Document:

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                                                                   EXHIBIT 10.60

CONFIDENTIAL TREATMENT REQUESTED

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

                         AMENDMENT NO. 6 TO AMENDED AND
                        RESTATED PARTICIPATION AGREEMENT

         This AMENDMENT NO. 6 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT
(this "Amendment"), is entered into as of February 28, 2003, among BEVERLY
ENTERPRISES, INC., a Delaware corporation ("BEI"), as the Representative,
Construction Agent, Parent Guarantor and a Lessee (in its capacity as
Representative, the "Representative"; in its capacity as Construction Agent, the
"Construction Agent"; in its capacity as Parent Guarantor, the "Parent
Guarantor" and together with the Guarantors listed on the signature page to the
Guaranty (each a "Guarantor") and the Structural Guarantors, collectively, the
"Guarantors"; and, in its capacity as Lessee, a "Lessee"); certain subsidiaries
of BEI that are signatories hereto, as Lessees; BANK OF MONTREAL GLOBAL CAPITAL
SOLUTIONS, INC. (formerly known as BMO LEASING (U.S.), INC.), a Delaware
corporation, as a Lessor (together with any permitted successors and assigns
thereto, each a "Lessor" and collectively the "Lessors") and as Agent Lessor for
the Lessors (in such capacity, the "Agent Lessor"); the various financial
institutions as are or may from time to time become lenders (the "Lenders")
under the Loan Agreement; and BANK OF MONTREAL, a Canadian banking organization
("BMO"), as Administrative Agent (in such capacity, the "Administrative Agent")
for the Lenders, and as Arranger and Syndication Agent (all of the parties of
this preamble, collectively, the "Parties").

         The effective date of this Amendment shall be the date of effectiveness
of Credit Amendment No. 4 (the "Amendment No. 6 Effective Date").

                                   RECITALS:

         The Parties entered into an Amended and Restated Participation
Agreement dated as of August 28, 1998 (the "Original Participation Agreement"
and as amended by the Prior Amendments and this Amendment, the "Participation
Agreement"), amending and restating the Participation Agreement dated as of
March 21, 1997.

         The Parties entered into a Master Amendment No. 1 to Amended and
Restated Participation Agreement and Amended and Restated Master Lease and
Open-End Mortgage, dated as of September 30, 1999 (the "First Amendment"), which
amended the Original Participation Agreement.

         The Parties entered into an Amendment No. 2 to Amended and Restated
Participation Agreement, dated as of November 1, 1999 (the "Second Amendment"),
which amended the Original Participation Agreement as amended by the First
Amendment.

         The Parties entered into a Master Amendment No. 3 to Amended and
Restated Participation Agreement, dated as of April 25, 2001 (the "Third
Amendment"), which amended

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the Original Participation Agreement as amended by the First Amendment and the
Second Amendment.

         The Parties entered into an Amendment No. 4 to Amended and Restated
Participation Agreement, dated as of December 31, 2001 (the "Fourth Amendment"),
which amended the Original Participation Agreement as amended by the First
Amendment, the Second Amendment and the Third Amendment.

         The Parties entered into an Amendment No. 5 to the Amended and Restated
Participation Agreement, dated as of December 20, 2002 (the "Fifth Amendment"
and, together with the First Amendment, Second Amendment, Third Amendment and
Fourth Amendment collectively the "Prior Amendments"), which amended the
Original Participation Agreement as amended by the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment.

         The Parties wish to further amend certain provisions of the Original
Participation Agreement, as amended by the Prior Amendments, as set forth
herein.

                                   AGREEMENT:

         NOW, THEREFORE, in consideration of the premises made hereunder, and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto, intending to be legally bound, hereby
agree as follows:

              1. Defined Terms; References. Unless otherwise expressly defined
herein, all capitalized terms used herein and defined in Appendix A to the
Participation Agreement shall be used herein as so defined. Unless otherwise
expressly stated herein, all Section and Article references herein shall refer
to Sections and Articles of the Participation Agreement.

              2. Added Defined Terms. (a) Effective as of the Amendment No. 6
Effective Date, the following defined terms shall be added to Appendix A of the
Participation Agreement.

         "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 10.1(m), as mortgagor, securing the Obligations (and, if the
         Representative so elects, the obligations of such owner under the
         Financing Documents), 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

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         Consolidated EBITDAR for the period of four consecutive fiscal quarters
         most recently ended on or prior to such day.

         "Amended Mortgage Condition" means the satisfaction by the
         Representative and its Subsidiaries of all of their obligations under
         Section 10.1(1).

         "Amended Mortgage Deadline" means the sixtieth day after the Amendment
         No. 6 Effective Date.

         "Amended Mortgage Property" means the property described in Schedule
         VII hereto.

         "Amended Mortgages" means amended mortgages or deeds of trust from each
         of Beverly Enterprises-Georgia, Inc. and Beverly Enterprises-Arkansas,
         Inc. (collectively, the "Designated Mortgagors") of each respective
         Amended Mortgage Property, as mortgagor, to the Administrative Agent,
         as mortgagee, in respect of the Amended Mortgage Properties, in each
         case amended in form and substance reasonably satisfactory to the
         Administrative Agent and as the same may be amended from time to time.

         "Amendment No. 6" means Amendment No. 6 to Amended and Restated
         Participation Agreement entered into as of February 28, 2003 among
         Beverly Enterprises, Inc., as the Representative, Construction Agent,
         Parent Guarantor and a Lessee, Bank of Montreal Global Capital
         Solutions, Inc., as the Agent Lessor and as a Lessor, the Lenders, Bank
         of Montreal, as Arranger, the Administrative Agent and as a Lender and
         the Guarantors.

         "Amendment No. 6 Effective Date" means the date on which Amendment No.
         6 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 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,
         2003, EBITDA for Mortgaged Facilities for the period

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         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 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 Representative) in the ordinary course of business, and (ii) sales,
         transfers, leases and other dispositions by the Representative or any
         of its Subsidiaries to the Representative or any of the Subsidiaries.

         "Care Focus" means, as of the Amendment No. 4 Effective Date (as
         defined in Credit Amendment No. 4), 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 Representative 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 Section 10.1(d)(i) and (ii), divided by (ii) 1.5; provided
         that if, on or prior to such day, the Representative has prepaid any
         New Senior Notes or Senior Notes pursuant to Section 5.21(iii)(B) of
         the Morgan Credit Agreement, 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.

         "Credit 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 BEI, the Existing Banks
         and JPMorgan Chase Bank.

         "Disposition Program" means, the sale, transfer or other disposition by
         the Representative 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 Representative 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.

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         "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.

         "Existing Mortgages" means mortgages and deeds of trust described in
         Schedule I to Amendment No. 6, in each case as the same has been or may
         be amended from time to time.

         "Extended Amended Mortgage Deadline" has the meaning set forth in
         Section 10.1(1).

         "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 (b)(ii)(A) of Section 7.11, (a) with respect to
         the 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 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 Obligations or
         Mortgage Facility Obligations) that would otherwise have been applied
         to repay such Obligations or Mortgage Facility Obligations shall be
         included in the Initial Specified Portion of Obligations or Mortgage
         Facility Obligations remaining outstanding.

         "Investments Side Letter" means the side letter dated February 28, 2003
         delivered by the Representative and acknowledged by the Administrative
         Agent under the Morgan Credit Agreement.

         "MK Medical" means, as of the Amendment No. 6 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.

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         "Mortgaged Facility Obligations" means all amounts now or hereafter
         payable by the Representative 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 Representative 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
         Representative 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 Representative and its
         Subsidiaries as a result of such Asset Sale to repay Indebtedness
         (other than prepayments of Mortgage Facility Obligations or Obligations
         required under clauses (a), (b)(ii), (b)(iii) and (c) of Section 7.11
         and prepayments of Loans (as defined in the Morgan Credit Agreement)
         required under Section 2.05(d) of the Morgan Credit Agreement in
         connection with the reductions of the Commitments (as defined in the
         Morgan Credit Agreement) pursuant to clauses (i), (ii)(B), (ii)(C) and
         (iii) of Section 2.11(b) of the Morgan Credit Agreement) secured by
         such asset or otherwise subject to mandatory prepayment as a result of
         such Asset Sale and (y) reductions in the Commitments (as defined in
         the Morgan Credit Agreement) pursuant to Section 2.11(b)(ii)(A) of the
         Morgan Credit Agreement, (iii) the amount of all taxes paid (or
         reasonably estimated to be payable) by the Representative 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 Representative) and (iv) the amount of all payments
         required to be made by the Representative 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.

         "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) an Amended Mortgage as to which all the
         conditions set forth in Section 10.1(1) have been satisfied, and, in
         each case, which has not theretofore been released.

         "New Senior Note Agreement" means that certain Indenture, dated as of
         April 25, 2001, between the Representative, the guarantors party
         thereto and The Bank of New York, as trustee, as amended, modified or
         supplemented.

         "Security Documents" means the Pledge Agreement, the Mortgages and the
         Additional Mortgages, together with all related filings, assignments,
         instruments, mortgages and other papers.

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         "Senior Note Agreement" has the meaning set forth in the Morgan Credit
         Agreement.

         "Senior Notes" means the senior unsecured notes of the Representative
         due 2006 issued pursuant to the Senior Note Agreement.

