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                                                                   EXHIBIT 10.32

                               EMPLOYMENT CONTRACT

                  AGREEMENT made as of December 6, 2001 between BEVERLY
ENTERPRISES, INC., a Delaware corporation (the "Company"), and WILLIAM R. FLOYD
(the "Executive").

                  WHEREAS, Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries; and

                  WHEREAS, the Company desires to assure itself of the
management services of the Executive by directly engaging the Executive as the
President and Chief Operating Officer of the Company; and

                  WHEREAS, the Company wishes to encourage the Executive to
remain with and devote full time and attention to the business affairs of the
Company and wishes to provide income protection to the Executive for a period of
time in the event of an involuntary Termination of Employment not for Cause or a
voluntary Termination of Employment for Good Reason within the Term of this
Agreement;

                  NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:

                  1. Definitions.

                           (a) "Base Salary" shall mean the Executive's regular
         annual rate of base pay, as set forth in Paragraph 4(a), as of the date
         in question.

                           (b) The "Benefit Multiplier" shall be equal to 2.0
         except that if Executive's Termination of Employment is pursuant to
         Paragraphs 6(b) or 6(c) it shall be equal to 3.0.

                           (c) The Benefit Period" shall be the period of years
         equal to the Benefit Multiplier which follows the Executive's
         Termination of Employment.

                           (d) "Cause" shall mean the Executive's (i) conviction
         of a crime involving moral turpitude or theft or embezzlement of
         property from the Company or (ii) willful misconduct or willful failure
         substantially to perform the duties of his position, but only if such
         has continued after receipt of notice from the Company's Board of
         Directors and such reasonable cure period as is set forth in such
         notice, but in no event less than ten (10) days.

                           (e) A "Change in Control" shall be deemed to have
         taken place if: (i) any person, corporation, or other entity or group,
         including any "group" as defined in Section l3(d)(3) of the Securities
         Exchange Act of 1934, other than any employee benefit plan then
         maintained by the Company, becomes the beneficial owner of shares of
         the Company having 30 percent or more of the total number of votes that
         may be cast for the election of Directors of the Company; (ii) as the
         result of, or in connection with, any contested election for the Board
         of Directors of the Company, or any tender or exchange offer, merger or
         other business combination or sale of assets, or any combination of the
         foregoing (a "Transaction"), the persons who were Directors of the
         Company before the Transaction shall cease to constitute a majority of
         the Board of Directors of the Company or any successor to the Company
         or its assets, or (iii) at any time (a) the Company shall consolidate
         with, or merge with, any other Person and the Company shall not be the
         continuing or surviving corporation, (b) any Person shall consolidate
         with, or merge with the Company, and the


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         Company shall be the continuing or surviving corporation and in
         connection therewith, all or part of the outstanding Company stock
         shall be changed into or exchanged for stock or other securities of any
         other Person or cash or any other property, (c) the Company shall be a
         party to a statutory share exchange with any other Person after which
         the Company is a subsidiary of any other Person, or (d) the Company
         shall sell or otherwise transfer 50% or more of the assets or earning
         power of the Company and its subsidiaries (taken as a whole) to any
         Person or Persons; provided, however, that notwithstanding anything to
         the contrary herein, a Change in Control shall not include either any
         transfer to a consolidated subsidiary, reorganization, spin-off,
         split-up, distribution, or other similar or related transaction(s) or
         any combination of the foregoing in which the core business and assets
         of the Company and its subsidiaries (taken as a whole) are transferred
         to another entity ("Controlled") with respect to which (1) the majority
         of the Board of Directors of the Company (as constituted immediately
         prior to such transaction(s)) also serve as directors of Controlled and
         immediately after such transaction(s) constitute a majority of
         Controlled's board of directors, and (2) more than 70% of the
         shareholders of the Company (immediately prior to such transaction(s))
         become shareholders or other owners of Controlled and immediately after
         the transaction(s) control more than 70% of the ownership and voting
         rights of Controlled.

