BEVERLY ENTERPRISES INC
AMENDMENT TO CORPORATE INTEGRITY AGREEMEENT
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<TYPE>EX-10.4
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<DESCRIPTION>AMENDMENT TO CORPORATE INTEGRITY AGREEMEENT
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;10.4</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>

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<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. (&#147;Beverly&#148;) entered
into a Corporate Integrity Agreement (&#147;CIA&#148;). This Amendment supersedes the
January&nbsp;17, 2003 Amendment to the CIA.


<!-- link1 "II. Term and Scope of the 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>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 coterminous with the CIA (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 the remaining
term of the Amendment. The effective date of this Amendment shall be the date
on which the final signatory executes this Amendment (&#147;Amendment Effective
Date&#148;). The &#147;Reporting Period&#148; shall be the calendar year. The first
Reporting Period shall be the period beginning with the Amendment Effective
Date through December&nbsp;31, 2004.


<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:


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    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&#147;Covered Facility,&#148; includes all the nursing home facilities
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).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&#147;Amendment Covered Persons&#148; includes the employees, contractors
and agents who work at a Covered Facility who:</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">1

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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    <TD width="6%" 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>

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    <TD colspan="5">&nbsp;</TD>
</TR>
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    <TD width="6%" 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>
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    <TD colspan="5">&nbsp;</TD>
</TR>
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    <TD width="6%" 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="6%" 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>
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<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
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    <TD width="6%" 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.


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    <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>
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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate Quality Committee. 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</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">2

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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. 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;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:


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<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>

</TABLE>



<P align="center" style="font-size: 10pt">3

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

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    <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, and the Monitors to
respond to any issues or questions that might arise. 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;4.&nbsp;<I>Quality Reviews</I>. Beverly currently performs Quality reviews under the
Beverly Quality System. The Quality Reviews (known as the Facility Performance
Assessments), including quality review follow-ups, are described in a 2003
notebook, which Beverly has previously provided to the OIG. Beverly shall
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:


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    <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>

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    <TD colspan="5">&nbsp;</TD>
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    <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>
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    <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>

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    <TD colspan="5">&nbsp;</TD>
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    <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>

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    <TD colspan="5">&nbsp;</TD>
</TR>
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    <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>

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<P align="center" style="font-size: 10pt">4

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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    <TD>f.&nbsp;make findings of whether corrective action plans are timely
created, implemented, and enforced.</TD>
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    <TD width="1%">&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 align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Written Standards.


<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 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>
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    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;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,
written directives and guidelines promulgated pursuant to these
statutes, including 42 C.F.R. 424 and 483, and any other applicable
laws that address quality of care in nursing facilities;</TD>
</TR>

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    <TD colspan="5">&nbsp;</TD>
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    <TD width="3%" 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 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</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">5

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

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    <TD>(&#147;RUG&#148;) classification system; and ensuring the accuracy of billing
and cost report preparation policies and procedures;</TD>
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    <TD colspan="5">&nbsp;</TD>
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    <TD>c.&nbsp;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; assessment of resident competence to make treatment
decisions; and professional services;</TD>
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    <TD width="3%" style="background: transparent">&nbsp;</TD>
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    <TD>d.&nbsp;Measures designed to ensure that staffing needs are decided first
and foremost upon achieving the level of care for Beverly&#146;s patients
and residents required by Federal and state laws, including, but not
limited to, 42 C.F.R. &#167; 483.30 (nursing facilities);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>e.&nbsp;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 the CIA or this Amendment and that
significantly affects patient care made by the Administrator or other
individuals at the regional or corporate level, and is unable to
resolve the issue through the normal chain of responsibility, then
that person must promptly call the hotline and the Monitor. Nothing
in this subsection prohibits such person from contacting the hotline
or Monitor without first going through the normal chain of
responsibility;</TD>
</TR>

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    <TD width="3%" style="background: transparent">&nbsp;</TD>
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    <TD>f.&nbsp;Measures designed to ensure compliance with the completion of
accurate clinical assessments as required by applicable Federal law;</TD>
</TR>

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    <TD width="3%" style="background: transparent">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD>g.&nbsp;Measures designed to inform Covered Persons of the staffing
requirements of Federal and state 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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>h.&nbsp;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,</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">6

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

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    <TD>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>

