Document:

Exhibit

SECOND AMENDED AND RESTATED GUARANTY
(TERM LOAN)
THIS SECOND AMENDED AND RESTATED GUARANTY (“Guaranty”) dated as of February 26, 2016, by DIVERSICARE HEALTHCARE SERVICES, INC., a Delaware corporation (“Guarantor”), is to and for the benefit of THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation in its capacity as administrative agent for the Lenders identified below (together with its successors and assigns, the “Administrative Agent”).
R E C I T A L S:
A.Certain direct and indirect subsidiaries of the Guarantor identified on Schedule 1.1(a) of the Loan Agreement (as defined below) (individually and collectively referred to herein as, “Borrower”) have requested that the Lenders (as defined below) make a (i) certain term loan and (ii) certain acquisition loans (collectively, the “Loan”) to Borrower pursuant to and in accordance with that certain Second Amended and Restated Term Loan and Security Agreement dated of even date herewith by and among Borrower, the lenders party thereto (collectively, the “Lenders”), and the Administrative Agent (as the same may be amended, supplemented, amended and restated or otherwise modified from time to time, the “Loan Agreement”); capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Loan Agreement.
B.    As security for repayment of the Loan, in addition to this Guaranty, certain other  loan and security documents have been executed and delivered to the Administrative Agent.  The Loan Agreement, the Term Loan Notes, the Acquisition Loan Notes, the Pledge Agreements, the Mortgages, this Guaranty, each other guaranty delivered in favor of the Administrative Agent on behalf of the Lenders in connection with the Loan Agreement, and any and all other instruments, agreements, and documents executed in conjunction herewith and therewith (including, without limitation, each of the “Financing Agreements” (as defined in the Loan Agreement)) are hereinafter sometimes collectively referred to herein as the “Loan Documents.”
C.    The Guarantor and Borrower are Affiliates of each other.  Guarantor will derive substantial direct and indirect benefit (financial and otherwise) from the Loan made to Borrower under the Loan Agreement.  The Guarantor desires to induce the Administrative Agent on behalf of the Lenders to make the Loan to Borrower.
D.    Administrative Agent on behalf of the Lenders is unwilling to make the Loan pursuant to the Loan Agreement unless Guarantor guarantees the payment of the principal and interest and all other amounts due or owing to the Administrative Agent and Lenders provided in the Loan Agreement and other Loan Documents and the performance by Borrower of all of the covenants on Borrower’s part to be performed and observed pursuant to the terms thereof, and Guarantor has agreed to execute and deliver this Guaranty to Administrative Agent (for the ratable benefit of Lenders and Administrative Agent).
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION RECEIVED, the adequacy and sufficiency of which is hereby acknowledged, and in further consideration of any advances, credit or other financial accommodation heretofore, now or that may hereafter at any time be extended to Borrower by Administrative Agent on behalf of Lenders under, pursuant to or in connection with the Loan Documents, (a) Guarantor hereby, jointly and severally, together with each Other Guarantor (as defined in Section 3 below), and, unconditionally and irrevocably, guarantees, irrespective of the validity or enforceability of any instrument, writing or agreement relating to or the subject of any such advances, financial accommodation or loans (including, but not limited to, the Loan Documents), and whether or not due or to become due before or after any bankruptcy or insolvency proceeding involving Borrower or would have become due but for Borrower’s bankruptcy proceeding, (i) the full and prompt payment to Administrative Agent and Lenders at maturity, whether by acceleration or otherwise, and at all times thereafter of any and all “Liabilities” (as defined in the Loan Agreement) of every kind and nature of Borrower to Administrative Agent and Lenders (arising out of or in connection with the Loan, the Loan Agreement, and each of the other Loan Documents to which Borrower (or any of its Affiliates) is a party, including, without limitation, for principal, interest, default interest, charges, fees, indemnification, costs, expenses, reasonable attorneys’ fees, or otherwise), and whether or not due or to become due before or after any bankruptcy or insolvency proceeding involving Borrower or would have become due but for Borrower’s bankruptcy proceeding, howsoever evidenced, whether now existing or hereafter created or arising, directly or indirectly, primary or secondary, absolute or contingent, due or to become due, and howsoever owned, held or acquired, whether through discount, overdraft, purchase, direct loan or as collateral, or otherwise, and (ii) the prompt, full and faithful performance and discharge by Borrower of each and every of the terms, conditions, agreements, covenants, representations and warranties on the part of Borrower contained in any agreement, the Loan Agreement and each of the other Loan Documents to which Borrower is a party, and any other promissory notes, loan agreements, or security agreements, or in any modification or addenda thereto or substitution thereof in connection with any advance, credit or financial accommodation afforded by Administrative Agent on behalf of Lenders to Borrower (collectively the “Guaranteed Liabilities”); and (b) Guarantor further agrees to pay all costs and expenses, legal and/or otherwise (including, but not limited to, court costs and reasonable attorneys’ fees and expenses), paid or incurred by Administrative Agent on behalf of Lenders in endeavoring to collect the Guaranteed Liabilities, the Extraordinary Claims (as hereinbelow defined), or in either case, any part thereof, or in enforcing this Guaranty or in defending any suit based on any act of commission or omission of Administrative Agent or Lenders with respect to the Liabilities, the Collateral (as defined in the Loan Agreement), or this Guaranty or in connection with any Recovery Claim (as hereinbelow defined) (the “Enforcement Costs”); and (c) Guarantor further agrees to pay any and all costs, losses, damages and reasonable attorney’s fees incurred by the Administrative Agent in connection with any of the following:  (i) misapplication or misappropriation of any insurance or condemnation proceeds; and (ii) Borrower or Guarantor institutes or becomes by virtue of a counterclaim a party to any case, action, suit, or proceeding which reduces, impedes or impairs Administrative Agent’s right of recourse to the Collateral or any part thereof or Borrower or Guarantor engages in any act, omission, or misrepresentation which has the effect of suspending, delaying, reducing, impeding, or impairing the Administrative Agent’s right of recourse to the Collateral or any part thereof (each of the aforesaid are collectively referred to as an “Extraordinary Claims”).  The Guaranteed Liabilities, the Enforcement Costs, and the Extraordinary Claims are collectively referred to as the “Guaranteed Obligations.”  Capitalized terms used herein and not otherwise defined herein shall have the meaning given to them in the Loan Agreement.
Guarantor hereby further agrees as follows:
1.    Continuing Guaranty.  This Guaranty includes any and all Guaranteed Obligations arising under successive transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing the Guaranteed Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Guaranteed Obligations after prior Guaranteed Obligations have been satisfied in whole or in part.  To the maximum extent permitted by law, Guarantor hereby waives any right to revoke this Guaranty as to future Liabilities.  If such a revocation is effective notwithstanding the foregoing waiver, Guarantor acknowledges and agrees that (a) no such revocation shall be effective until written notice thereof has been received by Administrative Agent, (b) no such revocation shall apply to any Guaranteed Obligations in existence on such date (including, but not limited to, any subsequent continuation, extension, or renewal thereof, or change in the interest rate, payment terms, or other terms and conditions thereof), (c) no such revocation shall apply to any Guaranteed Obligations made or created after such date to the extent made or created pursuant to a legally binding commitment of Administrative Agent in existence on the date of such revocation, (d) no payment by Guarantor, Borrower, or from any other source, prior to the date of such revocation shall reduce the maximum obligation of Guarantor hereunder, and (e) any payment by Borrower or from any source other than Guarantor, subsequent to the date of such revocation, shall first be applied to that portion of the Guaranteed Obligations as to which the revocation is effective and which are not, therefore, guaranteed hereunder, and to the extent so applied shall not reduce the maximum obligation of Guarantor hereunder.
2.    Performance Under This Guaranty.  If Borrower fails to make any payment of any Guaranteed Obligations on or before the due date thereof and after the expiration of the applicable notice and cure period, if any, or if Borrower shall fail, after the expiration of the applicable notice and cure period, if any, to perform, keep, observe, or fulfill any other obligation, covenant or agreement referred to or contained in any instrument, writing, document or agreement relating to the Guaranteed Obligations, Guarantor immediately shall cause such payment to be made or each of such obligations to be performed, kept, observed, or fulfilled to the extent such obligations constitute Guaranteed Obligations.
3.    Primary Obligations.  This Guaranty is a primary and original obligation of Guarantor, is not merely the creation of a surety relationship, and is an absolute, unconditional, and continuing guaranty of payment and performance and not of collection which shall remain in full force and effect without respect to future changes in conditions, including any change of law or any invalidity or irregularity with respect to the issuance of any instrument, writing or agreement relating to the Guaranteed Obligations.  Guarantor agrees that Guarantor is directly and severally with any other guarantors of the Guaranteed Obligations liable to Administrative Agent and Lenders, that the obligations of Guarantor hereunder are independent of the obligations of Borrower or any other guarantor, and that a separate action may be brought against Guarantor whether such action is brought against Borrower or any other guarantor of Borrower’s Indebtedness, obligations or liabilities to Administrative Agent and Lenders (each an “Other Guarantor”) or whether Borrower or any such Other Guarantor is joined in such action.  Guarantor agrees that Guarantor’s liability hereunder shall be immediate and shall not be contingent upon the exercise or enforcement of any lien, security interest, mortgage or realization upon any security or collateral Administrative Agent may at any time possess.  Guarantor agrees that any release which may be given by Administrative Agent to Borrower or any Other Guarantor shall not release Guarantor.  Guarantor consents and agrees that Administrative Agent shall be under no obligation to marshal any assets of Borrower or any Other Guarantor in favor of said Guarantor, or against or in payment of any or all of the Guaranteed Obligations.
