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                                                                   EXHIBIT 10.28

                    SEVERANCE AGREEMENT AND RELEASE OF CLAIMS

         This Severance Agreement and Release of Claims ("Release") is entered
into between Beverly Enterprises, Inc., its officers, agents, directors,
employees, successors, subsidiaries, insurers, parents and/or affiliated
companies, and assigns (the "Company") and DAVID R. BANKS (the "Employee").

         WHEREAS, the Employee and the Company had entered into an Employment
Contract dated August 22, 1997, and it is the parties intent that all the terms
of such Agreement shall be superceded on the Effective Date of this Release and
the terms of this Release shall govern the rights and obligations of the parties
after the Employee's termination of employment except as otherwise set forth in
this Release; and

         WHEREAS, Employee retired from the position of Non-executive Chairman
of the Board of the Company on December 30, 2001 pursuant to a retirement
transition arrangement authorized by the Company's Board of Directors on January
15, 2001 (attached as Exhibit 1) in recognition of his substantial contributions
to the Company, his change in position from Chairman and CEO to Non-executive
Chairman, and to provide him with both retirement and pension-like benefits.

         NOW, THEREFORE, in consideration of the mutual promises and other
consideration described herein, the Company and the Employee agree as follows.

               1. Termination of Employment. The Employee hereby tenders, and
the Company hereby accepts, the Employee's termination ("Termination"), as a
result of his retirement, as an officer and employee of the Company effective
December 30, 2001 (the "Termination Date" or "Termination of Employment"). The
parties agree that, upon the Termination Date of this Release, the Employee
shall have no further right or duty to render services to or on behalf of the
Company except as provided for under Section 2(b) hereof. The "Effective Date"
of this Release will be the eighth day following receipt by the Company of an
original of this Release executed by the Employee, provided that there has been
no revocation as specified in Section 4(d) by the Employee.

               2. Severance. The Company promises that Employee will receive the
amounts or benefits set forth in this Section 2, subject to the terms of this
Release, and in lieu of all other severance benefits:

               (a)  Retirement Transition Payment and Pension-like Benefits. The
                    benefits described in Exhibit 1 constitute Employee's
                    retirement arrangement from the Company and have been paid
                    or conferred by the Company as of the date of this Release.


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               (b)  Continuation of Benefits.

                    (i)  For the period of three (3) years from the Termination
                         Date, the Employee 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
                         Employee 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 Employee's employment.

                    (ii) The Company shall maintain in force, at its own
                         expense, for the remainder of the Employee's life, the
                         vested life insurance in effect under the Company's
                         Executive Split Dollar Life Insurance Plan as of the
                         Termination Date.

               (c)  Relocation Benefit; Office.

                    (i)  If, within three (3) years after the Employee's
                         Termination Date, the Employee gives the Company
                         written notice that he desires to relocate within the
                         continental United States, the Company will reimburse
                         the Employee for any reasonable relocation expenses (in
                         accordance with the Company's general relocation policy
                         for executives as then in effect) in connection with
                         such relocation.

                    (ii) For the lesser of three (3) years following Employee's
                         Termination Date or the date Employee commences
                         employment which provides an office for Employee, the
                         Company shall provide Employee with first-class office
                         space of approximately 800 square feet in the Fort
                         Smith or Fayetteville area. The Company may elect to
                         extend its responsibility for paying Employee's office
                         rental beyond the initial three (3) year period on a
                         year-to-year basis at its sole discretion. For three
                         (3) years from Employee's Termination Date, Company
                         agrees to pay Employee an annual amount of $40,000 for
                         his administrative/secretarial support. The Employee
                         shall be solely responsible for the payment of any
                         applicable taxes.

