<PAGE>   1
                                                                   EXHIBIT 10.35

                                   AGREEMENT

DATE:    ___________      _____, 19___

PARTIES:         First Party:     BEVERLY ENTERPRISES, INC., a Delaware
                                  corporation, and PHARMACY CORPORATION OF
                                  AMERICA, a California corporation, and its
                                  consolidated subsidiaries, hereinafter
                                  collectively referred to as "Company"; and

                 Second Party:    RONALD C. KAYNE, hereinafter referred to as
                                  "KAYNE."

AGREEMENT:

         FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, the parties hereto do agree between themselves as follows:

Section 1. DEFINITIONS.

         (a)     As used herein, "KAYNE" shall mean Ronald C. Kayne, his
successors-in-interest, predecessors-in-interest, assigns, administrators and
executors.

         (b)     As used herein, the term the Company" shall mean Beverly
Enterprises, Inc. and Pharmacy Corporation of America, their affiliates,
subsidiaries, divisions, agents, assigns, pension plans, compensation plans,
other benefit plans, predecessors-in-interest, successors-in-interest, and any
officer, director, employee, agent or other representative of any of the
foregoing

         Section 2. RESIGNATION.

         (a)     KAYNE hereby tenders his resignation from the offices of
President of Pharmacy Corporation of America ("PCA") and as Executive Vice
President of Beverly Enterprises, Inc. ("Beverly") effective May 31, 1995.
KAYNE further tenders his resignation as an employee of the Company effective
May 31, 1995. The Company hereby accepts such resignations effective on such





<PAGE>   2
dates. All duties and obligations of KAYNE in those positions are ended as of
that date, and all obligations of the Company to KAYNE with respect to those
positions or otherwise are terminated as of that date, except as otherwise
provided herein.

         (b)     The Parties enter into this Agreement solely to avoid
expensive, burdensome and protracted litigation. Nothing in this Agreement
constitutes or is intended to constitute any finding of fact, admission of
liability, or assessment of liability of the Company with respect to any claim
that KAYNE has asserted or could assert against the Company. This Agreement and
the Company's actions performed pursuant hereto shall not be deemed to be or
construed as an admission of any allegation of KAYNE'S, nor shall they
constitute any admission of any fact, liability or fault as to any claim or
proceeding which has been, is now being or may be pursued by any person, agency
or entity, including without limitation, KAYNE or any other past or present
employee of the Company. This Agreement shall not be used and is not intended
to be used as evidence or for any other purpose in any action or proceeding,
other than as evidence of the Parties' compromise of their disputes and
discharge of KAYNE's claims.

         Section 3. PAYMENTS. The Company agrees to pay KAYNE the following
sums in consideration of his voluntary resignation:

                 (a)      Vacation.  The sum of Seventeen Thousand Three
         Hundred Seven and 69/100 Dollars ($17,307.69), which shall be subject
         to all normal withholding taxes, in full payment for three (3) weeks
         of vacation pay due to KAYNE, which shall be payable on June 1, 1995,
         or as soon thereafter as this Agreement becomes effective;





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<PAGE>   3
                 (b)      Severance Payments. KAYNE will receive a severance
         payment equal to fifty-two (52) weeks pay pursuant to the Agreement
         Concerning Benefits Upon Severance dated September 1, 1990, as amended
         April 25, 1993, attached hereto as Exhibit "A" and incorporated herein
         by this reference, in the aggregate sum of Three Hundred Thousand and
         No/100 Dollars ($300,000.00) payable in full on June 1, 1995, or as
         soon thereafter as this Agreement is completed, fully-executed by the
         Parties and becomes effective.  Lump sum federal and state withholding
         taxes will be withheld.

         Section 4.  BONUS AND CAR ALLOWANCE.  KAYNE will receive Fourteen
Thousand Six Hundred Fifty-Eight and 75/100 ($14,658.75) which is the cash
value as of the close of market on June 1, 1995 of the twenty percent (20%) of
his 1994 bonus that was used to purchase One Thousand Three Hundred and Three
(1,303) shares of stock on February 2, 1995 at $13.75 per share which shares
are hereby cancelled effective May 31, 1995, and all right, title and interest
in and to said shares in KAYNE's name as of such date shall be and hereby is
declared null and void and cancelled. Lump sum federal and state withholding
will be withheld. It is understood and agreed between the parties hereto that
KAYNE shall not be entitled to any bonus from the Company for 1995 performance.
It is further understood and agreed between the parties hereto that KAYNE'S car
allowance shall terminate effective May 31, 1995.

