LOAN AND SECURITY AGREEMENT
 dated as of March 17, 2010
 by and among
 DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation,
as a Borrower
 and
 those certain additional Borrowers set forth on Schedule 1 hereto,
 and
 THE PRIVATEBANK AND TRUST COMPANY,
as Lender




---



##### 



TABLE OF CONTENTS
 Page1.
    
    DEFINITIONS
11.1
    
    General Terms
    
    
    11.2
    
    Interpretation
    
    
    232.
    
    COMMITMENT; INTEREST; FEES
242.1
    
    Revolving Loans
    
    
    242.2
    
    [Intentionally Omitted.]
    
    
    272.3
    
    Reduction of Revolving Loan Commitment by the Borrower
    
    
    272.4
    
    Principal Balance of Liabilities Not to Exceed the Maximum Revolving Facility
    
    
    272.5
    
    The Borrowers Loan Account
    
    
    272.6
    
    Statements
    
    
    272.7
    
    Interest
    
    
    272.8
    
    Method for Making Payments
    
    
    282.9
    
    Term of this Agreement
    
    
    282.10
    
    Optional Prepayment of Loans
    
    
    292.11
    
    Limitation on Charges
    
    
    292.12
    
    Method of Selecting Rate Options; Additional Provisions Regarding Libor Loans
    
    
    292.13
    
    Setoff
    
    
    302.14
    
    Termination of Commitment by the Lender
    
    
    302.15
    
    [Intentionally Omitted.]
    
    
    302.16
    
    Closing Fee
    
    
    302.17
    
    Late Charge
    
    
    302.18
    
    L/C Fees
    
    
    30
 -i-




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##### 



Page3.
    
    CHANGE IN CIRCUMSTANCES
313.1
    
    Yield Protection
    
    
    313.2
    
    Availability of Rate Options
    
    
    323.3
    
    Taxes
    
    
    323.4
    
    Funding Indemnification
    
    
    323.5
    
    Lender Statements
    
    
    333.6
    
    Basis for Determining Interest Rate Inadequate or Unfair
    
    
    333.7
    
    Illegality
    
    
    334.
    
    ELIGIBILITY REQUIREMENTS; CASH COLLATERAL ACCOUNT; ATTORNEY-IN-FACT
334.1
    
    Account Warranties; Schedule of Accounts
    
    
    334.2
    
    Account Covenants
    
    
    344.3
    
    Collection of Accounts and Payments
    
    
    344.4
    
    Appointment of the Lender as the Borrowers Attorney-in-Fact
    
    
    374.5
    
    Notice to Account Debtors
    
    
    384.6
    
    Equipment Warranties
    
    
    394.7
    
    Equipment Records
    
    
    395.
    
    CONDITIONS OF LOANS
395.1
    
    Conditions to all Loans
    
    
    395.2
    
    Initial Loans
    
    
    406.
    
    COLLATERAL
426.1
    
    Security Interest
    
    
    426.2
    
    Preservation of Collateral and Perfection of Security Interests Therein
    
    
    436.3
    
    Loss of Value of Collateral
    
    
    436.4
    
    Right to File Financing Statements
    
    
    436.5
    
    Third Party Agreements
    
    
    44




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##### 



Page6.6
    
    All Loans One Obligation
    
    
    446.7
    
    Commercial Tort Claim
    
    
    447.
    
    REPRESENTATIONS AND WARRANTIES
447.1
    
    Existence
    
    
    457.2
    
    Corporate Authority
    
    
    457.3
    
    Binding Effect
    
    
    457.4
    
    Financial Data
    
    
    457.5
    
    Collateral
    
    
    467.6
    
    Solvency
    
    
    467.7
    
    Principal Place of Business; State of Organization
    
    
    467.8
    
    Other Names
    
    
    467.9
    
    Tax Liabilities
    
    
    467.10
    
    Loans
    
    
    467.11
    
    Margin Securities
    
    
    467.12
    
    Organizational Chart
    
    
    477.13
    
    Litigation and Proceedings
    
    
    477.14
    
    Other Agreements
    
    
    477.15
    
    Compliance with Laws and Regulations
    
    
    477.16
    
    Intellectual Property
    
    
    477.17
    
    Environmental Matters
    
    
    477.18
    
    Disclosure
    
    
    487.19
    
    Pension Related Matters
    
    
    487.20
    
    Perfected Security Interests
    
    
    497.21
    
    [Intentionally Omitted.]
    
    
    497.22
    
    Brokers Fees
    
    
    49




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##### 



Page7.23
    
    Investment Company Act
    
    
    497.24
    
    [Intentionally Omitted.]
    
    
    497.25
    
    [Intentionally Omitted.]
    