               (d)  Executive Retirement Plan. For the year of the Employee's
                    Termination of Employment, the Company will make the
                    contribution to the Executive Retirement Plan on behalf of
                    the Employee that it would have made if the Employee had not
                    had a Termination of Employment, but in no event less than
                    the

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<PAGE>

                    percentage contribution it made for the Employee in the
                    immediately preceding year (and increased to take account of
                    the additional year of service), in each case taking account
                    of the Employee's annualized rate of "Compensation" (as
                    defined in the Executive Retirement Plan) and the percentage
                    of such Compensation that the Employee is contributing to
                    the Executive Retirement 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 Retirement Plan on behalf of
                    the Employee immediately upon the Employee's Termination
                    Date and any additional contribution required shall be paid
                    as soon as the amount is determined.

               (e)  Executive Deferred Compensation Plan. For the year of the
                    Employee'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 Employee had
                    not had a Termination of Employment determined based on the
                    Employee's deferral for such year. At Employee's election,
                    the Company contribution shall be paid to the Employee
                    immediately upon his Termination of Employment.

               (f)  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 2 are
                    not paid or payable or otherwise provided to the Employee 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.

               (g)  Extent of Benefit Eligibility. Employee will cease to be
                    eligible to participate under any stock option, bonus,
                    incentive compensation, commission, medical, dental, life
                    insurance, retirement, and any other compensation or benefit
                    plans of the Company or any affiliate following the
                    Termination Date except to the extent described above and
                    except where the governing documents of those plans provide
                    otherwise. Any payment from these plans will be in
                    accordance with the election(s) previously made by Employee.



                                       3
<PAGE>

         In the event of any material breach by the Employee of the terms of
this Release, the Employee's right to receive any further payments or benefits
under the Release shall immediately end, and the Employee will forfeit and be
required to return to the Company any payments or benefits received. Any such
breach shall not relieve the Employee of any obligations under the Release, and
the cessation of any benefits on account of a breach shall not limit the
Company's right to any other relief it may have as a matter of law or equity.
Notwithstanding the foregoing, any challenge as to the validity of the ADEA
release contained in subsection 4(d) of this Release shall not be considered a
material breach, to the extent such treatment is mandated by applicable law.

               3. Consideration of Release. Employee acknowledges that, before
signing this Release, he was given at least 21 days in which to consider this
Release. Employee waives any right he might have to additional time within which
to consider this Release. Employee further acknowledges that: (1) he took
advantage of the time he was given to consider this Release before signing it;
(2) he carefully read this Release; (3) he fully understand it; (4) he is
entering into it voluntarily; (5) he is receiving valuable consideration in
exchange for his execution of this Release that he would not otherwise be
entitled to receive; and (6) the Company, in writing, encouraged him to discuss
this Release with his attorney (at his own expense) before signing it, and that
he did so to the extent he deemed appropriate.

               4. General Release

               (a)  In General: Except for obligations established in this
                    Release, Employee irrevocably and unconditionally releases
                    all the Claims described in this Section 4 that he may now
                    have against the Released Parties listed in Section 4(b).

               (b)  Released Parties: The Released Parties are the Company, all
                    current and former parents, subsidiaries, related companies,
                    partnerships, or joint ventures, and, with respect to each
                    of them, their predecessors and successors; and, with
                    respect to each such entity, all of its past, present, and
                    future employees, officers, directors, stockholders, owners,
                    representatives, assigns, attorneys, agents, insurers,
                    employee benefit programs (and the trustees, administrators,
                    fiduciaries, and insurers of such programs), and any other
                    persons acting by, through, under or in concert with any of
                    the persons or entities listed in this subsection, and their
                    successors.

               (c)  Claims Released: The Claims Employee is releasing under this
                    Section 4 include all known and unknown claims, promises,
                    causes of action, or similar rights of any type that
                    Employee presently may have ("Claims") with respect to any
                    Released Party listed in Section 4(b). Employee understands
                    that the Claims Employee is


                                       4
<PAGE>

                    releasing might arise under many different foreign,
                    domestic, national, state, or local laws (including
                    statutes, regulations, other administrative guidance, and
                    common law doctrines), as set forth in this Section 4.