         "Specified Portion" means, with respect to any repayment required under
         clause (b)(ii)(B), (b)(iii) or (c) of Section 7.11 or any Commitment
         (as defined in the Morgan Credit Agreement) reduction pursuant to
         clause (ii)(B)(2), (ii)(C) or (iii) of Section 2.11(b) of the Morgan
         Credit Agreement, (a) with respect to the Commitments, 50%, (b) with
         respect to the Obligations, 40% and (c) with respect to the Mortgage
         Facility Obligations, 10%; provided that if at the time that any such
         Commitment (as defined in the Morgan Credit Agreement) reduction or
         repayment would otherwise be required, (i) the aggregate Commitments
         (as defined in the Morgan Credit Agreement) of all Existing 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 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
         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 (as defined in the Morgan Credit
         Agreement) to $85,000,000 or to repay such Obligations or Mortgage
         Facility Obligations in full) that would otherwise have been applied to
         reduce such Commitments (as defined in the Morgan Credit Agreement) or
         repay such Obligations or Mortgage Facility Obligations shall be
         included in the Specified Portions applicable to the outstanding
         Commitments (as defined in the Morgan Credit Agreement) in excess, in
         the aggregate for all Existing Banks, of $85,000,000 and the
         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 Representative.

         "Survey" shall mean a survey of the real property (and all improvements
         thereon) (i) prepared by a surveyor or engineer licensed to perform
         surveys in the state, commonwealth or applicable jurisdiction where
         such real property is located, (ii) dated (or redated) not earlier than
         six months prior to the date of delivery thereof unless there shall
         have occurred within six months prior to such date of delivery any
         exterior construction on the site of such real property, in which event
         such survey shall be dated (or redated) after the completion of such
         construction or if such construction shall not have been completed as
         of such date of delivery, not earlier than twenty days prior to such
         date of delivery, (iii) certified by the surveyor (in a manner
         reasonably acceptable to the Administrative Agent) to the
         Administrative Agent and the TIC, (iv) complying in all

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         respects with the minimum detail requirements of the American Land
         Title Association as such requirements are in effect on the date of
         preparation of such survey and (v) sufficient for the TIC to remove all
         standard survey exceptions from the title policy relating to such real
         property and issue title endorsements of the type reasonably required
         by the Administrative Agent.

         "TIC" has the meaning set forth in Section 10.1(l)(iv).

         "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.

                  3. Amended Defined Terms. (a) The definition of "Operative
Documents" set forth in Appendix A to the Participation Agreement is hereby
amended by (i) deleting the word "and" at the end of clause (s) therein, (ii)
deleting the period at the end of clause (t) and replacing the same with ";
and", and (iii) adding "(u) the Amended Mortgages." at the end thereof.

                  (b) The following defined terms in Appendix A to the
         Participation Agreement are hereby amended by deleting such definitions
         in their entirety and inserting the following in lieu thereof:

         "Adjusted Consolidated Debt" means, at any date, the sum, without
         duplication, of (i) all liabilities of the Representative 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 Amendment
         No. 6 Effective Date of obligations outstanding on the Amendment No. 6
         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 Representative 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) of the
         Morgan Credit Agreement (without regard to whether a period of 60 days
         shall have passed as contemplated in

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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.

         Section 6.01(i) of the Morgan Credit Agreement) shall have occurred
         with respect to the Person that is primarily liable in respect of such
         obligations, or who has agreed with the Representative 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
         Representative 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, but only to the extent permitted under Regulation S-X
         promulgated by the Securities and Exchange Commission) to any
         acquisition or disposition by the Representative 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 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 Representative and its Consolidated Subsidiaries on or
         prior to January 8, 2002 in connection with the Florida Disposition,
         (iv) charges and losses incurred by the Representative and its
         Consolidated Subsidiaries on or after the Amendment No. 6 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 Representative and its Consolidated Subsidiaries
         on or after the Amendment No. 6 Effective Date as a result of (x)
         closures of assisted living and skilled nursing facilities of the
         Representative and its Subsidiaries and (y) any change in GAAP that
         requires the Obligations and the assets subject to the Transactions to
         be included on the balance sheet of the Representative and its
         Consolidated Subsidiaries and (vi) transaction fees and expenses of the
         Representative and its Subsidiaries incurred in connection with
         Amendment No. 6 and any related amendments to the Operative Documents,
         the Morgan Credit Agreement and the Mortgage Credit Facilities) for the
         Representative and its Consolidated Subsidiaries, determined on a
         consolidated basis for such period.

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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 Net Worth" means, at any date, the consolidated
         stockholders' equity of the Representative and its Consolidated
         Subsidiaries at such date, without giving effect to (a) charges and
         losses incurred by the Representative and its Consolidated Subsidiaries
         on or after the Amendment No. 6 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
         Representative and its Consolidated Subsidiaries on or after the
         Amendment No. 6 Effective Date as a result of (i) closures of assisted
         living and skilled nursing facilities of the Representative and its
         Subsidiaries and (ii) any change in GAAP that requires the Obligations
         and the assets subject to the Transactions to be included on the
         balance sheet of the Representative and its Consolidated Subsidiaries
         and (c) transaction fees and expenses of the Representative and its
         Subsidiaries in connection with Amendment No. 6 and any related
         amendments to the Operative Documents and the Mortgage Credit
         Facilities.

         "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.

         "Maturity Date" means April 25, 2004, unless such Maturity Date is
         extended pursuant to Section 2.7 of the Loan Agreement and Section 11.1
         of the Participation Agreement.

         "Morgan Credit Agreement" means the Amended and Restated Credit
         Agreement dated as of April 25, 2001 amending and restating the Amended
         and Restated Credit Agreement dated as of April 30, 1998 among the
         Representative, the Banks listed on the signature pages thereof, Morgan
         Guaranty Trust Company of New York, as Issuing Bank, and Morgan
         Guaranty Trust Company of New York, as Agent, as the same has been or
         may be modified, amended or supplemented.

         "Mortgages" means the Existing Mortgages and the Amended Mortgages.

         "Refinanced Debt" is defined in Section 10.2(i)(v) of the Participation
         Agreement.

         "Refinancing Debt" is defined in Section 10.2(i)(v) of the
         Participation Agreement.

                  4. Distributions. Effective as of the Amendment No. 6
Effective Date, Article VII of the Participation Agreement is hereby amended by
adding, at the end thereof, a new Section 7.11 to read in full as follows:

                   "Section 7.11 Prepayment of Obligations and Mortgage Facility
          Obligations. The Representative shall prepay, or cause its
          Subsidiaries to prepay

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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.

                  (or, in the case of the Obligations, deposit funds with the
                  Administrative Agent that are committed to the repayment of),
                  the Obligations and the Mortgage Facility Obligations,

                           (a) on the Amendment No. 6 Effective Date, in the
                  case of the Obligations, in the amount of $20,000,000;
                  $16,800,000 of which shall be paid in consideration for the
                  sale to the Representative of certain properties subject to an
                  Existing Mortgage in favor of the Administrative Agent (which
                  properties shall continue to be subject to a Lien in favor of
                  the Administrative Agent pursuant to Amended Mortgages) and
                  $3,200,000 of which shall be deposited into a cash collateral
                  account maintained by the Administrative Agent,

                           (b) upon the consummation of any Asset Sale, by an
                  amount equal to:

                                    (i) if any Asset Sale includes assets that
                           were subject to a Lien securing the Obligations or
                           the Mortgage Facility Obligations, (A) in the case of
                           the Obligations, the amount set forth on Schedule
                           VIII hereto with respect to such assets and (B) in
                           the case of the Mortgage Facility Obligations, the
                           amount required to be repaid pursuant to the AmSouth
                           Mortgage Facility or the Washington Mutual Mortgage
                           Facilities, as applicable; and

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

                                             (A) until the 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 (A) (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 Representative shall
                                    have reached a final agreement related to
                                    past billing practices of MK Medical, which
                                    agreement requires the Representative 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

                                      -11-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

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

                                    excess of the aggregate amount of such
                                    payments over ***********; provided further
                                    that the provisions of this clause (A) shall
                                    remain in effect thereafter until the
                                    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 (A),

                                             (B) after the 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 (ii)(A) of this
                                    Section 7.11 (or, in either case, repaid in
                                    full), the Specified Portion of 65% of the
                                    Net Cash Proceeds of such Asset Sales; and

                                    (iii) if, in the absence of any additional
                           Commitment (as defined in the Morgan Credit
                           Agreement) reductions and/or repayments of Mortgage
                           Facility Obligations and/or the Obligations, the
                           Representative 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, 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 Representative to avoid the making of a
                           Senior Asset Sale Offer under the Senior Note
                           Agreement or the New Senior Note Agreement; and

                           (c) 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 (as defined in
                  the Morgan Credit Agreement) reductions required pursuant to
                  clause (ii) of Section 2.11(b) of the Morgan Credit Agreement
                  and related prepayments pursuant to Section 2.05(d) of the
                  Morgan Credit Agreement and any prepayments required pursuant
                  to clause (b) of this Section 7.11, 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 Representative may elect to apply 100% of any
                  prepayment that would

                                      -12-
<PAGE>

                  otherwise be applied under this Section 7.11 to prepay the
                  Mortgage Facility Obligations, to prepay the Obligations and
                  reduce the Commitments (as defined in the Morgan Credit
                  Agreement) in the same manner as if the Mortgage Facility
                  Obligations had theretofore been repaid in full pursuant to
                  this Section 7.11, (y) if the Mortgage Facility Obligations
                  have been prepaid in full (other than pursuant to this Section
                  7.11), the Representative may retain any amount that would
                  otherwise have been applied under this Section 7.11 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. 6 Effective Date less $5,000,000 and (z) any
                  proceeds resulting from the sale of assets that were not
                  subject to a Lien securing the Obligations and received by the
                  Representative or such Subsidiary prior to July 1, 2003
                  pursuant to clause (b)(ii)(A) or (B) of this Section 7.11 and
                  which are to be applied to the repayment of the Obligations,
                  may, in the Representative's sole discretion, either (I) be
                  promptly (but in any event, within one Business Day following
                  receipt by the Representative of such proceeds) deposited into
                  a cash collateral account maintained by the Administrative
                  Agent and applied upon the earlier of (A) July 1, 2003 or (B)
                  upon the occurrence of an Event of Default to the repayment of
                  the Obligations as otherwise set forth in this Section 7.11 or
                  (II) be paid in accordance with clause (b)(ii)(A) or (B) of
                  this Section 7.11, as applicable."

