<PAGE>
                                                                   EXHIBIT 10.66

CONFIDENTIAL TREATMENT REQUESTED

The asterisked portions of this document have been omitted and are filed
separately with the Securities and Exchange Commission.

                 AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT
                    AGREEMENT AND AMENDMENT NO. 2 TO AMENDED
                         AND RESTATED PLEDGE AGREEMENT

         AMENDMENT dated as of February 28, 2003 to (i) the Amended and Restated
Credit Agreement dated as of April 25, 2001 (as amended prior to the date
hereof, the "Credit Agreement") among BEVERLY ENTERPRISES, INC. (with its
successors, the "Borrower"), the BANKS listed on the signature pages thereof,
JPMORGAN CHASE BANK (formerly known as The Chase Manhattan Bank, successor by
merger to Morgan Guaranty Trust Company of New York), as Issuing Bank (with its
successors in such capacity, the "Issuing Bank"), and JPMORGAN CHASE BANK, as
Administrative Agent (the "Administrative Agent") and (ii) the Amended and
Restated Pledge Agreement dated as of April 25, 2001 (as amended prior to the
date hereof, the "Pledge Agreement") among the Borrower, Beverly Health and
Rehabilitation Services, Inc. and the Administrative Agent.

                                  WITNESSETH:

         WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth herein;

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
or the Pledge Agreement has the meaning assigned to such term in the Credit
Agreement or the Pledge Agreement, as the context requires. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement or any other Financing Document shall, after
this Amendment becomes effective, refer to the Credit Agreement or the Pledge
Agreement, as the case may be, as amended hereby.

         SECTION 2. New Definitions. Section 1.01 of the Credit Agreement is
hereby amended by adding, in appropriate alphabetical order, the following
definitions:


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                  "ADDITIONAL MORTGAGES" means mortgages or deeds of trust from
         the owner of each property on which a Lien is required to be granted
         pursuant to Section 5.23, as mortgagor, securing the obligations of
         such owner under the Financing Documents (and, if the Borrower so
         elects, the Bank of Montreal Synthetic Lease Obligations), in each case
         in form and substance reasonably satisfactory to the Administrative
         Agent and as the same may be amended from time to time.

                  "ADJUSTED LEVERAGE RATIO" means, (a) for any day prior to
         September 30, 2003, the ratio of Adjusted Consolidated Debt on such day
         to Annualized Consolidated EBITDAR for the fiscal quarter most recently
         ended on or prior to such day and (b) for any day on or after September
         30, 2003, the ratio of Adjusted Consolidated Debt on such day to
         Consolidated EBITDAR for the period of four consecutive fiscal quarters
         most recently ended on or prior to such day.

                  "AMENDMENT NO. 4" means Amendment No. 4 to Amended and
         Restated Credit Agreement and Amendment No. 2 to Amended and Restated
         Pledge Agreement dated as of February 28, 2003 among the Borrower, the
         Banks party thereto and the Administrative Agent.

                  "AMENDMENT NO. 4 EFFECTIVE DATE" means the date on which
         Amendment No. 4 becomes effective in accordance with its terms.

                  "AMSOUTH MORTGAGE FACILITY" means the Amended and Restated
         Term Loan Agreement, dated December 31, 1998, between Beverly
         Enterprises-Mississippi, Inc. and AmSouth Bank (successor by merger to
         First American National Bank), as amended by the First Amendment to
         Amended and Restated Term Loan Agreement and Promissory Notes, dated
         September 30, 1999, and as further amended, restated, supplemented or
         otherwise modified from time to time.

                  "ANNUALIZED CONSOLIDATED EBITDAR" means (a) for the fiscal
         quarter ended December 31, 2002, Consolidated EBITDAR for such fiscal
         quarter multiplied by 4, (b) for the fiscal quarter ended March 31,
         2003, Consolidated EBITDAR for the period of two fiscal quarters ended
         March 31, 2003 multiplied by 2 and (c) for the fiscal quarter ended
         June 30, 2003, Consolidated EBITDAR for the period of three fiscal
         quarters ended June 30, 2003 multiplied by the 4/3.

                  "ANNUALIZED MORTGAGE EBITDA" means (i) for the fiscal quarter
         ended December 31, 2002, EBITDA for Mortgaged Facilities for such
         fiscal quarter multiplied by 4, (ii) for the fiscal quarter ended March
         31,

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         2003, EBITDA for Mortgaged Facilities for the period of two fiscal
         quarters ended March 31, 2003 multiplied by 2, (iii) for the fiscal
         quarter ended June 30, 2003, EBITDA for Mortgaged Facilities for the
         period of three fiscal quarters ended June 30, 2003 multiplied by the
         4/3 and (iv) for any fiscal quarter thereafter, EBITDA for Mortgaged
         Facilities for the period of four consecutive fiscal quarters ended on
         the last day of such fiscal quarter.

                  "ASSET SALE" means any sale, lease, transfer or other
         disposition of any assets or property other than (i) sales of assets or
         property (other than assisted living and skilled nursing facilities,
         separate business units, businesses and divisions and stock of
         Subsidiaries of the Borrower) in the ordinary course of business, and
         (ii) sales, transfers, leases and other dispositions by the Borrower or
         any of its Subsidiaries to the Borrower or any of the Subsidiaries.

                  "AVAILABLE AMOUNT" means (i) for any day prior to the
         satisfaction of the New Mortgage Condition, the lesser of (x) the
         Specified Amount for such day and (y) $75,000,000 and (ii) for any day
         on or after the satisfaction of the New Mortgage Condition, the
         Specified Amount for such day.

                  "AVAILABLE COMMITMENT" means, for each Bank on any day, an
         amount equal to the product of (i) the Available Amount for such day
         multiplied by (ii) such Bank's Ratable Share for such day.

                  "BANK OF MONTREAL SYNTHETIC LEASE OBLIGATIONS" means all
         amounts now or hereafter payable by the Borrower and its Subsidiaries
         pursuant to the Bank of Montreal Synthetic Lease.

                  "CARE FOCUS" means, as of the Amendment No. 4 Effective Date,
         the personal care business, located in North Carolina, operated by
         Community Care, Inc. and Compassion and Personal Care Services, Inc.

                  "CONSOLIDATED CASH BALANCE" means on any day the cash and
         Temporary Cash Investments held by the Borrower and its Consolidated
         Subsidiaries on such day.

                  "COVERAGE LIMITATION" means, for any day, an amount equal to
         (i) the product of 5 multiplied by the Annualized Mortgage EBITDA, as
         determined on such day, for the most recent fiscal quarter for which
         financial statements have been, or are required to have been, delivered
         pursuant to Sections 5.01(a) and (b), divided by (ii) 1.5; provided
         that if,

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<PAGE>

         on or prior to such day, the Borrower has prepaid any New Senior Notes
         or Senior Notes pursuant to Section 5.21(iii)(B), the "Coverage
         Limitation" for such day shall be an amount equal to the amount set
         forth in clause (i), as determined for such day, divided by 2.0.

                  "CURABLE ENCUMBRANCES" means an encumbrance on New Mortgage
         Property in existence as of the New Mortgage Deadline (or, in the case
         of a New Mortgage Property as to which the Agent shall have consented
         to an Extended New Mortgage Deadline, as of the Extended New Mortgage
         Deadline in respect of such New Mortgage Property) and set forth in an
         executed letter accepted by the Administrative Agent pursuant to
         Section 5.20(d).

                  "CURE DATE" means the date specified in an executed letter
         accepted by the Administrative Agent pursuant to Section 5.20(d) as the
         date by which the Curable Encumbrances set forth in such letter are to
         be cured by the owner of the New Mortgage Property on which such
         encumbrances exist; provided that if no date is specified in the
         applicable letter for the cure of any Curable Encumbrance set forth
         therein, the Cure Date in respect of such Curable Encumbrance shall be
         the 90th day following the delivery of the relevant New Mortgage to the
         Administrative Agent pursuant to Section 5.20(a).

                  "DISPOSITION PROGRAM" means, the sale, transfer or other
         disposition by the Borrower and its Subsidiaries, in one or more
         transactions and pursuant to sales of facilities and related assets,
         sales of stock of Subsidiaries or a combination thereof, of assisted
         living and skilled nursing facilities of the Borrower and its
         Subsidiaries, all in substantial conformity with the plan of
         disposition described in the Strategic Review.

                  "DUCC BUSINESS LINE" means the management of occupational
         therapy and medicine clinics operated by Matrix Occupational Health,
         Inc. in North Carolina.

                  "EBITDA FOR MORTGAGED FACILITIES" means, for any period, Net
         Income for Mortgaged Facilities for such period plus, without
         duplication, any amounts deducted in determining such Net Income for
         Mortgaged Facilities in respect of (a) Consolidated Interest Charges
         for such period, (b) Consolidated Tax Charges for such period and (c)
         expenses for such period of the types classified as "depreciation and
         amortization" on the consolidated statement of operations included in
         the Base Financials.

                                       4

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                  "EXISTING MORTGAGES" means mortgages and deeds of trust
         described in Schedule V hereto, in each case as the same has been or
         may be amended from time to time.

                  "EXTENDED NEW MORTGAGE DEADLINE" has the meaning set forth in
         Section 5.20.

                  "FEDERAL WAY FACILITY" means the skilled nursing facility
         operated by Beverly Enterprises-Washington, Inc., located at 135 South
         336 Street, Federal Way, Washington, 98003.

                  "INITIAL SPECIFIED PORTION" means, with respect to any
         prepayment required under clause (ii)(B)(1) of Section 5.22, (a) with
         respect to the Bank of Montreal Synthetic Lease Obligations, 80% and
         (b) with respect to the Mortgage Facility Obligations, 20%; provided
         that if at the time that any such repayment would otherwise be
         required, (i) the Bank of Montreal Synthetic Lease Obligations have
         been repaid in full or would be repaid in full by the application of
         less than all of the applicable Initial Specified Portion of the
         applicable amount or (ii) the Mortgage Facility Obligations have been
         repaid in full or would be repaid in full by the application of less
         than all of the applicable Initial Specified Portion of the applicable
         amount, the Initial Specified Portion (or the portion of such Initial
         Specified Portion in excess of the amount necessary to repay such Bank
         of Montreal Synthetic Lease Obligations or Mortgage Facility
         Obligations) that would otherwise have been applied to repay such Bank
         of Montreal Synthetic Lease Obligations or Mortgage Facility
         Obligations shall be included in the Initial Specified Portion of Bank
         of Montreal Synthetic Lease Obligations or Mortgage Facility
         Obligations remaining outstanding.

                  "INVESTMENTS SIDE LETTER" means the side letter dated February
         28, 2003 delivered by the Borrower and acknowledged by the
         Administrative Agent.

                  "MATRIX ENTITIES" means AnMed/VBS Rehabilitative Services,
         MATRIX Rehabilitation, Inc., MATRIX Healthcare Services, LLC, MATRIX
         Rehabilitation - Delaware, Inc., MATRIX Rehabilitation -Georgia, Inc.,
         MATRIX Rehabilitation - Maryland, Inc., MATRIX Rehabilitation - Ohio,
         Inc., MATRIX Rehabilitation - Texas, Inc., MATRIX Rehabilitation -
         South Carolina, Inc., Theraphysics Corp., Theraphysics Partners of
         Colorado, Inc., Theraphysics Partners of Western Pennsylvania, Inc.,
         Theraphysics Partners of Texas, Inc., Carrollton Physical Therapy
         Clinic, Inc., Las Colinas Physical Therapy Center, Inc.,


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         Greenville Rehabilitation Services, Inc., Home Health and
         Rehabilitation Services, Inc., North Dallas Physical Therapy
         Associates, Inc. and The Parks Physical Therapy and Work Hardening
         Center, Inc.

                  "MK MEDICAL" means, as of the Amendment No. 4 Effective Date,
         collectively, the business divisions of HomeCare Preferred Choice, Inc.
         which operate a respiratory therapy business, durable medical equipment
         business and rehabilitation business, in each case in Nevada and
         California.

                  "MORTGAGE CREDIT FACILITIES" means, collectively, the AmSouth
         Mortgage Facility and the Washington Mutual Mortgage Facilities.

                  "MORTGAGE FACILITY OBLIGATIONS" means all amounts now or
         hereafter payable by the Borrower or its Subsidiaries pursuant to the
         Mortgage Credit Facilities.