4.    Return of Payments.  Guarantor agrees that, if at any time all or any part of any payment theretofore applied by Administrative Agent to any amounts due under the Loan or the Loan Agreement is rescinded or returned by Administrative Agent or any Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy, liquidation or reorganization of any party), such amounts shall, for the purposes of this Guaranty, be deemed to have continued in existence to the extent of such payment, notwithstanding such application by Administrative Agent and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such amounts due under the Loan and the Loan Agreement, all as though such application by Administrative Agent or Lenders had not been made.
5.    Waivers.  
(a)    Guarantor hereby waives: (1) notice of acceptance hereof; (2) notice of any Loan or other financial accommodations made or extended to Borrower or the creation or existence of any Guaranteed Obligations; (3) notice of the amount of the Guaranteed Obligations, subject, however, to Guarantor’s right to make inquiry of Administrative Agent to ascertain the amount of the Guaranteed Obligations at any reasonable time; (4) notice of any adverse change in the financial condition of Borrower or of any other fact that might increase Guarantor’s risk hereunder; (5) notice of presentment for payment, demand, protest, and notice thereof as to any promissory notes or other instruments, writing or agreements evidencing Guaranteed Obligations; (6) notice of any event of default by Borrower under any instrument, writing or agreement with Administrative Agent or any Lender including the Loan Documents; and (7) all other notices (except if such notice is specifically required to be given to Guarantor hereunder) and demands to which Guarantor might otherwise be entitled.
(b)    Guarantor hereby waives the right by statute or otherwise to require Administrative Agent or any Lender to institute suit against Borrower or under any other guaranty; or to exhaust any rights and remedies which Lender has or may have against Borrower or under any other guaranty; provided, however, that nothing herein contained shall prevent Administrative Agent from suing on the Loan Agreement or foreclosing any security interest or lien created by any of the other Loan Documents, or from exercising any other rights thereunder, and if such commercial code sale or other remedy is availed of, only the net proceeds therefrom, after deduction of all charges and expenses of every kind and nature whatsoever relating to the proceedings or sale, shall be applied in reduction of the amount due on the Loan Agreement and other Loan Documents, and Administrative Agent shall not be required to institute or prosecute proceedings to cover any deficiency as a condition of any payment hereunder or enforcement hereof.  At any sale of the security or collateral for the Loan, or any part thereof, whether by commercial code sale or otherwise, Administrative Agent may, at its discretion, purchase all or any part of such collateral offered for sale, for its own account (on behalf of the Lenders and itself), and may apply against the amount bid therefore the balance due it pursuant to the terms of the Loan Agreement and other Loan Documents.  Guarantor further agrees that Guarantor is bound to the payment of all Guaranteed Obligations, whether now existing or hereafter accruing, as fully as if such Guaranteed Obligations were directly owing to Administrative Agent and Lenders by Guarantor.  Guarantor further waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower in respect thereof.  Guarantor consents to any and all forbearances and extensions of the time of payment of the Loan Agreement or any of the other Loan Documents, and to any and all changes in the terms, covenants and conditions thereof hereafter made or granted, and to any part of the collateral therefor; it being the intention and agreement hereof that Guarantor shall remain unconditionally liable as a principal as, to and until the Guaranteed Obligations shall have been fully repaid to Administrative Agent on behalf of the Lenders, and the terms, covenants and conditions of the Loan Agreement and of the other Loan Documents and all other notes, instruments, writing or agreements evidencing or securing the Guaranteed Obligations shall have been fully performed and observed, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of Borrower or Guarantor.
(c)    Guarantor hereby waives: (1) any rights to assert against Administrative Agent or Lenders any defense (legal or equitable), setoff, counterclaim, or claim which Guarantor may now or at any time hereafter have against Borrower or any other party liable to Administrative Agent or Lenders (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid); and (2) any defense, setoff, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guaranteed Obligations or any security therefor (including, but not limited to, any of the Loan Documents).  Without limiting the generality of the foregoing or any other provisions of this Guaranty, Guarantor agrees that this Guaranty shall not be discharged, limited, impaired or affected by:  (a)  the transfer of all or any part of the personal property or real property described in any of the Loan Documents; (b) any sale, pledge, surrender, indulgence, alteration, substitution, exchange, modification or other disposition of any of the Guaranteed Obligations, all of which Administrative Agent and Lenders are expressly authorized to make from time to time; (c) any failure, neglect or omission on the part of Administrative Agent or Lenders to realize or protect any of the Guaranteed Obligations, or any personal property or real property or lien given as security therefor, or to exercise any lien upon or right of appropriation of monies, credits or property of Borrower toward liquidation of the Liabilities, or performance of the covenants guaranteed hereby; and (d) any proceedings with respect to the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, the marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, imposition or readjustment of, or other similar proceedings affecting Borrower or any Other Guarantor or any of their respective assets, it being expressly understood and agreed that no such proceeding shall affect, modify, limit or discharge the liability or obligation of Guarantor hereunder in any manner whatsoever, and that Guarantor shall continue to remain absolutely liable under this Guaranty to the same extent, and in the same manner, as if such proceedings had not been instituted.
(d)    Guarantor hereby waives any right of subrogation Guarantor has or may have as against Borrower until all preference periods under all applicable laws have expired.  In addition, Guarantor hereby waives any right to proceed against Borrower, now or hereafter for contribution, indemnity, reimbursement and any other suretyship rights and claims, whether direct or indirect, liquidated or contingent, whether arising under express or implied contract or by operation of law, which Guarantor may now have or hereafter have as against Borrower.  Until the Guaranteed Obligations are indefeasibly paid in full hereunder, Guarantor also hereby waives any right to recourse to or with respect to any asset of Borrower.  Guarantor agrees that in light of the immediately foregoing waivers, the execution of the Guaranty shall not be deemed to make Guarantor a “creditor” of Borrower, and that for purposes of Sections 547 and 550 of the Bankruptcy Code, Guarantor shall not be deemed a “creditor” of Borrower.
6.    Releases.  No release or discharge of the Other Guarantor, or of any other person or entity, whether primarily or secondarily liable for or obligated with respect to the Guaranteed Obligations, or the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against the Other Guarantor or any other person or entity, or the entry of any restraining or other order in any such proceeding, shall release or discharge Guarantor, unless and until all of the Guaranteed Obligations shall have been fully paid.  Notwithstanding anything to the contrary contained herein, Administrative Agent agrees that the obligations of Guarantor under this Guaranty shall terminate, subject to Sections 4 and 8 hereof, at the earlier of such time as (a) Administrative Agent on behalf of Lenders and itself shall have received indefeasible payment in full in cash of all Guaranteed Liabilities and all other Guaranteed Obligations under this Guaranty and all financing arrangements and accommodations by and among Borrower, Administrative Agent and Lenders shall have been irrevocably terminated and Administrative Agent and Lenders have no obligations to make any loans, financial accommodations or advance any funds to Borrower which could constitute Liabilities.  Release of this Guaranty, if it occurs, however, shall not affect, in any respect, the Loan or any other instrument securing or guarantying the Loan.
7.    Right of Setoff.  Guarantor agrees that Administrative Agent and Lenders have all rights of setoff and banker’s liens provided by applicable law.  Following any default by Guarantor hereunder or an Event of Default by Borrower under the Loan Agreement, any and all moneys, credits, deposits, accounts, or other property belonging to the Guarantor in transit to or in the possession or under the control of Administrative Agent or any Lender, or any agent or bailee thereof, may, without notice and opportunity to be heard, be setoff against, and appropriated and applied against and towards the payment of any and all of the liabilities of Guarantor under this Guaranty.  Following any default by Guarantor hereunder or an Event of Default by Borrower under the Loan Agreement, subject to the terms of any applicable Intercreditor Agreement, Guarantor does hereby assign and transfer to Administrative Agent (for the ratable benefit of Lenders and itself) any and all cash, negotiable instruments, documents of title, chattel paper, securities, certificates of deposit, deposit accounts, other cash equivalents and other assets of said Guarantor in transit to, or in the possession or control of Administrative Agent, or any agent or bailee of Administrative Agent for any purpose and to apply the same on any or all of the Guaranteed Obligations.  The rights of the Administrative Agent and Lenders under this Section are in addition to all other rights and remedies which the Administrative Agent and Lenders may otherwise have in equity or at law.
