Document:

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                                                                   EXHIBIT 10.22

                            BEVERLY ENTERPRISES, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                       (Effective as of December 31, 2002)

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                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                                 Page
                                                                                                                 ----
<S>                                                                                                              <C>
ARTICLE 1  ESTABLISHMENT AND PURPOSE..............................................................................  1

ARTICLE 2  DEFINITIONS............................................................................................  1

ARTICLE 3  ADMINISTRATION.........................................................................................  4

ARTICLE 4  ELIGIBILITY AND PARTICIPATION..........................................................................  6

ARTICLE 5  CONTRIBUTIONS TO PARTICIPANTS' ACCOUNTS................................................................  7

ARTICLE 6  DISTRIBUTIONS..........................................................................................  9

ARTICLE 7  DEFERRED COMPENSATION ACCOUNTS......................................................................... 12

ARTICLE 8  TRUST.................................................................................................. 14

ARTICLE 9  CHANGE IN CONTROL...................................................................................... 14

ARTICLE 10 RIGHTS OF PARTICIPANTS................................................................................. 15

ARTICLE 11 WITHHOLDING OF TAXES................................................................................... 15

ARTICLE 12 AMENDMENT AND TERMINATION.............................................................................. 15

ARTICLE 13 MISCELLANEOUS.......................................................................................... 16

ARTICLE 14 ADMINISTRATIVE INFORMATION............................................................................. 17

ARTICLE 15 ERISA RIGHTS........................................................................................... 17
</Table>

<PAGE>

                            BEVERLY ENTERPRISES, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                                    ARTICLE 1
                            ESTABLISHMENT AND PURPOSE

         1.1 Establishment. Effective as of December 31, 2002, the Company
hereby establishes this deferred compensation plan for a select group of
employees as described herein, which shall be known as the "Beverly Enterprises,
Inc. Executive Deferred Compensation Plan" (the "Plan"). The Plan is intended to
be an unfunded plan maintained primarily to provide deferred compensation
benefits for a select group of "management or highly compensated employees"
within the meaning of sections 201, 301, and 401 of ERISA, and therefore exempt
from the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Plan is
intended to constitute a "nonqualified deferred compensation plan" for purposes
of Code section 3121(v)(2) as well as 4 U.S.C. section 114.

         1.2 Purpose. The primary purposes of the Plan are (i) to provide a
select group of management or highly compensated employees with a capital
accumulation opportunity by deferring compensation on a pre-tax basis; (ii) to
provide the Company with a method of rewarding and retaining its highly
compensated executives; and (iii) to provide a nonqualified retirement program
with Company contributions to select individuals.

                                    ARTICLE 2
                                   DEFINITIONS

         Whenever used herein, the following terms shall have the meanings set
forth below, and, when the defined meaning is intended, the term is capitalized:

         (a)      "Account" means the accounting entry made with respect to each
                  Participant for the purpose of maintaining a record of each
                  Participant's benefit under the Plan.

         (b)      "Affiliate" means any business entity 80% or more directly or
                  indirectly owned or controlled by the Company.

         (c)      "Annual Incentive Plan" means the Company's annual performance
                  bonus plan as constituted from time to time.

         (d)      "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

                                       1
<PAGE>

                  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 or merge with any other person, entity or group of
                  persons within the meaning of Section 3(a)(9) of the
                  Securities Exchange Act of 1934 and as used in Sections 13(d)
                  and 14(d) thereto, including a "group" as defined in Section
                  13(d) (collectively referred to as a "Person") and the Company
                  shall not be the continuing or surviving corporation, (b) any
                  Person shall consolidate or merge with the Company, and the
                  Company shall be the continuing or surviving corporation and
                  in connection therewith, all or part of the outstanding
                  Company stock shall be changed into or exchanged for stock or
                  other securities of any other Person or cash or any other
                  property, (c) the Company shall be a party to a statutory
                  share exchange with any other Person after which the Company
                  is a subsidiary of any other Person, or (d) the Company shall
                  sell or otherwise transfer fifty percent (50%) or more of the
                  assets or earning power of the Company and its subsidiaries
                  (taken as a whole) to any Person or Persons.

                  Notwithstanding anything to the contrary contained herein, a
                  Change in Control shall not include any transfer to a
                  consolidated subsidiary, reorganization, spin-off, split-up,
                  distribution, or other similar or related transaction(s) or
                  any combination of the foregoing in which the core business
                  and assets of the Company and its subsidiaries (taken as a
                  whole) are transferred to another entity ("Controlled") with
                  respect to which (1) the majority of the board of directors of
                  the Company (as constituted immediately prior to such
                  transaction(s)) also serve as directors of Controlled and
                  immediately after such transaction(s) constitute a majority of
                  Controlled's board of directors, and (2) more than 70% of the
                  shareholders of the Company (immediately prior to such
                  transaction(s)) become shareholders or other owners of
                  Controlled and immediately after the transaction(s) control
                  more than 70% of the ownership and voting rights of
                  Controlled.

         (e)      "Code" means the Internal Revenue Code of 1986, as it has been
                  and may be amended from time to time.

         (f)      "Committee" means the Nominating and Compensation Committee of
                  the board of directors of the Company as it may exist from
                  time to time.

         (g)      "Company" means Beverly Enterprises, Inc., a Delaware
                  corporation.

         (h)      "Compensation" means an Employee's Salary and Incentive
                  Compensation paid by the Employer for the Plan Year.

         (i)      "Discretionary Contributions" means those contributions
                  credited to a Participant's Account, if any, pursuant to
                  section 5.4.

                                       2
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         (j)      "Distribution Eligibility Requirement" means the completion of
                  five (5) years of combined participation in this Plan and the
                  SERP.

         (k)      "Eligible Employee" means an Employee who is eligible to
                  participate in the Plan pursuant to Section 4.1.

         (l)      "Employee" means any person employed by the Employer whose
                  wages are subject to withholding for purposes of the Federal
                  Insurance Contribution Act.

         (m)      "Employee Contributions" means those contributions credited to
                  a Participant's Account in accordance with the Participant's
                  deferral election pursuant to Section 5.1.