                  "NET CASH PROCEEDS" means, with respect to any Asset Sale, (a)
         the cash proceeds received by the Borrower or any of its Subsidiaries
         in respect of such Asset Sale, including any cash received in respect
         of any non-cash proceeds, but only as and when received, net of (b) the
         sum of (i) all reasonable fees and out-of-pocket expenses paid by the
         Borrower and its Subsidiaries to third parties (other than Affiliates)
         in connection with such Asset Sale, (ii) the amount of all (x) payments
         required to be made by the Borrower and its Subsidiaries as a result of
         such Asset Sale to repay Debt (other than prepayments of Mortgage
         Facility Obligations or Bank of Montreal Synthetic Lease Obligations
         required under clauses (i), (ii)(B), (ii)(C) and (iii) of Section 5.22
         and prepayments of Loans required under Section 2.05(d) in connection
         with the reductions of the Commitments pursuant to clauses (i),
         (ii)(B), (ii)(C) and (iii) of Section 2.11(b)) secured by such asset or
         otherwise subject to mandatory prepayment as a result of such Asset
         Sale and (y) reductions in the Commitments pursuant to Section
         2.11(b)(ii)(A), (iii) the amount of all taxes paid (or reasonably
         estimated to be payable) by the Borrower and its Subsidiaries during
         the year that such Asset Sale occurred or the next succeeding year and
         that are directly attributable to such Asset Sale (as determined
         reasonably and in good faith by the chief financial officer of the
         Borrower) and (iv) the amount of all payments required to be made by
         the Borrower and its Subsidiaries to pay severance, salary for accrued
         and unused vacation days and other employee termination expenses during
         the year that such Asset Sale occurred or the next succeeding year and
         that are directly attributable to such Asset Sale.

                                       6

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                  "NET INCOME FOR MORTGAGED FACILITIES" means, for any period
         and as determined on any date, the net income (loss) (calculated
         exclusive of the effect of any extraordinary or other material
         non-recurring gain or loss outside the ordinary course of business) for
         such period for all assisted living and skilled nursing facilities
         subject to (x) an Existing Mortgage or (y) a New Mortgage as to which
         all the conditions set forth in Section 5.20 have been satisfied, and,
         in each case, which has not theretofore been released.

                  "NEW MORTGAGE CONDITION" means the satisfaction by the
         Borrower and its Subsidiaries of all of their obligations under Section
         5.20 (including the cure of all Curable Encumbrances).

                  "NEW MORTGAGE DEADLINE" means the sixtieth day after the
         Amendment No. 4 Effective Date.

                  "NEW MORTGAGE PROPERTY" means the property described in
         Schedule VI hereto; provided that the Borrower may, with the written
         consent of the Administrative Agent, which may be granted or withheld
         in its reasonable discretion, substitute for one or more properties
         listed on such Schedule VI one or more new properties not listed
         thereon so long as (i) such new property or properties are of equal or
         greater value than the property or properties for which they are to be
         substituted based on the "2003 Budget EBITDA with Cliff" assigned to
         such properties in the Strategic Review and (ii) at the time of such
         substitution the Borrower (x) represents in a writing to the
         Administrative Agent that after giving effect to such substitution, the
         aggregate "2003 Budget EBITDA with Cliff" assigned to all New Mortgage
         Properties in the Strategic Review shall be at least $33,000,000 and
         (y) provides an amended Schedule VI reflecting such substitution and
         any prior substitutions. Upon any such substitution, Schedule VI shall
         be deemed automatically to be amended to reflect such substitution.

                  "NEW MORTGAGES" means mortgages or deeds of trust from the
         owner of each New Mortgage Property, as mortgagor, to the
         Administrative Agent, as mortgagee, in respect of the New Mortgage
         Properties, in each case in form and substance reasonably satisfactory
         to the Administrative Agent and as the same may be amended from time to
         time.

                  "NEW SENIOR NOTE AGREEMENT" means that certain Indenture,
         dated as of April 25, 2001, between the Borrower, the guarantors party.

                                       7

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         thereto and The Bank of New York, as trustee, as amended, modified or
         supplemented.

                  "PERMITTED PROPERTY LIENS", with respect to any property
         covered by an Existing Mortgage, a New Mortgage or an Additional
         Mortgage, has the meaning set forth in the related Existing Mortgage,
         New Mortgage or Additional Mortgage, respectively.

                  "RATABLE SHARE" means, with respect to any Bank on any day, a
         fraction, the numerator of which is such Bank's Commitment on such day
         and the denominator of which is the aggregate Commitments of all Banks
         on such day.

                  "RESTRICTED PERIOD" means any period that is not an
         Unrestricted Period.

                  "SENIOR NOTES" means the senior unsecured notes of the
         Borrower due 2006 issued pursuant to the Senior Note Agreement.

                  "SPECIFIED AMOUNT" means (a) for any day during a Restricted
         Period (i) if such day occurs prior to the New Mortgage Deadline, the
         lesser of (x) the aggregate Commitments of all Banks on such day and
         (y) $100,000,000 and (ii) if such day occurs on or after the New
         Mortgage Deadline, the least of (x) the aggregate Commitments of all
         Banks on such day, (y) the Coverage Limitation for such day and (z)
         $100,000,000 and (b) for any day during an Unrestricted Period, (i) if
         such day occurs prior to the New Mortgage Deadline, the aggregate
         Commitments of all Banks on such day and (ii) if such day occurs on or
         after the New Mortgage Deadline, the lesser of (x) the aggregate
         Commitments of all Banks on such day and (y) the Coverage Limitation
         for such day.

                  "SPECIFIED PORTION" means, with respect to any repayment
         required under clause (ii)(B)(2), (ii)(C) or (iii) of Section 5.22 or
         any Commitment reduction pursuant to clause (ii)(B)(2), (ii)(C) or
         (iii) of Section 2.11(b), (a) with respect to the Commitments, 50%, (b)
         with respect to the Bank of Montreal Synthetic Lease Obligations, 40%
         and (c) with respect to the Mortgage Facility Obligations, 10%;
         provided that if at the time that any such Commitment reduction or
         repayment would otherwise be required, (i) the aggregate Commitments of
         all Banks have been reduced to $85,000,000 or would be reduced to
         $85,000,000 by the application of less than the applicable Specified
         Portion of the applicable amount, (ii) the Bank of Montreal Synthetic
         Lease Obligations have been repaid in full or would be repaid in full
         by the application of less than all of the applicable Specified Portion
         of the applicable amount or (iii) the

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         Mortgage Facility Obligations have been repaid in full or would be
         repaid in full by the application of less than all of the applicable
         Specified Portion of the applicable amount, the Specified Portion (or
         the portion of such Specified Portion in excess of the amount necessary
         to reduce such aggregate Commitments to $85,000,000 or to repay such
         Bank of Montreal Synthetic Lease Obligations or Mortgage Facility
         Obligations in full) that would otherwise have been applied to reduce
         such Commitments or repay such Bank of Montreal Synthetic Lease
         Obligations or Mortgage Facility Obligations shall be included in the
         Specified Portions applicable to the outstanding Commitments in excess,
         in the aggregate for all Banks, of $85,000,000 and the Bank of Montreal
         Synthetic Lease Obligations and Mortgage Facility Obligations remaining
         outstanding in proportion to the relative Specified Portions set forth
         in clauses (a), (b) and (c) above.

                  "STRATEGIC REVIEW" means the "Strategic Discussion and Review"
         dated January 10, 2003 provided by the Borrower to the Banks.

                  "UNRESTRICTED PERIOD" means any period of one or more days in
         which both (i) the aggregate gross cash proceeds received by the
         Borrower and its Subsidiaries from all Asset Sales made by the Borrower
         and its Subsidiaries on or after the Amendment No. 4 Effective Date and
         on or prior to such day (excluding all proceeds received from Assets
         Sales of the facilities and related assets, stock or any combination
         thereof pertaining to the Matrix Entities) equals or exceeds
         $175,000,000 and (ii) the Adjusted Leverage Ratio as of the last day of
         the two most recent fiscal quarters for which financial statements have
         been, or are required to have been, delivered pursuant to Sections
         5.01(a) and (b) did not exceed 5.0 to 1.0.

                  "WASHINGTON MUTUAL MORTGAGE FACILITIES" means, collectively,
         (1) the Loan Agreement, dated October 15, 1996, between Beverly
         Enterprises - Arkansas, Inc. and Washington Mutual Bank FA (successor
         by merger to Bank United) ("WASHINGTON MUTUAL"), (2) the Loan
         Agreement, dated October 15, 1996, between Beverly Enterprises -
         Alabama, Inc. and Washington Mutual, (3) the Loan Agreement, dated
         October 15, 1996, between Beverly Enterprises - Washington, Inc. and
         Washington Mutual and (4) the Loan Agreement, dated October 15, 1996,
         between Beverly Enterprises - Wisconsin, Inc. and Washington Mutual,
         each as amended from time to time.

         SECTION 3. Amendment of Definitions. (a) The definition of "Permitted
Encumbrances" set forth in Section 1.01 of the Credit Agreement is hereby
deleted in its entirety.


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<PAGE>

         (b) The definitions of "Adjusted Consolidated Debt", "Consolidated Net
Income", "Consolidated Net Worth", "Financing Documents", "Fixed Charge Coverage
Ratio", "Letter of Credit Commitment", "Mortgages" and "Security Documents", set
forth in Section 1.01 of the Credit Agreement, are hereby amended to read in
full as follows:

                  "ADJUSTED CONSOLIDATED DEBT" means, at any date, the sum,
         without duplication, of (i) all liabilities of the Borrower and its
         Subsidiaries at such date of the types classified as "current
         liabilities: short-term borrowings", "current liabilities: current
         portion of long-term obligations," "long-term obligations" and, to the
         extent arising out of claims made by governmental authorities relating
         to reimbursement obligations or settlements thereof, "other liabilities
         and deferred items" on the consolidated balance sheet included in the
         Base Financials, (ii) all guarantees at such date of obligations of
         other issuers (other than (x) guarantees outstanding on the Effective
         Date of obligations outstanding on the Effective Date, in amounts not
         in excess of $57,191,572 and reported in the Base Financials and (y)
         obligations, or guarantees of obligations, with respect to facilities
         or Subsidiaries disposed of, which obligations or guarantees existed
         prior to such dispositions and are initially recorded as liabilities or
         obligations on the consolidated balance sheet of the Borrower and its
         Consolidated Subsidiaries pursuant to FASB Interpretation 45 after the
         Closing Date, so long as (A) no event of the type referred to in
         Section 6.01(h) or (i) (without regard to whether a period of 60 days
         shall have passed as contemplated in Section 6.01(i)) shall have
         occurred with respect to the Person that is primarily liable in respect
         of such obligations, or who has agreed with the Borrower or any of its
         Subsidiaries to be responsible for such obligations, and (B) the
         obligee of such obligation, or the beneficiary of such guarantee, shall
         not have made a demand for payment in respect of such obligation or
         guarantee) and (iii) an amount equal to the product of eight multiplied
         by the Consolidated Rental Expense for the four fiscal quarters of the
         Borrower most recently completed on or prior to such date; provided
         that for purposes of this clause (iii), Consolidated Rental Expense for
         any such period of four fiscal quarters shall be calculated after
         giving pro forma effect (including, in the case of any acquisition, as
         to any cost savings and the like resulting from such acquisition, but
         only to the extent permitted under Regulation S-X promulgated by the
         Securities and Exchange Commission) to any acquisition or disposition
         by the Borrower or any of its Subsidiaries of any business, nursing
         home or other facility or any Subsidiary consummated after the first
         day of such period and on or prior to the date on which such
         determination is to be made, as if such acquisition or disposition had
         been consummated on the first day of such period, if, but only if, the

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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

The asterisked portions of this document have been omitted and are filed
separately with the Securities and Exchange Commission.

         Consolidated EBITDAR attributable to all such businesses, nursing homes
         and other facilities and all such Subsidiaries, in any transaction or
         series of related transactions, for such period, in the aggregate,
         equals or exceeds $10,000,000.

                  "CONSOLIDATED NET INCOME" means, for any period, the net
         income (loss) (calculated (a) before preferred and common stock
         dividends and (b) exclusive of the effect of (i) any extraordinary or
         other material non-recurring gain or loss outside the ordinary course
         of business, (ii) Specified Restructuring Charges in an aggregate
         amount, on a pretax basis, during the period from October 1, 2000
         through March 31, 2001 not exceeding $105,000,000, (iii) the charges or
         losses, in an aggregate amount, on a pretax basis, not exceeding
         $130,000,000, incurred by the Borrower and its Consolidated
         Subsidiaries on or prior to January 8, 2002 in connection with the
         Florida Disposition, (iv) charges and losses incurred by the Borrower
         and its Consolidated Subsidiaries on or after the Amendment No. 4
         Effective Date as a result of (x) Asset Sales outside the ordinary
         course of business and dispositions made pursuant to the Disposition
         Program and (y) payments relating to the past billing practices of MK
         Medical in an aggregate amount not exceeding ************, (v) non-cash
         charges and losses incurred by the Borrower and its Consolidated
         Subsidiaries on or after the Amendment No. 4 Effective Date as a result
         of (x) closures of assisted living and skilled nursing facilities of
         the Borrower and its Subsidiaries and (y) any change in GAAP that
         requires the Bank of Montreal Synthetic Lease Obligations and the
         assets subject to the Bank of Montreal Synthetic Lease to be included
         on the balance sheet of the Borrower and its Consolidated Subsidiaries
         and (vi) transaction fees and expenses of the Borrower and its
         Subsidiaries incurred in connection with Amendment No. 4 and any
         related amendments to the Bank of Montreal Synthetic Lease and the
         Mortgage Credit Facilities) for the Borrower and its Consolidated
         Subsidiaries, determined on a consolidated basis for such period.

