BEVERLY ENTERPRISES INC
AMENDMENT TO CORPORATE INTEGRITY AGREEMENT
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<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>d14946exv10w3.htm
<DESCRIPTION>AMENDMENT TO CORPORATE INTEGRITY AGREEMENT
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;10.3</B>



<P align="center" style="font-size: 10pt"><B>AMENDMENT TO CORPORATE INTEGRITY AGREEMENT<BR>
between the<BR>
Office of Inspector General<BR>
of the<BR>
Department of Health and Human Services<BR>
and<BR>
Beverly Enterprises Inc.</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>I.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Preamble and Scope of Amendment</B></TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">On February&nbsp;3, 2000, the Office of Inspector General (&#147;OIG&#148;) of the Department
of Health and Human Services and Beverly Enterprises Inc. entered into a
Corporate Integrity Agreement (&#147;CIA&#148;). On August&nbsp;1, 2002, the Superior Court
for the State of California, District of Santa Barbara, entered a Permanent
Injunction and Final Judgment (&#147;PIFJ&#148;) against Beverly Enterprises Inc. In
light of the PIFJ, Beverly and the OIG hereby enter into this Amendment to the
CIA pursuant to Section&nbsp;XI.C of the CIA.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>II.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Term and Scope of the Amendment</B></TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;The period of the compliance obligations assumed by Beverly under this
Amendment shall be five years from the effective date of this Amendment
(&#147;Amendment Effective Date&#148;) (unless otherwise specified). Notwithstanding the
foregoing, upon completion of the third year of this Amendment, the OIG, in its
sole discretion, may waive Beverly&#146;s obligation under Section&nbsp;III.D <I>infra </I>to
retain an Independent Monitor for one or more of the remaining two years of the
Amendment. The Amendment Effective Date shall be the date on which the final
signatory of this Amendment executes this Amendment. Each one-year period,
beginning with the one-year period following the Effective Date, shall be
referred to as a &#147;Reporting Period.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;The scope of this Amendment shall be governed by the following
definitions:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&#147;Covered Facility,&#148; except as expressly stated herein, includes the
nursing home facilities in California, Arizona, and Hawaii that are licensed,
operated, directed, or administered by Beverly or in which Beverly has an
ownership or control interest, as defined by 42 U.S.C. &#167; 1320a-3(a)(3).


<P align="center" style="font-size: 10pt">1
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&#147;Amendment Covered Persons&#148; includes the employees, contractors
and agents who work at a Covered Facility who:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(a)&nbsp;perform patient care or resident care duties;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(b)&nbsp;make assessments of patients or residents that affect
treatment decisions or reimbursement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(c)&nbsp;perform billing, coding, or assessment functions
described in Section&nbsp;III.A.4. of this Amendment;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(d)&nbsp;perform management oversight on staffing, patient care,
resident care, reimbursement, or the CIA and this Amendment;
or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(e)&nbsp;perform any function that relates to or is covered by the
CIA and this Amendment.</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered
Facility or any non-employee private caregivers and/or attending physicians
hired by any resident or the family or friends of any resident of a Covered
Facility regardless of the hours worked per year in a Covered Facility are not
Amendment Covered Persons.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&#147;California Covered Persons&#148; includes the employees, contractors, and
agents who are involved directly or indirectly in the delivery of patient or
resident care (including individuals who perform management oversight on
quality assurance, setting policies or procedures, or making staffing
decisions) at a Covered Facility located in the State of California.


<P align="left" style="font-size: 10pt">Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered
Facility or any non-employee private caregivers and/or attending physicians
hired by any resident or the family or friends of any resident of a Covered
Facility located in the State of California regardless of the hours worked per
year in a Covered Facility located in the State of California are not
California Covered Persons.


<P align="center" style="font-size: 10pt">2
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>III.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Corporate Integrity Obligations</B></TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">Beverly shall ensure that its compliance program required by the CIA includes
the following elements.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Compliance Officer, Committees, and Internal Audit and Review
Functions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<I>Compliance Officer</I>. In addition to his or her other duties, the
Compliance Officer appointed pursuant to the CIA shall also provide reasonable
assurance that quality of care problems are being appropriately addressed and
corrected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<I>Quality Compliance Committees</I>.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate Quality Committees. Beverly has
established a Corporate Quality Council (&#147;Corporate Quality
Committee&#148;). The purpose of the Corporate Quality Committee
is to monitor and improve quality of care at Beverly&#146;s nursing
homes. At a minimum, the Corporate Quality Committee includes
the Compliance Officer, the Corporate Medical Director, the
Chief Operating Officer of the Nursing Home subsidiary, the
Sr. Vice President of Professional Services, representatives
from Beverly&#146;s Regions, and any other appropriate officers or
individuals necessary to thoroughly implement the requirements
of this Amendment that relate to quality of care in the
Covered Facilities.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Regional Quality Councils. Beverly has
established Regional Quality Councils (&#147;Regional Quality
Compliance Committees&#148;). The purpose of the Regional Quality
Compliance Committees is to address issues concerning quality
of care at Beverly&#146;s nursing homes in each of its Regions. At
a minimum, the Regional Quality Compliance Committee includes
the Regional Vice President of Operations, the Regional
Director of Professional Services, and any other appropriate
officers or individuals necessary to thoroughly implement the
requirements of this Amendment that relate to quality of care
in the Covered Facilities. The Regional Quality Council for
the Region in which the Covered Facilities are located also
includes the California</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">3
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Compliance Officer. For each Regional Quality Council
meeting in the Region in which the covered facilities are
located, there shall be senior representatives from the
Covered Facilities, chosen on a rotating and random basis,
to report to the committee on the adequacy of care being
provided at their applicable Covered Facility.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<I>Board of Directors&#146; Committee</I>. Beverly currently has a Quality
Committee as part of its Board of Directors to provide oversight on quality of
care issues (&#147;Quality Assurance Monitoring Committee&#148;). This committee shall
continue to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review the adequacy of Beverly&#146;s system of
internal controls, quality assurance monitoring, and patient
care;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensure that Beverly&#146;s response to state, Federal,
internal, and external reports of quality of care issues is
complete, thorough, and resolves the issue(s) identified; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensure that Beverly adopts and implements
policies and procedures that are designed to ensure that each
individual cared for at a Beverly facility receives the
highest practicable physical, mental and psychosocial level of
care attainable. The individuals who serve on this committee
shall be readily available to the Compliance Officer, the Sr.
Vice President of Professional Services, the Monitors, and the
Independent Review Organization(s) required under this
Amendment to respond to any issues or questions that might
arise. The names of the Board members and the charter for the
committee shall be provided to the OIG within ninety (90)&nbsp;days
after the effective date of this Amendment. When new members
are appointed, or the responsibilities or authorities of the
Board committee are substantially changed, Beverly shall
notify the OIG, in writing, within fifteen (15)&nbsp;days of such a
change.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Quality Reviews. Beverly currently performs Quality reviews under the
&#147;Beverly Quality System.&#148; The Quality Reviews (including quality review
follow-ups) are described in a 2002 notebook, which Beverly has previously
provided to the OIG. Beverly shall continue to conduct Quality Reviews in the
manner described in the 2002 notebook until January&nbsp;31, 2003, at which time it
will commence performing its Quality Reviews in a manner described in a 2003
notebook. The 2003 notebook will be provided