                           (f) The "Change in Control Date" shall mean the date
         immediately prior to the effectiveness of the Change in Control.

                           (g) The "Committee" shall mean the Compensation
         Committee of the Company's Board of Directors.

                           (h) The "Competitive Businesses" shall mean any of
         the health care businesses in which the Company is engaged on the
         Effective Date.

                           (i) The Executive shall have "Good Reason" to
         terminate employment if: (i) the Executive is not elected, reelected,
         or otherwise continued in the office of the Company or any of its
         subsidiaries which he held immediately prior to the Change in Control
         Date, or he is removed as a member of the Board of Directors of the
         Company or any of its subsidiaries if the Executive was a director
         immediately prior to the Change in Control Date; (ii) the Executive's
         duties, responsibilities or authority as an employee are materially
         reduced or diminished from those in effect on the Change in Control
         Date without the Executive's consent; (iii) the Executive's duties,
         responsibilities, or authority as an employee are materially reduced or
         diminished from those in effect on the Effective Date without the
         Executive's consent; (iv) the Executive's compensation or benefits are
         reduced without the Executive's consent, unless all Executive-level
         officers have their compensation or benefits reduced in the same
         percentage amount; (v) the Company reduces the potential earnings of
         the Executive under any performance-based bonus or incentive plan of
         the Company in effect immediately prior to the Change in Control Date;
         (vi) the Company requires that the Executive's employment be based
         other than at its location on the Effective Date without his consent;
         (vii) any purchaser, assign, surviving corporation, or successor of the
         Company or its business or assets (whether by acquisition, merger,
         liquidation, consolidation, reorganization, sale or transfer of assets
         or business, or otherwise) fails or refuses to expressly assume in
         writing this Agreement and all of the duties and obligations of the
         Company hereunder pursuant to Section 16 hereof; (viii) a person, other
         than the Executive, replaces the current Chief Executive Officer; or
         (ix) the Company breaches any of the provisions of this Agreement.

                           (j) "Person" shall have the meaning ascribed to such
         term in Section 3(a)(9) of the Securities Exchange Act of 1934 and used
         in Sections 13(d) and 14(d) thereof, including a



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         "group" as defined in Section 13(d).

                           (k) "Target Bonus" shall mean the target bonus (100%
         level) established for the Executive for the year in question under the
         Company's "Annual Incentive Plan."

                           (l) "Termination of Employment" shall mean the
         termination of the Executive's employment by the Company other than
         such a termination in connection with an offer of immediate
         reemployment by a successor or assign of the Company or purchaser of
         the Company or its assets under terms and conditions which would not
         permit the Executive to terminate his employment for Good Reason.

                  2. Term. The initial term of this Agreement shall be for the
period commencing on the Effective Date and ending on December 31, 2006. The
Term shall be automatically extended by one additional day for each day beyond
the Effective Date of this Agreement that the Executive remains employed by the
Company until such time as the Company elects to cease such extension by giving
written notice of such to the Executive. (In such event, the Agreement shall
thus terminate on the third anniversary of the effective date of such notice).

                  3. Position and Duties. During the Term, the Executive shall
serve, as an employee, as the Chairman, President and Chief Executive Officer of
the Company and shall have such duties, functions, responsibilities and
authority as are consistent with the Executive's position as the senior
executive officer in charge of the general management, business and affairs of
the Company.

                  4. Compensation and Related Matters.

                           (a) Annual Base Salary. The Executive shall receive a
         Base Salary at a rate of $835,000 per annum and thereafter at any such
         greater rate as is determined by the Committee, but in no event shall
         the Base Salary be reduced except as permitted in Section 1(i)(iv)
         above.

                           (b) Benefits. During the Term, the Executive shall be
         entitled to all of the following and any other benefits and
         prerequisites offered by the Company to executives generally:

                                    (i) Participate in the Company's present and
                  future stock option, restricted stock, phantom stock and other
                  similar equity-based incentive plans, pursuant to their terms.