                  "CONSOLIDATED NET WORTH" means, at any date, the consolidated
         stockholders' equity of the Borrower and its Consolidated Subsidiaries
         at such date, without giving effect to (a) charges and losses incurred
         by the Borrower and its Consolidated Subsidiaries on or after the
         Amendment No. 4 Effective Date as a result of (i) Asset Sales outside
         the ordinary course of business and dispositions made pursuant to the
         Disposition Program, (ii) payments relating to the past billing
         practices of MK Medical in an aggregate amount not exceeding
         ************ (b) non-cash charges and losses incurred by the Borrower
         and its Consolidated Subsidiaries on or after the Amendment No. 4
         Effective Date as a result of (i) closures of

                                       11

<PAGE>

         assisted living and skilled nursing facilities of the Borrower and its
         Subsidiaries and (ii) any change in GAAP that requires the Bank of
         Montreal Synthetic Lease Obligations and the assets subject to the Bank
         of Montreal Synthetic Lease to be included on the balance sheet of the
         Borrower and its Consolidated Subsidiaries and (c) transaction fees and
         expenses of the Borrower and its Subsidiaries in connection with
         Amendment No. 4 and any related amendments to the Bank of Montreal
         Synthetic Lease and the Mortgage Credit Facilities.

                  "FINANCING DOCUMENTS" means this Agreement, the Notes, the
         Subsidiary Guaranty and the Security Documents.

                  "FIXED CHARGE COVERAGE RATIO" means, on any date, the ratio of
         (i) Consolidated EBITDAR for the four consecutive fiscal quarters most
         recently ended on or prior to such date to (ii) the sum of Consolidated
         Interest Charges and Consolidated Rental Expense for such fiscal
         quarters.

                  "LETTER OF CREDIT COMMITMENT" means, with respect to any Bank
         at any time, an amount equal to the lesser of (i) such Bank's Available
         Commitment at such time and (ii) the product of $75,000,000 multiplied
         by such Bank's Ratable Share at such time.

                  "MORTGAGES" means the Existing Mortgages and the New
         Mortgages.

                  "SECURITY DOCUMENTS" means the Pledge Agreement, the Mortgages
         and any Additional Mortgage (excluding, on any day prior to the
         execution and delivery of any New Mortgage or Additional Mortgage, such
         New Mortgage or Additional Mortgage), together with all related
         filings, assignments, instruments, mortgages and other papers.

         SECTION 4. Loans on and after the Effective Date. Clause (b) of Section
2.01 of the Credit Agreement is amended to read in full as follows:

                  "(b) Loans on and after the Effective Date. Each Bank
         severally agrees, on the terms and conditions set forth in this
         Agreement, to make loans to the Borrower pursuant to this Section
         2.01(b) from time to time from and including the Effective Date to but
         excluding the Termination Date in amounts such that such Bank's
         Exposure shall not exceed such Bank's Available Commitment. Each
         Borrowing under this Section 2.01(b) shall be in an aggregate principal
         amount of $1,000,000 or any larger multiple of $1,000,000 (except that
         any such Borrowing may be in the aggregate amount available under
         Section 3.02(b)) and shall be made


                                       12
<PAGE>

         from each Bank in the amount of its Ratable Share of such Borrowing.
         Within the foregoing limits, the Borrower may borrow under this Section
         2.01(b), prepay loans to the extent permitted by Section 2.13, and
         reborrow pursuant to this Section 2.01(b)."

         SECTION 5. Maturity of Loans; Mandatory Prepayments. Section 2.05 of
the Credit Agreement is amended to read in full as follows:

                  "SECTION 2.05. Maturity of Loans; Mandatory Prepayments. (a)
         Each Loan shall mature, and the principal amount thereof shall be due
         and payable in full, on the Termination Date.

                  (b) The Loans shall be prepaid on the first Business Day of
         each calendar month in an aggregate amount equal to the amount (if any)
         by which the Consolidated Cash Balance on last Business Day of the
         immediately preceding calendar month (after giving effect to any
         prepayment of the Bank of Montreal Synthetic Lease Obligations and/or
         the Mortgage Facility Obligations pursuant to Section 5.22 or the Loans
         pursuant to clause (d) of this Section 2.05, in each case to be made on
         such Business Day and net of the aggregate amount of checks issued by
         the Borrower and its Consolidated Subsidiaries on or prior to such
         Business Day that have not cleared at the close of business on such
         Business Day), exceeds $50,000,000.

                  (c) If, on any day, the aggregate Exposure of all Banks shall
         exceed the Available Amount for such day, the Borrower shall prepay
         Loans (and, to the extent that such amount exceeds the aggregate
         principal amount of all Loans then outstanding, cash collateralize
         Letters of Credit) in an aggregate principal amount equal to such
         excess.

                  (d) If, on any day on which the Commitments are reduced
         pursuant to Section 2.11(b), there shall be any Loans outstanding, the
         Borrower shall prepay Loans in an aggregate principal amount equal to
         the lesser of (x) the aggregate principal amount of all Loans then
         outstanding and (y) the amount of such Commitment reduction.

                  (e) Each prepayment of all or part of a Group of Loans
         pursuant to this Section 2.05 shall be applied to prepay ratably the
         Loans of the several Banks included in such Group."

         SECTION 6. Fees. (a) Clause (a) of Section 2.08 of the Credit Agreement
is amended to read in full as follows:


                                       13
<PAGE>

                  "(a) The Borrower shall pay to the Administrative Agent for
         the account of the Banks, ratably in proportion to their Commitments, a
         commitment fee at a rate per annum (the "COMMITMENT FEE RATE")
         determined for each day in accordance with the Pricing Schedule, on the
         amount by which the aggregate amount of the Commitments on such day
         exceeds the aggregate Exposure on such day; provided that for any day
         during a Restricted Period, the Commitment Fee Rate applicable to any
         portion of the unused Commitments that represents aggregate Commitments
         in excess of $100,000,000 shall be 0.50% per annum. Such fees shall
         accrue from and including the Effective Date to but excluding the
         Termination Date (or earlier date of termination of the Commitments in
         their entirety)."

         SECTION 7. No Increase of Commitments. Section 2.09 of the Credit
Agreement is amended to read in full as follows:

                  "SECTION 2.09. [INTENTIONALLY OMITTED]."

         SECTION 8. Mandatory Termination or Reduction of Commitments. Section
2.11 of the Credit Agreement is amended to read in full as follows:

                  "SECTION 2.11. Mandatory Termination or Reduction of
         Commitments. (a) All Commitments shall terminate in their entirety on
         the Termination Date.

                  (b) The Commitments shall automatically be reduced

                           (i) on the Amendment No. 4 Effective Date, by
                  $25,000,000,

                           (ii) upon the receipt by the Borrower or any of its
                  Subsidiaries of any proceeds of any Asset Sale, by an amount
                  equal to

                                    (A) if the assets subject to such Asset Sale
                           constituted Collateral immediately prior to such
                           Asset Sale, the product of 5 multiplied by the
                           Annualized Mortgage EBITDA for the assets subject to
                           such Asset Sale, as determined based on the most
                           recent fiscal quarter for which financial statements
                           have been delivered pursuant to Sections 5.01(a) and
                           (b);

                                       14

<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

The asterisked portions of this document have been omitted and are filed
separately with the Securities and Exchange Commission.

                                    (B) if any Net Cash Proceeds result from
                           such Asset Sale,

                                             (1) until the Commitments have been
                                    reduced by $18,750,000 in the aggregate
                                    pursuant to this clause (1), 100% of the Net
                                    Cash Proceeds in respect of such Asset Sale;
                                    provided that if, prior to the earlier of
                                    (x) *************************************
                                    ***************** and (y) ***************
                                    *******************************************,
                                    the Borrower shall have reached a final
                                    agreement related to past billing practices
                                    of MK Medical, which agreement requires the
                                    Borrower and its Subsidiaries to make cash
                                    payments in an aggregate amount greater than
                                    ************ but less than *************, no
                                    Commitment reduction shall be required in
                                    respect of the Net Cash Proceeds received on
                                    or after the date that such agreement
                                    becomes final in an amount equal to the
                                    excess of the aggregate amount of such
                                    payments over ***********; provided further
                                    that the provisions of this clause (1) shall
                                    remain in effect thereafter until the
                                    Commitments have been reduced by $18,750,000
                                    in the aggregate pursuant to this clause
                                    (1),

                                             (2) after the Commitments have been
                                    reduced by $18,750,000 in the aggregate
                                    pursuant to clause (ii)(B)(1) of this
                                    Section 2.11(b), the Specified Portion in
                                    respect of the Commitments of 65% of the Net
                                    Cash Proceeds of such Asset Sales and

                                    (C) if, in the absence of any additional
                           Commitment reductions and/or repayments of Mortgage
                           Facility Obligations and/or Bank of Montreal
                           Synthetic Lease Obligations, the Borrower would be
                           required to make a Senior Asset Sale Offer (as
                           defined in the Senior Note Agreement or the New
                           Senior Note Agreement) under the Senior Note
                           Agreement or the New Senior Note Agreement, by an
                           amount equal to the Specified Portion in respect of
                           the Commitments of the amount of Net Cash Proceeds
                           that must be applied to repay Senior Debt (as defined
                           in the Senior Note Agreement or the New Senior

                                       15

<PAGE>

                           Note Agreement) in order for the Borrower to avoid
                           the making of a Senior Asset Sale Offer under the
                           Senior Note Agreement or the New Senior Note
                           Agreement; and

                           (iii) on any Business Day, by the Specified Portion
                  in respect of the Commitments of the amount by which the
                  average of the Consolidated Cash Balances at the close of
                  business on the three consecutive Business Days immediately
                  preceding such day (in each case after giving effect to any
                  Commitment reductions required pursuant to clause (ii) of this
                  Section 2.11(b) and related prepayments pursuant to Section
                  2.05(d) and any prepayments required under clause (ii) of
                  Section 5.22, in each case to be made on any such Business
                  Day) exceeds $125,000,000;

         provided that in no event (other than pursuant to clause (ii)(C) above)
         shall the aggregate Commitments be reduced to less than $85,000,000
         pursuant to this Section 2.11(b).

                  (c) Each reduction of the Commitments pursuant to this Section
         2.11 shall be applied ratably to the respective Commitments of all
         Banks."

         SECTION 9. Conditions to Each Borrowing and Letter of Credit Issuance.
Clause (b) of Section 3.02 is amended to read in full as follows:

                  "(b) in the case of any Borrowing or the issuance of any
         Letter of Credit, the fact that, immediately after such Borrowing or
         the issuance of such Letter of Credit, as the case may be, the
         aggregate Exposures of all Banks does not exceed the Available Amount;"

         SECTION 10. Subsidiaries. The last sentence of Section 4.01 of the
Credit Agreement is amended by replacing the expression "Effective Date" with
"Amendment No. 4 Effective Date".

         SECTION 11. Binding Effect; Liens. Clause (b) of Section 4.03 of the
Credit Agreement is amended to read in full as follows:

                  "(b) The Security Documents create valid security interests in
         and mortgage liens on the Collateral purported to be covered thereby,
         which security interests and mortgage liens are and will remain
         perfected security interests and mortgage liens, prior to all Liens
         other than Permitted Property Liens and, at any time prior to the
         applicable Cure Date, applicable Curable Encumbrances, and as to which,
         in the case of the Pledged Stock, the Administrative Agent has control
         (within the meaning

                                       16

<PAGE>

         of Sections 8-106 and 9-106 of the UCC), subject, in the case of the
         Pledged Stock, to the Administrative Agent's maintaining possession
         thereof, and, in the case of the Mortgages, to the recording of the
         Mortgages in the county recording offices set forth on Schedules 1
         thereto and the filing of Uniform Commercial Code financing statements
         in the Uniform Commercial Code filing offices and county recording
         offices set forth or Schedules 2 thereto."

         SECTION 12. Compliance Certificate. Clause (d) of Section 5.01 of the
Credit Agreement is amended to read in full as follows:

                  "(d) simultaneously with the delivery of each set of financial
         statements referred to in clauses (a) and (b) above, a certificate of
         an Authorized Financial Officer of the Borrower (i) setting forth in
         reasonable detail the calculations required to establish whether the
         Borrower was in compliance with the requirements of Sections 5.05,
         5.06, 5.07, 5.09, 5.10, 5.11, 5.13, 5.18, 5.19, 5.21 and 5.22 hereof
         and Section 5(C) of the Pledge Agreement on the date of such financial
         statements, and, if such compliance is being determined on a pro forma
         basis in accordance with the proviso to the definition of Consolidated
         EBITDAR or Adjusted Consolidated Debt, setting forth in reasonable
         detail the nature and amount of each pro forma adjustment included in
         such calculations, (ii) setting forth in reasonable detail calculations
         of the Pricing Ratio as at the date of the balance sheet contained
         therein and for the period of four fiscal quarters ending on such date,
         (iii) in the case of each such certificate delivered after the New
         Mortgage Deadline, setting forth in reasonable detail the Coverage
         Limitation as of the date of the balance sheet contained therein and
         (iv) stating whether any Default exists on the date of such certificate
         and, if any Default then exists, setting forth the details thereof and
         the action which the Borrower is taking or proposes to take with
         respect thereto;"

         SECTION 13. Fixed Charge Coverage Ratio. Section 5.06 of the Credit
Agreement is amended to read in full as follows:

                  "SECTION 5.06. Fixed Charge Coverage Ratio. The Fixed Charge
         Coverage Ratio at any date shall not be less than 1.1 to 1.0."