8.    Recovery Claim.  Should a claim (“Recovery Claim”) be made upon Administrative Agent or Lenders at any time for recovery of any amount received by Administrative Agent or Lenders in payment of the Guaranteed Obligations (whether received from Borrower, Guarantor pursuant hereto, or otherwise) and should Administrative Agent or any Lender repay all or part of said amount by reason of (a) any judgment, decree, or order of any court or administrative body having jurisdiction over Administrative Agent or any Lender or any of its respective property; or (b) any reasonable settlement or compromise of any such Recovery Claim effected by Administrative Agent or such Lender with the claimant (including Borrower), Guarantor shall remain liable to Administrative Agent and Lenders for the amount so repaid to the same extent as if such amount had never originally been received by Administrative Agent and Lenders, notwithstanding any termination hereof or the return of this document to Guarantor or the cancellation of any note or other instrument evidencing any of the Liabilities.
9.    Assignments.  In the event Administrative Agent shall sell, assign or transfer the Guaranteed Obligations, or any part hereof, or grant participations therein, each and every immediate or remote successive assignee, transferee, holder of or participant or other interests therein, of all or any part of the Guaranteed Obligations shall have the right to enforce this Guaranty by suit or otherwise for the benefit of such assignee, transferee, holder or participant, as fully as if such assignee, transferee, holder or participant were herein by name specifically given such rights, powers and benefits; but Administrative Agent (for the ratable benefit of the Lenders and itself) shall have an unimpaired, prior and superior right to enforce this Guaranty for Administrative Agent’s benefit as to so much of the guaranteed debt as it has not sold, assigned or transferred.
10.    Representations and Warranties.  Guarantor agrees that the following shall constitute representations and warranties of Guarantor to Administrative Agent (for the benefit of Lenders and itself), which shall survive the execution and delivery hereof, and that Administrative Agent on behalf of the Lenders intends to make the Loan and other financial accommodations, if any, guaranteed hereby in reliance thereon:
(a)    Guarantor is not in default under any agreement to which Guarantor is a party, the effect of which will materially impair performance by the Guarantor of Guarantor’s obligations pursuant to and as contemplated by the terms of this Guaranty, and neither the execution and delivery of this Guaranty nor compliance with the terms and provisions of this Guaranty, will violate any law or any presently existing  regulation, order, writ, injunction or decree of any court or governmental department, commission, board, bureau, agency or instrumentality, will conflict or will be inconsistent with, or will result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind which creates, represents, evidences or provides for any lien, charge or encumbrance upon any of the property or assets of the Guarantor, or any other indenture, mortgage, deed of trust, instrument, document, agreement or contract of any kind to which Guarantor is a party or by which Guarantor may be bound of which the Guarantor is a party or by which Guarantor may be bound, or in the event of any such conflict, the required consent or waiver of the other party or parties thereto has been validly granted, is in full force and effect and is valid and sufficient therefor.  This Guaranty is the legal, valid and binding obligation of the Guarantor and is enforceable against the Guarantor in accordance with its terms.
(b)    Except as set forth on Schedule 10(b) hereof, there are no actions, suits or proceedings pending or to the best of Guarantor’s knowledge threatened against the Guarantor before any court or any governmental, administrative, regulatory, adjudicatory or arbitrational body or agency of any kind which will materially adversely affect performance by the Guarantor of Guarantor’s obligations pursuant to and as contemplated by the terms and provisions of this Guaranty.
(c)    Neither this Guaranty nor any document, financial statement, credit information, written certificate or written statement heretofore furnished or required herein to be furnished to Lender by the Guarantor contains any untrue statement of material fact or omits to state a fact material to this Guaranty.
(d)    Guarantor is currently informed of the financial condition of Borrower and of all other circumstances which a diligent inquiry would reveal and which would bear upon the risk of nonpayment of the Guaranteed Obligations.  Guarantor will continue to keep informed of the financial condition of Borrower and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Guaranteed Obligations.
(e)    As of the date hereof, the present fair saleable value of Guarantor’s assets is greater than the amount required to pay Guarantor’s total Indebtedness (contingent or otherwise), and is greater than the amount that will be required to pay such Indebtedness as it matures and as it becomes absolute and matured.  The transactions contemplated hereby were effectuated without actual intent to hinder, delay or defraud present or future creditors of Guarantor; it is Guarantor’s express intention that Guarantor will maintain a Solvent financial condition, giving effect to the Guaranteed Obligations incurred hereunder, as long as any of the Guaranteed Obligations remain outstanding or Guarantor is obligated to Administrative Agent or any Lender in any other manner whatsoever.  At all times until the Guaranteed Obligations remain satisfied and paid in full, the Guarantor shall keep and maintain assets sufficient to honor and pay any and all of the Guaranteed Obligations as and when due, subject to any express monetary limitation set forth herein.
11.    Subordination.  Any rights of Guarantor, whether now existing or later arising, to receive payment on account of any Indebtedness (including interest) owed to Guarantor by Borrower, or to withdraw capital invested by Guarantor in Borrower, if any, or to receive and retain distributions from Borrower if and solely as expressly provided in the Loan Agreement, shall at all times be subordinate as to Lien and time of payment, and in all other respects to the full and prior repayment to Administrative Agent and Lenders of all of the Liabilities owing to Administrative Agent and Lenders pursuant to the Loan Agreement and the other Loan Documents (including, without limitation, the Loan).  Except for dividends or distributions permitted by Section 9.9 of the Loan Agreement, Guarantor shall not be entitled to enforce or receive payment of any sums hereby subordinated until the Loan have been paid and performed in full, and any such sums received in violation of this Guaranty shall not be commingled with other monies of Guarantor and shall be received by Guarantor in trust for Administrative Agent on behalf of Lenders and itself.
12.    Payments; Application.  All payments to be made hereunder by Guarantor shall be made in lawful money of the United States of America at the time of payment, shall be made in immediately available funds, and shall be made without deduction (whether for taxes or otherwise) or offset.  All payments made by Guarantor hereunder shall be applied as follows; first, to all costs and expenses (including, but not limited to, reasonable attorneys’ fees, expenses and court costs) incurred by Administrative Agent in enforcing this Guaranty or in collecting the Guaranteed Obligations; second, to all accrued and unpaid interest and fees owing to Administrative Agent and Lenders constituting Guaranteed Obligations; and third, to the balance of the Guaranteed Obligations, all subject to the terms of the Loan Agreement.
13.    [Intentionally Omitted]
14.    Notices.  Any notice or other communication required or permitted under this Guaranty shall be in writing and personally delivered, mailed by registered or certified U.S. mail (return receipt requested and postage prepaid), sent by telecopier (with a confirming copy sent by regular mail), or sent by prepaid nationally recognized overnight courier service, and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Guaranty:
If to Administrative Agent, at:
The PrivateBank and Trust Company
120 South LaSalle Street
Chicago, Illinois  60603
Attention:  Adam D. Panos, Managing Director
Telephone No.:  312-564-1278
Facsimile No.:  312-564-6889
With a copy to:
Duane Morris LLP
190 South LaSalle Street - Suite 3700
Chicago, Illinois  60603
Attention:  Brian P. Kerwin, Esq.
Telephone No:  312-499-6737
Facsimile No:  312-499-6701
If to Guarantor, at:
Diversicare Healthcare Services, Inc.
1621 Galleria Boulevard
Brentwood, Tennessee 37027
Attention:  James R. McKnight, Jr.
Telephone No.:  615-771-7575
Facsimile No.:  615-771-7409
With a copy to:
Harwell Howard Hyne Gabbert & Manner
333 Commerce Street, Suite 1500
Nashville, Tennessee 37201
Attention:  John N. Popham IV, Esq.
Telephone No.:  615-251-1093
Facsimile No.:  615-251-1059
If mailed, notice shall be deemed to be given three (3) days after being sent, and if sent by personal delivery, telecopier, or prepaid courier, notice shall be deemed to be given when delivered.  If any notice is tendered to an addressee and delivery thereof is refused by such addressee, such notice shall be effective upon such tender unless expressly set forth in such notice.
15.    Cumulative Remedies.  No remedy under this Guaranty is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given hereunder and those provided by law or in equity.  No delay or omission by Administrative Agent to exercise any right under this Guaranty shall impair any such right nor be construed to be a waiver thereof.  No failure on the part of Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
16.    Financial Information.  Without limiting anything contained in this Guaranty, Guarantor agrees that, so long as any of the Guaranteed Obligations remain outstanding, Guarantor shall deliver to Administrative Agent, upon Administrative Agent’s written request and to the extent not included in the Guarantor’s public filings with the United States Securities and Exchange Commission, on at least an annual basis, and at such other times as Administrative Agent may reasonably request, (i) financial statements (showing all changes in Guarantor’s financial condition which occurred during the preceding fiscal year and Guarantor’s current financial position), (ii) federal and state tax returns of Guarantor, as applicable, and (iii) such other financial information as Administrative Agent or the Lenders may reasonably request.  Copies of annual tax returns shall be delivered to Administrative Agent upon Administrative Agent’s written request therefore.  The failure of Guarantor to perform or observe any of its obligations hereunder within the period of time specified in any notice from Administrative Agent to Guarantor, which notice shall in no event be less than five (5) business days, advising Guarantor of such failure, shall constitute a default under this Guaranty and an Event of Default under the Loan Agreement and the other Loan Documents.
