Document:

<PAGE>
                                                                    Exhibit 10.7

STATE OF TENNESSEE
COUNTY OF WILLIAMSON

              CROSS-COLLATERALIZATION AND CROSS-DEFAULT AGREEMENT

     THIS CROSS-COLLATERALIZATION AND CROSS-DEFAULT AGREEMENT (this "Agreement")
is executed as of the 18 day of June, 2003, by DIVERSICARE WINDSOR HOUSE, LLC, a
Delaware limited liability company (hereinafter called "Windsor House"), whose
address is c/o Advocat Inc., 277 Mallory Station Road, Suite 130, Franklin,
Tennessee 37067, DIVERSICARE PINEDALE, LLC, a Delaware limited liability company
(hereinafter called "Pinedale"), whose address is c/o Advocat Inc., 277 Mallory
Station Road, Suite 130, Franklin, Tennessee 37067, DIVERSICARE AFTON OAKS, LLC,
a Delaware limited liability company, (hereinafter called "Afton Oaks"), whose
address is c/o Diversicare Leasing Corp., 277 Mallory Station Road, Suite 130,
Franklin, Tennessee 37067, DIVERSICARE ASSISTED LIVING SERVICES NC I, LLC, a
Delaware limited liability company, whose address is c/o Advocat Inc., 277
Mallory Station Road, Suite 130, Franklin, Tennessee 37067 (hereinafter called
"NC I") and DIVERSICARE ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited
liability company, whose address is c/o Advocat Inc., 277 Mallory Station Road,
Suite 130, Franklin, Tennessee 37067 (hereinafter called "NC II"; Windsor House,
Pinedale, Afton Oaks, NC I and NC II may be referred to collectively herein as
the "Borrowers" or referred to individually as a "Borrower"), in favor of GMAC
COMMERCIAL MORTGAGE CORPORATION, a California corporation (hereinafter called
"Lender"), whose address is 200 Witmer Road, Horsham, Pennsylvania 19044.

                                    RECITALS

     A. Windsor House is indebted to Lender pursuant to a loan (the "Windsor
House Loan") in the principal sum of FOUR MILLION SEVEN HUNDRED NINE THOUSAND
AND NO/100 DOLLARS ($4,709,000), which Windsor House Loan is evidenced by that
certain Promissory Note dated March 29, 2001, from Windsor House to Lender (as
the same may be renewed, extended, modified, or amended, being hereinafter
referred to as the "Windsor House Note"), which Windsor House Note is secured
by, among other things, a Mortgage and Security Agreement (as amended, the
"Windsor House Mortgage"), recorded in the Office of the Judge of Probate of
Madison County, Alabama, in Book 2780, Page 756 encumbering the real property
more particularly described in Exhibit "A" hereto (the "Windsor House
Property"). The Windsor House Note and the Windsor House Mortgage, together with
all other documents listed on Exhibit "H" hereto under the caption "Windsor
House Loan Documents," are collectively referred to herein as the "Windsor House
Loan Documents".

     B. Pinedale is indebted to Lender pursuant to a loan (the "Pinedale Loan")
in the principal sum of TWO MILLION NINE HUNDRED THIRTEEN THOUSAND AND NO/100
DOLLARS ($2,913,000), which Pinedale Loan is evidenced by that certain
Promissory Note dated March 29, 2001, from Pinedale to Lender (as the same may
be renewed, extended, modified, or amended, being hereinafter referred to as the
"Pinedale Note"), which Pinedale Note is secured by, among other things, a
Mortgage and Security Agreement (as amended, the "Pinedale Mortgage"),

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recorded in the Office of the Clerk of Jackson County, Arkansas, in Book ____,
Page ____, encumbering the real property more particularly described in Exhibit
"B" hereto (the "Pinedale Property"). The Pinedale Note and the Pinedale
Mortgage, together with all other documents listed on Exhibit "H" hereto under
the caption "Pinedale Loan Documents," are collectively referred to herein as
the "Pinedale Loan Documents".