         Section 5. CONSULTING AGREEMENT. The Company and KAYNE shall enter
into a Consulting Agreement simultaneously herewith which Consulting Agreement
shall be in the form and substance of Exhibit "B" attached hereto and
incorporated herein by this reference.  Said Consulting Agreement shall





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<PAGE>   4
provide that KAYNE shall be required to be available to the Company for up to
twenty (20) hours each week on a cumulative basis, annually, and shall be paid
at the rate of Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) per
month for such consulting services which shall extend over a three-year period
commencing on June 1, 1995 and ending on May 31, 1998 (the "Consulting
Period").

         Section 6.  MEDICAL COVERAGE.  The Company will pay COBRA conversion
costs for continued coverage of KAYNE and his spouse and dependents under its
executive medical and dental plans during the Consulting Period or until such
time as KAYNE commences other employment and is eligible for benefits in that
other employment, whichever first occurs. KAYNE shall present any claims for
reimbursement under the Company's Executive medical and dental plans for
processing in accordance with the Company's current policy at the time any such
claims are made. If coverage is desired by KAYNE after the Consulting Period
ends all costs shall be paid by KAYNE as required by the insurer if such
continued coverage is in tact available.  KAYNE shall have no COBRA conversion
privilege following the end of the Consulting Period.

         Section 7. LIFE AND DISABILITY INSURANCE. The executive life insurance
policy on KAYNE is Sixty Percent (60%) vested and shall terminate on May 31,
1995. The Company will continue to provide term life insurance coverage to
KAYNE in accordance with the executive life insurance plan in the total amount
of One Hundred Eighty Thousand Dollars ($180,000).  The premiums on this
benefit are taxable to KAYNE, who shall be solely responsible for any tax.  The
remaining unvested portion of the executive life insurance policy of One
Hundred Twenty Thousand Dollars ($120,000) may be converted at the sole cost
and expense of KAYNE in accordance with the existing policy, or it will





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terminate as of said date.  The basic group life insurance policy in the amount
Three Hundred Thousand Dollars ($300,000) insuring KAYNE may be converted by
KAYNE at his sole cost and expense in accordance with the existing policy, or
it will terminate as of said date.

         The long term disability policy will terminate on effective May 31,
1995 and may be converted to an individual policy at KAYNE's sole cost and
expense in accordance with the existing policy.

         Section 8. OPTIONS AND RESTRICTED STOCK. KAYNE understands and agrees
that all vested and exercisable option grants and restricted Stock awarded
under any of the Company's stock option plans (i.e., the Company's Amended and
Restated 1981 Beverly Incentive Stock Option Plan, or the Amended and Restated
1981 and 1985 Non-qualified Stock Option Plans, or the Amended and Restated
Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, all of such
plans together hereinafter referred to as the "Stock Plans") must be exercised,
if at all, no later than ninety (90) days following May 31, 1995, and if KAYNE
does not exercise Said stock options within said ninety (90) day period, said
stock options Shall be and are hereby cancelled effective the close of business
on August 29, 1995 and all rights, title and interest in and to said stock in
KAYNE's name as of such date shall be and hereby is declared null and void and
cancelled. KAYNE further understands and agrees that unvested or unexercisable
option grants and restricted stock awarded under any of the Company's Stock
Plans shall be and hereby are cancelled effective May 31, 1995 and all right,
title and interest in and to any unvested or undelivered restricted Stock in
KAYNE'S name as of such date shall be and hereby is declared null and void and
cancelled.  KAYNE was granted the following stock options:





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<PAGE>   6
<TABLE>
<CAPTION>
GRANT    DATE OF      TYPE        SHARES           PRICE OF         VESTED   VESTED           VESTED           NOT
NUMBER  GRANT                     OR UNITS         GRANT--$                  AND              AND NOT          VESTED
                                  GRANTED                                    EXERCISED        EXERCISED
<S>      <C>          <C>       <C>                <C>            <C>        <C>               <C>             <C>
06737    12/08/94     ISO         12,000           14.000               0          0                0          12,000

06703    12/09/93     ISO         15,000           12.500           3,750          0            3,750          11,250

060006   2/15/94      NQ-          2,464           14.000               0          0                0           2,464
                      Phantom

060032   2/15/95      NQ-          3,258           13.750               0          0                0           3,258
                      Phantom