                  5. Affirmative Covenants of the Representative. Effective as
of the Amendment No. 6 Effective Date, Section 10.1 of the Participation
Agreement is hereby amended as follows:

                  (a) Section 10.1(d)(iii) is hereby amended by deleting said
         section in its entirety and inserting the following in lieu thereof:

                           "(iii) together with each delivery of financial
                  statements of the Representative and its Subsidiaries pursuant
                  to Sections 10.1(d)(i) and 10.1(d)(ii) above, (A) a
                  certificate of a Financial Officer (x) stating that the signer
                  thereof has reviewed the terms of this Participation Agreement
                  and the Master Lease and has made, or caused to be made under
                  his supervision, a review in reasonable detail of the
                  transactions and condition of the Representative and its
                  Subsidiaries (including the other Beverly Entities) during the
                  accounting period covered by such financial statements and
                  that such review has not disclosed the existence during or at
                  the end of such accounting period, and that the signer does
                  not have knowledge of the existence as at the date of such
                  certificate, of any condition or event which constitutes a
                  Lease Event of Default or Lease

                                      -13-
<PAGE>

                  Default, or, if any such condition or event existed or exists,
                  specifying the nature and period of existence thereof and what
                  action the Representative has taken, is taking and proposes to
                  take with respect thereto, (y) setting forth in reasonable
                  detail calculations of the Pricing Ratio as of the date of the
                  Balance Sheet contained therein and for the period of four
                  fiscal quarters ending on such date and (z) in the case of
                  each such certificate delivered after the Amended Mortgage
                  Deadline, setting forth in reasonable detail the Coverage
                  Limitation as of the date of the balance sheet contained
                  therein; and (B) a Compliance Certificate demonstrating in
                  reasonable detail compliance during and at the end of such
                  accounting periods with the restrictions contained in Section
                  10.2(a), Section 10.2(b), Section 10.2(c), Section 10.2(e)(v),
                  Section 10.2(f), Section 10.2(g), Section 10.2(i), Section
                  10.2(l) and Section 10.2(m)."

                  (b) Section 10.1(1) is hereby amended by deleting said section
         in its entirety and inserting the following in lieu thereof:

                           "(1) Mortgages. On or prior to the Amended Mortgage
         Deadline or such other date or dates (each, an "Extended Amended
         Mortgage Deadline") as the Representative, the Administrative Agent and
         the Agent Lessor shall agree:

                           (i) the Designated Mortgagors shall have each
                  delivered to the Administrative Agent and the Agent Lessor
                  duly executed counterparts of an Amended Mortgage in respect
                  of each Amended Mortgage Property owned by it, and
                  simultaneously therewith or immediately thereafter (A) the
                  Designated Mortgagors shall be released solely from their
                  obligation to make scheduled installments of Basic Rent solely
                  with respect to each Amended Mortgage Property, but shall not
                  be released from the obligations to pay any other amounts or
                  from any other obligations under any Operative Document, it
                  being agreed that the liability of the Designated Mortgagors
                  with respect to all other Obligations under the Operative
                  Documents, including without limitation, the Lease Balance,
                  shall remain in full force and effect and (B) the Agent Lessor
                  shall transfer to the Designated Mortgagors or their designees
                  the Agent Lessor's record title (but specifically excluding
                  rights under the Amended Mortgages) in and to the Amended
                  Mortgage Properties without representations or warranties,
                  except that such Amended Mortgage Property is free from
                  Lessor's Liens;

                           (ii) the Representative shall deliver, or cause to be
                  delivered, to the Administrative Agent and the Agent Lessor
                  legal opinions of local counsel reasonably satisfactory to the
                  Administrative Agent and the Agent Lessor with respect of each
                  of the Amended Mortgages, which legal

                                      -14-
<PAGE>

                  opinion shall be in form and substance reasonably satisfactory
                  to the Administrative Agent and the Agent Lessor;

                           (iii) the Representative shall deliver, or cause to
                  be delivered, to the Administrative Agent and the Agent Lessor
                  evidence satisfactory to the Administrative Agent and the
                  Agent Lessor 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 Administrative Agent and the Agent Lessor
                  shall have reasonably requested to perfect the Liens created
                  pursuant to the Amended Mortgages shall have been taken, or
                  that arrangements therefor satisfactory to the Administrative
                  Agent and the Agent Lessor shall have been made;

                           (iv) the Representative shall deliver, or cause to be
                  delivered, to the Administrative Agent and the Agent Lessor
                  policies of title insurance (or commitments therefor with all
                  conditions marked satisfied), in form and substance
                  satisfactory to the Administrative Agent and the Agent Lessor
                  and issued by an insurance company or companies as are
                  acceptable to the Administrative Agent and the Agent Lessor
                  (the "TIC"), insuring the perfection, enforceability and
                  priority of the Liens on the Amended Mortgage Property created
                  under the Amended Mortgages in amounts as are satisfactory to
                  the Administrative Agent and the Agent Lessor, subject only to
                  such exceptions as are reasonably satisfactory to the
                  Administrative Agent and the Agent Lessor, containing such
                  endorsements (other than endorsements that would require a new
                  survey) and affirmative assurances as have been previously
                  agreed to by, or are otherwise satisfactory to, the
                  Administrative Agent and the Agent Lessor, and reinsured in
                  amounts and under reinsurance agreements in form and substance
                  satisfactory to the Administrative Agent and the Agent Lessor,
                  and the Representative shall have paid or made arrangements
                  satisfactory to the Administrative Agent and the Agent Lessor
                  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
                  Administrative Agent and the Agent Lessor to pay to the TIC an
                  amount equal to the recording and stamp taxes payable in
                  connection with recording the Amended Mortgages in the
                  appropriate county land offices;

                           (v) the Representative shall deliver, or cause to be
                  delivered, to the Administrative Agent and the Agent Lessor
                  copies of file search reports from the Uniform Commercial Code
                  filing office in each jurisdiction (i) in which is located any
                  Amended Mortgage Property subject to an Amended Mortgage, (ii)
                  in which is located the chief executive office of any

                                      -15-
<PAGE>

                  Subsidiary of the Representative that owns or holds any right,
                  title or interest in any Amended Mortgage Property subject to
                  an Amended 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 Representative or such
                  Subsidiary, as the case may be;

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

                           (vii) the Representative 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 Administrative Agent and the Agent Lessor with respect to
                  the Amended Mortgages, in each case invoiced prior to the
                  Amended Mortgage Deadline; and

                           (viii) the Representative shall deliver a Survey with
                  respect to each Amended Mortgage."

                  (c) Section 10.1 is hereby amended by adding, at the end
         thereof, a new clause (m) to read in full as follows:

                           "(m) Additional Collateral. In the event that the
                  Representative or any of its Subsidiaries grants to the agent
                  or the lenders under the Morgan Credit Agreement in respect of
                  the obligations under the Financing Documents, at any time
                  after the Amendment No. 6 Effective Date, a Lien on any of its
                  property or assets (other than any Lien on (i) the New
                  Mortgage Property (as defined in the Morgan Credit Agreement)
                  or (ii) any Substituted Assets on which a Lien is permitted
                  under Section 10.2(g)(xvi)) the Representative shall, or shall
                  cause its Subsidiary to, as the case may be, simultaneously
                  grant to the Administrative Agent and/or the Agent Lessor for
                  the benefit of all the Lenders, 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 Morgan Credit Agreement. If all amounts now or
                  hereafter payable by the Representative and its Subsidiaries
                  under the AmSouth Mortgage Facility or the Washington Mutual
                  Mortgage Facilities shall have been repaid in full, then, to
                  the extent permitted

                                      -16-
<PAGE>

                  under the Senior Note Agreement and the New Senior Note
                  Agreement, the Representative shall, or shall cause its
                  applicable Subsidiary to, grant to the Administrative Agent
                  and/or the Agent Lessor for the benefit of all the Lenders
                  Liens on the property or assets theretofore securing such
                  Mortgage Facility Obligations to secure the Obligations (which
                  Liens may equally and ratably secure the obligations of the
                  Representative and the Subsidiary Guarantors (as defined under
                  the Morgan Credit Agreement) under the Financing Documents)."

                  6. Negative Covenants of the Representative. Effective as of
the Amendment No. 6 Effective Date, Section 10.2 of the Participation Agreement
is hereby amended as follows:

                           (a) Section 10.2(b) of the Participation Agreement is
         hereby amended by deleting said section in its entirety and inserting
         the following in lieu thereof:

                                    "(b) Fixed Charge Coverage Ratio. The Fixed
                  Charge Coverage Ratio at any date shall not be less than 1.10
                  to 1.00."