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<P align="left" style="font-size: 10pt">to the OIG no later than February&nbsp;1, 2003. After February&nbsp;1, 2003, Beverly
will continue to conduct Quality Reviews in a manner that devotes at least
equal resources to performing the function of quality review at the covered
facilities as that described in the 2003 notebook. Beverly shall notify the
OIG within fifteen (15)&nbsp;days of any material changes to the form, manner, or
frequency of these Quality Reviews. The Quality Reviews shall:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;make findings of whether the patients and residents at Covered
Facilities are receiving the quality of care and quality of life
consistent with basic care, treatment and protection from harm
standards, including but not limited to, 42 C.F.R. Parts 482 and
483 and any other Federal and state statutes, regulations, and
directives;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;make findings of whether the policies and procedures mandated by
this Amendment are created, implemented, and enforced;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;make findings of whether training is performed in accordance
with this Amendment;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>d.&nbsp;make findings of whether hotline complaints are appropriately
investigated;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>e.&nbsp;make findings of whether the reporting obligations are complied
with in accordance with this Amendment; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>f.&nbsp;make findings of whether corrective action plans are timely
created, implemented, and enforced.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD>Notwithstanding the above, the obligations and findings required by
Sections&nbsp;III.A.4(b), (c), (d), and (e)&nbsp;above may be made by Beverly&#146;s
Internal Audit function or any other Beverly review function whose
primary responsibility is not to conduct Quality Reviews under the
Beverly Quality System.</TD>
</TR>

</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD>B.&nbsp;Written Standards.</TD>
</TR>

</TABLE>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1.&nbsp;Policies and Procedures. </I>Beverly has established written Policies and
Procedures regarding its Compliance Program and its compliance with relevant
Federal and state requirements, including, but not limited to, the requirements
of Federal health care


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<P align="left" style="font-size: 10pt">programs. Beverly shall continue to assess and update as necessary the
Policies and Procedures at least annually and more frequently, as appropriate.
The Policies and Procedures shall be available to the OIG upon request. To the
extent not already accomplished, Beverly shall make the relevant portions of
its Policies and Procedures available to the appropriate Amendment Covered
Persons within 120&nbsp;days after the Effective Date of this Amendment. Compliance
staff or supervisors shall continue to be available to explain any and all
Policies and Procedures. Within 120&nbsp;days after the Effective Date of this
Amendment, Beverly shall review and analyze its Polices and Procedures to
ensure that, at a minimum, such Policies and Procedures specifically address
and/or include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that Beverly fully complies
with applicable portions of Titles XVIII and XIX of the Social
Security Act, 42 U.S.C. &#167;&#167; 1395-1395ggg and 1396-1396v, and all
regulations pursuant to these statutes, including 42 C.F.R. 424
and 483;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that Beverly complies with
all applicable requirements of Medicare&#146;s Prospective Payment
System (&#147;PPS&#148;) for long term care facilities, including, but not
limited to: ensuring the accuracy of the clinical data required
under the Minimum Data Set (&#147;MDS&#148;) as specified by the Resident
Assessment Instrument User&#146;s Manual; ensuring that facilities are
appropriately and accurately using the current Resource
Utilization Groups (&#147;RUG&#148;) classification system; and ensuring
the accuracy of billing and cost report preparation policies and
procedures;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure the provision of
coordinated interdisciplinary care to long term care residents,
including, but not limited to the following areas addressed in 42
C.F.R. 483: resident assessment and care planning; nutrition;
disease specific care; wound care; infection control; appropriate
drug therapies; appropriate mental health services; provision of
basic care needs, including the provision of Activities of Daily
Living (&#147;ADL&#148;); incontinence care; resident rights; physical and
chemical restraint use; therapy services; quality of life,
including accommodation of needs and activities; and assessment
of resident competence to make treatment decisions; and
professional services. Such Policies and Procedures shall
include the following specific items:</TD>
</TR>