          C.   Afton Oaks is indebted to Lender pursuant to a loan (the "Afton
Oaks Loan"); in the principal sum of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND
AND NO/100 DOLLARS ($3,750,000), which Afton Oaks Loan is evidenced by that
certain Promissory Note executed by Diversicare Management Services Co., a
Tennessee corporation ("DMSC") and dated December 27, 1996, in the original
principal amount of $3,750,000, as amended by that certain Amendment to
Promissory Note dated November 30, 1999, by that certain Second Amendment to
Promissory Note dated April 30, 2000, by that certain Third Amendment to
Promissory Note dated June 30, 2000, by that certain Memorandum of Lender dated
September 8, 2000, by that certain Fourth Amendment to Promissory Note dated
September 29, 2000, by that certain Fifth Amendment to Promissory Note dated
December 31, 2000, by that certain Memorandum of Lender dated January 26, 2001,
by that certain Sixth Amendment to and Assumption of Promissory Note dated
February 28, 2001 and by that certain Seventh Amendment to Promissory Note dated
December __, 2002 (as the same may be renewed, extended, modified, or amended,
being hereinafter referred to as the "Afton Oaks Note"). Pursuant to the terms
of the Sixth Amendment to and Assumption of the Promissory Note dated February
28, 2001, the Afton Oaks Note was assumed by Afton Oaks. The Afton Oaks Note is
secured by, among other things, a Deed of Trust and Security Agreement dated
December 27, 1996, executed by Diversicare Leasing Corp. ("DLC") and recorded
under Clerks' File No. S268193 in the Real Property Records of Harris County,
Texas, as assumed by Afton Oaks pursuant to that certain Assumption of Deed of
Trust and Security Agreement dated December 1, 2000, and recorded under Clerk's
File No. U778174 in the Real Property Records of Harris County, Texas (as
further amended, the "Afton Oaks Mortgage"), encumbering the real property more
particularly described in Exhibit "C" hereto (the "Afton Oaks Property"). The
Afton Oaks Note and the Afton Oaks Mortgage, together with all other documents
listed on Exhibit "H" hereto under the caption "Afton Oaks Loan Documents," are
collectively referred to herein as the "Afton Oaks Loan Documents".

          D.   NC I is indebted to Lender pursuant to a loan (the "NC I Loan")
in the principal sum of TWELVE MILLION SEVEN HUNDRED SEVENTY THOUSAND AND NO/100
DOLLARS ($12,770,000.00), which NC I Loan is evidenced by that certain
Promissory Note dated June 4, 1999, from NC I to Lender (as the same may be, or
has been, renewed, extended, modified, or amended, being hereinafter referred to
as the "NC I Note"), which NC I Note is secured by, among other things, six (6)
individual Deeds of Trust and Security Agreements more particularly described on
Exhibit "D" attached hereto (collectively, as amended, the "NC I Mortgage"),
encumbering the respective real property more particularly described on Exhibit
"F" attached hereto (collectively, the "NC I Property"). The NC I Note and the
NC I Mortgage, together with all documents listed on Exhibit "H" hereto, under
the caption "NC I Loan Documents", are collectively referred to herein as the
"NC I Loan Documents".

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<PAGE>
     E.  NC II is indebted to Lender pursuant to a loan (the "NC II Loan"; the
Windsor House Loan, the Pinedale Loan, the Afton Oaks Loan, the NC I Loan and
the NC II Loan are sometimes collectively referred to herein as the "Loans") in
the principal sum of TWELVE MILLION FOUR HUNDRED EIGHTY THOUSAND AND NO/100
DOLLARS ($12,480,000.00), which NC II Loan is evidenced by that certain
Promissory Note dated June 4, 1999, from NC II to Lender (as the same may be, or
has been, renewed, extended, modified, or amended, being hereinafter referred to
as the "NC II Note"), which NC II Note is secured by, among other things, seven
(7) individual Deeds of Trust and Security Agreements more particularly
described on Exhibit "E" hereto (collectively, as amended, the "NC II
Mortgage"), encumbering the respective real property more particularly described
on Exhibit "G" attached hereto (the "NC II Property"). The NC II Note and the NC
II Mortgage, together with all documents listed on Exhibit "H" hereto, under the
caption "NC II Loan documents", are collectively referred to herein as the "NC
II Loan Documents". The Windsor House Loan Documents, the Pinedale Loan
Documents, the Afton Oaks Loan Documents, the NC I Loan Documents and the NC II
Loan Documents may be collectively referred to herein as the "Loan Documents".