    
    497.26
    
    Offenses and Penalties Under the Medicare/Medicaid Programs
    
    
    497.27
    
    Medicaid/Medicare and Private Insurance/Managed Care Contracts
    
    
    507.28
    
    Consideration
    
    
    517.29
    
    USA Patriot Act
    
    
    517.30
    
    Absence of Foreign or Enemy Status
    
    
    517.31
    
    HIPAA Compliance
    
    
    517.32
    
    Labor Matters
    
    
    517.33
    
    Capitalization
    
    
    517.34
    
    Government Contracts
    
    
    527.35
    
    OFAC
    
    
    527.36
    
    Commercial Leases
    
    
    528.
    
    AFFIRMATIVE COVENANTS
528.1
    
    Reports, Certificates and Other Information
    
    
    528.2
    
    Inspection; Audit Fees
    
    
    548.3
    
    Conduct of Business
    
    
    558.4
    
    Claims and Taxes
    
    
    558.5
    
    State of Incorporation or Formation
    
    
    558.6
    
    Liability and Malpractice Insurance
    
    
    568.7
    
    Property and Other Insurance
    
    
    568.8
    
    Environmental
    
    
    578.9
    
    Banking Relationship
    
    
    578.10
    
    Intellectual Property
    
    
    57




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##### 



Page8.11
    
    Change of Location; Etc
    
    
    588.12
    
    Health Care Related Matters
    
    
    588.13
    
    US Patriot Act
    
    
    588.14
    
    Government Accounts
    
    
    598.15
    
    Further Assurances
    
    
    598.16
    
    Compliance with Anti-Terrorism Orders
    
    
    598.17
    
    Blocked Account Agreements and Account Debtors
    
    
    599.
    
    NEGATIVE COVENANTS
609.1
    
    Encumbrances
    
    
    609.2
    
    Indebtedness; Capital Expenditures
    
    
    619.3
    
    Consolidations, Mergers or Transactions
    
    
    619.4
    
    Investments or Loans
    
    
    619.5
    
    Guarantees
    
    
    619.6
    
    Disposal of Property
    
    
    629.7
    
    Use of Proceeds
    
    
    629.8
    
    Loans to Officers; Consulting and Management Fees
    
    
    629.9
    
    Dividends and Stock Redemptions
    
    
    629.10
    
    Payments in Respect of Subordinated Debt
    
    
    639.11
    
    Transactions with Affiliates
    
    
    639.12
    
    Financial Ratios
    
    
    639.13
    
    Change in Nature of Business
    
    
    649.14
    
    Other Agreements
    
    
    649.15
    
    Blocked Accounts and Lock Box Accounts
    
    
    649.16
    
    Amendments to Restricted Agreements
    
    
    649.17
    
    State of Incorporation or Formation
    
    
    64




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##### 



Page9.18
    
    Environmental
    
    
    659.19
    
    Fiscal Year
    
    
    659.20
    
    Restrictions on Fundamental Changes
    
    
    659.21
    
    Margin Stock
    
    
    659.22
    
    Truth of Statements and Certificates
    
    
    6510.
    
    HEALTH CARE MATTERS
 6510.1
    
    Funds from Restricted Grants
    
    
    6610.2
    
    Certificate of Need
    
    
    6610.3
    
    Licenses.  The Licenses
    
    
    6611.
    
    DEFAULT, RIGHTS AND REMEDIES OF THE LENDER
6711.1
    
    Event of Default
    
    
    6711.2
    
    Acceleration
    
    
    7111.3
    
    Rights and Remedies Generally
    
    
    7111.4
    
    Entry Upon Premises and Access to Information
    
    
    7211.5
    
    Sale or Other Disposition of Collateral by the Lender
    
    
    7211.6
    
    Waivers (General)
    
    
    7311.7
    
    Waiver of Notice
    
    
    7511.8
    
    Injunctive Relief
    
    
    7511.9
    
    Marshalling; Recourse to Borrower
    
    
    7511.10
    
    Advice of Counsel
    
    
    7512.
    
