<PAGE>


                                                                   EXHIBIT 10.36


                  AGREEMENT FOR SALE OF NURSING HOME PROPERTIES


                           DATED AS OF JULY 13, 2001


                                     BETWEEN


                   THE ENTITIES SET FORTH ON SCHEDULE 1 HERETO


                                       AND


                               NMC OF FLORIDA, LLC




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                                TABLE OF CONTENTS


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                                                                                   Page
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ARTICLE 1. Definitions................................................................2

     1.1      Assigned Contracts......................................................2
     1.2      Effective Time..........................................................2
     1.3      Equipment Leases........................................................2
     1.4      Excluded Assets.........................................................2
     1.5      Facilities..............................................................3
     1.6      Operating Contracts.....................................................3
     1.7      Personal Property.......................................................3
     1.8      Purchased Assets........................................................4
     1.9      Real Property...........................................................4
     1.10     Additional Defined Terms................................................4

ARTICLE 2. Transfer of the Purchased Assets...........................................5

     2.1      Conveyance of the Purchased Assets......................................5
     2.2      Purchase Price..........................................................6
     2.3      Earnest Money...........................................................6
     2.4      Condition of Purchased Assets...........................................7

ARTICLE 3. The Closing................................................................7

     3.1      Closing and Effective Times.............................................7

ARTICLE 4. The Assignments or Subleases...............................................7

     4.1      Form of Sublease or Assignment..........................................7
     4.2      Security Deposits under Subleases.......................................8

ARTICLE 5. Actions to Effect Consideration and Conveyance.............................9

     5.1      Deliveries by the Beverly Entities......................................9
     5.2      Deliveries by Buyer....................................................10
     5.3      Other Deliveries.......................................................11

ARTICLE 6. Prorations, Credits and Costs.............................................11

     6.1      Prorations.............................................................11
     6.2      Taxes..................................................................12
     6.3      Expenses...............................................................12
     6.4      Diligence..............................................................12
     6.5      Hart-Scott-Rodino Filings..............................................12
</Table>


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     6.6      Other Closing Costs....................................................12
     6.7      Credit for PTO.........................................................13

ARTICLE 7. Representations and Warranties............................................13

     7.1      Representations and Warranties of the Beverly Entities.................13
     7.2      Representations and Warranties of Buyer................................23

ARTICLE 8. Covenants.................................................................25

     8.1      Covenants of the Beverly Entities......................................25
     8.2      Covenants of Buyer.....................................................31

ARTICLE 9. Additional Provisions.....................................................36

     9.1      Title..................................................................36
     9.2      Risk of Loss or Condemnation...........................................37
     9.3      Termination of a Condemned Facility....................................38
     9.4      The Beverly Entities' Obligation to Pay Break-Up Fee Under Certain
              Circumstances..........................................................38
     9.5      Equipment Leases; Computer Hardware/Software; Manuals; Intellectual
              Property Rights........................................................39
     9.6      [Intentionally Omitted.]...............................................40

ARTICLE 10. Conditions To Closing....................................................40

     10.1     Conditions Precedent to Buyer's Performance............................40
     10.2     Conditions Precedent to the Beverly Entities' Performance..............42

ARTICLE 11...........................................................................44

     11.1     Leased Facilities......................................................44
     11.2     Furniture, Trade Fixtures and Business Equipment.......................44
     11.3     Personal Property......................................................44
     11.4     Loss or Damage.........................................................45

ARTICLE 12. Termination..............................................................45

     12.1     Termination............................................................45
     12.2     Due Diligence..........................................................46
</Table>


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ARTICLE 13. Survival and Indemnification.............................................46

     13.1     Survival of Representations............................................46
     13.2     Indemnity by the Beverly Entities......................................46
     13.3     Indemnity by Buyer.....................................................48
     13.4     Defense of Claims......................................................49

ARTICLE 14. Miscellaneous............................................................50

     14.1     Further Assurances.....................................................50
     14.2     Assignment.............................................................50
     14.3     Parties in Interest....................................................50
     14.4     Notices................................................................50
     14.5     Applicable Law.........................................................51
     14.6     Counterparts...........................................................51
     14.7     Effect of Captions and Table of Contents...............................51
     14.8     Attorney's Fees........................................................52
     14.9     Incorporation by Reference.............................................52
     14.10    Entire Agreement: Modification; Waiver.................................52
     14.11    Publicity..............................................................52
     14.12    Confidentiality........................................................52
     14.13    Time of the Essence....................................................52
     14.14    Survival...............................................................52
     14.15    Severability...........................................................52
     14.16    Escrow Facilities......................................................52
     14.17    Non-Competition........................................................53
     14.18    Liability with Appointees..............................................54
     14.19    Beverly Entities Liability.............................................55
</Table>


                                      iii
<PAGE>


EXHIBITS

Exhibit A-1       --       Owned Facilities
Exhibit A-2       --       Leased Facilities
Exhibit B         --       Excluded Assets
Exhibit C         --       Allocation of Purchase Price
Exhibit D         --       Principal Terms and Conditions of Sublease
Exhibit E         --       Assignment and Assumption of Lease
Exhibit F         --       Special Warranty Deed
Exhibit G         --       Memorandum of Sublease
Exhibit H         --       Bill of Sale
Exhibit I         --       Assignment and Assumption of Contracts
Exhibit J         --       Assignment of Trade Names
Exhibit M         --       Audit Materials

SCHEDULES

Schedule 1         --      The Beverly Entities
Schedule 1.1       --      Assigned Contracts
Schedule 1.4.4     --      Deposits; Escrowed Funds
Schedule 1.4.8     --      Deposits under the Leases
Schedule 1.4.10    --      National Contracts
Schedule 4.2       --      Sublease Security Deposits
Schedule 7.1.4     --      Labor Contracts
Schedule 7.1.6(A)  --      Environmental Matters
Schedule 7.1.6(B)  --      Environmental Reports
Schedule 7.1.7(C)  --      Leases and Management Agreement
Schedule 7.1.10    --      Litigation
Schedule 7.1.16    --      Employee Benefit Plans
Schedule 7.1.17    --      Taxes
Schedule 7.1.18(b) --      Patient Admission Contracts
Schedule 7.1.21(a) --      IP Registration
Schedule 7.1.21(b) --      Maintenance
Schedule 7.1.21(c) --      Unregistered Trademark Properties
Schedule 7.1.21(d) --      Infringement
Schedule 7.1.21(e) --      IP Rights Granted to Others
Schedule 7.1.21(f) --      IP Claims
Schedule 7.1.24    --      Notices
Schedule 7.1.25    --      Medicare and Medicaid Participation
Schedule 7.1.26    --      Patient Records
Schedule 7.1.30    --      Patient Trust Funds
Schedule 7.1.31    --      Licensure
Schedule 8.1.10    --      PTO Schedule
Schedule 9.1.D     --      Unpermitted Encumbrances


                                       iv
<PAGE>



                  AGREEMENT FOR SALE OF NURSING HOME PROPERTIES

                  THIS AGREEMENT (the "Agreement") is made and entered into as
of the ____ day of ____________, 2001, by and between the entities set forth on
Schedule 1 (singular and collectively, the "Beverly Entities"), and NMC of
Florida, LLC, a Florida limited liability company ("Buyer").

                                    Recitals

                  A. The Beverly Entities are the owners of forty-six (46)
nursing and retirement facilities (the "Owned Facilities") more fully described
in Exhibit A-1 attached hereto. Exhibit A-1 sets forth the names and addresses
of the Owned Facilities.

                  B. One of the Beverly Entities manages one (1) nursing
facility (the "Managed Facility") and other Beverly Entities lease the six (6)
nursing facilities (the "Leased Facilities") more fully described in Exhibit A-2
attached hereto, pursuant to (i) a management agreement between one of the
Beverly Entities and the owner of the Managed Facility (as such management
agreement may have been amended, the "Management Agreement") and (ii) leases
between certain Beverly Entities and the owners thereof (individually, a "Lease"
and collectively, the "Leases"). Exhibit A-2 sets forth the names and addresses
of the Managed Facility and the Leased Facilities and the identity of the owners
and/or sublessors, if applicable, of the Managed Facility and the Leased
Facilities (the "Lessors").

                  C. The Beverly Entities are also the owners of certain
Personal Property (as hereinafter defined), and are parties to certain Operating
Contracts and Equipment Leases (as such terms are hereinafter defined) with
respect to the Facilities.

                  D. Among other things, (i) the Beverly Entities wish to sell
the Owned Facilities and the Personal Property to Buyer; (ii) the Beverly
Entities wish to assign and/or sublease the Leased Facilities and the Managed
Facility and to assign certain of the Operating Contracts and Equipment Leases
to Buyer; (iii) Buyer wishes to purchase the Owned Facilities and Personal
Property from the Beverly Entities; and (iv) Buyer wishes to assume and/or
sublease the Leased Facilities and the Managed Facility from the Beverly
Entities and to assume the Beverly Entities' obligations under the Operating
Contracts and the Equipment Leases, all subject to the terms of this Agreement.

                                    Agreement

                  NOW, THEREFORE, in consideration of the foregoing, the
covenants, agreements, representations and warranties hereinafter set forth and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:



<PAGE>


                                   ARTICLE 1.
                                   Definitions

                  For purposes of this Agreement and in addition to any and all
definitions and interpretations otherwise provided throughout this Agreement,
the following words and phrases shall have the meanings set forth below:

1.1 Assigned Contracts. A collective term meaning all Equipment Leases and
Operating Contracts. Schedule 1.1 attached hereto sets forth all Assigned
Contracts as of the date hereof that are Material Contracts (defined below),
though not all contracts listed on such schedule are Material Contracts. For
purposes of this Agreement, "Material Contracts" shall mean any contracts,
agreements or leases relating to any of the Facilities that require payments in
excess of $2,000 per month and that cannot be terminated upon sixty (60) days or
less notice. Notwithstanding anything to the contrary, any contracts excluded in
accordance with Section 8.2.13 shall be excluded from Assigned Contracts.

1.2 Effective Time. 11:59 p.m. local time on the last day of the month in which
the Closing occurs.

1.3 Equipment Leases. A collective term meaning all leases pursuant to which the
Beverly Entities are leasing equipment used at the Facilities immediately prior
to the Effective Time other than National Contracts and other than those
Material Contracts that are rejected by Buyer pursuant to Section 8.2.13 hereof.

1.4 Excluded Assets. Shall mean the following:

         1.4.1 All of the Beverly Entities' right, title and interest in the
         accounts receivable of the Facilities as of the Effective Time
         ("Accounts Receivable").

         1.4.2 Cash and cash equivalents on hand at the Facilities, or relating
         to the Facilities, as of the Effective Time, except as otherwise
         expressly provided in this Agreement.

         1.4.3 All prepayments of insurance on the Purchased Assets prorated to
         the Effective Time.

         1.4.4 All refunds or reimbursements of whatever nature or description
         which relate to or are attributable to the period prior to the
         Effective Time and all deposits, escrowed funds and similar funds
         (regardless of the form of deposit, escrowed funds, or similar funds),
         except as otherwise expressly provided in this Agreement. All such
         deposits, escrowed funds and similar funds are listed on Schedule 1.4.4
         attached hereto.

         1.4.5 All claims, disputes and litigation, and all amounts of any
         nature or description relating thereto, to the extent such dispute,
         claim or litigation is related to the period prior to the Effective
         Time and constitute an asset.

         1.4.6 Except as otherwise specifically provided in this Agreement,
         proprietary materials of the Beverly Entities respecting their
         ownership and operation of the Purchased Assets, including, but not
         limited to, internal financial information, policy and procedure and




                                       2
<PAGE>


         training manuals, employee records, dietary menus, contracts and forms
         promulgated by any Beverly Entity, and in-service training materials,
         except that copies of policy and procedure manuals, employee records
         and dietary menus shall be provided as information to Buyer.

         1.4.7 Computer equipment, software and computer programs and vehicles
         used in connection with any of the Facilities, whether owned or leased
         by any Beverly Entity.

         1.4.8 All option deposits and security deposits under the Leases as
         shown on Schedule 1.4.8 (to be provided within ten (10) days after the
         date hereof), except as otherwise specifically provided in this
         Agreement and the Subleases.

         1.4.9 All items set forth on Exhibit B attached hereto.

         1.4.10 All contracts (and rights thereunder) for supplies and/or
         services that are set forth on Schedule 1.4.10 attached hereto (the
         "National Contracts"), which contracts are national in nature and/or
         affect properties other than the Facilities.

1.5 Facilities. A collective term meaning the Owned Facilities, the Leased
Facilities and the Managed Facility.

1.6 Operating Contracts. A collective term meaning any and all maintenance
contracts, service contracts and other similar commitments to which any Beverly
Entity is a party with respect to the Facilities immediately prior to the
Effective Time, other than National Contracts and other than those Material
Contracts that are rejected by Buyer pursuant to Section 8.2.13 hereof.

1.7 Personal Property. Personal Property is a collective term meaning, except
for the Excluded Assets, any and all tangible and intangible personal property
owned by the Beverly Entities and now located at the Facilities or that may have
been temporarily removed for repair or storage, subject to usage and replacement
in the ordinary course of business through the Effective Time. Personal Property
shall include, but shall not be limited to, the Beverly Entities' right, title
and interest in and to the following: any and all consumable inventory,
supplies, drugs, medicines and foodstuffs (collectively, "Supplies"); patient
and/or resident records and agreements, provider agreements, records of
inspection of the Purchased Assets by governmental agencies, copies of employee
records (excluding any internal evaluations), records of construction,
architectural plans, surveys, construction contracts and specifications, copies
of all financial statements and warranties related to the Purchased Assets (in
each case, relating to the Facilities collectively, the "Business Records"), as
such may exist in the Beverly Entities' possession at the Effective Time; the
use of the names of the Facilities as set forth in Exhibits A-1 and A-2 hereto,
excluding however, any right to the use of any of the following names, designs
or marks: "Beverly", "Beverly Enterprises", "Beverly Enterprises - Florida",
"Leisure Lodge" and any variation, derivative or combination thereof and
associated trademarks, service marks and logos; linens and other items used in
connection with the operation of the Purchased Assets, beds, furniture and
equipment, nursing equipment, therapy equipment, food service preparation and
distribution equipment, housekeeping equipment, maintenance equipment,
activities equipment and other equipment located in and upon each of the
Facilities. Tangible Personal


                                       3
<PAGE>


Property with respect to the Leased Facilities that are to be subleased to Buyer
in accordance with the terms hereof shall be set forth on an inventory conducted
by the parties hereto five (5) days prior to the Effective Time and set forth on
an exhibit to be attached to the applicable Subleases.

1.8 Purchased Assets. All of the following:

         1.8.1 The Real Property and certain rights to the Leased Facilities and
         interests in the Leases as set forth in this Agreement, the Lease
         Assignments and/or the Subleases, as applicable.

         1.8.2 The Personal Property.

         1.8.3 The Assigned Contracts.

1.9 Real Property. A collective term meaning the real estate and all easements,
structures, improvements, rights, and appurtenances attached thereto, the
nursing home and retirement buildings and accessory buildings, if any, located
on the real estate, and all fixtures attached to the real estate, including,
without limitation, all mechanical fixtures and kitchen fixtures, and all
landscaping, lawn, trees, shrubs, parking areas, sidewalks and other
improvements with respect to the Owned Facilities. Exhibit A-1 sets forth the
common street addresses for the Real Property.

1.10 Additional Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:

                  Actual Census                              10.1.9
                  Agreement                                  Preamble
                  Beverly Entities                           Preamble
                  Beverly Excepted Matters                   13.3.2D
                  Beverly Indemnitees                        13.3.1
                  Break-Up Fee                               9.4(a)
                  Business Records                           1.7
                  Buyer                                      Preamble
                  Buyer Excepted Matters                     13.2.2F
                  Buyer Indemnitees                          13.2.1
                  CIA                                        8.2.6
                  Closing                                    3.1
                  Closing Date                               3.1
                  Department                                 8.1.6E
                  Deposit                                    2.3
                  DOL                                        8.2.9
                  Employment Benefit Plan                    7.1.15(a)
                  Environmental Laws                         7.1.5
                  Escrow Facilities                          14.19
                  Accounts Receivable                        1.4.1
                  FIFO                                       8.2.11
                  Financial Statements                       7.1.11


                                       4
<PAGE>


                  Hazardous Materials                        7.1.5
                  HSR Act                                    6.5
                  Intellectual Property                      7.1.20(a)
                  Labor Dispute                              7.1.4
                  Lease                                      Recital B
                  Lease Assignment(s)                        4.1(b)
                  Leased Facilities                          Recital B
                  Leases                                     Recital B
                  Lessor Consent and Estoppel                8.1.8
                  Lessors                                    Recital B
                  Letter of Credit                           8.2.11
                  Liabilities                                13.2.1
                  LIFO                                       8.2.11
                  Managed Facility                           Recital B
                  Managed Facility Consent                   9.1E
                  Management Agreement                       Recital B
                  Material Contracts                         1.1
                  National Contracts                         1.4.10
                  OIG                                        10.1.10
                  Owned Facilities                           Recital A
                  Patient Admissions Contracts               7.1.17(b)
                  Permitted Encumbrances                     9.1D
                  Plans                                      7.1.15
                  PTO                                        8.1.9
                  PTO Schedule                               8.1.10
                  Purchase Price                             2.2
                  Security Deposit                           4.2
                  Sublease(s)                                4.1(a)
                  Supplies                                   1.7
                  Surveys                                    9.1A
                  Title Commitments                          9.1B
                  Title Company                              5.3
                  Union Meetings                             8.1.14
                  WARN Act                                   8.2.9

                                   ARTICLE 2.
                        Transfer of the Purchased Assets

2.1 Conveyance of the Purchased Assets. The Beverly Entities shall sell, convey,
assign and transfer, or sublease, as appropriate, to Buyer on a going concern
basis and upon the terms and conditions set forth herein, in the Subleases, the
Lease Assignments and in the documents executed and delivered in connection
herewith and therewith, all of the Beverly Entities' right, title and interest
in and to the Purchased Assets. Subject to the terms and conditions set forth
herein, in the Subleases, the Lease Assignments and in the documents executed
and delivered in connection herewith and therewith, Buyer agrees to purchase,
assume and/or sublease, as the case


                                       5
<PAGE>


may be, the Purchased Assets from the Beverly Entities at the Closing effective
as of the Effective Time. Except as provided for herein, Buyer assumes no
liabilities or obligations of the Beverly Entities.

2.2 Purchase Price. In consideration of the transfer of the Purchased Assets as
described herein, Buyer shall pay the Beverly Entities the sum of One Hundred
Sixty-Five Million Dollars ($165,000,000) (as may be adjusted pursuant to
Section 14.16 hereof, the "Purchase Price") to be paid in immediately available
funds at Closing. The Purchase Price will be allocated as specified in Exhibit C
attached hereto.

2.3 Earnest Money. Simultaneously with the execution and delivery of this
Agreement by all parties hereto, Buyer shall deliver to Fidelity National Title
Insurance Company ("Escrow Agent") (pursuant to its standard form escrow
agreement reasonably acceptable to Buyer and the Beverly Entities) an earnest
money deposit in the amount of Three Million Two Hundred Thousand Dollars
($3,200,000) (the "Deposit"), which Deposit is non-refundable, except as
described below. The Deposit shall be held in an interest bearing account. Any
accrued interest shall be transferred with the Deposit.

         2.3.1 In the event the transactions contemplated under this Agreement
         shall close as provided herein, the Deposit, less any offsets for
         expenses paid for by the Beverly Entities prior to Closing and not
         reimbursed by Buyer (to the extent Buyer is obligated to pay for such
         expenses hereunder), shall be applied against the Purchase Price at the
         Closing. In the event that the transactions contemplated under this
         Agreement shall fail to close as provided herein due to a breach of
         this Agreement by the Buyer, then the Escrow Agent shall pay the
         Deposit to the Beverly Entities as liquidated damages. In the event the
         Agreement is terminated as a result of (i) a breach of this Agreement
         by the Beverly Entities, (ii) the failure to satisfy any condition to
         closing contained in Article 10 provided that Buyer is not then in
         breach of this Agreement and such breach has been noticed in writing by
         the Beverly Entities to the Buyer, or (iii) termination of the
         Agreement in accordance with paragraph 12.2, then the Escrow Agent
         shall pay the Deposit to the Buyer.

         2.3.2 The parties hereto acknowledge that the actual damages sustained
         by the Beverly Entities if the transactions contemplated hereby shall
         fail to close are difficult to ascertain, and the parties hereby
         further agree that the liquidated damages amounts set forth in this
         Section 2.3 are a reasonable estimate of the amount of damages,
         including consequential damages, which the Beverly Entities would
         suffer by reason of Buyer's failure to close under this Agreement, and
         further that the retention of the Deposit is the Beverly Entities sole
         and exclusive remedy with respect thereto.

         2.3.3 In the event the transactions contemplated hereby fail to close
         as a result of a material breach hereof by the Beverly Entities of any
         provision hereof that is reasonably within the Beverly Entities'
         control, then the Beverly Entities shall pay Buyer an amount equal to
         the sum of (i) Buyer's reasonable out-of-pocket costs in pursuing the
         transactions contemplated hereby, not to exceed Five Million Dollars
         ($5,000,000) and (ii) One Million Dollars ($1,000,000). Buyer shall
         provide the Beverly Entities with reasonable documentation of such
         costs. All payments under this Section 2.3.3 shall constitute


                                       6
<PAGE>


         liquidated damages to Buyer. The parties hereto acknowledge that the
         actual damages sustained by Buyer if the transactions contemplated
         hereby shall fail to close are difficult to ascertain, and the parties
         hereby further agree that the liquidated damages amounts set forth in
         this Section 2.3.3 are a reasonable estimate of the amount of damages,
         including consequential damages, which Buyer would suffer by reason of
         the Beverly Entities' failure to close under this Agreement, and
         further that the retention of the Deposit is Buyer's sole and exclusive
         remedy with respect thereto.

2.4 Condition of Purchased Assets. Except for the representations and warranties
expressly contained in this Agreement, the Purchased Assets are sold or
subleased, as the case may be, in "AS IS, WHERE IS" condition with no warranties
whatsoever, either express or implied, whether of merchantability, of fitness
for a particular purpose, of physical condition, of the Beverly Entities'
operation thereof or otherwise, whether with regard to the Purchased Assets,
real or personal, tangible or intangible, whether conveyed hereby, contained
therein, or related thereto, or with regard to the Beverly Entities' operation
of the Purchased Assets.

                                   ARTICLE 3.
                                   The Closing

3.1 Closing and Effective Times. The Closing pursuant to this Agreement (the
"Closing") shall take place at the offices of Latham & Watkins, Sears Tower,
Chicago, Illinois (or, at Buyer's request, at the offices of Buyer's lender or
its lender's counsel in New York, New York) on the last business day of the
month containing the day that is fifteen (15) days after the day on which Buyer
satisfies the condition described in Section 10.1.4 hereof with respect to at
least forty-three (43) of the Facilities or such other date as the parties may
agree (the "Closing Date"), to be effective as of the Effective Time, but in no
event later than October 31, 2001, to be effective as of the Effective Time;
provided, however, that if the Closing with respect to at least forty-three (43)
Facilities has not occurred on or before October 31, 2001 and Buyer has not
satisfied the condition contained in Section 10.1.4 hereof with respect to at
least forty-three (43) Facilities by such date and Buyer is otherwise in
material compliance with all of its duties and obligations hereunder, then Buyer
may, by written notice to the Beverly Entities, extend the final date for the
Closing with respect to at least forty-three (43) Facilities to occur to
November 30, 2001. The parties hereto may by mutual consent expressed in writing
fix another time to be the Effective Time or the Closing Date or another
location for the Closing, subject to Article 12 hereof.

                                   ARTICLE 4.
                          The Assignments or Subleases

4.1 Form of Sublease or Assignment. Subject to the terms and conditions of this
Agreement, the Beverly Entities agree, with respect to each Leased Facility,
either:

                  (a) if the applicable Beverly Entity is not released by the
                  applicable Lessor from all material liability arising after
                  the Effective Date under the applicable Lease, to sublease to
                  Buyer, and Buyer agrees to sublease from the applicable
                  Beverly Entity at the Closing, effective at the Effective
                  Time, such Leased Facility pursuant to a sublease on the terms
                  and conditions set forth on Exhibit D attached


                                       7
<PAGE>


                  hereto, and such other terms and conditions by which the
                  parties hereto agree (each a "Sublease" and, collectively, the
                  "Subleases") provided that the Beverly Entities obtain from
                  the applicable Lessor the elimination of any provisions that
                  could cause a default of the Lease based on acts or omissions
                  of the Beverly Entities with respect to other agreements
                  between the Beverly Entities and the applicable Lessor, or
                  cross renewal provisions in the applicable leases. The
                  Subleases generally shall pass through to the Buyer, as
                  sublessee, all rights and obligations of the applicable
                  Beverly Entity, as tenant, under the Leases, including,
                  without limitation, the right to exercise all renewal options
                  provided to the Beverly Entities under the Leases but not
                  including any obligations or liabilities which constitute an
                  Excluded Liability; or

                  (b) if the applicable Beverly Entity is released by the
                  applicable Lessor from all material liability arising after
                  the Effective Date under the applicable Lease provided that
                  the Beverly Entities obtain from the applicable Lessor the
                  elimination of any provisions that could cause a default of
                  the Lease based on acts or omissions of the Beverly Entities
                  with respect to other agreements between the Beverly Entities
                  and the applicable Lessor, or cross renewal provisions in the
                  applicable leases to assign its rights and obligations under
                  the Leases to Buyer pursuant to an Assignment and Assumption
                  of Lease, substantially in the form of Exhibit E ---------
                  attached hereto (each a "Lease Assignment" and, collectively,
                  the "Lease Assignments"), which Lease Assignments shall
                  provide that the Beverly Entities remain obligated for any
                  Excluded Liability and Buyer shall not assume any Excluded
                  Liability.