         (n)      "Employer" means the Company and each Affiliate that adopts
                  the Plan with the Company's permission.

         (o)      "ERISA" means the Employee Retirement Income Security Act of
                  1974, as it has been and may be amended from time to time.

         (p)      "Incentive Compensation" means such bonuses and other non
                  periodic amounts payable to an Employee in addition to his
                  Salary, which may be paid to the Employee in the current or a
                  subsequent Plan Year as determined by the Employer in
                  accordance with its general policies and procedures and its
                  sole discretion. Whether a payment qualifies as "Incentive
                  Compensation" shall be determined by the Committee in its sole
                  discretion.

         (q)      "Matching Contributions" means those contributions credited to
                  a Participant's Account, if any, pursuant to Section 5.5.

         (r)      "Participant" means an Eligible Employee who is participating
                  in the Plan pursuant to Section 4.2.

         (s)      "Plan" means the Beverly Enterprises, Inc. Executive Deferred
                  Compensation Plan, as set forth herein, and as it may be
                  amended from time to time.

         (t)      "Plan Year" means January 1 to December 31 of each calendar
                  year. The first Plan Year shall be a short plan year that
                  begins and ends on December 31, 2002.

         (u)      "Qualified Plan" means the Beverly Enterprises, Inc. 401(k)
                  SavingsPlus Plan.

         (v)      "Rabbi Trust" means the grantor trust that may be established
                  pursuant to Article 8.

         (w)      "Rabbi Trustee" means the trustee of the Rabbi Trust.

         (x)      "Salary" means the base annual compensation payable to an
                  Employee by the Employer for services rendered during a Plan
                  Year, before reduction for amounts deferred pursuant to the
                  Plan or to the Qualified Plan or any other deferred

                                       3
<PAGE>

                  compensation, 401(k), or cafeteria plan, which is payable in
                  cash to the Employee for services to be rendered during the
                  Plan Year provided that "Salary" shall exclude Incentive
                  Compensation.

         (y)      "SERP" means the Beverly Enterprises, Inc. Supplemental
                  Executive Retirement Plan.

         (z)      "SERP Contributions" means those contributions credited to a
                  Participant's Account, if any, pursuant to Section 5.6.

                                    ARTICLE 3
                                 ADMINISTRATION

         3.1 Authority of the Committee. Subject to the provisions herein, the
Committee or its designee shall have full power and discretion to select
Employees for participation in the Plan; to determine the terms and conditions
of each Employee's participation in the Plan; to construe and interpret the Plan
and any agreement or instrument entered into under the Plan; to establish,
amend, or waive rules and regulations for the Plan's administration; to amend
(subject to the provisions of Articles 9 and 12 herein) the terms and conditions
of the Plan and any agreement entered into under the Plan; to adjudicate all
claims and appeals; and to make other determinations which may be necessary or
advisable for the administration of the Plan.

         The Committee may designate persons other than members of the Committee
to carry out the day-to-day ministerial administration of the Plan under such
conditions and limitations as it may prescribe; provided, however, that the
Committee shall not delegate its authority with regard to the determination of
Eligible Employees or contributions pursuant to Article 5.

         3.2 Decisions Binding. Subject to Section 3.4(b), all determinations
and decisions of the Committee or its designee as to any disputed question
arising under the Plan, including questions of construction and interpretation,
shall be final, conclusive, and binding on all parties and shall be given the
maximum possible deference allowed by law.

         3.3 Claim Procedures. If a request for Plan benefits is denied in whole
or in part, the Participant or his beneficiary ("claimant") will be notified in
writing within 90 days after receipt of the claim. In some instances, the
Committee may require an additional 90 days to consider the claim. When
additional time is needed, the claimant will be notified within 90 days of
receipt of the claim of the special circumstances requiring the extension and
the date by which the Committee expects to render its benefit determination. The
extension may not exceed a total of 180 days from the date the claim was
originally filed.

         If a claimant's initial request for benefits is denied, the notice of
the denial will include the specific reasons for denial and references to the
relevant Plan provisions on which the denial was based, a description of any
additional material or information necessary to perfect the claim and an
explanation of why such information is necessary, if applicable, and a
description of the Plan's review procedures and the time limits applicable
thereto, including a statement of the claimant's rights under Section 502(a) of
ERISA following an adverse benefits determination on review.

                                       4
<PAGE>

         Within 60 days after receiving a denial, the claimant or his authorized
representative may appeal the decision by requesting a review by writing the
Committee. On appeal, the claimant may submit in writing any comments or issues
with respect to the claim and/or any additional documents or information not
considered during the initial review and, upon request and free of charge, the
claimant will be provided access to and copies of all documents, records and
other information relevant to the claim.

         A decision on appeal will normally be given within 60 days of the
receipt of the appeal. If special circumstances warrant an extension, then the
decision will be made no later than 120 days after receipt of the appeal. If an
extension is required, the claimant will be provided a written notice of the
extension that shall indicate the special circumstances requiring the extension
and the date by which the Committee expects to render its final decision.
Subject to Section 3.4, the Committee's decision on appeal shall be final and
binding on all parties.

         If a claimant's appeal is denied in whole or in part, the notice of the
decision on appeal shall include the specific reasons for the denial and
reference to the relevant Plan provisions on which the denial was based, a
statement that, upon request and free of charge, the claimant may review and
copy all documents, records and other information relevant to the claim for
benefits and a statement describing the Plan's binding arbitration procedures
(or, on or after a Change in Control, other contest procedures) and the
claimant's rights under Section 502(a) of ERISA.

         3.4 Arbitration. (a) Pre Change in Control. The following provisions
shall apply before a Change in Control. Any individual making a claim for
benefits under this Plan may contest the Committee's decision to deny such claim
or appeal therefrom only by submitting the matter to binding arbitration before
a single arbitrator. Any arbitration shall be held in Fort Smith, Arkansas,
unless otherwise agreed to by the Committee. The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.