                           (b) Section 10.2(c) of the Participation Agreement is
         hereby amended by deleting said section in its entirety and inserting
         the following in lieu thereof:

                                    "(c) Adjusted Consolidated Debt Ratio. The
                  ratio at any date during any period set forth below of (a)
                  Adjusted Consolidated Debt to (b) 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 1.00
                  June 30, 2003 - September 29, 2003          6.50 to 1.00
                  September 30, 2003 - December 30, 2003      6.80 to 1.00
                  December 31, 2003 - March 30, 2004          7.30 to 1.00
                  March 31, 2004 and thereafter               7.45 to 1.00"
</Table>

                           (c) (i) Section 10.2(e)(ix) is hereby amended by
         deleting said section in its entirety and inserting the following in
         lieu thereof:

                           "(ix)(a) 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

                                      -17-
<PAGE>

                  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 (ix)(a)
                  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 Representative 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 Representative 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 Representative and the Guarantors under the
                  Financing Documents, the Mortgage Credit Facilities or the
                  Operative Documents were secured by a Lien on the facilities
                  sold, or the facilities owned by the Subsidiary whose stock
                  was sold, and such obligations remain 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
                  Representative and the Guarantors under the Financing
                  Documents, the Mortgage Credit Facilities or the Operative
                  Documents 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 Representative and the Guarantors under the Financing
                  Documents, the Mortgage Credit Facilities and the Operative
                  Documents and (b) 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 (ix)(b) shall not, at any time,
                  exceed $20,000,000."

                  (ii) Section 10.2(e) is hereby amended by adding, at the end
         thereof, the following:

                  "In addition, neither the Representative nor any of its
                  Subsidiaries will, during any period on or after the Amendment
                  No. 6 Effective Date during which the Adjusted Leverage Ratio
                  exceeds 5.00 to 1.00 make or acquire any Investments of the
                  types referred to in clauses (ii), (iv), (v), or (xv) of

                                      -18-
<PAGE>

                  this Section 10.2(e), 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 Transactions and (ii) Investments, Lease Conversions and
                  acquisitions of facilities in an aggregate amount not
                  exceeding $15,000,000."

                           (d) Section 10.2(f)(v) is hereby amended by deleting
         said section in its entirety and inserting the following in lieu
         thereof:

                           "(v) the Representative may make any such payment or
                  distribution if, after giving effect thereto, the aggregate
                  amount of all such payments or distributions made after the
                  Amendment No. 6 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 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 Representative on
                  any day on or after the Amendment No. 6 Effective Date on
                  which the Adjusted Leverage Ratio is greater than 5.00 to
                  1.00."

                           (e) Section 10.2(g)(a)(iv) is hereby amended by
         deleting said section in its entirety and inserting the following in
         lieu thereof:

                           "(iv) any Lien on any asset securing Indebtedness 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. 6 Effective Date, 385
                  days) after such acquisition, construction or reconstruction
                  and (y) on any day on or after the Amendment No. 6 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 Indebtedness referred to in clause (iv) of
                  the definition of Indebtedness.

                                      -19-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

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

                           (f) Section 10.2(g) is hereby amended by deleting the
         word "and" at the end of clause (xiv) thereof, adding the word "and" at
         the end of clause (xv) thereof and by adding, at the end thereof, the
         following new clauses (xvi) and (xvii):

                           "(xvi) With respect to each property covered by a
                  Mortgage (as defined in the Morgan Credit Agreement), the
                  Permitted Property Liens (as defined in the Morgan Credit
                  Agreement); provided that the assets subject to any such
                  Mortgage shall be limited to (i) the assets subject to any
                  Existing Mortgage (as defined in the Morgan Credit Agreement
                  as in existence on the Amendment No. 4 Effective Date), (ii)
                  any New Mortgage Property (as defined in the Morgan Credit
                  Agreement as in existence on the Amendment No. 4 Effective
                  Date) and (iii) any assets ("Substituted Assets") substituted
                  for assets ("Original Assets") referred to in clause (i) or
                  (ii) above so long as the value of such Substitute Assets is
                  not greater than (other than by a de minimus amount) the value
                  of the Original Assets for which they are substituted; and

                           (xvii)  Liens in respect of Additional Mortgages."

                           (g) Section 10.2(h) is hereby amended by deleting
         said section in its entirety and inserting the following in lieu
         thereof:

                           "(h) Consolidations, Mergers and Sales of Assets.
                  Neither the Representative nor any of its Subsidiaries will:

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

                           (ii) sell, lease or otherwise transfer (A) 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 Representative and
                  its Subsidiaries, taken as a whole, to any other Person and
                  (B) 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 (i) that this Section 10.2(h) shall not apply to (A)
                  mergers, dissolutions, reorganizations or liquidations of
                  Subsidiaries of the Representative that have disposed of all
                  or substantially all of their assets, (B) sales, leases or
                  other transfers by the Representative or any of its
                  Subsidiaries to the Representative or any Guarantor and (C)
                  sales, transfers or other dispositions of MK Medical,
                  **********, ********************** and
                  **********************************

                                      -20-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED

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

                  *************************** or made pursuant to the
                  Disposition Program and (ii) Section 10.2(h)(ii)(B) 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 10.2(m), (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 (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) any transfer of assets or property pursuant
                  to condemnations or in lieu of condemnations; and provided
                  further that the Representative 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 Representative 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)."

                           (h) Section 10.2(i) is hereby amended by adding, at
         the end thereof, a new clause (c) to read in full as follows:

                           "(c) If at any time on or after the Amendment No. 6
                  Effective Date the Adjusted Leverage Ratio exceeds 5.00 to
                  1.00, the Representative will not, and will not permit any of
                  its Subsidiaries to, incur or assume any Indebtedness, except:

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

                           (ii) Indebtedness of the type referred to in clause
                  (iv) of the definition of Indebtedness secured by a Lien
                  permitted pursuant to clause (iv) of Section 10.2(g)(a);

                           (iii) Indebtedness of any corporation that became or
                  becomes a Consolidated Subsidiary of the Representative 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;

                                      -21-
<PAGE>

                           (iv) Refinancing Debt incurred to refinance
                  Indebtedness 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 Indebtedness
                  permitted to have been incurred, and in fact incurred, prior
                  to the Amendment No. 6 Effective Date or when the Adjusted
                  Leverage Ratio did not exceed 5.00 to 1.00, Refinancing Debt
                  permitted under clause (v) of Section 10.2(i)(a) (treating
                  such Section 10.2(i)(a) solely for purposes of this clause (v)
                  as if it applied to the Representative 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) Indebtedness incurred under the Financing
                  Documents;

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

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

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

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

                           (xii) Indebtedness not otherwise permitted under
                  clauses (i) through (xi) of this Section 10.2(i)(c);

                  provided that the aggregate principal amount of Indebtedness
                  permitted under clauses (i), (ii), (iv) (to the extent that
                  the Indebtedness incurred

                                      -22-
<PAGE>

                  under such clause (iv) refinances Indebtedness incurred under
                  clause (i) or (ii) of this Section 10.2(i)(c)), (xi) and (xii)
                  of this Section 10.2(i)(c) shall not exceed $10,000,000 at any
                  time outstanding."

                  (i) Section 10.2(j) shall be amended by (a) deleting "and" at
         the end of clause (i) thereof, (b) inserting the expression "; and" at
         the end of clause (ii) thereof and (iii) adding, at the end thereof,
         the following as a new clause (iii):

                                    "(iii) if such Lease Conversion is made on
                           any day on or after the Amendment No. 6 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 10.2(e)."

                           (j) Section 10.2(l) shall be amended by deleting said
         section in its entirety and inserting the following in lieu thereof:

                           "(l) 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 10.2(l) are less than the applicable amount
                  specified pursuant to this Section 10.2(l), 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)."

                           (k) Section 10.2(m) shall be amended by deleting said
         section in its entirety and inserting the following in lieu thereof:

                           "(m) Sale and Leaseback Transactions.

                                      -23-
<PAGE>

                           (i) The Representative 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 Representative 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.

                           (ii) On any day on or after the Amendment No. 6
                  Effective Date on which the Adjusted Leverage Ratio is greater
                  than 5.00 to 1.00, the Representative 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. 6 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."

                           (l) Section 10.2 of the Participation Agreement is
         hereby amended by adding, at the end thereof, a new clause (n) to read
         in full as follows:

                           "(n) Prepayment of Notes. The Representative will
         not, and will not permit any of its Subsidiaries to, prepay the New
         Senior Notes or the Senior Notes; provided that the Representative 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 (as defined in the Morgan
                  Credit Agreement) outstanding;

                           (ii) the 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 giving effect to such

                                      -24-
<PAGE>

                  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 (as defined in the Morgan Credit
                  Agreement) of all Existing Banks do not exceed $85,000,000 or
                  (B) all of (I) the aggregate Commitments (as defined in the
                  Morgan Credit Agreement) of all Existing Banks do not exceed
                  $65,000,000, (II) the Representative shall have delivered to
                  the Administrative Agent cash in an amount equal to the
                  aggregate Letter of Credit Exposures (as defined in the Morgan
                  Credit Agreement) of all Existing Banks then outstanding, to
                  be held in escrow by the Administrative Agent to the extent
                  that such Letter of Credit Exposures (as defined in the Morgan
                  Credit Agreement) remain outstanding, (III) the Representative
                  shall have entered into a binding agreement not thereafter to
                  request or borrow any Loans (as defined in the Morgan Credit
                  Agreement) under the Morgan Credit 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 10.1(d)(i) or (ii), shall equal or exceed the product
                  of 2 multiplied by the aggregate Commitments (as defined in
                  the Morgan Credit Agreement) of all Existing Banks then
                  outstanding.

                  7. Effective as of the Amendment No. 6 Effective Date,
Schedule IV of the Participation Agreement are hereby amended by deleting said
schedule in its entirety and replacing said schedule with Schedule IV attached
hereto and made a part hereof.

                  8. Effective as of the Amendment No. 6 Effective Date,
Schedule VII and Schedule VIII hereto are hereby added as Schedule VII and
Schedule VIII, respectively, to the Participation Agreement.

