GUARANTY

Exhibit 10.4

GUARANTY

      THIS GUARANTY (“ Guaranty ”) dated as of August 10, 2007, by ADVOCAT INC. , a Delaware corporation (“ Guarantor ”), is to and for the benefit of LASALLE BANK NATIONAL ASSOCIATION , a national banking association (together with its successors and assigns, the “ Lender ”).

R E C I T A L S:

     A.  DIVERSICARE MANAGEMENT SERVICES CO. , a Tennessee corporation, (together with each (i) of the other borrowers set forth on Schedule 1 to the Loan Agreement (as defined below) and (ii) additional borrowers from time to time party to the Loan Agreement (whether pursuant to an amendment, written joinder or otherwise), individually and collectively referred to herein as, “ Borrower ”, has requested that the Lender make certain revolving loans and a term loan (individually and collectively, the “ Loan ”) to Borrower pursuant to and in accordance with that certain Loan and Security Agreement dated of even date herewith by and among Borrower and the Lender (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 Lender. The Loan Agreement, the Revolving Credit Note, the Term Loan Note, the Blocked Account Agreements, this Guaranty, each other guaranty delivered in favor of the Lender 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 Lender to make the Loan to Borrower.

     D. Lender 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 Lender 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 Lender for its benefit.

      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 Lender 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 Lender 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 Lender (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, charges, fees, costs, expenses 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 Lender 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 Lender 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 Lender with respect to the Indebtedness, 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 Lender 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 Lender’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 Lender’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 Lender, (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 Lender 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 Lender, 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 Lender (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 Lender may at any time possess. Guarantor agrees that any release which may be given by Lender to Borrower or any Other Guarantor shall not release Guarantor. Guarantor consents and agrees that Lender 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 Lender to any amounts due under the Loan or the Loan

Agreement is rescinded or returned by 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 Lender 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 Lender 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 Lender 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 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 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 Lender 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 Lender 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, Lender may, at its discretion, purchase all or any part of such collateral offered for sale, for its own account, 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 Lender 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 Lender, 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 Lender 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 Lender (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 Lender is expressly authorized to make from time to time; (c) any failure, neglect or omission on the part of Lender to realize or protect any of the Guaranteed Obligations, or any personal property or real property or lien security 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 Indebtedness, 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.

  &n