               (d)  Employee acknowledges that a portion of the amounts or
                    benefits under this Release is being paid to induce him to
                    release any claims that he may have under the Age
                    Discrimination in Employment Act ("ADEA"). Employee
                    acknowledges that he has adequate and legally sufficient
                    time to review and seek legal guidance concerning this
                    Release. Specifically, Employee acknowledges that this
                    Release was provided to him on January 11, 2002, and that he
                    has until January 31, 2002 to consider this Release. If
                    Employee chooses to execute this Release prior to January
                    31, 2002, it is solely his choice. Employee may revoke the
                    waiver of the ADEA claims in this Section of this Release
                    (which Employee acknowledges constitutes an entirely
                    separate release from the balance of this Release) within
                    seven (7) days after signing of this Release, in which case
                    Employee will not be paid that portion of the amounts or
                    benefits that are being paid to Employee for his release of
                    ADEA claims. Employee agrees that any revocation will be in
                    writing and accompanied by all sums received pursuant to
                    this Release and received by the Executive Vice President,
                    General Counsel by the end of the seven (7) day period.
                    Employee has been advised to consult with an attorney or
                    advisor concerning this Release. Employee understands the
                    rights that have been waived by this Release, including
                    rights under the Age Discrimination in Employment Act of
                    1967, 29 U.S.C.ss.62 1, et seq., as amended. Employee
                    further represents and warrants that he -- --- freely
                    negotiated the terms of this Release, and enters into it and
                    executes it voluntarily. He understands that this is a
                    voluntary waiver of any claims under the laws and orders
                    stated below, that relate in any way to his employment with,
                    complaints about, compensation due, or separation from the
                    Company.

                    Anti-discrimination statutes, such as the Age Discrimination
                    in Employment Act and Executive Order 11141, which prohibit
                    age discrimination in employment; Title VII of the Civil
                    Rights Act of 1964, Sections 1981 and 1983 of the Civil
                    Rights Act of 1866, and Executive Order 11246, which
                    prohibit discrimination based on race, color, national
                    origin, religion, or sex; the Equal Pay Act, which prohibits
                    paying men and women unequal pay for equal work; the
                    Americans With Disabilities Act and Sections 503 and 504 of
                    the Rehabilitation Act of 1973, which prohibit



                                       5
<PAGE>

                    discrimination based on disability; and any other federal,
                    state, or local laws prohibiting employment discrimination,
                    such as the State of Arkansas.

                    Federal employment statutes, such as the WARN Act, which
                    requires that advance notice be given of certain work force
                    reductions; the Employee Retirement Income Security Act of
                    1974, which, among other things, protects employee benefits;
                    the Fair Labor Standards Act of 1938, which regulates wage
                    and hour matters; the Family and Medical Leave Act of 1993,
                    which requires employers to provide leaves of absence under
                    certain circumstances; and any other federal laws relating
                    to employment, such as veterans' reemployment rights laws.

                    Other laws, such as any federal, state, or local laws
                    providing workers' compensation benefits, mandating leaves
                    of absence, restricting an employer's right to terminate
                    employees, or otherwise regulating employment; any federal,
                    state, or local law enforcing express or implied employment
                    contracts or requiring an employer to deal with employees
                    fairly or in good faith; any other federal, state, or local
                    laws providing recourse for alleged wrongful discharge,
                    tort, physical or personal injury, emotional distress,
                    fraud, negligent misrepresentation, defamation, and similar
                    or related claims, and any other law, such as the State of
                    Arkansas.

                    Examples of released Claims include, but are not limited to
                    the following (except to the extent explicitly preserved by
                    Section 1 or 2(a) of this Release): (i) Claims that in any
                    way relate to Employee's employment with the Company, or the
                    termination of that employment, such as Claims for
                    compensation, bonuses, commissions, lost wages, or unused
                    accrued vacation or sick pay except as otherwise provided in
                    paragraph 2(a); (ii) Claims that in any way relate to the
                    design or administration of any employee benefit program;
                    (iii) Claims that Employee has irrevocable or vested rights
                    to severance or similar benefits or to post-employment
                    health or group insurance benefits; (iv) any Claims to
                    attorneys' fees or other indemnities (such as under the
                    Civil Rights Attorneys' Fees Act), with respect to Claims
                    Employee is releasing, or any Claims that Employee has under
                    his Employment Contract.