         The arbitrator's authority shall be limited to the affirmation or
reversal of the Committee's denial of the claim or appeal, based solely on
whether or not the Committee's decision was arbitrary or capricious, and the
arbitrator shall have no power to alter, add to, or subtract from any provision
of this Plan. Except as otherwise required by ERISA, the arbitrator's decision
shall be final and binding on all parties, if warranted on the record and
reasonably based on applicable law and the provisions of this Plan. The
arbitrator shall have no power to award any punitive, exemplary, consequential,
special, or extracontractual damages, and under no circumstances shall an award
contain any amount that in any way reflects any of such types of damages. Each
party shall bear its own attorney's fees. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.

         (b) Post Change in Control. On and after a Change in Control, the
Committee's decisions shall be given no special deference, but rather shall be
reviewed de novo, and a claimant may contest any Committee decision through
arbitration or litigation, at the forum and the venue of his or her choice. The
Company shall be liable for all court or arbitration costs and legal fees if the
claimant makes such a challenge.

                                       5
<PAGE>

         3.5 Indemnification. Each person who is or shall have been a member of
the Committee or acts pursuant to the Committee's direction, shall be
indemnified and held harmless by the Employer against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party, or in which he or she may be involved by reason
of any action taken or failure to act under the Plan, and against and from any
and all amounts paid by him in settlement thereof, with the Employer's approval,
or paid by him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he or she shall give the Employer an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his own behalf.

         The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Employer's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Employer may have to indemnify them or hold
them harmless.

                                    ARTICLE 4
                          ELIGIBILITY AND PARTICIPATION

         4.1 Eligibility. The Committee shall determine, in its sole and
absolute discretion, which such Employees shall be eligible to participate from
time to time, and may modify such determinations at any time, provided that at
all times the Plan shall continue to qualify as an unfunded plan maintained
primarily to provide deferred compensation benefits to a select group of
management or highly compensated employees, within the meaning of sections 201,
301, and 401 of ERISA. Currently, to be eligible for selection by the Committee,
an Employee must (i) be in pay level D or above, (ii) have Salary scheduled to
be at least $90,000, and (iii) have Total Compensation for the Plan Year
scheduled to be at least $100,000. For purposes of this Section 4.1, the phrase
"Total Compensation" shall mean a Participant's scheduled Salary and target
bonus under the Company's Annual Incentive Plan for the Plan Year.

         4.2 Participation. Each Eligible Employee shall become a Participant in
the Plan upon contributions being made to his Account pursuant to Article 5, and
the completion of all other applicable election and administrative forms
required by the Company.

         In the event a Participant ceases to be eligible to participate in the
Plan, such Participant shall become an inactive Participant, retaining all the
rights described under the Plan, except the right to make any further deferrals,
until such time that the Participant again becomes an active Participant.

         4.3 Partial Year Eligibility. In the event that an Employee first
becomes eligible to participate in the Plan after the beginning of a Plan Year,
the Employer shall notify the Employee of his eligibility to participate, and
the Employer shall provide each such Participant with a "Deferral Election
Form," and any additional enrollment forms that must be completed by the
Participant; provided, however, that such Participant must make his election
within 30 days thereof and may elect only to defer that portion of his
Compensation for such Plan Year which is to be earned after the filing of the
deferral election.

                                        6
<PAGE>

         4.4 Notice. The Company shall notify an Employee within a reasonable
time of such Employee's gaining or losing eligibility for active participation
in the Plan.

                                    ARTICLE 5
                     CONTRIBUTIONS TO PARTICIPANTS' ACCOUNTS

         5.1 Compensation Deferrals. Effective as of January 1, 2003, and
subject to Sections 5.2 and 5.3, an Eligible Employee may elect to defer and
have credited to his Account for any Plan Year (i) up to one hundred percent
(100%) of his Incentive Compensation, and (ii) up to seventy-five percent (75%)
of his Salary; provided, however, that the amount of deferrals selected by the
Participant shall not reduce his non-deferred Compensation below the amount that
is required to be withheld for any state or federal payroll taxes (including
FICA/Medicare tax on deferred amounts), income tax, payments to be withheld
pursuant to the Qualified Plan or any other benefit plan of the Employer (other
than this Plan), and any other required or elected withholding. Deferrals shall
be credited to a Participant's Account on the business day the Compensation is
withheld from the Participant's pay check. The minimum amount of Salary that may
be deferred in any Plan Year is five percent (5%). The minimum amount of
Incentive Compensation that may be deferred in any Plan Year is the greater of:
(i) five percent (5%) of the Participant's Incentive Compensation for the Plan
Year or (ii) $1,000. The minimum deferral amounts will be prorated if a
Participant first becomes eligible to participate in the Plan after the
beginning of the Plan Year. Eligible Employees shall not be permitted to defer
any portion of their Compensation for the initial short Plan Year that begins
and ends on December 31, 2002. At the discretion of the Committee, deferrals may
also be permitted for awards under the Beverly Enterprises, Inc. Long-Term
Incentive Plan or other equity compensation.

         5.2 Deferral Election. Eligible Employees and Participants shall make
their elections to defer all or a portion of their Salary for the Plan Year no
later than December 15 prior to the beginning of the Plan Year in which the
Salary is to be earned, or not later than thirty (30) calendar days following
notification of eligibility to participate for a partial Plan Year (with respect
to Salary not yet earned). Eligible Employees and Participants shall make their
elections to defer all or a portion of their Incentive Compensation for the Plan
Year before it is earned and substantially certain of payment, pursuant to rules
established by the Committee from time to time. Any deferral election a
Participant may have made under the Beverly Enterprises, Inc. Executive Deferred
Compensation Plan, originally established as of January 1, 1997, and as amended
and restated as of January 1, 2000, and August 18, 2000, shall not apply for
purposes of this Plan. Notwithstanding the foregoing, if an Eligible Employee
wishes to defer a portion of his Salary for the Plan Year beginning on January
1, 2003, such Eligible Employee must elect on or before December 9, 2002, to
defer all or a portion of his Salary to be earned for the pay periods beginning
on or after January 1, 2003. All Salary and Incentive Compensation deferral
elections under this Plan must be made before the Compensation is earned and
before the amount thereof is substantially certain of payment.