075019   2/15/95      NQ-Other     1,303           13.750               0          0                0           1,303*
                      Units

090160   3/21/90      NonQual     40,000            4.375          40,000     32,000            8,000               0

090190   3/21/90      NonQual     12,500            4.375          12,500     10,000            2,500               0

090191   3/21/90      NonQual     17,500            4.375          17,500     14,000            3,500               0

090209   5/11/90      NonQual     60,000            4.500          60,000     48,000           12,000               0

091008   12/09/93     NonQual     35,000           12.500           8,750          0            8,750          26,250

091040   12/08/94     NonQual     18,000           14.000               0          0                0          18,000

TOTALS                          217,025                           142,500    104,000           38,500          74,525
</TABLE>

LEGENDS

 .        ISO =   Incentive Stock Option
 .        NQ-Phantom = Nonqualified Phantom Stock Option
 .        NQ-Other Units = Nonqualified "Other Unit" Stock Option
 .        NonQual = Nonqualified Stock Option

*        Twenty percent (20%) of 1994 bonus. See Section 4. Bonus and Car
         Allowance.

         Section 9. DEFERRED COMPENSATION. The Company has accrued a total of
One Hundred Ninety-Four Thousand Eight Hundred Fifty and 97/100 Dollars
($194,850.97) in KAYNE'S Special Ledger account pursuant to the applicable
provisions of the Company's Deferred Compensation Plan, and as more fully
calculated in Exhibit "C" attached to this Agreement.  The Special Ledger
account shall be paid to KAYNE as provided for in the Deferred Compensation
Plan in periodic payments commencing June 30, 1995.

         Section 10. CONFIDENTIALITY. The company and KAYNE each agree to keep
the terms of this Agreement confidential and that neither of them nor their




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respective employees, agents, officers, representatives, heirs or assigns will
publicize the terms of this Agreement in any way nor will they issue,
distribute, or make available any bulletin or written statement of any kind
concerning the subject matter of this Agreement or KAYNE'S termination except,
however, as required by legal process, or as they both may otherwise agree in
writing.

Section 11.      NON-COMPETITION AND NON-SOLICITATION AGREEMENT.

         (a)     KAYNE hereby covenants that during the Consulting Period as
set forth in the Consulting Agreement, he will not, directly or indirectly,
own, manage, operate, control, engage in, participate in or be connected in any
manner with the ownership, management, operation or control of any
institutional pharmacy business operations, which are similar to the Company's
present operations, any home infusion therapy business operations, or any home
health care business operations within a 100 mile radius of any of the existing
operations of the Company listed on Exhibit 1 attached to the Consulting
Agreement. The foregoing shall not prohibit KAYNE from (1) serving on the Park
Hospital District Board; (2) from being employed in any retail pharmacy
provided that the retail pharmacy does not engage in the nursing home pharmacy
business (except incidentally) or in the home IV infusion business, and to the
extent it does that KAYNE does not directly or indirectly engage in such
businesses; (3) from being employed by any retail drug chain provided the chain
does not engage in nursing home pharmacy (except incidentally) or in the home
IV infusion business (except incidentally), and to the extent it does that
KAYNE does not directly or indirectly engage in such businesses; (4) from being
employed by an acute care general hospital provided the hospital does not
engage in the nursing home pharmacy business off its licensed premises, or






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<PAGE>   8
in the home IV infusion business except in the care of its own on-site
patients, and to the extent it does that KAYNE does not directly or indirectly
engage in such businesses; (S) from being employed by any pharmaceutical
manufacturer provided the manufacturer does not operate nursing home pharmacies
(except incidentally) or home IV infusion pharmacies, and to the extent it does
that KAYNE does not directly or indirectly engage in such businesses, or (6)
from being employed by any Health Maintenance Organization (HMO), Pharmacy
Benefit Management Plan, School of Pharmacy and/or its affiliated teaching
hospital(s) or by a Pharmacy Trade Association or Professional Society so long
as any such organization or institution does not engage in the nursing home
pharmacy business (except incidentally) or in the home IV infusion business
(except incidentally), and to the extent it does that KAYNE does not directly
or indirectly engage in such businesses.

         (b)     KAYNE shall not during the Consulting Period, as set forth in
the Consulting Agreement, or at any time thereafter make, use for his own
purposes or divulge to any person, firm or corporation (except under the
authority of the Company or if ordered to do so by a court of competent
jurisdiction) 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 may hereafter come to
the knowledge of KAYNE which is not freely available to the public.