               (e)  Employee represents and covenants that Employee, his heirs,
                    representatives, executors, administrators, successors, and
                    assigns have not and will not file any claims, charges, or
                    complaints


                                       6
<PAGE>

                    against the Company, with any Federal, State, or local
                    agency or court arising out of his employment and/or
                    separation from the Company. Employee further represents
                    that if any such agency or court ever assumes jurisdiction
                    of or otherwise pursues any such lawsuit, claim, charge, or
                    complaint and/or purports to bring any legal proceeding, in
                    whole or in part, on behalf of Employee, or Employee's
                    heirs, representatives, executors, administrators,
                    successors, and/or assigns, behalf against the Company,
                    Employee, or Employee's heirs, representatives, executors,
                    administrators, successors, and/or assigns, promptly, in
                    writing, will request the agency or court to withdraw from
                    and/or dismiss the lawsuit, claim, charge or complaint with
                    prejudice and will take all available legal action to be
                    removed from any such legal proceeding brought, in whole or
                    in part, on behalf of Employee. This subsection shall not
                    apply to challenges to the ADEA release in subsection 4(d)
                    of this Release, to the extent, if any, prohibited by
                    applicable law.

               (f)  Employee understands and agrees that his employment with the
                    Company has terminated effective December 30, 2001, and he
                    will not apply for or otherwise seek re-employment with the
                    Company, or its successors, at any time. The Company shall
                    have the absolute right, without incurring liability of any
                    kind, to refuse Employee's consideration for employment and
                    Employee agrees that he shall not authorize any person or
                    agency to pursue any claim for such refusal of employment.
                    The Employee acknowledges that he has received no promise or
                    assurance that his employment will resume at any point in
                    the future or that he will ever be rehired by the Company or
                    its affiliates, parent, or subsidiaries.

               (g)  As further consideration for the covenants set forth herein,
                    Employee hereby agrees to cooperate fully with the Company's
                    Legal Department and/or any lawyer, law firm, or consultant
                    that the Company designates with respect to any litigation,
                    deposition, hearing, arbitration, or other proceeding
                    (including, but not limited to, support of the Company's
                    position in defending any employment-related lawsuits or
                    claims concerning which Employee has knowledge or audits,
                    investigations, lawsuits, complaints or proceedings by
                    government entities of state or federal law compliance)
                    where the Company's legal or financial interests are at
                    issue. Employee further covenants that he will contact the
                    Company's Legal Department in the event that there is


                                       7
<PAGE>

                    any subpoena, notice or other instruction directing the
                    Employee to appear in any legal proceeding involving the
                    Company.

               (h)  To the maximum extent permitted by law, the Company shall
                    indemnify Employee against all expenses (including
                    reasonable attorneys' fees), judgments, fines and amounts
                    paid in settlement actually incurred by himself in
                    connection with any claim, action, suit or proceeding,
                    whether civil, criminal, administrative or investigative, to
                    which Employee becomes a party or in which Employee becomes
                    otherwise involved by reason of the fact that Employee was a
                    director, officer, employee or agent of the Company or of
                    any subsidiary or affiliate of the Company. In addition, the
                    Company shall continue to include Employee among those
                    individuals covered by the Company's director and officer
                    liability insurance, as long as such insurance is available
                    and the Company elects to maintain such insurance; provided,
                    however, that the unavailability of such insurance coverage
                    or the Company's discontinuance of such insurance shall in
                    no way limit, reduce or otherwise affect Employee's rights
                    to indemnification by the Company under the first sentence
                    of this subsection. This subsection shall remain in full
                    force and effect indefinitely with respect to any claims
                    based upon events occurring on or prior to December 30,
                    2001.

               (i)  Employee also promises neither to contest the validity of
                    this Release, nor sue the Company concerning any claim he
                    may have relating to his employment with the Company or the
                    termination of that employment. This subsection shall not
                    apply to challenges to the ADEA release in subsection 4(d)
                    of this Release, to the extent, if any, prohibited by
                    applicable law.