17.    Books and Records.  Guarantor agrees that Administrative Agent’s books and records showing the Liabilities among Administrative Agent on behalf of Lenders and Borrower shall be admissible in any action or proceeding and shall be binding upon Guarantor for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof absent manifest error.
18.    Interpretation and Severability of Provisions.  The headings of sections and paragraphs in this Guaranty are for convenience of reference only and shall not be construed in any way to limit or define the content, scope or intent of the provisions hereof.  As used in this Guaranty, the singular shall include the plural, and masculine, feminine and neuter pronouns shall be fully interchangeable, where the context so requires.  Whenever the words “including”, “include or includes” are used in this Guaranty, they should be interpreted in a non-exclusive manner as though the words “, without limitation,” immediately followed the same.  Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law.  If any provision of this Guaranty is prohibited or unenforceable under applicable law, such provision shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.  As used herein, except in circumstances where under the Loan Documents the term is intended to mean or refer to all of the Borrowers or all of the Credit Parties on a consolidated basis, the term “Borrower” refers to any one or all of the Borrowers under the Loan Agreement, as applicable, provided, however, in the event of any disagreement between Administrative Agent and Guarantor as to whether or not a reference to Borrower means any or all of such Borrower(s) individually or collectively herein, and the circumstances are not covered by the Loan Documents, the Administrative Agent shall in reasonable good faith make such determination.
19.    Bankruptcy.  So long as any Guaranteed Obligations shall be owing to Administrative Agent or Lenders, Guarantor shall file in any bankruptcy or other proceeding against Borrower in which the filing of claims is required or permitted by law all claims which Guarantor may have against Borrower relating to any Indebtedness of Borrower to Guarantor and will assign to Administrative Agent (for the ratable benefit of Lenders and itself) all rights of Guarantor thereunder.  If Guarantor does not file any such claim, Administrative Agent, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Administrative Agent’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Administrative Agent’s nominee.  The foregoing power of attorney is coupled with an interest and cannot be revoked.  Administrative Agent or its nominee shall have the sole right to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do.  In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Administrative Agent the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Administrative Agent (for the ratable benefit of Lenders and itself) all of Guarantor’s rights to any such payments or distributions to which Guarantor would otherwise be entitled; provided, however, Guarantor’s obligations hereunder shall not be satisfied except to the extent that Administrative Agent receives cash by reason of any such payment or distribution.  If Administrative Agent receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty.  At such time as all Guaranteed Obligations have been fully paid, any sums or other collateral received by Administrative Agent pursuant to this Section 19 remaining in the possession of Administrative Agent shall be paid or delivered to Guarantor.
20.    Additional and Independent Obligations. Guarantor’s obligations under this Guaranty are in addition to Guarantor’s obligations under any other existing or future guaranties, each of which shall remain in full force and effect until it is expressly modified or released in a writing signed by Administrative Agent.  Guarantor’s obligations under this Guaranty are independent of those of Borrower and any Other Guarantor.  Administrative Agent may bring a separate action against Guarantor without first proceeding against Borrower, any Other Guarantor, any other person or entity or any security that Administrative Agent may hold, and without pursuing any other remedy.  Administrative Agent’s rights under this Guaranty shall not be exhausted by any action by Administrative Agent until all of the Indebtedness, Liabilities and obligations owing to Administrative Agent and Lenders pursuant to the Loan Agreement and the other Loan Documents (including, without limitation, the Loan and other Liabilities) have been indefeasibly paid in full in cash and otherwise performed in full and all financing arrangements and accommodations among Borrower, Administrative Agent and Lenders shall have been irrevocably terminated and Administrative Agent and Lenders have no obligations to make any loans, financial accommodations or advance any funds to Borrower which could constitute Liabilities.
21.    Costs and Expenses.  If any lawsuit is commenced which arises out of or which relates to this Guaranty, the Loan Documents or the Loan, including, without limitation, any insolvency, bankruptcy or similar proceeding, Guarantor agrees to pay all of Administrative Agent’s costs and expenses, including, without limitation, reasonable attorneys’ fees which may be incurred in any effort to collect or enforce any term of this Guaranty.  From the time(s) incurred until paid in full to Administrative Agent on behalf of Lenders, all sums shall bear interest at the “Default Rate” set forth in the Loan Agreement.
22.    Entire Agreement; Amendments; Other Agreements.  This Guaranty constitutes the entire agreement between Guarantor and Administrative Agent pertaining to the subject matter contained herein, and may not be altered, amended, or modified, nor may any provision hereof be waived or noncompliance therewith consented to, except by means of a writing executed by Guarantor as to which such consent or waiver is applicable and by Administrative Agent.  Any such alteration, amendment, modification, waiver, or consent shall be effective only to the extent specified therein and for the specific purpose for which it is given.  No course of dealing and no delay or waiver of any right or default under this Guaranty shall be deemed a waiver of any other similar or dissimilar right or default or otherwise prejudice the rights and remedies hereunder.  The Guarantor shall not enter into any agreement containing any provision which would be violated or breached by the performance of Guarantor’s obligations hereunder or which would violate or breach any provision hereof, or that would or is reasonably likely to adversely affect the Administrative Agent’s interests or rights under this Guaranty.  Time is of the essence for the payment and performance of this Guaranty.  The recitals hereto are hereby made a part of and incorporated into this Guaranty by this reference thereto.  A signature delivered or sent by facsimile or other electronic transmission shall be as legally binding and enforceable as a signed original for any and all purposes.
23.    Successors and Assigns. This Guaranty shall be binding upon Guarantor’s representatives, heirs, legal beneficiaries, successors, and assigns, as applicable, and shall inure to the benefit of the successors and assigns of Administrative Agent; provided, however, Guarantor shall not be permitted to assign this Guaranty or any of Guarantor’s rights, liabilities or obligations hereunder without the prior written consent of the Administrative Agent.  In the event of the dissolution, bankruptcy or failure to maintain a Solvent financial condition, as applicable, of the Guarantor, the Loan Agreement and any and all sums due thereunder, along with all of the other Guaranteed Obligations, shall at once, without any notice or demand from Administrative Agent, be due and payable.
24.    SUBMISSION OF JURISDICTION.  THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a)    SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF, TO THE 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;
(b)    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 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 GUARANTOR 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
(c)    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 GUARANTOR AT ITS ADDRESS SET FORTH ABOVE OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO.  THE GUARANTOR AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE GUARANTOR IN ANY SUIT, ACTION OR PROCEEDING, AND (ii) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THE GUARANTOR.  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 GUARANTOR OR ITS PROPERTY IN ANY COURT OR ANY OTHER JURISDICTION.
25.    GOVERNING LAW.  THIS GUARANTY SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND ENFORCED AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
26.    JURY TRIAL.  THE GUARANTOR AND THE ADMINISTRATIVE AGENT 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 GUARANTY OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO, INCLUDING, WITHOUT LIMITATION, ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS GUARANTY 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 WITH OR RELATED TO THIS GUARANTY.  THE ADMINISTRATIVE AGENT AND THE GUARANTOR AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY.
27.    Pledge of Equity.  Subject to the applicable Pledge Agreement, Guarantor agrees that, so long as any of the Guaranteed Obligations remain outstanding, except in the case of a Borrower that has been released from the Guaranteed Obligations in connection with any party’s prepayment thereof in accordance with the terms of the Loan Documents and is no longer a Borrower thereunder, Guarantor shall remain the owner (either directly or through one of its Subsidiaries) of all of the issued and outstanding the equity in each Borrower.  Without the prior written consent of Administrative Agent, Guarantor shall not assign, sell, convey, gift, transfer, pledge, hypothecate, grant a security interest in, encumber or in any other manner permit any lien (other than Permitted Liens) to exist in or on, all or any portion of the equity in or of any Borrower.
28.    REVIEW BY GUARANTOR.  The Guarantor acknowledges that Guarantor has thoroughly read and reviewed the terms and provisions of this Guaranty, and that such terms and provisions are clearly understood by the Guarantor, and has been fully and unconditionally consented to by the Guarantor with the full benefit and advice of counsel chosen by the Guarantor.
29.    Amendment and Restatement.  On the date hereof, that certain Amended and Restated Guaranty (Term Loan) previously entered into by the Guarantor in favor of the Administrative Agent (as amended through the date hereof, the “Original Guaranty”) shall be modified, amended and restated by this Guaranty.  All indemnification obligations of Pledgor pursuant to the Original Guaranty shall survive the amendment and restatement of the Original Guaranty pursuant to this Guaranty.
[Signature Page Follows] 