                  Subject to the terms and conditions of this Agreement, the
Beverly Entities agree, with respect to the Managed Facility, to assign their
rights and obligations under the Management Agreement and any related documents
including but not limited to any purchase options, lease renewal rights, and
options to renew, if any, pursuant to an assignment and assumption of management
agreement, containing reasonable terms and conditions to which the parties
hereto shall agree.

4.2 Security Deposits under Subleases. At the Closing, in accordance with
Schedule 4.2 Buyer shall deposit with the Beverly Entities cash or an
irrevocable letter of credit, from an institution and in a form acceptable to
the Beverly Entities, in an amount equal to six (6) months of the aggregate base
rent under the Subleases plus six (6) months of payments under the Management
Agreement, to be held by the Beverly Entities pursuant to the terms of the
Subleases and the assignment and assumption of the Management Agreement (the
"Security Deposit") as security for every Sublease and for the assignment of the
Management Agreement. The Security Deposit shall be held by the Beverly Entities
until expiration of the Subleases and the Management Agreement or termination of
or release of the Beverly Entities from liability under the applicable Leases or
the Management Agreement.


                                       8
<PAGE>


                                   ARTICLE 5.
                 Actions to Effect Consideration and Conveyance

5.1 Deliveries by the Beverly Entities. At the Closing the Beverly Entities
shall deliver, execute and deliver or cause to be executed and delivered, as
applicable, to Buyer the following:

         5.1.1 Counterpart to a closing statement.

         5.1.2 Special Warranty Deeds (or the local equivalent) to the Real
         Property for each of the Owned Facilities, substantially in the form of
         Exhibit F attached hereto.

         5.1.3 Counterpart to a Lease Assignment with respect to each of the
         Leases to be assigned, in proper form for recording.

         5.1.4 Counterparts to a Sublease with respect to each of the Leased
         Facilities to be subleased.

         5.1.5 Counterparts to a Memorandum of Sublease for each Sublease in the
         form of Exhibit G attached hereto, and otherwise in proper form for
         recording.

         5.1.6 Bill of Sale with respect to the Personal Property at each
         Facility owned by the Beverly Entities, substantially in the form of
         Exhibit H attached hereto.

         5.1.7 Counterpart to an Assignment and Assumption of Contracts,
         substantially in the form of Exhibit I attached hereto.

         5.1.8 An Assignment of Trade Names, substantially in the form of
         Exhibit J attached hereto assigning all of the Beverly Entities' right,
         title and interest in and to the use of the names of the Facilities set
         forth on Exhibits A-1 and A-2 hereto (excepting the names listed in
         Section 1.7 hereto).

         5.1.9 Necessary state, county and city real estate transfer tax
         declarations for each Facility.

         5.1.10 A certificate of non-foreign status (pursuant to Section 1445 of
         the Internal Revenue Code).

         5.1.11 A Certificate of the Beverly Entities that all representations
         and warranties of the Beverly Entities in this Agreement are true and
         correct in all material respects as of the Closing Date.

         5.1.12 Certificate or Certificates of the Secretary or Assistant
         Secretary of the Beverly Entities certifying the: (a) Articles of
         Incorporation and Bylaws of the Beverly Entities, (b) incumbency and
         signatures of officers of the Beverly Entities and (c) resolutions of
         the Beverly Entities authorizing the transactions contemplated hereby.

         5.1.13 Certificates of Good Standing for the Beverly Entities from
         their respective States of incorporation.


                                       9
<PAGE>


         5.1.14 Certificate of the Secretary of State of the State of Florida
         certifying the Beverly Entities' qualification and good standing as a
         foreign corporation.

         5.1.15 Any and all consents, approvals, instruments, certificates, and
         agreements obtained from the Lessors pursuant to Section 8.1.8 hereof,
         including, without limitation, the Lessor Consent and Estoppel.

         5.1.16 Any other documents reasonably required by the Title Company to
         issue the title insurance policies described in Section 5.3 hereof.

         5.1.17 Evidence of the authority of the Beverly Entities to execute and
         deliver the documents necessary to effectuate the Closing.

         5.1.18 Counterpart to an assignment and assumption of management
         agreement with respect to the Management Agreement.

         5.1.19 Counterparts to transition agreements, in form and substance
         reasonably acceptable to the Beverly Entities ("Transition
         Agreements"), among the Beverly Entities, Buyer and any appointees of
         Buyer permitted hereunder, pursuant to which such appointee agrees to
         perform all obligations hereunder which Buyer designates and Buyer
         agrees to be jointly and severally liable therefor.

5.2 Deliveries by Buyer. At the Closing Buyer shall deliver, execute and deliver
or cause to be executed and delivered, as applicable, to the Beverly Entities
the following:

         5.2.1 The Purchase Price as specified in Section 2.2 hereto.

         5.2.2 Counterpart to a closing statement.

         5.2.3 Counterpart to a Lease Assignment with respect to each of the
         Leases to be assigned, in proper form for recording.

         5.2.4 Counterpart to a Sublease with respect to each of the Leased
         Facilities to be subleased.

         5.2.5 Counterpart to a Memorandum of Sublease for each underlying
         Sublease.

         5.2.6 The Security Deposit.

         5.2.7 Counterpart to an Assignment and Assumption of Contracts,
         substantially in the form of Exhibit I hereto.

         5.2.8 Necessary state, county and city real estate transfer tax
         declarations for each Facility.

         5.2.9 A Certificate of Buyer that all representations and warranties of
         Buyer in this Agreement are true and correct in all material respects
         as of the Closing Date.


                                       10
<PAGE>


         5.2.10 Certificate of the Secretary or Assistant Secretary of Buyer
         certifying the: (a) Articles of Incorporation and Bylaws of Buyer, (b)
         incumbency and signatures of officers of Buyer and (c) resolutions of
         Buyer authorizing the transactions contemplated hereby.

         5.2.11 Certificate of Good Standing for Buyer from the Secretary of
         State of the State of Florida as of a recent date.

         5.2.12 Certificate of the Secretary of State of the State of Florida
         certifying Buyer's qualification and good standing as a foreign
         corporation.

         5.2.13 Any other documents reasonably required by the Title Company to
         issue the title insurance policies described in Section 5.3 hereof.

         5.2.14 Evidence of the authority of Buyer to execute and deliver the
         documents necessary to effectuate the Closing.

         5.2.15 Counterpart to an assignment and assumption of management
         agreement with respect to the Management Agreement.

         5.2.16 Counterparts to Transition Agreements.

5.3 Other Deliveries. Fidelity National Title Insurance Company located in Troy,
Michigan, and another title insurance company selected by Buyer to perform
(collectively the "Title Company"), shall deliver at Closing the title insurance
policies in the form of the Title Commitments, and insuring over the items on
Schedule 9.1.D hereto.

                                   ARTICLE 6.
                          Prorations, Credits and Costs

6.1 Prorations. The following items shall be prorated as of the Effective Time.
In the event that amounts as of the Effective Time cannot be accurately
determined, such amounts shall be estimated and adjusted as promptly as
practicable thereafter but in no event later than thirty (30) days after the
Effective Time.

         6.1.1 Taxes. All state, county, city, school, ad valorem, and other
         local real and personal property taxes and assessments relating to or
         assessed against the Purchased Assets shall be prorated as of the
         Effective Time notwithstanding the date of the assessment. If the real
         property tax rate for the current tax year is not established by the
         Effective Time, the prorations shall be made on the basis of the rate
         in effect for the preceding tax year and shall be adjusted when exact
         amounts are determined. All such prorations shall be based upon the
         most recent available assessed value of the Facilities prior to the
         Effective Time. The Beverly Entities shall pay all income, gains and
         other similar taxes, as well as all franchise taxes, incurred by it in
         carrying out the transactions contemplated under this Agreement.

         6.1.2 Utilities and Rents. All utilities and rents shall be prorated or
         paid by the Beverly Entities as of the Effective Time.


                                       11
<PAGE>


         6.1.3 Prepayments and Deposits. The Beverly Entities shall credit to
         Buyer payments received by any Beverly Entity for patient and resident
         or other services to be provided on or after the Effective Time. The
         Beverly Entities shall be credited with all prepayments made by any
         Beverly Entity for services relating to the Facilities to be provided
         after the Effective Time and amounts described in Sections 1.4.4 and
         1.4.8 hereof to the extent Buyer receives the contracted amount for
         services in accordance with the Beverly Entities' agreements with such
         vendors.

6.2 Taxes. All sales, use, personal property transfer taxes and excise taxes, if
any, by whatever jurisdiction levied, arising out of the transfer of the
Purchased Assets contemplated hereunder, including, but not limited to,
documentary transfer taxes relating to personal property, shall be paid by
Buyer. The Beverly Entities shall pay for all real property transfer taxes
including but not limited to any real property documentary stamp taxes with
respect to the transactions contemplated hereby.

6.3 Expenses. Each of the parties shall pay its own costs and expenses incurred
or to be incurred by it in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated herein, except as may
otherwise be provided herein.

6.4 Diligence. Buyer shall pay all costs and expenses associated with any
appraisals, UCC searches and other diligence undertaken by Buyer with respect to
the transactions contemplated under this Agreement. If Buyer is not required by
its lender to obtain new environmental surveys (other than a "desktop" review)
for the Facilities and Buyer obtains third party beneficiary certificates
allowing the Buyer and Buyer's lender to rely on the Phase I Environmental Site
Assessments for the Facilities, prepared by Guidewire Consulting, LLC and
ordered by the Beverly Entities prior to the date hereof ("Environment
Surveys"), at Closing Buyer shall pay fifty (50%) percent of the costs and
expenses for the Environmental Surveys not to exceed forty-five thousand dollars
$45,000). At Closing, Buyer, on the one hand, and the Beverly Entities, on the
other hand, shall each pay fifty percent (50%) of the costs and expenses for
obtaining ALTA/ACSM real property surveys of the Facilities. All such amounts
expended by the Beverly Entities for which Buyer is responsible shall be
credited to the Beverly Entities at Closing. In the event this Agreement is
terminated for any reason other than a breach by Buyer, Seller shall pay all
costs related to the Environmental Surveys and the ALTA/ACSM real property
surveys for the Facilities.

6.5 Hart-Scott-Rodino Filings. The Beverly Entities and Buyer are each
responsible for preparing their own required filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and for their own costs of preparing
such information, documents and filings as may be required pursuant to, and the
costs of otherwise complying with the HSR Act. Notwithstanding the above, the
filing fee for the first filing required under the HSR Act shall be shared
evenly between the Beverly Entities and Buyer. If any subsequent filings are
required, the filing fees shall be paid solely by Buyer.

6.6 Other Closing Costs. Buyer shall pay for any recording costs and tax
certificate fees with respect to the transactions contemplated hereby. Buyer, on
the one hand, and the Beverly Entities, on the other hand, shall each pay fifty
percent (50%) of all title insurance costs, fees and


                                       12
<PAGE>


premiums with respect to the transactions contemplated hereby (other than with
respect to any endorsements requested by Buyer or Buyer's lender's title
insurance requirements, which shall be paid one hundred percent (100%) by
Buyer). All such amounts expended by the Beverly Entities shall be credited to
the Beverly Entities at Closing.

6.7 Credit for PTO. At the Closing, Buyer shall receive a credit against the
Purchase Price for the value, as of the Effective Time, of all PTO for all
employees employed at the Facilities as of the Effective Time. Buyer hereby
assumes all liability for the PTO included on the PTO Schedule and agrees to
indemnify and hold harmless the Beverly Entities from and against all liability,
claims and demands against the Beverly Entities (including, without limitation,
defense thereof) arising in connection with such PTO Schedule.

                                   ARTICLE 7.
                         Representations and Warranties

7.1 Representations and Warranties of the Beverly Entities. Each of the Beverly
Entities hereby represents and warrants to Buyer as follows:

         7.1.1 Organization. The Beverly Entities are duly incorporated and
         validly existing corporations organized under the laws of and in good
         standing in their respective States of incorporation, and are qualified
         to do business as a foreign corporation in the State of Florida. Each
         of the Beverly Entities has full power and authority to own and lease
         its properties and to carry on its business as currently conducted.
         None of the Beverly Entities is insolvent, and none will be rendered
         insolvent by the transactions contemplated by this Agreement. None of
         the Beverly Entities has any material, unpaid and past due liability
         with respect to any creditor, supplier, landlord, or service provider
         of any of the Facilities.

         7.1.2 Authority. The Beverly Entities have complete and unrestricted
         corporate power to enter into this Agreement and perform its
         obligations hereunder. When executed and delivered, this Agreement will
         constitute a valid and binding obligation of the Beverly Entities,
         enforceable in accordance with its terms, except as limited by
         applicable laws relating to bankruptcy, insolvency, reorganization,
         liquidation, moratorium or other similar laws of general application
         relating to or affecting creditors' rights.

         7.1.3 Personal Property. The Beverly Entities are the owners of the
         Personal Property constituting Purchased Assets. At the Closing,
         effective as of the Effective Time, the Beverly Entities shall convey
         good title to same, free and clear of liens and encumbrances, except as
         set forth on Schedule 9.1.D attached hereto.

         7.1.4 Labor Relations; Employees. Except as set forth on Schedule 7.1.4
         attached hereto, (a) there have been no strikes, picketing (including
         recognitional), work stoppages, or to the Beverly Entities' actual
         knowledge, demands for recognition, unfair labor practice charges,
         representational petitions filed with a regional office of the National
         Labor Relations Board, soliciting for a showing of interest or any
         formal demands served upon the Beverly Entities with respect to the
         Facilities for collective bargaining by any union or labor organization
         at any time since January 1, 1998; (b) none


                                       13
<PAGE>


         of the Beverly Entities has received a written notice of a dispute or
         controversy with any union or other organization of employees of the
         Beverly Entities with respect to the Facilities; (c) there are no
         unfair labor practice charges or, to the Beverly Entities' actual
         knowledge, requests for injunctions pursuant to Section 10(j) of the
         National Labor Relations Act pending or, to the Beverly Entities'
         actual knowledge, threatened against the Beverly Entities with respect
         to the Facilities before the National Labor Relations Board or before
         any court; (d) there are no arbitration proceedings pending of which
         notice has been given to the Beverly Entities or, to the Beverly
         Entities' actual knowledge, threatened, involving any material dispute
         or controversy with any union or other organization of employees with
         respect to the Facilities; and (e) there are no ongoing negotiations
         with any unions with respect to any of the Facilities (herein
         collectively referred to as a "Labor Dispute").Except as set forth on
         Schedule 7.1.4 attached hereto, the Beverly Entities have no labor
         union contracts or collective bargaining agreement with its employees
         at the Facilities or executive employment agreements with respect to
         the Facilities.

         7.1.5 PTO. As of the date of delivery of the PTO Schedule pursuant to
         Section 8.1.10, the PTO Schedule will contain true and complete
         information with respect to the annual base salary or hourly rate of
         the employees of the Facilities and overtime, vacation, sick and
         holiday pay, flex benefits, bonus payments (other than "retention" or
         "stay-on" bonuses paid in connection with the transactions contemplated
         hereby), commissions, severance payments or other monetary compensation
         paid to, or which may become payable to the employees of the
         Facilities. The PTO Schedule will be true, correct and complete in all
         material respects and will reflect PTO that complies with the Beverly
         Entities' employment policies, applicable Florida law and applicable
         federal law.

         7.1.6 Environmental Matters

A. Except as set forth on Schedule 7.1.6(A) attached hereto or as revealed in
any of the environmental reports set forth on Schedule 7.1.6(B) attached hereto
which reports have been provided to Buyer, to the actual knowledge of the
Beverly Entities, there has not occurred any unauthorized or illegal emission,
leak, discharge, spill or release into the environment of any Hazardous
Materials (in excess of levels that could reasonably be expected to require
investigation or remediation under applicable Environmental Laws) by the Beverly
Entities or by any prior owner or tenant of any of the Facilities or of any use
of Hazardous Materials on or from the Facilities which, in any material respect,
violates federal, state or local laws, rules and regulations governing the use,
storage, treatment, handling, production or disposal of such Hazardous Materials
or any other Environmental Laws.

B. For purposes of this Section 7.1.6, the term "Hazardous Materials" shall
include, without limitation, any pollutants, contaminants, chemicals, wastes and
other carcinogenic, ignitable, corrosive, reactive, toxic or otherwise hazardous
substance or materials (whether solid, liquid or gaseous) subject to regulation,
control or remediation under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801 et seq.), the Resources Conservation and Recovery Act, as amended
(42 U.S.C. Section 6901 et seq.), the Toxic Substances Control Act, as amended,
the Clean Water Act, as amended, the Safe Drinking


                                       14
<PAGE>


Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety
and Health Act, as amended, the Atomic Energy Act of 1954, as amended, and all
analogous or related laws enacted, promulgated or issued in any jurisdiction in
which a Facility is located and in the regulations adopted and publications
promulgated pursuant thereto, or any other federal, state or local environmental
law, ordinance, rule or regulation (collectively, the "Environmental Laws").

C. The Beverly Entities shall indemnify and hold Buyer harmless for any
"Recognized Environmental Condition" as defined and disclosed in the
Environmental Surveys set forth on Schedule 7.1.6(B) and any related Liabilities
together with any "Recognized Environmental Condition" identified in any Phase
II site assessment conducted pursuant to an express recommendation, if any,
contained in any Environmental Survey set forth on Schedule 7.1.6(B).

         7.1.7 Title to Facilities

A. Exhibit A-1 hereto completely and accurately states the name and address of
each of the Owned Facilities. Exhibit A-2 hereto completely and accurately
states the name, address, lessee and lessor of each of the Leased Facilities.
Exhibit A-2 hereto completely and accurately states the name, address, owner and
manager of the Managed Facility.

B. The applicable Beverly Entities set forth on Exhibit A-1 are, or will be as
of the Closing Date, the owners of the Purchased Assets, including Real Property
constituting the Owned Facilities; provided, however, that with respect to the
Real Property held via the Beverly Entities' synthetic lease facility, the
applicable Beverly Entity is not on the date hereof the owner of fee simple
title to such Real Property but will be entitled to cause the deed to such Real
Property to be executed and delivered to its designee. At the Closing, the
applicable Beverly Entities shall convey to Buyer good and marketable fee title
to such Real Property free and clear of liens, covenants, restrictions,
conditions, reservations, rights, easements and encumbrances of record,
excepting only (i) Permitted Encumbrances (as hereinafter defined) and (ii) such
exceptions as may otherwise be approved by Buyer in accordance with the
provisions hereof.

C. The applicable Beverly Entities set forth on Exhibit A-2 are the holders of
valid and existing leasehold interests, as lessee, of the premises constituting
the Leased Facilities, for the terms set forth in and pursuant to the terms of
the Leases. The applicable Beverly Entity set forth on Exhibit A-2 hereto is the
manager pursuant to a valid and existing management agreement with respect to
the Managed Facility. Subject to receipt of all required consents from the
Lessors or the owner of the Managed Facility, as applicable, the applicable
Beverly Entities shall enter into valid and binding assignment and assumption of
Management Agreement, Lease Assignments and/or Subleases covering the Leased
Facilities and the Managed Facility, as applicable. Subject to the terms of the
assignment of Management Agreement, the Subleases and Lease Assignments, the
assignment of Management Agreement, the Subleases and Lease Assignments, as
applicable, shall convey the rights and interests therein provided free and
clear of liens and encumbrances, excepting only the Permitted Encumbrances and
such exceptions as may otherwise be approved by Buyer. True and complete copies
(including amendments, if any) of the Leases and the Management Agreement have
been made available to Buyer and are listed on Schedule 7.1.7(C).


                                       15
<PAGE>


D. All of the Leases and the Management Agreement are in full force and effect
and the Beverly Entities are not in default or breach in any material respect
under any of the Leases and the Management Agreement. No event has occurred
which, with the giving of notice or lapse of time or both, would cause a
material breach or a material default by the Beverly Entities under any of the
Leases or the Management Agreement. The Beverly Entities have no actual
knowledge of any breach or anticipated breach by the other parties to the Leases
or the Management Agreement.

E. The Beverly Entities have no actual knowledge of (i) any condemnation
proceeding affecting any portion of the Facilities or contemplated by any
governmental authority; (ii) any special assessment affecting any portion of the
Facilities or contemplated by any governmental authority, except as set forth in
the title insurance policies referred to in Section 9.1 hereof; or (iii) any
pending or threatened enforcement proceeding by any governmental authority
relating to an alleged zoning violation affecting any portion of the Facilities.

         7.1.8 Leases, Contracts, Commitments. Except for the Excluded Assets
         and the Purchased Assets, as of the Effective Time there will be no
         contracts, agreements or commitments of any kind relating to the
         business at the Facilities, no leases in force at the Effective Time
         affecting the use or occupancy of the Facilities, and no equipment
         leases, or other similar agreements, obligations or commitments the
         absence of which will materially adversely affect Buyer, any Facility
         or the Purchased Assets subsequent to the Effective Time.

         7.1.9 Compliance with Laws. The Facilities are in compliance with any
         and all applicable laws, rules, regulations and ordinances, federal,
         state and local, the violation of which, taken as a whole, would have a
         material adverse effect on the Facilities taken as a whole.

         7.1.10 Litigation; Governmental Proceedings. Except as set forth on
         Schedule 7.1.10 attached hereto, there is no litigation, proceeding or
         governmental investigation pending or, to the actual knowledge of the
         Beverly Entities, threatened against the Beverly Entities (with respect
         to the Facilities) or the Facilities which materially adversely affects
         the Beverly Entities or the Facilities. The Beverly Entities shall
         continue to have all responsibility for the handling and defense of and
         any liability or obligation arising from the matters listed on Schedule
         7.1.10 subsequent to the Closing and Buyer shall use good faith
         reasonable efforts to cooperate with such handling and defense, but
         said obligation to cooperate shall not be deemed to require Buyer to
         incur any material out-of-pocket expense. To the actual knowledge of
         the Beverly Entities, there is no Q-Tam proceeding currently pending
         against any of the Beverly Entities with respect to any of the
         Facilities.

         7.1.11 Absence of Certain Changes. Since September 30, 2000 with
         respect to the Facilities taken as a whole, there has not been any
         material adverse change in the financial condition, assets,
         liabilities, or prospects of the Beverly Entities with respect to the
         Facilities taken as a whole , and the Beverly Entities have not
         conducted the operation of the Facilities other than in the ordinary
         course of business; provided, however, that no representation or
         warranty is made with respect to any changes in the prospects of the
         Beverly Entities or the Facilities subsequent to the date of this
         Agreement as a result of


                                       16
<PAGE>


         the pending sale of the Facilities. Buyer acknowledges and agrees that
         the representation and warranty contained in this Section 7.1.11 shall
         be made only as of the date hereof.

         7.1.12 Information Supplied to Buyer. The Beverly Entities have
         provided Buyer with copies of unaudited profit and loss statements for
         each of the Facilities for the calendar years 1999 and 2000 and for the
         year-to-date period ending May 31, 2001 (collectively, the "Financial
         Statements"). Since September 30, 2000, there has been no change in the
         accounting methods or practices of the Beverly Entities. The Financial
         Statements were prepared on the basis of the books and records of the
         Beverly Entities and Beverly Health and Rehabilitation Services, Inc.,
         and are the financial statements used by the Beverly Entities and
         Beverly Health and Rehabilitation Services, Inc. for internal
         accounting purposes and have been prepared on a basis consistent with
         the other internal operating statements used by the Beverly Entity in
         the ordinary course of business. It is understood that the Financial
         Statements are prepared as internal operating statements that do not
         necessarily reflect adjustments required to cause such statements to
         fairly present or otherwise accurately reflect the operations of the
         Facilities in accordance with generally accepted accounting principles
         or otherwise. Notwithstanding the foregoing, the Financial Statements
         accurately reflect the operations of the Facilities and are true and
         correct in all material respects. There are no adjustments to the
         Financial Statements by the outside auditors with respect to the
         Facilities taken as a whole, that would materially affect the
         Facilities taken as a whole.

         7.1.13 Trust Accounts for Patients and Residents. For the period of
         their operation of the Facilities, the Beverly Entities have dealt with
         the trust accounts for patients and residents referred to in Section
         8.2.4 hereof in the fiduciary capacity required by law.

         7.1.14 Brokers, Finders. The Beverly Entities know of no brokerage or
         finder's fees or commissions which will be payable in connection with
         the sale of the Purchased Assets hereunder, and if any such fees or
         commissions are claimed or payable as the result of any other party's
         claimed representation of the Beverly Entities, such fees and
         commissions shall be the Beverly Entities' sole responsibility, without
         regard to the provisions of Sections 13.2.2D and 13.2.2F.