         (c)     KAYNE hereby covenants with the Company that he will not for
any reason whatsoever and whether directly or indirectly, either alone or
jointly with any person, firm or corporation and whether as principal, servant
or agent:

                 (i)  During the Consulting Period, as set forth in






                                      -8-
<PAGE>   9
         the Consulting Agreement, solicit or endeavor to entice away, offer
         employment to or employ, or offer or conclude any contract for
         services with any person who is employed by the Company as of the date
         of this Agreement so as to affect adversely the goodwill or business
         of the Company;

                 (ii)   At any time, 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; and

                 (iii)  At any time, use to the detriment of the Company 
         any confidential information of a technical, trade, financial or 
         other character which constitutes a legally protectable trade
         secret and which KAYNE has acquired or may acquire in the course of or
         as a result of his employment by the Company or his consulting to the
         Company.

         (d)     The parties agree that the geographical areas and time period
referred to in this Section 11 are divisible and severable and that if the
restrictions in subsections 11 (a) and (c) are held by any court to be
unenforceable with respect to a specific geographical area and/or time
interval, the restrictions shall remain applicable to all other geographical
areas and terms and to that portion of any reduced geographical area and time
interval designated by the court.

         (e)     The parties recognize that, in the event of a breach of the
covenant contained in subsections 11 (a) through (c) above, the Company's
remedy at law alone would be inadequate and, accordingly, the Company shall be






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entitled to an order or injunction restraining KAYNE from violating the
covenant herein contained.

         (f)     For purposes of this Section 11 and in consideration of this
Agreement, this non-competition and non-solicitation agreement has been
separately negotiated and bargained for, and constitutes a substantial portion
of the consideration for this Agreement.

         Section 12. LITIGATION.  KAYNE recognizes that as a key member of the
staff of the Company, KAYNE has occupied a position of trust and confidence
with respect to information of a secret or confidential nature which is or will
become the property of the Company, including but not limited to information
concerning various claims and lawsuits that have arisen or may arise out of the
Company's operations in which KAYNE was indirectly involved (collectively, the
"Litigation").  KAYNE agrees that KAYNE will not at any time for so long as any
such information shall remain confidential or otherwise remain wholly or
partially protectable, use, divulge, furnish, or make accessible such
information to anyone outside of the Company, the Company's agents or
representatives, except as required by legal process.

         For purposes of this Section 12, the term "information of a secret or
confidential nature" shall mean any information of any nature in any form which
at the time or times concerned is not generally known to or which could not be
obtained by persons engaged in a business similar to that conducted or
contemplated by Company and which relates to any one or more of the aspects of
the present or past businesses of the Company. For purposes hereof any such
confidential information which is disclosed to any third party by a present or
past employee or representative of the Company not authorized to make such
disclosures shall be deemed to remain confidential and protected.  KAYNE






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<PAGE>   11
further agrees that KAYNE shall continue to cooperate with the Company and its
attorneys concerning all aspects of the Litigation, including but not limited
to making himself available for a sufficient and reasonable period of time for
reviews, conferences, meetings, depositions, and testimony until such time as
the Litigation has been finally resolved to the Company's satisfaction.

         For purposes of this Section 12, KAYNE acknowledges that the
Litigation consists or may consist of several lawsuits of a complex nature such
that it is difficult to estimate the exact number of hours that KAYNE will be
needed to devote to the Litigation. KAYNE therefore agrees to make himself
available to the Company in compliance with this Section 12, for sufficient
periods of time as is required for lawsuits of a complexity similar to those
comprising (or which may in the future comprise) the Litigation. The Company
agrees that its attorneys shall work with KAYNE to insure that, to the extent
possible, the time that KAYNE shall be required to devote to the Litigation
shall be scheduled in accordance with KAYNE'S preferences.  During the
Consulting Period, KAYNE agrees that he will provide his services (including
actual travel time) required in connection with the Litigation at no cost to
the Company provided, however, the Company shall reimburse KAYNE for the costs
and expenses reasonably incurred by KAYNE in connection with the provision of
such services, and provided further that all services provided pursuant to this
Section 12 shall be treated as meeting KAYNE's obligation under Section 5 of
the Consulting Agreement. After the end of the Consulting Period, KAYNE will
continue to be obligated to provide the services called for by this Section 12,
and in such circumstances, he will be compensated at the rate of Seventy- Five
Dollars ($75.00) per hour, and the Company will reimburse KAYNE for the costs
and expenses reasonably incurred by KAYNE in connection with the





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provision of such services.