         SECTION 14. Leverage Ratio. Section 5.07 of the Credit Agreement is
amended to read in full as follows:

                  "SECTION 5.07. Leverage Ratio. The ratio at any date during
         any period set forth below of (a) Adjusted Consolidated Debt to (b)


                                       17

<PAGE>

         Consolidated EBITDAR for the period of four consecutive fiscal quarters
         most recently ended on or prior to such date shall not be more than the
         ratio set forth below opposite such period:

<Table>
<Caption>
PERIOD                                    MAXIMUM RATIO
------                                    -------------
<S>                                       <C>
January 1, 2003 - June 29, 2003           5.50 to 1.0
June 30, 2003 - September 29, 2003        6.50 to 1.0
September 30, 2003 - December 30, 2003    6.80 to 1.0
December 31, 2003 - March 30, 2004        7.30 to 1.0
March 31, 2004 and thereafter             7.45 to 1.0
</Table>

         SECTION 15. Investments. (a) Clause (i) of Section 5.09 of the Credit
Agreement is amended to read in full as follows:

                  "(i) (i) promissory notes (and, in the case of facilities or
         stock sold other than as part of the Disposition Program or the sale of
         certain assets specified in the Investments Side Letter, or stock of
         Subsidiaries holding solely such specified assets, other Investments)
         received as consideration for facilities or stock of Subsidiaries sold
         (other than in connection with, or as part of, the Florida
         Disposition), provided that (x) the aggregate net book value of all
         outstanding Investments permitted by this subclause (i)(i) shall not
         exceed at any time (1) in the case of promissory notes received in
         connection with the sale of facilities and stock of Subsidiaries
         pursuant to the Disposition Program, 10% of the gross proceeds received
         by the Borrower and its Subsidiaries at or prior to such time in
         connection with all sales of facilities and stock of Subsidiaries
         pursuant to the Disposition Program, (2) in the case of promissory
         notes received in connection with the sale of certain assets specified
         in the Investments Side Letter, or the stock of Subsidiaries holding
         solely such specified assets, the percentages set forth in the
         Investments Side Letter of the gross proceeds received by the Borrower
         and its Subsidiaries in connection with such sale and (3) in the case
         of all other promissory notes and Investments so received, $25,000,000
         and (y) in the case of promissory notes referred to in subclauses (1)
         and (2) of clause (x) above, (A) if the obligations of the Borrower and
         the Subsidiary Guarantors under the Financing Documents, the Mortgage
         Credit Facilities or the Bank of Montreal Synthetic Lease were secured
         by a Lien on the facilities sold, or the facilities owned by the
         Subsidiary whose stock was sold, and such obligations remain

                                       18

<PAGE>

         outstanding, then the promissory notes received in connection with the
         sale of such facilities or stock shall be pledged to the Person or
         Persons that held such Lien and (B) if none of the obligations of the
         Borrower and the Subsidiary Guarantors under the Financing Documents,
         the Mortgage Credit Facilities or the Bank of Montreal Synthetic Lease
         was secured by a Lien on the facilities sold, or the facilities owned
         by the Subsidiary whose stock was sold, then, to the extent permitted
         under the Senior Note Agreement and the New Senior Note Agreement, the
         promissory notes received in connection with the sale of such
         facilities or stock shall be pledged to secure, equally and ratably,
         the obligations of the Borrower and the Subsidiary Guarantors under the
         Financing Documents, the Mortgage Credit Facilities and the Bank of
         Montreal Synthetic Lease and (ii) promissory notes received as partial
         consideration for the Florida Disposition, provided that the aggregate
         principal amount of all such promissory notes permitted by this
         subclause (i)(ii) shall not, at any time, exceed $20,000,000;"

         (b) Section 5.09 of the Credit Agreement is amended by adding, at the
end thereof, the following:

         "In addition, neither the Borrower nor any of its Subsidiaries will,
         during any period on or after the Amendment No. 4 Effective Date during
         which the Adjusted Leverage Ratio exceeds 5.0 to 1.0 make or acquire
         any Investments of the types referred to in clauses (b), (d), (e) or
         (o) of this Section 5.09, acquire any health care facilities
         (including, without limitation, any acquisition of such a facility
         pursuant to a Lease Conversion) or make any Lease Conversion other than
         (i) Lease Conversions with respect to the Bank of Montreal Synthetic
         Lease and (ii) Investments, Lease Conversions and acquisitions of
         facilities in an aggregate amount not exceeding $15,000,000."

         SECTION 16. Restricted Payments on Stock. Clause (v) of Section 5.10 of
the Credit Agreement is amended to read in full as follows:

                  "(v) the Borrower may make any such payment or distribution
         if, after giving effect thereto, the aggregate amount of all such
         payments or distributions made after the Effective Date (including,
         without limitation, any such payments or distributions permitted under
         subclause (ii)(A) or clause (iv) above) does not exceed (A) on any date
         on which no Event of Default shall have occurred and be continuing or
         shall result from such payment and the Adjusted Leverage Ratio as at
         the last day of the most recently ended fiscal quarter is (I) less than
         5.00 to 1.00 but not less than 4.75 to 1.00, $25,000,000, (II) less
         than 4.75 to 1.00 but not less than 4.50

                                       19

<PAGE>

         to 1.00, $30,000,000, and (III) less than 4.50 to 1.00, $40,000,000 and
         (B) on any other date, $10,000,000; provided that no payment or
         distribution otherwise permitted under this clause (v) shall be made by
         the Borrower on any day on or after the Amendment No. 4 Effective Date
         on which the Adjusted Leverage Ratio is greater than 5.00 to 1.00."

         SECTION 17. Negative Pledge. Clause (a) of Section 5.11 of the Credit
Agreement is amended by: (a) amending clause (iv) thereof to read in full as
follows:

                  "(iv) any Lien on any asset securing Debt or lease obligations
         incurred or assumed for the purpose of financing all or any part of the
         cost of acquiring or constructing such asset or reconstructing
         substantially all of such asset, provided that (x) such Lien attached
         or attaches to such asset concurrently with or within one year (or, in
         the case of any such Lien on the Federal Way Facility that attached
         prior to the Amendment No. 4 Effective Date, 385 days) after such
         acquisition, construction or reconstruction and (y) on any day on or
         after the Amendment No. 4 Effective Date on which the Adjusted Leverage
         Ratio is greater than 5.00 to 1.00, Liens may be created or assumed
         under this clause (iv) only to secure Debt referred to in clause (iv)
         of the definition of Debt in Section 1.01;" and

         (b) (i) deleting the expression "and" at the end of clause (xiv)
thereof, (ii) replacing the period at the end of clause (xv) thereof with the
expression"; and" and (iii) inserting at the end thereof the following:

                  "(xvi) with respect to each property covered by a Mortgage or
         an Additional Mortgage, the Permitted Property Liens (as defined in the
         Mortgage or Additional Mortgage covering such property)."

         SECTION 18. Consolidations, Mergers and Sales of Assets. Section 5.12
of the Credit Agreement is amended to read in full as follows:

                  "SECTION 5.12. Consolidations, Mergers and Sales of Assets.
         Neither the Borrower nor any of its Subsidiaries will:

                  (a) consolidate or merge with or into any other Person, unless
         the Borrower or, except in the case of a merger or consolidation to
         which the Borrower is a party, a Wholly-Owned Subsidiary of the
         Borrower is the surviving corporation or


                                       20

<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

The asterisked portions of this document have been omitted and are filed
separately with the Securities and Exchange Commission.

                  (b) sell, lease or otherwise transfer (i) if the Adjusted
         Leverage Ratio as of the day of such sale, lease or other transfer is
         less than or equal to 5.00 to 1.00, all or any substantial part of the
         assets of the Borrower and its Subsidiaries, taken as a whole, to any
         other Person and (ii) if the Adjusted Leverage Ratio as of the day of
         such sale, lease or other transfer is greater than 5.00 to 1.00, any
         assets or property;

         provided that (i) this Section 5.12 shall not apply to (A) mergers,
         dissolutions, reorganizations or liquidations of Subsidiaries of the
         Borrower that have disposed of all or substantially all of their
         assets, (B) sales, leases or other transfers by the Borrower or any of
         its Subsidiaries to the Borrower or any Subsidiary Guarantor and (C)
         sales, transfers or other dispositions of MK Medical, ****************
         **********************************************************************
         **************************** or made pursuant to the Disposition
         Program and (ii) Section 5.12(b)(ii) does not apply to sales, leases or
         other transfers of (A) assets or property made in respect of Sale and
         Leaseback Transactions permitted under Section 5.19, (B) assets or
         property (other than assisted living and skilled nursing facilities,
         separate business units, businesses or divisions or stock of
         Subsidiaries) not covered by clause (ii)(A) above and (1) disposed of
         in the ordinary course of business or (2) to the extent not disposed of
         in the ordinary course of business, so long as the aggregate gross
         proceeds of sales, transfers and other dispositions made pursuant to
         this clause (2) does not exceed $2,000,000 and (C) assets or property
         pursuant to condemnations or in lieu of condemnations; and provided
         further that the Borrower and its Subsidiaries may assign or grant
         security interests in their Medicare, Medicaid or other patient
         accounts receivable to a Special Purpose Receivables Financing
         Subsidiary to secure Permitted Receivables Financing Securities
         (provided that the net amount at any time of all uncollected accounts
         receivable owing to the Borrower or any of its Subsidiaries that are so
         assigned or in which a security interest is so granted shall not exceed
         200% of the aggregate principal or redemption amount of all Permitted
         Receivables Financing Securities then outstanding)."

         SECTION 19. Incurrence of Debt. Section 5.13 of the Credit Agreement is
amended by adding, at the end thereof, a new clause (c) to read in full as
follows:

                  "(c) At any time on or after the Amendment No. 4 Effective
         Date at which the Adjusted Leverage Ratio exceeds 5.00 to 1.00, the
         Borrower will not, and will not permit any of its Subsidiaries to,
         incur or assume any Debt, except:


                                       21

<PAGE>

                  (i) Debt incurred in connection with Lease Cancellation
         Payments;

                  (ii) Debt of the type referred to in clause (iv) of the
         definition of "Debt" secured by a Lien permitted pursuant to clause
         (iv) of subsection 5.11(a);

                  (iii) Debt of any corporation that became or becomes a
         Consolidated Subsidiary of the Borrower that existed or exists at the
         time such corporation became or becomes such a Consolidated Subsidiary
         and (other than in a Workout Transaction) not created in contemplation
         thereof;

                  (iv) Refinancing Debt incurred to refinance Debt permitted
         under clauses (i) through (iii) above, provided that (A) the principal
         amount of such Refinancing Debt shall not exceed the principal amount
         of such Refinanced Debt and (B) such Refinancing Debt shall have a
         weighted average life of not less than the remaining weighted average
         life of such Refinanced Debt or such Refinancing Debt shall not have
         any required payments of principal prior to the first anniversary of
         the Termination Date;

                  (v) to the extent it refinances Debt permitted to have been
         incurred, and in fact incurred, prior to the Amendment No. 4 Effective
         Date or when the Adjusted Leverage Ratio did not exceed 5.00 to 1.00,
         Refinancing Debt permitted under clause (v) of Section 5.13(a)
         (treating such Section 5.13(a) solely for purposes of this clause (v)
         as if it applied to the Borrower as well as its Subsidiaries);

                  (vi) Permitted Receivables Financing Securities, provided that
         the aggregate principal and redemption amount of all Permitted
         Receivables Financing Securities outstanding at any time shall not
         exceed $100,000,000;

                  (vii) Debt incurred under the Financing Documents;

                  (viii) Guarantees by the Borrower or any of its Subsidiaries
         of any obligation of the Borrower or any of its Subsidiaries that the
         Borrower or such guaranteeing Subsidiary would have been permitted to
         incur hereunder as a primary obligation;


                                       22

<PAGE>

                  (ix) Debt consisting of advances from the Borrower or any of
         its Subsidiaries in connection with the normal operation of the
         business of the Borrower and its Subsidiaries;

                  (x) Debt incurred in connection with and as part of a Workout
         Transaction;

                  (xi) Debt incurred or assumed for the purpose of financing the
         cost of acquiring, constructing or improving an asset of the Borrower
         or any of its Subsidiaries;

                  (xii) Debt not otherwise permitted under clauses (i) through
         (xi) of this Section;

         provided that the aggregate principal amount of Debt permitted under
         clauses (i), (ii), (iv) (to the extent that the Debt incurred under
         such clause (iv) refinances Debt incurred under clause (i) or (ii) of
         this Section 5.13(c)), (xi) and (xii) of this Section 5.13(c) shall not
         exceed $10,000,000 at any time outstanding."