         7.1.15 Accuracy of Representations and Warranties. Except as expressly
         herein otherwise provided, the representations and warranties of the
         Beverly Entities set forth in this Agreement (other than those
         contained in Section 7.1.10 hereof) shall be true and correct when made
         and on and as of the Closing Date and as of the Effective Time as
         though such representations and warranties were made at such times.

         7.1.16 ERISA and Related Matters.

                  (a) As used in this Agreement, the term "Employment Benefit
                  Plan" means any "employee benefit plan" (within the meaning of
                  Section 3(3) of ERISA), and any other bonus, profit sharing,
                  pension, severance, deferred compensation, fringe benefit,
                  insurance, welfare, medical, medical reimbursement, health,
                  life, stock option, stock purchase, tuition refund, service
                  award, company car, scholarship,


                                       17
<PAGE>


                  relocation, disability, accident, sick pay, sick leave,
                  vacation, incentive, commission, retention or other plan,
                  policy, trust fund or arrangement.

                  (b) Schedule 7.1.16 attached hereto contains a true and
                  complete list of all Employee Benefit Plans currently in
                  effect, (i) maintained, sponsored, participated in, or
                  contributed to by Seller on behalf of any of its employees
                  (whether current or former) working at or in connection with
                  the Facilities or their beneficiaries, (ii) which provides or
                  provided benefits to any such employee or beneficiary, or
                  (iii) with respect to which the Beverly Entities have or have
                  had any obligation on behalf of any such employee or
                  beneficiary (each a "Plan" and collectively the "Plans").

                           (i) each Plan has, at all times, been maintained and
                           operated in compliance, in all material respects,
                           with its terms and the requirements of all applicable
                           laws, including without limitation, ERISA, as
                           amended, and the Code;

                           (ii) each Plan intended to be qualified under Section
                           401(a) of the Code has been determined to be so
                           qualified, as to design, by the Internal Revenue
                           Service. Each Plan intended to be tax-qualified is
                           qualified under Section 401(a) of the Code (and with
                           respect to the Beverly Entities' 401(k) plan, Section
                           401(k) of the Code); and

                           (iii) each trust established in connection with any
                           Plan which is intended to be exempt from federal
                           income taxation under Section 501(a) of the Code
                           continues to be exempt.

         7.1.17 Taxes. Except as set forth in Schedule 7.1.17 attached hereto,
         (i) all taxes including, without limitation, income, property, sales,
         use, franchise, value added, employees' income withholding and social
         security taxes imposed by the United States or by any state,
         municipality, subdivision or instrumentality of the United States, or
         by any other taxing authority, which are due and payable by Beverly
         Entities with respect to the Facilities and all interest and penalties
         thereon, whether disputed or not (hereinafter, the "Taxes"), have been
         paid in full or are being contested in accordance with applicable law,
         and (ii) all Tax returns required to be filed in connection therewith
         have been accurately prepared and duly and timely filed.

         7.1.18 Contracts.

                  (a) Schedule 1.1 attached hereto includes without limitation a
                  true and correct list as of the date of this Agreement of all
                  outstanding Assigned Contracts that are Material Contracts
                  (though not all contracts on such schedule are Material
                  Contracts) to which the Beverly Entities are parties and
                  Beverly Entities have provided or will provide to Buyer access
                  to true and complete copies of each such written contract.
                  There is no default existing or continuing by Beverly Entities
                  or to their knowledge, of any other party, under the terms of
                  any contracts listed on



                                       18
<PAGE>


                  Schedule 1.1 hereto which could reasonably be expected to have
                  a material adverse effect on the Facilities effected by the
                  contract.

(b)               The Beverly Entities have provided or will provide Buyer with
                  specimen patient admission agreements with residents of the
                  Facilities, if any, or with any other persons or organizations
                  ("Patient Admissions Contracts"). Except as set forth on
                  Schedule 7.1.18(b) attached hereto, no Patient Admissions
                  Contract deviates from such standard forms, and all residents
                  of the Facilities have executed Patient Admissions Contracts,
                  except where such deviations or failures taken as a whole to
                  execute a Patient Admissions Contract could reasonably be
                  expected to have a material adverse effect on the Facilities
                  taken as a whole.

         7.1.19 Condition of Assets.

                  (a) All of the Purchased Assets are in Beverly Entities'
                  possession or control and located at or on the Real Property.

                  (b) The Personal Property is in working order, sufficient for
                  normal operation of the business of the Beverly Entities
                  consistent with the Beverly Entities' customary practice, in
                  all material respects, and has been properly repaired,
                  replaced and maintained by the Beverly Entities in the
                  ordinary course of business and consistent with the Beverly
                  Entities' customary practice.

                  (c) The Real Property is working order and has been maintained
                  in operating condition and has been properly repaired,
                  replaced and maintained by the Beverly Entities in the
                  ordinary course of business and consistent with the Beverly
                  Entities' customary practice.

         7.1.20 Survey Reports, Etc. True and complete copies of all survey
         reports, waivers of deficiencies, plans of correction, and any other
         investigation reports issued with respect to the Facilities for the
         last two (2) years have been provided or will be provided to Buyer.

         7.1.21 Intellectual Property.

                  (a) Definition of Intellectual Property. "Intellectual
                  Property" shall mean (i) the trademarks, service marks, trade
                  dress, trade names and corporate names and registrations and
                  applications for registrations thereof (other than those names
                  excluded in the immediately succeeding sentence collectively,
                  "Trademark Properties"); (ii) financial and marketing plans,
                  and customer and supplier lists and information ("Trade
                  Secrets"); (iii) the telephone numbers used by each Seller and
                  each Facility in the conduct of their business and operations;
                  and (iv) the goodwill symbolized by all of the foregoing and
                  connected therewith throughout the world. Notwithstanding
                  anything to the contrary, Intellectual Property shall exclude
                  the following names, designs or marks: "Beverly", "Beverly
                  Enterprises", "Beverly Enterprises Florida", "Leisure Lodge"
                  and any variation, derivative or combination thereof and
                  associated trademarks, service marks and logos and all
                  Excluded Assets.


                                       19
<PAGE>


                  (b) Ownership of Intellectual Property. Except as would not
                  have a material adverse effect on any Facility, Sellers own
                  and have good and marketable title to all such Intellectual
                  Property as is presently used by or in connection with each
                  Facility in the conduct of their businesses free and clear of
                  all liens, charges and encumbrances or have the right to use
                  pursuant to valid license all such Intellectual Property.

                  (c) Registrations. Schedule 7.1.21(a) (which shall be
                  furnished within fourteen (14) days after the date hereof)
                  sets forth a complete list of all Intellectual Properties used
                  by Beverly Entities in the operation of the Facilities that
                  are currently registered in any jurisdiction, and identifies
                  the jurisdiction, Property, registration number and date of
                  registration. None of such registrations has been determined
                  to be invalid.

                  (d) Maintenance. Except as set forth in Schedule 7.1.21(b)
                  (which shall be furnished within fourteen (14) days after the
                  date hereof) and except as would not have a material adverse
                  effect on any Facility, all filing and maintenance fees that
                  are required to maintain registrations of the Beverly
                  Entities' Intellectual Property used in the operation of the
                  businesses at the Facilities and that are due as of the date
                  of this Agreement have been filed and paid and none of Beverly
                  Entities' Intellectual Property rights are subject to any
                  renewal or maintenance filings, fees, taxes, or actions
                  falling due within ninety (90) days after the date of this
                  Agreement.

                  (e) Unregistered Trademark Properties. Schedule 7.1.21(c)
                  (which shall be furnished within fourteen (14) days after the
                  date hereof) sets forth a complete list of all unregistered
                  Trademark Properties used by Beverly Entities in the conduct
                  of their respective businesses at the Facilities that would
                  have a material adverse effect on any Facility.

                  (f) Non-infringement. Except as disclosed in Schedule
                  7.1.21(d) (which shall be furnished within fourteen (14) days
                  after the date hereof), to the Beverly Entities' actual
                  knowledge, the Beverly Entities have not infringed,
                  misappropriated, or otherwise used in an unauthorized manner
                  the proprietary rights (including but not limited to, the
                  patent, trade secret, trademark, service mark, trade dress, or
                  copyright rights) of any third party in the operation of the
                  businesses at the Facilities that would have a material
                  adverse effect on any Facility.

                  (g) Rights Granted to Others. The Beverly Entities have not
                  granted or committed to grant any rights in their Intellectual
                  Property used in the operation of the business at the
                  Facilities of any nature whatsoever to any third party except
                  as disclosed in Schedule 7.1.21(e) (which shall be furnished
                  within fourteen (14) days after the date hereof) and except as
                  would not have a material adverse effect on any Facility.


                                       20
<PAGE>


                  (h) No Claims. Except as disclosed in Schedule 7.1.21(f)
                  (which shall be furnished within fourteen (14) days after the
                  date hereof) and except as would not have a material adverse
                  effect on any Facility, the Beverly Entities have received no
                  written notice of any claim asserted by any person: (i)
                  claiming that any action by the Beverly Entities in the
                  operation of their businesses at the Facilities infringes on
                  the intellectual property rights of any other person or (ii)
                  challenging or questioning the right of the Beverly Entities
                  to use any of the Intellectual Property being used by them in
                  the operation of their businesses at the Facilities.

                  (i) Unauthorized Use. Except as would not have a material
                  adverse effect on any Facility, the Beverly Entities do not
                  have actual knowledge of any unauthorized use, infringement or
                  misappropriation of any of their Intellectual Property in the
                  operation of their businesses at the Facilities by any third
                  party, including, but not limited to, any employee or former
                  employee of the Beverly Entities.

         7.1.22 Capital Expenditures. Other than the construction activities
         currently in progress at (i) Lee Convalescent Center (Facility #789)
         with respect to renovations, (ii) Coral Trace (Facility #793) with
         respect to water pipe replacements and (iii) Harbor Beach (Facility
         #2168) with respect to a parking lot expansion, there are no
         construction activities currently in progress at the Facilities other
         than in the ordinary course of business.

         7.1.23 Inventory and Supplies. The inventories of perishable food,
         nonperishable food, central supplies, linen, housekeeping and other
         supplies are in sufficient quantity and condition for the operation of
         the business of the Beverly Entities at the Facilities consistent with
         past practices.

         7.1.24 Absence of Notices. Except as disclosed on Schedule 7.1.24, the
         Beverly Entities have not received written notice that any customer or
         supplier of the Beverly Entities intends to discontinue or
         substantially alter prices or terms to, or significantly diminish its
         relationship with the Beverly Entities as a result of the transactions
         contemplated hereby or otherwise which collectively would have a
         material adverse effect on the Facilities taken as a whole.

         7.1.25 Medicare and Medicaid Participation:

                  (a) Except as set forth on Schedule 7.1.25,

                           (i) Each of the Facilities that is eligible to
                           receive payment under Title XVIII ("Medicare") and
                           Title XIX ("Medicaid") of the Social Security Act has
                           valid and current provider agreements and one or more
                           provider numbers with the federal Medicare, all
                           applicable state Medicaid and successor programs
                           through intermediaries;

                           (ii) Each of the Facilities that is receiving
                           payments under CHAMPUS or TRICARE has valid and
                           current provider agreements with one or more


                                       21
<PAGE>



                           provider numbers with CHAMPUS and/or TRICARE programs
                           through intermediaries;

                           (iii) Medicare, Medicaid, CHAMPUS, TRICARE and other
                           federal, state or local governmental reimbursement
                           programs, or successor programs to any of the above,
                           are referred to herein as "Government Programs"; and

                           (iv) Each of the Facilities is in compliance with the
                           conditions of participation for applicable Government
                           Programs except where the failure to so comply taken
                           as a whole would have a material adverse effect on
                           the Facilities taken as a whole.

                  (b) The Beverly Entities are in compliance in all material
                  respects with the obligations under the CIA.

         7.1.26 Patient Records. Except as provided on Schedule 7.1.26 and other
         than as would not have a material adverse effect on the Facilities
         taken as a whole, to the Beverly Entities' actual knowledge, there is
         no deficiency in the patient records of the Beverly Entities, used or
         developed in connection with the business conducted at the Facilities,
         to be delivered by Beverly Entities to Buyer pursuant to the terms of
         this Agreement, and all such records have, prior to the date of this
         Agreement, been created and maintained in compliance with all
         applicable federal, state or local laws and regulations governing the
         preparation, maintenance confidentiality, transfer and/or destruction
         of such records.

         7.1.27 Knowledge. For the purposes of this Agreement, "knowledge",
         "actual knowledge" and similar standards with respect to the Beverly
         Entities shall mean actual awareness of Jeff Bomberger, Rich Mason or
         Andrea Ludington, the regional directors for the Facilities, following
         reasonable inquiry, and Doug Babb, Dwight Kouri and Brad McKown.

         7.1.28 Leased Facilities; Real and Personal Property. The real and
         personal property leased pursuant to the Leases is in all material
         respects in a condition that satisfies the requirements that each Lease
         may have for the condition of such property upon termination of the
         applicable Lease.

         7.1.29 Managed Facility. The real and personal property of the Managed
         Facility is in all material respects in a condition that satisfies the
         requirements that the Management Agreement may have for the condition
         of such property upon termination of the Management Agreement.

         7.1.30 Patient Trust Funds. Except as provided on Schedule 7.1.30, the
         Beverly Entities have maintained patient trust funds on behalf of the
         residents of the Facilities in material compliance with all applicable
         laws, rules and regulations, and have maintained an accurate and
         updated accounting of such trust funds.


                                       22
<PAGE>


         7.1.31 Licensure. With respect to each Facility, the Beverly Entities
         have in full force and effect licenses for the operation of each such
         Facility. Except as set forth on Schedule 7.1.31, there are no current,
         or to the actual knowledge of the Beverly Entities, threatened
         investigations by any applicable licensing authority that would
         materially affect any of the licenses or the Beverly Entities' ability
         to continue to operate any of the Facilities as the lawful operator of
         such Facilities. The Beverly Entities are in the process of correcting,
         contesting or appealing, in accordance with applicable law, all
         deficiencies identified in a state survey of any Facility.

         7.1.32 BHRS. Beverly Health and Rehabilitation Services, Inc. ("BHRS")
         owns, either directly or indirectly, the outstanding shares of all
         nursing facilities operated by Beverly Enterprises, Inc. or its
         affiliates. The assets of BHRS constitute not less than seventy percent
         (70%) of the total assets of Beverly Enterprises, Inc. For the years
         ending December 31, 1998, 1999 and 2000, BHRS contributed in excess of
         one hundred percent (100%) of the operating income (excluding unusual
         and extraordinary items) of Beverly Enterprises, Inc.



7.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Beverly Entities as follows:

         7.2.1 Organization. Buyer is a duly organized and validly existing
         limited liability company organized under the laws of and in good
         standing in the State of Florida, and is qualified to do business in
         the State of Florida, the only jurisdiction in which the nature of its
         business or the location of property makes such qualification
         necessary. Buyer has full power and authority to own and lease the
         Facilities and to carry on the business contemplated by this Agreement.

         7.2.2 Authority. Buyer has the complete and unrestricted limited
         liability company power to enter into this Agreement and perform its
         obligations hereunder. The execution, delivery and performance of this
         Agreement have been duly authorized by the board of directors of Buyer
         in accordance with its operating agreement, and no further limited
         liability company action by Buyer or approval of its members or of any
         third party, other than contemplated in this Agreement, will be
         required to make this Agreement valid and binding upon Buyer in
         accordance with its terms. When executed and delivered, this Agreement
         and all instruments executed and delivered pursuant hereto will
         constitute valid and binding obligations of Buyer, enforceable in
         accordance with their terms, except as limited by applicable laws
         relating to bankruptcy, insolvency, reorganization, liquidation,
         moratorium or other similar laws of general application relating to or
         affecting creditors' rights.

         7.2.3 Licensure and Financing

A. Buyer is aware of no existing event, matter or situation or any pending or
threatened litigation or event, happening or occurrence which would prevent or
materially and adversely impair Buyer's ability to obtain licensure in its name
as required by applicable law for its


                                       23
<PAGE>


ownership and/or operation of the Facilities. Neither Buyer nor any of its
affiliates has been denied licensure of a nursing home in any state.

B. Buyer acknowledges and agrees that its ability to obtain financing for the
consummation of this transaction are not conditions to Closing.

         7.2.4 Condition of the Purchased Assets. Notwithstanding that all the
         members of Buyer have not had the opportunity to inspect the Purchased
         Assets, or to conduct all of its due diligence, Buyer accepts the
         Purchased Assets in the condition set forth in Section 2.4 hereof.
         Buyer has not relied on any representations, warranties, statements,
         summaries or annotations by any of the Beverly Entities other than as
         set forth in this Agreement and in any other agreement contemplated
         herein.

         7.2.5 Litigation. To the actual knowledge of Buyer, there does not
         exist any pending or threatened litigation (including, without
         limitation, derivative actions), arbitration proceeding or governmental
         proceeding which could prevent or delay the consummation of the
         transactions contemplated hereby.

         7.2.6 The Beverly Entities' Representations and Warranties. Buyer has
         no knowledge of any breach, untruth or inaccuracy by the Beverly
         Entities of a representation, warranty, or covenant made by the Beverly
         Entities in or pursuant to this Agreement. This Section 7.2.6 shall not
         affect Buyer's rights with respect to any breach, untruth or inaccuracy
         by the Beverly Entities discovered after the Closing.

         7.2.7 Brokers, Finders. Buyer knows of no brokerage or finder's fees or
         commissions which will be payable in connection with the sale of the
         Purchased Assets hereunder other than Formation Capital, and if any
         such fees or commissions are claimed or payable as the result of any
         other party's claimed representation of Buyer, such fees and
         commissions shall be Buyer's sole responsibility without regard to the
         provisions of Section 13.3.2D.

         7.2.8 Accuracy of Representations and Warranties. Except as expressly
         herein otherwise provided or contemplated, the representations and
         warranties of Buyer set forth in this Agreement shall be true on and as
         of the Closing Date and as of the Effective Time as though such
         representations and warranties were made at such times.

         7.2.9 Solvency. Each of Buyer and its appointees permitted hereunder is
         solvent, has not made a general assignment for the benefit of its
         creditors, and has not admitted in writing its inability to pay its
         debts as they become due. Further, each of Buyer and its appointees
         permitted hereunder has not filed, nor does Buyer or its permitted
         appointees contemplate the filing of, any bankruptcy, reorganization,
         or arrangement, insolvency or liquidation proceedings, or any other
         proceedings for the relief of debtors in general, nor has any such
         proceeding been instituted by or against Buyer or its permitted
         appointees, nor has any such proceeding, to Buyer's and its permitted
         appointees actual knowledge, been threatened or contemplated.


                                       24
<PAGE>


         7.2.10 Knowledge. For the purposes of this Agreement, "knowledge,"
         "actual knowledge" and similar standards with respect to Buyer shall
         mean the actual knowledge of William Smith and Joy Feldman following
         reasonable inquiry.

         7.2.11 Buyer's Net Worth. Immediately after the Effective Time, Buyer's
         net worth shall be at least Fifteen Million Dollars ($15,000,000).


                                   ARTICLE 8.
                                    Covenants

8.1 Covenants of the Beverly Entities. The Beverly Entities hereby covenant and
agree as follows:

         8.1.1 Accounts Payable. The Beverly Entities shall pay all accounts
         payable with respect to the Facilities that relate to the period prior
         to the Effective Time including, without limitation, all Supplies
         received prior to the Effective Time and for all other goods and
         services delivered, rendered, or performed prior to the Effective Time.

         8.1.2 The Beverly Entities' Cost Reports. The Beverly Entities shall
         prepare and file with the appropriate Medicare and Medicaid agencies
         their final cost reports with respect to their operation of the
         Facilities as soon as practicable after the Effective Time and within
         the time required by law, and will provide Buyer copies of said reports
         at least five (5) business days after such filing. In the event the
         federal or state agencies making payments to the Beverly Entities for
         services performed prior to the Effective Time make any claim for
         reimbursement of overpayment occurring for any such period, then the
         Beverly Entities shall be responsible for such claims and shall notify
         Buyer of such claims within five (5) business days after the Beverly
         Entities' receipt thereof.

         8.1.3 Maintenance of Supplies, etc. Prior to Closing, the Beverly
         Entities agree to maintain the Supplies, foodstuffs and other
         consumable inventory at levels which are consistent with their
         operations, in the ordinary course of business, in compliance with all
         health care regulations, and shall not sell or remove any personal
         property after the date hereof except in the ordinary course of
         business.

         8.1.4 Maintenance of Standards. The Beverly Entities agree to continue
         the operations of the Facilities between the date hereof and the
         Effective Time in accordance with the same standards of care and
         diligence historically applied to the operation of the Facilities by
         the Beverly Entities and in material compliance with all applicable
         laws, rules and regulations.

         8.1.5 Access to Records, Properties and Premises. Between the date
         hereof and the Closing, the Beverly Entities shall cooperate with Buyer
         and their accountants, engineers, counsel and other representatives in
         obtaining reasonable access to all assets, properties, books,
         contracts, agreements, records, documents and other data of the
         Facilities in the


                                       25
<PAGE>


         Beverly Entities' possession or under its control, as Buyer or its
         representatives shall reasonably request.

         8.1.6 Preserve Business

A. For the period between the date of this Agreement and the Effective Time, the
Beverly Entities shall use their commercially reasonable efforts to continue,
carry on, maintain, protect and preserve the businesses operated by them at the
Facilities, preserve their relationships with patients and residents, hospitals,
suppliers, third party payors and others with which they have business relations
and shall otherwise deal in the Facilities only in the ordinary course of
business and in the same manner as was customary prior to the date hereof. For
the period between the date of this Agreement and the Effective Time, the
Beverly Entities shall keep and maintain in full force and effect the same or
reasonably equivalent insurance coverage relating to the Facilities which were
in effect on the date hereof. For the period between the date of this Agreement
and the Effective Time, the Beverly Entities further covenant and agree that
they shall promptly pay when due any and all uncontested liabilities,
obligations or indebtedness relating in any manner or respect to the Facilities
with respect to such time period.

B. For the period between the date of this Agreement and the Effective Time, the
Beverly Entities shall maintain in full force and effect any and all licenses,
authorizations, permits, permissions, approvals and provider agreements (whether
obtained from local, state, federal or other governmental authorities) relating
to the Facilities, and shall apply or reapply, as the case may be, for any such
licenses, permits, authorizations, permissions, approvals or provider agreements
now in force and necessary to the Facilities to operate as they are currently
being operated and provide copies of any such applications to the Buyer within
five days of submittal of said application to the appropriate government
authority.

C. For the period between the date of this Agreement and the Effective Time, and
with respect to the Facilities, the Beverly Entities shall not, without prior
written consent of Buyer:

                           (i) enter into any contract or commitment, incur any
                  liability, absolute or contingent, or waive any right which is
                  not in the ordinary course of business or which would
                  materially and adversely affect the Facilities;

                           (ii) extend, renew, modify or amend any collective
                  bargaining agreement, except as required under applicable law;

                           (iii) sell, assign, mortgage, pledge, hypothecate or
                  otherwise transfer or encumber (or attempt to commit to do the
                  same) any of the Facilities;

                           (iv) take any action which, if taken prior to the
                  date hereof, would constitute or result in a material breach
                  of any of the representations, warranties or covenants of the
                  Beverly Entities set forth in this Agreement;

                           (v) adjust the wages of any employee at the
                  Facilities other than in the ordinary course of business,
                  except for "retention" or "stay-on"



                                       26
<PAGE>


                  bonuses paid in connection with the transactions contemplated
                  by this Agreement; or

                           (vi) lease any equipment under any lease that the
                  Beverly Entities capitalize in the ordinary course of business
                  where the amount capitalized exceeds Five Thousand Dollars
                  ($5,000).

D. The Beverly Entities shall advise Buyer in writing as to the particulars of
any governmental investigations, inspections or proceedings, of which it has
knowledge, commenced against the Beverly Entities (with respect to the
Facilities) or the Facilities after the date hereof and prior to the Effective
Time, to the extent such investigations, inspections or proceedings could
reasonably be expected to have a material adverse effect on any Facility. The
Beverly Entities shall provide such notice within ten (10) days after gaining
such knowledge.

E. The Beverly Entities shall advise Buyer in writing of the particulars of any
structural deficiencies (with respect to the Facilities), of which it has
knowledge, cited by the Agency for Health Care Administration (the "Department")
or other appropriate regulatory authorities after the date hereof and prior to
the Effective Time. The Beverly Entities shall provide such notice within ten
(10) days after gaining such knowledge. The Beverly Entities shall respond to
all such deficiencies in accordance with applicable law.

         8.1.7 Hart-Scott-Rodino. The Beverly Entities shall use commercially
         reasonable efforts to furnish, or cause to be furnished, such
         information, and promptly file, or cause to be filed, such documents as
         may be required in order for the Beverly Entities to comply with the
         HSR Act, and the Beverly Entities shall cooperate fully in order that
         all necessary filings by Buyer in connection therewith shall be
         completed as soon as possible after the execution and delivery of this
         Agreement or earlier if practicable. The Beverly Entities shall use
         commercially reasonable efforts to respond promptly to any request for
         additional information received in connection with any HSR Act filing,
         and the Beverly Entities shall promptly notify Buyer of any such
         request for additional information.