         5.3 Length of Deferral and Modification of Elections. All deferral
elections shall be irrevocable for the Plan Year in which they are in effect,
and shall be made on a "Deferral Election Form," as described herein. Once made,
a Participant's deferral election shall remain in effect for all subsequent Plan
Years for which the Participant is an Eligible Employee unless and until the
Participant increases, decreases, or terminates such election by submitting a
new

                                       7
<PAGE>

Deferral Election Form to the Employer during the annual open enrollment period
prior to a Plan Year. Deferral election changes must be submitted to the
Employer no later than December 15 prior to the beginning of the Plan Year for
which the change is to be effective.

         On the "Deferral Election Form" and related enrollment forms
Participants shall elect (i) the percentage or flat dollar amount of each
eligible component of Compensation to be deferred for the Plan Year; (ii) the
deemed investment elections of the amounts to be deferred, in accordance with
Section 7.2; and (iii) the time when a distribution of such deferrals and other
contributions for the Plan Year shall begin. Except as provided herein, an
election to receive Employee Contributions and deemed investment returns (or
losses) thereon with respect to a Plan Year upon termination of employment is
irrevocable and cannot be changed by the Participant.

         5.4 Discretionary Contributions. The Committee may, within its sole
discretion, direct the Employer to make contributions to a Participant's Account
for the Plan Year based on the Participant's performance, the Company's
performance, or any other criteria determined by the Employer within its sole
discretion. Such contributions, if any, shall be referred to as "Discretionary
Contributions."

         5.5 Matching Contributions. The Committee may, within its sole
discretion, direct the Employer to make contributions to a Participant's Account
for the Plan Year equal to (i) the matching contributions that would have been
contributed to the Qualified Plan on the Participant's behalf for the Plan Year
if the limitations imposed by Code sections 401(a)(17) and 402(g) had not been
in effect, less (ii) the total matching contributions made to the Qualified Plan
on the Participant's behalf for the Plan Year. In addition to or in the
alternative, the Employer may, within its sole discretion, make contributions to
a Participant's Account for the Plan Year equal to the matching contributions
that were not made on the Participant's behalf under the Qualified Plan for the
Plan Year due to his participation in this Plan. Contributions made under this
Section 5.5 shall be referred to as "Matching Contributions."

                                       8
<PAGE>

         5.6 SERP Contributions. The Committee may, within its sole discretion,
direct the Employer to make contributions on behalf of the former SERP
participants whose names are set forth on Appendix A, in an amount determined in
accordance with the chart set forth below, or as determined by the Committee in
its sole discretion.

<Table>
<Caption>
         AGE RANGE                 CONTRIBUTION FOR YEARS (PERCENTAGE OF SALARY)
         ---------                 ---------------------------------------------
<S>                                <C>            <C>                   <C>
     (AS OF 1/1 FOR THE
        PLAN YEAR)
                                    12/31/02 -     1/1/06 - 1/1/08       1/1/09 -
                                      1/1/05                              FORWARD

              a 50                     5.00%             7.50%            10.00%

             50 - 59                   7.50%           11.25%             15.00%

             60 - 64                  10.00%           15.00%             20.00%
</Table>

         The Committee, within its sole discretion, may direct the Employer to
make additional contributions to the former SERP participants who are age 65 or
older, provided that they are still actively employed by the Employer and meet
the eligibility requirements set forth in Section 4.1.

         In addition, for the initial Plan Year that begins and ends on December
31, 2002, the Employer shall make contributions to the Participant's Accounts
whose names are set forth on Appendix B in an amount equal to the amount set
forth in Appendix B, in lieu of such Participant's accrued benefit under the
SERP. Contributions made pursuant to this Section 5.6 shall be referred to as
"SERP Contributions."

         As a condition to having SERP Contributions credited to his Account
pursuant to this Section 5.6, a Participant whose name is listed on Appendix A
or B shall waive his right to any and all benefit he had or may have had under
the SERP.

                                    ARTICLE 6
                                  DISTRIBUTIONS

         6.1 General. Each Plan Year's contributions (and earnings) may have a
separate distribution schedule, commencing either at termination of employment
or at a specified future date while still employed, and payable either in a lump
sum or installments. The default election is a lump sum payable at termination.
Once a Participant elects a distribution form for termination of employment, his
election shall remain in effect for all subsequent Plan Years unless and until
the Participant changes his election by submitting a new Deferral Election Form
to the Employer.

                                       9
<PAGE>

         6.2 Scheduled In-Service Distributions. A Participant may elect in the
manner prescribed by the Committee to receive all or a portion of the vested
portion of his Account while he is still employed by the Employer in either (i)
a single lump sum payment, or (ii) annual installment payments over a period of
two (2) to five (5) years; provided that the Participant has not previously
elected to receive a distribution of such amounts upon termination of
employment. If the amount the Participant elects to receive is less than $25,000
(for all years combined), payment shall be made in a single lump sum. If a
Participant elects to receive installment payments under (ii) above, the amount
of each installment payment shall be equal to the balance remaining in the
portion of the Participant's Account that is subject to such installment
election (as determined immediately prior to each such payment), multiplied by a
fraction, the numerator of which is one (1), and the denominator of which is the
total number of remaining installment payments. The installment amount shall be
adjusted annually to reflect gains and losses, if any, allocated to such
Participant's Account pursuant to Article 7.