     F.  Pursuant to that certain Cross-Collateralization and Cross-Default
Agreement dated            , 2002, the Windsor House Loan and the Pinedale Loan
were cross-collateralized and cross-defaulted with the Afton Oaks Loan.

     G.  The Borrowers and the Lender have agreed to cross-collateralize and
cross-default the NC I Loan and the NC II Loan with one another and with the
Windsor House Loan, the Pinedale Loan and the Afton Oaks Loan.

                                   AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing Recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrowers agree with Lender, and Lender agrees with
the Borrowers, as follows:

         1.  Cross-Default.  The Windsor House Loan, the Pinedale  Loan, the
Afton Oaks Loan, the NC I Loan and the NC II Loan are hereby cross-defaulted
with one another, and the Borrowers agree that the occurrence of an "Event of
Default" (as such term is defined in the Loan Documents) which is not cured
within any applicable grace or curative periods set forth therein, shall
constitute an immediate Event of Default (without need of notice or the
expiration of any additional cure period other than as specified in such Related
Loan Document) as defined in and under certain of the Loan Documents.

         2.  Cross-Collateralization.  Subject to the rights, if any, of AmSouth
Bank under that certain Intercreditor Agreement, as defined in the Loan
Agreement between Afton Oaks and the Lender, as amended, the Windsor House
Loan, the Pinedale Loan, the Afton Oaks Loan, the NC I Loan and the NC II Loan
are hereby cross-collateralized with one another, and the Borrowers agree that
the collateral described in the Loan Documents (the "Collateral") shall secure,
in addition to the Loans, the obligations of the Borrowers, including, without
limitation, the obligations of the Borrowers to pay the principal of and
interest on the Windsor House Note, the Pinedale Note, the

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Afton Oaks Note, the NC I Note and the NC II Note, and to pay all other
indebtedness and other agreed charges and to perform all of the terms and
conditions under all other Loan Documents, as the same may hereafter be
renewed, modified, amended or extended.

          3.   Contribution.

          (a)  Borrowers hereby acknowledge and agree that, due to the fact that
the Windsor House Loan, the Pinedale Loan, the Afton Oaks Loan, the NC I Loan
and the NC II Loan will be cross-defaulted and cross-collateralized as of the
date hereof, the Borrowers have a direct and material interest in preventing the
occurrence of an Event of Default under any of the Loan Documents. Accordingly,
each Borrower is willing to commit to make or receive loans (each an
"Intra-Borrower Loan", and collectively, the "Intra-Borrower Loans") in order to
provide for the payment of all amounts due under the Loan Documents and, in so
doing, to avoid an Event of Default thereunder. In the event and to the extent
that the proceeds from the property of the Borrowers are applied to any payments
due with respect to the property owned by a Borrower from and after the date
hereof, then the Borrowers shall have the right to make an Intra-Borrower Loan
to such Borrower in the amount of such proceeds so applied. Such Intra-Borrower
Loan shall be made on a non-recourse basis and shall be repaid out of the future
proceeds of the property owned by such Borrower, together with interest thereon
at a rate to be agreed upon from time to time between the Borrowers.