         8.1.8 Landlord Documents

A. Subject to Section 9.1E hereof, the Beverly Entities shall use commercially
reasonable efforts to obtain (i) from the Lessors, if required under the Leases,
written consent to the Subleases or Lease Assignments and reasonably acceptable
to Buyer and the Beverly Entities, including without limitation, the applicable
Lessor's written agreement, if necessary, that the applicable Lease and Sublease
will not be adversely impacted by any other agreement of the Beverly Entities
with Lessor and any renewal options will not require the renewal of leases
relating to other Facilities (the "Lessor Consent and Estoppel"), and (ii) from
the owner of the Managed Facility, if required under the Management Agreement,
written consent to the assignment of the Management Agreement and any rights
held by the Beverly Entities with respect to the Managed Facility (the "Managed
Facility Consent"). The Beverly Entities shall also use commercially reasonable
efforts to obtain from the Lessors and lessee of the Managed Facility a release
of the Beverly Entities from all liability under such Leases and Management
Agreements, in which event such Leases and Management Agreement will be assigned
to Buyer as provided in Section 4.1(b) hereof.


                                       27
<PAGE>


B. The Beverly Entities' agreement to use commercially reasonable efforts
pursuant to this Section 8.1.8 shall not be deemed to require the Beverly
Entities to incur any out-of-pocket expense or obligation in connection with
such efforts in excess of Ten Thousand Dollars ($10,000) per Leased or Managed
Facility.

         8.1.9 Payroll. The Beverly Entities shall, except as otherwise agreed
         herein, be responsible for and shall pay any and all obligations for
         wages, salaries, earned and unused vacation benefits, health and
         welfare benefits (including, but not limited to, health, dental,
         disability, life and severance pay, if any), deferred or incentive
         compensation including but not limited to bonus payments (and
         including, without limitation "retention" and "stay-on" bonuses) and
         commissions, any other benefits payable to employees upon their
         termination in accordance with the applicable Beverly Entity's policies
         at each Facility (collectively, "PTO") and all other payroll expenses
         and taxes for its employees, in each case, owed as of the Effective
         Time. The Beverly Entities shall be responsible for all claims and
         obligations under insurance policies and similar coverage arising out
         of events occurring prior to the Effective Time.

         8.1.10 List of Employees. Within thirty (30) days after the execution
         of this Agreement, the Beverly Entities shall provide a list of all
         employees of the Beverly Entities at the Facilities and a schedule of
         their rates of pay, length of employment, current benefits, including
         overtime, vacation, sick and holiday pay and flex benefits, and
         deferred or incentive compensation, including any bonus plans (other
         than "retention" or "stay-on" bonuses in connection with the
         transactions contemplated by this Agreement) as of the Effective Time
         (the "PTO Schedule"). Approximately five (5) days prior to the Closing
         Date, the Beverly Entities shall provide an updated PTO Schedule.

         8.1.11 Trust Accounts for Patients and Residents. Within thirty (30)
         days following the Effective Time, the Beverly Entities shall deliver
         to Buyer an accounting, properly reconciled as of the Effective Time,
         of all patient and resident trust funds that the Beverly Entities held
         with respect to the Facilities at the Effective Time.

         8.1.12 Licensure Notices. As soon as reasonably practicable but in no
         event later than ten days after the date of this Agreement, the Beverly
         Entities shall provide notice of the transactions contemplated hereby
         to the Department. The Beverly Entities shall cooperate with Buyer and
         take reasonable measures to shorten the periods required under
         applicable law for notice, licensure approval and other similar
         processes in connection with Buyer's receipt of licensure as described
         in Section 8.2.1 hereof. If the Beverly Entities and Buyer mutually
         agree to pay fees to the Department to shorten such periods, the
         Beverly Entities shall pay fifty percent (50%) of all such fees.

         8.1.13 Final Cost Report. The Beverly Entities shall prepare a final
         cost report for both Medicare and Medicaid for each Facility within the
         time frame required by law.

         8.1.14 Unions. The Beverly Entities shall use commercially reasonable
         efforts to assist Buyer in scheduling meetings, within thirty (30) days
         after the execution of this Agreement, between Buyer or Buyer's
         representative and representatives from the unions


                                       28
<PAGE>


         that have members that are employees of the Beverly Entities at the
         Facilities ("Union Meetings").

         8.1.15 Patient Census Information and Financial Information. The
         Beverly Entities shall deliver to Buyer monthly, commencing upon the
         execution of this Agreement, census information on the number of
         licensed beds occupied by bona fide residents pursuant to Patient
         Admissions Contracts at normal and customary rates then in effect for
         the Beverly Entities, monthly financial statements for each Facility
         and any other financial report generated by the Beverly Entities in the
         ordinary course of business for any of the Facilities and requested by
         Buyer.

         8.1.16 Construction. In the event the construction at Facilities ##
         789, 793 and 2168 set forth in Section 7.1.21 hereof is not expected to
         be completed on or before the Closing Date, Buyer and the Beverly
         Entities agree to enter into a construction management agreement on or
         prior to the Closing Date on commercially reasonable and customary
         terms and conditions pursuant to which the Beverly Entities will manage
         the completion of such construction (the "Construction Management
         Agreement"). During the management of such construction, the Beverly
         Entities shall cooperate with Buyer in all reasonable respects to allow
         Buyer to monitor the completion of such construction. On or before the
         Closing Date, the Beverly Entities shall cause the general contractor
         responsible for performing such construction to name Buyer as an
         additional obligee on the performance bond it has provided the Beverly
         Entities or the applicable Beverly Entity and Buyer shall enter into a
         mutually acceptable agreement to provide for the allocation of any
         proceeds of such bond. The Beverly Entities shall pay all costs and
         expenses related to the construction described in this paragraph.

         8.1.17 No Solicitation. Until the No Solicitation End Date (as defined
         below), so long as Buyer is in material compliance with all of its
         obligations hereunder, the Beverly Entities agree they shall not
         directly or indirectly, through any officer, director, employee, agent
         or otherwise, enter into or conduct substantive discussions or
         negotiations, solicit, initiate or encourage submission of proposals or
         offers from any person relating to any acquisition of any or all of the
         Facilities, or furnish to any other person any information with respect
         to, negotiate, discuss or otherwise cooperate in any way with, or
         assist or participate in, facilitate or encourage, any effort or
         attempt by any other person to do or seek any of the foregoing. Upon
         and after the No Solicitation End Date, the Beverly Entities shall not
         engage in any of the activities described in this section until the
         fifth (5th) day after the later of the No Solicitation End Date and the
         date it has provided notice to Buyer of its intent to do so. During
         such five (5) day period, the Beverly Entities shall provide Buyer with
         a reasonable opportunity to consult with the Beverly Entities about the
         reasons for their decision to engage in such activities. After such
         five (5) day period, the Beverly Entities may in their sole discretion
         proceed to engage in such activities. Notwithstanding the foregoing,
         the Beverly Entities may not enter into a definitive purchase and sale
         agreement with respect to any or all of the Facilities prior to the
         expiration or valid termination of this Agreement. The "No Solicitation
         End Date" shall be the thirtieth (30th) or forty-fifth (45th) day, as
         applicable, after the execution and


                                       29
<PAGE>


         delivery hereof by all parties hereto if, but only if, Buyer has not
         made the deliveries required by such dates pursuant to Section 8.2.12
         hereof.


         8.1.18 Regulatory Inspections. The Beverly Entities shall be
         responsible for, and shall bear all costs and expenses incurred in
         connection with any regulatory inspection or survey conducted prior to
         the Effective Time; provided, however, that with respect to matters
         relating to the life safety code and physical plant of the Facilities
         that are revealed in any such inspection or survey occurring after the
         date hereof, Buyer shall not be required to pay any amount in excess of
         One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate
         for all Facilities.

         8.1.19 Lifecare Contracts. The Beverly Entities shall reimburse Buyer
         for the "Contract Cost" (as defined below) for any resident in any
         Facility who is a resident pursuant to a multi-year admissions
         agreement that provides for a payment by such resident of a fixed
         amount that is below market rates by more than ten percent (10%). For
         any such resident, the "Contract Cost" shall be calculated as the net
         present value (using a discount rate of 9% per annum) of the applicable
         Facility's average cost of care minus the amount actually required to
         be paid by such resident under his/her admissions agreement, calculated
         over the shorter of (i) the remaining term of such admissions agreement
         and (ii) the remaining life of such resident as determined by
         applicable actuarial tables.

         8.1.20 Cooperation. From the date hereof and until the Closing Date,
         the Beverly Entities shall cooperate in all commercially reasonable
         respects if requested by Buyer to assist in the transition of the
         operations of the Facilities from the Beverly Entities to Buyer,
         including but not limited to, after Buyer has filed its applications
         for operating licenses with the Department, providing the Buyer access
         to all the Facilities and employees of the Facility and provide
         insurance cost runs and claims history for general liability,
         professional liability, property and workers' compensation insurance
         for the previous three (3) years, provided that the Beverly Entities
         shall not be required to incur any material out-of-pocket costs or
         expenses in connection with such cooperation.

         8.1.21 Depreciation Recapture. The Beverly Entities shall pay any
         amounts due arising from the recapture of depreciation or recapture of
         fair rental value index to the extent owed under Florida law.

         8.1.22 Notification. From the date hereof through the Closing Date, the
         Beverly Entities shall promptly notify the Buyer in writing of any
         discovery on their part of any event, fact or circumstance that would
         constitute a breach if the representations or warranties were made as
         of the date of discovery; provided, however, that nothing herein shall
         relieve Buyer of its obligations to close the transaction contemplated
         hereby in the event that the Beverly Entities correct such event, fact
         or circumstance such that the representations are true as of Closing.
         No such notification shall be deemed to relieve the Beverly Entities of
         its obligations hereunder.

                  8.1.24 OIG Confirmation. The Beverly Entities shall use their
commercially reasonable efforts to secure the letter or evidence from OIG
contained in Section 10.1.10.


                                       30
<PAGE>


8.2 Covenants of Buyer. Buyer hereby covenants and agrees as follows:

         8.2.1 Licensure. Prior to the Closing, Buyer shall use commercially
         reasonable efforts and due diligence to obtain a license from the
         Department, or commitment that such license will be issued as of the
         Effective Time, and such other licenses and permits as may be required,
         to authorize Buyer or its appointees to operate the Facilities as they
         are currently operated and to obtain Medicare and Medicaid
         certification and provider agreements thereunder. As soon as reasonably
         practicable after the Beverly Entities provide the notices described in
         Section 8.1.12 hereof, Buyer shall cause all applications for such
         licenses and permits to be submitted, properly completed, to the
         Department and other appropriate regulatory authorities. Buyer shall
         cooperate with the Beverly Entities and take reasonable measures to
         shorten the periods required under applicable law for notice, licensure
         approval and other similar processes in connection with the receipt of
         licensure as described in this Section. If the Beverly Entities and
         Buyer mutually agree to pay fees to the Department to shorten such
         periods, Buyer shall pay fifty percent (50%) of all such fees. In the
         event for any reason Buyer shall be unable to obtain necessary licenses
         for any of the Facilities prior to the Closing Date, then each such
         Facility shall be deemed an Escrow Facility.

         8.2.2 Assumption of Contracts. Buyer covenants and agrees to assume, or
         to cause its appointees to assume all the terms and provisions of the
         Leases, the Management Agreement and Assigned Contracts and to perform
         all obligations accruing pursuant to any of the Leases, the Management
         Agreement and Assigned Contracts subsequent to the Effective Time.
         Notwithstanding the foregoing or any other provision of this Agreement,
         Buyer shall not assume, and the Beverly Entities shall be responsible
         for any Non-Assumed Liability. For the purposes of this Agreement,
         "Non-Assumed Liability" means any liability, obligation or commitment
         or obligation arising under the Leases, Management Agreement or
         Assigned Contract that (a) arises on or prior to the Effective Time,
         (b) are attributable to any breach of such Management Agreement or
         Assigned Contract by one or more of the Beverly Entities, or (c) arise
         from any event, circumstance or condition occurring or existing on or
         prior to Effective Time that but for notice or lapse of time would
         constitute a breach of such Management Agreement or Assigned Contract
         prior to the Effective Time, except to the extent Buyer has exacerbated
         such event, circumstance or condition.

         8.2.3 Accounts Payable. Buyer agrees to assume, or to cause its
         appointees to assume, all accounts payable for Supplies and other goods
         or equipment received at the Facilities on and subsequent to the
         Effective Time, and for services rendered and performed on and
         subsequent to the Effective Time.

         8.2.4 Trust Accounts for Patients and Residents. Buyer recognizes the
         Beverly Entities will, at the Closing, transfer to Buyer or its
         appointees all trust accounts for patients and residents currently held
         by the Beverly Entities. With respect to such trust accounts for
         patients and residents, Buyer agrees to assume, or to cause its
         appointees to assume, custody of such accounts and treat such accounts
         in the fiduciary capacity required by law.


                                       31
<PAGE>


         8.2.5 Maintenance of Patient and Resident Records. Buyer understands
         that all Beverly Entities' patient and resident records are being
         transferred hereunder to Buyer, and, with respect to all patient and
         resident records, Buyer agrees to, and to the extent doing so is within
         Buyer's control, to cause any future owner, operator, lessee and
         manager to, maintain such records as prescribed by law and in
         accordance with the CIA (as more fully set forth in Section 8.2.6
         hereof), to allow the Beverly Entities, or their agents or
         representatives, to examine from time to time such records relating to
         the period of the Beverly Entities' operation of the Facilities, to
         promptly cooperate with the Beverly Entities, their agents or
         representatives in their examination or review of such records and to
         promptly provide the Beverly Entities with copies thereof at the
         Beverly Entities' expense. Without limiting the generality of the
         foregoing sentence, Buyer shall obtain from any purchaser of any
         Facility a contractual obligation to comply with the obligations set
         forth in this Section 8.2.5, which contract shall name the Beverly
         Entities as third party beneficiaries.

         8.2.6 Cooperation. Buyer and its employees, officers, directors,
         partners, agents and consultants shall, and shall cause the operator of
         each Facility to, cooperate in all reasonable respects with the Beverly
         Entities and their attorneys and agents in the investigation, trial and
         defense of any claim, lawsuit or action, and any appeal therefrom,
         relating to the Beverly Entities' ownership of the Facilities. Buyer
         shall promptly cooperate in all reasonable respects and promptly comply
         with the Beverly Entities' reasonable requests in connection with
         obtaining Lessor Consent and Estoppels for any of the Leased Facilities
         and consent to the assignment of the Management Agreement. Subsequent
         to the Effective Time, upon reasonable notice, Buyer shall allow, and
         shall cause any future owner, lessee, manager and operator of the
         Facilities to allow the Beverly Entities and their agents and
         representatives to have reasonable access to, and to make copies of,
         the books, records and supporting material of the Facilities relating
         to the period prior to the Effective Time to the extent reasonably
         necessary to enable the Beverly Entities to investigate and defend
         malpractice or employee claims, to file or defend cost reports and tax
         returns and to perform similar matters. Without limiting the generality
         of the foregoing, in connection with any Medicare audit relating to
         periods prior to the Effective Time, Buyer shall allow, or shall cause
         any future owner, lessee, manager and operator to allow, the Beverly
         Entities, their agents and representatives and any auditors and their
         agents and representatives to have access to (i) the Facilities, (ii)
         any and all staff involved with payroll and timekeeping functions at
         any of the Facilities and (iii) the materials listed on Exhibit M
         hereto. In addition, the Beverly Entities shall be entitled to remove
         any such records for purposes of litigation involving a patient or
         employee to whom such record refers; provided, however, prior to
         removing any original records, the Beverly Entities will, at their sole
         cost and expense, provide Buyer with complete copies of such removed
         records. Any records so removed shall be returned promptly following
         its use. Buyer agrees to, and agrees to require any future lessee to,
         maintain such books, records and other material relating to the
         Facilities' operations prior to the Effective Time, including, but not
         limited to, patient records and records of patient funds, in the manner
         required by law and as required by that certain Corporate Integrity
         Agreement effective February 3, 2000, ("CIA") between Beverly
         Enterprises, Inc., a Delaware corporation, and the Office of Inspector
         General of the Department of Health


                                       32
<PAGE>


         and Human Services, said time period being seven (7) years from filing
         of reimbursement claim, or as required by law, whichever time period is
         longer. To the extent doing so is within Buyer's control, Buyer shall
         cause any future owner, lessee, manager and operator of any Facility to
         comply with the obligations of Buyer set forth in this Section 8.2.6.
         Without limiting the generality of the foregoing sentence, Buyer shall
         obtain from any purchaser of any Facility a contractual obligation to
         comply with the obligations set forth in this Section 8.2.6, which
         contract shall name the Beverly Entities as third party beneficiaries.

         8.2.7 Regulatory Inspections; Surveys. Buyer shall be responsible for
         and shall bear all costs and expense incurred in connection with any
         requirements of regulatory inspections or surveys conducted after the
         Effective Time and implementing any plans of correction relating to
         such surveys or inspections. Subject to the requirements of applicable
         law, Buyer agrees that it shall not request any regulatory inspection
         or survey of any Facility by any regulatory authority until after the
         Effective Time.

         8.2.8 Reimbursement. If Buyer receives from any federal or state agency
         payment which represents reimbursement in respect to underpayments made
         to the Beverly Entities for services rendered prior to the Effective
         Time, then it shall be deemed to be holder of such in trust for the
         Beverly Entities' benefit and it shall promptly remit such payments to
         the Beverly Entities. If Buyer receives from any federal or state
         agency any claim for reimbursement of overpayments made to the Beverly
         Entities for services rendered prior to the Effective Time, then Buyer
         shall notify the Beverly Entities of any such notices within ten (10)
         business days after Buyer's receipt thereof; provided that failure to
         provide such notice shall not limit or diminish the Beverly Entities'
         indemnification obligations under Section 13.2 hereof, except to the
         extent such failure to provide any Medicaid notice causes actual loss
         to the Beverly Entities and then only to the extent of such actual
         loss.

         8.2.9 Employees; WARN Act Compliance. The employment of all employees
         of the Beverly Entities at the Facilities shall terminate effective at
         the Effective Time. Buyer has complied in all material respects with
         and hereby agrees to comply in all material respects with the Worker
         Adjustment and Retaining Notification Act ("WARN Act") and all
         Department of Labor ("DOL") regulations related thereto to the extent
         that the WARN Act and the DOL regulations pertain to Buyer with respect
         to the transfer of the Facilities. Buyer covenants that Buyer will,
         upon Closing of the transactions contemplated hereby, offer employment
         to substantially all employees of the Beverly Entities at the
         Facilities as employees at will. Buyer shall offer each such individual
         employment at substantially the same compensation, same seniority, and
         substantially comparable benefits as offered by the Beverly Entities
         immediately prior to the Effective Time or as required by any
         collective bargaining agreement. Except as required by any collective
         bargaining agreement, it is agreed that the Plans are not being
         continued or assumed by Buyer and, under no circumstances, shall Buyer
         have any liability or obligation with respect to the Plans. Buyer
         agrees to provide all such employees with benefits as required by and
         in accordance with all applicable federal and state laws.


                                       33
<PAGE>


         8.2.10 Hart-Scott-Rodino. Buyer shall use commercially reasonable
         efforts to furnish, or cause to be furnished, such information, and
         promptly file, or cause to be filed, such documents as may be required
         in order for Buyer to comply with the HSR Act, and Buyer shall
         cooperate fully in order that all necessary filings by the Beverly
         Entities in connection therewith may be completed as soon as possible
         after the execution and delivery of this Agreement, or earlier if
         practicable. Buyer shall use commercially reasonable efforts to respond
         promptly to any requests for additional information received in
         connection with any HSR Act filing, and Buyer shall promptly notify the
         Beverly Entities of any such request for additional information.

         8.2.11 Accounts Receivable. Buyer agrees to fully cooperate with and
         assist the Beverly Entities in their collection of the private pay and
         private portion of Medicaid receivables, which such portion of the
         receivables shall be processed, to the extent permitted by applicable
         law, first-in-first-out ("FIFO") for thirty (30) days following the
         Closing, and thereafter last-in-first-out ("LIFO"). It is further
         agreed that, in connection with the non-private pay portion of Medicare
         and Medicaid receivables, collections relating to patients and
         residents who continue to reside at the Facilities after the Effective
         Time shall be applied to the account and period specified by the paying
         agency until the account is liquidated. Buyer further agrees to make
         available to the Beverly Entities reasonably adequate space, equipment,
         and facilities at the Facilities to permit an employee of the Beverly
         Entities to review and process the accounts receivable after the
         Effective Time, and to provide such employee with full access to the
         collection records with respect to the patients and residents owing
         such accounts receivable. Any funds received by Buyer which are due and
         payable to the Beverly Entities under this Section 8.2.11 shall be
         deemed to be held in trust by Buyer for the Beverly Entities' benefit
         and shall be remitted to the Beverly Entities no less frequently than
         once a month beginning fifteen (15) days after the Closing.

                  Buyer shall assume responsibility for the billing for and
         collection of payments on account of services rendered by it at the
         Facilities on and after the Effective Time. The Beverly Entities shall
         retain all rights in and title to the Accounts Receivable prior to the
         Effective Date and shall retain full responsibility for the collection
         thereof. The Beverly Entities agree that they may not institute legal
         action against any current resident at one of the Facilities in order
         to collect the Accounts Receivable without Buyer's prior written
         consent, which shall not be unreasonably withheld; provided, however,
         that with respect to any current resident for which consent is
         reasonably withheld, all payments received on behalf of such resident
         shall thereafter be processed, to the extent permitted by applicable
         law, on a FIFO basis until the Beverly Entities are paid in full.

                  All third party payor payments (Medicare, Medicaid, etc.)
         received by Buyer from and after the Effective Time shall relate to the
         pre-Effective Time or post-Effective Time account of the resident for
         whom the payment is made in accordance with the dates of service
         indicated on the remittance, and Buyer shall remit to the applicable
         Beverly Entities within fifteen (15) business days of its receipt
         thereof any payment


                                       34
<PAGE>


         received by Buyer that applies to a pre-Effective Time account,
         together with a copy of the remittance advice.

                  In addition, Buyer shall remit to the Beverly Entities within
         fifteen (15) business days of its receipt thereof any repayment or
         reimbursement received by Buyer arising out of cost reports filed for
         the cost reporting period ending prior to the Effective Time.

                  The Beverly Entities agree that any payment, whether received
         by the Beverly Entities from private pay patients or as repayment or
         reimbursement arising out of cost reports, that pertain to the period
         from and after the Effective Time shall be remitted by the Beverly
         Entities to Buyer within fifteen (15) business days of the Beverly
         Entities' receipt thereof to be applied and/or disbursed by Buyer in
         accordance with the terms of this Section.

         8.2.12 Financing Commitments. On or before the fifth (5th) day after
         the execution and delivery of this Agreement by all parties hereto,
         Buyer shall deliver to the Beverly Entities a true, correct and
         complete copy of its fully executed loan application (which shall
         contain, among other things, all conditions precedent to the funding of
         such loans) for senior and junior debt to finance the Purchase Price,
         subject to the last sentence of this paragraph. On or before the
         thirtieth (30th) day after the execution and delivery of this Agreement
         by all parties hereto, Buyer shall deliver to the Beverly Entities a
         written, signed acknowledgement, in form and substance reasonably
         acceptable to the Beverly Entities, by each of its senior and junior
         lenders (subject to the last sentence of this paragraph) financing the
         Purchase Price, describing the status of such lender's diligence
         process and stating that based on the diligence it has performed to
         such date, such lender knows of no state of facts that could reasonably
         be expected to prevent it from funding the senior and junior loans, as
         applicable (each, a "Comfort Letter"). In the event the Comfort Letters
         are not delivered on or before such thirtieth (30th) day, or if the
         Comfort Letters are not reasonably acceptable to the Beverly Entities,
         then the Beverly Entities shall so notify Buyer. Buyer shall have five
         (5) business days after such notice to deliver a revised or replacement
         Comfort Letter from a lending institution, reasonably acceptable to the
         Beverly Entities, if applicable, from which the senior and if
         applicable junior loans will be available. On or before the forty-fifth
         (45th) day after the execution and delivery of this Agreement by all
         parties hereto, Buyer shall deliver to the Beverly Entities a written,
         signed acknowledgement from each of its senior and junior lender(s)
         financing the Purchase Price that such lender(s) have completed all
         diligence and received all approvals required for the funding of such
         loans provided that failure to deliver the Financing Commitments
         required hereunder shall not be deemed a breach of this Agreement.
         Buyer's failure to timely comply with the provisions of this Section
         8.2.12 shall permit the Beverly Entities, at their option, by written
         notice to Buyer delivered to Buyer not later than the fifth (5th)
         business day after the required date for such delivery, to terminate
         this Agreement, provided that the Beverly Entities are not then in
         material breach of this Agreement. If the Beverly Entities have not
         timely terminated this Agreement pursuant to the immediately preceding
         sentence, such termination right shall be waived. In the event of said
         termination, the Escrow Agent shall pay the Deposit to


                                       35
<PAGE>


         Buyer. Notwithstanding anything to the contrary contained herein, in
         the event that Buyer does not obtain or elects not to pursue junior or
         mezzanine financing, then on such thirtieth (30th) day and forty-fifth
         (45th) day, Buyer shall provide the Beverly Entities with evidence
         reasonably satisfactory to the Beverly Entities that equity
         contributions will be available in an amount sufficient, when
         aggregated with senior financing, to pay the Purchase Price.