    MISCELLANEOUS

7512.1
    
    Waiver
    
    
    7512.2
    
    Costs and Attorneys Fees
    
    
    7612.3
    
    Expenditures by the Lender
    
    
    7712.4
    
    Custody and Preservation of Collateral
    
    
    77




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##### 



Page12.5
    
    Reliance by the Lender
    
    
    7712.6
    
    Assignability; Parties
    
    
    7712.7
    
    Severability; Construction
    
    
    7712.8
    
    Application of Payments
    
    
    7812.9
    
    Marshalling; Payments Set Aside
    
    
    7812.10
    
    Sections and Titles; UCC Termination Statements
    
    
    7812.11
    
    Continuing Effect; Inconsistency
    
    
    7812.12
    
    Notices
    
    
    7912.13
    
    Equitable Relief
    
    
    8012.14
    
    Entire Agreement
    
    
    8012.15
    
    Participations and Assignments
    
    
    8012.16
    
    Indemnity
    
    
    8012.17
    
    Representations and Warranties
    
    
    8112.18
    
    Counterparts; Electronically Transmitted Signatures
    
    
    8112.19
    
    Limitation of Liability of Lender
    
    
    8112.20
    
    Borrower Authorizing Accounting Firm
    
    
    8212.21
    
    Joint and Several Liability; Binding Obligations
    
    
    8212.22
    
    Confidentiality
    
    
    8512.23
    
    Expenses and Taxes
    
    
    8512.24
    
    Release
    
    
    8612.25
    
    Time; Reliance
    
    
    8712.26
    
    Relationship
    
    
    8712.27
    
    Borrower Agent
    
    
    8712.28
    
    Agents; Borrower Authorizing Accounting Firm
    
    
    8812.29
    
    Additional Provisions
    
    
    88




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##### 



Page12.30
    
    Nonliability of Lender
    
    
    9112.31
    
    INTENTIONALLY OMITTED
    
    
    9212.32
    
    SUBMISSION TO JURISDICTION; WAIVER OF VENUE
    
    
    9212.33
    
    GOVERNING LAW
    
    
    9312.34
    
    JURY TRIAL
    
    
    93SCHEDULES
    
    
    96EXHIBITS
    
    
    105




---



##### 



LOAN AND SECURITY AGREEMENT
 LOAN AND SECURITY AGREEMENT Agreement DIVERSICARE MANAGEMENT SERVICES CO. Schedule 1 Borrower THE PRIVATEBANK AND TRUST COMPANY Lender
 RECITALS
 WHEREAS Parent
 WHEREAS
 WHEREAS
 NOW, THEREFORE
 1. DEFINITIONS.
 General Terms
 Account Debtor
 Accounts
 -1-




---



##### 



ACH Transactions
 Adjusted EBITDA
 Adjusted EBITDAR plus
 Affiliate
 Agreement
 Allocable Amount Section
12.21(g)
 Applicable Base Rate Margin
 Applicable Libor Margin
 Bank Product
 -2-




---



##### 



Bank Product Agreements
 Bank Product Obligations
 Base Rate
 Base Rate Loan
 Base Rent
 Blocked Account Agreement
 Blocked Persons List Section
7.29
 Borrower Agent
 Borrower Cash Management Program
 Borrowing Base
 -3-




---



##### 



Borrowing Date
 Borrowing Notice Section
2.12
 Business Day
 Capital Expenditures
 Capitalized Lease Obligations
 Capmark
 Capmark Borrowers
 -4-




---



##### 



Capmark Blocked Account Agreement
 Capmark Cash Collateral Account Section 4.3(b)
 Capmark Commercial Blocked Account Section 4.3(b)
 Capmark Debt Documents Section 9.16
 Capmark Government Blocked Account Section 4.3(b)
 Capmark Intercreditor Agreement
 Capmark Mortgage
 Capmark Mortgage Loan
 Capmark Mortgage Loan Documents
 Capmark Security Interest
 Cash Collateral Account Section
4.3(a)
 Cash Cost of Self-Insured Professional and General Liability
 -5-




---



##### 



CERCLA
 Certificates Section 5.2
 CHAMPUS
 Closing Date
 Closing Fee Section 2.16
 CMS
 Collateral Section 6.1
 Commercial Blocked Account Section 4.3(a)
 Commercial Leases
 Commitment
 Compliance Certificate Section
8.1(c)
 CON Section 10.2
 Credit Party
 Credit Termination Date Section 11.2
 Default
 Default Rate Section 2.7(a)
 Demand Deposit Account Section
4.3(a)
 -6-




---



##### 



Deposit Accounts
 Duly Authorized Officer
 EBITDA
 EBITDAR
 Eligible Accounts
      -7-




---



##### 



provided however
  provided further
 -8-




---



##### 



provided further
 Environmental Laws
 Environmental Notice
 Equipment
 ERISA
 ERISA Affiliate
 Event of Default Section
11.1
 -9-




---



##### 



Facility Facilities Schedule 1.1(a)
 Financing Agreements
 Fiscal Quarter
 Fiscal Year
 Fixed Charge Coverage Ratio
 Fixed Charges
 GAAP
 -10-




---



##### 



General Intangibles
 Governing Documents Section
9.14
 Government Accounts
 Governmental Approvals
 Governmental Authority
 Government Blocked Account Section 4.3(a)
 Guarantor
 Guaranty
 Hazardous Substances
 -11-




---



##### 



Healthcare Laws
 Hedging Agreement
 HHS
 HIPAA
 Indebtedness
 -12-




---



##### 



Indemnified Parties Section
12.16
 Insurer
 Intellectual Property
 Intercreditor Agreements
 Inventory
 Joint Liability Payment Section
12.21(g)
 Laws
 L/C Fee Section 2.18
 -13-




---



##### 



Leased Real Property
 Leases
 Lender Parties Section 12.24
 Letter of Credit
 Letter of Credit Obligations plus
 Liabilities
 Libor Base Rate Bloomberg Financial Markets
 -14-




---



##### 



provided however
 Libor Interest Period provided however provided further
 Libor Loan
 Libor Rate
 Licenses Section 10.2
 Lien
 Loan Account Section 2.5
 Loans
 Location Locations Schedule 1.1(a)
 Manage Management
 Management Agreements
 Master Letter of Credit Agreement Section 2.1B
 -15-