                                    (ii) Participate in the Company's Employee
                  Stock Purchase Plan, pursuant to its terms;

                                    (iii) Participate in the Company's Executive
                  Deferred Compensation Plan, pursuant to its terms;

                                    (iv) Participate in the Company's Executive
                  Savings Plus Plan, pursuant to its terms;

                                    (v) $835,000 of individual life insurance
                  coverage under the Company's Executive Split Dollar Life
                  Insurance Plan;

                                    (vi) $835,000 (or such greater amount as the
                  Company may make available to its senior executives generally)
                  of group term life insurance coverage;



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                             (vii) $100,000 (or such greater amount as the
                  Company may make available to its senior executives generally)
                  of business travel accident insurance coverage when traveling
                  on Company business;

                             (viii) Participate in the Company's Medical Plan,
                  and Dental Plan, pursuant to their terms, except that the
                  premium cost for such shall be treated as a benefit under the
                  Company's Executive Medical Reimbursement Plan, described
                  below, (and therefore at the present time, there shall be no
                  payroll deduction as a condition of coverage in the Medical
                  Plan and Dental Plan);

                             (ix) Participate in the Company's Executive Medical
                  Reimbursement Plan (with a maximum benefit of $11,500 (or such
                  greater amount as the Company may make available to its senior
                  executives generally), a portion of which shall be deemed
                  applied to the payment of premiums under the Company's Medical
                  Plan and Dental Plan as described above), pursuant to its
                  terms;

                             (x) Participate in the Company's group Long-Term
                  Disability Plan, at the maximum benefit level, pursuant to its
                  terms, and participate in the Company's Supplemental Long-Term
                  Disability Plan, according to its terms;

                             (xi) 4 weeks of paid vacation;

                             (xii) Participate in or receive benefits under any
                  other employee benefit plan or other arrangement made
                  available by the Company to any of its employees, subject to
                  and on a basis consistent with the terms, conditions and
                  overall administration of such plan or arrangement.

                             (xiii) Be provided a Supplemental Executive
                  Retirement Plan ("SERP") benefit through subsequent amendment
                  to the SERP Plan as follows:

                                      i. 25% per year graduated vesting schedule
                                         retroactive to Executive's October 16,
                                         2001 birthday;

                                     ii. 5% discount will be waived for each
                                         year until the age of 65; and

                                    iii. lump sum option will be made available.

                  (c) Annual Bonus. As additional compensation for services
         rendered, the Executive shall be eligible to receive an annual bonus in
         cash pursuant to the Company's Annual Incentive Plan.

                  (d) Expenses. The Company shall promptly reimburse the
         Executive for all reasonable travel and other business expenses
         incurred by the Executive in the performance of his duties to the
         Company hereunder.

                  (e) Reporting. The Executive shall report directly to the
         Chairman and Chief Executive Officer of the Company.



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                  5. Non-Solicitation.

                           (a) Executive shall not at any time during the period
         of his employment with the Company, or during the one (1) year period
         immediately following his Termination of Employment with the Company
         ("Non-Solicitation Period"), without the prior written consent of the
         Company, on behalf of himself or any other person, solicit for
         employment or employ any of the current officers or employees of the
         Company; provided, however, that nothing contained herein shall
         prohibit Executive from hiring employees of the Company when such
         employment results from general solicitations for employment.

                           (b) Executive shall not at any time during the period
         of his employment with the Company, or during the Non-Solicitation
         Period, without the prior written consent of the Company, solicit for
         his own use, or for the use of any company or person by whom he is
         employed, or for whom he may be acting, any of the current customers of
         the Company, nor shall he divulge to any other person any information
         or fact relating to the management, business (including prospective
         business), finances, its customers or the terms of any of the contracts
         of the Company which has heretofore or which may hereafter come to the
         knowledge of Executive which is not freely available to the public.

