Document:

<PAGE>

                                                                    Exhibit 10.2

                               HMN FINANCIAL, INC.
                             2001 OMNIBUS STOCK PLAN

                      NON-STATUTORY STOCK OPTION AGREEMENT

Full Name of Optionee:

No. of Shares Covered:                              Date of Grant:

Exercise Price Per Share:                           Expiration Date:

Exercise Schedule pursuant to Section 4:

                                                No. of Shares as to Which Option
        Date of Vesting                               Becomes Exercisable

This is a NON-STATUTORY STOCK OPTION AGREEMENT (this "Agreement") between HMN
Financial, Inc., a Delaware corporation (the "Company"), and the optionee
identified above (the "Optionee") effective as of the date of grant specified
above.

                                    RECITALS

      WHEREAS, the Company maintains the HMN Financial, Inc. 2001 Omnibus Stock
Plan (the "Plan");

      WHEREAS, the Board of Directors of the Company has appointed the
Compensation Committee (the "Committee") with the authority to determine the
awards to be granted under the Plan; and

      WHEREAS, the Committee or its designee has determined that the Optionee is
eligible to receive an award under the Plan in the form of a Non-Statutory Stock
Option (the "Option") and has set the terms thereof;

      NOW, THEREFORE, the Company hereby grants this Option to the Optionee
under the terms set by the Committee as follows:

<PAGE>

                                     TERMS*

1.    GRANT. Subject to the terms of the Plan, the Optionee is granted this
      Option to purchase the number of Shares specified at the beginning of this
      Agreement on the terms set forth herein.

2.    EXERCISE PRICE. The price to the Optionee of each Share subject to this
      Option is the exercise price specified at the beginning of this Agreement.

3.    NOT AN INCENTIVE STOCK OPTION. This Option is not intended to be an
      "incentive stock option" within the meaning of Section 422 of the Internal
      Revenue Code of 1986, as amended (the "Code").

4.    EXERCISE SCHEDULE. Subject to the terms of the Plan and Section 8 of this
      Agreement, the Option shall become exercisable as to the number of Shares
      and on the dates specified in the exercise schedule at the beginning of
      this Agreement. The exercise schedule shall be cumulative; thus, to the
      extent the Option has not already been exercised and has not expired,
      terminated, or been canceled, the Optionee may at any time, and from time
      to time, purchase any portion of the Shares then purchasable under the
      exercise schedule.

      This Option may be exercised in full (notwithstanding the exercise
      schedule) under the circumstances described in Section 8 of this Agreement
      if it has not expired prior thereto.

5.    EXPIRATION. This Option shall expire at 4:00 p.m. Central Time on the
      earliest of:

      (a)   the expiration date specified at the beginning of this Agreement;

      (b)   the last day of the period as of or following the termination of
            employment of the Optionee during which this Option can be exercised
            (as specified in Section 7 of this Agreement); or

      (c)   the date (if any) fixed for cancellation pursuant to Section 8 of
            this Agreement.

      No one may exercise this Option after it has expired, notwithstanding any
      other provision of this Agreement.

6.    PROCEDURE TO EXERCISE OPTION.

      Notice of Exercise. Subject to the terms of this Agreement, this Option
      may be exercised by delivering written notice of exercise to the Company
      at its headquarters in the form attached to this Agreement or a similar
      form containing substantially the same information and addressed or
      delivered to the President. The notice shall state the election to
      exercise the Option, the number of Shares to be purchased, and shall be
      signed by the person exercising this Option. If the person exercising this
      Option is not the Optionee, he or she also must submit appropriate proof
      of his or her right to exercise this Option.

----------------
   *  Unless the context indicates otherwise, capitalized terms that are not
      defined in this Agreement have the meanings set forth in the Plan as it
      currently exists or as it may be amended in the future.

                                       B-2
<PAGE>

      Tender of Payment. Any notice of exercise shall be accompanied by:

      (a)   payment (by check, bank draft, or money order payable to the
            Company) of the full purchase price of the Shares being purchased;

      (b)   To the extent permitted by law, a broker-assisted cashless exercise
            in which the Optionee irrevocably instructs a broker to deliver
            proceeds of a sale of all or a portion of the Shares to be issued
            pursuant to the exercise (or a loan secured by such Shares) to the
            Company in payment of the purchase price of such Shares;

      (c)   By delivery to the Company of unencumbered Shares having an
            aggregate Fair Market Value (as defined in the Plan) on the date of
            exercise equal to the purchase price of such Shares; or

      (d)   any combination of (a), (b), or (c).

      Notwithstanding the other terms of this subparagraph, the Optionee shall
      not be permitted to pay any portion of the purchase price of the Shares
      being purchased with Shares if the Committee believes that payment in such
      manner is undesirable.

      Delivery of Certificates. As soon as practicable after the Company
      receives a properly executed notice and the purchase price provided for
      above, it shall deliver to the person exercising the Option, in the name
      of such person, one or more certificates representing the Shares being
      purchased. The Company shall pay any original issue or transfer taxes with
      respect to the issue or transfer of the Shares and all fees and expenses
      incurred by it in connection therewith. All Shares so issued shall be
      fully paid and nonassessable. Notwithstanding anything to the contrary in
      this Agreement, the Company shall not be required to issue or deliver any
      Shares before the completion of such registration or other qualification
      of such Shares under any state law, rule, or regulation as the Company
      determines to be necessary or desirable.