---



##### 



Material Adverse Change Material Adverse Effect
 Maximum Revolving Facility
 Medicaid Certification
 Medicaid Provider Agreement
 Medicaid Regulations Medicaid
 -16-




---



##### 



Medical Services
 Medicare Certification
 Medicare Provider Agreement
 Medicare Regulations Medicare
 Multiemployer Plan Section
7.19
 Net Capital Expenditures Schedule 1.1(d)
 OFAC Lists
 Omega
 Omega Debt Documents
 -17-




---



##### 



Section 9.16
 Omega-Florida Intercreditor Agreement
 Omega Intercreditor Agreements
 Omega Letter of Credit
 Omega Master Lease Agreement DLC
 Omega Security Interests
 Omega Senior Leases Schedule 1.1(e)
 -18-




---



##### 



Omega Senior Lessors
 Omega-Sterling Increditor Agreement
 Operating Lease
 Operators Operator
 Parent Recitals
 Patient
 Patriot Act Section 8.16
 PBGC Section 7.19
 Permitted Liens Section 9.1
 Person
 Plan Section 7.19
 Pledge Agreements
 -19-




---



##### 



Pledgor
 Possession Date
 Preferred Stock
 Preferred Stock Certificate of Designation
 Private Insurance/Managed Care Account
 Private Insurance/Managed Care Contracts
 Private Pay Accounts
 Prohibited Transaction
 Property
 Rate Option
 Release
 Released Parties Section
12.24
 Releasing Parties Section
12.24
 Required Dividends and Redemption Amounts
 -20-




---



##### 



Respond Response
 Restricted Agreements
 Restrictions Section 10.3
 Restructuring Stock Issuance and Subscription Agreement
 Revolving Credit Note Section
2.1
 Revolving Loan Commitment Section 2.1
 Revolving Loans Section 2.1
 Rose Terrace Lease
 Schedule of Accounts Section 8.1(d)
 Service Fee Section 8.9
 Solvent
 -21-




---



##### 



Stated Maturity Date
 Stock
 Subordinated Debt
 Subordination Agreement
 Subsidiary
 Tax Code Section 7.19
 Taxes Section 3.3
 -22-




---



##### 



Tenant
 TRICARE
 Uniform Commercial Code UCC Code provided further
 Interpretation.
   -23-




---



##### 



2. COMMITMENT; INTEREST; FEES.
 Revolving Loans Revolving Loans Revolving Loan Section
2.1(b) Section 2.1(b) Section 3.4 provided however Reborrowing Date Section 5.1 Revolving Loan Commitment Section
12.21
    -24-




---



##### 



Letters of Credit
 Master Letter of Credit Agreement Section 2.1(c)
 -25-




---



##### 



-26-




---



##### 



[Intentionally Omitted.].
 Reduction of Revolving Loan Commitment by the Borrower
 Principal Balance of Liabilities Not to Exceed the Maximum Revolving Facility.
 The Borrowers Loan Account Loan Account
 Statements
 Interest provided however
 -27-




---



##### 



provided however Default Rate
  Method for Making Payments
 Term of this Agreement Section 2.10 provided however Section 6.1 Section 11.2
 -28-




---



##### 



Optional Prepayment of Loans Section 3.4
 Limitation on Charges
 Method of Selecting Rate Options; Additional Provisions Regarding Libor Loans Section 2.12 provided however Exhibit B Borrowing Notice
      -29-




---



##### 



Setoff
 Section 2.13(a)
 Section 2.13
 Termination of Commitment by the Lender Section 11.2
 Intentionally Omitted
 Closing Fee Closing Fe
 Late Charge
 L/C Fees L/C Fee
 -30-




---



##### 



provided
 3. CHANGE IN CIRCUMSTANCES
 Yield Protection
      -31-




---



##### 



Availability of Rate Options Section 3.4 Section 3.1 clause (ii)
 Taxes Taxes
     Funding Indemnification
 -32-




---



##### 



Lender Statements Sections 3.1 3.3 3.4
 Basis for Determining Interest Rate Inadequate or Unfair
 Illegality
 4. ELIGIBILITY REQUIREMENTS; CASH COLLATERAL ACCOUNT; ATTORNEY-IN-FACT.
 Account Warranties; Schedule of Accounts Section 8.1
 -33-




---



##### 



Verification of Accounts
 Account Covenants
 Collection of Accounts and Payments Commercial Blocked Account Government Blocked Account Demand Deposit
Account Cash Collateral Account
 -34-




---



##### 



Capmark Commercial Blocked Account
 -35-




---



##### 



Capmark Government Blocked Account Capmark Cash
Collateral Account
 -36-




---



##### 



Capmark Conditions Side Letter
 Appointment of the Lender as the Borrowers Attorney-in-Fact
 -37-