          (b)  All Intra-Borrower Loans made under this Agreement shall be
evidenced by this Agreement, shall be an obligation of the applicable Borrower,
and shall not be evidenced by any separate instrument. The Borrowers hereby
waive presentment, notice of dishonor, protest and notice of non-payment or
non-performance with respect to each Intra-Borrower Loan for which they are
liable under this Agreement. Interest and principal on Intra-Borrower Loans
shall be paid solely out of net proceeds from the property owned by the
applicable Borrower and shall be subject in all cases to the terms and
conditions of the applicable Loan Documents, and each such payment of principal
or interest on Intra-Borrower Loans shall be subordinate and subject to the
prior payment of all amounts payable under the applicable Loan Documents. To the
extent such sources of payment are insufficient to pay interest and principal on
any Intra-Borrower Loan, the applicable Borrower shall not have any claim
against the other Borrower in any of the other assets of the applicable Borrower
and no further or additional recourse shall be available against the Borrower.
All payments pursuant to Intra-Borrower Loans shall be made on a net basis. All
payments received on account of any Intra-Borrower Loan under this Agreement
shall be credited first to interest, then to principal. Accrued but unpaid
interest shall not be compounded.

          (c)  Until all indebtedness under the Windsor House Loan, the
Pinedale Loan, the Afton Oaks Loan, the NC I Loan and the NC II Loan has been
paid in full, each Borrower waives the right of subrogation arising from any
Intra-Borrower Loan it makes and waives any right to enforce any remedy which
Lender now has or may hereafter have against any Borrower and any benefit of,
and any right to participate in, any security now or hereafter held by Lender.

          4.   Miscellaneous.

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          (a) This Agreement is being given as additional collateral to secure
the obligations of the Borrowers under the Loan Documents.

          (b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

          5. No Oral Agreements. The Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.

          6. Controlling Law. This Agreement shall be governed by the laws of
the State of Alabama.

          7. Waiver of Jury Trial. BORROWERS HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE
LOANS OR THE RELATED LOANS, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWERS WITH
RESPECT TO THE RELATED LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR
THE EXERCISE OF ANY PARTY'S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR
OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF
THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWERS AGREE THAT LENDER MAY FILE A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY, AND BARGAINED AGREEMENT OF BORROWERS IRREVOCABLY TO WAIVE THEIR
RIGHT TO TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO MAKE THE LOANS TO
BORROWERS, AND THE OTHER RELATED LOANS TO AFFILIATES, AND THAT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR
NOT MODIFIED HERE) BETWEEN ANY BORROWER AND LENDER SHALL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

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     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
properly executed as of the date set forth above.

WITNESS:                 BORROWER:

                         DIVERSICARE WINDSOR HOUSE, LLC, a
                         Delaware limited liability company
/s/ Glynn Riddle
_____________________    By: Diversicare Leasing Corp., a
                             Tennessee corporation, its sole member
    Glynn Riddle
_____________________       By: /s/ William R. Council III
[Print Name]                    ________________________________________________
                                William R. Council III, Chief Executive Officer

                         DIVERSICARE PINEDALE, LLC, a Delaware
                         limited liability company

/s/ Glynn Riddle
_____________________    By: Diversicare Leasing Corp., a
                             Tennessee corporation, its sole member
    Glynn Riddle
_____________________       By: /s/ William R. Council III
[Print Name]                ________________________________________________
                                William R. Council III, Chief Executive Officer

                         DIVERSICARE AFTON OAKS, LLC, a Delaware
                         limited liability company

/s/ Glynn Riddle
_____________________    By: Diversicare Leasing Corp., a
                             Tennessee corporation, its sole member
    Glynn Riddle
_____________________       By: /s/ William R. Council III
[Print Name]                    ________________________________________________
                                William R. Council III, Chief Executive Officer

                         DIVERSICARE ASSISTED LIVING SERVICES NC I, LLC,  a
                         Delaware limited liability company

/s/ Glynn Riddle
_____________________    By: Diversicare Assisted Living Services NC, LLC
                         Its: Sole Member
    Glynn Riddle
_____________________       By: /s/ William R. Council, III
[Print Name]                    ________________________________________________
                                Name:  William R. Council, III
                                Title:  Chief Executive Officer

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                                        DIVERSICARE ASSISTED LIVING SERVICES NC
                                        II, LLC, a Delaware limited liability
                                        company
     /s/ Glynn Riddle
-----------------------------           By: Diversicare Assisted Living Services
                                             NC, LLC
                                        Its: Sole Member