                  9. Representations and Warranties. To induce the
Administrative Agent, the Agent Lessor and the Participants to execute and
deliver this Amendment, each of the Beverly Entities that is a party hereto
represents and warrants (which representations and warranties shall survive the
execution and delivery of this Amendment) to each of the Administrative Agent,
the Agent Lessor and the Participants that:

                           (a) this Amendment has been duly authorized, executed
         and delivered by it and this Amendment constitutes the legal, valid and
         binding obligation, contract and agreement of such Beverly Entity
         enforceable against it in accordance with its terms, except as
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         moratorium or similar laws or equitable principles relating to or
         limiting creditors' rights generally;

                           (b) the Original Participation Agreement, as amended
         by the Prior Amendments and this Amendment, constitutes the legal,
         valid and binding obligation, contract and agreement of such Beverly
         Entity enforceable against it in accordance with

                                      -25-
<PAGE>

         their respective terms, except as enforcement may be limited by
         bankruptcy, insolvency, reorganization, moratorium or similar laws or
         equitable principles relating to or limiting creditors' rights
         generally;

                           (c) the execution, delivery and performance by such
         Beverly Entity of this Amendment (i) has been duly authorized by all
         requisite corporate action and, if required, shareholder action, (ii)
         does not require the consent or approval of any governmental or
         regulatory body or agency, and (iii) will not (A) violate (l) any
         provision of law, statute, rule or regulation or its certificate of
         incorporation or bylaws, (2) any order of any court or any rule,
         regulation or order of any other agency or government binding upon it,
         or (3) any provision of any material indenture, agreement or other
         instrument to which it is a party or by which its properties or assets
         are or may be bound, including, without limitation, the Morgan Credit
         Agreement (as the same has been amended or modified), or (B) constitute
         (alone or with due notice or lapse of time or both) a default under any
         indenture, agreement or other instrument referred to in clause
         (iii)(A)(3) of this subsection (c);

                           (d) as of the date hereof and after giving effect to
         this Amendment, no Default or Event of Default has occurred which is
         continuing; and

                           (e) all the representations and warranties contained
         in Section 8.2 of the Participation Agreement (after giving effect to
         this Amendment) are true and correct in all material respects with the
         same force and effect as if made by such Beverly Entity on and as of
         the date hereof.

                  10. Conditions to Effectiveness of this Amendment. This
Amendment shall not become effective until, and shall become effective when,
each and every one of the following conditions shall have been satisfied to the
satisfaction of the Agent Lessor, the Administrative Agent and each Participant
(the conditions precedent are for the benefit of the Agent Lessor, the
Administrative Agent and each Participant only):

                           (a) The Agent Lessor, the Administrative Agent and
         the Participants shall have received executed counterparts of this
         Amendment, duly executed by the Beverly Entities party hereto;

                           (b) The Agent Lessor, the Administrative Agent and
         the Participants shall have received evidence satisfactory to them that
         the Morgan Credit Agreement has been amended as of February 28, 2003 in
         form and substance reasonably satisfactory to the Administrative Agent,
         the Agent Lessor and the Participants;

                           (c) The representations and warranties of the Beverly
         Entities set forth in Section 9 hereof are true and correct on and as
         of the date hereof;

                                      -26-
<PAGE>

                           (d) (A) Each of the Lenders that has executed and
         delivered to the Administrative Agent a counterpart of this Amendment
         on or prior to the date hereof shall have received, ratably in
         proportion to its Commitment Percentage, an amendment fee equal to
         0.375% of the Commitment of such Lender as in effect immediately after
         giving effect to the $16,800,000 payment contemplated by Section
         7.11(a) of the Participation Agreement, as amended by this Amendment
         (but, for the avoidance of doubt, no other payment contemplated by this
         Amendment) and (B) each of the Lenders that executed and delivered to
         the Administrative Agent a counterpart of the Fifth Amendment on or
         prior to December 20, 2002, shall have received, ratably in proportion
         to its Commitment Percentage, an amendment fee equal to 0.125% of the
         Commitment of such Lender as of December 20, 2002;

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

                           (f) Receipt by the Administrative Agent of evidence
         satisfactory to it that the Representative shall have prepaid (or
         deposited funds that are committed to the prepayment of) the
         Obligations in an aggregate principal amount of $20,000,000; and

                           (g) Receipt by the Administrative Agent of payment of
         all out-of-pocket expenses due and payable to it pursuant to Section
         9.1(b) of the Participation Agreement (including, to the extent
         invoiced, all fees and expenses of Mayer, Brown, Rowe & Maw, special
         counsel to the Lessors, pursuant to Section 11 hereof).

         Upon receipt of all of the foregoing, this Amendment shall become
effective.

                  11. Payment of Fees and Expenses. The Representative agrees to
pay upon or prior to the effectiveness of this Amendment, the reasonable fees
and expenses of Mayer, Brown, Rowe & Maw, counsel to the Lessors, in connection
with the negotiation, preparation, approval, execution and delivery of this
Amendment and all reasonable fees and expenses attendant to any filing,
registration, recording or perfection of any Lien contemplated hereby.

                  12. Application of Certain Payments. The Administrative Agent
shall apply the proceeds received pursuant to (a) Section 7.11(a) of the
Participation Agreement in the amount of $3,200,000 and (b) Section 7.11(b)(ii)
of the Participation Agreement to the prepayment of the Participant Balance.

                  13. Counterparts. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.

                                      -27-
<PAGE>

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

                  15. Successors and Assigns. This Amendment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.

                  16. General Release. In consideration of the amendments
provided for herein, the Representative and the Guarantors, on behalf of
themselves and their respective Subsidiaries and their respective Subsidiaries'
successors and assigns (collectively, "Releasors"), hereby forever waive,
release and discharge to the fullest extend 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,
or 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 Administrative Agent and any Lender 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 Representative 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 Participation Agreement and the other
Operative Documents and payment in full of all amounts owing thereunder.

                                      -28-
<PAGE>

                  IN WITNESS WHEREOF, the Parties have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                   BEVERLY ENTERPRISES, INC., as
                                   Representative, Construction Agent, Parent
                                   Guarantor and a Lessee

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

                                   BANK OF MONTREAL, as Arranger,
                                   Administrative Agent and as a Lender

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

                                   BANK OF MONTREAL GLOBAL CAPITAL
                                   SOLUTIONS, INC., as Agent Lessor and as a
                                   Lessor

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

                                   GENERAL ELECTRIC CAPITAL
                                   CORPORATION,  as a Lender

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

                                      S-1

<PAGE>

                                   TORONTO-DOMINION (TEXAS), INC., as a
                                   Lender

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

                                   BANK OF AMERICA, NATIONAL
                                   ASSOCIATION, as a Lender

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

                                   VANTAGE HEALTHCARE CORPORATION, as
                                   Lessee and Structural Guarantor

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

                                   PETERSEN HEALTH CARE, INC., as Lessee and
                                   Structural Guarantor

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

                                      S-2

<PAGE>

                                   BEVERLY SAVANA CAY MANOR, INC., as
                                   Lessee and Structural Guarantor

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

                                   BEVERLY ENTERPRISES - GEORGIA, INC., as
                                   Lessee and Structural Guarantor

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

                                   BEVERLY ENTERPRISES - CALIFORNIA, INC.,
                                   as Lessee and Structural Guarantor

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

                                   BEVERLY ENTERPRISES - ARKANSAS, INC.,
                                   as Lessee and Structural Guarantor

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

                                      S-3

<PAGE>

                                   BEVERLY ENTERPRISES - FLORIDA, INC., as
                                   Lessee and Structural Guarantor

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

                                   BEVERLY HEALTH AND REHABILITATION
                                   SERVICES, INC., as Lessee and Structural
                                   Guarantor

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

                                   BEVERLY ENTERPRISES - WASHINGTON,
                                   INC., as Lessee and Structural Guarantor

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

                                      S-4

<PAGE>

                                   SCHEDULE I

                               EXISTING MORTGAGES

1. That certain Lease Supplement No. 2 (And Memorandum of Lease Supplement,
Memorandum of Master Lease and Memorandum of Option to Purchase) and Deed to
Secure Debt and Security Agreement, dated as of May 30, 1997, between Beverly
Enterprises-Georgia, Inc., as the Lessee and as grantor and BMO Leasing (U.S.),
Inc., as the Agent Lessor and as grantee for the benefit of the Participants and
Beverly Enterprises, Inc., as the Representative, such instrument having been
recorded with the Cobb County Superior Court Clerk on June 2, 1997, in Deed Book
10396, Page 1 and also recorded on June 2, 1997 in Deed Book 10396, Page 161.

2. That certain Master Lease and Open-End Mortgage and Lease Supplement No. 12,
dated as of March 21, 1997 and April 30, 1998, by and between BMO Leasing
(U.S.), Inc., as the Agent Lessor for the Lessors, Beverly Enterprises-Arkansas,
Inc., as the Lessee, and Beverly Enterprises, Inc., as the Representative, such
instrument having been recorded on May 1, 1998 as Instrument #983572 of the
Public Records of Union County, Arkansas.

3. That certain Master Lease and Open-End Mortgage and Lease Supplement No. 16,
dated as of March 21, 1997 and May 29, 1998, by and between BMO Leasing (U.S.),
Inc., as Agent Lessor for the Lessors, Beverly Enterprises-Arkansas, Inc., as
the Lessee, and Beverly Enterprises, Inc., as the Representative, such
instrument having been recorded on June 1, 1998 as Document #98-40781 of the
Public Records of Pulaski County, Arkansas.