         SECTION 20. Use of Proceeds and Letters of Credit. Section 5.14 of the
Credit Agreement is amended to read in full as follows:

                  "SECTION 5.14. Use of Proceeds and Letters of Credit. The
         Letters of Credit issued (or deemed issued), and the proceeds of the
         Loans made, under this Agreement will be used for general corporate
         purposes; provided that none of such Letters of Credit or proceeds of
         Loans will be used, directly or indirectly, for the purpose, whether
         immediate, incidental or ultimate, of (a) buying or carrying any
         "margin stock" within the meaning of Regulation U or (b) prepaying any
         Debt of the Borrower or its Subsidiaries."

         SECTION 21. Lease Conversions. Section 5.16 of the Credit Agreement is
amended by (i) deleting "and" at the end of clause (i) thereof, (ii) inserting
the expression"; and" at the end of clause (ii) thereof and (iii) adding the
following at the end thereof:

         "(iii) if such Lease Conversion is made on any day on or after the
         Amendment No. 4 Effective Date on which the Adjusted Leverage Ratio is
         greater than 5.00 to 1.00, such Lease Conversion is permitted under the
         last sentence of Section 5.09."


                                       23

<PAGE>


         SECTION 22. Consolidated Gross Capital Expenditures. Section 5.18 of
the Credit Agreement is amended to read in full as follows:

                  "SECTION 5.18. Consolidated Gross Capital Expenditures.
         Consolidated Gross Capital Expenditures will not, for any fiscal year
         ending on or after December 31, 2002 exceed (A) if the Adjusted
         Leverage Ratio on the first day of such fiscal year is greater than
         5.00 to 1.00, $55,000,000 and (B) if the Adjusted Leverage Ratio on the
         first day of such fiscal year is less than or equal to 5.00 to 1.00,
         the amount indicated below opposite such fiscal year:

<Table>
<Caption>
                Fiscal Year Ending              Amount
                ------------------              ------
<S>                                          <C>
                December 31, 2003            $80,000,000
                December 31, 2004            $80,000,000
</Table>


                  To the extent that Consolidated Gross Capital Expenditures for
         any fiscal year referred to in clause (B) of this Section 5.18 are less
         than the applicable amount specified pursuant to this Section 5.18, the
         difference may be carried forward to the next fiscal year unless the
         Adjusted Leverage Ratio is greater than 5.00 to 1.00 on the first day
         of such next fiscal year (and for this purpose, Consolidated Gross
         Capital Expenditures in any subsequent fiscal year shall be applied,
         first, to any such carry-forward amount and, second, to the specified
         amount for such year)."

         SECTION 23. Sale and Leaseback Transactions. Section 5.19 of the Credit
Agreement is amended to read in full as follows:

                  "SECTION 5.19. Sale and Leaseback Transactions. (a) The
         Borrower will not, and will not permit any of its Subsidiaries to,
         enter into any arrangement, directly or indirectly, whereby it shall
         sell or transfer any property, real or personal, used or useful in its
         business, whether now owned or hereafter acquired, which property has
         been owned and operated by the Borrower and its Subsidiaries for more
         than 180 days, and thereafter rent or lease such property or other
         property that it intends to use for substantially the same purpose or
         purposes as the property sold or transferred (each, a "SALE AND
         LEASEBACK TRANSACTION"), except for Sale and Leaseback Transactions the
         aggregate amount of Attributable Debt in respect of which does not
         exceed $20,000,000.

                  (b) On any day on or after the Amendment No. 4 Effective Date
         on which the Adjusted Leverage Ratio is greater than 5.00 to 1.00, the


                                       24

<PAGE>

         Borrower will not and will not permit any of its Subsidiaries to enter
         into any Sale and Leaseback Transaction other than Sale and Leaseback
         Transactions with respect to specified equipment previously identified
         to the Administrative Agent for which the Attributable Debt, together
         with all other Attributable Debt arising on or after the Amendment No.
         4 Effective Date from Sale and Leaseback Transactions in respect of all
         other specified equipment previously identified to the Administrative
         Agent and entered into on a day on which the Adjusted Leverage Ratio
         was greater than 5.00 to 1.00, does not exceed $2,000,000.

         SECTION 24. Mortgages. Article 5 of the Credit Agreement is hereby
amended by adding, immediately after Section 5.19, new Sections 5.20, 5.21, 5.22
and 5.23 to read in their entirety as follows:

                  "SECTION 5.20. Mortgages. On or prior to the New Mortgage
         Deadline or, if requested by the Borrower and agreed to by the Agent in
         its reasonable discretion with respect to one or more New Mortgage
         Properties that do not exceed in value (as determined on the basis of
         the "2003 Budget EBITDA with Cliff" assigned to each New Mortgage
         Property in the Strategic Review) 40% of the aggregate value (so
         determined) of all New Mortgage Properties, such other date or dates
         (which shall not, except in the case of New Mortgage Properties that do
         not exceed in value (so determined) 15% of the aggregate value (so
         determined) of all New Mortgage Properties, be later than the ninetieth
         day after the Amendment No. 4 Effective Date) (each, an "EXTENDED NEW
         MORTGAGE DEADLINE") as the Borrower and the Agent shall agree:

                           (a) the owner of each New Mortgage Property shall
                  have delivered to the Agent duly executed counterparts of a
                  New Mortgage in respect of each New Mortgage Property owned by
                  it;

                           (b) the Borrower shall deliver, or cause to be
                  delivered, to the Agent legal opinions of local counsel
                  reasonably satisfactory to the Agent with respect to each of
                  the New Mortgages, which legal opinion shall be in form and
                  substance reasonably satisfactory to the Agent;

                           (c) the Borrower shall deliver, or cause to be
                  delivered, to the Agent evidence satisfactory to the Agent
                  that such action (including, without limitation, the filing of
                  appropriately completed Uniform Commercial Code financing
                  statements and the recording of Mortgages) as may be necessary
                  or as the Agent shall have reasonably requested to perfect the
                  Liens created pursuant to the


                                       25

<PAGE>

                  New Mortgages shall have been taken, or that arrangements
                  therefor satisfactory to the Agent shall have been made;

                           (d) the Borrower shall deliver, or cause to be
                  delivered, to the Agent policies of title insurance (or
                  commitments therefor with all conditions marked satisfied), in
                  form and substance satisfactory to the Agent and issued by an
                  insurance company or companies as are acceptable to the Agent
                  (the "TIC"), insuring the perfection, enforceability and
                  priority of the Liens on the New Mortgage Property created
                  under the New Mortgages in amounts not less than 110% of the
                  product of 5 multiplied by the "2003 Budget EBITDA with Cliff"
                  assigned to such New Mortgage Property in the Strategic
                  Review, subject only to such exceptions as are reasonably
                  satisfactory to the Agent, containing such endorsements (other
                  than endorsements that would require a new survey or survey
                  update) and affirmative assurances as have been previously
                  agreed to by, or are otherwise satisfactory to, the Agent, and
                  reinsured in amounts and under reinsurance agreements in form
                  and substance satisfactory to the Agent; and the Borrower
                  shall have paid or made arrangements satisfactory to the Agent
                  to pay to the TIC all expenses and premiums of the TIC in
                  connection with the issuance of such policies and in addition
                  shall have paid or made arrangements satisfactory to the Agent
                  to pay to the TIC an amount equal to the recording and stamp
                  taxes payable in connection with recording the New Mortgages
                  in the appropriate county land offices; provided that, if with
                  respect to any New Mortgage Property there are encumbrances of
                  record, as of the New Mortgage Deadline (or, in the case of a
                  New Mortgage Property as to which the Agent shall have
                  consented to an Extended New Mortgage Deadline, as of the
                  Extended New Mortgage Deadline in respect of such New Mortgage
                  Property) that are not reasonably acceptable to the
                  Administrative Agent, then unless the Administrative Agent, in
                  its reasonable discretion, enters into a letter agreement with
                  the Borrower, the owner of the New Mortgaged Property and the
                  TIC setting forth such encumbrances and providing for the
                  removal of such encumbrances and the execution and delivery of
                  documentation evidencing such removal by the applicable Cure
                  Date, the Administrative Agent shall accept a New Mortgage on
                  a substitute property as described in the proviso to the
                  definition of New Mortgage Property set forth in Section 1.01
                  hereof (and title insurance complying with the provisions of
                  this clause (d)) in lieu of such New Mortgage Property;

                                       26

<PAGE>

                           (e) the Borrower shall deliver, or cause to be
                  delivered, to the Agent copies of file search reports from the
                  Uniform Commercial Code filing office in each jurisdiction (i)
                  in which is located any Collateral (other than Pledged Stock)
                  subject to a New Mortgage, (ii) in which is located the chief
                  executive office of any Subsidiary of the Borrower that owns
                  or holds any right, title or interest in any property that
                  constitutes Collateral (other than the Pledged Stock) subject
                  to a New Mortgage or (iii) in which any such Subsidiary is
                  located (within the meaning of Section 9-307 of the UCC),
                  setting forth the results of Uniform Commercial Code file
                  searches conducted in the name of the Borrower or such
                  Subsidiary, as the case may be;

                           (f) the Borrower shall deliver, or cause to be
                  delivered, to the Agent all documents the Agent may reasonably
                  request relating to the existence of each Subsidiary of the
                  Borrower party to any New Mortgage, the corporate authority
                  for and the validity of the New Mortgages, and any other
                  matters relevant thereto, all in form and substance
                  satisfactory to the Agent; and

                           (g) the Borrower shall have paid all other costs,
                  fees and expenses (including, without limitation, mortgage
                  recording, intangibles or documentary stamp on similar taxes,
                  reasonable legal fees and expenses) payable to the Agent with
                  respect to the New Mortgages, in each case invoiced prior to
                  the New Mortgage Deadline or the Extended New Mortgage
                  Deadline, as applicable.

                  SECTION 5.21. Prepayment of Notes. The Borrower will not, and
         will not permit any of its Subsidiaries to, prepay the New Senior Notes
         or the Senior Notes; provided that the Borrower may prepay or redeem
         New Senior Notes or Senior Notes on any day with the amount, if any, by
         which the average of the Consolidated Cash Balances at the close of
         business on the three consecutive Business Days immediately preceding
         such day (exclusive of any amount escrowed pursuant to clause
         (iii)(B)(II) below), exceeds $125,000,000 if on such day

                           (i) there shall be no Loans outstanding;

                           (ii) the Bank of Montreal Synthetic Lease Obligations
                  and the Mortgage Facility Obligations have been repaid in
                  full; and

                           (iii) either (A) (I) the Adjusted Leverage Ratio does
                  not and did not exceed 5.00 to 1.00 on (x) such day, both
                  prior to and after

                                       27

<PAGE>


                  giving effect to such prepayment, and (y) the last day of each
                  of the two fiscal quarters most recently ended prior to such
                  day and (II) the aggregate Commitments of all Banks do not
                  exceed $85,000,000 or (B) all of (I) the aggregate Commitments
                  of all Banks do not exceed $65,000,000, (II) the Borrower
                  shall have delivered to the Agent cash in an amount equal to
                  the aggregate Letter of Credit Exposures of all Banks then
                  outstanding, to be held in escrow by the Agent to the extent
                  that such Letter of Credit Exposures remain outstanding, (III)
                  the Borrower shall have entered into a binding agreement not
                  thereafter to request or borrow any Loans under this Agreement
                  and (IV) the product of 5 multiplied by Annualized Mortgage
                  EBITDA determined as of the date of such prepayment for the
                  most recent fiscal quarter for which financial statements have
                  been, or are required to have been, delivered pursuant to
                  Section 5.01(a) or (b), shall equal or exceed the product of 2
                  multiplied by the aggregate Commitments of all Banks then
                  outstanding.

                  SECTION 5.22. Prepayment of Bank of Montreal Synthetic Lease
         Obligations and Mortgage Facility Obligations. The Borrower shall
         prepay, or cause its Subsidiaries to prepay (or, in the case of the
         Bank of Montreal Synthetic Lease Obligations, deposit funds that are
         committed to the repayment of), the Bank of Montreal Synthetic Lease
         Obligations and the Mortgage Facility Obligations,

                           (i) on the Amendment No. 4 Effective Date, in the
                  case of the Bank of Montreal Synthetic Lease Obligations, in
                  the amount of $20,000,000,

                           (ii) upon the receipt by the Borrower or any of its
                  Subsidiaries of any proceeds of any Asset Sale, by an amount
                  equal to

                                    (A) if such Asset Sale includes assets that
                           were subject to a Lien securing the Bank of Montreal
                           Synthetic Lease Obligations or the Mortgage Facility
                           Obligations, solely to the obligations secured by
                           such assets, (1) in the case of the Bank of Montreal
                           Synthetic Lease Obligations, in the amount set forth
                           on Schedule VII hereto with respect to such assets
                           and (2) in the case of the Mortgage Facility
                           Obligations, in the amount required to be repaid
                           pursuant to the AmSouth Mortgage Facility or the
                           Washington Mutual Mortgage Facilities, as applicable;

                                       28

<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

The asterisked portions of this document have been omitted and are filed
separately with the Securities and Exchange Commission.