         Glynn Riddle
-----------------------------
[Print Name]                            By:   /s/ William R. Council, III
                                            ------------------------------------
                                              Name: William R. Council, III
                                              Title: Chief Executive Officer

WITNESS:                                LENDER:

                                        GMAC COMMERCIAL MORTGAGE CORPORATION,
                                        a California corporation
/s/ Peggy Scarborough
-----------------------------

    Peggy Scarborough                   By:  /s/ Laura Y. McDonald
-----------------------------                -----------------------------------
[Print Name]                            Its: Senior Vice President
                                             -----------------------------------

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STATE OF TENNESSEE)
WILLIAMSON COUNTY)

     I, the undersigned, a Notary Public in and for said County in said State,
hereby certify that William R. Council III, whose name as Chief Executive
Officer of Diversicare Leasing Corp., a Tennessee corporation and the sole
member of Diversicare Windsor House, LLC, a Delaware limited liability company,
Diversicare Pinedale, LLC, a Delaware limited liability company, and Diversicare
Afton Oaks, LLC a Delaware limited liability company, is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day that,
being informed of the contents of said instrument, he, as such officer and with
full authority, executed the same voluntarily for and as the act of each of said
limited liability companies.

     Given under my hand and official seal this the 18th day of June, 2003.

                                                 /s/ Jacqueline S. Reed
                                        ----------------------------------------
                                        Notary Public

AFFIX SEAL
My commission expires: 2/20/2006
                       ---------

                                       8
<PAGE>
STATE OF ALABAMA)

JEFFERSON COUNTY)

     I, the undersigned, a Notary Public in and for said County in said State,
hereby certify that Laura Y. McDonald, whose name as Senior Vice President of
GMAC Commercial Mortgage corporation, a California corporation, is signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that, being informed of the contents of said instrument, he, as such officer and
with full authority, executed the same voluntarily for and as the act of said
corporation.

     Given under my hand and official seal this the 18th day of June, 2003.

                                        Crissa K. Randolph Brice
                                        ___________________________________
                                        Notary Public

AFFIX SEAL
My commission expires: 10-13-2005
                       -------------------

This instrument prepared by:

Kay K. Bains, Esq.
Walston, Wells, Anderson & Bains, LLP
505 20th Street North
Suite 500
Birmingham, Alabama 35203
(205) 251-9600

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                                  EXHIBIT "A"

                       WINDSOR HOUSE PROPERTY DESCRIPTION

                                       10

<PAGE>
                                  EXHIBIT "B"

                         PINEDALE PROPERTY DESCRIPTION

                                       11

<PAGE>
                                  EXHIBIT "C"

                        AFTON OAKS PROPERTY DESCRIPTION

                                       12

<PAGE>
                                  EXHIBIT "D"

                                 NC I MORTGAGES

                                       13

<PAGE>
                                  EXHIBIT "E"

                                NC II MORTGAGES

                                       14

<PAGE>
                                  EXHIBIT "F"

                           NC I PROPERTY DESCRIPTION

                                       15

<PAGE>
                                  EXHIBIT "G"

                           NC II PROPERTY DESCRIPTION

                                       16

<PAGE>
                                  EXHIBIT "H"

WINDSOR HOUSE LOAN DOCUMENTS

1)  Promissory Note

2)  Loan Agreement

3)  Mortgage and Security Agreement

4)  Assignment of Leases and Rents

5)  Guaranty Agreement of Advocat, Inc.

6)  Cross-Collateralization and Cross-Default Agreement

7)  Agreement to Amend or Comply

8)  Collateral Assignment of Management Agreement

9)  Subordination of Management Agreement

10) Operations and Maintenance Agreement

11) Debt Service Reserve Escrow and Security Agreement

12) Loan Closing Certification

PINEDALE LOAN DOCUMENTS

1)  Promissory Note

2)  Loan Agreement

3)  Mortgage and Security Agreement

4)  Assignment of Leases and Rents

5)  Guaranty Agreement of Advocat, Inc.