         8.2.13 Material Contracts. On or before the forty-fifth (45th) day
         after the date hereof, Buyer shall notify the Beverly Entities of those
         Material Contracts that it refuses to assume and the terms "Operating
         Contracts" or "Equipment Leases", as applicable, shall thereafter not
         include such contracts.

         8.2.14 OIG Confirmation. Buyer shall use commercially reasonable
         efforts to assist the Beverly Entities in securing the letter or
         evidence from OIG contained in Section 10.1.10.



                                   ARTICLE 9.
                              Additional Provisions

9.1 Title

A. Buyer has been provided the real property surveys covering each of the
Facilities provided by the Beverly Entities (the "Surveys").

B. Buyer has been provided title insurance commitments for an owner's policy of
title insurance for each of the Facilities other than the Managed Facility (the
"Title Commitments"), which commitments have been issued by Fidelity. The
aggregate amount of insurance for the Facilities shall not exceed the Purchase
Price.

C. Intentionally deleted.

D. For the purposes of this Agreement, the term "Permitted Encumbrances" shall
mean (i) rights or claims of possession of patients and residents in the
Facilities as residents or patients only, with no option to purchase or acquire
an interest in the Facilities; (ii) the specific (not generally part of the
promulgated title commitment form) exceptions set forth on the Title
Commitments, other than those set forth on Schedule 9.1D hereof (as such
schedule is modified according to Section 9.1G hereof); and (iii) items revealed
on the Surveys, other than those set forth on Schedule 9.1D hereof (as such
schedule is modified according to Section 9.1G hereof).

E. Notwithstanding any provision hereof to the contrary, the parties acknowledge
that the Beverly Entities might be unable to effect (i) valid Subleases or Lease
Assignments without first obtaining a Lessor Consent and Estoppel from each of
the Lessors and their lenders, if required or (ii) a valid assignment of the
Management Agreement without first obtaining the Managed Facility Consent. In
the event for any reason the Beverly Entities shall be unable to obtain a
necessary Lessor Consent and Estoppel for any of the Leased Facilities or the
Managed Facility


                                       36
<PAGE>


Consent for the Managed Facility by the Closing Date, then such Leased Facility
or Managed Facility, as applicable, shall be deemed an Escrow Facility.

F. Notwithstanding any provision hereof to the contrary, the parties acknowledge
that the Beverly Entities might be unable to remove or insure over title
exceptions on certain Title Commitments relating to liens arising out of bond
financings placed on a specific Facility by the Closing Date. In such event, the
affected Facility shall be deemed an Escrow Facility.

G. Within thirty (30) days of the date hereof, Buyer shall review the Title
Commitments and the Surveys and provide the Beverly Entities with a list of
additional title and survey clearance items to include on Schedule 9.1D attached
hereto; provided, however, that Buyer may not include any additional title
and/or survey clearance items on Schedule 9.1D attached hereto unless such item
would (i) have a material adverse effect on the use of the affected Facility as
a nursing home or as an assisted living facility consistent with the Beverly
Entities' past operations thereof or (ii) have a material adverse effect on the
marketability of title to the affected Facility. Any objections to the Title
Commitments or Surveys that are not provided to the Beverly Entities within
thirty (30) days of the date hereof shall be deemed waived, except that if after
such date and before the Closing Date, any other matters of record, additional
liens or encumbrances to the title to the Facilities are created or discovered,
then Buyer may add any such encumbrances to Schedule 9.1D if such other matters
of record, additional liens or encumbrances satisfy the condition contained in
the proviso of the immediately preceding sentence.

9.2 Risk of Loss or Condemnation

                  (a) The Beverly Entities agree to give Buyer prompt written
                  notice of any fire or other casualty affecting any Facility or
                  of any actual or threatened (to the extent that the Beverly
                  Entities have current actual knowledge thereof) taking or
                  condemnation of all or any portion of any Facility.

                  (b) If prior to the Closing there shall occur:

                           (i) damage to any Facility caused by fire or other
                           casualty which would (A) cost an amount greater than,
                           or equal to, FIVE HUNDRED THOUSAND DOLLARS
                           ($500,000), in the aggregate, to repair, and (B)
                           materially interfere with the use of such Facility as
                           currently operated; or

                           (ii) the taking or condemnation of all or any portion
                           of any Facility which would materially interfere with
                           the use of such Facility as currently operated;

then, in such event, such Facility shall be deemed an Escrow Facility upon
Buyer's providing written notice thereof delivered to the Beverly Entities
within ten (10) days after Buyer receives written notice from the Beverly
Entities. If Buyer does not so timely elect to treat the Facility as an Escrow
Facility, then the Closing shall take place as provided herein and Buyer shall
receive a credit at Closing in the amount of applicable insurance deductibles
and shall be assigned at the Closing all interest of the Beverly Entities in and
to any insurance proceeds (including, but not limited to, any proceeds of
business interruption insurance for the period after the Effective


                                       37
<PAGE>


Time) or condemnation awards payable to the Beverly Entities on account of that
event, less sums which the Beverly Entities incurs before the Closing for the
direct cost of the repair of any of the damage or in pursuing the collection of
any such insurance proceeds or participating in any condemnation proceeding.

                  (c) If before the Closing there occurs:

                           (i) damage to any Facility caused by fire or other
                           casualty which would (A) cost an amount less than
                           FIVE HUNDRED THOUSAND DOLLARS ($500,000), in the
                           aggregate, to repair, or (B) not materially interfere
                           with the use of such Facility as currently operated;
                           or

                           (ii) the taking or condemnation of all or any portion
                           of any Facility which would not materially interfere
                           with the use of such Facility as currently operated;

then, in such event, the Facility shall not be deemed an Escrow Facility and
Buyer shall receive a credit at Closing in the amount of applicable insurance
deductibles and shall be assigned at the Closing all interest of the Beverly
Entities in and to any insurance proceeds (including, but not limited to, any
proceeds of business interruption insurance for the period after the Effective
Time) or condemnation awards payable to the Beverly Entities on account of that
event, less sums which the Beverly Entities incurs before the Closing for the
direct cost of the repair of any of the damage or in pursuing the collection of
any such insurance proceeds or participating in any condemnation proceeding.

9.3 Termination of a Condemned Facility. Upon any Facility being deemed an
Escrow Facility hereunder as a result of a condemnation or taking as set forth
in Section 9.2, this Agreement shall terminate as to such Facility and Buyer and
the Beverly Entities shall be released from all further obligations hereunder
with respect to such Facility, and the Purchase Price shall be reduced by the
amount allocated to such Facility on Exhibit C hereto.

9.4 The Beverly Entities' Obligation to Pay Break-Up Fee Under Certain
Circumstances.

                  (a) The Beverly Entities shall pay (by wire transfer of
                  immediately available funds) to Buyer a break-up fee
                  ("Break-Up Fee") of (i) Ten Million Dollars ($10,000,000) in
                  the event the Beverly Entities transfer, sell, lease or enter
                  into a management agreement for the Facilities to a
                  third-party unrelated to Buyer within two (2) years after the
                  termination of this Agreement other than as a result of (w) a
                  material breach of this Agreement by Buyer, (x) the conditions
                  to closing in Article 10 hereof not being satisfied, (y)
                  termination under Sections 8.2.12, 9.3 or 14.16 hereof or (z)
                  termination of this Agreement as a result of a material breach
                  by the Beverly Entities that is not reasonably within their
                  control or (ii) Six Million Dollars ($6,000,000) in the event
                  the Beverly Entities elect not to sell the Facilities to Buyer
                  and do not sell the Facilities to a third-party unrelated to
                  Buyer within two (2) years after the termination of this
                  Agreement other than as a result of (w) a material breach of
                  this Agreement by Buyer, (x) the conditions to closing in
                  Article 10 hereof not being satisfied, (y) termination under
                  Sections 8.2.12, 9.3


                                       38
<PAGE>


                  or 14.16 hereof or (z) termination of this Agreement as a
                  result of a material breach by the Beverly Entities that is
                  not reasonably within their control. Notwithstanding the
                  foregoing, if either of such events described in the
                  immediately preceding sentence occur with respect to less than
                  all of the Facilities, the Break-Up Fee shall be limited to an
                  amount equal to two (2) times the Purchase Price allocated to
                  such Facilities, not to exceed the Break-Up Fee that would
                  otherwise be payable hereunder. The Beverly Entities shall
                  receive a credit in the amount of any amounts payable under
                  Section 2.3.3 hereof against any amounts payable to Buyer
                  under this Section 9.4(a).

                  (b) The parties hereto acknowledge that the actual damages
                  sustained by the Buyer resulting from the events set forth in
                  subsection (a)(i) or (a)(ii) above are difficult to ascertain,
                  and the parties hereby further agree that the liquidated
                  damages amounts set forth in this Section 9.4 are a reasonable
                  estimate of the amount of damages, including consequential
                  damages, which the Buyer would suffer by reason of such event
                  by the Beverly Entities, gauged by the circumstances existing
                  at the time this Agreement is executed. The payment of such
                  amount by the Beverly Entities is intended not as a penalty,
                  but as full liquidated damages. Receipt of such payment as
                  full liquidated damages is the Buyer's sole and exclusive
                  remedy, and the Buyer hereby waives and releases any right to
                  (and hereby covenants that it shall not) sue the Beverly
                  Entities (a) for specific performance of this Agreement or (b)
                  to recover actual damages in excess of such amount if Buyer
                  receives such amount. Notwithstanding anything to the contrary
                  contained herein, after the initial Closing Date (as described
                  in the first sentence of Section 3.1 hereof has occurred), the
                  Beverly Entities shall be obligated to pay only a pro rata
                  portion of the Break-Up Fee (based on the allocated amount as
                  set forth in Exhibit C hereto) for the reasons described in
                  this Section 9.4 with respect to the occurrence of either
                  event set forth in subsections (a)(i) or (a)(ii) above with
                  respect to any Escrow Facility. Notwithstanding anything
                  herein to the contrary, at any time, the Beverly Entities may
                  pay Buyer the Break-Up Fee (which Break-Up Fee shall
                  constitute full liquidated damages and is Buyer's sole and
                  exclusive remedy), and Buyer shall thereafter be prohibited
                  from commencing an action for specific performance or other
                  remedies and shall promptly terminate all such actions already
                  commenced.

9.5 Equipment Leases; Computer Hardware/Software; Manuals; Intellectual Property
Rights

                  (a) During the sixty (60) day period immediately following the
                  Closing, the Beverly Entities shall permit Buyer to use the
                  leased computer equipment (hardware only) located in the
                  Facilities and excluding any VSAT equipment, to the extent
                  permitted under the applicable leases and in consideration
                  thereof, (a) Buyer shall be responsible for any payments under
                  the applicable leases which relate to post-Effective Time
                  periods, and (b) Buyer shall indemnify, defend and hold
                  harmless the Beverly Entities for any and all claims,
                  liabilities, losses, damages, costs and expenses incurred by
                  the Beverly Entities arising out of Buyer's use of such
                  equipment during the post-Effective Time period. Buyer shall


                                       39
<PAGE>


                  notify the Beverly Entities at least thirty (30) days prior to
                  the Closing Date if it desires to use such equipment.

                  (b) Buyer acknowledges that the Beverly Entities have advised
                  Buyer that the Beverly Entities intend to remove from the
                  Facilities all of the computer hardware and software which is
                  connected to the Beverly Entities' corporate accounting and
                  medical records network and any and all other computer systems
                  which are subject to master leases or master financing
                  arrangements. In order to assist Buyer to ensure the continued
                  operation of the Facilities after the Closing Date in
                  compliance with applicable law and in a manner which does not
                  jeopardize the health and welfare of the residents and
                  patients of the Facilities, the Beverly Entities shall, at
                  their option, within ten (10) business days before the Closing
                  Date, either (i) print out the medical treatment records and
                  physician orders for each resident and patient and deliver
                  such records and orders to Buyer or (ii) electronically
                  transfer such information to Buyer's information management
                  systems to provide Buyer with complete records for each
                  resident and patient.

9.6 [Intentionally Omitted.].



                                   ARTICLE 10.
                              Conditions To Closing

10.1 Conditions Precedent to Buyer's Performance. The obligations of Buyer under
this Agreement are subject to the satisfaction, at or before the Closing, of the
conditions set forth in this Section 10.1. Buyer may waive any or all of these
conditions in whole or in part without prior notice and the closing of the
transactions contemplated hereby shall mean that such conditions are deemed
satisfied or waived.

         10.1.1 Accuracy of Representations and Warranties. All representations
         and warranties of the Beverly Entities in this Agreement (other than
         those contained in Section 7.1.10 hereof) shall be true and correct in
         all material respects at Closing as though made at that time, except as
         otherwise expressly provided in this Agreement; provided, that if any
         representations or warranties are untrue in any material respect with
         respect to one or more individual Facilities (other than
         representations or warranties made with respect to the Facilities taken
         as a whole), such Facilities shall be deemed Escrow Facilities and the
         condition shall be deemed to have been met with respect to all other
         Facilities.

         10.1.2 The Beverly Entities' Performance. The Beverly Entities shall
         have performed, satisfied and complied in all material respects with
         all covenants, agreements and conditions required by this Agreement to
         be performed, satisfied or complied with by the Beverly Entities prior
         to Closing, including, without limitation, the delivery of all items
         set forth in Section 5.1 hereof.

         10.1.3 Actions, Suits, Proceedings. No action, suit or proceeding
         pertaining to the transactions contemplated by this Agreement, shall
         have been instituted on or before the


                                       40
<PAGE>


         Effective Time that enjoins or restrains the Beverly Entities or the
         Buyer in connection with the Closing or that could reasonably be
         expected to subject Buyer to material liability as a result of closing
         the transactions contemplated hereby or that could reasonably be
         expected to materially interfere with Buyer's ability to operate the
         Facilities following the Closing.

         10.1.4 Licenses, Permits. Buyer or its appointee shall have received a
         permanent license from the Department to operate the Facilities as they
         are currently operated; provided that in the event for any reason Buyer
         or its appointee shall be unable to obtain necessary licenses for any
         of the Facilities by the Closing Date, then each such Facility shall be
         deemed an Escrow Facility and the condition shall be deemed to have
         been met with respect to all other Facilities.

         10.1.5 Consents. All necessary governmental and third party consents,
         approvals and filings, including without limitation filings and
         approvals pursuant to the HSR Act, approval by state and federal
         government agencies of Medicare and Medicaid provider agreements with
         Buyer for the Facilities and as otherwise required to consummate the
         transactions contemplated herein have been obtained.

         10.1.6 Hart-Scott-Rodino. Any person required in connection with the
         transactions contemplated hereby to file a notification and report form
         in compliance with the HSR Act shall have filed such form, and the
         applicable waiting period with respect to each such form (including any
         extension thereof by reason of a request for additional information)
         shall have expired or been terminated.

         10.1.7 Lessors' Consents. With respect to the Leased Facilities and the
         Managed Facility, the Beverly Entities shall have obtained the Lessor
         Consent and Estoppels and Managed Facility Consent and Estoppel
         required to be obtained from the Lessors or owner, as applicable, in
         order to sublease or assign the Management Agreement or the leasehold
         interest in the Leased Facilities to Buyer pursuant to the assignment
         of Management Agreement, Subleases and Lease Assignments, as
         applicable, provided, that, if the Beverly Entities fail to obtain the
         Lessor Consent and Estoppels or Managed Facility Consent required to be
         obtained for any Leased Facilities or Managed Facility, as applicable,
         such Leased Facilities or Managed Facility, as applicable, shall be
         deemed Escrow Facilities and the condition shall be deemed to have been
         met with respect to all other Leased Facilities and the Managed
         Facility, as applicable.

         10.1.8 Bond Financings. The Beverly Entities shall cause the Title
         Company to remove or insure over any liens (in a manner reasonably
         satisfactory to Buyer and Buyer's lender) arising out of the bond
         financings placed on the applicable Facilities, provided, that if such
         title insurance coverage is not obtained with respect to any such
         Facilities, such Facilities shall be deemed Escrow Facilities and the
         condition shall be deemed to have been met with respect to all other
         Facilities.

         10.1.9 [Intentionally Omitted.]


                                       41
<PAGE>


         10.1.10 CIA Confirmation. The Office of Inspector General of the
         Department of Health and Human Services ("OIG") shall have provided a
         letter or other evidence reasonably acceptable to Buyer stating that,
         with respect to the Facilities, Buyer will not be subject to the terms
         of the CIA.

         10.1.11 No Material Adverse Change. Since May 31, 2001, there has not
         been any material adverse change in the financial condition, assets,
         liabilities or prospects of the Facilities taken as a whole, except as
         may have been caused by Buyer's acts or omissions.

         10.1.12 Medicaid Reimbursement. Provided that Buyer has properly filed
         its applications for licensing with the Department on or prior to
         August 30, 2001, and timely responded to requests from the Department,
         Buyer shall receive a Medicaid reimbursement rate increase as provided
         by applicable Florida change of ownership law.

10.2 Conditions Precedent to the Beverly Entities' Performance. The obligations
of the Beverly Entities under this Agreement are subject to the satisfaction, at
or before the Closing, of the conditions set forth in this Section 10.2. The
Beverly Entities may waive any or all of these conditions in whole or in part
without prior notice and the closing of the transactions contemplated hereby
shall mean that such conditions are deemed satisfied or waived.

         10.2.1 Accuracy of Representations and Warranties. All representations
         and warranties of Buyer in this Agreement shall be true in all material
         respects at Closing as though made at that time, except as otherwise
         provided in this Agreement.

         10.2.2 Buyer's Performance. Buyer shall have performed, satisfied and
         complied in all material respects with all covenants, agreements and
         conditions required by this Agreement to be performed, satisfied or
         complied with by Buyer prior to Closing, including, without limitation,
         delivery of the items set forth in Section 5.2 hereof.

         10.2.3 Actions, Suits, Proceedings. No action, suit or proceeding by
         any governmental authority, pertaining to the transactions contemplated
         by this Agreement, shall have been instituted or threatened on or
         before the Effective Time that could reasonably be expected to subject
         the Beverly Entities to material liability.

         10.2.4 Licenses, Permits. Buyer shall have received a license from the
         Department to operate the Facilities as they are currently operated;
         provided that in the event (i) Buyer or its appointee shall not have
         received a license for any of the Facilities on the Closing Date and
         such failure is due to any reason that is reasonably within Buyer's
         control, then the Beverly Entities shall have the option of (a)
         terminating this Agreement with respect to such Facility or (b)
         treating such Facility as an "Escrow Facility" and the condition shall
         be deemed to have been met with respect to all other Facilities and
         (ii) Buyer or its appointee shall not have received a permanent license
         for any of the Facilities by the Closing Date for any other reason
         except as set forth in (a) above, then each such Facility shall be
         deemed an Escrow Facility and the condition shall be deemed to have
         been met with respect to all other Facilities.


                                       42
<PAGE>


         10.2.5 Consents. All necessary governmental and third party consents,
         approvals and filings, including without limitation (a) consents of the
         owner of the Managed Facility, Lessors and their lenders, (b) filings
         and approvals pursuant to the HSR Act and (c) consents and approvals
         pursuant to the bond financings, and as otherwise required to
         consummate the transactions contemplated herein have been obtained;
         provided that in the event for any reason Buyer or the Beverly Entities
         is unable to obtain the required consents for any of the Facilities by
         the Closing Date, then each such Facility shall be deemed an Escrow
         Facility and the condition shall be deemed to have been met with
         respect to all other Facilities.

         10.2.6 Hart-Scott-Rodino. Any person required in connection with the
         transactions contemplated hereby to file a notification and report form
         in compliance with the HSR Act shall have filed such form and the
         applicable waiting period with respect to each such form (including any
         extension thereof by reason of a request for additional information)
         shall have expired or been terminated.

         10.2.7 Regulatory Inspection Liability. The aggregate amount of costs
         for all Facilities required to remedy matters relating to life safety
         code and physical plant that have been identified in regulatory
         inspections or surveys conducted after the date hereof and prior to the
         Effective Time ("Regulatory Costs") shall not exceed One Million Five
         Hundred Thousand Dollars ($1,500,000). In the event the Regulatory
         Costs exceed One Million Five Hundred Thousand Dollars ($1,500,000)
         Buyer may waive this condition so long as Buyer assumes and pays all
         liabilities in excess of such amounts.

         10.2.8 Pharmerica Contract. On or before July 31, 2001, Buyer and/or
         its appointee shall have entered into a valid and binding agreement
         with Pharmerica, Inc. for a maximum term of five years to assume,
         effective as of the Effective Time, all rights and obligations of the
         Beverly Entities under their preferred provider agreement with
         Pharmerica, Inc. with respect to all of the Facilities (the "Pharmerica
         Assumption"). The agreement shall be at competitive pricing not
         materially less favorable than the Buyer can obtain from alternative
         sources providing comparable products. If Buyer has not entered into
         the Pharmerica Assumption with Pharmerica, Inc. on or before July 31,
         2001, then the Beverly Entities may terminate this Agreement by
         providing written notice to Buyer within three (3) business days after
         such date, and failure to provide such notice shall be a waiver of such
         termination rights; provided, however, that if Buyer has not entered
         into the Pharmerica Assumption on or before such date as a result of
         Pharmerica, Inc. refusing to agree to competitive pricing as described
         above, then, if the Beverly Entities terminate this Agreement as
         provided, the Escrow Agent shall pay the Deposit to Buyer.

         10.2.9 Aegis Contract. On or before July 31, 2001, Buyer and/or its
         appointee shall have entered into a valid and binding agreement with
         Aegis Therapies, Inc. for Aegis Therapies, Inc. to provide all contract
         therapy services (PT/OT/ST) at all of the Facilities for a period of
         five (5) years after the Effective Time (the "Aegis Agreement"),
         effective automatically as of the Effective Time. The Aegis Agreement
         shall be at competitive pricing on market terms and service levels no
         less favorable than the Buyer can obtain from alternative sources
         providing comparable services. If Buyer has not entered into the Aegis
         Agreement with Aegis Therapies, Inc. on or before July 31, 2001, then
         the Beverly



                                       43
<PAGE>


         Entities may terminate this Agreement by providing written notice to
         Buyer within three (3) business days after such date, and failure to
         provide such notice shall be a waiver of such termination rights;
         provided, however, that if Buyer has not entered into the Aegis
         Agreement on or before such date as a result of Aegis Therapies, Inc.
         refusing to agree to the conditions as described above, then, if the
         Beverly Entities terminate this Agreement as provided, the Escrow Agent
         shall pay the Deposit to Buyer. If Buyer's appointee(s) enter into the
         Aegis Agreement, Buyer shall provide Aegis Therapies, Inc. with a full
         payment guaranty of all of such appointee(s)' obligations thereunder.


                                   ARTICLE 11.

                                    Surrender

11.1 Leased Facilities. With respect to the Managed Facility and the Leased
Facilities that are subleased to Buyer under a Sublease, except as otherwise
provided herein or in the Subleases, Buyer shall on the last day of the term of
the assignment of the Managed Agreement and of each Sublease or upon any earlier
termination of the assignment of the Managed Agreement or any Sublease,
surrender and deliver up the Managed Facility and the Leased Facility relating
to such Sublease, and, to the extent transferable, any and all appropriate
licenses and certificates related thereto, to the possession and use of the
applicable Beverly Entity without delay and in good order, condition and repair,
except for reasonable wear and tear to the Managed Facility and the Leased
Facility, pursuant to its obligations hereunder or under the assignment of
Management Agreement or Subleases, as applicable, free and clear of all lettings
and occupancies other than the patients, subleases then terminable at the option
of the Beverly Entities or subleases to which the Beverly Entities shall have
specifically consented, and free and clear of all liens and encumbrances other
than those, if any, currently existing or created or suffered by the Beverly
Entities, without any payment or allowance whatever by the Beverly Entities in
respect of any improvements to the Leased Facilities or Managed Facility. Buyer
shall provide the Beverly Entities with such assurances as the Beverly Entities
reasonably require that it has satisfied any and all obligations that it had to
any of its employees who may have been employed at the Leased Facilities or
Managed Facility at any time during the term of the Sublease or assignment of
the Management Agreement.

11.2 Furniture, Trade Fixtures and Business Equipment. Subject to the terms of
the assignment of Management Agreement and Subleases, furniture and equipment
installed by Buyer may not be removed by Buyer at or prior to the termination of
the assignment of Management Agreement or Sublease, as applicable, such
furniture shall be and become the property of the applicable Beverly Entity or
the lessee of the Managed Facility or the applicable Lessor, upon installation
thereof to the extent required by the Management Agreement or the Leases, as
applicable.