IN WITNESS WHEREOF, Guarantor has executed and delivered this Second Amended and Restated Guaranty as of the date set forth in the first paragraph hereof.
	
		
	Guarantor:
DIVERSICARE HEALTHCARE SERVICES, INC. 

	By:
	/s/Kelly J. Gill

	 
	Name:   Kelly J. Gill
Title:   President and Chief Executive Officer

SCHEDULE 10(b)
Guaranty
LITIGATION
See attached list of pending or threatened litigation against Diversicare Healthcare Services, Inc. (f/k/a Advocat Inc.)Exhibit

SECURITY AGREEMENT
(OHI – Diversicare)

THIS SECURITY AGREEMENT (the “Security Agreement”) is made and entered into  as  of October 1, 2018, by and among the entities listed on Schedule 1 to this Agreement (collectively, the “Tenant”), the entities listed on Schedule 2 to this Agreement (collectively, the “Subtenants”), and DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation (“DMS”, and together with Tenant and the Subtenants, each being sometimes referred to individually as a “Debtor” and collectively as “Debtors”), and the entities listed on Schedule 3 to this Agreement (collectively, “Secured Party”).
RECITALS:
A.    Capitalized terms used and not otherwise defined herein shall have the meanings given them in Article I below.
B.    Tenant has executed and delivered to Secured Party a Master Lease dated as of the date of this Agreement (as such agreement may from time to time be amended, modified or supplemented, the “Master Lease”), pursuant to which Tenant is leasing from Secured Party the healthcare facilities identified therein.
C.    Simultaneously with the execution of the Master Lease, (i) DLC and DTI have entered into an Amended and Restated Master Sublease and (ii) DTI and each other Subtenant have executed a an Amended and Restated Sublease with respect to a Facility (collectively, the “Subleases”). DMS is executing this Security Agreement in its capacity as the UPL-IGT Manager of a permitted Hospital Transaction (each as defined in the Master Lease).
NOW, THEREFORE, in consideration of the foregoing and in order to induce Secured Party to enter into the Master Lease and to consent to the Subleases, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I 
DEFINITIONS
This Security Agreement is executed and delivered in connection with the Master Lease.  Terms defined in the Commercial Code (as hereinafter defined) or in the Master Lease and not otherwise defined in this Security Agreement or in the Master Lease shall have the meanings ascribed to those terms in the Commercial Code.  In addition to the other definitions contained herein, when used in this Security Agreement the following terms shall have the following meanings:
“Collateral” means the collateral described in Article II, Section 2 below.
“Commercial Code” means the Uniform Commercial Code, as enacted and in force from time to time in the State of Maryland.
“DLC” means Diversicare Leasing Corp., a Tennessee corporation.
“DTI” means Diversicare Texas I, LLC, Delaware limited liability company.
“Facilities” means the healthcare facilities leased pursuant to the Master Lease.  The initial Facilities are identified on attached Schedule 4.
ARTICLE II     
AGREEMENT
 1.    GRANT OF SECURITY INTEREST.
(a)    Debtor hereby grants to Secured Party a security interest in the Collateral to secure the payment of all amounts now or hereafter due and owing to Secured Party from Tenant, the Subtenants and their Affiliates under the Master Lease and the other Lease Documents, or any extension or renewal thereof, and any and all other obligations incurred in connection therewith, whether direct or indirect, whether primary, secondary, absolute, contingent or otherwise, now or hereafter existing (including future advances), due or to become due, plus all interest, costs, out-of-pocket expenses and reasonable attorneys’ fees which may be made or incurred by Secured Party in the disbursement, administration, and collection thereof, and in the protection, maintenance, and liquidation of the Collateral (the “Liabilities”).
(b)    If the Debtor shall at any time acquire a commercial tort claim, as defined in Article 9 of the Commercial Code (“Article 9”), Debtor shall immediately notify the Secured Party, in a writing signed by Debtor, of the details thereof and grant to Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance satisfactory to Secured Party.
 2.    COLLATERAL.  The “Collateral” covered by this Security Agreement is all of the personal property described below that Debtor now owns or shall hereafter acquire or create, immediately upon the acquisition or creation thereof, wherever located, and consisting of the following:
All personal and fixture property of every kind and nature including, without limitation, all furniture, fixtures, equipment, raw materials, inventory, other goods, accounts, accounts receivable, contract rights (including rights under any management agreement or franchise agreement with respect to the Facilities), rights to the payment of money, prepaid items, choses in action, insurance refund claims and all other insurance claims and proceeds, commercial tort claims, chattel paper, electronic chattel paper, documents, instruments, securities and all other investment property (other than a security, whether certificated or uncertificated, in a subsidiary or affiliate of DLC or DMS), deposits, deposit accounts, rights to proceeds of letters of credit, letter-of-credit rights, supporting obligations of every nature, and general intangibles, including, without limitation, to the extent permitted by applicable law:
		
	(i)
	all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (a) the Debtor operates or has authority to operate, (b) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (c) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor; and

		
	(ii)
	all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics; and

		
	(iii)
	to the extent permitted by law, all rights under that certain program of medical assistance, funded jointly by the federal government and the states, for impoverished individuals who are aged, blind and/or disabled, and/or members of families with dependent children, which program is more fully described in Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and the regulations promulgated thereunder; and

		
	(iv)
	to the extent permitted by law, all rights under that certain federal program providing health insurance for eligible elderly and other individuals, under which physicians, hospitals, skilled nursing homes, home health care, and other providers are reimbursed for certain covered services they provide to the beneficiaries of such program, which program is more fully described in Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and the regulations promulgated thereunder; and

		
	(v)
	any and all contracts, authorizations, agreements or consents made by or on behalf of any patient or resident of any of the Facilities, or any other person seeking or obtaining services or goods from Debtor, pursuant to which Debtor provides skilled nursing care, intermediate care, personal care and/or assisted living facilities, or any form of patient or residential care, as well as related services (“Primary Intended Use”) at any of the Facilities (as such contracts, authorizations, agreements or consents may be amended, supplemented, renewed, replaced, extended or modified from time to time); including consents to treatment and assignments of payment of benefits; and

		
	(vi)
	to the extent permitted by law, the (a) operating licenses for each of the Facilities, any certificate of need, any other license, permit, approval or certificate which from time to time, may be issued or is required to be issued by the United States, any state or local government, or any agency or instrumentality of any of the foregoing with respect to the construction, installation or operation of any of the Facilities or any portion or component of any of the Facilities, the providing of any professional or other services by the Debtor,  the purchase, sale, dispensing, storage, prescription or use of drugs, medications or the like by Debtor, or any other operations or businesses of Debtor at the Facilities; and (b) certifications and eligibility for participation by Debtor, in respect of its operation of any of the Facilities and any related businesses or operations at the Facilities, in programs or arrangements of or reimbursement from any third-party payors, including Medicare and Medicaid; and (c) all other licenses permits and certificates used or useful in connection with the ownership, operation, use or occupancy of any of the Facilities; and

		
	(vii)
	to the extent permitted by law, all rights to third-party reimbursement contracts for the Facilities which are now or hereafter in effect with respect to residents or patients qualifying for coverage under the same, including Medicare and Medicaid, managed care plans and private insurance agreements, and any successor program or other similar reimbursement program and/or private insurance agreements, now or hereafter existing; and

		
	(viii)
	all ledgers, printouts, papers, data, file materials and information pertaining to any of the above described property, relating to any account debtors in respect thereof, and/or to the operation of the Debtor’s business relating to the Facilities, and all rights of access to such books, records, ledgers, printouts, data, file materials and information, and all property in which such books, records, ledgers, printouts, data, file materials and information are stored wherever located, but excluding any computer readable memory and any computer hardware or software necessary to process such memory.

and all rights, remedies, powers and/or privileges of Debtor with respect to any of the foregoing and all proceeds therefrom owned by Debtor or in which Debtor has an interest, which are now or at any time hereafter in possession or under the control of Secured Party or in transit by mail or carrier to or from Secured Party or in the possession of any third party acting on behalf of Secured Party, without regard to whether Secured Party received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Secured Party has conditionally released the same; but specifically excluding all continuous quality improvement program, manuals and materials, management information systems, policy, procedure and educational manuals and materials, and similar proprietary property including any right to the use of the name “Diversicare”,  or any derivative or trademark  thereof, and any subsequent trade name adopted and which is commonly used as part of a long term marketing program among multiple facilities by Debtor and Affiliates of Debtor.
The Debtor acknowledges and agrees that, with respect to any term used herein that is defined in either (i) Article 9 in effect as of the date this Security Agreement is signed by the Debtor, or (ii) Article 9 as in force at any time hereafter, the meaning ascribed thereto with respect to any particular item of property shall be that under the more encompassing of the two definitions.
Notwithstanding anything in this Agreement to the contrary, DLC is only granting to Secured Party a security interest in Collateral to the extent such Collateral is located at, used in connection with, or arises out of the operation of, the Facilities, and DMS is only granting to Secured Party a security interest in Collateral to the extent such Collateral is located at, used in connection with, or arises out of the operation of, or is related to the Facility commonly known as Diversicare of Providence, 4915 Charlestown Road, New Albany, IN 47150.
Except with respect to DLC and DMS, the description of the Collateral to be included on any financing statements executed in connection herewith shall be as follows: 
All personal and fixture property of Debtor, but excluding (i) any computer readable memory and any computer hardware or software necessary to process such memory, and (ii) all continuous quality improvement program, manuals and materials, management information systems, policy, procedure and educational manuals and materials, and similar proprietary property including any right to the use of the name “Diversicare”, or any derivative or trademark  thereof, and any subsequent trade name adopted and which is commonly used as part of a long term marketing program among multiple facilities by Debtor and Affiliates of Debtor.
The Description of the Collateral to be included on any financing statements for DLC shall be as follows:
All personal and fixture property of Debtor which is located at, used in connection with, or arises out of the operation of, the Facilities, but excluding (i) any computer readable memory and any computer hardware or software necessary to process such memory, and (ii) all continuous quality improvement program, manuals and materials, management information systems, policy, procedure and educational manuals and materials, and similar proprietary property including any right to the use of the name “Diversicare”, or any derivative or trademark  thereof, and any subsequent trade name adopted and which is commonly used as part of a long term marketing program among multiple facilities by Debtor and Affiliates of Debtor.
The Description of the Collateral to be included on any financing statements for DMS shall be as follows:
All personal and fixture property of Debtor which is located at, used in connection with, or  arises out of the operation of, the healthcare facility commonly known as Diversicare of Providence, 4915 Charlestown Road, New Albany, IN 47150, but excluding (i) any computer readable memory and any computer hardware or software necessary to process such memory, and (ii) all continuous quality improvement program, manuals and materials, management information systems, policy, procedure and educational manuals and materials, and similar proprietary property including any right to the use of the name “Diversicare”, or any derivative or trademark  thereof, and any subsequent trade name adopted and which is commonly used as part of a long term marketing program among multiple facilities by Debtor and Affiliates of Debtor
3.        PERFECTION OF SECURITY INTEREST.
(b)    Perfection by Filing.  Debtor hereby irrevocably authorizes Secured Party, at any time and from time to time, pursuant to the provisions of this Security Agreement, to take any and all actions Secured Party may reasonably determine to be necessary to assure that the security interests granted hereby are and remain perfected, including without limitation, filing financing statements, continuation statements and amendments thereto that describe the Collateral as all assets of Debtor or words of similar effect and which contain any other information required by Part 5 of Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether that Debtor is an organization, the type of organization and any organization identification number(s) issued to the Debtor.  Debtor agrees to furnish any such information to Secured Party promptly upon request.  Any such financing statements, continuation statements or amendments may be signed by Secured Party on behalf of Debtor, and may be filed at any time in any jurisdiction deemed appropriate by Secured Party; provided that in any state in which an indebtedness tax is imposed upon the filing of a financing statement, Secured Party shall only file in such state if necessary under applicable law to perfect the security interest created pursuant to this Agreement or if Secured Party otherwise agrees to pay such indebtedness tax.  Debtor further agrees to execute and deliver to Secured Party, concurrently with Debtor’s execution of this Security Agreement, and at any time or times hereafter at the request of Secured Party, all financing statements and continuation financing statements (where not covered by the first sentence of this paragraph), assignments, affidavits, reports, notices, letters of authority, vehicle title notations and all other documents that Secured Party may reasonably request, in a form reasonably satisfactory to Secured Party, to perfect and maintain perfected Secured Party’s security interests in the Collateral.  Debtor also agrees to make appropriate entries on its books and records disclosing Secured Party’s security interests in the Collateral.
(c)    Other Perfection, etc.  Debtor shall at any time and from time to time take such steps as Secured Party may reasonably request for Secured Party (i) to obtain an acknowledgment, in form and substance satisfactory to Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the benefit of Secured Party, (ii) to obtain “control” of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper, with any agreements establishing control to be in form and substance satisfactory to Secured Party, and (iii) otherwise to insure the continued perfection and priority of Secured Party’s security interest in any of the Collateral and of the preservation of its rights therein.  Debtor authorizes Secured Party to file financing statements describing any statutory liens held by Secured Party.
 3.    WARRANTIES AND COVENANTS.  In addition to the warranties and representations, if any, made in the Master Lease, as of the date of execution of this Security Agreement, Debtor warrants, represents and agrees that:
		