<PAGE>

                                                               SCHEDULE IV
                                                      TO PARTICIPATION AGREEMENT

                                PRICING SCHEDULE

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

         "LESSOR MARGIN" means, with respect to the Lessor Amounts on any day,
the percentage set forth below opposite the Pricing Category in effect for such
date for the applicable type of Lessor Amount (or, in the case of any day on or
after the Amendment No. 6 Effective Date and prior to the date upon which
financial statements for the second full fiscal quarter occurring after the
Amendment No. 6 Effective Date shall have been delivered pursuant to Section
10.1(d)(i), the greater of (i) the applicable rate so determined for such day
and (ii) (y) in the case of the LIBO Margin, 4.500% and (z) in the case of the
Base Rate Margin, 3.500%):

<Table>
<Caption>
             Pricing Category        LIBO Margin        Base Rate Margin
             ----------------        -----------        ----------------
<S>                                  <C>                <C>
                    I                  3.875%                2.875%
                   II                  4.500%                3.500%
                  III                  5.000%                4.000%
                   IV                  5.375%                4.375%
                    V                  5.750%                4.750%
</Table>

         "LOAN MARGIN" means, with respect to the Loans on any day, the
percentage set forth below opposite the Pricing Category in effect for such day
for the applicable type of Loan (or, in the case of any day on or after the
Amendment No. 6 Effective Date and prior to the date upon which financial
statements for the second full fiscal quarter occurring after the Amendment No.
6 Effective Date shall have been delivered pursuant to Section 10.1(d)(i), the
greater of (i) the applicable rate so determined for such day and (ii) (y) in
the case of the LIBO Margin, 4.000% and (z) in the case of the Base Rate Margin,
3.000%):

<Table>
<Caption>
             Pricing Category        LIBO Margin        Base Rate Margin
             ----------------        -----------        ----------------
<S>                                  <C>                <C>
                     I                 3.375%                2.375%
                    II                 4.000%                3.000%
                   III                 4.500%                3.500%
                    IV                 4.875%                3.875%
                     V                 5.250%                4.250%
</Table>

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

<PAGE>

         "CATEGORY I PRICING" applies on any day if, as of the last day of the
fiscal quarter of the Representative most recently ended on or prior to such day
and as to which the Representative shall have delivered, or been required to
deliver, on or prior to such day a certificate pursuant to Section 10.1(d)(iii),
the Pricing Ratio is less than 5.0 to 1.0.

         "CATEGORY II PRICING" applies on any day if, as of the last day of the
fiscal quarter of the Representative most recently ended on or prior to such day
and as to which the Representative shall have delivered, or been required to
deliver, on or prior to such day a certificate pursuant to Section 10.1(d)(iii),
(i) the Pricing Ratio is less than 5.5 to 1.0 and (ii) Category I Pricing does
not apply.

         "CATEGORY III PRICING" applies on any day if, as of the last day of the
fiscal quarter of the Representative most recently ended on or prior to such day
and as to which the Representative shall have delivered, or been required to
deliver, on or prior to such day a certificate pursuant to Section 10.1(d)(iii),
(i) the Pricing Ratio is less than 6.0 to 1.0 and (ii) Category II Pricing does
not apply.

         "CATEGORY IV PRICING" applies on any day if, as of the last day of the
fiscal quarter of the Representative most recently ended on or prior to such day
and as to which the Representative shall have delivered, or been required to
deliver, on or prior to such day a certificate pursuant to Section 10.1(d)(iii),
(i) the Pricing Ratio is less than 6.5 to 1.0 and (ii) Category III Pricing does
not apply.

         "CATEGORY V PRICING" applies on any day if, on such day, no other
Pricing Category applies.

         "PRICING CATEGORY" means any one of the five pricing levels dominated
Category I Pricing, Category II Pricing, Category III Pricing, Category IV
Pricing or Category V Pricing.

                                      -2-
<PAGE>

                                  SCHEDULE VII
                           TO PARTICIPATION AGREEMENT
                            AMENDED MORTGAGE PROPERTY

<Table>
<Caption>
                ENTITY                               ADDRESS                        COUNTY
                ------                               -------                        ------
<S>                                      <C>                                      <C>
1.  Beverly Enterprises-Georgia, Inc.    613 Roselane Street                      Cobb County
                                         Marietta, Georgia 30060

2.  Beverly Enterprises-Arkansas, Inc.   2415 West Hillsboro                      Union County
                                         El Dorado, Arkansas 71730

3.  Beverly Enterprises-Arkansas, Inc.   3600 Richards Road                       Pulaski County
                                         North Little Rock, Arkansas 72117
</Table>

<PAGE>

                                  SCHEDULE VIII
                           TO PARTICIPATION AGREEMENT

<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             Fontanbleu Nursing Center                    500,000.00
                      Bloomington, Indiana
     2272             Lincoln Hills Nursing Center,                800,000.00
                      Tell City Indiana
     3678             Woodlands Convalescent Center              1,200,000.00
                      Newburgh, Indiana
</Table><PAGE>
                                                                   EXHIBIT 10.62

                               FIFTH AMENDMENT TO
                            MASTER SERVICES AGREEMENT

         This Fifth Amendment to Master Services Agreement ("Fifth Amendment")
         is effective as of the first day of January, 2003 ("Fifth Amendment
         Effective Date"). This Fifth Amendment amends and supplements that
         certain Master Services Agreement effective as of the 18th day of
         September 1997 ("Agreement") by and between BEVERLY ENTERPRISES, INC.
         ("Customer") and ALLTEL INFORMATION SERVICES, INC. ("ALLTEL").

                                   WITNESSETH:

         WHEREAS, Client and ALLTEL desire to extend the Term of the Agreement;
         and

         WHEREAS, Client and ALLTEL desire to make certain other changes to the
         Agreement,

         NOW, THEREFORE, in consideration of the mutual promises and covenants
         herein, the parties agree as follows:

         1.       Section 1.1(e) shall be deleted in its entirety and replaced
                  with the following:
                  "Expiration Date" shall mean the earliest of (i) the later to
                  occur of December 31, 2007 or the date to which this Agreement
                  is extended in accordance with Section 4, or (ii) the date
                  this Agreement is terminated in accordance with Section 20.

         2.       Section 20.7 of the Agreement (Termination for Convenience) is
                  deleted in its entirety and replaced with the following:

                           "20.7 Termination for Convenience. Client may
                           terminate this Agreement for convenience and without
                           cause, such termination becoming effective as of any
                           date after the 48th month after the Fifth Amendment
                           Effective Date provided Client is not in default of
                           any of its obligations under this Agreement by doing
                           each of the following:

                                    (i) giving ALLTEL at least six (6) months
                                    prior written notice designating the
                                    termination date (the "Early Termination
                                    Date") and (ii) paying ALLTEL, upon the date
                                    of delivery of notice of termination (the
                                    "Early Termination Notice Date") an amount
                                    equal to the "Early Termination Fee" (as
                                    described below) and (iii) paying an
                                    additional amount equal to the reasonable
                                    costs actually incurred by ALLTEL in
                                    terminating this Agreement, including
                                    without limitation, relocation, expenses
                                    consistent with ALLTEL's then-existing
                                    policies, travel and severance expenses,
                                    incentive payments (stay bonuses) to provide
                                    for continued services of ALLTEL through the
                                    Early Termination Date; an amount equal to
                                    any remaining book value of any equipment
                                    and unamortized software used to provide
                                    the Services; expenses incurred in canceling
                                    leases, licenses subcontractor or similar
                                    agreements ("Shutdown Expenses") ALLTEL
                                    shall use reasonable efforts to minimize
                                    Shutdown Expenses.

                                    The Early Termination Fee shall be
                                    determined according to the following
                                    formula:

                                      -1-
<PAGE>

                                    (AMFx3x.40) for the first three (3) month
                                    period between the Early Termination Date
                                    and the Expiration Date*, plus

                                    (AMFx3x.35) for the second three (3) month
                                    period between the Early Termination Date
                                    and the Expiration Date*, plus

                                    (AMFx3x.30) for the third three (3) month
                                    period between the Early Termination Date
                                    and the Expiration Date*, plus

                                    (AMFx3x.20) for the fourth three (3) month
                                    period between the Early Termination Date
                                    and the Expiration Date*, plus

                                    AMF shall mean the average of Monthly Fees
                                    for the six months prior to the Early
                                    Termination Notice Date.

                                    * As prorated if fewer than three (3) months
                                    remain until the Expiration Date."

         3.       Exhibit E shall be deleted in its entirety and replaced with
                  the attached Exhibit E.

         4.       All capitalized terms in this Fifth Amendment shall have the
                  same meaning as set forth in the Agreement, unless defined
                  herein.

         5.       All terms and conditions of the Agreement not amended by this
                  Fifth Amendment remain in full force and effect. In the event
                  of a conflict or inconsistency between the terms of the
                  Agreement and the terms of this Fifth Amendment, the latter
                  shall supercede and govern.

         6.       Except as herein expressly amended, the Agreement is ratified,
                  confirmed and remains unchanged in all respects and shall
                  remain in full force and effect in accordance with its
                  respective terms.

         7.       This Fifth Amendment may be executed in counterparts, each of
                  which shall be an original, but such counterparts shall
                  together constitute one and the same document.

         8.       This Fifth Amendment shall be governed by and shall be
                  construed in accordance with the laws of the State of
                  Arkansas.

                                      -2-
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the
Fifth Amendment Effective Date by their duly authorized representatives.

ALLTEL INFORMATION SERVICES, INC.           BEVERLY ENTERPRISES, INC.