               5. Transfer of Duties. During the period preceding the
Termination Date and for one (1) year thereafter, the Employee will act at all
times with complete loyalty and good faith in promoting the best interests of
the Company. To this end, the Employee will: (a) fully inform the Company and
the Employee's successor (if any) of all material activities performed by the
Employee and of progress on assigned duties; and (b) transfer or otherwise make
available to the Company and the Employee's successor (if any), to the extent
reasonably possible, the Employee's knowledge and experience regarding his
activities on behalf of the Company. Employee will also promote the goodwill,
reputation, and ongoing business of the Company, and take all steps necessary to
maintain, and in no way act to hinder, the foregoing interests.

               6. Company Property: By Employee's last day of work, Employee
will return to the Company all files, memoranda, documents, records, copies of
the




                                       8
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foregoing, credit cards, keys, and any other property of the Company or its
affiliates in his possession, provided, however, that Employee and his
Administrative Assistant may retain their existing office furniture and
equipment. Company agrees to pay the reasonable and necessary expenses of moving
this furniture and equipment to its first non-Company location.

               7. Ownership of Claims: Employee has not assigned or transferred
any Claim he is purporting to release, nor has he attempted to do so.

               8. Other Representations: In addition to Employee's other
representations in this Release, Employee has made the following representations
to the Company, on which he acknowledges it also has relied in entering into
this Release with Employee: (a) Employee has not suffered any discrimination on
account of his age, sex, race, national origin, marital status, sexual
orientation, or any other protected status, and none of these ever has been an
adverse factor used against Employee by any Released Party; (b) Employee has not
suffered any job-related wrongs or injuries for which he might still be entitled
to compensation or relief, such as an injury for which Employee might receive a
workers' compensation award in the future; (c) Employee has no knowledge of any
wrongdoing by the Company that would subject the Company to any harm, civil or
criminal; and (d) Employee has provided no information, oral or in writing, to
anyone - individual, corporation or any other organization, private, public or
governmental - that involves any wrongdoing, civil or criminal, by the Company.

               9. False Claims Representations and Promises: Employee has
disclosed to the Company any information he has concerning any conduct involving
the Company or any affiliate that he has any reason to believe may be unlawful
or that involves any false claims to the United States. Employee promises to
cooperate fully in any investigation the Company or any affiliate undertakes
into matters occurring during Employee's employment with the Company or any
affiliate. Employee understands that nothing in this Release prevents him from
cooperating with any U.S. government investigation. In addition, to the fullest
extent permitted by law, Employee hereby irrevocably assign to the U.S.
government any right he might have to any proceeds or awards in connection with
any false claims proceedings against the Company or any affiliate.

               10. Cooperation Required: Employee agrees that, as requested by
the Company, he will fully cooperate with the Company or any affiliate in
effecting a smooth transition of his responsibilities to others.

               11. Non-Solicitation. Employee agrees to the following
prohibitions on solicitation of the Company's employees, customers, and business
interests, to wit:

               (a)  Employee shall not at any time during the period of his
                    employment with the Company, or during the one (1) year
                    period immediately following the effective date of his
                    termination (the




                                       9
<PAGE>

                    "Non-Solicitation Period"), without the prior written
                    consent of the Company, on behalf of himself or any other
                    person or entity, solicit for employment or employ any of
                    the current officers or employees of the Company; provided,
                    however, that nothing contained herein shall prohibit the
                    Employee from hiring employees of the Company when such
                    employment results from general solicitations for
                    employment.

               (b)  Employee 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 benefit, or for the benefit of any
                    company or persons 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, or customers of the Company
                    or the terms of any contracts of the Company which is not
                    freely available to the public.

               (c)  Employee covenants and agrees that a material breach of the
                    foregoing subsections 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 Release, at law
                    or otherwise, be entitled to an injunction to be issued by
                    any court of competent jurisdiction enjoining and
                    restraining the Employee from committing any violation of
                    the foregoing subsections.

