<PAGE>   1
                                                                   EXHIBIT 10.28

                              EMPLOYMENT CONTRACT


         AGREEMENT made as of December 8, 1995 between BEVERLY ENTERPRISES,
INC., a Delaware corporation (the "Company"), and David R. Banks (the
"Executive").

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

         WHEREAS, the Executive currently serves as Chairman of the Company's
Board of Directors;

         WHEREAS, the Company recognizes that the Executive's contribution to
the Company's growth and success has been and continues to be substantial;

         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 a Change in Control;

         NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth here in and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agrees 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 1.0 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.

                 (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 13(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
         Company shall be the continuing





<PAGE>   2
         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.

                 (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
         execution date of this Agreement, except that ownership of nursing
         homes or other medical facilities (as distinguished from the operation
         of said facilities) shall not be deemed to be competitive businesses,
         and the Executive's serving on the Board of Directors or as the
         Chairman of such Board of Directors of Nationwide Health Properties,
         Inc. or of Wellpoint Health Networks, Inc. is specifically excluded
         from the definition of competitive businesses.

                 (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
         compensation or benefits are reduced; (iv) 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; (v) the Company requires that the Executive's
         employment be based other than at Fort Smith, Arkansas, without his
         consent; (vi) 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; or
         (vii) 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 "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
<PAGE>   3
         2.      Term. The initial term of this Agreement shall be for the
period commencing on December 8, 1995 (the "Effective Date") and ending on
December 7, 1998. 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 of the Board of Directors 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 $540,000 per annum through December 31, 1994
         and thereafter at any such greater rate as is determined by the
         Committee.

                 (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)  Retain his interest in the Company's
                 terminated Deferred Compensation Plan pursuant to its terms
                 with the Executive's units 100% vested, locked in at the
                 Company's stock price on July 17, 1991, and credited with
                 interest (with quarterly compounding) at a rate to be
                 determined, from time to time, by the Committee;

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

                          (v)    $600,000 of individual life insurance
                 coverage under the Company's Executive Life Insurance Plan,
                 which coverage shall be 70% vested as of the date hereof, and
                 shall vest an additional 10% on January 1, 1995 and each of
                 the next two annual anniversaries thereof so long as Executive
                 is employed by the Company on any of such dates;

                          (vi)   $125,000 (or such greater amount as the
                 Company may make available to its senior executives generally)
                 of group term life insurance coverage;

                          (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;





                                       3
<PAGE>   4
                          (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;

                          (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.

                 (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.

         5.      Competition.

                 (a)      Executive shall not, at any time during the period of
         his employment with the Company, or, if his Termination of Employment
         is for Cause or without Good Reason, during the two year period
         following his Termination of Employment with the Company ("Non-Compete
         Period"), without the prior written consent of the Board, directly or
         indirectly engage in, or have any interest in, or manage or operate
         any person, firm, corporation, partnership or business (whether as
         director, officer, employee, agent, representative, partner, security
         holder, consultant or otherwise) that engages in any of the
         Competitive Businesses in any State of the United States or any
         foreign country in which the Company is then engaged in any of such
         businesses; provided, however, that Executive shall be permitted to
         acquire a stock interest in such a corporation provided such stock is
         publicly traded and the stock so acquired is not more than one percent
         of the outstanding shares of such corporation, and provided further,
         that Executive may engage in business that is a non- competitive
         supplier to the Company or that is a customer of Company products or
         services.

                 (b)      The Executive covenants that a breach of subparagraph
         (a) above 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 other rights and remedies available under this
         Agreement, at law or otherwise, be entitled to an injunction to be
         issued by any court of competent jurisdiction enjoining and
         restraining the Executive from committing any violation





                                       4
<PAGE>   5
         of subparagraph (a) above, and the Executive hereby consents to the
         issuance of such injunction.

                 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,
         subsection (c) does 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, 1996 - May 1, 1996, inclusive, for a Change in Control
         which is effective in the month of March, 1995), the Executive has a
         Termination of Employment initiated by the Executive without Good
         Reason, or

                          (c)     during the Term 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.

