GUARANTY





         This GUARANTY ("Guaranty") is given as of November 8, 2000 ("Effective

Date"), by ADVOCAT, INC., a Delaware corporation, whose address is 277 Mallory

Station Road, Suite 130, Franklin, Tennessee 37067 ("Advocat"), ADVOCAT FINANCE,

INC., a Delaware corporation ("Finance") whose address is 277 Mallory Station

Road, Suite 130, Franklin, Tennessee 37067 and DIVERSICARE MANAGEMENT SERVICES

CO., a Tennessee corporation ("Management") whose address is 277 Mallory Station

Road, Suite 130, Franklin, Tennessee 37067 (jointly and severally the

"Guarantors" and individually referred to herein as a "Guarantor"), in favor of

STERLING ACQUISITION CORP., a Kentucky corporation ("Lessor") whose address is

900 Victors Way, Suite 350, Ann Arbor, Michigan 48108, with reference to the

following facts:



                                    RECITALS



         A.       Diversicare Leasing Corp., a Delaware corporation (the

"Lessee"), has executed and delivered to Lessor a Consolidated Amended and

Restated Master Lease dated of even date herewith (the "Master Lease") pursuant

to which the Lessee is leasing from Lessor certain healthcare facilities

identified therein (the "Facilities").



         B.       By a guaranty dated May ___, 1994 and by an amended and

restated guaranty dated February 1, 1997, Advocat guaranteed certain obligations

of the Lessee and certain predecessors in interest as set forth therein.



         C.       By a guaranty dated February 1, 1997, Finance guaranteed

certain obligations of the Lessee and certain predecessors in interest as set

forth therein.



         D.       By a guaranty dated February 1, 1997, Management guaranteed

certain obligations of the Lessee and certain predecessors in interest as set

forth therein.



         E.       Pursuant to Section 19(B) of that certain Settlement and

Restructuring Agreement by and among Lessor, Omega Healthcare Investors, Inc., a

Maryland corporation, Advocat, Management, and Sterling Health Care Management

Corporation, a Kentucky corporation of even date herewith, and only to the

extent set forth therein, Lessor released Advocat, Finance and Management from

liability under those guarantees described above.



         F.       Each Guarantor continues to maintain a direct financial

interest in the Lessee and it is to the advantage of each Guarantor that Lessor

enter into the Master Lease.



{PAGE}   2



         G.       As a material inducement to Lessor to lease the Facilities

pursuant to the Master Lease, each Guarantor has agreed to jointly and severally

guarantee the payment of all amounts due from, and the performance of all

obligations undertaken by the Lessee under the Master Lease and any security

agreements, promissory notes, letter of credit agreements, guarantees or other

documents which evidence, secure or otherwise relate to the Master Lease (the

Master Lease and all such documents, and any and all amendments, modifications,

extensions and renewals thereof, are hereinafter referred to collectively as the

"Sterling Transaction Documents"), all as hereinafter set forth.



         WHEREFORE, the parties hereby agree as follows:



         1.       Defined Terms. All capitalized terms used herein and not

defined herein shall have the meaning for such terms set forth in the Master

Lease.



         2.       Guaranty. Guarantors hereby unconditionally and irrevocably,

jointly and severally, guarantee to Lessor (i) the payment when due of all Rent

and all other sums payable by the Lessee under the Master Lease, and (ii) the

faithful and prompt performance when due of each and every one of the terms,

conditions and covenants to be kept and performed by the Lessee under the

Sterling Transaction Documents, any and all amendments, modifications,

extensions and renewals of the Sterling Transaction Documents, including without

limitation all indemnification obligations, insurance obligations, and all

obligations to operate, rebuild, restore or replace any facilities or

improvements now or hereafter located on the real estate covered by the Master

Lease. In the event of the failure of Lessee to pay any such amounts owed, or to

render any other performance required of Lessee under the Sterling Transaction

Documents, when due, Guarantors shall forthwith perform or cause to be performed

all provisions of the Sterling Transaction Documents to be performed by Lessee

thereunder, and pay all damages that may result from the non-performance thereof

to the full extent provided under the Sterling Transaction Documents

(collectively, the "Obligations"). As to the Obligations, each Guarantor's

liability under this Guaranty is without limit.



         3.       Survival of Obligations. The obligations of Guarantors under

this Guaranty with respect to the Sterling Transaction Documents shall survive

and continue in full force and effect (until and unless all Obligations, the

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