               12. Non-Disclosure, Return of Proprietary Information, and
Inventions and Patents. The Company and the Employee agree that during his
employment with the Company, the Employee has received and become acquainted
with confidential, proprietary, and trade secret information of the Company
including, but not limited to, information regarding Company business programs,
plans, and strategies; finances; customers and prospective customers; suppliers
and vendors; marketing plans and results; personnel matters regarding Company
employees, officers, directors, and owners; manners of operation and services
provided; negotiating positions and strategies; legal arguments, theories,
claims, and defenses; pending, threatened, or potential legal actions, claims,
investigations, and audits; or information which could lead to the same; and
similar sensitive information regarding the operation and business of the
Company. The Employee acknowledges that such information has been developed or
acquired by the Company through the expenditure of substantial time, effort, and
money, that such information provides the Company with strategic and business
advantages over others who do not know or use such information, and that the
Company has implemented



                                       10
<PAGE>

specific policies and practices to keep such information secret. Accordingly,
the Employee acknowledges and agrees to abide by the prohibitions on use and
disclosure of such information set forth in his August 22, 1997 Employment
Contract, to wit:

               (a) Proprietary Information. Employee shall not during the term
          of employment or at any time thereafter (irrespective of the
          circumstances under which Employee'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
          (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 Employee or through authorized
          publication by Company to persons other than Company's employees.

               (b) Confidentiality and Surrender of Records. Employee shall not
          during the term of employment or at any time thereafter (irrespective
          of the circumstances under which Employee'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. Employee shall promptly return to Company all
          "confidential records" upon the


                                       11
<PAGE>

          termination of Employee's employment with Company. For 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 Employee's possession or under his control or
          accessible to him which contain any proprietary information as defined
          in subsection (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 Employee, either alone or jointly
          with others, during the term of employment belong to Company. Employee
          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
          Employee 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 Employee can
          provide conclusive evidence to the contrary.

               13. Public Statements. Employee also agrees that he will make no
disparaging remarks to any third parties concerning the Company, its employees,
agents, representatives, subsidiaries, parents, affiliates, and shareholders.
Employee further agrees that he will not disparage the Company's business
capabilities, products, plans, or management to any customer, potential
customer, vendor, supplier, contractor or subcontractor of the Company so as to
affect adversely the good will or business of the Company.

               14. Consequences of Violating Promises:

               (a)  General Consequences: In addition to any other remedies or
                    relief that may be available, Employee agrees to pay the
                    reasonable attorneys' fees as a result of his breaching a
                    promise he made in this Release (such as by suing a Released
                    Party over a released Claim) or if any representation he
                    made in this Release was false when made. Employee further
                    agrees that the Company would be irreparably harmed by any
                    actual or threatened violation of Sections 11 and 12 that
                    involves Release-related disclosures or disclosure or use of
                    confidential information or trade secrets or solicitation of
                    employees, customers, or suppliers, and that the


                                       12
<PAGE>

                    Company will be entitled to an injunction prohibiting
                    Employee from committing any such violation.

               (b)  Challenges to Validity: Should Employee attempt to challenge
                    the enforceability of this Release, Employee agrees first:
                    (1) to deliver a certified check to the Company for all
                    amounts he has received because he signed this Release, plus
                    10 percent interest per annum; (2) to direct in writing that
                    all future benefits or payments Employee is to receive
                    because he signed this Release be suspended; and (3) to
                    invite the Company to cancel this Release. If the Company
                    accepts Employee's offer, this Release will be canceled. If
                    it rejects Employee's offer, the Company will notify
                    Employee and deposit the amount Employee repaid, plus all
                    suspended future benefits and payments, in an
                    interest-bearing account pending a determination of the
                    enforceability of this Release. If the Release is determined
                    to be enforceable, the Company is to pay Employee the amount
                    in the account, less any amounts Employee owes the Company.
                    If the Release is determined to be unenforceable, the amount
                    credited to the account shall be paid to the entities that
                    paid the consideration for this Release in proportion to
                    their payments, and the suspension of future benefits or
                    payments shall become permanent.