                           (c) Executive shall not, during the Non-Solicitation
         Period, in any way defame the Company or disparage its business
         capabilities, products, plans or management to any customer, potential
         customer, vendor, supplier, contractor, subcontractor of the Company so
         as to affect adversely the goodwill or business of the Company.

                           (d) Executive covenants and agrees that a breach of
         these subparagraphs (a), (b) or (c) would immediately and irreparably
         harm the Company and that a remedy at law would be inadequate to
         compensate the Company for its losses by reason of such breach and
         therefore that the Company shall, in addition to any rights and
         remedies available under this Agreement, at law or otherwise, be
         entitled to any injunction to be issued by any court of competent
         jurisdiction enjoining and restraining Executive from committing any
         violation of these subparagraphs (a), (b) or (c), and Executive hereby
         consent to the issuance of such injunction.

                           (e) For purposes of this Section 5 and in
         consideration of this Agreement, this non-solicitation agreement has
         been separately negotiated and bargained for, and constitutes a
         substantial portion of the consideration for this Agreement.

                 6. Eligibility for Severance Benefits. The Executive shall be
eligible for the benefits described in Paragraph 7 (the "Severance Benefits")
if:

                           (a) during the Term, the Executive has a Termination
         of Employment initiated (i) by the Company without Cause, or (ii) by
         the Executive for Good Reason, and, in either case, subsections (b) or
         (c) do not apply,

                           (b) during the Term there has been a Change in
         Control and during the 31 day period commencing on the first day of the
         13th calendar month following the Change in Control Date (e.g. the
         period April 1, 1999 - May 1, 1999, inclusive, for a Change in Control
         which is effective in the month of March, 1998), the Executive has a
         Termination of Employment initiated by the Executive without Good
         Reason, or



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                           (c) during the Term either (i) there has been a
         Change in Control and during the two year period commencing on the
         Change in Control Date the Executive has a Termination of Employment
         which is initiated by the Company without Cause or by the Executive for
         Good Reason, or (ii) the Executive has a Termination of Employment
         initiated by the Company without Cause or by the Executive for Good
         Reason following the commencement of any discussion with a third person
         that ultimately results in a Change in Control with such third person
         within 12 months of the commencement of such discussions (in which
         case, the date of such discussion shall be substituted for the Change
         in Control Date wherever appropriate, including in the definition of
         "Good Reason" and in Paragraph 7 hereof).

                  7. Severance Benefit. Upon satisfaction of the requirements
set forth in Paragraph 6, and subject to Paragraphs 8 and 11, the Executive
shall be entitled to the following Severance Benefits:

                          (a) Cash Payment. The Executive shall be entitled to
receive an amount of cash equal to the Benefit Multiplier times the greater of:

                                (i) the sum of the Executive's Base Salary as in
                          effect upon the Termination of Employment, and the
                          greater of

                                       (A) the Executive's Target Bonus as in
                          effect upon the Termination of Employment or,

                                       (B) the Executive's actual bonus under
                          the Company's "Annual Incentive Plan" for the year
                          prior to the year of the Executive's Termination of
                          Employment; or

                                (ii) the sum of the Executive's Base Salary as
                          in effect on the Change in Control Date, and the
                          greater of

                                       (A) the Executive's Target Bonus as in
                          effect upon the Change in Control Date or,

                                       (B) the Executive's actual bonus under
                          the Company's "Annual Incentive Plan" for the year
                          prior to the Change in Control Date.

The payment shall be made in a single lump sum within ten days following the
Executive's Termination of Employment.

                          (b) Long-Term Incentive Award; Equity-Based
             Compensation. The Executive's interest under the Company's
             long-term incentive plans shall be fully vested. Any and all (i)
             options, phantom units, and other awards granted to Executive to
             purchase Company stock or which is measured by the current market
             value of Company stock and (ii) restricted stock of the Company,
             owned by the Executive shall be fully vested.