         Section 13.  RELEASES.  In consideration of the provisions of this
Agreement and for other good and sufficient consideration, receipt whereof is
hereby acknowledged, the Company and KAYNE do each hereby release and discharge
the other, from all actions, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, attorneys' fees, costs, disbursements, bonds,
bills, covenants, contracts, controversies, agreements, promises, and demands
whatsoever, at law or in equity, present and future, known or unknown, in any
manner arising out of the employment relationship between the Company and
KAYNE, and the termination thereof, and all said actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, attorneys' fees,
costs, disbursements, bonds, bills, covenants, contracts, controversies,
agreements, promises, and demands whatsoever, at law or in equity, are hereby
satisfied in full, terminated and forever discharged.  No further action
whatsoever shall be taken before any tribunal and forum regarding said actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
attorneys' fees, costs, disbursements, bonds, bills, covenants, contracts,
controversies, agreements, promises, and demands whatsoever, at law or in
equity.

         Other than arising out of this Agreement, KAYNE further agrees not to
file or lodge or bring any charges, complaints, grievances or other claims in
any forum including, but not limited to judicial, administrative or arbitral
forums against the Company arising out of his employment with the Company or
his resignation and severance therefrom.

         KAYNE affirms that there is no administrative or judicial proceeding
against the Company to which KAYNE is a party or which has been filed on his






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behalf.  In the event that there is outstanding any such proceeding, KAYNE
agrees to cause the immediate withdrawal and dismissal with prejudice of that
proceeding.  In the event that any agency, court or other forum does not
dismiss with prejudice such proceeding, KAYNE agrees that he will not give
testimony or evidence voluntarily against the Company in such proceeding. The
prohibition contained herein shall not apply with respect to information or
testimony provided by KAYNE pursuant to a subpoena enforced by order of the
court.

         Section 14. INDEMNIFICATION. The Company will indemnify KAYNE to the
fullest extent permitted (including payment of expenses in advance of final
disposition of a proceeding) by the Certificate of Incorporation and By-Laws of
the Company, as in effect at such time or on the effective date of this
Agreement, whichever affords or afforded greater protection to KAYNE, and KAYNE
shall be entitled to the protection of any insurance policies the Company may
elect to maintain generally for the benefit of its directors and officers,
against all costs, charges and expenses whatsoever incurred or sustained by him
in connection with any action, suit or proceeding to which he may be made a
party by reason of his being or having been an officer or employee of the
Company or any of its subsidiaries or affiliates or his serving or having
served any other enterprises as an officer or employee at the request of the
Company.  The Indemnification Agreement between Beverly Enterprises, Inc. and
KAYNE dated January 20, 1992 shall remain in full force and effect for the
period up to and including May 31, 1995.

         Section 15.  POSITIVE RECOMMENDATION.  The Company shall respond,
verbally, to inquiries from a potential employer of KAYNE with a positive
recommendation, and upon request of either KAYNE or any such potential





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<PAGE>   14
employers, shall provide a positive letter of recommendation, provided KAYNE
shall inform any such potential employers to direct their inquiries to the
attention of David R. Banks, Chairman of the Board of Directors, President and
Chief Executive Officer of the Company.

         Section 16. THE COMPANY'S RIGHT OF SET-OFF. In the event the Company,
in its reasonable discretion, believes that KAYNE has breached any material
obligation under this Agreement and/or the Consulting Agreement attached hereto
as Exhibit "A", then, in addition to any other legal or equitable remedies it
may have, the Company may suspend making the payments to KAYNE provided for in
Section 3 hereof and Section 4 of the Consulting Agreement and, instead shall
place such payments in an interest bearing account to be held in escrow by the
Company pending judicial resolution of the issue of whether KAYNE has breached
this Agreement and/or the Consulting Agreement.  Within a reasonable time of
suspending such payments, the Company shall commence an action in any court of
competent jurisdiction seeking, in addition to whatever other remedies may be
available to it, an order that KAYNE has breached any provision of the this
Agreement and/or the Consulting Agreement.  Upon the entry of a final judgment
to that effect (and after any appeals, if any) , then any damages to the
Company resulting from said breach, including but not limited to liquidated
damages, may be set-off by the Company from the amounts it holds in escrow
under this Section.  Upon entry of any final judgment that KAYNE has not
breached any provision of this Agreement and/or the Consulting Agreement (and
after any appeals, if any) then all funds held in escrow, including interest
thereon, shall be released to KAYNE