         A Participant's election under this Section 6.2 must specify the future
year in which the payment of the deferred amounts shall commence, provided that
the year in which distributions are to commence must be at least two (2) years
beyond the end of the Plan Year in which the compensation is deferred. Any
desired in-service distribution must be separately elected for each year
compensation is deferred. Thus, to elect a scheduled in-service withdrawal for
future plan years' deferrals, a new distribution election form must be submitted
during the applicable enrollment period. Once the applicable enrollment period
has passed, a scheduled in-service distribution cannot be elected for that plan
year's deferrals. Distributions under this Section 6.2 shall commence in
February of the year specified in the Participant's election. A Participant may
delay the commencement of in-service payments or amend his election as to the
form of the distribution at any time provided that such amendment must be made
in the manner specified by the Committee at least one (1) calendar year prior to
the date the distribution is to commence. If the Participant elects to delay his
distributions (as opposed to changing the form of distribution), the new
distribution date must be either at least one (1) year after the prior
distribution date or termination of employment. A maximum of two (2) changes are
permitted with respect to the time of payment and a maximum of two changes are
permitted with respect to the form of payment of contributions attributable to
each Plan Year; provided, however, the Committee may, within its sole
discretion, allow additional amendments.

         If a Participant terminates employment not on account of his death or
long-term disability after meeting the Distribution Eligibility Requirement but
prior to the commencement of a previously elected in-service distribution, the
portion of the Participant's Account subject to the in-service election will
instead be distributed at the time of such termination in the same form of
distribution elected for termination. If a Participant terminates employment
with the Employer not due to death or long-term disability after meeting the
Distribution Eligibility Requirement and while receiving installment payments
pursuant to this Section 6.2, the remaining installment payments will be made to
the Participant when they become due pursuant to the in-service distribution
election. If a Participant's employment terminates due to his death, long-term
disability, or prior to the Participant meeting the Distribution Eligibility
Requirement while receiving installment payments pursuant to this Section 6.2,
the remaining installment payments will be paid in accordance with Section 6.4.

                                       10
<PAGE>

         6.3 Distributions upon Meeting the Distribution Eligibility
Requirement. If a Participant terminates employment with the Employer after
meeting the Distribution Eligibility Requirement, the Participant may elect to
receive the vested balance credited to his Account in (i) a single lump sum
payment or, (ii) annual installment payments over a period of two (2) to fifteen
(15) years. If a Participant fails to make a distribution election or if the
vested balance credited to his Account to be distributed is less than $25,000,
payment shall be made in a single lump sum. The amount of each installment
payment under (ii) above shall be equal to the balance remaining in the portion
of the Participant's Account that is subject to such installment election (as
determined immediately prior to each such payment), multiplied by a fraction,
the numerator of which is one (1), and the denominator of which is the total
number of remaining installment payments. The installment amount shall be
adjusted annually to reflect gains and losses, if any, allocated to such
Participant's Account pursuant to Article 7. A Participant may amend his
distribution election at any time to change the form of distribution provided
that the amendment (a) be made in the manner specified by the Committee, and (b)
be made at least one (1) year prior to termination of employment. A Participant
may amend his election up to two times.

         Distributions under (ii) above shall begin in February of the year
following the Participant's termination. Lump sum distributions under this
Section 6.3 shall commence in the calendar quarter following the Participant's
termination.

         6.4 Termination of Employment Before Meeting the Distribution
Eligibility Requirement, Death or Disability. In the event of a Participant's
death, long-term disability (as determined by the Committee in its sole
discretion) or if a Participant's employment with the Employer terminates for
any reason prior to the date the Participant completes the Distribution
Eligibility Requirement, the unpaid vested portion of such Participant's Account
shall be paid to the Participant or (in the event of his death) the
Participant's designated beneficiary in a single lump sum payment the calendar
quarter following the Participant's termination of employment, death or
long-term disability. At the request of a deceased Participant's beneficiary,
the Committee may, within its sole discretion, change the form of distribution
from a lump sum to installment payments.

         6.5 Nonscheduled In-Service Withdrawals. Notwithstanding any provision
of this Plan to the contrary, a Participant may at any time request a lump sum
distribution of all or a portion of his vested Account. In the event a
Participant requests a distribution under this Section 6.5, such Participant
will receive a portion of his vested Account equal to 90% of the requested
distribution, and the remaining 10% of the requested distribution will be
forfeited, and (ii) such Participant will be ineligible to participate in the
Plan for the remainder of the Plan Year in which the distribution is received
and for the immediately following Plan Year. The minimum amount that can be
withdrawn pursuant to this Section is the lesser of: (i) the Participant's
vested Account balance, or (ii) $25,000. Participants who have terminated
employment shall be eligible to request a withdrawal pursuant to this Section.
If a Participant is eligible to receive a distribution under this Section 6.5,
such distribution will be made within a reasonable time after the Participant's
request.

         6.6 Financial Hardship. The Committee shall have the authority to alter
the timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the

                                       11
<PAGE>

satisfaction of the Committee, severe financial hardship. In such event, the
Committee may, in its sole discretion, distribute all or a portion of such
Participant's vested Account to the Participant without penalty. Participants
who have terminated employment shall be eligible to request a withdrawal
pursuant to this Section.

         For purposes of this Section 6.6, "severe financial hardship" shall
mean any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant, including, but not limited to the following: (a) the
illness or injury of a Participant or dependent (the term dependent shall have
the meaning set forth in Code section 152(a)), (b) the casualty loss of a
Participant's real or personal property, or (c) other similar and unforeseeable
circumstances caused by events beyond the Participant's control that the
Committee, in its sole discretion, determines constitutes a severe financial
hardship. In any event, payment under this Section 6.6 may not be made to the
extent such emergency is or may be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship; and (iii) by cessation of deferrals under the Plan.
Withdrawals of amounts because of a severe financial hardship may only be
permitted to the extent reasonably necessary to satisfy the hardship, plus to
pay taxes on the withdrawal. Examples of what are not considered to be severe
financial hardships include the need to send a Participant's child to college or
the desire to purchase a home. The Participant's Account will be credited with
earnings (or losses) in accordance with the Plan up to the date of distribution.
A Participant requesting a hardship withdrawal is required to submit proof of
his severe financial hardship and proof that it is not compensated by other
means.

         The Committee shall judge the severity of the financial hardship based
on the information submitted by the Participant. The Committee's decision with
respect to the severity of financial hardship and the manner in which, if at
all, the Participant's future deferral opportunities shall be ceased, and/or the
manner in which, if at all, the payment of deferred amounts to the Participant
shall be altered or modified, shall be final, conclusive, and not subject to
appeal.