                                    (B) if any Net Cash Proceeds result from
                           such Asset Sale,

                                             (1) until the Bank of Montreal
                                    Synthetic Lease Obligations have been
                                    prepaid by $15,000,000 in the aggregate and
                                    the Mortgage Facility Obligations have been
                                    prepaid by $3,750,000 in the aggregate, in
                                    each case pursuant to this clause (1) (or,
                                    in either case, repaid in full), the Initial
                                    Specified Portion of the Net Cash Proceeds
                                    in respect of such Asset Sale; provided that
                                    if, prior to the earlier of (x) ************
                                    ********************************************
                                    *********** and (y) ************************
                                    ******************************, the Borrower
                                    shall have reached a final agreement related
                                    to past billing practices of MK Medical,
                                    which agreement requires the Borrower and
                                    its Subsidiaries to make cash payments in an
                                    aggregate amount greater than ***********
                                    but less than ***********, no prepayment
                                    shall be required in respect of the Net Cash
                                    Proceeds received on or after the date that
                                    such agreement becomes final in an amount
                                    equal to the excess of the aggregate amount
                                    of such payments over ***********; provided
                                    further that the provisions of this clause
                                    (1) shall remain in effect thereafter until
                                    the Bank of Montreal Synthetic Lease
                                    Obligations have been prepaid by $15,000,000
                                    in the aggregate and the Mortgage Facility
                                    Obligations have been prepaid by $3,750,000
                                    in the aggregate, in each case pursuant to
                                    this clause (1),

                                             (2) after the Bank of Montreal
                                    Synthetic Lease Obligations have been
                                    prepaid by $15,000,000 in the aggregate and
                                    the Mortgage Facility Obligations have been
                                    prepaid by $3,750,000 in the aggregate, in
                                    each case pursuant to clause (B)(1) of this
                                    Section 5.22(ii) (or, in either case, repaid
                                    in full), the Specified Portion of 65% of
                                    the Net Cash Proceeds of such Asset Sales,
                                    and

                                    (C) if, in the absence of any additional
                           Commitment reductions and/or repayments of Mortgage
                           Facility



                                       29

<PAGE>

                           Obligations and/or Bank of Montreal Synthetic Lease
                           Obligations, the Borrower would be required to make a
                           Senior Asset Sale Offer (as defined in the Senior
                           Note Agreement or the New Senior Note Agreement)
                           under the Senior Note Agreement or the New Senior
                           Note Agreement, in an amount equal to the applicable
                           Specified Portion of the amount of Net Cash Proceeds
                           that must be applied to repay Senior Debt (as defined
                           in the Senior Note Agreement or the New Senior Note
                           Agreement) in order for the Borrower to avoid the
                           making of a Senior Asset Sale Offer under the Senior
                           Note Agreement or the New Senior Note Agreement; and

                           (iii) on any Business Day, by the applicable
                  Specified Portion of the amount by which the average of the
                  Consolidated Cash Balances at the close of business on the
                  three consecutive Business Days immediately preceding such day
                  (in each case after giving effect to any Commitment reductions
                  required pursuant to clause (ii) of Section 2.11(b) and
                  related prepayments pursuant to Section 2.05(d) and any
                  prepayments required pursuant to clause (ii) of this Section
                  5.22, in each case to be made on any such Business Day)
                  exceeds $125,000,000;

                  provided that (x) if the Mortgage Facility Obligations remain
                  outstanding, the Borrower may elect to apply 100% of any
                  prepayment that would otherwise be applied under this Section
                  5.22 to prepay the Mortgage Facility Obligations to prepay the
                  Bank of Montreal Synthetic Lease Obligations and reduce the
                  Commitments in the same manner as if the Mortgage Facility
                  Obligations had theretofore been repaid in full pursuant to
                  this Section 5.22 and (y) if the Mortgage Facility Obligations
                  have been prepaid in full (other than pursuant to this Section
                  5.22), the Borrower may retain any amount that would otherwise
                  have been applied under this Section 5.22 to prepay the
                  Mortgage Facility Obligations to the extent that the aggregate
                  of such retained amounts does not exceed the amount of
                  Mortgage Facility Obligations so prepaid on or after the
                  Amendment No. 4 Effective Date less $5,000,000.

                  SECTION 5.23. Additional Collateral. (a) In the event that the
         Borrower or any of its Subsidiaries grants to the agent or the lenders
         under Bank of Montreal Synthetic Lease in respect of the Bank of
         Montreal Synthetic Lease Obligations, at any time after the Amendment
         No. 4


                                       30

<PAGE>

         Effective Date, a Lien on any of its property or assets (other than a
         Lien on (i) Amended Mortgage Property (as defined in the Bank of
         Montreal Synthetic Lease) or (ii) any property (the "SUBSTITUTE
         PROPERTY") substituted for property (the "ORIGINAL PROPERTY") referred
         to in clause (i) above so long as the value of such Substitute Property
         is not greater than (other than by a de minimus amount) the value of
         the Original Property for which it is substituted), the Borrower shall,
         or shall cause its Subsidiary to, as the case may be, simultaneously
         grant to the Agent for the benefit of the Secured Parties, a security
         interest in such property or assets on an equal and ratable basis with
         the grant of the security interest to the agent or the lenders under
         the Bank of Montreal Synthetic Lease.

                  (b) If all amounts now or hereafter payable by the Borrower
         and its Subsidiaries under (a) the AmSouth Mortgage Facility or (b) the
         Washington Mutual Mortgage Facilities shall have been repaid in full,
         then, to the extent permitted under the Senior Note Agreement and the
         New Senior Note Agreement, the Borrower shall, or shall cause its
         applicable Subsidiary to, grant Liens on the assets theretofore
         securing such Mortgage Facility Obligations to secure the obligations
         of the Borrower and the Subsidiary Guarantors under the Financing
         Documents (which Liens may equally and ratably secure the Bank of
         Montreal Synthetic Lease Obligations)."

         SECTION 25. Events of Default. (a) Section 6.01 of the Credit Agreement
is amended by:

                  (i) replacing the word "or" on the second line of clause (b)
         thereof with a comma; and

                  (ii) adding, following the expression "5.19" on the second
         line of clause (b) thereof, the expression", 5.20, 5.21, 5.22 or
         5.23".

         (b) Clause (n) of Section 6.01 of the Credit Agreement is amended to
read in full as follows:

                  "(n) the Security Documents shall at any time on or after the
         Amendment No. 4 Effective Date (or, in the case of any New Mortgage to
         be delivered pursuant to Section 5.20 or any Additional Mortgage to be
         delivered pursuant to Section 5.23, the date upon which such New
         Mortgage or Additional Mortgage is recorded in accordance with Section
         5.20 or 5.23), for any reason (other than solely due to actions taken
         by the Agent or any Bank) fail to create perfected Liens in favor of
         the Secured Parties on the Collateral, securing all of the Secured
         Obligations purported

                                       31

<PAGE>

         to be secured thereby, and as to which, in the case of Pledged Stock,
         the Agent has control (within the meaning of Sections 8-106 and 9-106
         of the UCC), subject to no other Liens other than, in the case of
         Collateral covered by any Mortgage or Additional Mortgage, Permitted
         Property Liens and, at any time prior to the applicable Cure Date,
         applicable Curable Encumbrances, or, in the case of any Collateral
         other than Pledged Stock, Liens permitted under Section 5.11(a)(x) as
         to which the Liens created under the Security Documents have priority;"

         SECTION 26. Amendment to Schedules. Schedule I and Schedule IV of the
Credit Agreement are hereby replaced in their entirety by Schedule I and
Schedule IV hereto, respectively.

         SECTION 27. Additional Schedules. Schedules VI and VII hereto are
hereby added as Schedules VI and VII, respectively, to the Credit Agreement.

         SECTION 28. Pledge Agreement Amendments. (a) Section 5(C) of the Pledge
Agreement is hereby amended by adding, at the beginning of clause (ii) thereof,
the following expression:

         "if the New Mortgage Condition is not satisfied on or prior to the New
         Mortgage Deadline or, to the extent that the Agent shall have agreed to
         an Extended New Mortgage Deadline with respect to any New Mortgage
         Property, in respect of such New Mortgage Property only, such Extended
         New Mortgage Deadline (it being understood that the Borrower will not
         be required to take any action under this clause (ii) between the
         Amendment No. 4 Effective Date and the later of the New Mortgage
         Deadline and any such Extended New Mortgage Deadline),".

         (b) The last sentence of Section 10 of the Pledge Agreement is hereby
amended to read in full as follows:

         "The Administrative Agent and the Obligors agree that such notice
         constitutes `REASONABLE AUTHENTICATED NOTIFICATION' within the meaning
         of Section 9-611(b) of the UCC."

         SECTION 29. Representations. (a) The Borrower represents and warrants
that (i) the representations and warranties of the Borrower set forth in Article
4 of the Credit Agreement will be true on and as of the Amendment No. 4
Effective Date, (ii) no Default will have occurred and be continuing on such
date and (iii) the aggregate "2003 Budget EBITDA with Cliff" allocated in the
Strategic Review to the assisted living and skilled nursing facilities set forth
on Schedule VI hereto is at least $33,000,000.


                                       32
<PAGE>

         (b) Each Subsidiary Guarantor represents and warrants that the
representations and warranties set forth in Article 3 of the Amended and
Restated Subsidiary Guaranty dated as of April 25, 2001 (as amended through to
the Amendment No. 4 Effective Date) among the Borrower and the Subsidiaries of
the Borrower party thereto will be true on and as of the Amendment No. 4
Effective Date.

         SECTION 30. General Release. In consideration of the amendments
provided for herein, the Borrower and the Subsidiary Guarantors, on behalf of
themselves and their respective Subsidiaries and their and their respective
Subsidiaries' successors and assigns (collectively, "RELEASORS"), hereby forever
waive, release and discharge to the fullest extent permitted by law any and all
claims (including, without limitation, crossclaims, counterclaims, rights of
set-off and recoupment), causes of action, demands, suits, costs, expenses and
damages (collectively, the "CLAIMS"), that any Releasor now has or hereafter may
have, of whatsoever nature and kind, whether known or unknown, whether now
existing or hereafter arising, whether arising at law or in equity, against any
or all of the Agent and any Bank and their respective affiliates, shareholders
and "controlling persons" (within the meaning of the federal securities laws),
and their respective successors and assigns and each and all of the officers,
directors, employees, agents, attorneys and other representatives of each of the
foregoing (collectively, the "RELEASEES"), based in whole or in part on facts,
whether or not now known, existing on or before the execution of this Amendment,
except for Claims solely arising out of the gross negligence or willful
misconduct of any Releasees (the "EXCLUDED CLAIMS"). In entering into this
Amendment, the Borrower has consulted with and been represented by counsel and
expressly disclaims any reliance on any representations, acts or omissions by
any of the Releasees and hereby agrees and acknowledges that the validity and
effectiveness of the release set forth above do not depend in any way on any
such representations, acts and/or omissions or the accuracy, completeness or
validity thereof. The provisions of this Section shall survive the termination
of the Credit Agreement and the other Financing Documents and payment in full of
all amounts owing thereunder.

         SECTION 31. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

         SECTION 32. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         SECTION 33. Effectiveness. This Amendment shall become effective as of
the date hereof on the date when the following conditions are met:


                                       33
<PAGE>


         (a) the Administrative Agent shall have received from each of the
Borrower, the Subsidiary Guarantors, and the Required Banks a counterpart hereof
signed by such party or facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that such party has signed a
counterpart hereof;

         (b) the Administrative Agent shall have received a favorable written
opinion of each of (i) John Arena, General Counsel - Corporate Law, of the
Borrower, and (ii) Weil, Gotshal & Manges LLP, in each case covering such
matters as the Required Banks shall reasonably request and in form and substance
satisfactory to the Administrative Agent;

         (c) receipt by the Administrative Agent of a certificate of an
Authorized Financial Officer of the Borrower setting forth in reasonable detail
calculations that establish that the aggregate fair market value of the assisted
living and skilled nursing facilities set forth on Schedule VI does not exceed
the amount of the available and unused Permitted Liens under clause (xi) of the
definition of Permitted Liens in the Senior Note Agreement immediately prior to
the Amendment No. 4 Effective Date;

         (d) the Administrative Agent shall have received from the Borrower a
counterpart of the Investments Side Letter signed by the Borrower or facsimile
or other written confirmation (in form satisfactory to the Administrative Agent)
that the Borrower has signed a counterpart thereof;

         (e) receipt by the Administrative Agent of evidence satisfactory to it
that the Borrower shall have prepaid (or deposited funds that are committed to
the prepayment of) the Bank of Montreal Synthetic Lease Obligations in an
aggregate principal amount of $20,000,000;

         (f) receipt by the Administrative Agent of a fully executed amendment
to the Bank of Montreal Synthetic Lease, in form and substance satisfactory to
the Administrative Agent, and evidence satisfactory to it that such amendment is
effective;

         (g) receipt by the Administrative Agent (i) for the account of the
Banks which have executed Amendment No. 3 on or prior to the date hereof,
ratably in proportion to their Commitments, of an amendment fee equal to 0.125%
of the Commitments of such Banks as in effect immediately prior to giving effect
to Amendment No. 4 and (ii) for the account of the Banks executing Amendment No.
4 on or prior to the date hereof, ratably in proportion to their Commitments, of
an amendment fee equal to 0.375% of the Commitments of such Banks as in effect
immediately prior to giving effect to Amendment No. 4;


                                       34
<PAGE>


         (h) receipt of arrangement fees in the amounts, and for the accounts of
the Persons, previously agreed with the Borrower; and

         (i) receipt by the Administrative Agent of payment of all out-of-pocket
expenses due and payable to it pursuant to Section 9.03(a) of the Credit
Agreement (including, to the extent invoiced, all fees and disbursements of
Davis Polk & Wardwell, special counsel to the Administrative Agent).