<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>i.&nbsp;Measures designed to minimize the use of individuals at any
Beverly facility who are from a temporary agency or not employed by
Beverly (not including those individuals who are included in the
definition of Covered Persons) and measures designed to create and
maintain a standardized system to track the number of individuals at
each facility who fall within this category so that the
number/proportion of or changing trends in such staff can be
adequately identified by Beverly and/or 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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>j.&nbsp;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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>k.&nbsp;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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>l.&nbsp;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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>m.&nbsp;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>

<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>n.&nbsp;Measures designed to effectively collect and analyze staffing
data, including staff-to-resident ratio and staff turnover;</TD>
</TR>

</TABLE>



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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

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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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>o. 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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>p.&nbsp;Measures designed to ensure that appropriate and qualified
individuals perform the internal quality reviews;</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>q.&nbsp;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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>r.&nbsp;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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>s.&nbsp;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; 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>t.&nbsp;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>

</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 Covered Facilities. </I>At least annual training conducted in
Covered Facilities will continue to be conducted in the same manner as exists
as of the date of this Amendment. Such training includes, at a minimum,
training covering the Policies and Procedures set forth in section B.1. above.




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<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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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;2.&nbsp;<I>Additional Training. </I>In addition, each facility shall conduct
periodic training on an &#147;as needed&#148; basis (but at least semi-annually) 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 and consider
the recommendations of the Monitor, 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 will be for the length of time necessary to
teach the subject matter. Such training will be provided to all Covered
Persons at the facility who are responsible for patient or resident care, or
whose job function allows them to contribute to the correction of the alleged
deficiency. Beverly shall implement mechanisms to evaluate the individual&#146;s
competence with respect to the training received.

<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>An attendance log shall document the attendance of
each person who is required to attend the training. The member of the
Compliance Department or other person providing the training shall certify the
accuracy of the attendance log. The attendance log shall specify the type of
training received and the date received. Beverly shall retain the attendance
logs and certifications, and make all of these logs, certifications, and
materials available to OIG upon request.




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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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

<P align="left" style="font-size: 10pt">Pursuant to the previous Amendment to the CIA, Beverly retained the Long Term
Care Institute (LTCI)&nbsp;as the appropriately qualified monitoring team (the
&#147;Monitor&#148;), approved by the OIG. Within thirty (30)&nbsp;days after the Effective
Date of this Amendment, Beverly shall revise its contract with LTCI to enable
LTCI to continue to serve as the Monitor pursuant to this Amendment. 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 amount for his or
her fees and expenses, pursuant to a budget to be agreed upon by the Monitor,
Beverly and the OIG. Any dispute regarding the amount or the budget will be
resolved by the OIG. 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. 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. 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>



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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</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>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>



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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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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="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>



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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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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="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 for resolution by
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>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;When requested by the Monitor, provide the Monitor a
report of each of the following occurrences that may have
happened during the time period requested by the Monitor:</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>



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

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</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="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 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 semi-annual 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 for resolution</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">14

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</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>by OIG. The Monitor 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(o)(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">15

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</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">16

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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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;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.

<!-- link1 "IV. Annual Reports" -->

<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>Annual Reports</B></TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&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.&nbsp;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.&nbsp;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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;all Covered Persons have completed the training and
executed the certification required by Section&nbsp;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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;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.&nbsp;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.&nbsp;a summary of the Covered Facilities reviewed pursuant to
Section&nbsp;III.A.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.&nbsp;Beverly&#146;s response/corrective action plan to any issues raised
by the Monitor.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">17

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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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;B.&nbsp;Certifications. The 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)
the Compliance Officer has reviewed 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.

<!-- link1 "V. Disclosures" -->

<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="center" style="font-size: 10pt">18

<P align="left" style="font-size: 10pt">Beverly Quality Amendment: 2004

</DIV>

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


<!-- link1 "VI. Breach and Default Provisions" -->

<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</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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)&nbsp;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 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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a.&nbsp;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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>b.&nbsp;a failure to retain and use the Monitor in accordance with
Section
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.





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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;Dispute Resolution


<P align="left" style="font-size: 10pt">&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;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:
(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 twenty (20)
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;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;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.




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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "VII. Effective and Binding Agreement" -->

<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="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.




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</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 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%">
<!-- 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 -->
<!-- Begin Table Body -->
<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">LARRY J. GOLDBERG
</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">Assistant Inspector General for Legal Affairs<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>

<!-- End Table Body -->
</TABLE>
</DIV>





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</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 -->
<!-- Begin Table Body -->
<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">DAVID DEVEREAUX<br>
Executive Vice President and Chief Operating Officer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">DATE</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





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

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