationBy:
Name:
    
    /s/ Glynn Riddle

Glynn RiddleTitle:
    
    EVP and CFO
    /s/ Jacqueline S. ReedNotary Public, Tenn. County, WilliamsonMy commission expires: 1/24/2010




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##### 



Acknowledgment to
 Sixth Amendment
 ADVOCAT, INC. a Delaware corporationBy:
    
    /s/ Glynn RiddleName:
    
    Glynn RiddleTitle:
    
    EVP & CFO
    /s/ Jacqueline S. ReedNotary Public, Tenn. County, WilliamsonMy Commission Expires: 1/24/2010




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##### 



Acknowledgment to
 DIVERSICARE MANAGEMENT SERVICES CO.,a Tennessee corporationBy:
Name:
    
    /s/ Glynn Riddle

Glynn RiddleTitle:
    
    EVP & CFO
    /s/ Jacqueline S. ReedNotary Public, Tenn. County, WilliamsonMy Commission Expires: 1/24/2010




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##### 



Acknowledgment to
 ADVOCAT FINANCE INC.,a Delaware corporationBy:
    
    /s/ Glynn RiddleName:
    
    Glynn RiddleTitle:
    
    EVP & CFO
    /s/ Jacqueline S. ReedNotary Public, Tenn. County, WilliamsonMy Commission Expires: 1/24/2010




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##### 



Acknowledgment to
 STERLING HEALTH CAREMANAGEMENT, INC., a Kentucky corporationBy:
    
    /s/ Glynn RiddleName:
    
    Glynn RiddleTitle:
    
    EVP & CFO
    /s/ Jacqueline S. Reed

Notary Public, Tenn. County, WilliamsonMy Commission Expires: 1/24/2010




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##### 



Acknowledgment to
 DIVERSICARE TEXAS I, LLCBy:
    
    /s/ Glynn RiddleName:
    
    Glynn RiddleTitle:
    
    EVP & CFODIVERSICARE BALLINGER, LLCDIVERSICARE DOCTORS, LLCDIVERSICARE ESTATES, LLCDIVERSICARE HUMBLE, LLCDIVERSICARE KATY, LLCDIVERSICARE NORMANDY TERRACE, LLCDIVERSICARE TREEMONT, LLCBY:
    
    DIVERSICARE TEXAS I, LLC,
its sole memberBy:
    
    /s/ Glynn RiddleName:
    
    Glynn RiddleTitle:
    
    EVP & CFO
    /s/ Jacqueline S. Reed

Notary Public, Tenn. County, WilliamsonMy Commission Expires: 1/24/2010




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##### 



List of Exhibits and Schedules to
 Exhibit A
    
    Legal Description of Paris FacilityExhibit B
    
    Survey RequirementsExhibit C
    
    List of Facilities and Facility Trade NamesExhibit D
    
    Permitted Encumbrances for Paris FacilitySchedule 1
    
    Construction Budget




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##### 



Exhibit and Schedules to
   1 2
 1 2
 1 2
 1 2
 1 2 1 2 1 2 1 2




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##### 



Exhibit and Schedules to
    SURVEY CERTIFICATION
 
 Date:(signature of surveyor)




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##### 



Exhibit and Schedules to
  Name
    
    Street Address
    
    City
    
    County
    
    State
    
    Zip1.
    
    Arbor Oaks Health & Rehab
Center (Stillmeadow)
    
    105 Russellville Road,
Route 2, Highway 67 South
    
    Malvern
    
    Hot Spring
    
    AR
    
    
    721042.
    
    Ash Flat Nursing & Rehab
Center
    
    66 Ozbirn Lane
    
    Ash Flat
    
    Sharp
    
    AR
    
    
    725133.
    
    Best Care, Inc.
    
    2159 Dogwood Ridge
    
    Wheelersburg
    
    Scioto
    
    OH
    
    
    456944.
    
    Boone Health Care Center,
Inc.
    
    Lick Creek Road, P.O. Box
605
    
    Danville
    
    Boone
    
    WV
    
    
    250535.
    
    Boyd Nursing and Rehab
Center
    
    12800 Princeland Drive
    
    Ashland
    
    Boyd
    
    KY
    
    
    411026.
    
    Canterbury Health Center
    
    1720 Knowles Road
    
    Phenix City
    
    Russell
    
    AL
    
    
    368677.
    
    Carter Nursing & Rehab
Center
    
    250 McDavid Boulevard,
P.O. Box 904
    
    Grayson
    
    Carter
    
    KY
    
    
    411438.
    
    Conway Health & Rehab
Center (Faulkner)
    
    2603 Dave Ward Drive
    
    Conway
    
    Faulkner
    
    AR
    
    
    720329.
    
    Des Arc Nursing & Rehab
Center
    
    2216 West Main, P.O. box
143B
    
    Des Arc
    
    Prairie
    
    AR
    
    
    7204010.
    
    Elliott Nursing & Rehab
Center
    
    Howard Creek Road, P.O.
Box 694, Route 32 East
    
    Sandy Hook
    
    Elliott
    
    KY
    
    
    4117111.
    