                                       35

<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

                                   BEVERLY ENTERPRISES, INC.

                                   By: /s/ RICHARD D. SKELLY, JR.
                                       ----------------------------------------
                                   Name:  Richard D. Skelly, Jr.
                                   Title: Senior Vice President and Treasurer

                                   SUBSIDIARY GUARANTORS:

                                   4F FUNDING, INC. (f/k/a Beverly Enterprises
                                     - Oklahoma, Inc.)
                                   AEDON STAFFING, LLC
                                   AEDON HOMECARE, LLC
                                   AEGIS THERAPIES, INC. (f/k/a
                                     Beverly Rehabilitation, Inc.)
                                   AEGIS THERAPIES-FLORIDA, INC.
                                     (f/k/a AEGIS-Florida, Inc.)
                                   AGI-CAMELOT, INC.
                                   BEVERLY- BELLA VISTA HOLDING, INC.
                                   BEVERLY - INDIANAPOLIS, LLC
                                   BEVERLY - MISSOURI VALLEY
                                     HOLDING, INC.
                                   BEVERLY - RAPID CITY HOLDING, INC.
                                   BEVERLY CLINICAL, INC.
                                   BEVERLY ENTERPRISES
                                     INTERNATIONAL LIMITED
                                   BEVERLY ENTERPRISES -
                                     ALABAMA, INC.
                                   BEVERLY ENTERPRISES -
                                     ARIZONA, INC.
                                   BEVERLY ENTERPRISES -
                                     ARKANSAS, INC.
                                   BEVERLY ENTERPRISES -
                                     CALIFORNIA, INC. (f/k/a
                                     Hospital Facilities Corporation)
                                   BEVERLY ENTERPRISES -
                                     COLORADO, INC.
                                   BEVERLY ENTERPRISES -
                                     CONNECTICUT, INC.


<PAGE>

                                   BEVERLY ENTERPRISES -
                                     DELAWARE, INC.
                                   BEVERLY ENTERPRISES -
                                     DISTRIBUTION SERVICES, INC. (f/k/a
                                     Beverly Enterprises - New York, Inc.)
                                   BEVERLY ENTERPRISES - DISTRICT OF
                                     COLUMBIA, INC.
                                   BEVERLY ENTERPRISES -
                                     FLORIDA, INC.
                                   BEVERLY ENTERPRISES -
                                     GARDEN TERRACE, INC.
                                   BEVERLY ENTERPRISES -
                                     GEORGIA, INC.
                                   BEVERLY ENTERPRISES - HAWAII, INC.
                                   BEVERLY ENTERPRISES - IDAHO, INC.
                                   BEVERLY ENTERPRISES - ILLINOIS, INC.
                                   BEVERLY ENTERPRISES -
                                     INDIANA, INC.
                                   BEVERLY ENTERPRISES - IOWA, INC.
                                   BEVERLY ENTERPRISES - KANSAS, LLC
                                     (successor to Beverly Enterprises -
                                     Kansas, Inc.)
                                   BEVERLY ENTERPRISES -
                                     KENTUCKY, INC.
                                   BEVERLY ENTERPRISES -
                                     LOUISIANA, INC.
                                   BEVERLY ENTERPRISES - MAINE, INC.
                                   BEVERLY ENTERPRISES -
                                     MARYLAND, INC.
                                   BEVERLY ENTERPRISES -
                                     MASSACHUSETTS, INC.
                                   BEVERLY ENTERPRISES -
                                     MICHIGAN, INC.
                                   BEVERLY ENTERPRISES -
                                     MINNESOTA, LLC (successor to
                                     Beverly Enterprises - Minnesota, Inc.)
                                   BEVERLY ENTERPRISES -
                                     MISSISSIPPI, INC.
                                   BEVERLY ENTERPRISES -
                                     MISSOURI, INC.
                                   BEVERLY ENTERPRISES -
                                     MONTANA, INC.


<PAGE>

                                   BEVERLY ENTERPRISES -
                                     NEBRASKA, INC.
                                   BEVERLY ENTERPRISES -
                                     NEVADA, INC.
                                   BEVERLY ENTERPRISES - NEW
                                     HAMPSHIRE, INC.
                                   BEVERLY ENTERPRISES - NEW
                                     JERSEY, INC.
                                   BEVERLY ENTERPRISES - NEW
                                     MEXICO, INC.
                                   BEVERLY ENTERPRISES - NORTH
                                     CAROLINA, INC.
                                   BEVERLY ENTERPRISES - NORTH
                                     DAKOTA, INC.
                                   BEVERLY ENTERPRISES - OHIO, INC.
                                   BEVERLY ENTERPRISES - OREGON,
                                     INC.
                                   BEVERLY ENTERPRISES -
                                     PENNSYLVANIA, INC.
                                   BEVERLY ENTERPRISES - RHODE
                                     ISLAND, INC.
                                   BEVERLY ENTERPRISES - SOUTH
                                     CAROLINA, INC.
                                   BEVERLY ENTERPRISES - TENNESSEE,
                                     INC.
                                   BEVERLY ENTERPRISES - TEXAS, INC.
                                   BEVERLY ENTERPRISES - UTAH, INC.
                                   BEVERLY ENTERPRISES - VERMONT, INC.
                                   BEVERLY ENTERPRISES - VIRGINIA, INC.
                                   BEVERLY ENTERPRISES -
                                     WASHINGTON, INC.
                                   BEVERLY ENTERPRISES - WEST
                                     VIRGINIA, INC.
                                   BEVERLY ENTERPRISES - WISCONSIN,
                                     INC.
                                   BEVERLY ENTERPRISES - WYOMING, INC.
                                   BEVERLY HEALTH AND
                                   REHABILITATION SERVICES, INC.
                                   BEVERLY HEALTHCARE, LLC
                                   BEVERLY HEALTHCARE - CALIFORNIA,
                                     INC.
                                   BEVERLY HOLDINGS I, INC.
                                   BEVERLY INDEMNITY, LTD.

<PAGE>

                                   BEVERLY MANOR INC. OF HAWAII
                                   BEVERLY REAL ESTATE HOLDINGS, INC.
                                   BEVERLY SAVANA CAY MANOR, INC.
                                   BEVRD, LLC
                                   CERES OXYGEN SERVICES, LLC
                                   CERES STRATEGIES, INC. (f/k/a/ Beverly
                                     Healthcare Acquisition, Inc.)
                                   CERES STRATEGIES MEDICAL SERVICES,
                                     LLC
                                   COMMERCIAL MANAGEMENT, INC.
                                   COMMUNITY CARE, INC.
                                   COMPASSION AND PERSONAL CARE
                                     SERVICES, INC.
                                   EASTERN HOME HEALTH SUPPLY &
                                     EQUIPMENT CO., INC.
                                   HALLMARK CONVALESCENT HOMES, INC.
                                   HOMECARE PREFERRED CHOICE, INC.
                                   HOSPICE OF EASTERN CAROLINA, INC.
                                   HOSPICE PREFERRED CHOICE, INC.
                                   LARES CARE RESOURCE, LLC
                                   LIBERTY NURSING HOMES,
                                     INCORPORATED
                                   MATRIX OCCUPATIONAL HEALTH, INC.
                                   MATRIX WELLNESS, LLC
                                   MEDICAL ARTS HEALTH FACILITY OF
                                   LAWRENCEVILLE, INC.
                                   MODERNCARE OF LUMBERTON, INC.
                                   NEBRASKA CITY S-C-H, INC.
                                   NURSING HOME OPERATORS, INC.
                                   PETERSEN HEALTH CARE, INC.
                                   SOUTH ALABAMA NURSING HOME, INC.
                                   SOUTH DAKOTA - BEVERLY
                                     ENTERPRISES, INC.
                                   SPECTRA HEALTHCARE ALLIANCE, INC.
                                   TAR HEEL INFUSION COMPANY, INC.
                                   TMD DISPOSITION COMPANY
                                   VANTAGE HEALTHCARE
                                     CORPORATION

                                   All by: /s/ JOHN G. ARENA
                                          -------------------------------------
                                          Name:  John G. Arena
                                          Title: Secretary

<PAGE>

                                   JPMORGAN CHASE BANK (formerly
                                   known as The Chase Manhattan Bank
                                   successor by merger to Morgan Guaranty
                                   Trust Company of New York)

                                   By: /s/ DAWN LEE LUM
                                      -----------------------------------------
                                      Name:  Dawn Lee Lum
                                      Title: Vice President


<PAGE>

                                   BANK OF AMERICA, N.A.

                                   By: /s/  WILLIAM E. LIVINGSTON
                                      -----------------------------------------
                                      Name:  William E. Livingston
                                      Title: Managing Director


<PAGE>

                                   THE BANK OF NEW YORK

                                   By:  /s/ BRENDAN T. NEDEI
                                      -----------------------------------------
                                      Name:  Brendan T. Nedei
                                      Title: Senior Vice President


<PAGE>

                                   BANK OF MONTREAL

                                   By:  /s/ EDWARD P. McGUIRE
                                      -----------------------------------------
                                      Name:  Edward P. McGuire
                                      Title: Vice President


<PAGE>

                                   GENERAL ELECTRIC CAPITAL
                                     CORPORATION

                                   By: /s/ JANET K. WILLIAMS
                                      -----------------------------------------
                                      Name:  Janet K. Williams
                                      Title: Duly Authorized Signatory
<PAGE>


                                                                      SCHEDULE I

                                PRICING SCHEDULE

         The "EURO-DOLLAR MARGIN", "CD MARGIN", "BASE RATE MARGIN", "LETTER OF
CREDIT COMMISSION RATE" and "COMMITMENT FEE RATE" for any day are the respective
rates per annum set forth below in the applicable row in the column
corresponding to the Pricing Level that applies on such day (or, in the case of
any day on or after the Amendment No. 4 Effective Date and prior to the date
upon which financial statements for the second full fiscal quarter occurring
after the Amendment No. 4 Effective Date shall have been delivered pursuant to
Section 5.01(b), the greater of (i) the applicable rate so determined for such
day and (ii) (v) in the case of the Euro-Dollar Margin, 3.500%, (w) in the case
of the CD Margin, 3.625%, (x) in the case of the Base Rate Margin, 2.500%, (y)
in the case of the Letter of Credit Commission Rate, 3.500% and (z) in the case
of the Commitment Fee Rate, 0.6875%):

<Table>
<Caption>
                          Level I    Level II     Level III     Level IV     Level V
                          -------    --------     ---------     --------     -------
<S>                       <C>        <C>          <C>           <C>          <C>
Euro-Dollar Margin        2.875%      3.500%       4.000%       4.375%       4.750%
CD Margin                 3.000%      3.625%       4.125%       4.500%       4.875%
Base Rate Margin          1.875%      2.500%       3.000%       3.375%       3.750%
Letter of Credit
  Commission Rate         2.875%      3.500%       4.000%       4.375%       4.750%
Commitment Fee Rate       0.500%     0.6875%       0.875%       1.125%       1.500%
</Table>

                  For purposes of this Pricing Schedule, the following terms
         have the following meanings:

                  "PRICING RATIO" means, on any day, the ratio of Adjusted
         Consolidated Debt on such day to Consolidated EBITDAR for the four
         consecutive fiscal quarters most recently ended on or prior to such
         day.

                  "LEVEL I PRICING" applies on any day if, as of the last day of
         the fiscal quarter most recently ended on or prior to such day and as
         to which the Borrower shall have delivered, or been required to
         deliver, on or prior to such day a certificate pursuant to Section
         5.01(d), (i) the Pricing Ratio is less than 5.0 to 1.0.