</TABLE>
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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Nutrition: Measures designed to facilitate
nutritional care of residents by the Registered Dietitian
including:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(A)&nbsp;Nutritional measures for residents with wounds;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(B)&nbsp;Measures to accurately assess all residents&#146;
appropriate body weight in order to determine an
appropriate healthy weight range for each resident on a
regular and consistent basis and clearly document such
findings in the residents&#146; charts; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(C)&nbsp;Measures designed to ensure that Beverly identifies
and provides timely clinical responses to all
&#147;nutritionally at risk&#148; and &#147;nutritionally compromised&#148;
residents at the earliest possible time;</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provision of Basic Care Needs, including those
Activities of Daily Living, such as bathing, oral care, and
positioning;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Use of Chemical &#038; Physical Restraints, pursuant
to acceptable professional standards, including:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(A)&nbsp;Measures designed to ensure that physical and chemical
restraints are used only pursuant to accepted professional
standards when less restrictive alternatives are not
effective and that they are never used as punishment or
for the convenience of staff;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(B)&nbsp;Measures designed to ensure that appropriate
physicians&#146; orders are obtained and followed before
physical restraints are used; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(C)&nbsp;Measures designed to ensure that psychotropic
medication is used only in accordance with accepted
professional standards and only where there is an
appropriate psychiatric or neuropsychiatric diagnosis, and
that psychotropic medication is never used as punishment,
in lieu of a training program, for behavior control or in
lieu of a psychiatric or neuropsychiatric diagnosis or for
the convenience of staff.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that Beverly
provides appropriate wound care (decubitus ulcer) treatment
and appropriate nutrition for residents with wounds; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">v.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures to assess that the resident&#146;s drug
regime is free of unnecessary medications.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure the provision of a
safe and functional environment for all residents, allowing
all residents to be free from mistreatment, verbal, sexual,
physical and mental abuse, corporal punishment, involuntary
seclusion, neglect and misappropriation of property. Such
measures shall include:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that Beverly
adequately supervises, monitors and safeguards all
residents, including those with histories of exhibiting
behaviors that cause injury to themselves or others, and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that residents
shall be protected from being victimized by other
aggressive residents.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure the provision for an ongoing program of
meaningful activities both during the week and on the weekends,
which are structured and designed to meet individual needs and
interests and the physical, mental, and psychosocial well-being of
the residents;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure the provision of
medically-related social services to attain the individual
interests and physical, mental, and psychosocial well-being of
each resident, and provides medically-related social services to
attain or maintain the highest practicable physical, mental, and
psychosocial well-being of each resident;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that physician services
are provided in a manner set forth in 42 C.F.R. 483.40, and to
provide in any contracts with independent physicians that they
render preventative, chronic, routine, acute, follow-up, and
emergency medical care in accordance with generally accepted
standards of care;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">h.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure the provision of Nursing
Services as outlined in applicable portions of 42.C.F.R. 483.30;
and that nursing care is provided in keeping with the accepted
professional standards of care such as assessment, planning,
implementing and evaluating the care of the long term care
resident. Examples of such are:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notifying physician of health related
issues;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Monitoring and intervening in keeping with
professional standards of care; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Keeping appropriate records of the
residents&#146; health care status.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that residents and patients
are discharged only for the reasons authorized by and in
accordance with the procedures established by applicable law and
not discharged for financial reasons unless authorized by law;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">j.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that staffing is in
compliance with Federal health care program requirements and
state laws, including, but not limited to, 42 C.F.R.
&#167;&#167;&nbsp;483.23(a)
and (b) (hospitals)&nbsp;and &#167;&nbsp;483.30 (nursing services, sufficient
staff), and not based on financial considerations;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">k.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures that specify that if the director of nursing
(or other person who is making staffing decisions at the
facilities) disagrees with a staffing determination that is not
in compliance with state or federal regulations or this CIA or
the Amendment and that significantly affects patient care made by
the Administrator or other individuals at the regional or
corporate level, then that person must promptly call the hotline
and the Monitor;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">l.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to minimize the number of
individuals working at any Covered Facility who are not Amendment
Covered Persons, <I>i.e., </I>are on a temporary assignment or not
employed by Beverly, and measures designed to create and maintain
a standardized system to track the usage of such individuals at
each facility so that the number/proportion of or changing trends
in such staff can be adequately identified by Beverly and/or the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Monitor. Use of temporary staff will be reported to the Monitor on
an ongoing basis;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">m.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure compliance with the
completion of accurate clinical assessments as required by
applicable Federal law;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">n.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that all residents and
patients are
served in the least restrictive environment and most
integrated setting appropriate to their needs;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">o.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disciplinary guidelines and methods for employees to
make
disclosures or otherwise report on compliance issues through
the Disclosure Program required by Section&nbsp;III.E of the CIA;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">p.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to promote adherence to the
compliance and quality of care standards set forth in the
applicable statutes, regulations, and in this Amendment, by
including such adherence as a significant factor in determining
the compensation to Administrators of the facilities, and the
individuals responsible for such compliance at the regional, and
corporate level;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">q.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure cooperation by Beverly and
its employees, contractors, and agents with the Monitor in the
performance of his or her duties as set forth <I>infra</I>;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">r.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that compliance issues identified
internally <I>e.g.</I>, through reports to supervisors, hotline complaints, internal
audits, patient satisfaction surveys, CHSRA quality indicators,
facility specific key indicators, or internal surveys) or externally
(<I>e.g.</I>, through CMS or state survey agency reports, consultants,
audits performed by the Independent Review Organization, or
Monitor&#146;s reports) are promptly and appropriately investigated and,
if the investigation substantiates compliance issues, Beverly
assesses the nature and scope of the problems, implements
appropriate corrective action plans, and monitors compliance with
such plans;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">s.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to effectively collect and analyze
staffing data, including staff-to-resident ratio and staff
turnover;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">t.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that individuals and
entities who fall within the ambit of the Covered Contractor
definition are appropriately supervised to ensure that the
Covered Contractor is acting within the parameters of Beverly&#146;s
Policies and Procedures and the requirements of Federal health
care programs;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">u.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that appropriate and
qualified individuals perform the internal audits;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">v.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Non-retaliation policies and methods for employees to
make disclosures or otherwise report on compliance issues through
the Disclosure Program required by Section&nbsp;III.E of the CIA;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">w.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disciplinary guidelines to reflect the Code of Conduct
requirements as specified in Section&nbsp;III.B.1 of the CIA;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">x.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to ensure that Provider has a system
to require and centrally collect reports relating to incidents,
accidents, abuse and neglect. The reports required under this
system shall be of nature to allow the Quality Assurance
Committees meaningful information to be able to determine: 1) if
there is a quality of care problem; and 2) the scope and severity
of the problem;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">y.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures designed to inform Covered Persons of the
staffing requirements of Federal and state law; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">z.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Measures to inform Covered Persons during orientation
and during other training required by this Amendment that
staffing levels are a critical aspect of patient and resident
care, and if any person has a concern about the level of staffing
that there are many avenues available to report such concerns,
including, but not limited to, the Administrator, the Hotline (as
described in Section&nbsp;III.E of the CIA), individuals at the
district, regional, or corporate level, or directly to the
Compliance Officer or Monitor.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
<P align="left" style="font-size: 10pt">Beverly shall assess and update as necessary the Policies and Procedures at
least annually and more frequently, as appropriate. The Policies and
Procedures will be available to OIG upon request.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Training and Education.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1<I>.&nbsp;Training in Hawaii and Arizona facilities. </I>Training conducted in
facilities located in Hawaii and Arizona will continue to be conducted in the
same manner as exists as of the date of this Amendment. Such training includes
includes: (a)&nbsp;Infection Control, Prevention of Communicable Diseases; (b)
Residents Rights; (c)&nbsp;Abuse Prevention;
(d)&nbsp;Safety and Accident Prevention; (e)&nbsp;Restraint Reduction/ Needs of the Aged;
(f)&nbsp;Fire and Disaster Preparedness; and (g)&nbsp;Facility Policies and Procedures.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<I>Supplemental Training to California Covered Persons</I>. Pursuant to the
schedule set forth below, each California Covered Person shall receive
Supplemental Training in addition to the training required in the original CIA.
This Supplemental Training shall include a discussion of the policies and
procedures set forth in Section&nbsp;III.B, including, but not limited to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>policies, procedures, and other
requirements applicable to the
documentation of medical records; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the coordinated interdisciplinary
approach to providing care to residents, including, but
not limited to, resident assessment and care planning;
nutrition; diabetes care; wound care; infection control;
abuse and neglect policies and reporting procedures;
appropriate drug therapies; appropriate mental health
services; provision of basic care needs; incontinence
care; resident rights and restraint use; ADL care;
therapy services; quality of life, including
accommodation of needs and activities; and assessment of
the resident&#146;s competence to make treatment decisions.</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">Supplemental Training on each topic in Sections&nbsp;III.C.1.a. and b. above shall
be given (to the extent it was not previously given within six (6)&nbsp;months prior
to the Effective Date of this Amendment by in-service training, orientation or
otherwise) at each Covered Facility located in California to each California
Covered Person. No later than one hundred and twenty (120)&nbsp;days after the
Effective Date of this Amendment, Beverly shall institute a