                 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 shaH 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,

                                  (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 all of the Company's 
         long-term incentive plans shall be fully





                                       5
<PAGE>   6
         vested. Any and all (i) options to purchase 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, or for two (2) years,
                 whichever is longer, the Executive shall be treated as if he
                 had continued to be an executive employee for all purposes
                 under the Company's Medical Plan, Executive Medical
                 Reimbursement Plan and Dental Plan, as described in Paragraph
                 4(b). 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.

                          (ii)    The Company shall fully vest and maintain in
                 force, at its own expense, for the remainder of the
                 Executive's life, the life insurance in effect under the
                 Company's Executive 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; Office.

                          (i)     If, within three years after the Executive's
                 Termination of Employment with the Company, 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.

                          (ii)    For the lesser of the Benefit Period or the
                 date Executive commences such employment which provides an
                 office to Executive, the Company shall provide Executive with
                 first-class office space of not more than 800 square feet in a
                 city to be selected by the Executive and approved by the
                 Company (with such approval not to be unreasonably withheld).

                 (e)      Executive Retirement Plan.  For the year of the
         Executive's Termination of Employment, the Company will make the
         contribution to the Retirement 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 Retirement Plan) and the percentage
         of such Compensation that the Executive is contributing to the
         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 Retirement 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)      Disability. For the Benefit Period, the Company shall
         provide long-term disability insurance benefits coverage to Executive
         equivalent to the coverage that the





                                       6
<PAGE>   7

         Executive would have had had he remained employed under the Company's
         Long-Term Disability Plan as described in Paragraph 4(b) applicable to
         Executive on the date of Termination of Employment, or, at the
         Executive's election, the plan 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 provides.

                 (g)      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.

         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 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 following a Change
in Control (including, without limitation, any benefits to which Executive
might otherwise have been entitled under the "Agreement Concerning Benefits
Upon Severance" dated as of September 1, 1990 to which Executive and the
Company are parties), 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, 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.





                                       7
<PAGE>   8
         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(f) 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.

         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.     Trust. Any payments or installments that may be required to be
made to Executive under this Agreement shall be funded immediately prior to any
Change of Control Date (or, if earlier, within ten (10) days after any
Termination of Employment) by a contribution by the Company of the necessary
amount of cash, as determined by independent actuaries acceptable to both
Executive and the Company, to the irrevocable grantor trust created for such
purpose by the Company, with Chemical Bank as Trustee dated July 18, 1995, a
copy of which Trust Agreement may be obtained from the Company or the Trustee.

         15.     Letter of Credit for Legal Fees. In order to ensure the
benefits intended to be provided to the Executive hereunder, immediately prior
to any Change of Control Date the Company shall establish and hereby agrees to
maintain throughout the remaining Term an irrevocable standby Letter of Credit
in favor of the Executive and each other person who is named an Executive under
similar agreements, drawn on a bank selected by the Company (the "Letter of
Credit") which provides for a credit amount of $250,000 being made available to
the Executive against presentation at any time and from time to time of his
clean sight drafts, accompanied by statements of his counsel for fees and
expenses, in an aggregate amount not to exceed $250,000, unless a larger amount
is authorized by either the Chief Executive Officer, General Counsel, Chief
Financial Officer, or a Senior Vice President of the Company.

         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





                                       8
<PAGE>   9
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, 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 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, 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 Board of Directors. 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





                                       9
<PAGE>   10
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.

         22.     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.

         The parties have duly executed this Agreement as of the date first
written above.

BEVERLY ENTERPRISES, INC.                          EXECUTIVE



By:
         Robert W. Pommerville                     David R. Banks
         Executive Vice President,                 3421 Free Ferry Road
         General Counsel and Secretary             Fort Smith, AR 72903


By;
         Christine Murray
         Assistant Secretary

5111 Rogers Avenue, Suite 40A
Fort Smith, AR 72919

Attention:       Secretary






                                       10