         6.7 Incompetence of Distributee. In the event that it shall be found
that a person entitled to receive payment under the Plan (including a designated
beneficiary) is a minor or is physically or mentally incapable of personally
receiving and giving a valid receipt for any payment due (unless prior claim
therefore shall have been made by a duly qualified committee or other legal
representative), such payment may be made to any person whom the Committee in
its sole discretion determines is entitled to receive it, and any such payment
shall fully discharge the Employer, the Company, the Committee, the Plan, the
Rabbi Trust, and the Rabbi Trust Trustee from any further liability to the
person otherwise entitled to payment hereunder, to the extent of such payment.

                                    ARTICLE 7
                         DEFERRED COMPENSATION ACCOUNTS

         7.1 Participants' Accounts. The Company shall establish and maintain an
individual bookkeeping Account for each Participant, and subaccounts for
different contribution sources, as determined by the Committee. The Employee
Contributions held in each Participant's Account shall be one hundred percent
(100%) vested at all times.

                                       12
<PAGE>

         A Participant's Account shall also be credited with (i) Discretionary
Contributions, if any, made pursuant to Section 5.4, (ii) Matching
Contributions, if any, made pursuant to Section 5.5, (iii) SERP Contributions,
if any, made pursuant to Section 5.6, and (iv) any deemed earnings credit to
such amounts pursuant to Section 7.2 below.

         A Participant shall vest in Discretionary Contributions and Matching
Contributions in accordance with the schedule determined by the Committee at the
time any such contributions are made. A Participant shall vest in SERP
Contributions in accordance with the following schedule:

        Years of Participation                         % Vested
        ----------------------                         --------
                  0-4                                     0%

              5 and more                                 100%

         For purposes of vesting in SERP Contributions, a Participant's years of
participation shall be the combined total of his years of participation in this
Plan and the SERP (without duplication of any years). The Committee, within its
sole discretion, may accelerate the vesting of SERP Contributions upon a
Participant's termination of employment. Notwithstanding anything in this Plan
to the contrary, upon the occurrence of a Change in Control, Participants shall
become fully vested in all amounts credited to their Accounts as of the date of
the Change in Control.

         7.2 Earnings on Contributions. A Participant's Account shall be
credited with earnings (or losses) based on a deemed investment of the
Participant's Account, as directed by each Participant, which deemed investment
shall be in one or more benchmark funds among the investment options selected by
the Company from time to time. Until a Participant's insurance application is
processed and approved, his Account shall be credited with a money market rate
of return. Deemed earnings (and losses) on a Participant's Account shall be
based upon the daily unit valuation of the funds selected by such Participant,
and shall be credited to a Participant's Account each business day. Deemed
earnings (or losses) shall be paid out to a Participant at the same time as the
rest of his Account, pursuant to Article 6. Any portion of a Participant's
Account which is subject to distribution in installments shall continue to be
credited with deemed earnings (or losses) until fully paid out to the
Participant.

         The Company reserves the right to change the options available for
deemed investments under the Plan from time to time, or to eliminate any such
option at any time. A Participant may specify a separate investment allocation
with respect to each Deferral Election Form or amended Deferral Election Form.
Participants may modify their deemed investment instructions each business day
with respect to any portion (whole percentages only) of their Account, provided
they notify the Company or its designee within the time and in the manner
specified by the Company. Changes will be effective at the closing price of the
funds the business day following the business day the change is received by the
Company's designee. Elections and amendments thereto pursuant to this Section
7.2 shall be made in the manner prescribed by the Company.

         7.3 Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries who, upon the Participant's death, or physical or
mental incapacity will receive the

                                       13
<PAGE>

amounts that otherwise would have been paid to the Participant under the Plan.
All designations shall be signed by the Participant, and shall be in such form
as prescribed by the Committee. Each designation shall be effective as of the
date delivered to the Committee or its designee by the Participant.

         Participants may change their beneficiary designations on such form as
prescribed by the Committee. The payment of amounts deferred under the Plan
shall be in accordance with the last unrevoked written beneficiary designation
that has been signed by the Participant and delivered to the Committee or its
designee prior to the Participant's death.

         In the event that all the beneficiaries named by a Participant pursuant
to this Section 7.3 predecease the Participant, the deferred amounts that would
have been paid to the Participant or the Participant's beneficiaries shall be
paid to the Participant's estate.

         In the event a Participant does not designate a beneficiary, or for any
reason such designation is ineffective, in whole or in part, the amounts that
otherwise would have been paid to the Participant or the Participant's
beneficiaries under the Plan shall be paid to the Participant's estate.

                                    ARTICLE 8
                                      TRUST

         Nothing contained in this Plan shall create a trust of any kind or a
fiduciary relationship between the Employer and any Participant. Nevertheless,
the Employer may establish one or more trusts, with such trustee(s) as the
Committee may approve, for the purpose of providing for the payment of deferred
amounts and earnings thereon (collectively referred to hereinafter as the "Rabbi
Trust"). Such trust or trusts may be irrevocable, but the assets thereof shall
be subject to the claims of the Employer's general creditors upon the bankruptcy
or insolvency of the Employer.

                                    ARTICLE 9
                                CHANGE IN CONTROL

         9.1 Trust and Trustees. Upon the occurrence of a Change in Control, the
Rabbi Trust shall become irrevocable and the Employer shall not thereafter be
permitted to remove, terminate, or change the Rabbi Trustee without the prior
written consent of the majority of the Participants, with weighted voting as
measured by their account balances.

         9.2 Advanced Funding. No later than 10 days after a Change in Control
occurs, the Employer shall make a contribution to the Rabbi Trust to the extent
required to fully fund all benefits that are or may become payable under the
Plan, together with all expenses of administering the Plan and Rabbi Trust. No
later than December 31 of each Plan Year thereafter, the Employer shall make
such additional contributions to the Rabbi Trust to fully fund the additional
benefits that may become payable to Participants or beneficiaries under the Plan
and the additional administrative, legal, and other Plan expenses.