                          (c) Continuation of Benefits.

                                (i) For the Benefit Period, the Executive shall
                          be treated as if he had continued to be an employee
                          for all purposes under the Company's Medical Plan,
                          Executive Medical Reimbursement Plan and Dental Plan.
                          Following this period, the Executive shall be entitled
                          to receive continuation coverage under Part Six of
                          Title I of ERISA ("COBRA Benefits") treating the end
                          of this period as a termination of the Executive's
                          employment (other than for gross misconduct).



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                                    (ii) The Company shall maintain in force, at
                  its own expense, for the remainder of the Executive's life,
                  the vested life insurance in effect under the Company's
                  Executive Split Dollar Life Insurance Plan (as described in
                  Paragraph 4(b)) as of the Change in Control Date or as of the
                  date of Termination of Employment, whichever is greater.

                           (d) Relocation Benefit. If, within the Benefit Period
         after the Executive's Termination of Employment, the Executive gives
         the Company written notice that he desires to relocate within the
         continental United States, the Company will reimburse the Executive for
         any reasonable relocation expenses (in accordance with the Company's
         general relocation policy for executives as then in effect, or, at the
         Executive's election, as in effect on the Change in Control Date) in
         connection with such relocation.

                           (e) Executive Savings Plus Plan. For the year of the
         Executive's Termination of Employment, the Company will make the
         contribution to the Executive Savings Plus Plan on behalf of the
         Executive that it would have made if the Executive had not had a
         Termination of Employment, but in no event less than the percentage
         contribution it made for the Executive in the immediately preceding
         year (and increased to take account of the additional year of service),
         in each case taking account of the Executive's annualized rate of
         "Compensation" (as defined in the Executive Savings Plus Plan) and the
         percentage of such Compensation that the Executive is contributing to
         the Executive Savings Plus Plan, as of the date of Termination of
         Employment, and the Company's matching contribution rate for such year
         (or, if greater, the preceding year). The portion of the Company's
         matching contribution which is based on the preceding year's
         contribution percentage shall be contributed to the Executive Savings
         Plus Plan on behalf of the Executive immediately upon the Executive's
         Termination of Employment and any additional contribution required
         shall be paid as soon as the amount is determined.

                           (f) Executive Deferred Compensation Plan. For the
         year of the Executive's Termination of Employment, the Company will
         make the contribution to its Executive Deferred Compensation Plan (the
         "EDC Plan") that it would have made if the Executive had not had a
         Termination of Employment determined based on the Executive's deferral
         for such year. At Executive's election, the Company contribution shall
         be paid to the Executive immediately upon his Termination of
         Employment.

                           (g) Disability. For the Benefit Period, the Company
         shall provide long-term disability insurance benefits coverage to
         Executive equivalent to the coverage that the Executive would have had
         had he remained employed under the Company's Long-Term Disability Plan
         and Supplemental Long-Term Disability Plan applicable to Executive on
         the date of Termination of Employment, or, at the Executive's election,
         the plan or plans applicable to Executive as of the Change in Control
         Date. Should Executive become disabled during such period, Executive
         shall be entitled to receive such benefits, and for such duration, as
         the applicable plan(s) provide.

                           (h) Plan Amendments. The Company shall adopt such
         amendments to its employee benefit plans and insurance policies as are
         necessary to effectuate the provisions of this Agreement. If and to the
         extent any benefits under this Paragraph 7 are not paid or payable or
         otherwise provided to the Executive or his dependents or beneficiaries
         under any such plan or policy (whether due to the terms of the plan or
         policy, the termination thereof, applicable law, or otherwise), then
         the Company itself shall pay or provide for such benefits.