---



##### 



Section 4.4
 Notice to Account Debtors
 -38-




---



##### 



Section 4.5
 Equipment Warranties
 Equipment Records
 5. CONDITIONS OF LOANS
 Conditions to all Loans
 The
Borrowers Request.
 Financial Condition.
 -39-




---



##### 



No Default.
 Other
Requirements.
 Representations and Warranties.
 Initial Loans Section 5.1
 Fees and Expenses
 Documents
 Financing Agreements
 Resolutions; Incumbency and Signatures
 -40-




---



##### 



Consents
 Opinion of Counsel
 Certain Restricted Agreements
 Financial Condition Certificate
 Governing Documents and Good Standings Certificates
 [Intentionally Omitted.]
 UCC Financing Statements; Termination Statements; UCC Searches
 -41-




---



##### 



Insurance Certificates
 Pay Off Letter
 [Intentionally Omitted.]
 Capmark Debt Documents and Omega Debt Documents
 [Intentionally Omitted.]
 [Intentionally Omitted.]
 Other
 Field Examinations
 Certificate
 Closing Fee
 Commitment Letter
 Omega Letter of Credit
 COLLATERAL.
 Security Interest
 -42-




---



##### 



Collateral
 Preservation of Collateral and Perfection of Security Interests Therein
 Loss of Value of Collateral
 -43-




---



##### 



Right to File Financing Statements provided however
 Third Party Agreements
 All Loans One Obligation
 Commercial Tort Claim
 REPRESENTATIONS AND WARRANTIES.
 -44-




---



##### 



Existence
 Corporate Authority
 Binding Effect
 Financial Data.
  -45-




---



##### 



Collatera Schedule 1
 Solvency
 Principal Place of Business; State of Organization Schedule
1
 Schedule 7.8
 Tax Liabilities
 Loans Section 9.2
 -46-




---



##### 



Margin Securities
 Organizational Chart Schedule 7.12
 Litigation and Proceedings Section 11.1 Schedule 7.13 Section 8.1(e)
 Other Agreements
 Compliance with Laws and Regulations
 Intellectual Property
 -47-




---



##### 



Environmental Matters Schedule 7.17
 Disclosure
 Pension Related Matters Multiemployer Plan Plan Tax Code
 -48-




---



##### 



PBGC
 Perfected Security Interests Section 6.1
 Intentionally Omitted
 Brokers Fees
 Investment Company Act
 Intentionally Omitted
 Intentionally Omitted
 Offenses and Penalties Under the Medicare/Medicaid Programs Schedule 7.26 Schedule 7.26
 -49-




---



##### 



Medicaid/Medicare and Private Insurance/Managed Care Contracts
 The Borrower has:
      -50-




---



##### 



Consideration
 USA Patriot Act Blocked Persons Lists
 Absence of Foreign or Enemy Status et seq.
 HIPAA Compliance
 Labor Matters Schedule 7.32 Schedule 7.32
 Capitalization. Schedule 7.33
 -51-




---



##### 



Government Contracts
 OFAC
 Commercial Leases Schedule 7.36
 AFFIRMATIVE COVENANTS.
  Reports, Certificates and Other Information
 Financial Statements.
  Section 8.1(a)(1)
 -52-




---



##### 



Borrower Base Certificates
 Compliance Certificates
 Schedule of Accounts
 Notice of Default, Regulatory Matters, Litigation Matters or Adverse Change in
Business
 Insurance Reports
 -53-




---



##### 



Annual Projections
 Affiliate Transactions
 Health Care
 Interim Reports
 Reports to the SEC
 Other Information
 -54-




---



##### 



Inspection; Audit Fees
 Conduct of Business
 Claims and Taxes
 State of Incorporation or Formation Schedule 1
 -55-




---



##### 



Liability and Malpractice Insurance Section 8.6 Section 8.7
 Property and Other Insurance
  -56-




---



##### 



Environmental.
 Banking Relationship Section 4.3 provided however Service Fee Section 8.9 Schedule 8.9
 -57-




---



##### 



Section 8.9
 Intellectual Property
 Change of Location; Etc
 Health Care Related Matters
 -58-




---



##### 



US Patriot Act Section
7.29
 Government Accounts
 Further Assurances
 Compliance with Anti-Terrorism Orders Patriot Act nolo
contendere
 -59-




---



##### 



Blocked Account Agreements and Account Debtors
   NEGATIVE
COVENANTS.
  Encumbrances Permitted Liens
 -60-




---



##### 



Indebtedness; Capital Expenditures Section 9.1 Section 9.4
 Consolidations, Mergers or Transactions provided Schedule 9.3 Inactive
Subsidiary
 Investments or Loans
 -61-




---



##### 



Section 9.8
 Guarantees Section 9.2 Section 9.2
 Disposal of Property
 Use of Proceeds
 Loans to Officers; Consulting and Management Fees provided however
 -62-




---



##### 



Section 9.8
 Dividends and Stock Redemptions provided Section 9.12(a) Section
9.9
 Payments in Respect of Subordinated Debt
   Transactions with Affiliates provided however
 -63-