                  "LEVEL II PRICING" applies on any day if, as of the last day
         of the fiscal quarter most recently ended on or prior to such day and
         as to which the Borrower shall have delivered, or been required to
         deliver, on or prior to such day a

<PAGE>

         certificate pursuant to Section 5.01(d), (i) the Pricing Ratio is less
         than 5.5 to 1.0 and (ii) Level I Pricing does not apply.

                  "LEVEL III PRICING" applies on any day if, as of the last day
         of the fiscal quarter most recently ended on or prior to such day and
         as to which the Borrower shall have delivered, or been required to
         deliver, on or prior to such day a certificate pursuant to Section
         5.01(d), (i) the Pricing Ratio is less than 6.0 to 1.0 and (ii) Level
         II Pricing does not apply.

                  "LEVEL IV PRICING" applies on any day if, as of the last day
         of the fiscal quarter most recently ended on or prior to such day and
         as to which the Borrower shall have delivered, or been required to
         deliver, on or prior to such day a certificate pursuant to Section
         5.01(d), (i) the Pricing Ratio is less than 6.5 to 1.0 and (ii) Level
         III Pricing does not apply.

                  "LEVEL V PRICING" applies on any day if, on such day, no other
         Pricing Level applies.

                  "PRICING LEVEL" means any one of the six pricing levels
         denominated Level I Pricing, Level II Pricing, Level III Pricing, Level
         IV Pricing or Level V Pricing.

<PAGE>

                                                                     SCHEDULE IV

                          SUBSIDIARIES OF THE BORROWER

4F FUNDING, INC. (f/k/a Beverly Enterprises - Oklahoma, Inc.)
AEDON STAFFING, LLC
AEDON HOMECARE, LLC
AEGIS THERAPIES, INC. (f/k/a Beverly Rehabilitation, Inc.)
AEGIS THERAPIES-FLORIDA, INC. (f/k/a AEGIS-Florida, Inc.)
AGI-CAMELOT, INC.
BEVERLY- BELLA VISTA HOLDING, INC.
BEVERLY - INDIANAPOLIS, LLC
BEVERLY - MISSOURI VALLEY HOLDING, INC.
BEVERLY - RAPID CITY HOLDING, INC.
BEVERLY CLINICAL, INC.
BEVERLY ENTERPRISES INTERNATIONAL LIMITED
BEVERLY ENTERPRISES - ALABAMA, INC.
BEVERLY ENTERPRISES - ARIZONA, INC.
BEVERLY ENTERPRISES - ARKANSAS, INC.
BEVERLY ENTERPRISES - CALIFORNIA, INC. (f/k/a Hospital Facilities
  Corporation)
BEVERLY ENTERPRISES - COLORADO, INC.
BEVERLY ENTERPRISES - CONNECTICUT, INC.
BEVERLY ENTERPRISES - DELAWARE, INC.
BEVERLY ENTERPRISES - DISTRIBUTION SERVICES, INC. (f/k/a Beverly
  Enterprises - New York, Inc.)
BEVERLY ENTERPRISES - DISTRICT OF COLUMBIA, INC.
BEVERLY ENTERPRISES - FLORIDA, INC.
BEVERLY ENTERPRISES - GARDEN TERRACE, INC.
BEVERLY ENTERPRISES - GEORGIA, INC.
BEVERLY ENTERPRISES - HAWAII, INC.
BEVERLY ENTERPRISES - IDAHO, INC.
BEVERLY ENTERPRISES - ILLINOIS, INC.
BEVERLY ENTERPRISES - INDIANA, INC.
BEVERLY ENTERPRISES - IOWA, INC.
BEVERLY ENTERPRISES - KANSAS, LLC
  (successor to Beverly Enterprises - Kansas, Inc.)
BEVERLY ENTERPRISES - KENTUCKY, INC.
BEVERLY ENTERPRISES - LOUISIANA, INC.
BEVERLY ENTERPRISES - MAINE, INC.
BEVERLY ENTERPRISES - MARYLAND, INC.
BEVERLY ENTERPRISES - MASSACHUSETTS, INC.
BEVERLY ENTERPRISES - MICHIGAN, INC.


<PAGE>

BEVERLY ENTERPRISES - MINNESOTA, LLC
(successor to Beverly Enterprises - Minnesota, Inc.)
BEVERLY ENTERPRISES - MISSISSIPPI, INC.
BEVERLY ENTERPRISES - MISSOURI, INC.
BEVERLY ENTERPRISES - MONTANA, INC.
BEVERLY ENTERPRISES - NEBRASKA, INC.
BEVERLY ENTERPRISES - NEVADA, INC.
BEVERLY ENTERPRISES - NEW HAMPSHIRE, INC.
BEVERLY ENTERPRISES - NEW JERSEY, INC.
BEVERLY ENTERPRISES - NEW MEXICO, INC.
BEVERLY ENTERPRISES - NORTH CAROLINA, INC.
BEVERLY ENTERPRISES - NORTH DAKOTA, INC.
BEVERLY ENTERPRISES - OHIO, INC.
BEVERLY ENTERPRISES - OREGON, INC.
BEVERLY ENTERPRISES - PENNSYLVANIA, INC.
BEVERLY ENTERPRISES - RHODE ISLAND, INC.
BEVERLY ENTERPRISES - SOUTH CAROLINA, INC.
BEVERLY ENTERPRISES - TENNESSEE, INC.
BEVERLY ENTERPRISES - TEXAS, INC.
BEVERLY ENTERPRISES - UTAH, INC.
BEVERLY ENTERPRISES - VERMONT, INC.
BEVERLY ENTERPRISES - VIRGINIA, INC.
BEVERLY ENTERPRISES - WASHINGTON, INC.
BEVERLY ENTERPRISES - WEST VIRGINIA, INC.
BEVERLY ENTERPRISES - WISCONSIN, INC.
BEVERLY ENTERPRISES - WYOMING, INC.
BEVERLY FUNDING CORPORATION
BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
BEVERLY HEALTHCARE, LLC
BEVERLY HEALTHCARE - CALIFORNIA, INC.
BEVERLY HOLDINGS I, INC.
BEVERLY INDEMNITY, LTD.
BEVERLY MANOR INC. OF HAWAII
BEVERLY REAL ESTATE HOLDINGS, INC.
BEVERLY SAVANA CAY MANOR, INC.
BEVRD, LLC
CERES OXYGEN SERVICES, LLC
CERES STRATEGIES, INC. (f/k/a/ Beverly Healthcare Acquisition, Inc.)
CERES STRATEGIES MEDICAL SERVICES, LLC
COMMERCIAL MANAGEMENT, INC.
COMMUNITY CARE, INC.
COMPASSION AND PERSONAL CARE SERVICES, INC.
EASTERN HOME HEALTH SUPPLY & EQUIPMENT CO., INC.

<PAGE>

HALLMARK CONVALESCENT HOMES, INC.
HOMECARE PREFERRED CHOICE, INC.
HOSPICE OF EASTERN CAROLINA, INC.
HOSPICE PREFERRED CHOICE, INC.
LARES CARE RESOURCE, LLC
LIBERTY NURSING HOMES, INCORPORATED
MATRIX OCCUPATIONAL HEALTH, INC.
MATRIX WELLNESS, LLC
MEDICAL ARTS HEALTH FACILITY OF LAWRENCEVILLE, INC.
MODERNCARE OF LUMBERTON, INC.
NEBRASKA CITY S-C-H, INC.
NURSING HOME OPERATORS, INC.
PETERSEN HEALTH CARE, INC.
SOUTH ALABAMA NURSING HOME, INC.
SOUTH DAKOTA - BEVERLY ENTERPRISES, INC.
SPECTRA HEALTHCARE ALLIANCE, INC.
TAR HEEL INFUSION COMPANY, INC.
TMD DISPOSITION COMPANY
VANTAGE HEALTHCARE CORPORATION


<PAGE>

                                                                     SCHEDULE VI

                            NEW MORTGAGE PROPERTIES

<Table>
STATE    FAC NO.                         ADDRESS
-----    -------                        ---------
<S>      <C>          <C>
 AL       00359       1130 S. Hale Street, Oxford, AL 36203
 AL       00650       600 Corley Avenue, Boas, AL 35957
 AL       00732       1701 N. Alston, Foley, AL 35064
 AL       04870       119 Watterson Parkway, Trussville, AL 35173
 GA       00766       5470 Meridian Mark Road, Atlanta, GA 30342
 GA       00769       2787 N. Decatur Road, Decatur, GA 30033
 MA       00116       25 Armory Street, West Newton, MA 02165
 MA       00117       188 Florence Street, Chestnut Hill, MA 02467
 MA       02062       76 N. Street, Middleboro, MA 02346
 MA       02061       27 George Street, Attleboro, MA 02703
 MA       02063       195 Pleasant Street, Attleboro, MA 02703
 MA       02070       383 Mill Street, Worchester, MA 01602
 MA       02236       19 Obery Street, Plymouth, MA 02360
 MA       02249       120 Main Street, Malden, MA 02148
 MA       02259       Chief Justice Cushing Highway, Rte. 3A, Cohasset,
                      MA 02025
 MA       02260       146 Dean Street, Taunton, MA 02780
 MA       02413       1650 Washington Street, West Newton, MA 02465
 MA       03969       460 Washington Street, Norwood, MA 02062
 MN       00438       305 Fremont Street, Anoka, MN 55303
 MN       00442       2957 Redwood Avenue, Slayton, MN 56172
 MN       00876       313 S. Greeley Street, Stillwater, MN 55082
 MN       00883       2810 Second Avenue North, Moorhead, MN 56560
 MN       02332       15409 Wayzata Boulevard, Wayzata, MN 55391
 MO       02279       1050 Dawson, New Madrid, MO
 MN       02325       2727 N. Victoria , Roseville, MN 55113
 MO       02367       215 Rear West Grant, Dexter, MO 63841
 MO       02380       Sidney Street, R.R. 2, St. James, MO 65559
 NC       00063       127 Moye Boulevard, Greenville, NC 27834
 NE       00451       3918 27th Street, Columbus, NE 68601
 NE       00458       202 N. Esther, Fullerton, NE 68638
 NE       00489       5505 Grover Street, Omaha, NE 68106
 NE       00492       N. Highway 2181, O'Neill, NE 68763
 NE       00510       602 S. 18th Street, Plattsmouth, NE 68048
 NE       00511       2023 Colfax Avenue, Schuyler, NE 68661
 NE       00512       823 M Street, Tekamah, NE 68061
 NE       02183       610 B Darr, Grand Island, NE 68803
 NE       02187       1405 W. Highway 34, Grand Island, NE 68801
</Table>

<PAGE>

<Table>
STATE    FAC NO.                         ADDRESS
-----    -------                        ---------
<S>      <C>          <C>
 NE       02188       1100 North "T" Street, Neligh, NE 68756
 NE       02190       224 E. South East Street, Broken Bow, NE 68822
 NE       02193       111 W. 36th Street, Scottsbluff, NE 69361
 NE       02194       1435 Toledo Street, Sidney, NE 69162
 PA       00262       824 Adams Ave, Scranton, PA 18510
 PA       00266       833 S. Main Street, Phoenixville, PA 19460
 PA       00267       35 Rosemont Avenue, Rosemont, PA 19010
 PA       00268       221 E. Brown Street, E. Stroudsburg, PA 18301
 PA       00284       3300 Logan Ferry Road, Murrayville, PA 15668
 PA       00287       2686 Peach Street, Erie, PA 16508
 PA       02145       26 Ann Street, Oakmont, PA 15139
 PA       03533       7310 Stenton Avenue, Philadelphia, PA 19150
 PA       03959       46 Erford Road, Camp Hill, PA 17011
 PA       03963       700 S. Cayuga Avenue, Altoona, PA 16602
 PA       03964       700 S. Cayuga Avenue, Altoona, PA 16602
 SD       00321       1106 N. 2nd Street, Groton, SD 57445
 SD       02199       803 Park Street, Lake Norden, SD 57248
 SD       02201       1100 4th Avenue East, Mobridge, SD 57601
 SD       02203       916 Mountain View Road, Rapid City, SD 57702
 SD       02743       718 N.W. 8th Street, Madison, SD 57042
 VA       00086       835 Glendale Road, Galax, VA 24333
</Table>


<PAGE>

                                                                    SCHEDULE VII

<Table>
<Caption>
FACILITY NUMBER              LOCATION                        US$
---------------              --------                    -------------
<S>                 <C>                                  <C>
     0776           Corporate Headquarters               36,010,011.00
     3835           Arkadelphia                           4,920,573.00
     4850           El Dorado                             4,589,223.00
     4141           North Little Rock                     5,364,812.00
     4138           Murrieta                              7,325,034.00
     4310           Murrieta                              4,417,644.00
     3715           Cobb Co.                              6,828,586.00
     2046           Fontanblue Nursing Center
                    Bloomington, Indiana                    500,000.00
     2272           Lincoln Hills Nursing Center Tell
                    City, Indiana                           800,000.00
     3687           Woodlands Convalescent Center
                    Newburgh, Indiana                     1,200,000.00
</Table>