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                  8. Golden Parachute Gross-Up. If, in the written opinion of a
Big 6 accounting firm engaged by either the Company or the Executive for this
purpose (at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments under Paragraph 7 would cause the
payment of one or more of such benefits to constitute an "excess parachute
payment" as defined in Section 280G(b) of the Internal Revenue Code ("Code"),
then the Company will pay to the Executive an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by the Executive, after deduction of any (i) excise tax on the payments
under Paragraph 7, (ii) federal, state or local income tax on the Gross-Up
Payment, and (iii) excise tax on the Gross-Up Payment, to be equal to the
aggregate remuneration the Executive would have received under Section 7,
excluding such Gross-Up Payment (net of all federal, state and local excise and
income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment provided
for in this Paragraph shall be made within ten (10) days after the termination
of Executive's employment, provided however that if the amount of the payment
cannot be finally determined at the time, the Company shall pay to Executive an
estimate as determined in good faith by the Company of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the date of termination. Any dispute concerning the application
of this Paragraph shall be resolved pursuant to Paragraph 10, and if Paragraph
11 applies, any reference in this Paragraph and to Paragraph 7 shall also be
deemed to include a reference to Paragraph 11 as well.

                  9. Waiver of Other Severance Benefits. The benefits payable
pursuant to this Agreement are in lieu of any other severance benefits which may
otherwise be payable to the Executive upon termination of employment with the
Company, whether or not in connection with a Change in Control (including
without limitation, any benefits to which Executive might otherwise have been
entitled under any employment, change in control, or severance agreement or
other compensation or employee benefit plan to which the Company was a party or
which was assumed by the Company), except those benefits which are to be made
available to the Executive as required by applicable law.

                  10. Disputes. Any dispute or controversy arising under, out
of, in connection with or in relation to this Agreement shall, at the election
and upon written demand of either party, be finally determined and settled by
binding arbitration in the city of Fort Smith, Arkansas, using a single
arbitrator appointed by the American Arbitration Association, in accordance with
the Labor Arbitration rules and procedures of the American Arbitration
Association, and judgment upon the award may be entered in any court having
jurisdiction thereof. The arbitrator shall have the power to order specific
performance, mandamus, or other appropriate legal or equitable relief to enforce
the provisions of this Agreement. The Company shall pay all costs of the
arbitration and all reasonable attorney's and accountant's fees of the Executive
in connection therewith.

                  11. Additional Payments Due to Dispute. Notwithstanding
anything to the contrary herein, and without limiting the Executive's rights at
law or in equity, if the Company fails or refuses to timely pay to the Executive
the benefits due under Paragraphs 7 and/or 8 hereof, then the benefits under
Paragraph 7(a) shall be increased and the benefits under Paragraphs 7(c), 7(d),
and 7(g) shall each be continued by one additional day for each day of any such
failure or refusal of the Company to pay. In addition, any Gross-Up Payment due
under Paragraph 8 shall be increased to take into account any increased benefits
under this Paragraph.

                  12. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement.



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                  13. No Mitigation Obligation. The parties hereto expressly
agree that the payment of the benefits by the Company to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and that
the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.

                  14. Waiver of Rights. Executive hereby waives any rights
against the Company, including without limitation any rights under any
employment, change in control, or severance agreement; under any stock option or
long-term incentive plan or any other compensation or employee benefit plan.