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">rotating training program at the Covered Facilities located in California
whereby the Supplemental Training specified above shall be instituted in a
reasonable manner, one topic each week, until all topics specified above in
Sections&nbsp;III C.1.a. and b. has been completed. By the time the rotating
program is completed, all currently employed California Covered Persons and all
California Covered Persons retained in the interim period (between six (6)
months prior to the Effective Date of this Amendment and one hundred twenty
(120)&nbsp;days after the Effective Date), shall have received the Supplemental
Training, orientation (in the case of New California Covered Persons), or other
training regarding each topic as applicable. All subsequently retained
California Covered Persons shall enter into the rotating program within two (2)
weeks of their date of employment and shall receive the Supplemental Training
required by Section&nbsp;III C. of this Amendment by orientation, in-service, or
otherwise in each of the areas specified in Sections&nbsp;III. C.1. a. and b. above
as applicable and on a weekly basis consistent with the rotating training
program.


<P align="left" style="font-size: 10pt">Beverly may arrange the Supplemental Training to be provided pursuant to the
provisions of this Amendment so that similar or even different topics can be
taught within the same in-service training program, orientation, or other
training. Separate in-service training programs, orientations or other
training are not required for each of the topics if some of the topics to be
taught can be reasonably combined into one in-service training program and/or
orientation and/or other training. If a California Covered Person has any
responsibility for the delivery of patient or resident care, then prior to
completing this specific training, a Beverly Covered Person who has completed
the substantive training shall monitor the untrained person&#146;s work.


<P align="left" style="font-size: 10pt">Every California Covered Person shall receive such Supplemental Training on an
annual basis.


<P align="left" style="font-size: 10pt">In addition, each facility shall conduct periodic training on an &#147;as needed&#148;
basis on those quality of care issues identified by the Board of Directors
Committee, the Compliance Committee or through other means as set forth below.
In determining what training should be performed, these Committees will review
the complaints received, satisfaction surveys, staff turnover data, any state
or Federal surveys, including those performed by the Joint Commission on
Accreditation of Healthcare Organizations (&#147;JCAHO&#148;) or other such private
agencies, any internal surveys, and the CHSRA quality indicators. Such
training, at a minimum, shall include in-service training for each California
Covered Person at the applicable Covered Facility in California addressing the
issues set forth for

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">each deficiency of a level F or higher (Federal F-tag) or for each B, A, or AA
citation (California-specific) received by a Covered Facility. Such training
will be provided to all California Covered Persons within sixty (60)&nbsp;days of
the Annual Report for that year or earlier.


<P align="left" style="font-size: 10pt">Each individual trained will be evaluated through means such as testing,
monitoring, or supervision to confirm that each person trained understands the
topic taught, and is properly implementing the practices, policies, procedures
or techniques, which were taught. If it becomes evident to the instructor or
supervisor that the person trained does not understand the topic taught, and/or
is not properly implementing the practices, policies, procedures or techniques
which were taught, then &#147;as-needed&#148; training shall be conducted for such
California Covered Person until such time that the person being trained does in
fact understand the topic taught, and is implementing the practices, policies,
procedures or techniques that were taught. Any California Covered Person who
is not able to demonstrate that he or she understand the topic taught, or is
not able to demonstrate that he or she is properly implementing the practices,
policies, procedures or techniques which were taught in either the Supplemental
Training or &#147;as-needed&#148; training, shall not be allowed to engage in direct
patient care involving such practices, policies, procedures or techniques
without the direct supervision by a competent supervisor. Such practices,
policies, procedures or techniques shall not be performed by a California
Covered Person, even with the direct supervision by a competent supervisor, if
the attempted implementation of such practices, policies, procedures, or
techniques by the person being trained creates a reasonable possibility of
injury or harm to the resident being cared for if such implementation is not
done properly.


<P align="left" style="font-size: 10pt">Training materials shall be made available to OIG upon request. Persons
providing the training must have sufficient expertise in the subject area.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<I>Certification. </I>Each California Covered Person shall certify, in
writing, that he or she has attended the required training. The certification
shall specify the type of training received and the date received. Each
Covered Facility in California shall retain the certifications, along with
specific course materials. These shall be made available to OIG upon request
made to the Compliance Officer.


<P align="center" style="font-size: 10pt">14
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Independent Monitor.