11.3 Personal Property. Subject to the terms of the assignment of Management
Agreement and the Subleases, with respect to the Managed Facility and the Leased
Facilities that are subleased to Buyer, any personal property of Buyer or any
sublessee which shall remain in the Managed Facility and the Leased Facilities
after the termination of the assignment of Management Agreement and the Sublease
and the vacation of Buyer or such sublessee from the Managed


                                       44
<PAGE>


Facility and the Leased Facilities, may, at the option of the applicable Beverly
Entity, be deemed to have been abandoned by Buyer or such sublessee and either
may be retained by such Beverly Entity as its property or be disposed of,
without accountability, in such manner as such Beverly Entity may see fit, or if
such Beverly Entity shall have given written notice to Buyer to such effect,
such property shall be removed by Buyer at Buyer's sole cost and expense.

11.4 Loss or Damage. With respect to the Leased Facilities and the Managed
Facility, the Beverly Entities shall not be responsible for any loss or damage
occurring after the Effective Time to any property owned by Buyer or any
sublessee.

                                   ARTICLE 12.
                                   Termination

12.1 Termination. If any condition precedent to the Beverly Entities'
obligations hereunder is not satisfied and such condition is not waived by the
Beverly Entities at or prior to the Closing Date, or if any condition precedent
to Buyer's obligations hereunder is not satisfied and such condition is not
waived by Buyer at or prior to the Closing Date, the Beverly Entities or Buyer,
as the case may be, may terminate this Agreement at its option by notice to the
other party. In the event of the termination of this Agreement by either party
as above provided, neither party shall have any liability hereunder of any
nature whatsoever to the other party, other than as expressly set forth in this
Agreement hereof, including, without limitation, any liability for damages,
unless the other party has acted in bad faith and knowingly and willfully failed
to perform its obligations hereunder, in which event the party in default shall
be liable to the other party for such default. Either party may terminate this
Agreement if the Closing has not occurred on or prior to October 31, 2001
subject to the extension rights expressly set forth in Section 3.1 hereof.





                                       45
<PAGE>



12.2 Due Diligence. For a period of four (4) weeks ending on the first business
day after the date this Agreement is fully executed, Buyer may perform due
diligence on the financial statements provided by the Beverly Entities with
respect to the Facilities. The Beverly Entities shall provide immediate access
to the Facilities and all information reasonably requested by Buyer or its
representatives to conduct such due diligence. If, during such four (4) week
diligence period, Buyer discovers that the representations and warranties
contained in Sections 7.1.11 and 7.1.12 are not true, complete and correct in
all material respects, in addition to its other rights to terminate this
Agreement as provided herein, then Buyer may terminate this Agreement upon
written notice to the Beverly Entities provided within ten (10) days after such
discovery and Escrow Agent shall pay the Deposit to Buyer, and the Beverly
Entities shall reimburse Buyer for its actual reasonable out-of-pocket costs and
expenses incurred in connection with the transactions contemplated hereby
(provided that Buyer shall provide the Beverly Entities with reasonable
documentation of such costs and expenses). Return of the Deposit to Buyer and
reimbursement of such costs and expenses by the Beverly Entities shall
constitute liquidated damages to Buyer for the Beverly Entities' default under
this Agreement. The parties hereto acknowledge that the actual damages sustained
by the Buyer for such a default by the Beverly Entities are difficult to
ascertain, and the parties hereby further agree that the liquidated damages
amounts set forth in this Section 12.2 are a reasonable estimate of the amount
of damages, including consequential damages, which the Buyer would suffer by
reason of such default, gauged by the circumstances existing at the time this
Agreement is executed.


                                   ARTICLE 13.
                          Survival and Indemnification

13.1 Survival of Representations. Except for the representations and warranties
made in Sections 7.1.9, 7.1.17 and 7.1.25 which shall survive indefinitely, the
representations and warranties of the Beverly Entities and Buyer contained
herein shall survive the Effective Time for a period of one (1) year.
Notwithstanding the foregoing, if one or more of the parties hereto had actual
knowledge of a breach of its representations or warranties and failed to
disclose it in writing to the other parties prior to the Effective Time, such
representations and warranties shall survive for a period of two years following
the Closing Date. Such one or two year period shall be referred to herein as the
"Survival Period".

13.2 Indemnity by the Beverly Entities

         13.2.1 The Beverly Entities hereby agree to indemnify, defend and hold
         Buyer and its affiliates, officers, directors, shareholders, employees,
         partners, agents and representatives (collectively, "Buyer
         Indemnitees") harmless from any and all claims, demands, obligations,
         losses, liabilities, damages, recoveries and deficiencies, including
         interest, penalties and reasonable attorneys' fees, costs and expenses
         (collectively, the "Liabilities") suffered by any Buyer Indemnitee as a
         result of the Beverly Entities' ownership or operation of the
         Facilities prior to the Effective Time (subject to the provisions of
         Section 2.4) or the inaccuracy of any of the representations or the
         breach of any of the warranties or covenants of the Beverly Entities
         herein or given pursuant hereto (including any other document delivered
         by the Beverly Entities at the Closing), including



                                       46
<PAGE>


         without limitation (i) any liability, commitment or obligation to third
         parties arising on or prior to the Effective Time, (ii) Reimbursement
         Exposure, (iii) Buyer Excepted Matters, or (iv) the inaccuracy of any
         of the representations or the breach of any of the warranties or
         covenants of the Beverly Entities herein or given pursuant hereto
         (including any other document delivered by the Beverly Entities at the
         Closing). For the purposes of this Agreement, "Excluded Liabilities"
         means the matters referred in clause (i), (ii) and (iii) and any
         liabilities related thereto.

         13.2.2 Notwithstanding any provision of this Agreement to the contrary
         and other than with respect to Excluded Liabilities:

A. [Intentionally Omitted.]

B. The Beverly Entities shall not be responsible for lost profits or
consequential damages; provided, however, Medicaid and Medicare recapture
payments relating to periods prior to the Effective Time and realized through
adjustments in Medicaid or Medicare reimbursement rates shall not be deemed lost
profits or consequential damages.

C. [Intentionally Omitted.]

D. If and to the extent any Liabilities for which indemnification is sought
relate to events or circumstances occurring both prior to and after the
Effective Time or are from both a cause that is indemnified and one that is not
so indemnified, the Beverly Entities' obligations hereunder shall extend only to
the Liabilities attributable to events or circumstances prior to the Effective
Time or the indemnified event, circumstance or cause.

E. Except for the matters addressed in Section 13.1 hereof, which shall survive
as set forth therein, the Beverly Entities shall not be responsible for any
claim that is asserted more than the Survival Period, except for claims relating
to Excluded Liabilities, which shall survive indefinitely. Any claim to be
timely asserted must be asserted in writing and with reasonable specificity as
to the facts forming the basis of such claim.

F. The aggregate Liabilities indemnified hereunder shall not exceed, in the
aggregate, Twenty Million Dollars ($20,000,000), except that Medicaid and
Medicare overpayments or recapture, and fair rental value depreciation recapture
and tax liabilities relating to periods prior to the Effective Time and
obligations pursuant to Section 6.1 shall not be subject to such limit
(collectively, "Buyer Excepted Matters").

G. The Beverly Entities shall not be liable for the breach or inaccuracy of any
representation or warranty hereunder if Buyer discovered (or, with respect to
matters or other conditions that are revealed in reports or audits from third
parties obtained by Buyer, or obtained by the Beverly Entities and to which
Buyer has had access) the existence of the condition or conditions the existence
of which, if required, would have made such representation or warranty untrue or
inaccurate.

H. Buyer shall not be entitled to receive an indemnification payment with
respect to any Liabilities (other than the Buyer Excepted Matters) unless the
aggregate payments claimed by


                                       47
<PAGE>


Buyer hereunder with respect to all Liabilities (other than the Buyer Excepted
Matters) equal or exceed Two Hundred Fifty Thousand Dollars ($250,000), and the
Beverly Entities shall only be responsible for Liabilities in excess of such
amount.

I. After the Closing Date, the provisions of this Section 13.2 are agreed, to
the extent permitted by law, to be the sole and exclusive remedy of Buyer for
any breach by the Beverly Entities of the representations, warranties and
covenants contained in this Agreement (or any other document delivered by the
Beverly Entities at the Closing) and Buyer waives all other remedies other than
in the case of fraud. Notwithstanding anything to the contrary, (a) Buyer shall
be permitted to seek legal remedies with respect to the Buyer Excepted Matters
to the full extent permitted by law and (b) this subsection 13.2.2(J) shall not
in any way limit the parties' equitable rights and remedies (including the right
to an injunction and the right to specific performance) pursuant to Section
14.17 hereof.

13.3 Indemnity by Buyer

         13.3.1 (a) Buyer hereby agrees to indemnify, defend and hold the
         Beverly Entities and its affiliates, officers, directors, shareholders,
         employees, partners, agents and representatives (collectively, "Beverly
         Indemnitees") harmless from any and all Liabilities suffered by any
         Beverly Indemnitee as a result of Buyer's ownership or operation of the
         Facilities subsequent to the Effective Time and the untruth of any of
         the representations or the breach of any of the warranties or covenants
         of Buyer herein or given pursuant hereto (including any other document
         delivered by Buyer at the Closing).

                           (b) Further, Buyer hereby agrees to indemnify, defend
         and hold the Beverly Indemnitees harmless from any and all Liabilities
         suffered by any Beverly Indemnitee with respect to the Managed Facility
         and any of the Leases to the extent such liabilities arise after the
         Effective Time.

         13.3.2 Notwithstanding any provision of this Agreement to the contrary:

A. Buyer shall not be responsible for lost profits or consequential damages;
provided, however, Medicaid and Medicare recapture payments realized through
adjustments in Medicaid or Medicare reimbursement rates shall not be deemed lost
profits or consequential damages.

B. If and to the extent any Liabilities for which indemnification is sought
relate to events or circumstances occurring both prior to and after the
Effective Time or are from both a cause that is indemnified and one that is not
so indemnified, Buyer's obligations hereunder shall extend only to the
Liabilities attributable to events or circumstances subsequent to the Effective
Time or the indemnified event, circumstance or cause.

C. Except for the matters addressed in Section 13.1 hereof, which shall survive
as set forth therein, Buyer shall not be responsible for any claim that is
asserted more than the Survival Period, except for claims relating to Beverly
Excepted Matters (as hereinafter defined), which shall survive indefinitely. Any
claim to be timely asserted must be asserted in writing and with reasonable
specificity as to the facts forming the basis of such claim.


                                       48
<PAGE>


D. The Beverly Entities shall not be entitled to receive an indemnification
payment with respect to any Liabilities (other than the Buyer's failure to (i)
comply with its indemnification obligations under Sections 6.7 and 9.5 hereof
and its obligation to indemnify the Beverly Entities for breach of its covenants
in Section 8.2.9 hereof, (ii) comply with all of the covenants set forth in
Section 8.2 hereof, (iii) remit payments on account of reimbursements and
accounts receivable as herein provided, and (iv) Liabilities arising under
Section 13.3.1(b) (collectively, the "Beverly Excepted Matters")) unless the
aggregate payments claimed by the Beverly Entities hereunder with respect to all
Liabilities (other than the Beverly Excepted Matters) equal or exceed Two
Hundred Fifty Thousand Dollars ($250,000), and Buyer shall only be responsible
for Liabilities in excess of such amount.

E. After the Closing Date, the provisions of this Section 13.3 are agreed, to
the extent permitted by law, to be the sole and exclusive remedy of the Beverly
Entities for any breach by Buyer of representations, warranties and covenants
contained in this Agreement (or any other document delivered by Buyer at the
Closing) and the Beverly Entities waive all other remedies other than in the
case of fraud. Notwithstanding anything to the contrary contained herein, (i)
the Beverly Entities shall be permitted to seek legal remedies with respect to
the Beverly Excepted Matters to the full extent permitted by law and (ii) in the
event the Beverly Entities knowingly and intentionally made a material
misrepresentation or committed fraud in making any of the representations or
warranties contained in Section 7.1 hereof, if Buyer terminates this Agreement
as a result thereof, then the Deposit shall be paid to Buyer, and the Beverly
Entities shall reimburse Buyer for its actual reasonable out-of-pocket costs and
expenses in connection with the transactions contemplated hereby (provided that
Buyer shall provide the Beverly Entities with reasonable documentation of such
costs and expenses). Reimbursement of such costs and expenses by the Beverly
Entities shall constitute liquidated damages to Buyer for such fraud by the
Beverly Entities. The parties hereto acknowledge that the actual damages
sustained by the Buyer for such fraud by the Beverly Entities are difficult to
ascertain, and the parties hereby further agree that the liquidated damages
amounts set forth in this Section 13.3.2E are a reasonable estimate of the
amount of damages, including consequential damages, which the Buyer would suffer
by reason of such fraud, gauged by the circumstances existing at the time this
Agreement is executed.

13.4 Defense of Claims. If a claim for Liabilities is to be made by a party
seeking indemnification hereunder against the indemnifying party, the party
seeking indemnification shall give written notice to the indemnifying party as
soon as practicable after the party seeking indemnification becomes aware of any
fact, condition or event which may give rise to Liabilities for which
indemnification may be sought under this Article 13. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice hereof shall be given to the indemnifying
party as promptly as practicable (and in any event within thirty (30) days after
the service of the citation or summons). After such notice, if the indemnifying
party shall acknowledge in writing to the indemnified party that the
indemnifying party shall be obligated under the terms of its indemnity hereunder
in connection with such lawsuit or action, then the indemnifying party shall be
entitled, if it so elects, to take control of the defense and investigation of
such lawsuit or action and to employ and engage attorneys of its own choice to
handle and defend the same, at the indemnifying party's cost, risk and expense,
provided that the indemnifying party and its counsel shall proceed with
diligence and in good


                                       49
<PAGE>


faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. If the indemnifying party has
acknowledged to the indemnified party its obligation to indemnify hereunder, the
indemnifying party shall not settle such lawsuit or enforcement action without
twenty (20) days' prior notice to the indemnified party.

                                   ARTICLE 14.
                                  Miscellaneous

14.1 Further Assurances. Each party hereto agrees to use all reasonable efforts
and to proceed with due diligence to cause the conditions to its obligations
herein set forth to be satisfied at or prior to the Closing. Each of the parties
hereto agrees to execute and deliver any and all further agreements, documents
or instruments reasonably necessary to effectuate this Agreement, the Subleases,
the Lease Assignments and the transfer of the Purchased Assets to, and the
assumption of the Assigned Contracts by Buyer. All parties will make all
reasonable efforts to effect an orderly transfer of control of the Facilities
from the Beverly Entities to Buyer and to complete the transactions contemplated
by this Agreement as promptly as practicable. Each party will promptly notify
the other party of any information delivered to or obtained by such party which
would prevent or delay the consummation of the transactions contemplated by this
Agreement, or would indicate a breach of the representations or warranties of
any of the parties to this Agreement.

14.2 Assignment. Neither party may make any assignment of this Agreement or any
rights thereof without the prior written consent of the other party in each
instance. Notwithstanding the foregoing, Buyer may assign the Agreement to one
or more affiliates that are controlled by Buyer or under common control with
Buyer or that controls Buyer, without the prior written consent of the Beverly
Entities, provided that Buyer shall remain jointly and severally liable with
such assignee for all obligations of Buyer under this Agreement in the event of
such assignment. The Beverly Entities shall execute and deliver such documents
and agreements as shall be reasonably necessary to effectuate the transactions
contemplated hereby.

14.3 Parties in Interest. Nothing in this Agreement, whether express or implied,
is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than Buyer and the Beverly Entities and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provisions give any third
person any right or subrogation of action over or against any party to this
Agreement.

14.4 Notices. Any notice, request, instruction or other document given hereunder
by either party to the other shall be in writing and delivered personally, by
mail (certified mail, postage prepaid, return receipt requested, such mailed
notice to be effective three (3) days after deposit) by overnight courier (to be
effective the business day following deposit), by telex or facsimile
transmission (to be effective when receipt acknowledged unless sent after 2:00
p.m. on any business day or on the weekend, in which event they will be deemed
received on the next business day), as follows:


                                       50
<PAGE>


To the Beverly
Entities:                  Beverly Enterprises - Florida, Inc.
                           1000 Beverly Way
                           Fort Smith, AR 72919
                           Attention:  Dwight Kouri
                           Telecopier: (501) 201-5602
                           Telephone:  (800) 666-9996

With a copy to the same address:    Attention: Doug Babb

and:                       Latham & Watkins
                           233 S. Wacker Drive, Suite 5800
                           Chicago, IL 60606
                           Attention: Kenneth D. Crews
                           Telecopier: (312) 993-9767
                           Telephone:  (312) 876-7700

To Buyer:                  NMC of Florida, LLC
                           Attention:  President
                           Telecopier:
                           Telephone:

with a copy to:            Williams Mullen Clark & Dobbins, P.C.
                           One Columbus Center, Suite 900
                           Virginia Beach, VA  23462
                           Attention:  Lawrence R. Siegel, Esquire
                           Telecopier: (757) 473-0395
                           Telephone:  (757) 473-5359

or at such other address as either party may by like notice designate to the
other in writing.

14.5 Applicable Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida with the exception of
its conflict of laws provisions, which shall not apply.

14.6 Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

14.7 Effect of Captions and Table of Contents. The captions of Articles,
Sections and Sub-Sections of this Agreement and the Table of Contents have been
inserted solely for convenience of reference, and shall not control or affect
the meaning of construction of any of the provisions of this Agreement.


                                       51
<PAGE>


14.8 Attorney's Fees. In the event either party brings an action against the
other to enforce any condition or covenant of this Agreement, the prevailing
party in such action shall be entitled to recover the court costs and reasonable
attorney's fees in the judgment rendered through such action.

14.9 Incorporation by Reference. All Exhibits and Schedules hereto shall be
deemed incorporated by reference.

14.10 Entire Agreement: Modification; Waiver. This Agreement and the Exhibits
and Schedules hereto constitute the entire Agreement between the Beverly
Entities and Buyer pertaining to the subject matter contained therein and
supersedes all prior agreements, representations and all understanding of the
parties. No supplement, modification or amendment of this Agreement shall be
binding unless expressed as such and executed in writing by Buyer and the
Beverly Entities. Except as set forth herein, no waiver of any of the provisions
of this Agreement shall be deemed to be or shall constitute a waiver of any
other provisions hereof, whether or not similar, nor shall any such waiver
constitute a continuing waiver. No waiver shall be binding unless expressed as
such in a document executed by the party making the waiver.

14.11 Publicity. All publicity concerning the transactions contemplated by this
Agreement and all notices respecting publicity shall be jointly planned,
coordinated and released by and between Buyer and the Beverly Entities. Neither
of the parties shall act unilaterally in this regard without prior notice to the
other, except as may be required to comply with law.

14.12 Confidentiality. Each party hereto agrees not to divulge, communicate or
disclose, except as may be required by law or for the performance of this
Agreement, or use to the detriment of the other, or for the benefit of any other
person or persons or misuse in any way, any confidential information or trade
secrets of the other concerning the subject matter hereof, including personnel
information, know-how, patient and resident lists or other information. Each
party acknowledges and agrees that any information or data it has acquired on
any of these matters or items was received in confidence.

14.13 Time of the Essence. Time is of the essence of this Agreement.

14.14 Survival. Subject to the limitations set forth in Sections 13.2.2(E) and
13.3.2(C) hereof, all representations, warranties, covenants, agreements and
obligations of the parties to this Agreement shall survive the Closing.

14.15 Severability. If any provision of this Agreement or any of the documents
executed and delivered at Closing pursuant hereto, or the application thereof to
any particular circumstance, shall to any extent be invalid or unenforceable,
the remainder of this Agreement and all other documents executed at Closing, or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each provision of this Agreement and the documents executed at Closing pursuant
hereto shall be valid and enforceable to the fullest extent permitted by law.

14.16 Escrow Facilities. In the event one or more Facilities has been deemed an
"Escrow Facility" hereunder (the "Escrow Facilities"), then the Closing shall
proceed with respect to all


                                       52
<PAGE>


other Facilities, the closing with respect to the Escrow Facility shall be
closed in escrow, such that the documents and other items that are required to
be delivered pursuant to Article 5 hereof and that relate to the Escrow Facility
or Escrow Facilities, including, without limitation, the amount, if any, of the
Purchase Price allocated to such Escrow Facility or Escrow Facilities as set
forth on Exhibit C hereto, shall be placed into escrow with the Title Company or
such other party as the parties hereto shall designate, pursuant to an escrow
agreement mutually acceptable to the parties hereto in their reasonable
discretion, on the Closing Date for a period of six (6) months. Such escrow or
the termination of the Agreement with respect to such Escrow Facility shall not
affect the Closing with respect to all other Facilities pursuant hereto. The
closing with respect to each Escrow Facility pursuant to this Section 14.16
shall take place as soon as practicable, but in no event later than thirty (30)
days after the cause for such Facility being deemed an Escrow Facility has been
remedied, and such date will be deemed the "Closing Date" with respect to such
Escrow Facility and the "Effective Time" with respect to such Escrow Facility
shall be 11:59 p.m. on such Closing Date. In the event the closing with respect
to any Escrow Facility pursuant to this Section 14.16 does not occur within such
six (6) month escrow period, the escrow period shall be extended for an
additional one (1) month period, during which the parties hereto shall negotiate
in good faith to determine whether the transactions contemplated hereby with
respect to such Escrow Facility shall close, and thereafter, absent an agreement
between the parties to the contrary, this Agreement shall terminate with respect
to such Escrow Facility and the portion of the Purchase Price, if any, allocated
to such Escrow Facility or Escrow Facilities on Exhibit C shall be refunded to
Buyer and the documents placed in escrow shall be returned to the executing
party. Notwithstanding any other provision in this Agreement to the contrary,
return of the purchase price pursuant to this Section 14.16 or placement of
closing documents, purchase price and other items into escrow pursuant to this
Section 14.16, as applicable, shall be Buyer's exclusive remedy for the Beverly
Entities' failure to obtain the Lessor Consent and Estoppel with respect to any
or all of the Leased Facilities, or the Managed Facility Consent with respect to
the Managed Facility, and for any other failure of the Beverly Entities that has
resulted in such Facility being deemed an Escrow Facility.

14.17 Non-Competition.

         14.17.1 Except as permitted in this Section 14.17, during the period
         commencing on the Effective Time and ending on the second anniversary
         of the Effective Time, the Beverly Entities agree that they shall not,
         and shall cause their affiliates not to, (i) engage in the operation of
         any Competing Business (defined in Section 14.17.4 below) within five
         (5) miles of any Facility (a "Territory"), or (ii) acquire, lease, own
         or be a controlling shareholder, controlling partner, controlling
         member or controlling equity holder of, or acquire or maintain a
         controlling interest in, any Competing Business that is located in a
         Territory. Notwithstanding the foregoing, this Section 14.17 shall not
         apply to (i) any person that succeeds to a substantial portion of any
         Beverly Entity's or any of its affiliate's assets, (ii) the acquisition
         of a Competing Business within a Territory to the extent the aggregate
         number of Competing Businesses within any one or more Territories
         constitutes less than twenty (20%) of the facilities acquired by the
         Beverly Entities or their affiliates in any one transaction or series
         of related transactions, (iii) any Beverly Entity if such Beverly
         Entity is acquired by or merged with or into any other person that owns
         or operates a Competing Business, (iv) any Beverly Entity's (a)
         ownership and/or


                                       53
<PAGE>


         operation of Jupiter Care Center in Jupiter, Florida and Holly Point in
         Orange Park, Florida, which are leased and/or subleased to third-party
         operators as of the date hereof or any of the Leased Facilities or the
         Managed Facility and (b) operation of such facilities in the event the
         applicable Beverly Entity exercises its remedies under any such lease,
         (v) any of the Facilities for which a Closing does not occur in
         accordance with the terms and provisions of this Agreement or (vi) any
         Beverly Entities' ownership and/or operation of the Whispering Pines
         facility in Newport Richey, Florida, in the event the sale of such
         facility has not closed prior to the Effective Time, as currently
         contemplated. As used herein, "controlling" means having possession,
         directly or indirectly, of the power to direct or cause the direction
         of the management and policies of a person whether through ownership of
         voting securities, by contract or otherwise.

         14.17.2 The Beverly Entities recognize that the covenants in this
         Section 14.17, and the territorial, time and other limitations with
         respect thereto, are reasonable and properly required for the adequate
         protection of the acquisition of the Purchased Assets by Buyer, and
         agree that such limitations are reasonable with respect to its
         activities, business and public purpose. The Beverly Entities agrees
         and acknowledges that the violation of the covenants or agreements in
         this Section 14.17 would cause irreparable injury to Buyer and that the
         remedy at law for any violation or threatened violation thereof would
         be inadequate and that, in addition to whatever other remedies may be
         available at law or in equity, Buyer shall be entitled to temporary and
         permanent injunctive or other equitable relief without the necessity of
         proving actual damages or posting bond. The parties also waive any
         requirement of proving actual damages in connection with the obtaining
         of any such injunctive or other equitable relief.

         14.17.3 It is the intention of each party hereto that the provisions of
         this Section 14.17 shall be enforced to the fullest extent permissible
         under the laws and the public policies of the State of Florida and of
         any other jurisdiction in which enforcement may be sought, but that the
         unenforceability (or the modification to conform with such laws or
         public policies) of any provisions hereof shall not render
         unenforceable or impair the remainder of this Agreement. Accordingly,
         if any term or provision of this Section 14.17 shall be determined to
         be illegal, invalid or unenforceable, either in whole or in part, this
         Agreement shall be deemed amended to delete or modify, as necessary,
         the offending provisions and to alter the balance of this Agreement in
         order to render the same valid and enforceable to the fullest extent
         permissible as aforesaid.

