Exhibit 10.3

FIRST AMENDMENT
TO THE
BEVERLY ENTERPRISES, INC.
1997 LONG-TERM INCENTIVE PLAN
As Amended and Restated Effective as of June 1, 2001

      First Amendment made effective the 1st day of June, 2004, by Beverly
Enterprises, Inc. (the “Corporation”).

W I T N E S S E T H:

      WHEREAS, the Corporation sponsors the Beverly Enterprises, Inc. 1997
Long-Term Incentive Plan, as amended and restated effective as of June 1, 2001
(the “Plan”);

      WHEREAS, the Corporation has reserved 15,000,000 shares of the
Corporation’s common stock, par value $0.10 per share (“Common Stock”), to be
issued under the Plan, provided that no more than 7,500,000 shares may be issued
pursuant to awards of Restricted Stock, Restricted Stock Units, Performance
Shares, Performance Units, Bonus Stock or Other Stock Unit Awards (collectively,
the “Full Value Awards”), and no more than 7,500,000 shares may be issued
pursuant to awards of Incentive Stock Options (“ISOs”) (as all such awards are
defined in the Plan);

      WHEREAS, the Corporation wishes to reserve an additional 5,250,000 shares
of Common Stock, for a total of 20,250,000 shares, to be issued under the Plan,
with all such additional shares available to be issued as Full Value Awards or
ISOs;

      WHEREAS, the Corporation also wishes to amend the Plan to (i) reflect the
reservation of such additional shares of Common Stock for issuance as any
permissible Awards thereunder, including Full Value Awards and ISOs,
(ii) clarify that the vesting of Restricted Stock granted under the Plan may
accelerate in the event of death, disability or a Change in Control,
(iii) permit the early vesting by the Committee of Restricted Stock granted
under the Plan upon the occurrence of a change in control, termination of
employment without cause, or other event as may be required in an employment,
change in control, severance, or other agreement the Corporation or one of its
affiliates may have entered into or may enter into from time to time with a
participant in the Plan, (iv) permit performance-based cash bonuses to be paid
under the Plan, to the extent that such awards are not already allowed, and
(v) make certain other technical changes thereto;

      WHEREAS, Section 14.8 of the Plan provides that the Board of Directors of
the Corporation (the “Board”) or the Nominating and Compensation Committee of
the Board (the “Committee”) may amend the Plan at anytime, provided that any
such amendment is made with shareholder approval if required by applicable law
or regulation; and

 

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      WHEREAS, the Corporation has determined that the reservation of the
5,250,000 additional shares of Common Stock and the other amendments to the Plan
generally require shareholder approval, and such approval will be sought;

      NOW, THEREFORE, the Plan is hereby amended effective as the date such
amendments and the reservation of such additional shares of Common Stock are
duly approved by the Corporation’s shareholders, unless otherwise provided
herein:

1.   The last sentence of Section 1 of the Plan is amended in its entirety to
read as follows:       “The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options (intended to qualify under Section 422 of the
Code), Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Performance-Based Cash Bonuses, Bonus
Stock, and any other Stock Unit Awards or stock-based forms of awards as the
Committee may determine in its sole and complete discretion at the time of
grant.”   2.   Section 2.3 of the Plan is amended in its entirety to read as
follows:       “2.3 “Award” means, individually or collectively, a grant under
this Plan of any one of the following: Nonqualified Stock Options; Incentive
Stock Options; Stock Appreciation Rights; Restricted Stock; Restricted Stock
Units; Performance Shares; Performance Units; Performance-Based Cash Bonuses;
Bonus Stock; or Other Stock Unit Awards.”   3.   Section 2.11 of the Plan is
amended effective as of January 1, 2004, by replacing the phrase “Compensation
Committee” with the phrase “Nominating and Compensation Committee.”   4.  
Section 2.32 of the Plan is amended in its entirety to read as follows:      
“2.32 “Performance Award” means a performance-based Award, which may be in the
form of either Performance Shares, Performance Units, or Performance-Based Cash
Bonuses.”   5.   A new Section 2.33 is added to the Plan, with the subsequent
Subsections in Section 2 and the applicable cross-references being renumbered
accordingly, to read as follows:       “2.33 “Performance-Based Cash Bonus”
means a cash bonus Award, designated as a Performance-Based Cash Bonus, granted
to a Participant pursuant to Section 9 herein, the value of which is determined,
in whole or in part, by the attainment of pre-established goals relating to the
Company’s financial or operating performance as deemed appropriate by the
Committee and described in the Agreement.”