         9.3 Amendment and Termination. After the occurrence of a Change in
Control, neither the Employer nor the Committee may amend the Plan without the
prior approval of a

                                       14
<PAGE>

majority of the Participants. After a Change in Control, the Employer may not
terminate the Plan until either (i) all benefits have been paid in full, or (ii)
the majority of the Participants approve the same. For purposes hereof,
Participants' votes shall be weighted based on their relative Plan account
balances.

                                   ARTICLE 10
                             RIGHTS OF PARTICIPANTS

         10.1 Contractual Obligation. The Plan shall create an unfunded,
unsecured contractual obligation on the part of the Employer to make payments
from the Participants' Accounts when due. Payment of Account balances shall be
made out of the general assets of the Employer or from the trust or trusts
referred to in Article 8 above.

         10.2 Unsecured Interest. No Participant or party claiming an interest
in deferred amounts of a Participant shall have any interest whatsoever in any
specific asset of the Employer. To the extent that any party acquires a right to
receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Employer. Each Participant, by participating
hereunder, agrees to waive any priority creditor status for wage payments with
respect to any amounts due hereunder. The Employer shall have no duty to set
aside or invest any amounts credited to Participants' Accounts under this Plan.
Accounts established hereunder are solely for bookkeeping purposes and the
Employer shall not be required to segregate any funds based on such Accounts.

         10.3 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Employer to terminate a Participant's employment at any
time, or confer upon any Participant any right to continue in the employ of the
Employer.

                                   ARTICLE 11
                              WITHHOLDING OF TAXES

         The Employer shall have the right to require Participants to remit to
the Employer an amount sufficient to satisfy federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan (or from a Participant's other Compensation) amounts sufficient to
satisfy withholding tax requirements. Employment taxes with respect to amounts
deferred hereunder shall be payable in accordance with Code section 3121(v)(2)
and may be withheld from a Participant's Compensation even if due prior to the
time of a distribution hereunder. The Employer makes no representations,
warranties, or assurances and assumes no responsibility as to the tax
consequences of this Plan or participation herein.

                                   ARTICLE 12
                            AMENDMENT AND TERMINATION

         Except as provided herein, the Employer reserves the right to amend,
modify, or terminate the Plan (in whole or in part) at any time by action of the
Company or the Committee, with or without prior notice. Except as described
below in this Article 12, no such amendment or termination shall in any material
manner adversely affect any Participant's rights to any vested

                                       15
<PAGE>

amounts already deferred or credited hereunder or deemed earnings thereon, up to
the point of amendment or termination, without the consent of the Participant.

         The Company may terminate the Plan and commence termination payout for
all or certain Participants, or remove certain Employees as Participants, if it
is determined by the United States Department of Labor or a court of competent
jurisdiction that the Plan constitutes an employee pension benefit plan within
the meaning of section 3(2) of ERISA that is not exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA, or if the IRS otherwise taxes or proposes
to tax amounts deferred hereunder prior to their scheduled payment date. If
payout is commenced pursuant to the operation of this Article 12, the payment of
deferred amounts and earnings thereon shall be made in the manner selected by
each Participant under Section 6.3 herein (other than the commencement date), as
if the Participant had met the Distribution Eligibility Requirement.

                                   ARTICLE 13
                                  MISCELLANEOUS

         13.1 Notice. Any notice or filing required or permitted to be given to
the Employer under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the Beverly Enterprises,
Inc. Executive Deferred Compensation Plan Committee, and if mailed, shall be
addressed to the principal executive offices of the Employer. Notice mailed to a
Participant shall be at such address as is given in the records of the Employer.
Notices to the Employer shall be deemed given as of the date of delivery. Notice
to a Participant or beneficiary shall be deemed given as of the date of hand
delivery, or if delivery is made by mail, three (3) days following the postmark
date.

         13.2 Nontransferability. Except as provided in Section 7.3 and this
Section 13.2, Participants' rights to deferred amounts and earnings credited
thereon under the Plan may not be sold, transferred, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution, or pursuant to a domestic relations order, nor shall the Employer
make any payment under the Plan to any assignee or creditor of a Participant.

         13.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

         13.4 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.

         13.5 Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Employer.

         13.6 Successors. All obligations of the Employer under the Plan shall
be binding on any successor to the Employer, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Employer.

                                       16
<PAGE>

         13.7 Applicable Law. Except to the extent preempted by applicable
federal law, the Plan shall be governed by and construed in accordance with the
laws of the state of Delaware.

                                   ARTICLE 14
                           ADMINISTRATIVE INFORMATION

         14.1 Plan Sponsor and Administrator. The Plan described herein is
sponsored by:

                            Beverly Enterprises, Inc.
                            One Thousand Beverly Way
                           Fort Smith, Arkansas 72919

         The Committee is the plan administrator and named fiduciary. Prior to a
Change in Control, the Committee has been granted complete fiduciary discretion
and authority to administer, operate, and interpret the Plan and make final
decisions on such issues as eligibility, payment of benefits, claims, and claims
appeals, unless such decisions have been delegated to another party. However,
many day-to-day questions can be answered by the Benefits Department.

         The agent for the service of legal process for the Plan is the Company.

         14.2 Plan Type and Plan Year. Documents and reports for the Plan are
filed with the United States Internal Revenue Service and the Department of
Labor under Employer Identification Number: 62-1691861.

         The official Plan name is the Beverly Enterprises, Inc. Executive
Deferred Compensation Plan, which, for government purposes, is intended to be an
unfunded pension plan maintained by an employer for a select group of management
or highly compensated employees. Plan records are maintained on an annual basis
and December 31 is the end of the plan year.

         14.3 Plan Funding. The Plan is unfunded and unsecured and benefits are
paid solely from the Employer's general assets.

                                   ARTICLE 15
                                  ERISA RIGHTS

         Certain rights and protections are provided to Plan participants under
the Employee Retirement Income Security Act of 1974 (ERISA). These ERISA rights
include the following:

         (a)      Any Plan participant may contact the Benefits Department to
                  examine all Plan documents without charge. These may include
                  the Plan descriptions and all other documents filed with the
                  United States Department of Labor.