<P align="left" style="font-size: 10pt">Within sixty (60)&nbsp;days after the Effective Date of this Amendment, Beverly
shall retain an appropriately qualified monitoring team (the &#147;Monitor&#148;),
approved by the OIG. The Monitor may retain additional personnel, including,
but not limited to, independent consultants, if needed to help meet the
Monitor&#146;s obligations under this Amendment. Beverly shall be responsible for
all fees and expenses incurred by the Monitor, including, but not limited to,
travel costs, consultants, administrative personnel, office space and
equipment, or additional personnel. The Monitor shall charge a reasonable rate
for his or her fees and expenses, which shall not exceed $750,000 per year
unless the OIG, after consultation with Beverly, determines that exceptional
circumstances necessitate additional expenditures. As a condition to retaining
the Monitor, Beverly shall require the Monitor to enter into a subcontract with
an individual or entity, approved by the OIG, that has the requisite expertise,
capacity and access to MDS data directly from CMS to perform quarterly Quality
Indicator data analysis reports of the type described in the attached Appendix
# 1. To assist Beverly in its budgeting process, the Monitor shall provide
Beverly with an estimated budget on an annual basis. Such budget shall be
provided to Beverly no later than November 1 of each year. Failure to pay the
Monitor within thirty (30)&nbsp;calendar days of submission of its invoices for
services previously rendered shall constitute a breach of the CIA and this
Amendment and shall subject Beverly to one or more of the remedies set forth in
Section&nbsp;VI <I>infra. </I>The Monitor may be removed solely at the discretion of the
OIG. If the Monitor resigns or is removed for any reason prior to the
termination of the Amendment, Beverly shall appoint another Monitor, after
approval by the OIG, with the same functions and authorities.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1.&nbsp;The Monitor shall be responsible for assessing the
effectiveness, reliability and thoroughness of the following at or
with regard to Covered Facilities:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;Beverly&#146;s Quality of Care internal quality control
systems, including, but not limited to, whether the systems
in place to promote quality of care and to respond to quality
of care issues are acting in a timely and effective manner;
whether the communication system is effective, allowing for
accurate information, decisions, and results of decisions to
be transmitted to the proper individuals in a timely fashion;
and whether the training programs are effective and thorough;</TD>
</TR>

</TABLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;Beverly&#146;s response to quality of care issues at Covered
Facilities, which shall include an assessment of:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(1)&nbsp;Beverly&#146;s ability to identify the problem;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2)&nbsp;Beverly&#146;s ability to determine the scope of the
problem, including, but not limited to whether the
problem is isolated or systemic;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(3)&nbsp;Beverly&#146;s ability to create a corrective action
plan to respond to the problem;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(4)&nbsp;Beverly&#146;s ability to execute the corrective action
plan; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(5)&nbsp;Beverly&#146;s ability to evaluate whether the
assessment, corrective action plan and execution of that
plan was effective, reliable, and thorough.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;Beverly&#146;s development and implementation of corrective
action plans and the timeliness of such actions; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>d.&nbsp;Beverly&#146;s proactive steps to ensure that each patient and
resident in a Covered Facility receives care in accordance
with: (1)&nbsp;basic care, treatment and protection from harm
standards; (2)&nbsp;the rules and regulations set forth in 42
C.F.R. Parts 482 and 483; (3)&nbsp;state and local statutes,
regulations, and other directives or guidelines; and (4)&nbsp;the
policies and procedures adopted by Beverly and set forth in
this Amendment.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2.&nbsp;<I>Access. </I>The Monitor shall have access to:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;Covered Facilities, at any time and without prior notice;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;The following types of documents: (1)&nbsp;the CMS quality
indicators (for Covered Facilities); (2)&nbsp;internal or external
surveys or reports applicable to Covered Facilities; (3)
Beverly&#146;s hotline</TD>
</TR>

</TABLE>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>complaints regarding Covered Facilities; (4)&nbsp;resident or
patient satisfaction surveys for each Covered Facility; (5)
staffing data for each Covered Facility in the format
requested by the Monitor, including but not limited to
reports setting forth the staff to patient ratios, temporary
staffing levels, and staff turnover data, as well as reports
of any facility where temporary agency staff constitutes more
than ten percent of the nursing and direct care staff; (6)
incident, accident, abuse, neglect or death reports for each
Covered Facility; (7)&nbsp;reports of incidents involving a
patient or resident that prompt a full internal investigation
at a Covered Facility; (8)&nbsp;patient or resident records for
Covered Facilities; (9)&nbsp;financial data for Covered
Facilities; (10)&nbsp;self-evaluative reports including, but not
limited to, those from quality assurance committees,
applicable to Covered Facilities; and (11)&nbsp;any other
pre-existing data, including the reconfiguring of existing
data that the Monitor may determine relevant to fulfilling
the duties required under this Amendment in the format
requested by the Monitor, to the extent practicable; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;Immediate access to Covered Facilities&#146; current
patients, residents, and staff subject to: (1)&nbsp;their
clinical condition; and (2)&nbsp;their consent to conduct
interviews outside the presence of Beverly supervisory staff
or counsel, provided such interviews are conducted in
accordance with all applicable laws and the rights of such
individuals.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3.&nbsp;<I>Beverly&#146;s Obligations</I>. Beverly shall:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;Not impede the Monitor&#146;s access to its facilities
(pursuant to the provisions of this Amendment) and shall
provide any requested documentation within the time frame
specified by the Monitor, subject to any extensions and
modifications requested by Beverly and granted by the Monitor
(the Monitor shall balance the circumstances of the situation
with the burden on Beverly when making document requests);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;Assist in contacting and arranging interviews of
Amendment Covered Persons, and not impede the cooperation by
such individuals;</TD>
</TR>

</TABLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;Provide access to current residents
or patients and contact information for their families
and guardians, in a manner consistent with the rights of
such individuals under state or Federal law, and not
impede their cooperation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>d.&nbsp;Provide the last known contact
information for former employees, contractors, and
agents, and not impede the cooperation from such
individuals, including but not limited to, refraining
from placing any provision in agreements that would
limit such cooperation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>e.&nbsp;Provide the last known contact information for former
residents, patients, their families, or guardians consistent
with the rights of such individuals under state or Federal
law, and not impede their cooperation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>f.&nbsp;Address any written recommendation made by the Monitor
either by substantially implementing the Monitor&#146;s
recommendations or by explaining in writing why it has
elected not to do so;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>g.&nbsp;Pay the Monitor&#146;s bills for Monitor&#146;s Costs within 30
days of receipt. While Beverly must pay all the Monitor&#146;s
bills within 30&nbsp;days, Beverly may bring any disputed
Monitor&#146;s Costs or bills to OIG&#146;s attention;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>h.&nbsp;Not sue or otherwise bring any action against the Monitor
related to any findings made by the Monitor or related to any
exclusion or other sanction of Beverly under this Agreement;
provided, however, that this clause shall not apply to any
suit or other action based solely on the dishonest or illegal
acts of the Monitor, whether acting alone or in collusion
with others; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>i.&nbsp;Provide the Monitor a report within forty-eight hours of
becoming aware that any of the following occurrences may
exist:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(1)&nbsp;Deaths or injuries related to the use of restraints;</TD>
</TR>