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6.   Section 5.1 of the Plan is amended by replacing the phrase “fifteen million
(15,000,000)” with the phrase “twenty million, two hundred and fifty thousand
(20,250,000),” and by replacing the phrase “seven million, five hundred thousand
(7,500,000)” with the phrase “twelve million, seven hundred and fifty thousand
(12,750,000).”   7.   Section 5.2 of the Plan is amended by replacing the phrase
“seven million, five hundred thousand (7,500,000)” with the phrase “twelve
million, seven hundred and fifty thousand (12,750,000).”   8.   The last
sentence of Section 8.4 of the Plan is amended to read as follows:       “The
foregoing limitations notwithstanding, the Committee in its sole discretion may
reduce or remove the restrictions or reduce or remove the Period of Restriction
with respect to Restricted Stock or Restricted Stock Units (a) upon assumption
of, or in substitution for, restricted stock or restricted stock units of a
company with which the Company participates in an acquisition, separation, or
similar corporate transaction, (b) in the event of the death or disability of
the Participant, (c) upon a Change in Control of the Company, or (d) as may be
required in an employment, change in control, severance, or other agreement the
Company may enter into with a Participant from time to time in the case of an
involuntary termination without Cause, normal retirement, or a Change in
Control.”   9.   Section 9 of the Plan is amended in its entirety to read as
follows:       “Section 9. Performance Awards

      9.1 Grant of Performance Awards. Subject to the terms and provisions of
the Plan and applicable law, the Committee, at any time and from time to time,
may grant Performance Awards in the form of either Performance Units,
Performance Shares or Performance-Based Cash Bonuses to Participants subject to
such Performance Goals and Performance Period as it shall determine. The
Committee shall have complete discretion in determining the number and value of
Performance Awards granted to each Participant. Participants receiving
Performance Awards are not required to pay the Company therefor (except for
applicable tax withholding) other than the rendering of services.

      9.2 Value of Performance Awards. The Committee shall determine the number
and value of Performance Units, Performance Shares or Performance-Based Cash
Bonuses granted to each Participant as a Performance Award. The Committee shall
set Performance Goals in its discretion for each Participant who is granted a
Performance Award. The extent to which such Performance Goals are met will
determine the value of the Performance Award to the Participant. Such
Performance Goals may be particular to a Participant, may relate to the
performance of the Subsidiary which employs him or her, may be based on the
division which employs him or her, may be based on the performance of the
Company generally, or a combination of the foregoing. The

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Performance Goals may be based on achievement of balance sheet or income
statement objectives, or any other objectives established by the Committee. The
Performance Goals may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated. The
terms and conditions of each Performance Award will be set forth in an
Agreement. Except as specifically provided herein, including, without
limitation, Section 14.13, the Committee shall have no authority to reduce or
remove the Performance Goals or Performance Period without the express consent
of the stockholders of the Company. Furthermore, except in the case of the
Participant’s death or disability, or a Change of Control of the Company, no
Performance Award shall become vested or payable less than one (1) year after
its grant.

      9.3 Settlement of Performance Awards. After a Performance Period has
ended, the holder of a Performance Award shall be entitled to receive the value
thereof based on the degree to which the Performance Goals established by the
Committee and set forth in the Agreement have been satisfied.

      9.4 Form of Payment. Payment of the amount to which a Participant shall be
entitled upon the settlement of a Performance Unit or Performance Share shall be
made in cash, Stock, or a combination thereof as determined by the Committee.
Payment of the amount to which a Participant shall be entitled upon the
settlement of a Performance-Based Cash Bonus shall be made in cash. Payment may
be made as prescribed by the Committee.”

10.   The last sentence of Section 12(a) of the Plan is amended to read as
follows:       “In establishing Performance Measures, the Committee shall
consider one or more of the following business or financial goals of the
Company: absolute or relative increases in total stockholder return, stock
price, economic value added, return on capital employed, return on assets or net
assets, revenues, sales, income, operating income, net income, operating margin,
profit margin, earnings per share, return on equity, cash flow, earnings before
interest, taxes, depreciation and amortization (“EBITDA”), EBITDA margin,
operating margin or net worth of the Company, any of its Subsidiaries, divisions
or other areas of the Company.”   11.   A new sentence is added to the end of
Section 12(c) of the Plan to read as follows:       “In addition, the Committee
may appropriately adjust any evaluation of performance under a Performance
Measure to exclude any of the following events that occur during a performance
period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to stockholders
for the applicable year.”

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