         (b)      Copies of Plan documents and other information may be obtained
                  by writing to the Committee. A reasonable charge may be
                  assessed for these copies.

                                       17
<PAGE>

         (c)      Each Plan participant has the right to receive a written
                  summary of the Plan's annual financial reports, if any.
                  However, this type of plan is not required to have either an
                  annual financial report or a summary annual report.

         (d)      An employee may not be discharged or discriminated against to
                  prevent his obtaining a benefit or exercising his ERISA
                  rights.

         (e)      If a claim for a benefit is denied, in whole or in part, you
                  have a right to know why this was done, to obtain copies of
                  documents relating to the decision without charge, and to
                  appeal any denial, all within certain time schedules.

         The named fiduciary for this Plan is the Committee.

         Under certain circumstances, outside assistance may be necessary to
resolve disputes between a Participant and Plan officials. For instance, if you
request a copy of plan documents or the latest annual report from the plan and
do not receive them within 30 days, you may file suit in a Federal court. In
such a case, the court may require the plan administrator to provide the
materials and pay you up to $110 a day until you receive the materials, unless
the materials were not sent because of reasons beyond the control of the
administrator. If a claim for benefits is denied or ignored, in whole or in
part, after a final review, the claim may be submitted to binding arbitration
(or, after a Change in Control, to either arbitration or a court, at the
Participant's election). If you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a Federal court. The court will decide who should pay court costs
and legal fees. If you are successful the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.

         For further information about this Plan, contact the Benefits
Department. Or, if you have any questions about this statement or about your
rights under ERISA, you may contact the nearest area office of the Pension and
Welfare Benefits Administration, United States Department of Labor, listed in
your telephone directory or the Division of Technical Assistance and Inquires,
Pension and Welfare Benefits Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington D.C. 20210. You may also obtain certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Pension and Welfare Benefits Administration.

         IN WITNESS WHEREOF, Beverly Enterprises, Inc. has caused this document
to be executed by its duly authorized officer on ____________, 2002, effective
as of the date set forth above.

                                        BEVERLY ENTERPRISES, INC.

                                        By:
                                           ------------------------------------

                                        Its:
                                            -----------------------------------

                                       18

<PAGE>

                                   APPENDIX A

                  PARTICIPANTS ELIGIBLE FOR SERP CONTRIBUTIONS

 1.     Partice Acosta
 2.     Douglas Babb
 3.     Linda Burch
 4.     Pamela Daniels
 5.     David Devereaux
 6.     Jeffrey Friemark
 7.     Blaise Mercadante
 8.     Chris Roussos
 9.     Richard Skelly
10.     Cindy Susienka
11.     Crystal Wright

                                       19
<PAGE>

                                   APPENDIX B

                   PARTICIPANTS SERP CONTRIBUTIONS ON 12/31/02

1.       Douglas Babb         =    $40,998

2.       Crystal Wright       =    $63,058

                                       20<PAGE>
                                                                   EXHIBIT 10.32

                               EMPLOYMENT CONTRACT

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

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

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

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

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

                  1. Definitions.

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

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

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

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

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

                                        1

<PAGE>

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

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

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

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

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

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

                                       2

<PAGE>
         "group" as defined in Section 13(d).

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

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

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

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

                  4. Compensation and Related Matters.

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

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

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

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

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

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

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

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

                                       3
<PAGE>
                             (vii) $100,000 (or such greater amount as the
                  Company may make available to its senior executives generally)
                  of business travel accident insurance coverage when traveling
                  on Company business;

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

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

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

                             (xi) 4 weeks of paid vacation;

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

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

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

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

                                    iii. lump sum option will be made available.

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

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

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

                                       4
<PAGE>
                  5. Non-Solicitation.

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

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

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

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

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

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

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

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

                                       5
<PAGE>
                           (c) during the Term either (i) there has been a
         Change in Control and during the two year period commencing on the
         Change in Control Date the Executive has a Termination of Employment
         which is initiated by the Company without Cause or by the Executive for
         Good Reason, or (ii) the Executive has a Termination of Employment
         initiated by the Company without Cause or by the Executive for Good
         Reason following the commencement of any discussion with a third person
         that ultimately results in a Change in Control with such third person
         within 12 months of the commencement of such discussions (in which
         case, the date of such discussion shall be substituted for the Change
         in Control Date wherever appropriate, including in the definition of
         "Good Reason" and in Paragraph 7 hereof).

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

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

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

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

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

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

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

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

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

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

                          (c) Continuation of Benefits.

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

                                       6
<PAGE>

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

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

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

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

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

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

                                       7

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

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

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

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

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

                                       8
<PAGE>
                  13. No Mitigation Obligation. The parties hereto expressly
agree that the payment of the benefits by the Company to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and that
the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.

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

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

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

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

                                       9
<PAGE>
         purposes hereof, "confidential records" means all correspondence,
         memoranda, files, analyses, studies, reports, notes, documents,
         manuals, books, lists, financial, operating or marketing records,
         computer software, magnetic tape, or electronic or other media or
         equipment of any kind which may be in Executive's possession or under
         his control or accessible to him which contain any proprietary
         information as defined in subsection 15(a) above. All confidential
         records shall be and remain the sole property of Company during the
         term of employment and thereafter.

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

                  16. Successors; Binding Agreement.

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

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

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

                                       10
<PAGE>
         or otherwise subject to anticipation, alienation, sale, encumbrance,
         charge, hypothecation, or set-off in respect of any claim, debt, or
         obligation, or to execution, attachment, levy or similar process, or
         assignment by operation of law, other than by a transfer by his will or
         by the laws of descent and distribution. Any attempt, voluntarily or
         involuntarily, to effect any action prohibited by this Paragraph shall
         be null, void, and of no effect.

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

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

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

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

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

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

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

                                       11
<PAGE>

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

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

                                       12

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

BEVERLY ENTERPRISES, INC.                   EXECUTIVE

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

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

                                       13

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