---



##### 



Financial Ratios
 Minimum Fixed Charge Coverage Ratio
 Minimum Adjusted EBITDA
 Computation
 Change in Nature of Business
 Other Agreements Governing Document
 Blocked Accounts and Lock Box Accounts
 Amendments to Restricted Agreements
 -64-




---



##### 



State of Incorporation or Formation Schedule 1
 Environmental.
 Fiscal Year
 Restrictions on Fundamental Changes
      -65-




---



##### 



Margin Stock
 Truth of Statements and Certificates
 Article 9 Article 9
 HEALTH CARE MATTERS .
 Article 7 Articles 8 9
 Funds from Restricted Grants et seq
 Certificate of Need CON Licenses
 Licenses Restrictions
 -66-




---



##### 



DEFAULT, RIGHTS AND REMEDIES OF THE LENDER
 Event of Default
     -67-




---



##### 



-68-




---



##### 



-69-




---



##### 



-70-




---



##### 



Acceleration Sections 11.1(h) (i) (j)
 -71-




---



##### 



Rights and Remedies Generally
   Entry Upon Premises and Access to Information
 -72-




---



##### 



Sale or Other Disposition of Collateral by the Lender Section 12.12 Sections 8.2 11.2
 Waivers (General)
   -73-




---



##### 



-74-




---



##### 



Waiver of Notice
 Injunctive Relief
 Marshalling; Recourse to Borrower
 -75-




---



##### 



Advice of Counsel
 MISCELLANEOUS .
 Waiver
 Costs and Attorneys Fees
   -76-




---



##### 



Expenditures by the Lender
 Custody and Preservation of Collateral
 -77-




---



##### 



Reliance by the Lender
 Assignability; Parties
 Severability; Construction
 Application of Payments
 Marshalling; Payments Set Aside
 -78-




---



##### 



Sections and Titles; UCC Termination Statements
 Continuing Effect; Inconsistency Section 2.9
 Notices
 If to the Lender, at:
 
  
 If to the Borrower or Borrower Agent, at:
 
 -79-




---



##### 



Equitable Relief
 Entire Agreement
 Participations and Assignments
 Indemnity Indemnified Parties
 -80-




---



##### 



provided Section 12.16
 Representations and Warranties
 Counterparts; Electronically Transmitted Signatures
 Limitation of Liability of Lender
 -81-




---



##### 



Borrower Authorizing Accounting Firm
 Joint and Several Liability; Binding Obligations
  -82-




---



##### 



inter alia
    -83-




---



##### 



-84-




---



##### 



Confidentiality. Securities Laws
 -85-




---



##### 



Expenses and Taxes.
   -86-




---



##### 



Release. Releasing Parties Lender Parties Released Parties
 Time; Reliance
 Relationship
 Borrower Agent
 -87-




---



##### 



Agents; Borrower Authorizing Accounting Firm
 Additional Provisions
 Consents
 -88-




---



##### 



Waivers
    -89-




---



##### 



-90-




---



##### 



Additional Waivers
 Primary Obligations
 Nonliability of Lender
 -91-




---



##### 



INTENTIONALLY OMITTED
 SUBMISSION TO JURISDICTION; WAIVER OF VENUE
 SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND THE OTHER FINANCING AGREEMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF ILLINOIS AND APPELLATE COURTS FROM ANY THEREOF;
 CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING (i) ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
 -92-




---



##### 



COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME, (ii) THE RIGHT TO ASSERT OR IMPOSE ANY
CLAIM, NONCOMPULSORY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM IN RESPECT THEREOF IN SUCH PROCEEDING;
PROVIDED, HOWEVER, THIS WAIVER DOES NOT PRECLUDE THE RIGHT TO ASSERT A DEFENSE IN SUCH ACTION OR
PROCEEDING OR TO ASSERT OR IMPOSE ANY CLAIM, COUNTERCLAIM OR CROSS-CLAIM WHICH THE BORROWER WISHES
TO PURSUE IN A SEPARATE PROCEEDING AT ITS SOLE COST AND EXPENSE, AND (iii) ALL STATUTES OF
LIMITATIONS WHICH MAY BE RELEVANT THERETO; AND
 AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER
ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER AGREES THAT
SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE BORROWER IN ANY SUIT, ACTION OR PROCEEDING, AND (ii) SHALL BE TAKEN AND
HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE BORROWER. SOLELY TO THE EXTENT
PROVIDED BY APPLICABLE LAW, SHOULD THE BORROWER, AFTER BEING SERVED, FAIL TO APPEAR OR ANSWER TO
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW
AFTER THE DELIVERY OR MAILING THEREOF, THE BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED BY THE COURT AGAINST THE BORROWER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. NOTHING HEREIN SHALL AFFECT THE LENDERS RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR LIMIT THE LENDERS RIGHT TO BRING PROCEEDINGS
AGAINST THE BORROWER OR ITS PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.
 GOVERNING LAW
 JURY TRIAL. THE BORROWER AND THE LENDER HEREBY IRREVOCABLY AND KNOWINGLY WAIVE (TO THE
FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS AGREEMENT, THE FINANCING
AGREEMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO, INCLUDING, WITHOUT
LIMITATION, ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE
BE DELIVERED IN CONNECTION HEREWITH, OR (B) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION
 -93-