               (c)  ADEA Claims: This section shall not apply to a challenge to
                    the ADEA release in subsection 4(b) of this Release to the
                    extent, if any, prohibited by applicable law.

               15. No Admission of Liability. This Release shall not in any way
be construed as an admission by the Company that it has acted wrongfully with
respect to Employee or any other person, entity or agency, or that Employee has
any rights whatsoever against the Company. The Company further specifically
disclaims and denies any liability to or wrongful acts against Employee or any
other person, entity or agency, on the part of itself, its employees and its
agents.

               16. Successors and Assigns. This Release shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives, and assigns. However, neither this Release
nor any right or interest hereunder shall be assignable by Employee, his
beneficiaries, or legal representatives, except as provided by law or pursuant
to referenced benefit plan documents.

               17. Severability and Reformation. The provisions of this Release
are severable. If any provision of this Release shall be determined to be
invalid, illegal, or unenforceable, in whole or in part, neither the validity of
the remaining parts of such provision nor the validity of any other provision of
this Release shall in any way be affected thereby. In lieu of such invalid,
illegal, or unenforceable provision, there shall be


                                       13
<PAGE>

added automatically as part of this Release a provision as similar in terms to
such invalid, illegal, or unenforceable provision as may be possible and be
valid, legal, and enforceable. Each party also agrees that, without receiving
further consideration, it will sign and deliver such documents and do anything
else necessary in the future to make the provisions of this Release effective.

               18. Taxes. Employee understands that he will be responsible for
paying all taxes that may become due on any of the severance benefits provided
herein. If he fails to pay these payments, or any taxing authority alleges that
he has failed to do so or that the Company is responsible for the payment of
these taxes, for any reason, Employee agrees to be fully responsible for any
judgments or orders, fines and penalties, and that he will indemnify the Company
including, but not limited to, the satisfaction of judgments, orders, fines or
penalties in the payment of the Company's defense by counsel of its choice in
such proceedings. The taxability of the amounts contained herein shall not
affect the validity of this Release.

               19. Governing Law. This Release shall be governed by the law of
the State of Arkansas.

               20. Arbitration of Disputes:

               (a)  In the event the Company believes that Employee has breached
                    this Release in any way, prior to seeking any remedy,
                    including arbitration, the Company's General Counsel will
                    first contact Employee and inform him of the claimed breach.
                    Employee will then have seven (7) days within which to
                    address the Company's claim before it may take any action
                    under this Release.

               (b)  Arbitrable Disputes: The Company and Employee agree to
                    resolve any claims they may have with each other (except, if
                    either Employee or the Company so elects, any dispute for
                    which injunctive relief is a principal remedy) through final
                    and binding arbitration in accordance with this section.
                    Employee also agrees to resolve in accordance with this
                    section any claim between him and any other Released Party
                    who offers or agrees to arbitrate the claim in this manner.
                    This arbitration requirement applies to, among other things,
                    disputes about the validity, interpretation, or effect of
                    this Release or alleged violations of it, claims of
                    discrimination under federal or state law, or other
                    statutory violation claims.

               (c)  The Arbitration: Except as otherwise provided in any other
                    enforceable arbitration agreement between Employee and the
                    Company (Another Arbitration Agreement), which the Company
                    and Employee hereby reaffirm if one exists, the arbitration
                    shall be


                                       14
<PAGE>

                    in accordance with the then-current arbitration rules and
                    procedures for employment disputes governing arbitrations
                    administered by the Judicial Arbitration and Mediation
                    Service (JAMS), except as provided in this section.
                    Arbitration shall take place before a panel of three
                    arbitrators experienced in employment law licensed to
                    practice in the state of Arkansas selected in accordance
                    with subsection (c). The arbitrators may not modify or
                    change this Release in any way. Employee, the Company, and
                    any Released Party who agrees to arbitrate an Arbitrable
                    Dispute under this section agree to submit to personal
                    jurisdiction in the state listed in the first Section of
                    this Release for such arbitration and in any jurisdiction
                    necessary for the enforcement of any arbitration award.