    Garland Nursing & Rehab
Center and Apts.
    
    610 Carpenter Dam Road
    
    Hot Springs
    
    Garland
    
    AR
    
    
    7190112.
    
    Hardee Manor Care Center
    
    401 Orange Place
    
    Wauchula
    
    Hardee
    
    FL
    
    
    3387313.
    
    Laurel Manor Health Center
    
    902 Buchanan Road, P.O.
Box 505
    
    New Tazewell
    
    Claiborne
    
    TN
    
    
    3782514.
    
    Laurel Nursing & Rehab
Center
    
    HC 75, Box 153, Clinic Road
    
    Ivydale
    
    Clay
    
    WV
    
    
    2511315.
    
    Lynwood Nursing Home
    
    4164 Halls Mill Road
    
    Mobile
    
    Mobile
    
    AL
    
    
    3669316.
    
    Manor House of Dover
    
    537 Spring Street, P.O.
Box 399
    
    Dover
    
    Stewart
    
    TN
    
    
    3705817.
    
    Mayfield Rehab and Special
Care Center
    
    200 Mayfield Drive
    
    Smyrna
    
    Rutherford
    
    TN
    
    
    3716718.
    
    Northside Health Care
    
    700 Hutchins Ave
    
    Gadsden
    
    Etowah
    
    AL
    
    
    3590119.
    
    Ouachita Nursing /Pine
Manor Apts.
    
    1411 Country Club Road
    
    Camden
    
    Ouachita
    
    AR
    
    
    7170120.
    
    Pocahontas Nursing & Rehab
Center
    
    105 Country Club Road
    
    Pocahontas
    
    Randolph
    
    AR
    
    
    7245521.
    
    Rich Mountain Nursing &
Rehab Center
    
    306 Hornbeck
    
    Mena
    
    Polk
    
    AR
    
    
    7195322.
    
    Sheridan Nursing & Rehab
Center
    
    113 South Briarwood Drive
    
    Sheridan
    
    Grant
    
    AR
    
    
    7215023.
    
    South Shore Nursing &
Rehab Center
    
    James Hannah Drive, P.O.
box 489
    
    South Shore
    
    Greenup
    
    KY
    
    
    4117524.
    
    The Pines Nursing & Rehab
Center
    
    524 Carpenter Dam Road
    
    Hot Springs
    
    Garland
    
    AR
    
    
    7190125.
    
    Walnut Ridge Nursing &
Rehab Center
    
    1500 West Main
    
    Walnut Ridge
    
    Lawrence
    
    AR
    
    
    7247626.
    
    West Liberty Nursing &
Rehab Center
    
    774 Liberty Road, P.O. Box
219, Route 5 Wells Hill
    
    West Liberty
    
    Morgan
    
    KY
    
    
    4147227.
    
    Westside Health Care Center
    
    4320 Judith Lane
    
    Huntsville
    
    Madison
    
    AL
    
    
    35805




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##### 



Name
    
    Street Address
    
    City
    
    County
    
    State
    
    Zip28.
    
    Wurtland Nursing & Rehab
Center
    
    100 Wurtland Avenue, P.O.
Box 677
    
    Wurtland
    
    Greenup
    
    KY
    
    
    4114429.
    
    Doctors Healthcare
    
    9009 White Rock Trail
    
    Dallas
    
    Dallas
    
    TX
    
    
    7523830.
    
    Estates at Ft. Worth
    
    201 Sycamore School Road
    
    Fort Worth
    
    Tarrant
    
    TX
    
    
    7613431.
    
    Heritage Oaks Estates
    
    2001 N. 6th Street
    
    Ballinger
    
    Runnels
    
    TX
    
    
    7682132.
    
    Humble
    
    8450 Will Clayton Parkway
    
    Humble
    
    Harris
    
    TX
    
    
    7733833.
    
    IHS of Dallas at Treemont
    
    5550 Harvest Hill Road
    
    Dallas
    
    Dallas
    
    TX
    
    
    7523034.
    
    Katy
    
    1525 Tull Drive
    
    Katy
    
    Harris
    
    TX
    
    
    7749935.
    
    Normandy Terrace
    
    841 Rice Road
    
    San Antonio
    
    Bexar
    
    TX
    
    
    7822036.
    
    Paris Facility
    
    ### Stillhouse Road
    
    Paris
    
    Lamar
    
    TX




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##### 



Exhibit and Schedules to
   1.
    
    Easement to Texas Power & Light Co. dated 07/08/52and recorded in Book 327, Page 397, Lamar
County Deed Records.2.
    
    Easement to Texas Power & Light Co., dated 05/09/56and recorded in Book 349, Page 456, Lamar
County Deed Records.3.
    
    Easement to Texas Power & Light Co., dated 05/12/66and recorded in Book 443, Page 175, Lamar
County Deed Records.4.
    
    Easement to Texas Power & Light Co, dated 03/21/68and 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.




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##### 



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




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##### 



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