         14.17.4 For purposes of this Section 14.17, the term "Competing
         Business" means the business of owning and operating skilled nursing or
         assisted living facilities.

14.18 Liability with Appointees. With respect to any provision of this Agreement
that permits Buyer to cause its "appointee(s)" to perform any obligation, Buyer
shall be jointly and severally liable with such appointee for such appointee's
failure to perform or default in the performance of the applicable obligation at
any time. Buyer may not designate any appointee to assume any obligation
hereunder unless such appointee is the duly licensed operator of the Facility to
which such obligation is applicable.


                                       54
<PAGE>


14.19 Beverly Entities Liability. With the exception of Beverly Health and
Rehabilitation Services, Inc. which shall be liable for all of the obligations,
covenants and agreements herein of the Beverly Entities hereunder, and shall
cause the other Beverly Entities to comply with all their obligations hereunder,
each of the Beverly Entities is severally and not jointly liable for its
obligations hereunder. Each representation and warranty by the Beverly Entities
shall be deemed made by each Beverly Entity as to itself only and not as to any
other Beverly Entity, and each covenant and agreement made by the Beverly
Entities shall be deemed made by each Beverly Entity on behalf of itself only
and not on behalf of any other Beverly Entity. .

                            [SIGNATURE PAGE FOLLOWS]




                                       55
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
duly authorized officers, as of the date first above written.


Signed, sealed and delivered                BEVERLY ENTERPRISES - FLORIDA,
in the presence of                          INC.,
                                            a California corporation

---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------


Signed, sealed and delivered                BEVERLY HEALTH AND
in the presence of                          REHABILITATION SERVICES, INC.,
                                            a California corporation

---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------


Signed, sealed and delivered                BEVERLY SAVANA CAY MANOR, INC.,
in the presence of                          a California corporation


---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------


Signed, sealed and delivered                VANTAGE HEALTHCARE
in the presence of                          CORPORATION,
                                            a Delaware corporation

---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------



                                      S-1
<PAGE>



Signed, sealed and delivered                PETERSEN HEALTH CARE, INC.,
in the presence of                          a Florida corporation


---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------


Signed, sealed and delivered                BUYER:
in the presence of
                                            NMC OF FLORIDA, LLC
                                            a Florida limited liability company

---------------------------------------
Printed Name:                               By:
             --------------------------        -------------------------------
                                            Name:
                                                 -----------------------------
                                            Title:
                                                  ----------------------------
---------------------------------------
Printed Name:
             --------------------------







                                      S-2
<PAGE>


                                   EXHIBIT A-1
                                OWNED FACILITIES

<Table>
<Caption>
                                                                                     NAME OF BEVERLY
FACILITY #                  NAME                       LOCATION                      ENTITY AS OWNER
----------                  ----                       --------                      ---------------
<S>             <C>                          <C>                              <C>

   77           Tampa Health Care Center     Tampa, Hillsborough County,           Beverly California
                                             Florida                                  Corporation

  135           Donegan Square Villas        Kissimmee, Osceola County,          Beverly Enterprises -
                                             Florida                              Florida, Inc. d/b/a
                                                                                      Beverly Gulf
                                                                                  Coast-Florida, Inc.

  188           Perry Health Facility        Perry, Taylor County, Florida       Beverly Enterprises -
                                                                                     Florida, Inc.

  225           Eastbrooke Healthcare        Brooksville,                        Beverly Enterprises -
                Center                       Hernando County, Florida                Florida, Inc.

  233           Oak Terrace Specialty Care   Green Cove Springs,                 Beverly Enterprises -
                Center                       Clay County, Florida                    Florida, Inc.

  302           Beverly Healthcare-Winter    Winter Garden,                      Beverly Enterprises -
                Garden                       Orange County, Florida                  Florida, Inc.

  329           Pinehurst Rehabilitation &   Pompano Beach,                      Beverly Enterprises -
                Specialty Care Center        Broward County, Florida                 Florida, Inc.

  494           North Florida Specialty      Gainesville,                        Beverly Enterprises -
                Care Center                  Alachua County, Florida              Florida, Inc. (as to
                                                                                 Parcel I) and Beverly
                                                                                   Enterprises (as to
                                                                                       Parcel II)

  495           Beverly Healthcare-Deltona   Deltona, Volusia County, Florida    Beverly Enterprises -
                                                                                     Florida, Inc.

  496           Heritage Health Care Center  Venice,                               Beverly Health and
                                             Sarasota County, Florida                Rehabilitation
                                                                                     Services, Inc.
</Table>


                                      A-1-1
<PAGE>



<Table>
<S>             <C>                          <C>                              <C>
  754           Beverly                      Kissimmee,                          Beverly Enterprises -
                Healthcare-Kissimmee         Osceola County, Florida              Florida, Inc. d/b/a
                                                                                      Beverly Gulf
                                                                                  Coast-Florida, Inc.

  785           Cross Creek Healthcare       Pensacola,                          Beverly Enterprises -
                Center                       Escambia County, Florida                Florida, Inc.

  786           Spanish Gardens Nursing      Dunedin,                             Beverly Enterprises
                Center                       Pinellas County, Florida              d/b/a Beverly-Gulf
                                                                                      Coast, Inc.,
                                                                                      successor to
                                                                                    S.G.N.C.H., Inc.

  788           Heritage Healthcare and      Naples,                               Beverly Health and
                Rehabilitation Center        Collier County, Florida                 Rehabilitation
                                                                                     Services, Inc.

  789           Lee Convalescent Center      Fort Myers,                           Vantage Healthcare
                                             Lee County, Florida                      Corporation

  791           Beverly Health and           Englewood,                           Beverly Enterprises
                Rehabilitation-Englewood     Charlotte County, Florida

  792           Heritage Healthcare Center   Tallahassee,                        Beverly Enterprises -
                                             Leon County, Florida                    Florida, Inc.
                                                                                    qualified to do
                                                                                 business in the State
                                                                                 of Florida as Beverly
                                                                                  Gulf Coast-Florida,
                                                                                          Inc.

  793           Beverly Health and Rehab     Cape Coral,                         Beverly Enterprises -
                at Coral Terrace             Lee County, Florida                     Florida, Inc.

  800           Beverly Health and           Merritt Island,                     Beverly Enterprises -
                Rehabilitation               Brevard County, Florida                 Florida, Inc.
                Services-Merritt Island

  807           Vista Manor                  Titusville,                         Beverly Enterprises -
                                             Brevard County, Florida                 Florida, Inc.

  891           Beverly Healthcare-Rosemont  Orlando,                            Beverly Enterprises -
                                             Orange County, Florida                  Florida, Inc.
</Table>


                                      A-1-2
<PAGE>



<Table>
<S>             <C>                          <C>                              <C>
  2003          Beauclerc Manor              Jacksonville,                       Beverly Enterprises -
                                             Duval County, Florida                   Florida, Inc.

  2050          Edinborough Square           Dunedin,                             Beverly Enterprises
                                             Pinellas County, Florida              d/b/a Beverly-Gulf
                                                                                      Coast, Inc.,
                                                                                      successor to
                                                                                    S.G.N.C.H., Inc.

  2168          Harbor Beach Convalescent    Fort Lauderdale,                     Beverly Enterprises
                Center                       Broward County, Florida                 Florida, Inc.

  2278          Cypress Square               Fort Myers,                         Beverly Enterprises -
                                             Lee County, Florida                     Florida, Inc.

  2296          Countryside Healthcare       Palm Harbor,                          Beverly Health and
                Center                       Pinellas County, Florida                Rehabilitation
                                                                                     Services, Inc.

  2553          Washington Manor Nursing     Hollywood,                          Beverly Enterprises -
                and Rehabilitation Center    Broward County, Florida                 Florida, Inc.

  2598          Beverly Healthcare-West      West Palm Beach,                    Beverly Enterprises -
                Palm Beach                   Palm Beach County, Florida              Florida, Inc.

  3577          Emerald Oaks                 Sarasota,                           Beverly Enterprises -
                                             Sarasota County, Florida                Florida, Inc.

  3580          Beverly Health and           Palm Coast,                         Beverly Enterprises -
                Rehabilitation Center of     Flagler County, Florida                 Florida, Inc.
                Palm Coast

  3581          Plantation Bay               St. Cloud,                          Beverly Enterprises -
                Rehabilitation Center        Osceola County, Florida                 Florida, Inc.
                (Plantation Bay Healthcare
                Center)

  3625          Beverly Health and           Brooksville,                        Beverly Enterprises -
                Rehabilitation-Spring Hill   Hernando County, Florida                Florida, Inc.

  3643          Beverly Health and           Brandon,                            Beverly Enterprises -
                Rehabilitation Center of     Hillsborough County, Florida            Florida, Inc.
                Brandon

  3668          Capital Healthcare Center    Tallahassee,                          Vantage Healthcare
                                             Leon County, Florida                     Corporation
</Table>


                                     A-1-3
<PAGE>


<Table>
<S>             <C>                          <C>                              <C>

  3672          Beverly Health and           South Daytona,                      Petersen Health Care,
                Rehabilitation               Volusia County, Florida                      Inc.
                Services-South Daytona

  3696          Brentwood Retirement         Lecanto,                            Petersen Health Care,
                Community                    Citrus County, Florida                       Inc.

  3697          Health Center at Brentwood   Lecanto,                            Petersen Health Care,
                                             Citrus County, Florida                       Inc.

  3813          Beverly Healthcare-Largo     Largo,                               BMO Leasing (U.S.),
                                             Pinellas County, Florida               Inc. (fee simple
                                                                                   interest); Beverly
                                                                                 Enterprises--Florida,
                                                                                    Inc. (leasehold
                                                                                       interest)

  3818          Beverly Health and           Palm Bay,                           Beverly Enterprises -
                Rehabilitation               Brevard County, Florida                 Florida, Inc.
                Services-Palm Bay

  3824          Beverly Healthcare-Lakeland  Lakeland,                            BMO Leasing (U.S.),
                                             Polk County, Florida                   Inc. (fee simple
                                                                                   interest); Beverly
                                                                                   Savana Cay Manor,
                                                                                    Inc. (leasehold
                                                                                       interest)

  3957          Destin Healthcare and        Destin,                               Vantage Healthcare
                Rehabilitation Center        Okaloosa County, Florida                 Corporation

  4126          Beverly Health and           Tampa,                               BMO Leasing (U.S.),
                Rehabilitation-Fletcher      Hillsborough County, Florida           Inc. (fee simple
                (Tampa Health Care Center)                                        interest); Petersen
                                                                                   Health Care, Inc.
                                                                                  (leasehold interest)

  4131          Beverly                      Bradenton,                           BMO Leasing (U.S.),
                Healthcare-Bradenton         Manatee County, Florida                Inc. (fee simple
                                                                                   interest); Vantage
                                                                                       Healthcare
                                                                                      Corporation
                                                                                  (leasehold interest)

  4851          Beverly Healthcare-Emerald   Callaway,                           Peterson Health Care,
                Shores                       Bay County, Florida                          Inc.
</Table>



                                     A-1-4
<PAGE>


<Table>
<S>             <C>                          <C>                              <C>
  4911          Beverly Healthcare-N.        Crestview,                           BMO Leasing (U.S.),
                Okaloosa                     Okaloosa County, Florida             Inc. (fee interest);
                                                                                   Beverly Savana Cay
                                                                                      Manor, Inc.
                                                                                  (leasehold interest)

  4936          Beverly Healthcare-Lake      Lake Mary,                            Beverly Savana Cay
                Mary                         Seminole County, Florida                 Manor, Inc.
</Table>









                                      A-1-5
<PAGE>


                                   EXHIBIT A-2
                     MANAGED FACILITY AND LEASED FACILITIES

<Table>
                                                                                                  NAME OF BEVERLY
   FACILITY #                 NAME                     LESSOR                  LOCATION           ENTITY AS LESSEE
   ----------                 ----                     ------                  --------           ----------------
<S>                <C>                          <C>                     <C>                    <C>

   759(1)
   Managed                Gulf Coast                Fee Owner: Gulf         Panama City (Bay       Beverly Health and
  Facility            Convalescent Center        Coast Convalescent        County) Florida          Rehabilitation
                                                     Center, Inc.                                  Services, Inc. is
                                                                                                  manager, not lessee
                                                 Fee Owner's Lessee:
                                                Brookwood-Gulf Coast
                                                 Convalescent Center


      803         Beverly Health and            City of Tarpon              Tarpon Springs       Beverly Enterprises
                  Rehabilitation-Tarpon         Springs, Florida          (Pinellas County)        - Florida, Inc.
                  Springs                                                      Florida

      804              Beverly Health and       Jacksonville Nursing     Jacksonville (Duval     Beverly Enterprises
                   Rehabilitation - Paradise         Home, Ltd.            County) Florida         - Florida, Inc.
                             Pines

      2052             Beverly Health and       Health Care Property   Orlando (Orange County)   Beverly Enterprises
                   Rehabilitation - Rio Pinar      Investors, Inc.             Florida             - Florida, Inc.

      2129             Beverly Health and         Nationwide Health     Fort Pierce (St. Lucie   Beverly Enterprises
                  Rehabilitation - Fort Pierce   Properties Finance        County) Florida         - Florida, Inc.
                                                     Corporation

      3928               Cypress Manor             Encore Nursing      Fort Myers (Lee County)   Beverly Enterprises
                                                  Center Partners,             Florida             - Florida, Inc.
                                                      Ltd. -85

      4132        Beverly Healthcare-Evans      City of Fort Myers,    Fort Myers (Lee County)    Vantage Healthcare
                                                Florida                        Florida               Corporation
</Table>



----------

(1)   Note: Beverly is the manager, not the lessee, of this Facility.



                                     A-2-1
<PAGE>


                                    EXHIBIT B

                                 EXCLUDED ASSETS

Micro fiche readers

Training tapes and miscellaneous in-service training materials, including
Corporate Integrity Agreement materials and manuals

"Hot Line" posters

"Employee of the Month" plaques and stands

Facility brochures and marketing manuals

Employee "Dress for Success" and "Professional" mirrors

Beverly promulgated forms, contracts and internal financial statements

Employee uniforms not owned by the Beverly Entities

Employee uniforms owned by the Beverly Entities, except to the extent Buyer
permanently removes or covers, in a manner reasonably acceptable to the Beverly
Entities, any Beverly trademarks, service marks and logos.

Policy and procedures manuals, employee records and dietary menus

All owned and leased computer equipment and programs, including, but not limited
to, equipment racks, terminals, keyboards, printers, data processing systems,
programs and software

Claims or actions against third parties

Deposits held by third parties relating to Beverly's operations

Insurance maintained by Beverly

Cash, cash equivalents, tax reimbursement or other refunds due Beverly

Use of Beverly's tradename or logo, including, without limitation, any right to
the use of any of the following names, designs or marks: "Beverly", "Beverly
Enterprises", "Beverly Enterprises-Florida", "Leisure Lodge" and any variation,
derivative or combination thereof and associated trademarks, service marks and
logos


                                  Exhibit B-1
<PAGE>


Vehicles at the Facilities [owned] or leased by Beverly

Kronos Time Clock Software

Xerox Copiers

Pitney Bowes Postage Meters and Postage Machines

VSAT Equipment

Bed monitors










                                  Exhibit B-2
<PAGE>


            ADDENDUM TO AGREEMENT FOR SALE OF NURSING HOME PROPERTIES


                  This Addendum to Agreement for Sale of Nursing Home Properties
(this "Addendum") is made and entered into as of the 13th day of July, 2001 by
and among the Entities set forth on Schedule 1 hereto (collectively, the
"Beverly Entities") and NMC of Florida, LLC, a Florida limited liability company
("Buyer").

                                   WITNESSETH:

                  WHEREAS, the Beverly Entities and Buyer are parties to that
certain Agreement for Sale of Nursing Home Properties, dated as of July 13, 2001
(as amended, supplemented or otherwise modified from time to time, the "Purchase
Agreement"; capitalized terms not otherwise defined herein shall have the
definitions provided therefore in the Purchase Agreement); and

                  WHEREAS, the Beverly Entities and Buyer wish to supplement and
amend the Purchase Agreement as more specifically provided herein.

                  NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

1. Addendum to the Purchase Agreement

         a. Appointees.

         (1) The Purchase Agreement is hereby amended by deleting all references
         to the phrases "its appointees", "its appointee", "any appointee",
         "such appointee", "its appointees permitted hereunder" and "its
         permitted appointees" wherever they appear therein and replacing each
         such phrase with the phrase "the Proposed Operators".

         (2) Section 5.1.19 of the Purchase Agreement is hereby amended and
         restated in its entirety to read as follows:

                  Counterparts to transition agreements, in form and substance
                  reasonably acceptable to the Beverly Entities ("Transition
                  Agreements"), among the Beverly Entities, Buyer and the
                  Proposed Operators, pursuant to which Buyer or such Proposed
                  Operators agree to perform all obligations hereunder which are
                  to be performed by the operator of the Facilities (including,
                  without limitation, those set forth in Sections 8.2.5, 8.2.6,
                  8.2.7, 8.2.8, 8.2.9 and 8.2.11 hereof) and Buyer agrees to be
                  jointly and severally liable therefor.

         (3) The last sentence of Subsection 10.2.9 is hereby amended and
         restated to read as follows:

                  If wholly-owned subsidiaries of the Proposed Operators enter
                  into the Aegis Agreement, each Proposed Operator shall provide
                  Aegis Therapies, Inc. with a


<PAGE>


                  full payment guaranty of all of such Proposed Operators'
                  subsidiaries' obligations thereunder.

         (4) Section 14.18 of the Purchase Agreement is hereby amended and
         restated in its entirety to read as follows:

                  14.18 Liability with Appointees. With respect to any provision
                  of this Agreement that permits Buyer to cause the Proposed
                  Operators to perform any obligation, Buyer shall be jointly
                  and severally liable with the applicable Proposed Operator for
                  such Proposed Operator's failure to perform or default in the
                  performance of the applicable obligation at any time. Buyer
                  may not designate any Proposed Operator to assume any
                  obligation hereunder unless such Proposed Operator is the duly
                  licensed operator of the Facility to which such obligation is
                  applicable.

         (5) Buyer shall cause the Proposed Operators to perform all of the
         covenants set forth in Sections 8.2.5, 8.2.6, 8.2.7, 8.2.8, 8.2.9,
         8.2.10, 8.2.11 and 8.2.13 of the Purchase Agreement.

         b. Section 1.10 (Additional Defined Terms). Section 1.10 of the
Purchase Agreement is hereby amended by adding the following reference in proper
alphabetical order:

                  Additional Deposit                 2.3.4
                  Proposed Operators                 8.2.15

         c. Section 2.2 (Purchase Price). Section 2.2 of the Purchase Agreement
is hereby amended and restated in its entirety to read as follows:

                  2.2 Purchase Price. In consideration of the transfer of the
                  Purchased Assets as described herein, Buyer shall pay the
                  Beverly Entities the sum of One Hundred Sixty-Five Million
                  Dollars ($165,000,000) (as may be increased as set forth in
                  this Section 2.2 and/or as otherwise adjusted pursuant to
                  Section 14.16 hereof, the "Purchase Price") to be paid in
                  immediately available funds at Closing. If Buyer elects to
                  extend the date by which the Closing must occur from October
                  31, 2001 to November 30, 2001 in accordance with Section 3.1
                  hereof and if all applications for licenses and permits (other
                  than Form 855) contemplated by Section 8.2.1 hereof were not
                  filed, substantially completed in proper form (other than Form
                  855) on or before July 31, 2001, then the Purchase Price shall
                  be increased in the amount of Two Million Five Hundred
                  Thousand Dollars ($2,500,000). The Purchase Price will be
                  allocated as specified in Exhibit C attached hereto; provided,
                  however, that if the Purchase Price is increased as provided
                  in this Section 2.2, then such increased amount shall be
                  allocated to the Facilities pro rata based on the allocations
                  set forth in Exhibit C attached hereto.

         d. Earnest Money. Buyer acknowledges that the Beverly Entities have
advanced or will advance the sum of Five Hundred Thousand Dollars ($500,000) to
Buyer's senior lender, UBS Warburg Real Estate Investments, Inc., in order to
allow UBS Warburg Real Estate Investments,



                                       2
<PAGE>


Inc. to begin to obtain third party diligence reports necessary in connection
with its financing. As consideration for making such advance, in the event that
the transactions contemplated by the Purchase Agreement shall fail to close as a
result of (i) Buyer's material breach of the terms of the Purchase Agreement,
(ii) termination of the Purchase Agreement by the Beverly Entities as permitted
thereunder, or (iii) Buyer's failure to satisfy a condition to closing that is
reasonably within Buyer's control, then Buyer hereby assigns, without additional
consideration, all of its rights to such third party reports to the Beverly
Entities and shall promptly deliver such reports to the Beverly Entities. In the
event that the transaction contemplated by the Purchase Agreement shall fail to
close for any other reason, then upon the Beverly Entity's payment to Buyer of
the actual amount Buyer paid, directly or indirectly, to UBS Warburg Real Estate
Investments, Inc. for the preparation of any of such reports that the Beverly
Entities desire to purchase, then Buyer shall assign, all of its rights to such
third party reports to the Beverly Entities and shall promptly deliver (or, if
such reports are not in Buyer's possession, direct UBS Warburg Real Estate
Investments, Inc. to deliver) such reports to the Beverly Entities; provided,
however, that if the Beverly Entities have not been reimbursed for the advance
made to UBS Warburg Real Estate Investments, Inc. as described in this
paragraph, the Beverly Entities shall not be required to make any such payment
for such reports. Buyer and the Beverly Entities desire to provide for the
Beverly Entities to be reimbursed for such advance by the amendments to the
Purchase Agreement set forth below.

         (1) The first paragraph of Section 2.3 of the Purchase Agreement is
         hereby amended and restated to read as follows:

                  Simultaneously with the execution and delivery of this
                  Agreement by all parties hereto, Buyer shall deliver (i) to
                  Fidelity National Title Insurance Company ("Escrow Agent")
                  (pursuant to its standard form escrow agreement reasonably
                  acceptable to Buyer and the Beverly Entities) an earnest money
                  deposit in the amount of One Million One Hundred Thousand
                  Dollars ($1,100,000) (together with all Additional Deposits,
                  the "Escrowed Deposit"), and (ii) to the Beverly Entities a
                  deposit in the amount of Five Hundred Thousand Dollars
                  ($500,000) (the "Diligence Deposit", and together with the
                  Escrowed Deposit, the "Deposit"), which Deposit is
                  non-refundable, except as described below. The Escrowed
                  Deposit shall be held in an interest bearing account, but the
                  Diligence Deposit shall not be required to be held in an
                  interest bearing account. Any accrued interest shall be
                  transferred with the Escrowed Deposit.

         (2) Subsection 2.3.1 of the Purchase Agreement is hereby amended and
         restated in its entirety to read as follows:

                  In the event the transactions contemplated under this
                  Agreement shall close as provided herein, the Deposit, less
                  any offsets for expenses paid for by the Beverly Entities
                  prior to Closing and not reimbursed by Buyer (to the extent
                  Buyer is obligated to pay for such expenses hereunder), shall
                  be applied against the Purchase Price at the Closing. In the
                  event that the transactions contemplated under this Agreement
                  shall fail to close as provided herein due to a breach of this
                  Agreement by the Buyer, then the Escrow Agent shall pay the
                  Escrowed Deposit



                                       3
<PAGE>


                  to the Beverly Entities as liquidated damages and the Beverly
                  Entities shall retain the Diligence Deposit as liquidated
                  damages. In the event the Agreement is terminated as a result
                  of (i) a breach of this Agreement by the Beverly Entities,
                  (ii) the failure to satisfy any condition to closing contained
                  in Article 10 provided that Buyer is not then in breach of
                  this Agreement and such breach has been noticed in writing by
                  the Beverly Entities to the Buyer, or (iii) termination of the
                  Agreement in accordance with Section 12.2, then the Escrow
                  Agent shall pay the Escrowed Deposit to the Buyer and the
                  Beverly Entities shall retain the Diligence Deposit; provided,
                  however, that if a termination by Buyer occurs under Section
                  12.2, then the Beverly Entities shall pay the Diligence
                  Deposit to Buyer.

         (3) The following new subsection 2.3.4 is hereby added to the Purchase
         Agreement in proper numerical order:

                  On or before July 18, 2001, Buyer shall increase the Escrowed
                  Deposit by the amount of One Million Six Hundred Thousand
                  Dollars ($1,600,000) (the "Additional Deposit").
                  Notwithstanding anything to the contrary contained herein, on
                  the date that is forty-five (45) days after the date hereof,
                  the Diligence Deposit shall become the exclusive property of
                  the Beverly Entities and shall cease to be any part of the
                  Deposit. On or before the date that is forty-six (46) days
                  after the date hereof, Buyer shall increase the Escrowed
                  Deposit by the amount of One Million Five Hundred Thousand
                  Dollars ($1,500,000) (also, the "Additional Deposit"), at
                  which time the Escrowed Deposit shall thereafter comprise the
                  entire amount of the "Deposit." In the event that Buyer fails
                  to increase the Escrowed Deposit by the required amounts on or
                  before July 18, 2001 or such forty-sixth (46th) day after the
                  date hereof, as applicable, the Beverly Entities may terminate
                  this Agreement by providing written notice to Buyer and the
                  Beverly Entities may retain the Deposit (including, without
                  limitation, the Diligence Deposit), and neither party shall
                  have any other liability hereunder of any nature whatsoever to
                  the other party, including, without limitation, any liability
                  for damages.