               (d)  Selection of the Arbitrators: The arbitrators shall be
                    selected as follows: JAMS shall give each party a list of 11
                    arbitrators drawn from its panel of employment dispute
                    arbitrators from the state of Arkansas. Each party may
                    strike all names on the list it deems unacceptable. If only
                    three common names remain on the lists of both parties,
                    those individuals shall be designated as the Arbitrators. If
                    more than three common names remain on the lists of both
                    parties, the parties shall strike names alternately from the
                    list of common names until only three remain. The party who
                    did not initiate the claim shall strike first. If no common
                    name exists on the lists of both parties, JAMS shall furnish
                    an additional list and the process shall be repeated. If the
                    arbitrators have been selected after two lists have been
                    distributed, then the parties shall strike alternately from
                    a third list, with the party initiating the claim striking
                    first, until only three names remain. Those persons shall be
                    designated as the arbitrators. Striking decisions must be
                    made and communicated to the other party and JAMS within 10
                    calendar days after the date of the transmittal
                    communication relaying the arbitrators remaining for
                    selection. In the event a party does not make a timely
                    strike, the other party may select the arbitrators from the
                    names remaining.

               (e)  Exclusive Remedy: Arbitration in this manner shall be the
                    exclusive remedy for any claim that must be arbitrated
                    pursuant to this section. Should Employee or the Company
                    attempt to resolve such a claim by any method other than
                    arbitration pursuant to this section, the responding party
                    will be entitled to recover from the initiating party all
                    damages, expenses, and attorneys' fees incurred as a result
                    of that breach.


                                       15
<PAGE>

               (f)  Fees and Expenses: Each party shall pay the fees of his or
                    her attorneys, the expenses of his or his witnesses, and any
                    other expenses that party incurs in connection with the
                    arbitration, but all other costs of the arbitration,
                    including the fees of the arbitrator, the cost of any record
                    or transcript of the arbitration, administrative fees, and
                    other fees and costs shall be paid in equal shares by the
                    Employee and Company. Except as provided in Another
                    Arbitration Agreement, the party losing the arbitration
                    shall reimburse the party who prevailed for all attorneys'
                    fees and expenses the prevailing party paid pursuant to the
                    preceding sentence.

               21. Entire Release. This Release constitutes the entire Release
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, oral and written, between the parties hereto to the extent
such agreements are inconsistent herewith, including but not limited to, any
prior agreements with respect to severance benefits. This Release may be
modified or amended only by an instrument in writing signed by both parties
hereof.

================================================================================
READ THIS RELEASE, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING
IT: IT INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS, AND ITS
ARBITRATION-OF-CLAIMS REQUIREMENT WAIVES EMPLOYEE'S RIGHT TO A JURY TRIAL. IF
EMPLOYEE WISHES, HE SHOULD TAKE ADVANTAGE OF THE FULL CONSIDERATION PERIOD
AFFORDED BY SECTION 3 AND YOU SHOULD CONSULT AN ATTORNEY.
================================================================================

               Employee represents that as of December 30, 2001, he has not
filed any lawsuits, charges, complaints, or claims relating to his employment or
any other matters that involve the Company. Employee agrees to cause the
withdrawal or dismissal with prejudice of all of these matters unless otherwise
stated by the Company, to the extent still pending within five (5) days after
this Release becomes irrevocable, and until such withdrawal or dismissal is
accepted or ordered, no amounts otherwise due Employee under this Release shall
become payable.



                                       16
<PAGE>

         IN WITNESS WHEREOF, the Company and the Employee have executed this
Release as of the day and year indicated below.

                                          Beverly Enterprises, Inc.


Dated:                                    By:
       --------------------------
                                          William R. Floyd
                                          Chairman of the Board,
                                          President and Chief Executive Officer


                                          Employee


Dated:                                    --------------------------------------
       --------------------------         David R. Banks


                                       17