By:    /s/ HAROLD FACKLER                   By:     /s/ JEFFREY P. FREIMARK
   -------------------------------             ---------------------------------
Name:  Harold Fackler                       Name:   Jeffrey P. Freimark
     -----------------------------               -------------------------------
Title: Sr. V.P.                             Title:  EVP-CFO
      ----------------------------                ------------------------------
Date:  1/1/03                               Date:   1/30/03
     -----------------------------               -------------------------------

<PAGE>

                                    EXHIBIT E
                                      FEES

1.       Monthly Fees.

         (a)      Prior to Fifth Amendment Effective Date. The Monthly Fees for
                  the Services provided under the Agreement prior to the Fifth
                  Amendment Effective Date shall be those set forth in Exhibit E
                  prior to the Fifth Amendment Effective Date.

         (b)      As Of the Fifth Amendment Effective Date. In addition to other
                  amounts set forth herein, Client agrees to pay to ALLTEL for
                  sixty (60) months commencing with the Fifth Amendment
                  Effective Date the Monthly Fees set forth in the Fee Schedule
                  for the Services to be provided by ALLTEL to Client pursuant
                  to this Agreement

2.       CPI-U Adjustment. During the Term of the Agreement (and any renewal
         thereof), the fees and charges reflected in this Agreement will be
         adjusted in direct proportion to changes in the Consumer Price Index
         for All Urban Consumers - Other Goads and Services (the "CPI-U") as
         published by the U.S. Department of Labor, Bureau of Labor Statistics.
         Effective the thirteenth (13th) month from the Fifth Amendment
         Effective Date, such fees shall be adjusted by the percentage change in
         the CPI-U over the one-year period ending with the thirteenth (13th)
         month. Annually thereafter, such fees and charges shall be further
         adjusted by the percentage change in the CPI-U for the corresponding
         one year period throughout the term of the Agreement. In no case shall
         the CPI-U adjustment be less than 3% nor more than 6.5%.

3.       Pass-Through Expenses. Client shall pay, in addition to the Monthly
         Fees, Pass-Through Expenses.

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-1-1
<PAGE>

                                RESOURCE CAPACITY

1.       DEFINITIONS.

         1.1.     Resource Fees.

                  Client shall pay fees according to their defined resource
                  levels as defined herein. Any increase in Client defined
                  resources shall result in an increase in fees paid.

         1.2.     Client Specific Fees.

                  In each case where the Client specific business requirements
                  dictate the use of resources that are not shared with other
                  ALLTEL Client's, such dedicated resources shall be referred to
                  as "client specific." In this Agreement the client specific
                  resources are; network circuits, network equipment, and
                  Client's nonstandard third party software.

2.       RESOURCE CAPACITY.

         2.1.     DASD Capacity.

                  The amount of DASD in use as of the effective date of this
                  Agreement will be the initial resource level.

         2.2.     Network Capacity.

                  The level of network capacity is determined during the annual
                  planning cycle with review of trend reports on usage over the
                  past twelve (12) months and planned changes in their business
                  or workload by the Client, and with agreement of the ALLTEL
                  Account Relationship Executive. The level of network capacity
                  is derived from the following two main components: (1) Number
                  of FEP ports needed for connectivity between ALLTEL and the
                  Client and, (2) Number of LAN ports needed for connectivity
                  between the ALLTEL and Client's LAN. The inventory of FEP and
                  LAN ports will be reported to Client on a monthly basis.
                  Client may request an adjustment to the level of network
                  capacity as described in Section 3, "Capacity Adjustments".

3.       CAPACITY ADJUSTMENTS.

                  The following information pertains to resource increases or
                  decreases that are planned as part of the normal business
                  planning cycle for Client.

         3.1.     Planning Cycle

                  The Mutual Planning Committee will provide at minimum on an
                  annual basis information on Client's business plans and its
                  impact on ALLTEL resource requirements.

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-2-1
<PAGE>

         3.2.     Resource Increases

                  Planned increases to any unit of resource will be allowed four
                  (4) times a year with notice in writing to the ALLTEL Account
                  Relationship Executive. All resource increases requested are
                  subject to a minimum timeframe to execute as described in the
                  ALLTEL's Service Delivery Schedule and/or Capacity Adjustments
                  Schedule set forth in Section 3.4 of Exhibit E-2. If resources
                  are available and do not require ALLTEL to upgrade or replace
                  any equipment, then the request by Client will be handled
                  within a minimum of thirty (30) days from time of the request.

         3.3.     Resource Decreases

                  Decreases will be allowed four (4) times a year with notice in
                  writing to the ALLTEL Account Relationship Executive. ALLTEL
                  will make reasonable effort to re-deploy the resources earlier
                  than the minimum timeframe defined in the table in Section
                  3.4, and if ALLTEL is able to, will do so.

         3.4.     Unit Quantities and Timeframes

<Table>
<Caption>
                                Minimum Quantity
                                 of Increase or           Minimum Increase         Minimum Decrease
         Resource                   Decrease                 Timeframe                 Timeframe
         --------               ----------------          ----------------         ----------------
<S>                             <C>                       <C>                      <C>
       DASD Volume                  1 Volume                  60 Days                   90 Days
</Table>

4.       UNPLANNED RESOURCE INCREASES.

         4.1.     Occurrence Cycle

                  The Fees set forth in this Exhibit E include certain Network
                  and Systems personnel as defined in Exhibit F as "Base Staff".
                  These are specifically dedicated to or functioning on behalf
                  of Client. The Base Staff will perform the Systems Support and
                  Network Support Services as outlined in Exhibit F as Base
                  Staff (Network Systems) and Base Staff (Systems Support).
                  Should the volume of Client Systems & Network Services
                  requests exceed that which can reasonably be performed by the
                  Base Staff Client shall increase the level of Base Staff in
                  accordance with the provisions of Section 3 (Increases in Base
                  Staff) of the Base Staff provisions of Exhibit F. The ALLTEL
                  Account Relationship Executive will notify Client of requests
                  that are outside the scope of the Monthly Fee and that will
                  result in additional, incremental charges to Client. ALLTEL
                  shall utilize commercially reasonable efforts to manage the
                  dedicated resources in such a manner as to minimize such
                  incremental additional fees. Client acknowledges that it can
                  also help minimize such additional charges through advanced
                  scheduling and notification to ALLTEL of such work requests
                  and through

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-2-2
<PAGE>

                  effective use of the Mutual Planning Committee process
                  described in section 10.5 of the Agreement.

5.       CLIENT'S CURRENT NETWORK (Effective 05/01/01)

                (1) DS1 Circuit for VSAT connection from Hughes'
                   facility in Minneapolis, Minnesota to LRTC

                 (1) DS1 Circuit for Beverly Corp. headquarters
                                location to LRTC

                  (1) SDLC FEP Port on shared 3745 for BCBS of
                                   California

                      Raised floor space for Beverly owned
                                   equipment.

               (4) Dial-out FEP Port on shared 3745 for subsidiary
              36 / non VSAT traffic and (1) dial-in for production
                                     support

6.       DEFINITION OF BACKBONE.

         The circuit(s) between the Technology Center's telephone carrier and
         the remote Client, called the "backbone" circuit(s), while considered
         Client specific in terms of charges, is engineered and provisioned by
         the Technology Center to provide maximum availability on behalf of
         Client. The portion of the circuit between the Technology Center and
         the local telephone company in Little Rock rides on dedicated fiber
         circuits that are survivable, meaning that if any failure occurs in the
         ring in one direction, the data are routed automatically in the reverse
         direction with no loss of data.

7.       SERVICES FOR BASE NETWORK

         Services for Base Network shall Include the ALLTEL Technology Center
         host attachments, the communications equipment, cables and multiplexing
         required to bring a communication line to the ALLTEL Technology Center
         from the telephone carrier as well as the circuits between the ALLTEL
         Technology Center and the local telephone company in Little Rock. Also
         included are the remote cabling and communications equipment required
         to terminate the port. Maintenance contracts cover the components and
         those costs are included in the network fee. Disaster recovery fees
         shall be in addition to the network fees.

8.       ANALOG NETWORK SERVICES

         Analog network equipment located at ALLTEL used for file transmissions
         and other production-related activities (detailed in Exhibit D) will be
         owned (ownership transferred at no cost to ALLTEL at Client's request
         under the Agreement), monitored, operated and managed by ALLTEL
         However, this equipment is expected to be displaced during the term of
         the Agreement, and, by Client's request, is not currently or will be
         placed under

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-2-3
<PAGE>

         any manufacturers maintenance contract during the Agreement. Thus, any
         necessary repairs, replacement or problem resolution will be initiated
         by ALLTEL and all associated costs (i.e. Labor and Materials) of such
         repair/replacement will be billed to Client as Pass-Through Expense.
         ALLTEL will make every reasonable effort to minimize such expense and
         will notify Client in advance of any such expenditures to the extent
         practical.

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-2-4
<PAGE>

                                  SERVICE FEES

1.       ALLTEL HOURLY/MONTHLY/YEARLY RATES.

         1.1      Hourly Rates. The following hourly rates are in effect as of
                  the Fifth Amendment Effective Date. The ALLTEL hourly rates
                  may be changed by ALLTEL upon written notice to Client not
                  more often than once during each twelve (12) month period
                  following the Start Date. In the event that Client desires
                  ALLTEL to provide additional services, such additional
                  services shall be charged to Client at the corresponding rates
                  set forth in the table below. ALLTEL shall charge Client
                  overtime rates only in those instance where such overtime
                  services are approved by Client in advance. In addition,
                  Client agrees to reimburse ALLTEL for the actual expense of
                  reasonable travel and lodging expense, if any, related to
                  hourly rate based services requested by Client. ALLTEL will
                  inform Client, in advance, if overtime or travel and lodging
                  expense is anticipated to be incurred.

