THIS INSTRUMENT WAS PREPARED BY,
AND UPON RECORDING SHOULD BE RETURNED TO:

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

STATE OF ARKANSAS )

COUNTY OF JACKSON )

MORTGAGE AND SECURITY AGREEMENT

THIS MORTGAGE AND SECURITY AGREEMENT (this "Instrument"), is made as of the 29th day of March, 2001, by and between DIVERSICARE PINEDALE, LLC, a Delaware limited liability company ("Mortgagor"), whose address is 277 Mallory Station Road, Suite 130, Franklin, Tennessee 37067, and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation (together with its successors and assigns, "Mortgagee"), whose address is 200 Witmer Road, Horsham, Pennsylvania 19044.

RECITALS

A. Mortgagor is indebted to Mortgagee for money loaned in the principal sum of Two Million Nine Hundred Thirteen Thousand and No/100 Dollars ($2,913,000.00) (the "Loan"), as is evidenced by that certain Promissory Note of even date herewith from Mortgagor, payable to the order of Mortgagee in installments of principal and/or interest thereon, such final installment being due on April 1, 2006.

B. As a condition precedent to making the Loan, Mortgagee has required that Mortgagor execute this Instrument as security for the Loan and the other Indebtedness (as hereinafter defined).

GRANTING CLAUSES

NOW, THEREFORE, for and in consideration of the Indebtedness, and to secure the prompt payment thereof, Mortgagor does hereby irrevocably grant, bargain, sell, convey, assign, transfer, mortgage, pledge and set over unto Mortgagee, its successors and assigns forever, and grants to Mortgagee a security interest in and to, the Mortgaged Property (as hereinafter defined).

TO HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto Mortgagee, its successors and assigns forever, subject however to the terms and conditions herein:

PROVIDED, HOWEVER, that if Mortgagor shall pay to Mortgagee the entire Indebtedness, at the times and in the manner stipulated herein, in the Note (as hereinafter defined) and in the other Loan Documents (as hereinafter defined), all without any deduction or credit for taxes or other similar charges paid by Mortgagor, and shall cause all other obligated parties to, keep, perform, and observe all and singular the covenants and promises herein, in the Note and in each of the other Loan Documents to be kept, performed, and observed, all without fraud or delay, then this Instrument, and all the properties, interests, and rights hereby granted, bargained, and sold shall cease, terminate, and be void, but shall otherwise remain in full force and effect.

AGREEMENT

AND Mortgagor and Mortgagee covenant and agree as follows:

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a) "1933 ACT" has the meaning given to that term in Section 13.

(b) "ACCOUNTS" means any rights of Mortgagor arising from the operation of the Facility to payment for goods sold or leased or for services rendered, not evidenced by an Instrument, including, without limitation, (i) all accounts arising from the operation of the Facility, (ii) all moneys and accounts, if any, held by Mortgagee pursuant to this Instrument or any other Loan Document, and (iii) all rights to payment from Medicare or Medicaid programs or similar state or federal programs, boards, bureaus or agencies, and rights to payment from patients, residents, private insurers, and others arising from the operation of the Facility, including rights to payment pursuant to Reimbursement Contracts. Accounts shall include the Proceeds thereof.

(c) "AFFILIATE" means, with respect to any Person, (i) each Person that controls, is controlled by or is under common control with such Person, (ii) each Person that, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, any of the Stock of such Person, and (iii) each of such Person's officers, directors, members, joint venturers and partners.

(d) "APPURTENANT RIGHTS" means all air rights, development rights, zoning rights, easements, rights-of-way, strips and gores of land, vaults, streets, roads, alleys, tenements, passages, sewer rights, waters, water courses, water rights and powers, minerals, flowers, shrubs, crops, trees, timber and other emblements now or hereafter appurtenant to, or used or useful in connection with, or located on, under or above the Land, or any part or parcel thereof, and all ground leases, estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances, reversions, and remainders whatsoever, in any way belonging, relating or appertaining to the Land, or any part thereof, now or hereafter.

(e) "ASSIGNMENT OF LEASES AND RENTS" means that certain Assignment of Leases and Rents of even date herewith executed by Mortgagor for the benefit of Mortgagee.

(f) "ASSIGNMENT OF LICENSES" means that certain Assignment of Licenses, Permits and Contracts of even date herewith executed by Mortgagor for the benefit of Mortgagee.

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