</TABLE>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2)&nbsp;Deaths or injuries related to the use of
psychotropic medications;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(3)&nbsp;Suicides;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(4)&nbsp;Deaths or injuries related to abuse or neglect (as
defined in the applicable Federal guidelines); and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(5)&nbsp;Any other incident that involves or causes actual
harm to a resident when such incident prompts a full
internal investigation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Each such report shall contain the full name, Social
Security number, and date of birth of the resident, the
date of death or incident, and a brief description of
the events surrounding the death or incident.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4.&nbsp;<I>The Monitor&#146;s Obligations. </I>The Monitor shall:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;Respect the legal rights, privacy, and dignity of all
Amendment Covered Persons, residents, and patients;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;Where independently required by applicable law or
professional licensing standard, to report any finding to an
appropriate regulatory or law enforcement authority,
simultaneously submit copies of such reports to the OIG and
to Beverly;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;At all times act reasonably in connection with its duties
under the Amendment including when requesting information
from Beverly;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>d.&nbsp;Simultaneously provide quarterly reports to Beverly and
OIG concerning the findings made to date;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>e.&nbsp;Submit bills to Beverly on a consolidated basis no more
than once per month, and submit an annual summary
representing an accounting of its costs throughout the year
to Beverly and to OIG. Beverly shall have the opportunity to
review such bills and bring any issue of disputed bills or
costs to the attention of OIG. The Monitor</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">19
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shall submit to Beverly an annual report representing an
accounting of its costs throughout the year;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>f.&nbsp;Not be bound by any other private or governmental
agency&#146;s findings or conclusions, including, but not limited
to, JCAHO, CMS, or the state survey agency. Likewise, such
private and governmental agencies shall not be bound by the
Monitor&#146;s findings or conclusions. The Monitor&#146;s reports
shall not be the sole basis for determining deficiencies by
the state survey agencies. The parties agree that CMS and its
contractors shall not introduce any material generated by the
Monitor, or any opinions, testimony, or conclusions from the
Monitor as evidence into any proceeding involving a Medicare
or Medicaid survey, certification, or other enforcement
action against Beverly, and Beverly shall similarly be
restricted from using material generated by the Monitor, or
any opinions, testimony, or conclusions from the Monitor as
evidence in any of these proceedings. Nothing in the
previous sentence, however, shall preclude the OIG or Beverly
from using any material generated by the Monitor, or any
opinions, testimony, or conclusions from the Monitor in any
action under the CIA or this Amendment or pursuant to any
other OIG authorities or in any other situations not
explicitly excluded in this subsection subject to the
confidentiality provisions set forth in Section&nbsp;V. of this
Agreement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>g.&nbsp;Abide by the legal requirements of Beverly&#146;s facilities
to maintain the confidentiality of each resident&#146;s personal
and clinical records, and to maintain confidential and not to
disclose the records of Beverly&#146;s Corporate Compliance
Committee, Corporate, Regional or District Quality Councils,
Facility QAA Committees and self-evaluative reports,
including, but not limited to, those from, Internal Audit,
the Hotline, medical review committees, if any, quality
assurance committees or peer review committees, if any. See
42 C.F.R. &#167;&#167;483.10 and 483.75(0)(3)). Nothing in the prior
sentence, however, shall limit or affect the Monitor&#146;s
obligation to provide information, including information from
patient and resident clinical records, to the OIG, and, when
legally or professionally required, reporting to other
agencies;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>h.&nbsp;Except to the extent required by law, maintain the
confidentiality of any proprietary financial and operational
information, processes, procedures and forms obtained in
connection with its duties under this Amendment and not
comment publicly concerning its findings except to the extent
authorized by the OIG;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>i.&nbsp;Visit each Covered Facility as often as the Monitor
believes it necessary to perform its functions;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>j.&nbsp;Where appropriate, communicate
requests for access, documents or other information to
the Compliance Officer; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>k.&nbsp;When possible, identify the criteria
under which it intends to assess Beverly&#146;s or individual
Covered Facilities&#146; activities as set forth herein and
communicate those criteria to Beverly in advance of its
assessments.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>5.&nbsp;<I>Miscellaneous Provisions</I></TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;The Monitor may confer and correspond with Beverly and
OIG on an <I>ex parte </I>basis at any time.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;If, after consulting with Beverly, the Monitor has
concerns about corrective action plans that are not being
enforced or systemic or repeated problems that could impact
Beverly&#146;s ability to render quality care to its patients and
residents, the Monitor shall: (A)&nbsp;report such concerns in
writing to the OIG, which in its discretion shall relay such
concerns to the Consortium (the Consortium consists of
representatives of OIG, the Department of Justice (DOJ)&nbsp;and
CMS); and (B)&nbsp;provide notice and a copy of the report to the
Compliance Officer and the Board Committee. Beverly shall be
provided an opportunity to respond to the Consortium
concerning any such report. The Consortium shall seek to
resolve any such dispute between the Monitor and Beverly
prior to OIG seeking any remedies pursuant to the terms of
the CIA and this Amendment;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>c.&nbsp;The Monitor shall not control, manage or operate Beverly.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;Reporting of Material Deficiencies. The definition of Material
Deficiency set forth in Section&nbsp;III.H.4(iii) of the CIA and Beverly&#146;s reporting
obligations set forth in Section&nbsp;III.H.2 of the CIA are hereby amended to
provide that Beverly no longer must report occurrences or instances meeting the
definition of Material Deficiency set forth in Section&nbsp;III.H.4(iii) if those
occurrences or instances occur in a Covered Facility. Sections&nbsp;III.H.2 and
III.H.4(iii) shall continue to apply to Beverly with regard to all other
nursing home facilities owned or operated by Beverly not defined as Covered
Facilities in Section&nbsp;II. of this Amendment.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>IV.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Implementation and Annual Reports</B></TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Implementation Report. On or before March&nbsp;31, 2003, Beverly shall
submit a written report to OIG summarizing the status of its implementation of
the requirements of this Amendment. This Implementation Report shall include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1. the name, address, phone number and position description of all
individuals in positions described in Section&nbsp;III.A;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2. the charter for the Board of Directors&#146; Committee required in
Section
III.A;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3. the program(s) for the Quality Reviews required
in Section&nbsp;III.A.4;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4. a description of the training programs required by Section
III.C, including a description of the targeted audiences and a
schedule of when the training sessions were held; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>5. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the
Implementation Report:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Policies and Procedures required
by Section&nbsp;III.B have been developed, are being
implemented, and have been made available to all
pertinent employees, contractors, and agents; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all persons required by Section&nbsp;III.C
to have completed training and executed a certification
have done so.</TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">22
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
<P align="left" style="font-size: 10pt">The information and certifications required to be included on the
Implementation Report may be included in Beverly&#146;s Annual Report filed pursuant
to Section&nbsp;V of the CIA.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Annual Report. Each Annual Report required by the CIA shall include,
in addition to the information required by Section&nbsp;V.B. of the CIA, the
following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1. any change in the identity or position description of
individuals in
positions described in Section&nbsp;III.A of this Amendment, a change in
any of the committees&#146; structure or charter, or any change in the
Quality Review program;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the Annual
Report:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all California Covered Persons have completed the
training and executed the certification required by Section
III.C; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Beverly has effectively implemented
all plans of correction
related to problems identified under this Amendment Beverly&#146;s
Compliance Program, or Quality Reviews.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3. notification of any changes or amendments to the Policies and
Procedures required by Section&nbsp;III.B of this Amendment and the
reasons for such changes (<I>e.g.</I>, change in contractor policy);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4. a summary of the Covered Facilities reviewed pursuant to
Section&nbsp;III.B.4., a summary of the findings of such review, and a
summary of the corrective action taken under the Quality Review
Program; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>5. Beverly&#146;s response/corrective action plan to any issues raised
by the Monitor.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Certifications. The Implementation Report and Annual Reports shall
include a certification by Beverly&#146;s Compliance Officer, under penalty of
perjury, that: (1)&nbsp;Beverly is in compliance with all of the requirements of
this Amendment and the CIA (unless the non-compliance is clearly and explicitly
described in the Implementation or Annual Report), to the best of his or her
knowledge; and (2)&nbsp;the Compliance Officer has reviewed


