Document:

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                                                                    EXHIBIT 10.3

                               [BMFEA LETTERHEAD]

                                 August 1, 2002

Kevin Rosen,
Attorney at Law
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071

RE:      Beverly

Dear Mr. Rosen:

         This will confirm that with the entry of the pleas and permanent
injunction in connection with the above-referenced matters, the Bureau of
Medi-Cal Fraud & Elder Abuse (BMFEA) agrees that all active BMFEA
investigations, either civil or criminal, that relate to corporate liability for
patient care (direct or vicarious) for (1) any California skilled nursing
facilities that are or have been owned or operated directly by Beverly
Enterprises, Inc. or any of its subsidiaries, and (2) Beverly Enterprises, Inc.
and its subsidiaries ((1) and (2) collectively, hereinafter "Beverly") are
closed and concluded. Only if additional material evidence that was not
uncovered in the BMFEA investigation is submitted to BMFEA, will BMFEA reopen a
closed case.

         This further confirms that, with the exception as to certain employees
or contractors identified below, there are no active BMFEA investigations, civil
or criminal, that directly relate to the personal liability of current or former
Beverly directors, officers, employees who do not work in a facility, but affect
the quality of patient care, or high managerial employees except as noted in the
criminal plea agreement and the direct caregivers of Albert H. at the Sonora
facility. The term "direct caregivers" is defined here as a certified nurse
assistant, licensed vocational nurse, registered nurse, and medical director.
The term "high managerial employee" is defined here as a facility executive
director or a facility director of nursing services or a more senior management
executive employee.

         BMFEA has put forth its best effort to make Beverly aware of all active
criminal or civil BMFEA investigations presently being conducted that directly
relate to directors, officers, or high managerial agents and has done so via
this letter.

<PAGE>
Kevin Rosen
August 1, 2002
Page 2
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                                        Sincerely,

                                        /s/ ALAN B. ROBISON

                                        Alan B. Robison
                                        Deputy Attorney General
                                        Bureau of Medi-Cal Fraud and Elder Abuse

                                    For BILL LOCKYER
                                        Attorney General<PAGE>
                                                                    EXHIBIT 10.4

                           DESCRIPTION OF NON-EMPLOYEE
                              DIRECTORS GROUP TERM
                               LIFE INSURANCE PLAN

         The Company provides each non-employee director with up to $125,000 of
group term life insurance coverage, subject to a 35% reduction if age 70 or
older. Amounts in excess of $62,500 are subject to insurance company approval of
satisfactory evidence of insurability.

         All premiums are paid by the Company.

         Coverage terminates on the last day of service as a non-employee
director.<PAGE>

                                                                    EXHIBIT 10.5

                           AMENDMENT NUMBER ONE TO THE
                            BEVERLY ENTERPRISES, INC.
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

             (AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 2000)

                                  WITNESSETH:

         WHEREAS, Beverly Enterprises, Inc. (the "Employer") sponsors the
Beverly Enterprises, Inc. Supplemental Executive Retirement Plan (the "Plan") to
provide supplemental retirement benefits to a select group of management or
highly compensated employees; and

         WHEREAS, the Employer wishes to amend the Plan to document special
payment provisions previously approved for a certain senior executive; and

         WHEREAS, pursuant to Section 8.3 of the Plan, the Plan may be amended
at any time by the Employer;

         NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as
follows, effective as of October 16, 2001;

         1. Section 4.7(c) of the Pan is amended to read as follows:

                  "(c) Notwithstanding anything herein to the contrary, the
         Participant named on Exhibit "B" shall be entitled to the special
         benefit and payment provisions provided for therein."

         2. Exhibit "B" is hereby amended to read as follows:

                                   EXHIBIT "B"

Participant:   William R. Floyd

Special Provisions:  (i)  Section 4.1 shall be amended to provide as follows:

                  "The above-named Participant's annual Retirement Benefit shall
         equal the product of (a) 50% of his Final Average Compensation,
         multiplied by (b) a fraction, the numerator of which is the number of
         months that have elapsed from [10/16/01] until the Participant's
         retirement or termination, and the denominator of which is the number
         of months between [10/16/01] and the Participant's attainment of age 60
         on 10/16/05 (provided that the fraction cannot exceed one (1)), such
         that the Participant will receive the full benefit of 50% of Final
         Average Compensation if he retires from the Employer on or after
         attaining age 60."

<PAGE>

         (ii)     Section 4.2(b) is deleted in its entirety. If the Participant
retires or terminates employment prior to age 60, he shall be entitled to the
pro-rated annual benefits as described in (i) above. Anything to the contrary in
Sections 4.2(a) or 4.3(b) is hereby overridden.