                  15. Non-disclosure of Proprietary Information, Surrender of
Records; Inventions and Patents.

                           (a) Proprietary Information. Executive shall not
         during the term of employment or at any time thereafter (irrespective
         of the circumstances under which Executive's employment terminates),
         directly or indirectly use for his own purpose or for the benefit of
         any person or entity other than Company, nor otherwise disclose, any
         proprietary information, as defined below, to any individual or entity,
         unless such disclosure has been authorized in writing by the Company or
         is otherwise required by law. For purposes of this Agreement, the term
         "proprietary information" shall include, but is not limited to: (a) the
         name or address of any client or affiliate of Company or any
         information concerning the transactions or relations of any client or
         affiliate of Company with Company or any of its shareholders; (b) any
         information concerning any product, service, methodology, analysis,
         presentation, technology or procedure employed by Company but not
         generally known to its clients or competitors, or under development by
         or being tested by Company but not at the time offered generally to
         clients; (c) any information relating to Company's computer software,
         computer systems, pricing or marketing methods, capital structure,
         operating results, borrowing arrangements or business plans; (d) any
         information which is generally regarded as confidential or proprietary
         in any line of business engaged in by Company; (e) any information
         contained in any of Company's written or oral policies and procedures
         or employee manuals; (f) any information belonging to clients or
         affiliates of Company which Company has agreed to hold in confidence;
         (g) any inventions, innovations or improvements covered by subsection
         15(c) below; (h) any other information which Company has reasonably
         determined to be confidential or proprietary; and (i) all written,
         graphic, electronic and other material relating to any of the
         foregoing. Information that is not novel or copyrighted or patented may
         nonetheless be proprietary information. Proprietary information,
         however, shall not include any information that is or becomes generally
         known to the industries in which Company competes through sources
         independent of Company or Executive or through authorized publication
         by Company to persons other than Company's employees.

                           (b) Confidentiality and Surrender of Records.
         Executive shall not during the term of employment or at any time
         thereafter (irrespective of the circumstances under which Executive's
         employment terminates), except as required by law, directly or
         indirectly give or disclose any "confidential records" (as hereinafter
         defined) to, or permit any inspection or copying of confidential
         records by, any individual or entity other than in the ordinary course
         and scope of such individual's or entity's employment or retention by
         Company, nor shall he use or retain any of the same following
         termination of his employment. Executive shall promptly return to
         Company all "confidential records" upon the termination of Executive's
         employment with Company. For



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         purposes hereof, "confidential records" means all correspondence,
         memoranda, files, analyses, studies, reports, notes, documents,
         manuals, books, lists, financial, operating or marketing records,
         computer software, magnetic tape, or electronic or other media or
         equipment of any kind which may be in Executive's possession or under
         his control or accessible to him which contain any proprietary
         information as defined in subsection 15(a) above. All confidential
         records shall be and remain the sole property of Company during the
         term of employment and thereafter.

                           (c) Inventions, Patents, and Copyrights. All
         inventions, innovations or improvements in Company's method of
         conducting its business (including policies, procedures, products,
         improvements, software, ideas and discoveries, whether or not
         patentable or copyrightable) conceived or made by Executive, either
         alone or jointly with others, during the term of employment belong to
         Company. Executive will promptly disclose in writing such inventions,
         innovations or improvements to Company and perform all actions
         reasonably requested by Company to establish and confirm such ownership
         by Company, including, but not limited to, cooperating with and
         assisting Company in obtaining patents and copyrights for Company in
         the United States and in foreign countries. Any patent or copyright
         application filed by Executive within a year after termination of his
         employment hereunder shall be presumed to relate to an invention or
         work of authorship which was made during the term of employment unless
         Executive can provide conclusive evidence to the contrary.

                  16. Successors; Binding Agreement.

                           (a) This Agreement shall not be terminated by the
         voluntary or involuntary dissolution of the Company or by any merger or
         consolidation where the Company is not the surviving corporation, or
         upon any transfer of all or substantially all of the Company's assets,
         or any other Change in Control. The Company shall require any
         purchaser, assign, surviving corporation or successor (whether direct
         or indirect, by purchase, merger, consolidation, reorganization or
         otherwise) to all or substantially all of the business and/or assets of
         the Company, by agreement in form and substance satisfactory to the
         Executive, expressly to assume and agree to perform this Agreement in
         the same manner and to the same extent the Company would be required to
         perform if no such succession had taken place. This Agreement shall be
         binding upon and inure to the benefit of the Company and any purchaser,
         assign, surviving corporation or successor to the Company, including
         without limitation any persons acquiring directly or indirectly all or
         substantially all of the business and/or assets of the Company whether
         by purchase, merger, consolidation, reorganization, transfer of all or
         substantially all of the business or assets of the Company, or
         otherwise (and such purchaser, assign, surviving corporation or
         successor shall thereafter be deemed the "Company" for the purposes of
         this Agreement), but this Agreement shall not otherwise be assignable,
         transferable or delegable by the Company.