---



##### 



WITH OR RELATED TO THIS AGREEMENT AND THE FINANCING AGREEMENTS. THE LENDER AND THE BORROWER
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY.
  -94-




---



##### 



IN WITNESS WHEREOF
 DIVERSICARE MANAGEMENT
SERVICES CO., a Tennessee
corporation, as Borrower AgentBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerADVOCAT ANCILLARY SERVICES, INC., a Tennessee
corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerADVOCAT FINANCE, INC., a Delaware corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerDIVERSICARE MANAGEMENT SERVICES CO.,a Tennessee
corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerADVOCAT DISTRIBUTION SERVICES, INC., a Tennessee
corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
Officer




---



##### 



DIVERSICARE ASSISTED LIVING SERVICES, INC., a
Tennessee corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerDIVERSICARE ASSISTED LIVING SERVICES NC, LLC, a
Tennessee limited liability companyBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerDIVERSICARE LEASING CORP., a Tennessee corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerSTERLING HEALTH CARE MANAGEMENT, INC., a Kentucky
corporationBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial
OfficerSENIOR CARE CEDAR HILLS, LLC, a Delaware
limited liability companyBY: SENIOR CARE FLORIDA LEASING, LLC, its sole memberBY: DIVERSICARE LEASING CORP., its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts: Executive Vice President & Chief Financial Officer




---



##### 



SENIOR CARE GOLFCREST, LLC, a Delaware limited
liability companyBY:
    SENIOR CARE FLORIDA LEASING,
LLC, its sole memberBY:
    DIVERSICARE LEASING CORP.,
its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerSENIOR CARE GOLFVIEW, LLC, a Delaware 
limited liability companyBY:
    SENIOR CARE FLORIDA LEASING, 
LLC, its sole memberBY:
    DIVERSICARE LEASING CORP., 
its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerSENIOR CARE FLORIDA LEASING, LLC,a Delaware
limited liability companyBY:
    DIVERSICARE LEASING CORP.,
its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
Officer




---



##### 



SENIOR CARE SOUTHERN PINES, LLC,a Delaware limited
liability companyBY:
    SENIOR CARE FLORIDA LEASING, LLC, its sole memberBY:
    DIVERSICARE LEASING CORP.,
its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerDIVERSICARE AFTON OAKS, LLC, a 
Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ASSISTED LIVING
SERVICES NC I, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE ASSISTED LIVING SERVICES NC, LLC, its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE ASSISTED LIVING
SERVICES NC II, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE ASSISTED LIVING SERVICES NC, LLC, its sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerDIVERSICARE BRIARCLIFF, LLC,a 
Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE CHISOLM, LLC, a Delaware 
limited liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE HARTFORD, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE HILLCREST, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE LAMPASAS, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE PINEDALE, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE WINDSOR HOUSE, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE YORKTOWN, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE BALLINGER, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE DOCTORS, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ESTATES, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its 
sole memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE HUMBLE, LLC, a Delaware limited liability
companyBY:
    DIVERSICARE TEXAS I, LLC, its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE KATY, LLC, a Delaware limited liability
companyBY:
    DIVERSICARE TEXAS I, LLC, its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE NORMANDY TERRACE, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE TEXAS I, LLC, a Delaware limited
liability companyBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
Officer




---



##### 



DIVERSICARE TREEMONT, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ROSE TERRACE, LLC, a Delaware limited
liability companyBY:
   DIVERSICARE LEASING CORP., its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE PARIS, LLC,a Delaware limited liability
companyBY:
    DIVERSICARE TEXAS I, LLC, its sole 
memberBy:
    /s/ Glynn RiddleName:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerTHE PRIVATEBANK AND TRUST COMPANYBy:
    /s/ Adam D. PanosName:
    Adam D. PanosIts:
    Associate Managing Director




---



##### 



SCHEDULES
 Schedule 1
    
    BorrowersSchedule 1.1(a)
    
    FacilitiesSchedule 1.1(b)
    
    Intentionally OmittedSchedule 1.1(c)
    
    Omega LeasesSchedule 1.1(d)
    
    Certain Capital ExpendituresSchedule 7.8
    
    Other NamesSchedule 7.12
    
    Organizational ChartSchedule 7.13
    
    LitigationSchedule 7.17
    
    Environmental MattersSchedule 7.26
    
    Medicare and Medicaid PenaltiesSchedule 7.32
    
    Labor MattersSchedule 7.33
    
    CapitalizationSchedule 7.36
    
    Commercial LeasesSchedule 8.9
    
    Certain Corporate AccountsSchedule 9.3
    
    Requirements for Subsidiary Formation
 EXHIBITS
 Exhibit A
    
    Form of Revolving Credit NoteExhibit B
    
    Form of Borrowing Notice




---



##### 



SCHEDULE 1
 BORROWERS
 State of Incorporation or
    
    Principal Place of Business andName
    
    Formation
    
    Chief Executive OfficeAdvocat Ancillary Services, Inc.
    