         (iii)    The first two sentences of Section 4.4(a) shall be amended to
read as follows:

                  "Except as provided in Section 4.4(b) (concerning lump sum
         payments), if the Participant retires at or after attaining age 60, his
         Retirement Benefit shall be paid annually, as of the first business day
         of each year, for 15 years. Except as provided in Section 4.4(b), if
         the Participant retires or terminates employment prior to attaining age
         60, his Retirement Benefit shall be paid annually, as of the first
         business day of each year, for a number of full and partial years equal
         to the product of (a) 15, multiplied by (b) a fraction, the numerator
         of which is the number of months between [10/16/01] and the
         Participant's retirement or termination, and the denominator of which
         is the number of months between [10/16/01] and the Participant's
         attainment of age 60 on 10/16/05."

         (iv)     The third sentence of Section 4.4(a) is deleted.

         IN WITNESS WHEREOF, this Amendment Number One to the Plan has been
executed this _____ day of ____________, 2002, but to be effective as of October
16, 2001.

                                 BEVERLY ENTERPRISES, INC.

                                 By:
                                     ------------------------------------------
                                 Its:
                                     ------------------------------------------

                                        2<PAGE>
                                                                    EXHIBIT 10.6

June 6, 2002

Jeffrey Freimark

Dear Jeff:

I am pleased to announce that you have been selected to participate in the
Beverly Process Improvement Team Award Program. The company is embarking on a
long-term improvement initiative. As a member of the core implementation team,
it is important to recognize your critical role and to reward you for the
overall success of the initiative. Details of the program are outlined in the
enclosure.

I am excited about the potential impact and improvements we can make in the
profitability of our company. I look forward to working with you in the months
and years ahead.

Sincerely,

William R. Floyd
CEO

<PAGE>

                         PROCESS IMPROVEMENT TEAM AWARDS
                               PROGRAM HIGHLIGHTS

<Table>
<S>                             <C>
PROGRAM OBJECTIVE:              Measure process improvement achievements against last reduction goals

PROGRAM GOAL:                   Reduction of G & A expenses as a percent of revenue by $26 million for the
                                year ended December 2005

PROGRAM BASELINE:               G & A expenses as of the 12 month period ending June 2002

PROGRAM PAYMENT :               GOAL                                          PAYMENT = AMOUNT

                                26.0 MILLION OR GREATER                       100% =
                                -----------------------                       ------
                                Jeff Freimark                                 150,000 shares
                                Darlene Burch                                  75,000 shares

                                23.0 - 25.9 MILLION                            50% =
                                -------------------                           ------
                                Jeff Freimark                                  75,000 shares
                                Darlene Burch                                  37,500 shares

Performance evaluation and awards are subject to the full discretion of the Nominating and Compensation
Committee of the Board of Directors
</Table><PAGE>
                                                                    EXHIBIT 10.7

June 6, 2002

Darlene Burch

Dear Darlene:

I am pleased to announce that you have been selected to participate in the
Beverly Process Improvement Team Award Program. The company is embarking on a
long-term improvement initiative. As a member of the core implementation team,
it is important to recognize your critical role and to reward you for the
overall success of the initiative. Details of the program are outlined in the
enclosure.

I am excited about the potential impact and improvements we can make in the
profitability of our company. I look forward to working with you in the months
and years ahead.

Sincerely,

Jeffrey P. Freimark
CFO

<PAGE>

                         PROCESS IMPROVEMENT TEAM AWARDS
                               PROGRAM HIGHLIGHTS

<Table>

<S>                             <C>
PROGRAM OBJECTIVE:              Measure process improvement achievements against last reduction goals

PROGRAM GOAL:                   Reduction of G & A expenses as a percent of revenue by $26 million for the
                                year ended December 2005

PROGRAM BASELINE:               G & A expenses as of the 12 month period ending June 2002

PROGRAM PAYMENT :               GOAL                                          PAYMENT = AMOUNT

                                26.0 MILLION OR GREATER                       100% =
                                -----------------------                       ------
                                Jeff Freimark                                 150,000 shares
                                Darlene Burch                                  75,000 shares

                                23.0 - 25.9 MILLION                            50% =
                                -------------------                           ------
                                Jeff Freimark                                  75,000 shares
                                Darlene Burch                                  37,500 shares

Performance evaluation and awards are subject to the full discretion of the Nominating and Compensation
Committee of the Board of Directors
</Table>

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