                           (b) This Agreement shall inure to the benefit of and
         be enforceable by the Executive's personal or legal representatives,
         executors, administrators, successors, heirs, distributees and/or
         legatees.

                           (c) This Agreement is personal in nature and neither
         of the parties hereto shall, without the consent of the other, assign,
         transfer or delegate this Agreement or any rights or obligations
         hereunder except as expressly provided in this Section 16. Without
         limiting the generality of the foregoing, the Executive's right to
         receive payments hereunder shall not be assignable, transferable or
         delegable, whether by pledge, creation of a security interest or
         otherwise,



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<PAGE>
         or otherwise subject to anticipation, alienation, sale, encumbrance,
         charge, hypothecation, or set-off in respect of any claim, debt, or
         obligation, or to execution, attachment, levy or similar process, or
         assignment by operation of law, other than by a transfer by his will or
         by the laws of descent and distribution. Any attempt, voluntarily or
         involuntarily, to effect any action prohibited by this Paragraph shall
         be null, void, and of no effect.

                  17. Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex, telecopy, or certified or registered mail, postage prepaid, or other
similar means of communication, as follows:

                           (a) If to the Company, addressed to its principal
         executive offices to the attention of its Secretary;

                           (b) If to the Executive, to him at the address set
         forth below under the Executive's signature, and a copy to Gary Jaffee,
         at the law firm of Jaffe Friedman, Suite 200, 7848 Old York Road,
         Elkins Park, PA 19027, or at any such other address as either party
         shall have specified by notice in writing to the other.

                  18. Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Company. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform; provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity.

                  19. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto. The parties further
intend that this Agreement shall constitute the complete and exclusive statement
of its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.

                  20. Severability; Enforcement. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance
shall be held by a court of competent jurisdiction to be invalid, unenforceable
or void, the remainder of this Agreement and such provisions as applied to other
persons, places and circumstances shall remain in full force and effect.

                  21. Indemnification. The Company shall indemnify, defend, and
hold the Executive harmless from and against any liability, damages, costs, or
expenses (including attorney's fees) in connection with any claim, cause of
action, investigation, litigation, or proceeding involving him by reason of his
having been an officer, director, employee, or agent of the Company, unless it
is judicially determined, in a final, nonappealable order that the Executive was
guilty of gross negligence or willful misconduct. The Company also agrees to
maintain adequate directors and officers liability insurance for the benefit of
Executive for the term of this Agreement and for at least three years,
thereafter, to the extent such insurance is reasonably available and provided to
all executives of the Company.




                                       11
<PAGE>

                  22. ERISA. This Agreement is pursuant to the Company's
Severance Plan for Executives (the "Plan") which is unfunded and maintained by
the Company primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees. The Plan constitutes
an employee welfare benefit plan ("Welfare Plan") within the meaning of Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Any payments pursuant to this Agreement which could cause the Plan
not to constitute a Welfare Plan shall be deemed instead to be made pursuant to
a separate "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA as to which the applicable portions of the document constituting the Plan
shall be deemed to be incorporated by reference. None of the benefits hereunder
may be assigned in any way.

                  23. Governing Law. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of Arkansas,
except to the extent pre-empted by Federal law.



                                       12

<PAGE>
                  The parties have duly executed this Agreement to be effective
as of the date first written above.


BEVERLY ENTERPRISES, INC.                   EXECUTIVE

By:
   -----------------------------------      -----------------------------------
    Marilyn Seymann, PhD                    William R. Floyd
    Chair, Nominating and Compensation
    Committee
    Board of Directors



By:
   -----------------------------------
    Douglas J. Babb
    Executive Vice President -
    Law and Government Relations
    and Secretary



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