	(a)
	To the extent permitted by law, Debtor has rights in or the power to transfer the Collateral, and is and will be the lawful owner or lessee of all of the Collateral, with the right, to the extent permitted by law, to subject the Collateral to the security interests of Secured Party hereunder;

		
	(b)
	Except for the security interests in the Collateral herein granted to Secured Party and as may otherwise be permitted under the Master Lease, there are no other adverse claims, liens, restrictions on transfer or pledge, or security interests in the Collateral that are known to Debtor, and there are no financing statements covering any of the Collateral filed in any public office created by or known to Debtor prior to the date hereof.  Debtor shall defend Secured Party against any claims and demands of any and all other persons to the Collateral inconsistent with this Security Agreement;

		
	(c)
	All of the Collateral that constitutes tangible personal property is or will be (upon delivery) located at the Facilities or at the chief executive offices of Debtor;

		
	(d)
	Except as permitted under the Master Lease or hereunder, Debtor shall not remove the Collateral from the Facilities or its chief executive offices without Secured Party’s prior written consent and shall not use or permit the Collateral to be used for any unlawful purpose whatsoever.  Except as permitted under the Master Lease or hereunder, Debtor shall not remove any Collateral from the state in which the Facilities or its chief executive offices are located, without the prior written consent of Secured Party;

		
	(e)
	Except as permitted under the Master Lease, Debtor shall not conduct business under any name at the Facilities other than that given above or set forth on attached Schedule 1 and Schedule 2, nor will Debtor  ( other than DMS) change or reorganize the type of business entity under which it presently does business, except upon prior and express written approval of Secured Party, which approval shall not be unreasonably withheld, and, if such approval is granted, Debtor agrees that all documents, instruments and agreements reasonably requested by Secured Party and relating to such change shall be prepared, filed and recorded at Debtor’s expense before the change occurs;

		
	(f)
	Debtor shall not remove any records concerning the Collateral located at the Facilities or its chief executive offices nor keep any of its records concerning the same at any other location unless written notice thereof is given to Secured Party at least ten (10) days prior to the removal of such records to any new addresses; and

		
	(g)
	Debtor has the right and power and is duly authorized to enter into this Security Agreement. The execution of this Security Agreement does not and will not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected.

		
	(h)
	Debtor (other than DMS) shall not change its location (as that term is defined in Section 9.307 of the Commercial Code). DMS shall not change its location (as that term is defined in Section 9.307 of the Commercial Code) without providing Secured Party thirty (30) days prior written notice. Debtor shall not change its corporate name without providing Secured Party thirty (30) days prior written notice. 

		
	(i)
	Debtor’s (i) chief executive office is located in the state of Tennessee, (ii) location (as that term is defined in Section 9.307 of the Commercial Code) is the State of Tennessee (as to DLC and DMS) and the State of Delaware as to the other Debtors (the “Debtor State”), (iii) exact legal name is as set forth in the first paragraph of this Security Agreement, and (v) filing number with the Debtor State is set forth on Schedule 1 and Schedule 2 and is 000244626 for DMS.

		
	(j)
	To the extent required under the Master Lease, the Debtor shall maintain the Collateral in good order and repair and with reasonable promptness make all necessary and appropriate repairs thereto of every kind and nature whether ordinary or extraordinary, foreseen or unforeseen, or arising by reason of a condition whether or not existing prior to the date of this Security Agreement.  It is the intention of this provision that the level of maintenance of the Collateral shall be not less than that of a first class operator making use of the Collateral for its Primary Intended Use.

		
	(k)
	All agreements and papers required to be filed, registered or recorded in order to create in favor of the Secured Party a perfected lien in the Collateral are true and correct, have been, or will be, filed, registered or recorded in the appropriate filing offices, and to the best of Debtor’s knowledge no further or subsequent filing, refiling, registration, reregistration, recorded or rerecording is necessary in any jurisdiction, except as provided under applicable law with respect to the filing of continuation statements.

		
	(l)
	Except as otherwise permitted pursuant to the terms of this Security Agreement or the Master Lease, Debtor will not sell, lease assign, transfer, grant any other security interest in, pledge, license or otherwise dispose of or encumber any Collateral to any third party while this Security Agreement is in effect without the prior and express written consent of Secured Party.