<Table>
<Caption>
                                                                                      Minimum Billable
                                 Resource                         Hourly Rate         Hours Per Person
                                 --------                         -----------         ----------------
<S>                                                               <C>                 <C>
                System Programmer                                 $    150.00              4 Hours
                Network Programmer                                $    150.00              4 Hours
                Network Engineer                                  $    150.00              4 Hours
                Database Administrator (DBA)                      $    150.00              4 Hours
                Operations Analyst                                $     90.00              4 Hours
                Project Management                                $    150.00              4 Hours
</Table>

         1.2      Monthly/Annual Rates. In the event that Client desires monthly
                  or annual rates for the Resources as set forth in the table
                  above, the rates agree to negotiate in good faith to reach a
                  mutually agreeable monthly/annual rate.

         1.3      Travel and Expenses. Client will pay all reasonable travel and
                  subsistence costs incurred by ALLTEL employees in performance
                  of any such additional services in accordance with Client's
                  reasonable travel policy but in no event shall such policy
                  differ materially from normally accepted industry standards.

         1.4      Qualifications of Personnel. The ALLTEL personnel provided
                  pursuant to the monthly or hourly rates under this section
                  will be individuals with at least such experience,
                  qualifications and technical skills suitable to, and generally
                  required in connection with, the duties attendant to their
                  respective positions.

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-3-1
<PAGE>

                                  FEE SCHEDULE

Monthly Fees

The following Monthly Fees shall be applicable effective as of the Fifth
Amendment Effective Date for the time periods set forth in the following table
and will be invoiced to Client in accordance with Section 3.2 of the Agreement:

<Table>
<Caption>
                                               CALENDAR YR 1    CALENDAR YR 2    CALENDAR YR 3    CALENDAR YR 4    CALENDAR YR 5
                                                1/03 - 12/03     1/04 -12/04      1/05 - 12/05     1/06 -12/06      1/07 -12/07
                                               -------------    -------------    -------------    -------------    -------------
<S>                                            <C>              <C>              <C>              <C>              <C>
MONTHLY RATES:
CPU Seconds (per second)                       $       0.092    $       0.087    $       0.083    $       0.079    $       0.075
DASD (per Gigabyte)                            $      25.000    $      23.750    $      22.563    $      21.434    $      20.363
Tape Gigabytes                                 $       2.800    $       2.800    $       2.800    $       2.800    $       2.800
Read/Written
Tape Mounts-Round (per mount)                  $      83.330    $      83.330    $      83.330    $      83.330    $      83.330
7X24 LEVERAGED
Production Support
10,000 - 14,000 production jobs per
month                                          $      33,571    $      33,571    $      33,571    $      33,571    $      33,571
14,001 + production jobs rate per job          $        1.30    $        1.30    $        1.30    $        1.30    $        1.30
7,000 - 9,999 production jobs credit per job   $       (2.00)   $       (2.00)   $       (2.00)   $       (2.00)   $       (2.00)
4,000 - 6,999 production jobs credit per job   $       (1.00)   $       (1.00)   $       (1.00)   $       (1.00)   $       (1.00)
Application Change Control
0-145 application Panapt moves                 $    2,700.00    $    2,700.00    $    2,700.00    $    2,700.00    $    2,700.00
146 + Panapt moves rate per move               $       28.50    $       28.50    $       28.50    $       28.50    $       28.50
On-site Staff                                  $      38,248    $      38,248    $      38,248    $      38,248    $      38,248
Mailout Support                                $         900    $         900    $         900    $         900    $         900
Network                                        $       9,313    $       9,313    $       9,313    $       9,313    $       9,313
Business Continuity Services                   $       7,369    $       7,369    $       7,369    $       7,369    $       7,369
</Table>

ALLTEL will calculate CPU seconds in the following manner:

         (1)      ALLTEL will extract the total number of CPU-seconds by "user"
                  workloads for each calendar month as captured by Tivoli
                  Decision Support for OS/390 from the Beverly OS/390 RMF
                  records. As of the Fifth Amendment Effective Date, the
                  following OS/390 workload manager workloads are considered to
                  be SYSTEM workloads: SYSTEM, SYSSTC, SYSOTHER, and STCHIGH.
                  All other workloads are considered to be "user" workloads.

         (2)      ALLTEL will Normalize the CPU-seconds using an IBM 9672-R56
                  engine speed of 109 mips as the standard. As of the Fifth
                  Amendment Effective Date, Client is

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-4-l

<PAGE>

                  running on an IBM 9672-R65 with an engine speed of 50.8 mips
                  and the normalization factor is 0.466. A change in the
                  normalization factor due to a change of engine speed will be
                  effective as of the change date.

ALLTEL will calculate production jobs in the following manner:

         (1)      ALLTEL will extract the total number of Production Job records
                  for the calendar month, as captured by Tivoli Decision Support
                  for OS/390, from the Beverly OS/390 SMF records by selecting
                  all records that contain in column 26 of the Job Card a "P"
                  for production or if RACFUSER is (SYMBOL) CBEVP000, ZEKE,
                  SARVTAM, PANAPT, RMOSTC, and MAILBOX.

ALLTEL shall be responsible for providing the following:

         o        Provide Level II and Level III support for Troubleshooting
                  back-bone circuit problems from the ALLTEL Technology Center
                  to the Client's Ft. Smith corporate headquarters and Hughes
                  Facility in Minneapolis, Minnesota.

         o        Responsibility for management and monitoring of the backbone
                  network from ALLTEL Technology Center to Client's Ft. Smith
                  corporate headquarters and Hughes Facility in Minneapolis,
                  Minnesota.

         o        Maintain documentation of network connectivity between ALLTEL
                  Technology Center and Client's Ft. Smith corporate
                  headquarters.

         o        Responsibility for engineering and re-engineering of ALLTEL
                  Technology Center networks.

         o        Own vendor management for all networks at the ALLTEL
                  Technology Center.

Client shall be responsible for the following:

         o        Responsibility for all associated cost for all non-standard
                  software maintenance and cost i.e. SYNCSORT, SAS, etc. (See
                  Exhibit C-2).

         o        Responsibility for all cost for printers, including
                  consumables and maintenance, attached to the host system and
                  located at Client's facilities

                                                                initials /S/ HJF
                                                                             ---
                                                                         /S/ JPF
                                      E-4-2
<PAGE>

                             CREDITS AND INCENTIVES

Within ninety (90) days after the Fifth Amendment Effective Date, ALLTEL and
Client shall negotiate in good faith to reach mutually agreeable performance
incentives and credits related to batch processing windows. Client agrees to
provide the necessary assistance to ALLTEL during such ninety (90) day period to
determine reasonable performance standards and the associated incentives and
credits.

Services Levels - The following categories will be used to determine the
priority of each service level outage that is to be measured monthly:

         o        Priority 1. Total major service outage to online user(s) or
                  component(s) failure.

         o        Priority 2. Limited user(s) or component(s) failed or
                  degraded.

         o        Priority 3. Minor impact to non-critical user(s) or component
                  fails or degraded.

The purpose of the categorization is to keep Client and ALLTEL focused on the
most critical service components. In the event of a failure to meet the service
level as defined in Exhibit A-2, and if ALLTEL fails to correct the service
level problem as defined in Exhibit A-2, then Client can request payment of the
credit as outlined below.

         o        In the event of failures in Priority 1 or 2 which ALLTEL fails
                  to correct within ____, Client may assess to ALLTEL a credit
                  of __% of that Month's Fees, in no event may any such credit
                  exceed __% of that estimated annual fees payable to ALLTEL. In
                  the event that ALLTEL exceeds expectations in these categories
                  for a period of ____, ALLTEL shall accumulate credit(s) at __%
                  of that Month's Fees in the aggregate not to exceed __% of __
                  Fees paid by Client to ALLTEL for the _ time period.

         o        In the event of failures in Priority 3 not corrected by ALLTEL
                  within ____, ALLTEL will be assessed a credits of ___% of that
                  Month's Fees, in no event may any such credits exceed ____% of
                  that estimated annual fees payable to ALLTEL. In the event
                  that ALLTEL exceeds expectations in these categories, ALLTEL
                  shall accumulate credit(s) at ___% of that Month's Fees in the
                  aggregate not to exceed __% of Fees paid by Client to ALLTEL
                  for the __ time period.

At the end of each year measured from each anniversary of the Fifth Amendment
Effective Date, the dollar difference between credits and incentives for the
specific months of that one (1) year period will be calculated. If credits are
greater than incentives, the difference will be credited to the next monthly
invoice to the Client. If incentives are equal to or greater than credits for a
given one year period only the amount

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-4-3
<PAGE>

equal to the total credits for that period will be used by ALLTEL to offset
credits for that period. The credits set forth in the Exhibit E are Client's
sole and exclusive remedy for ALLTEL's failure to meet the Service levels
defined in the Agreement including Exhibit A. All credits are subject to the
limitations set forth in Exhibit A.2.

Performance Metrics - Service Levels - (as determined in Exhibit A)

         o        CICS Availability

         o        Priority 1

         o        Network Availability

         o        Priority 1

         o        Machine Availability

         o        Priority 1

         o        TSO Availability

         o        Priority 2

         o        Batch Availability

         o        (see Exhibit E)

         o        CICS Response Time

         o        Priority 1

         o        TSO Response Time

         o        Priority 2

                                                                initials /s/ HJF
                                                                             ---
                                                                         /s/ JPF
                                      E-4-4

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