    Tennessee corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Advocat Finance, Inc.
    
    Delaware corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Management Services Co.
    
    Tennessee corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Advocat Distribution Services, Inc.
    
    Tennessee corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Assisted Living
Services, Inc.
    
    Tennessee corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Assisted Living 
Services NC, LLC
    
    Tennessee limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Leasing Corp.
    
    Tennessee corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Sterling Health Care Management,
Inc.
    
    Kentucky corporation
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Senior Care Cedar Hills, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Senior Care Golfcrest, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Senior Care Golfview, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Senior Care Florida Leasing, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Senior Care Southern Pines, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Afton Oaks, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Assisted Living 
Services NC I, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Assisted Living 
Services NC II, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Briarcliff, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Chisolm, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Hartford, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Hillcrest, LLC,
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Lampasas, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Pinedale, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Windsor House, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027




---



##### 



State of Incorporation or
    
    Principal Place of Business andName
    
    Formation
    
    Chief Executive OfficeDiversicare Yorktown, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Ballinger, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Doctors, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Estates, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Humble, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Katy, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Normandy Terrace, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Texas I, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Treemont, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Rose Terrace, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027Diversicare Paris, LLC
    
    Delaware limited liability company
    
    1621 Galleria
Blvd., Brentwood,
TN 37027




---



##### 



Schedule 9.3
 Joinders




---



##### 



EXHIBIT A
 FORM OF REVOLVING CREDIT NOTE




---



##### 



EXHIBIT B
 FORM OF BORROWING NOTICE
  
 Loan Agreement Borrower THE PRIVATEBANK AND TRUST COMPANY Lender
  Section 7
  
 *** signature page follows***




---



##### 



DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee
corporation, as Borrower AgentBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerADVOCAT ANCILLARY SERVICES, INC.,a Tennessee
corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerADVOCAT FINANCE, INC.,a Delaware corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerDIVERSICARE MANAGEMENT SERVICES CO., 
a Tennessee corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerADVOCAT DISTRIBUTION SERVICES, INC., 
a Tennessee corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE ASSISTED LIVING
SERVICES, INC.,a
Tennessee corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerDIVERSICARE ASSISTED LIVING SERVICES NC, LLC,a
Tennessee limited liability companyBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerDIVERSICARE LEASING CORP.,a Tennessee corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
OfficerSTERLING HEALTH CARE MANAGEMENT, INC.,a Kentucky
corporationBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerSENIOR CARE CEDAR HILLS, LLC,a Delaware
limited liability companyBY:

    SENIOR CARE FLORIDA LEASING, LLC,its
sole memberBY:  DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief Financial
Officer




---



##### 



SENIOR CARE GOLFCREST, LLC, a Delaware limited
liability companyBY:
    SENIOR CARE FLORIDA LEASING, LLC, its sole memberBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerSENIOR CARE GOLFVIEW, LLC, a Delaware limited
liability companyBY:
    SENIOR CARE FLORIDA LEASING, LLC, its sole memberBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerSENIOR CARE FLORIDA LEASING, LLC, a Delaware
limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



SENIOR CARE SOUTHERN PINES, LLC, a Delaware limited liability companyBY:
    SENIOR CARE FLORIDA LEASING, LLC, its sole memberBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE AFTON OAKS, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ASSISTED LIVING SERVICES NC I, LLC,a Delaware limited liability companyBY:
    DIVERSICARE ASSISTED LIVING SERVICES NC, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited liability companyBY:
    DIVERSICARE ASSISTED LIVING SERVICES NC, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE BRIARCLIFF, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE CHISOLM, LLC, a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE HARTFORD, LLC,a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE HILLCREST, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE LAMPASAS, LLC,a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE PINEDALE, LLC,a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE WINDSOR HOUSE, LLC,a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE YORKTOWN, LLC, a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE BALLINGER, LLC, a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE DOCTORS, LLC,a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ESTATES, LLC, a Delaware limited
liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE HUMBLE, LLC, a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE KATY, LLC,a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE NORMANDY TERRACE, LLC,a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE TEXAS I, LLC,a Delaware limited liability companyBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




---



##### 



DIVERSICARE TREEMONT, LLC, a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE ROSE TERRACE, LLC, a Delaware limited liability companyBY:
    DIVERSICARE LEASING CORP., its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial OfficerDIVERSICARE PARIS, LLC, a Delaware limited liability companyBY:
    DIVERSICARE TEXAS I, LLC, its sole memberBy:Name:
    Glynn RiddleIts:
    Executive Vice President & Chief
Financial Officer




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##### 



Schedule 1