 4.    COLLECTION OF ACCOUNTS.
(a)    Secured Party conditionally authorizes Debtor to collect accounts from Debtor's account debtors provided, however, this privilege may be terminated by Secured Party at any time upon an Event of Default and, upon such Event of Default, Secured Party shall have all of Debtor's rights, title, and interest in the accounts (to the extent permitted under applicable law), including a right of stoppage in transit.  After the occurrence of an Event of Default, Secured Party (to the extent permitted under applicable law) may notify any account debtor(s) of Secured Party's security interest in Debtor's accounts and shall be entitled to collect same, and, Debtor will thereafter receive all accounts payments as the agent of and as trustee for Secured Party and will deliver to Secured Party on the day of receipt, all checks, cash, drafts, acceptances, notes and other accounts payments and, until such delivery, Debtor shall not use or commingle any accounts payments and shall at all times keep all such remittances separate and apart from Debtor's own funds, capable of identification as the Secured Party’s property.  After the occurrence of an Event of Default, Secured Party and its representatives are hereby authorized to endorse in Debtor's name, any item received by the Secured Party representing any payment on or proceeds of any of the Collateral, and may sign Debtor's name upon all accounts, invoices, assignments, financing statements, notices to debtors, bills of lading, storage receipts, or other instruments or documents in respect to the account debtors, the proceeds therefrom, or property related thereto.  Debtor shall promptly give Secured Party copies of all accounts statements, accompanied by such additional information, documents, or copies thereof, as Secured Party may request.  Debtor shall maintain all records with respect to the accounts of the Facilities and with respect to the general conduct and operation of Debtor's business at the Facilities, including balance sheets, operating statements and other financial information, in accordance with generally accepted accounting principles and as Secured Party may reasonably request.
(b)    Until such time as Secured Party shall notify Debtor of the revocation of such power and authority by reason of an Event of Default (and effective only during the continuance thereof), Debtor (i) may, only in the ordinary course of business, at its own expense, sell, lease or furnish under contracts of service any of the inventory normally held by Debtor for such purpose; (ii) may use and consume any raw materials, work in process or materials, the use and consumption of which is necessary in order to carry on Debtor’s business; (iii) replace equipment in accordance with the provisions of the Master Lease; and (iv) shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as Secured Party may request or, in the absence of such request, as Debtor may deem advisable.  A sale, lease, furnishing of services or other transfer of the Collateral as a partial or total satisfaction of any debt of Debtor shall not constitute a sale in the ordinary course of business.
 5.    INSPECTIONS/INFORMATION.  Debtor shall permit Secured Party or its agents upon reasonable written request and during business hours to have access to and to inspect any of the Collateral.  Secured Party may from time to time inspect, check, make copies of, or extracts from the books, records and files of Debtor relating to the Collateral, and Debtor shall make the same available to Secured Party upon reasonable written notice and during business hours.  Secured Party’s right of access and inspection shall be subject to any prohibitions or limitations on disclosure under applicable law, including the Health Insurance Portability and Accountability Act (“HIPAA”) and any so-called “Patient’s Bill of Rights” or similar legislation, including such limitations as may be necessary to preserve the confidentiality of the Facility-patient relationship and the physician-patient relationship.  Debtor agrees to promptly supply Secured Party with such financial and other information concerning its financial and business affairs, assets and liabilities relating to the Collateral as Secured Party may from time to time request, and Debtor agrees that Secured Party or its agents may from time to time verify Debtor's continuing compliance with any of Debtor's warranties and covenants made in Paragraph 4 above, at Debtor's cost and expense.
 6.    DEFAULT/REMEDIES.
(a)    The occurrence of any of the following shall constitute an Event of Default under this Security Agreement without any additional notice or grace period:
(i)    An Event of Default as defined in the Master Lease;
(ii)    Debtor fails to observe or perform any other term, covenant or condition of this Security Agreement and the failure is not cured by Debtor within a period of fifteen (15) days after written notice thereof from Secured Party, unless the failure cannot with due diligence be cured within a period of fifteen (15) days, in which case such failure shall not be deemed an Event of Default if and for so long as Debtor proceeds promptly and with due diligence to cure the failure and completes the cure prior to the time that the same causes a default under the Master Lease and prior to the time that the same results in civil or criminal penalties to Secured Party, Debtor, any affiliates of either or to the Facilities; however, in no event to exceed a period of sixty (60) days; or
(iii)    Any of the representations or warranties of the Debtor contained herein proves to be untrue when made in any material respect, the Secured Party or Collateral is materially and adversely affected thereby, and same is not cured within fifteen (15) days after written notice from Secured Party thereof.
(b)    Whenever an Event of Default shall have occurred and so long as its continues (and subject to the Intercreditor Agreement), Secured Party may exercise from time to time any rights and remedies, including the right to immediate possession of the Collateral, available to it under the Master Lease, this Security Agreement or applicable law.  Secured Party shall have the right to hold any property then in or upon the Facilities (but excluding any property belonging to patients at the Facilities) at the time of repossession not covered by this Security Agreement until return is demanded in writing by Debtor.  Debtor agrees, in case of the occurrence of an Event of Default and upon the request of Secured Party, to assemble, at its expense, all of the Collateral at a convenient place acceptable to Secured Party and to pay all costs of Secured Party of collection of all the Liabilities, and enforcement of rights hereunder, including reasonable attorneys’ fees and legal expenses, including participation in bankruptcy proceedings, and the expenses of locating the Collateral and the expenses of any repairs to any realty or other property to which any of the Collateral may be affixed or be a part.  If the Collateral is disposed of at a public sale, the parties agree that (i) a public sale with at least ten (10) calendar days prior notice to Debtor and notice to the public by one publication in a local newspaper is commercially reasonable, and (ii) a disclaimer of warranties at a public or private sale is commercially reasonable.  If any notification of intended disposition of any of the Collateral is required by law, such notification, if mailed, shall be deemed reasonably and properly given if sent at least ten (10) days before such disposition, by first class mail, postage prepaid, addressed to the Debtor either at the address set forth in the notice section hereof, or at any other address of the Debtor appearing on the records of Secured Party.
(c)    TO THE EXTENT PERMITTED BY LAW, DEBTOR AGREES THAT SECURED PARTY SHALL, UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF THE COLLATERAL.  DEBTOR WAIVES ANY RIGHT IT MAY HAVE, IN SUCH INSTANCE, TO A JUDICIAL HEARING PRIOR TO SUCH RETAKING.
(d)    The obligations of Debtor under this Security Agreement, the Master Lease and other agreements and instruments executed by Debtor and its Affiliates in connection with the Master Lease are cross-defaulted and cross-collateralized such that upon an Event of Default under the Master Lease, this Security Agreement and/or any such other agreements and instruments which evidence, secure or otherwise relate to the Master Lease, the Secured Party has the right to declare such Event of Default to be an Event of Default without the benefit of any notice or grace periods contained under any or all of this Security Agreement, the Master Lease and such other agreements and instruments and without limitation to resort to any or all of the Collateral and the other collateral securing such obligations in pursuit of its remedies thereunder.
(e)    Debtor acknowledges and agrees that in the event that any of the Collateral is sold by the Secured Party for credit, then credit shall be made against the Liabilities only as, if and when cash payments are actually received by the Secured Party for such Collateral.
 7.    Intentionally omitted.
 8.    GENERAL.
(a)    Time.  Time shall be deemed of the essence with respect to this Security Agreement.
(b)    Condition of Collateral.  Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care.  Failure of Secured Party to preserve or protect any rights with respect to such Collateral against any prior parties shall not be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral.
(c)    Waivers.  Any delay on the part of Secured Party in exercising any power, privilege or right under the Master Lease, this Security Agreement or under any other instrument or document executed by Debtor in connection herewith shall not operate as a waiver thereof.  No single or partial exercise thereof, or the exercise of any other power, privilege or right shall preclude other or further exercise thereof, or the exercise of any other power, privilege or right.  The waiver by Secured Party in writing of any default by Debtor shall not constitute a waiver of any subsequent defaults but shall be restricted to the default so waived.
(d)    Rights Cumulative.  All rights, remedies and powers of Secured Party hereunder are irrevocable and cumulative, and nothing contained herein shall be construed as in any way modifying, limiting, creating an alternative to or exclusive of, and shall be in addition to all rights, remedies and power is given by the Master Lease or the Commercial Code, or any other applicable rules of decision, regulations or laws now existing or hereafter enacted.
(e)    Rules of Construction.  In this Security Agreement, words in the singular include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word “or” is disjunctive but not exclusive; and the words “include”, “including” or “includes” are not limiting terms.  The captions and section numbers appearing in this Security Agreement are inserted only as a matter of convenience.  They do not define, limit or describe the scope or intent of the provisions of this Security Agreement.
(f)    Severability.  If any term or provision set forth in this Security Agreement shall be held invalid or unenforceable, the remainder of this Security Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.
(g)    Counterparts.  This Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Security Agreement by signing and delivering one or more counterparts.
(h)    Successors.  The terms of this Security Agreement shall be binding upon the Debtor, its successors, assigns, heirs, executors and personal representatives, including all “new debtors” within the meaning of the Commercial Code, and shall inure to the benefit of Secured Party, its successors and any holder, owner or assignee of any rights in the Master Lease and will be enforceable by them as their interest may appear.
(i)    Enforcement Expenses.  In the event of any action to enforce this Security Agreement or to protect the security interest of Secured Party in the Collateral, or to protect, preserve, maintain, process, assemble, develop, insure, market or sell any Collateral, Debtor agrees to pay the costs owed and expenses thereof, together with reasonable and documented attorneys’ fees (including fees incurred in appeals and post judgment enforcement proceedings).
(j)    Choice of Law.  THIS SECURITY AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF THE DEBTOR AND SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, EXCEPT THAT THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED SHALL GOVERN THIS SECURITY AGREEMENT (A) TO THE EXTENT NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS SECURITY AGREEMENT AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B) FOR PROCEDURAL REQUIREMENTS THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED.
(k)    Jurisdiction, Venue, Service of Process.  DEBTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND AND AGREES THAT ALL DISPUTES CONCERNING THIS SECURITY AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED OR IN MARYLAND.  DEBTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED OR MARYLAND, AND DEBTOR IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED AND MARYLAND.
(l)    Amendments.  No amendment to this Security Agreement shall be effective unless the same shall be in writing and signed by the party to be charged.
(m)    Notices.  All notices, demands or requests required or permitted to be given to any party hereto shall be given and deemed effective as provided in the Master Lease.  The parties hereby agree that a notice sent as specified in this paragraph at least ten (10) days before the date of any intended public sale or the date after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to be reasonable notice of such sale or other disposition.
(n)    Joint Preparation.  This Security Agreement shall be deemed to have been prepared jointly by the parties hereto.  Any ambiguity herein shall not be interpreted against any party hereto and shall be interpreted as if each of the parties hereto had prepared this Security Agreement.
(o)    Entire Agreement.  This Security Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations.  There are no oral conditions precedent to the effectiveness of this Security Agreement.
(p)    Joint and Several.  If more than one Debtor has signed this Security Agreement, their obligations shall be joint and several.
(q)    Agency Appointment.  Each entity comprising Secured Party appoints each other entity comprising Secured Party as its contractual representative for the purpose of administering and enforcing the terms and conditions of this Agreement; provided, however, that no Secured Party may, as an agent for any other Secured Party, release any collateral or modify or amend this Agreement, each of which shall require the written consent of all Secured Parties. It is expressly understood and agreed that no Secured Party, as agent, shall have any fiduciary responsibilities to any other Secured Party by reason of this Agreement.  In its capacity as the Secured Parties’ contractual representative, each Secured Party (i) is a "representative" of the Secured Parties within the meaning of the term "secured party" as defined in the Uniform Commercial Code and (ii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement.  Each Secured Party, as a contractual representative, shall have and may exercise such powers under this Agreement as are specifically delegated by the terms of hereof, together with such powers as are reasonably incidental thereto.  No Secured Party shall have any implied duties to the other Secured Parties, or any obligation to the other Secured Parties to take any action hereunder.
(r)    Release.  Upon the full payment, satisfaction and discharge of the Liabilities herein secured, the security interest provided for herein shall terminate and Secured Party shall file, register or record, or authorize Debtors in writing to file, register or record, UCC-3 termination statements or other appropriate evidence of such termination with the appropriate filing offices in all jurisdictions necessary to evidence such termination. 
(Signature Pages Follow)

IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the date first written above.
TENANT:
DIVERSICARE LEASING CORP.