         Section 17. AUTHORITY OF COMPANY TO ENTER INTO THIS AGREEMENT. The
Company is a corporation duly organized, validly existing and in good standing





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<PAGE>   15
under the laws of the State of Delaware and qualified to transact business in
the State of Arkansas as a foreign corporation. In addition, the execution and
delivery of this Agreement and the performance by it of its obligations under
this Agreement have been duly authorized by all necessary corporate action of
the Company and do not violate or conflict with: (a) any provision of the
Company's Articles of Incorporation or By-laws; (b) any law or any order, writ,
injunction, decree, rule, regulation of any Court, administrative agency or any
other governmental authority; or (c} any agreement to which the Company is a
party or by which the Company is bound.

         Section 18. EXPERTS. Each of the parties declares that prior to the
execution of this Agreement, it apprised itself of sufficient relevant data,
either through experts or through other sources of its own selection, including
without limitation full legal review by attorneys chosen by each party, in
order that it might intelligently exercise its own judgment in deciding whether
to execute this Agreement.

         Section 19. NOTICE. All notices and other communications to be given
pursuant to this Agreement shall be in writing and shall be delivered,
telegraphed or mailed by first class registered or certified mail, postage
prepaid and return receipt requested to the other party, as set forth below:

         If to KAYNE:

                                        Ronald C. Kayne
                                        3000 Puma
                                        Estes Park, CO 80517





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<PAGE>   16
         If to the COMPANY:

                                        Beverly Enterprises, Inc.
                                        Attn:   Chairman or President
                                        5111 Rogers Avenue, Suite 40-A
                                        Fort Smith, AR 72919-0155

         Communications which are delivered or telegraphed shall be deemed to
have been given when delivered or telegraphed.  Communications which are mailed
shall be deemed to have been given 72 hours after deposit in the U.S. Postal
Service as required in this Section 19.

         Section 20. CHOICE OF LAW. The parties agree that the laws of the
State of Arkansas shall govern the enforcement and construction of the
provisions of this Agreement.

         Section 21.  ENTIRE AGREEMENT.  This Agreement sets forth the entire
agreement of the parties hereto, and any and all prior agreements, whether oral
or written, on the subject matter contained herein, are superseded by this
Agreement. This Agreement may only be modified by a later agreement in writing
duly executed by each of the parties hereto.  In the event of the commencement
of any litigation for the enforcement of any rights under this Agreement, the
prevailing party in such litigation shall be entitled to receive from the
unsuccessful party, all costs incurred in connection with such litigation,
including a reasonable amount as attorneys' fees.

         Section 22. DISCLAIMER. KAYNE understands and agrees that he:

         (a)     Has had a full twenty-one (21) days within which to consider
this Agreement before executing it;

         (b)     Has carefully read and fully understands all of the provisions
of this Agreement;

         (c)     Is, through this Agreement, releasing the Company from any and
all claims he may have against the Company;






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<PAGE>   17
         (d)     Knowingly and voluntarily agrees to all of the terms set forth
in this Agreement;

         (e)     Knowingly and voluntarily intends to be legally bound by the
same;

         (f)     Was advised and hereby is advised in writing to consider the
terms of this Agreement and consult with an attorney of his choice prior to
executing this Agreement;

         (g)     Has a full seven (7) days following the execution of this
Agreement to revoke this Agreement and has been and hereby is advised in
writing that this Agreement shall not become effective or enforceable until the
revocation period has expired; and KAYNE understands that rights or claims
under the Age Discrimination in Employment Act of 1967 (29 U.S.C. SC 621, et
seq.) that may arise after the date this Agreement is executed are not waived
or released.

         IN WITNESS WHEREOF, the undersigned, having read the foregoing
Agreement, and understanding all of its terms, execute it voluntarily, on the
date first set forth above, with full knowledge of its significance.

                                        FIRST PARTY
                                        
                                        BEVERLY ENTERPRISES, INC.
                                        
                                        
                                        By
                                                David R. Banks
                                                Chairman, President and Chief
                                                Executive Officer
                                        
                                        
                                        SECOND PARTY
                                        
                                        
                                        
                                        Ronald C. Kayne





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