6)  Cross-Collateralization and Cross-Default Agreement

7)  Agreement to Amend or Comply

8)  Collateral Assignment of Management Agreement

                                       17

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9)   Subordination of Management Agreement

10)  Operations and Maintenance Agreement

11)  Debt Service Reserve Escrow and Security Agreement

12)  Loan Closing Certification

AFTON OAKS LOAN DOCUMENTS

1)   Promissory Note

2)   Loan Agreement

3)   Deed of Trust and Security Agreement

4)   Assignment of Occupancy Agreements, Security and Other Deposits, Service
     agreements and Assumption Agreement

5)   Assignment of Noncompete Agreements

NC I LOAN DOCUMENTS

NC II LOAN DOCUMENTS

                                       18<PAGE>
                                                                    EXHIBIT 10.8

                       SIXTH AMENDMENT TO PROMISSORY NOTE

         THIS SIXTH AMENDMENT TO PROMISSORY NOTE (this "Sixth Amendment") is
entered into as of the 1st day of July, 2003, by and between DIVERSICARE
ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited liability company (the
"Borrower"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
(the "Lender").

                                    RECITALS

             A. The Borrower executed to the order of the Lender that certain
Promissory Note dated June 4, 1999, in the principal amount of $12,480,000, as
amended by that certain First Amendment to Promissory Note dated July 1, 2002,
as amended by that certain Second Amendment to Promissory Note dated as of
October 1, 2002, as amended by that certain Third Amendment to Promissory Note
dated as of December 1, 2002, as amended by that certain Fourth Amendment to
Promissory Note dated as of January 1, 2003, and as further amended by that
certain Fifth Amendment to Promissory Note dated as of June 18, 2003 (the
"Note"). Unless otherwise defined herein, capitalized terms shall have the
meaning assigned to them in the Note.

             B. The Borrower has requested that the Lender extend the Maturity
Date of the Note, and the Lender has agreed, upon certain conditions, one of
which is the execution of this Sixth Amendment.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the above Recitals and other good
and valuable consideration, the Borrower and the Lender hereby amend the Note as
follows:

             1. Section 1.4 of the Note, LIBOR Rate, is hereby amended by
deleting from the third line thereof the phrase "two and thirty-five hundredths
percent (2.35%)" and replacing it with the phrase "three and thirty-five
hundredths percent (3.35%)".

             2. Section 4.1 of the Note, Maturity Date, is hereby amended to
extend the Maturity Date from July 1, 2003, until June 30, 2004. All references
in the Note to the "Maturity Date" are hereby amended to mean June 30, 2004.

         Except as expressly amended herein, the Note shall remain in full force
and effect in accordance with its terms and conditions.

         Notwithstanding the execution of this Sixth Amendment, the indebtedness
evidenced by the Note shall remain in full force and effect, and nothing
contained herein shall be interpreted or construed as resulting in a novation of
such indebtedness. The Borrower acknowledges and agrees that there are no
offsets or defenses to payment of the obligations evidenced by the Note,

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<PAGE>

as hereby amended, and hereby waives any defense, claim or counterclaim of the
Borrower regarding the obligations of the Borrower under the Note, as hereby
amended. The Borrower represents that there are no conditions of default or
facts or consequences which will or could lead to a default under the
obligations due from the Borrower under the Note, as amended herein, except as
any such Event of Default has been expressly waived in writing by the
Beneficiary, or the Beneficiary has provided an express written forbearance.

         IN WITNESS WHEREOF, the Borrower and Lender have caused this Sixth
Amendment to be executed by their respective duly authorized representatives, as
of the date first set forth above.

                                BORROWER:

                                DIVERSICARE ASSISTED LIVING SERVICES NC II, LLC,
                                a Delaware limited liability company

                                By: Diversicare Assisted Living Services NC, LLC
                                Its: Sole Member

                                By:  /s/ William R. Council, III
                                     ----------------------------------
                                     Name: William R. Council, III
                                     Title: Chief Executive Officer

                                LENDER:

                                GMAC COMMERCIAL MORTGAGE CORPORATION,
                                a California corporation

                                By: /s/ Laura Y. McDonald
                                    -----------------------------------
                                Its: Senior Vice President
                                    -----------------------------------

                                       2

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