By:    /s/James R. McKnight, Jr.            
Name:    James R. McKnight, Jr.
Its:    President and Chief Executive Officer

DIVERSICARE OF CHATEAU, LLC
DIVERSICARE OF RIVERSIDE, LLC
DIVERSICARE OF ST. JOSEPH, LLC
DIVERSICARE OF PROVIDENCE, LLC
DIVERSICARE OF ST. THERESA, LLC
DIVERSICARE OF SIENA WOODS, LLC 
DIVERSICARE OF BRADFORD PLACE, LLC
DIVERSICARE OF NICHOLASVILLE, LLC
DIVERSICARE OF SENECA PLACE, LLC
DIVERSICARE OF GREENVILLE, LLC
Each a Delaware limited liability company

By:    Diversicare Leasing Company II, LLC, its sole member

By:    /s/James R. McKnight, Jr.            
Name:    James R. McKnight, Jr.
Its:    President and Chief Executive Officer

DIVERSICARE HIGHLANDS, LLC
A Delaware limited liability company

By:    Diversicare Leasing Corp., its sole member

By:    /s/James R. McKnight, Jr.            
Name:    James R. McKnight, Jr.
Its:    President and Chief Executive Officer

 
SUBTENANTS:

DIVERSICARE TEXAS I, LLC

By:    /s/James R. McKnight, Jr.    
Name:    James R. McKnight, Jr.
Title:    President and Chief Executive Officer

DIVERSICARE BALLINGER, LLC
DIVERSICARE DOCTORS, LLC
DIVERSICARE ESTATES, LLC
DIVERSICARE HUMBLE, LLC
DIVERSICARE KATY, LLC
DIVERSICARE NORMANDY TERRACE, LLC
DIVERSICARE TREEMONT, LLC
DIVERSICARE PARIS, LLC

By:     Diversicare Texas I, LLC
           sole Member

By:     /s/James R. McKnight, Jr.    
Name:    James R. McKnight, Jr.
Title:    President and Chief Executive Officer

DMS:

DIVERSICARE MANAGEMENT SERVICES CO., a Tennessee corporation

By:    /s/James R. McKnight, Jr.    
Name:    James R. McKnight, Jr.
Title:    President and Chief Executive Officer

 
SECURED PARTY:

STERLING ACQUISITION, LLC
STEVENS AVENUE PROPERTY, L.L.C.
ST. JOSEPH MISSOURI PROPERTY, L.L.C.
OHIO INDIANA PROPERTY, L.L.C.
NICHOLASVILLE KENTUCKY PROPERTY, L.L.C.
LOUISVILLE DUTCHMANS PROPERTY, L.L.C.
GREENVILLE KENTUCKY PROPERTY, L.L.C.

By:    /s/Megan M. Ames        
Name:    Megan M. Ames
Title:    Senior Vice President - Operations

SCHEDULE 1
TENANTS
	
			
	ENTITY
	ORG. ID#
	STATE

	Diversicare Leasing Corp.
	184309
	Tennessee

	Diversicare of Chateau, LLC
	5543771
	Delaware

	Diversicare of Riverside, LLC
	5543777
	Delaware

	Diversicare of St. Joseph, LLC
	5543776
	Delaware

	Diversicare of Providence, LLC
	5371371
	Delaware

	Diversicare of St. Theresa, LLC
	5371372
	Delaware

	Diversicare of Siena Woods, LLC
	5371369
	Delaware

	Diversicare of Bradford Place, LLC
	5371370
	Delaware

	Diversicare of Nicholasville, LLC
	5518692
	Delaware

	Diversicare of Seneca Place, LLC
	5364461
	Delaware

	Diversicare of Greenville, LLC
	5584479
	Delaware

	 
	 
	 

SCHEDULE 2

SUBTENANTS:

	
			
	ENTITY
	ORG. ID#
	STATE

	Diversicare Texas I, LLC
	4388082
	Delaware

	Diversicare Ballinger, LLC
	4388083
	Delaware

	Diversicare Doctors, LLC
	4388084
	Delaware

	Diversicare Estates, LLC
	4388085
	Delaware

	Diversicare Humble, LLC
	4388087
	Delaware

	Diversicare Katy, LLC
	4388088
	Delaware

	Diversicare Normandy Terrace, LLC
	4388089
	Delaware

	Diversicare Treemont, LLC
	4388090
	Delaware

	Diversicare Paris, LLC
	4421472
	Delaware

SCHEDULE 3

Secured Party

Sterling Acquisition, LLC, the successor by conversion to Sterling Acquisition Corp.
Stevens Avenue Property, L.L.C.
St. Joseph Missouri Property, L.L.C.
Ohio Indiana Property, L.L.C.
Nicholasville Kentucky Property, L.L.C.
Louisville Dutchmans Property, L.L.C.
Greenville Kentucky Property, L.L.C.

SCHEDULE 4

INITIAL FACILITIES:

	
		
	 
	Facility

	1.    
	Best Care, Inc.
2159 Dogwood Ridge
Wheelersburg, OH 45694

	2.    
	Boyd Nursing and Rehab Center
12800 Princeland Drive
Ashland, KY 41102

	3.    
	Canterbury Health Center
1720 Knowles Road
Phoenix City, AL 36867

	4.    
	Carter Nursing & Rehab Center
250 McDavid Boulevard, P.O. Box 904
Grayson, KY 41143

	5.    
	Elliott Nursing & Rehab Center
Howard Creek Road, P.O. Box 694, Route 32 East
Sandy Hook, KY 41171

	6.    
	Hardee Manor Care Center
401 Orange Place
Wauchula, FL 33873

	7.    
	Laurel Manor Health Center
902 Buchanan Road, P.O. Box 505
New Tazewell, TN 37825

	8.    
	Lynwood Nursing Home
4164 Halls Mill Road
Mobile, AL 36693

	9.    
	Manor House of Dover
537 Spring Street, P.O. Box 399
Dover, TN 37058

	10.    
	Mayfield Rehab and Special Care Center
200 Mayfield Drive
Smyrna, TN 37167

	11.    
	Northside Health Care
700 Hutchins Ave
Gadsden, AL 35901

	12.    
	South Shore Nursing & Rehab Center
James Hannah Drive, P.O. box 489
South Shore, KY 41175

	13.    
	West Liberty Nursing & Rehab Center
774 Liberty Road, P.O. Box 219, Route 5 Wells Hill
West Liberty, KY 41472

	14.    
	Westside Health Care Center
4320 Judith Lane
Huntsville, AL 35805

	15.    
	Wurtland Nursing & Rehab Center
100 Wurtland Avenue, P.O. Box 677
Wurtland, KY 41144

	16.    
	Doctors Healthcare
9009 White Rock Trail
Dallas, TX 75238

	17.    
	Estates at Ft. Worth
201 Sycamore School Road
Fort Worth, TX 76134

	18.    
	Heritage Oaks Estates
2001 N. 6th Street
Ballinger, TX 76821

	19.    
	Humble
8450 Will Clayton Parkway
Humble, TX 77338

	20.    
	IHS of Dallas at Treemont
5550 Harvest Hill Road
Dallas, TX 75230

	21.    
	Katy
1525 Tull Drive
Katy, TX 77499

	22.    
	Normandy Terrace
841 Rice Road
San Antonio, TX 78220

	23.    
	Brentwood Terrace
2885 Stillhouse Road
Paris, TX 75460

	24.    
	Highlands Nursing and Rehabilitation Center
1705 Stevens Avenue
Louisville, KY 40205

	25.    
	Chateau Care Center
811 N. Ninth Street
St. Joseph, MO 64501

	26.    
	Riverside Care Center
1616 Weisenborn Road
St. Joseph, MO 64507

	27.    
	The Inn
3002 N. 18th Street
St. Joseph, MO 64505

	28.    
	Diversicare of Bradford Place (fka Mercy Schroder)
1302 Millville Avenue
Hamilton, OH 45013

	29.    
	Diversicare of Providence
4915 Charlestown Road
New Albany, IN 47150

	30.    
	Diversicare of Siena Woods
6125 North Main Street
Dayton, OH 45415

	31.    
	Diversicare of St. Theresa
7010 Rowan Hill Drive
Cincinnati, OH 45227

	32.    
	Royal Manor Health Care
100 Sparks Avenue
 Nicholasville, KY 40356

	33.    
	Twinbrook Nursing and Rehabilitation Center
3526 Dutchman's Lane
 Louisville, KY 40205

	34.    
	Belle Meade Home
521 Greene Dr.
Greenville, KY 42345

24516935.4

1
Derwent – 9.25.18

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