         (4) Subject to the provisions set forth in Section 2.3.1 of the
         Purchase Agreement as amended hereby pursuant to which the Beverly
         Entities shall return the Diligence Deposit to Buyer in the event the
         Purchase Agreement is terminated by Buyer under Section 12.2 thereof,
         the Purchase Agreement is hereby amended to provide, notwithstanding
         anything to the contrary set forth therein, that in the event of the
         termination of the Purchase Agreement for any reason and regardless of
         which of Buyer or the Beverly Entities is entitled to retain the
         Escrowed Deposit, the Beverly Entities shall be entitled to retain the
         Diligence Deposit as reimbursement of the advance of funds to UBS
         Warburg Real Estate Investments, Inc.

         (5) All references in the Purchase Agreement to Buyer or the Beverly
         Entities being entitled to "retain" either the Deposit or the Escrowed
         Deposit shall be interpreted to mean that the Escrow Agent shall pay
         the Deposit or the Escrowed Deposit, as applicable, to the applicable
         party.


                                       4
<PAGE>


         e. Section 7.1.19 (Condition of Assets). Section 7.1.19(c) of the
Purchase Agreement is hereby amended by inserting the word "in" between the
words "is" and "working".

         f. Section 7.1.25 (Medicare and Medicaid Participation). Section
7.1.25(a)(iv) is hereby amended by inserting the word "not" immediately before
the word "material".

         g. Section 7.2.10 (Knowledge). Section 7.2.10 of the Purchase Agreement
is hereby amended and restated in its entirety to read as follows:

                  For the purposes of this Agreement, "knowledge," "actual
                  knowledge" and similar standards with respect to Buyer shall
                  mean the actual knowledge of Arnold Whitman, Steve Fishman and
                  William Smith, following reasonable inquiry.

         h. Section 8.1.12 (Licensure Notices). Section 8.1.12 of the Purchase
Agreement is hereby amended by deleting the phrase "As soon as reasonably
practicable but in no event later than ten days after the date of this
Agreement" that appears therein and replacing it with the phrase "No later than
two (2) business days after the Beverly Entities issue a press release making
public disclosure of the execution and delivery of this Agreement".

         i. Section 8.1.17 (No Solicitation). Section 8.1.17 of the Purchase
Agreement is hereby amended and restated in its entirety to read as follows:

                  8.1.17 No Solicitation. Until July 31, 2001, so long as Buyer
                  is in material compliance with all of its obligations
                  hereunder, the Beverly Entities agree they shall not directly
                  or indirectly, through any officer, director, employee, agent
                  or otherwise, enter into or conduct substantive discussions or
                  negotiations, solicit, initiate or encourage submission of
                  proposals or offers from any person relating to any
                  acquisition of any or all of the Facilities, or furnish to any
                  other person any information with respect to, negotiate,
                  discuss or otherwise cooperate in any way with, or assist or
                  participate in, facilitate or encourage, any effort or attempt
                  by any other person to do or seek any of the foregoing. From
                  August 1, 2001 through August 15, 2001, the Beverly Entities
                  agree they shall not directly or indirectly, through any
                  officer, director, employee, agent or otherwise, enter into or
                  conduct substantive discussions or negotiations, solicit,
                  initiate or encourage submission of proposals or offers from
                  any Proposed Operator with whom Buyer has entered into a valid
                  and binding term sheet, as contemplated by Section 8.2.15
                  hereof, relating to any acquisition of any or all of the
                  Facilities, or furnish to any such Proposed Operator any
                  information with respect to, negotiate, discuss or otherwise
                  cooperate in any way with, or assist or participate in,
                  facilitate or encourage, any effort or attempt by any other
                  person to do or seek any of the foregoing. Between August 1,
                  2001 and August 15, 2001, the Beverly Entities may conduct any
                  of the aforementioned activities with any person (other than
                  any Proposed Operator with whom Buyer has entered into a valid
                  and binding term sheet, as contemplated by Section 8.2.15
                  hereof); provided, however, that the Beverly Entities may not
                  enter into any written term sheet, letter of intent or other
                  agreement with respect to the sale of the Facilities to any
                  such person. After



                                       5
<PAGE>


                  August 15, 2001, this Section 8.1.17 shall be of no further
                  force or effect. Notwithstanding anything to the contrary
                  contained herein, nothing in this Section 8.1.17 shall
                  prohibit the Beverly Entities from making inquiries and having
                  discussions from time to time with any Proposed Operator as to
                  the status of such Proposed Operator's transaction with Buyer
                  as contemplated by this Agreement.

         j. .Section 8.1.18 (Regulatory Inspections). Section 8.1.18 of the
Purchase Agreement is hereby amended by replacing the word "Buyer" with the
phrase "the Beverly Entities."

         k. Section 8.2.1 (Licensure). Section 8.2.1 of the Purchase Agreement
is hereby amended and restated in its entirety to read as follows:

                  8.2.1 Licensure. Prior to the Closing, Buyer shall, and Buyer
                  shall cause its Proposed Operators to, use commercially
                  reasonable efforts and due diligence to obtain licenses from
                  the Department, or commitment that such licenses will be
                  issued as of the Effective Time, and such other licenses and
                  permits as may be required, to authorize the Proposed
                  Operators to operate the Facilities as they are currently
                  operated and to obtain Medicare and Medicaid certification and
                  provider agreements thereunder, if applicable. Buyer shall,
                  and Buyer shall cause its Proposed Operators to, use
                  commercially reasonable efforts to cause all applications
                  (other than form 855) for such licenses and permits to be
                  submitted, substantially completed in proper form (other than
                  Form 855), to the Department and other appropriate regulatory
                  authorities on or before July 31, 2001; provided, however,
                  that Buyer shall, and Buyer shall cause its Proposed Operators
                  to, cause all applications for such licenses and permits to be
                  submitted, substantially completed in proper form (other than
                  form 855), to the Department and other appropriate regulatory
                  authorities on or before August 7, 2001; provided, however,
                  that Buyer shall, and Buyer shall cause the Proposed Operators
                  to, cause all Forms 855 for all of the Facilities to be
                  submitted substantially complete in proper form on or before
                  August 15, 2001. In the event of a breach of the obligations
                  for the submission of applications in accordance with this
                  Section 8.2.1 (including, without limitation, the timing
                  requirements set forth herein), then the Beverly Entities may
                  terminate this Agreement by providing written notice to Buyer
                  and retain the Deposit (including, without limitation, the
                  Diligence Deposit), and neither party shall have any other
                  liability hereunder of any nature whatsoever to the other
                  party, including, without limitation, any liability for
                  damages. Buyer shall, and Buyer shall cause the Proposed
                  Operators to, cooperate with the Beverly Entities and take
                  reasonable measures to shorten the periods required under
                  applicable law for notice, licensure approval and other
                  similar processes in connection with the receipt of licensure
                  as described in this Section. If the Beverly Entities and
                  Buyer mutually agree to pay fees to the Department to shorten
                  such periods, Buyer shall pay fifty percent (50%) of all such
                  fees. In the event for any reason Buyer shall be unable to
                  obtain necessary licenses for any of the Facilities prior to
                  the Closing Date, then each such Facility shall be deemed an
                  Escrow Facility.


                                       6
<PAGE>


         l. Section 8.2.7 (Regulatory Inspections; Surveys). The last sentence
of Section 8.2.7 of the Purchase Agreement is hereby amended and restated in its
entirety to read as follows:

                  Subject to the requirements of applicable law, Buyer shall
                  not, and Buyer shall cause the Proposed Operators not to,
                  request any regulatory inspection or survey of any Facility by
                  any regulatory authority until after the Effective Time.

         m. Section 8.2.10 (Hart-Scott-Rodino). Section 8.2.10 of the Purchase
Agreement is hereby amended and restated in its entirety to read as follows:

                  Buyer shall use commercially reasonable efforts to furnish, or
                  cause to be furnished, such information, and promptly file, or
                  cause to be filed, such documents as may be required in order
                  for Buyer and the Proposed Operators to comply with the HSR
                  Act, and Buyer shall cooperate fully in order that all
                  necessary filings by the Beverly Entities in connection
                  therewith may be completed as soon as possible after the
                  execution and delivery of this Agreement, or earlier if
                  practicable. Buyer shall, and shall cause the Proposed
                  Operators to, use commercially reasonable efforts to respond
                  promptly to any requests for additional information received
                  in connection with any HSR Act filing, and Buyer shall
                  promptly notify the Beverly Entities of any such request for
                  additional information.

         n. Section 8.2.12 (Financing Commitments). Section 8.2.12 of the
Purchase Agreement is hereby amended by deleting the third (3rd) and fourth
(4th) sentences thereof in their entirety. Additionally, the last two sentences
of Section 8.2.12 of the Purchase Agreement are hereby amended and restated in
their entirety to read as follows:

                  In the event of said termination, the Escrow Agent shall pay
                  the Escrowed Deposit to Buyer and the Beverly Entities shall
                  retain the Diligence Deposit. Notwithstanding anything herein
                  to the contrary, the aggregate contributions from the senior
                  and junior lenders (net of all origination, commitment and
                  other fees, prepayments, reserves and other deductions of any
                  nature whatsoever) available to Buyer to finance the Purchase
                  Price and any other amounts owing by Buyer hereunder at the
                  Closing shall total at least One Hundred Fifty Million Dollars
                  ($150,000,000), and all deliveries by Buyer under this Section
                  8.2.12 shall evidence such availability or Buyer shall be
                  deemed not to have made the deliveries required hereunder;
                  provided, however that nothing herein shall obligate Buyer to
                  actually incur junior or mezzanine financing at Closing if all
                  funds that would have been provided by such junior or
                  mezzanine financing are replaced with equity contributions
                  obtained by Buyer (other than pursuant to Section 9.6 hereof).

         o. Section 8.2.15 (Proposed Operators). The following new Section
8.2.15 is hereby added to the Purchase Agreement in proper numerical order:

                  8.2.15  Proposed Operators



                                       7
<PAGE>


                           (a) Attached hereto as Schedule 8.2.15 is Buyer's
                  list of potential operators of the Facilities. Buyer may add
                  potential operators to such schedule only with the Beverly
                  Entities' prior written consent, which shall not be
                  unreasonably withheld or delayed. The Beverly Entities shall
                  respond to any request to add potential operators to Schedule
                  8.2.15 within one (1) business day after its receipt of
                  Buyer's written request to do so. If the Beverly Entities fail
                  to respond to such written request within such time period,
                  then such request shall be deemed approved and such potential
                  operators shall be deemed added to Scheduled 8.2.15. Buyer
                  shall use commercially reasonable efforts to arrange for
                  representatives of the Beverly Entities to meet (or have other
                  communications reasonably acceptable to the Beverly Entities)
                  with all operators listed on Schedule 8.2.15 promptly after
                  Buyer has met with such operators to open discussions
                  regarding the terms and conditions of operating leases. On or
                  before July 23, 2001, Buyer shall identify which of the
                  potential operators listed on Schedule 8.2.15 it intends to
                  have operate the Facilities (the "Proposed Operators"). Buyer
                  may identify more than two (2) or less than two (2) Proposed
                  Operators from those listed on Schedule 8.2.15 only with the
                  Beverly Entities' prior written consent, which shall not be
                  unreasonably withheld or delayed, and such operators that
                  Beverly so approves shall also be "Proposed Operators." The
                  Beverly Entities shall respond to any request to allow Buyer
                  to identify more than two (2) or less than two (2) Proposed
                  Operators within three (3) business days after its receipt of
                  Buyer's written request to do so. If the Beverly Entities fail
                  to respond to such written request within such time period,
                  then such request shall be deemed approved.

                           (b) On or before July 31, 2001, Buyer and the
                  Proposed Operators shall have entered into valid and binding
                  term sheets (including, without limitation, all material
                  economic and other terms) for the operating leases (or in the
                  case of New Millennium Care and/or Aurora Healthcare, an
                  operating structure, other than a lease, reasonably acceptable
                  to the Beverly Entities) necessary to allow the Proposed
                  Operators to operate all of the Facilities. On or before July
                  31, 2001, Buyer shall deliver fully-executed copies to the
                  Beverly Entities of all such valid and binding term sheets. On
                  or before August 15, 2001, Buyer and the Proposed Operators
                  shall have entered into valid and binding operating leases (or
                  in the case of New Millennium Care and/or Aurora Healthcare,
                  valid and binding documentation of an operating structure,
                  other than a lease, reasonably acceptable to the Beverly
                  Entities) necessary to allow the Proposed Operators to operate
                  all of the Facilities. On or before August 15, 2001, Buyer
                  shall deliver fully-executed copies to the Beverly Entities of
                  all such valid and binding operating leases. In the event
                  Buyer and the Proposed Operators fail to enter into such valid
                  and binding term sheets and operating leases on or before the
                  dates provided in this Section 8.2.15, or if fully-executed
                  copies of all of such term sheets and operating leases have
                  not been delivered to the Beverly Entities on or before such
                  dates, then the Beverly Entities may terminate this Agreement
                  by providing written notice to Buyer and the Beverly Entities
                  may retain the Deposit (including,


                                       8
<PAGE>


                  without limitation, the Diligence Deposit), and neither party
                  shall have any other liability hereunder of any nature
                  whatsoever to the other party, including, without limitation,
                  any liability for damages. The foregoing term sheets and
                  operating leases and all information contained therein shall
                  be deemed confidential information of Buyer and shall be
                  treated by the Beverly Entities in accordance with Section
                  14.12 hereof.

         p. Section 9.4 (The Beverly Entities' Obligation to Pay Break-Up Fee
Under Certain Circumstances). Section 9.4 of the Purchase Agreement is hereby
amended to add the phrase "2.3.4, 8.2.1, 8.2.15," immediately after the phrase
"Section 8.2.12" in both places that such phrase appears in such section.

         q. Section 9.6 (Funding Contingency). The following new Section 9.6 is
hereby added to the Purchase Agreement in proper numerical order:

                  9.6 Funding Contingency

                           (a) In the event that, at the Closing, Buyer does not
                  have funds available that, when aggregated with all amounts
                  available from Buyer's senior and junior lenders, are
                  sufficient to allow Buyer to pay the Purchase Price and all
                  other amounts owing by Buyer hereunder as of the Closing, then
                  the Beverly Entities, in their sole discretion, may elect to
                  make, and Buyer shall accept, a loan in the amount of such
                  deficiency, in no event to exceed Fifteen Million Dollars
                  ($15,000,000), which amount may be increased in the Beverly
                  Entities sole discretion (the "Funding Contingency Credit").
                  To evidence the Funding Contingency Credit, at the Closing,
                  Buyer shall execute and deliver to the Beverly Entities a
                  promissory note in the principal amount equal to the amount of
                  the Funding Contingency Credit actually credited against the
                  Purchase Price by the Beverly Entities plus Five Million
                  Dollars ($5,000,000) (the "Funding Contingency Note"). The
                  Funding Contingency Note shall be for a term of one (1) year,
                  shall bear interest at the rate of fifteen percent (15%) per
                  annum and shall require monthly payments of interest and
                  principal based on a five (5) year straight-line amortization
                  schedule. Notwithstanding the foregoing, instead of a Funding
                  Contingency Credit, the Beverly Entities may elect, in their
                  sole discretion, to provide, and Buyer shall accept, a
                  guaranty or other form of credit support in favor of a third
                  party lender making a loan to Buyer in the amount of the
                  Funding Contingency Credit (a "Funding Contingency Guaranty"),
                  in which event Buyer shall execute and deliver, at the
                  Closing, a Funding Contingency Note in the principal amount of
                  Five Million Dollars ($5,000,000). Buyer acknowledges and
                  agrees that it is within the Beverly Entities' sole discretion
                  to provide either a Funding Contingency Credit, a Funding
                  Contingency Guaranty, a combination of a Funding Contingency
                  Credit and a Funding Contingency Guaranty or none of the
                  foregoing.

                           (b) To secure the Funding Contingency Credit and/or
                  the Funding Contingency Guaranty, at the Closing Buyer shall
                  execute and deliver to the


                                       9
<PAGE>


                  Beverly Entities second mortgages on the Funding Contingency
                  Security Facilities (as defined below). The "Funding
                  Contingency Security Facilities" shall be those Facilities (i)
                  that are fee-owned, (ii) that are encumbered only by a
                  mortgage in favor of Heller Healthcare Finance (the "Heller
                  Mortgage"), (iii) for which (A) the product of six (6) times
                  Adjusted EBITDA (as defined below) equals or exceeds (B) the
                  sum of the original face amount of the Funding Contingency
                  Note plus the total amount of all of the Beverly Entities'
                  contingent liabilities under any Funding Contingency Guaranty
                  plus the amount secured by the Heller Mortgage, (iv) at least
                  half of which are no older than ten (10) years and none of
                  which are older than twenty (20) years and (v) that are
                  mutually identified by the Beverly Entities, Buyer's senior
                  lender and Heller Healthcare Finance. The Beverly Entities
                  shall negotiate in good faith the form of second mortgage and
                  an intercreditor agreement with Heller Healthcare Financial,
                  which is satisfactory to the Beverly Entities in their sole
                  discretion. For purposes of this Section 9.6, "Adjusted
                  EBITDA" shall mean EBITDA calculated and adjusted using the
                  same methodology and procedures as used in that certain
                  Beverly Enterprises Florida Facilities Descriptive Memorandum,
                  dated September 30, 2000, regarding the disposition of the
                  Facilities.

                           (c) The documents described in this Section 9.6, and
                  all other documents and instruments reasonably required by the
                  Beverly Entities in connection with the Funding Contingency
                  Credit shall be executed and delivered at the Closing
                  regardless of whether they are listed in Article 5 of this
                  Agreement.

         r. Section 10.1.11 (No Material Adverse Change). Section 10.1.11 of the
Purchase Agreement is hereby amended by inserting the phrase "or the Proposed
Operators'" immediately after the word "Buyer's".

         s. Section 10.1.13 (Restrictions on Payment). The following new Section
10.1.13 is hereby added to the Purchase Agreement in proper numerical order:

                  10.1.13 Restrictions on Payment. As of the Effective Time no
                  Facility shall be under a Denial of Payment for New Admissions
                  or similar prohibition on the operator of such Facility
                  receiving payment for providing care or services to residents
                  of such Facility under government reimbursement programs, in
                  each case that would have a material adverse effect on such
                  Facility; provided that in the event for any reason any
                  Facility shall be under such a Denial of Payment for New
                  Admissions or similar prohibition, then each such Facility
                  shall be deemed an Escrow Facility and the condition shall be
                  deemed to have been met with respect to all other Facilities.

         t. Section 10.2.8 (Pharmerica Contract). All references to the date
"July 31, 2001" in Section 10.2.8 of the Purchase Agreement are hereby amended
to be "August 15, 2001". Additionally, the third sentence of Section 10.2.8 of
the Purchase Agreement is hereby amended and restated in its entirety to read as
follows:


                                       10
<PAGE>


                  If Buyer has not entered into the Pharmerica Assumption with
                  Pharmerica, Inc. on or before August 15, 2001, then the
                  Beverly Entities may terminate this Agreement by providing
                  written notice to Buyer within three (3) business days after
                  such date and the Beverly Entities may retain the Deposit
                  (including, without limitation, the Diligence Deposit) as
                  liquidated damages, and failure to provide such notice shall
                  be a waiver of such termination rights; provided, however,
                  that if Buyer has not entered into the Pharmerica Assumption
                  on or before such date as a result of Pharmerica, Inc.
                  refusing to agree to competitive pricing as described above,
                  then, if the Beverly Entities terminate this Agreement as
                  provided, the Escrow Agent shall pay the Escrowed Deposit to
                  Buyer and the Beverly Entities may retain the Diligence
                  Deposit.

         u. Section 10.2.9 (Aegis Contract). All references to the date "July
31, 2001" in Section 10.2.9 of the Purchase Agreement are hereby amended to be
"August 15, 2001". The third sentence of Section 10.2.9 of the Purchase
Agreement is hereby amended and restated in its entirety to read as follows:

                  If Buyer has not entered into the Aegis Agreement with Aegis
                  Therapies, Inc. on or before August 15, 2001, then the Beverly
                  Entities may terminate this Agreement by providing written
                  notice to Buyer within three (3) business days after such date
                  and the Beverly Entities may retain the Deposit (including,
                  without limitation, the Diligence Deposit) as liquidated
                  damages, and failure to provide such notice shall be a waiver
                  of such termination rights; provided, however, that if Buyer
                  has not entered into the Aegis Agreement on or before such
                  date as a result of Aegis Therapies, Inc. refusing to agree to
                  the conditions as described above, then, if the Beverly
                  Entities terminate this Agreement as provided, the Escrow
                  Agent shall pay the Escrowed Deposit to Buyer and the Beverly
                  Entities may retain the Diligence Deposit.

         v. Further Assurances. Section 14.1 of the Purchase Agreement is hereby
amended by adding the following sentence to the end thereof:

                  The Beverly Entities acknowledge and agree that Buyer may
                  assign this agreement to one or more wholly-owned subsidiaries
                  (as permitted under and in accordance with Section 14.2
                  hereof) and that the Proposed Operators may create one or more
                  wholly-owned subsidiaries to lease the facilities from Buyer
                  and/or its subsidiaries, and the Beverly Entities consent to
                  the foregoing. The Beverly Entities agree to execute and
                  deliver any and all agreements, documents or instruments
                  reasonably necessary to accomplish the foregoing and to convey
                  title to Buyer's permitted assignees, including but not
                  limited to special warranty deeds, bills of sale and
                  assignments of contracts.

3. Miscellaneous

         a. Captions. Section captions used in this Addendum are for convenience
only, and shall not affect the construction of this Addendum.



                                       11
<PAGE>


         b. Governing Law. This Addendum shall be a contract made under and
governed by the laws of the State of Florida, without regard to conflict of laws
principles. Whenever possible each provision of this Addendum shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Addendum shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Addendum.

         c. Counterparts. This Addendum may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Addendum.

         d. Successors and Assigns. This Addendum shall be binding upon Buyer
and the Beverly Entities and their respective successors and assigns, and shall
inure to the sole benefit of Buyer and the Beverly Entities and the successors
and assigns of Buyer and the Beverly Entities.

         e. References. Any reference to the Purchase Agreement contained in any
notice, request, certificate, or other document executed concurrently with or
after the execution and delivery of this Addendum shall be deemed to include
this Addendum unless the context shall otherwise require.

         f. Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Addendum are not intended to and do not serve to effect a
novation as to the Purchase Agreement. The Purchase Agreement as supplemented
and amended hereby remains in full force and effect.


                            [SIGNATURE PAGE FOLLOWS]





                                       12
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
Addendum to be duly executed on their respective behalf, by their respective
duly authorized officers, as of the date first above written.


NMC OF FLORIDA, LLC, a Florida limited       BEVERLY ENTERPRISES - FLORIDA,
liability company                            INC.,
                                             a California corporation
     By: Vantage Medical, Inc., its sole
     manager

                                             By:
                                                --------------------------------
         By:                                 Name:
            ----------------------------           -----------------------------
         Name:                               Title:
              --------------------------            ----------------------------
         Title:
                ------------------------



BEVERLY HEALTH AND                           BEVERLY SAVANA CAY MANOR, INC.,
REHABILITATION SERVICES, INC.,               a California corporation
a California corporation

By:                                          By:
   -------------------------------------         -------------------------------
Name:                                        Name:
      ----------------------------------           -----------------------------
Title:                                       Title:
       ---------------------------------            ----------------------------



VANTAGE HEALTHCARE CORPORATION,              PETERSEN HEALTH CARE, INC.,
a Delaware corporation                       a Florida corporation

By:                                          By:
   -------------------------------------         -------------------------------
Name:                                        Name:
      ----------------------------------           -----------------------------
Title:                                       Title:
       ---------------------------------            ----------------------------



               [SIGNATURE PAGE TO ADDENDUM TO PURCHASE AGREEMENT]



<PAGE>



                                   SCHEDULE 1

                                BEVERLY ENTITIES


BEVERLY ENTERPRISES - FLORIDA, INC., a California corporation

BEVERLY HEALTH AND REHABILITATION SERVICES, INC., a California corporation

BEVERLY SAVANA CAY MANOR, INC., a California corporation

VANTAGE HEALTHCARE CORPORATION, a Delaware corporation

PETERSEN HEALTH CARE, INC., a Florida corporation






<PAGE>



                                 SCHEDULE 8.2.15

                               POTENTIAL OPERATORS

Delta Healthcare

Harborside Healthcare

Tandem Healthcare

An entity controlled by Paul Diaz

Northpoint Health Services, Inc.

Adventist Health System

New Millennium Care, Inc. and/or Aurora Healthcare (an anticipated spin-off of
the nursing home operating business of New Millennium Care, Inc.)

LifeCare Centers of America, Inc.

Healthmark Group - Matt Robertson

National Health Investors - Andy Adams