<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">the Report and has made reasonable inquiry regarding its content and
believes that, upon such inquiry, the information is accurate and truthful.
Each Report shall also include a certification the chair of the appropriate
committee(s) of Beverly&#146;s Board of Directors certifying that the committee(s)&#146;
members have reviewed the Annual Report.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>V.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Disclosures</B></TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The OIG will follow all applicable Federal laws concerning privacy and
confidentiality, including the Federal Privacy Act, 5 U.S.C. &#167; 552a, to the
greatest extent allowed by law.


<P align="left" style="font-size: 10pt">Consistent with HHS&#146;s Freedom of Information Act (&#147;FOIA&#148;) procedures, set forth
in 45 C.F.R. Part&nbsp;5, the OIG shall make a reasonable effort to notify Beverly
prior to any release by OIG of information submitted by Beverly pursuant to its
obligations under this Amendment or the CIA and identified upon submission by
Beverly as trade secrets, commercial or financial information and privileged
and confidential under the FOIA rules. Beverly shall refrain from identifying
any information as trade secrets, commercial, or financial information and
privileged and confidential under the FOIA rules. Beverly shall refrain from
identifying any information as trade secrets, commercial, or financial
information and privileged and confidential that does not meet the criteria for
exemption from disclosure under FOIA. With respect to the disclosure of
information, Beverly shall have the rights set forth in 45 C.F.R. &#167; 5.65(d).
The OIG shall seek to protect confidential information under the FOIA rules to
the greatest extent allowed by law. The OIG shall provide the pre-disclosure
notice required pursuant to 45 C.F.R. &#167; 5.65(d) to the Compliance Officer at
the address provided in Section&nbsp;VI of the CIA.


<P align="left" style="font-size: 10pt">One of the purposes of the original CIA and this Amendment is to assist and
monitor Beverly to ensure that Beverly develops, revises, and maintains
effective internal controls that promote adherence to applicable Federal and
state laws and the program requirements of Federal and state health care
programs. Communication, record-keeping, reporting and frank and open
communication by and between the OIG and Beverly, its employees and its
Compliance Officer are essential to meeting the OIG&#146;s expectations and the
purpose of the CIA and this Amendment.


<P align="left" style="font-size: 10pt">Nothing in this Amendment or the CIA, or any communication or report made
pursuant to this Amendment or the CIA, shall constitute or be construed as a
waiver by Beverly or Beverly&#146;s attorney-client, work product, peer review, or
other applicable privileges, including, without limitation, the protections
contained in 42 C.F.R. &#167; 473.75(o).



<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Notwithstanding that fact, the existence of any such privilege does not affect
Beverly&#146;s obligations to comply with the provisions of the CIA or this
Amendment or to provide documents and information to the OIG pursuant to the
CIA or this Amendment.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>VI.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Breach and Default Provisions</B></TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">Beverly is expected to fully and timely comply with all of the obligations
herein throughout the term of this Amendment or other time frames herein agreed
to.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Specific Performance of Amendment Provisions. If OIG
determines that Beverly is failing to comply with a provision or
provisions of this Amendment and decides to seek specific
performance of any of these provisions, OIG shall provide Beverly
with prompt written notification of such determination
(&#147;Noncompliance Notice&#148;).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Opportunity to Cure. Beverly will have thirty five (35)&nbsp;days
from receipt of the Noncompliance Notice either to demonstrate to
the OIG&#146;s satisfaction that: (1)&nbsp;Beverly is in full compliance with
this Amendment; (2)&nbsp;the alleged failure to comply has been cured; or
(3)&nbsp;the alleged non-compliance cannot be cured within the
thirty-five (35)&nbsp;day period but that: (i)&nbsp;Beverly has begun to take
action to cure the non-compliance; (ii)&nbsp;Beverly is pursuing such
action with due diligence; and (iii)&nbsp;Beverly has provided to the OIG
a reasonable timetable for curing the non-compliance; or to reply
in writing that Beverly disagrees with the determination of
noncompliance and request a hearing before an HHS Administrative Law
Judge (&#147;ALJ&#148;), pursuant to the provisions set for in Section&nbsp;VI.E of
this Amendment. This purpose of the hearing is to determine whether
Beverly has failed to comply with the Amendment and whether Beverly
shall be required to implement the particular provisions at issue.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Stipulated Penalties for Failure to Comply with Certain
Obligations. In addition to the Stipulated Penalty provisions of the
original CIA, as a contractual remedy, Beverly and OIG agree that
failure to comply with certain obligations set forth in this Amendment
may lead to the imposition of the following monetary penalties
(&#147;Stipulated Penalties&#148;) in accordance with the following provisions:
A Stipulated Penalty of $1,000 (which shall begin to accrue ten (10)
days after the date OIG provides notice to Beverly of the failure to
comply) for each day Beverly fails to comply fully and adequately with
an obligation of this Amendment that is widespread or systemic in
nature or</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reflective of a pattern or practice. In its notice to Beverly, the
OIG shall state the specific grounds for its determination that
Beverly has failed to comply fully and adequately with the CIA or
Amendment obligation(s) at issue. The &#147;Opportunity to Cure&#148;
provisions of Section&nbsp;VI.B. above apply to this Section as though
fully set forth herein.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">D.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exclusion for Material Breach of the CIA</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Material Breach</I>. In addition to the definition of Material Breach set
forth in the original CIA, Material Breach also means:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a. a failure to address concerns raised by the Monitor as set
forth in Section&nbsp;III.D.1. above or otherwise meet an
obligation under this Amendment that has a material impact
on the quality of care rendered to any residents or patients
of Beverly;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b. a failure to retain and use the Monitor in accordance with
Section&nbsp;III.D.</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The notice and cure provisions of Section&nbsp;X.C. of the CIA apply equally to this
Section&nbsp;VI.D. of the Amendment as though fully set forth herein.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">E.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Dispute Resolution</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<I>Review Rights</I>. Upon the OIG&#146;s delivery to Beverly of its
Noncompliance Notice, and as an agreed-upon contractual remedy for the
resolution of disputes arising under the obligations of this Amendment, Beverly
shall be afforded certain review rights comparable to those set forth in 42
U.S.C. &#167; 1320a-7(f) and 42 C.F.R. Part&nbsp;1005 as if they applied to the specific
performance, Stipulated Penalties, or exclusion sought pursuant to this
Amendment. Specifically, an action for specific performance shall be subject
to review by an ALJ and, in the event of an appeal, the Departmental Appeals
Board (&#147;DAB&#148;), in a manner consistent with the provisions in 42 C.F.R. &#167;&#167;
1005.2-1005.21. Notwithstanding the language in 42 C.F.R. &#167; 1005.2(c), a
request for a hearing involving specific performance shall be made within
thirty (30)&nbsp;days of the date of the Demand Letter.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<I>Specific Performance Review. </I>Notwithstanding any provision of Title
42 of the United States Code or Chapter&nbsp;42 of the Code of Federal Regulations,
the only issues in a proceeding for specific performance of Amendment
provisions shall be:


<P align="center" style="font-size: 10pt">26
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">(a)&nbsp;whether, at the time specified in the Noncompliance Notice, Beverly was in
full and timely compliance with the obligations of this Amendment for which the
OIG seeks specific performance; and (b)&nbsp;whether Beverly failed to cure.
Beverly shall have the burden of proving its full and timely compliance and the
steps taken to cure the noncompliance, if any. If the ALJ finds for the OIG,
Beverly shall take the actions OIG deems necessary to cure within (20)&nbsp;days
after the ALJ issues such a decision notwithstanding that Beverly may request
review of the ALJ decision by the DAB.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<I>Finality of Decision. </I>The review by an ALJ or DAB provided for above
shall not be considered to be an appeal right arising under any statutes or
regulations. Consequently, the parties to this Amendment agree that the DAB&#146;s
decision (or the ALJ&#146;s decision if not appealed) shall be considered final for
all purposes under this Amendment, and Beverly agrees to waive any right it may
have to appeal the decision administratively, judicially or otherwise seek
review by any court or other adjudicative forum.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<I>Review by Other Agencies</I>. Nothing in this Amendment shall affect the
right of CMS or any other Federal or State agency to enforce any statutory or
regulatory authorities with respect to Beverly&#146;s compliance with applicable
Federal and state health care program requirements.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>VII.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Effective and Binding Agreement</B></TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;This Amendment shall be binding on the successors, assigns, and
transferees of Beverly, except that facilities and entities which Beverly
subsequently divests shall be excused from the obligations under the Amendment
upon the assignment of a provider agreement or the disposition of assets to an
entity unrelated to Beverly.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;All other sections of Beverly&#146;s original CIA will remain unchanged and
in effect and applicable to this Amendment, unless specifically amended upon
the prior written consent of the OIG.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;The undersigned Beverly signatories represent and warrant that they
are authorized to execute this Amendment. The undersigned OIG signatory
represents that he is signing this Amendment in his official capacity and that
he is authorized to execute this Amendment; and any modifications to this
Amendment shall be made only with the prior written consent of the parties to
the CIA and this Amendment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;The Effective Date of this Amendment shall be the date the last
signatory signs the Amendment.


<P align="center" style="font-size: 10pt">27
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;The original CIA and this Amendment are by and between the parties
hereto and for their sole benefit and not for the benefit of any third parties.
Notwithstanding any language in the original CIA or this Amendment, neither
the original CIA nor this Amendment shall create or be construed or interpreted
to create any benefit for any person not a party to the original CIA or this
Amendment or create any right or cause of action in or on behalf of any person
(including without limitation any resident, patient or customer of Beverly)
other than the parties hereto.


<P align="center" style="font-size: 10pt"><B>On behalf of the Office of Inspector General<BR>
of the Department of Health and Human Services</B>
<P>&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
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<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LEWIS MORRIS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DATE</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Counsel to the Inspector General<BR>
Office of Inspector General<BR>
U. S. Department of Health and Human Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

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</TABLE>
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>On Behalf of Beverly Enterprises Inc.</B>

<P>&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
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<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">WILLIAM R. FLOYD
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DATE</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chairman and Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

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</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">29
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