7.    EMPLOYMENT REQUIREMENT. This Option may be exercised only while the
      Optionee remains employed with the Company or an Affiliate, and only if
      the Optionee has been continuously so employed since the date of this
      Agreement; provided that:

      (a)   This Option may be exercised for three months following the day the
            Optionee's employment by the Company ceases if such cessation of
            employment is for a reason other than death or disability, but only
            to the extent that it was exercisable immediately prior to
            termination of employment.

      (b)   This Option may be exercised in full within one year after the
            Optionee's employment by the Company ceases if such cessation of
            employment is because of death, and the Optionee's employment by the
            Company has been continuous between the date of this Option and a
            date not more than three months prior to death.

      (c)   This Option may be exercised in full within one year after the
            Optionee's employment by the Company ceases if such cessation of
            employment is because

                                       B-3
<PAGE>

            of disability, and Optionee's employment by the Company has been
            continuous between the date of this Option and the date of such
            disability.

      (d)   If the Optionee's employment terminates after a declaration made
            pursuant to Section 8 of this Agreement, this Option may be
            exercised at any time permitted by such declaration.

      Notwithstanding the above, this Option may not be exercised after it has
      expired.

8.    ACCELERATION OF OPTION.

      Disability. This Option may be exercised in full (notwithstanding the
      exercise schedule) if the Optionee's employment with the Company or an
      Affiliate terminates because of disability, and Optionee's employment by
      the Company or its Affiliates has been continuous between the date of this
      Option and the date of such disability.

      Death. This Option may be exercised in full (notwithstanding the exercise
      schedule) if the Optionee dies while employed by the Company or an
      Affiliate, and the Optionee's employment by the Company or its Affiliates
      has been continuous between the date of this Option and a date not more
      than three months prior to death.

      Fundamental Change. At least 10 days before a Fundamental Change, the
      Committee may, but shall not be obligated to, declare, and provide written
      notice to the Optionee of the declaration, that this Option shall be
      cancelled at the time of, or immediately before the occurrence of, the
      Fundamental Change (unless it is exercised before the Fundamental Change)
      in exchange for payment to the Optionee, within 10 days after the
      Fundamental Change, of cash equal to the amount, for each Share covered by
      the cancelled Option, by which the event proceeds per share (as defined
      below) exceeds the exercise price per Share covered by this Option. This
      Option may be exercised in full (notwithstanding the exercise schedule) at
      any time after such declaration and before the time of cancellation of
      this Option. This Option, to the extent it has not been exercised before
      the Fundamental Change, shall be cancelled at the time of, or immediately
      before, the Fundamental Change, as provided in the declaration, and this
      Agreement shall terminate at the time of such cancellation, subject to the
      payment obligations of the Company provided in this paragraph.
      Notwithstanding the foregoing, no person holding an Option shall be
      entitled to the payment or vesting provided for in this Section 8 if the
      Option has terminated, expired, or been cancelled pursuant to this
      Agreement.

      In the case of a Fundamental Change that consists of the merger or
      consolidation or statutory share exchange, the Committee, instead of the
      declaration above, may make appropriate provision for the protection of
      this Option by the substitution, in lieu of this Option, of an option to
      purchase appropriate voting common stock or appropriate voting common
      stock of the corporation surviving any such merger or consolidation or, if
      appropriate, the parent corporation of the Company or such surviving
      corporation.

      For purposes of the preceding paragraphs, the "event proceeds per share"
      is the cash plus the fair market value (as determined in good faith by the
      Committee) of the non-cash

                                       B-4
<PAGE>

      consideration to be received per Share by the shareholders of the Company
      upon the occurrence of the Fundamental Change.

9.    LIMITATION ON TRANSFER. While the Optionee is alive, only the Optionee (or
      his or her legal representative) may exercise this Option. This Option may
      not be assigned or transferred other than by will or the laws of descent
      and distribution or pursuant to a qualified domestic relations order as
      defined by the Code, or Title I of ERISA, or the rules thereunder, and
      shall not be subject to pledge, hypothecation, execution, attachment, or
      similar process. Any attempt to assign, transfer, pledge, hypothecate, or
      otherwise dispose of this Option contrary to the provisions hereof, and
      the levy of any attachment or similar process upon this Option, shall be
      void.

10.   NO STOCKHOLDER RIGHTS BEFORE EXERCISE. No person shall have any of the
      rights of a stockholder of the Company with respect to any Share subject
      to this Option until the Share actually is issued to him upon exercise of
      this Option.

11.   DISCRETIONARY ADJUSTMENT. The Committee may make appropriate adjustments
      in the number of Shares subject to this Option and in the purchase price
      per Share to give effect to any adjustments made in the number of
      outstanding Shares through a Fundamental Change, recapitalization,
      reclassification, stock dividend, stock split, stock combination or other
      relevant change; provided that, fractional Shares shall be rounded to the
      nearest whole Share.

12.   TAX WITHHOLDING. Delivery of Shares upon exercise of this Option shall be
      subject to any required withholding taxes. As a condition precedent to
      receiving Shares upon exercise of this Option, the Optionee may be
      required to pay to the Company, in accordance with the provisions of the
      Plan, an amount equal to the amount of any required withholdings.

13.   INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations made
      by the Committee with regard to any question arising hereunder or under
      the Plan shall be binding and conclusive upon the Company and the
      Optionee. If there is any inconsistency between the provisions of this
      Agreement and the Plan, the provisions of the Plan shall govern.

14.   DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give the Optionee a
      right to continued employment with the Company or any Affiliate, and the
      Company or Affiliate employing the Optionee may terminate his or her
      employment and otherwise deal with the Optionee without regard to the
      effect it may have upon him under this Agreement.

15.   OBLIGATION TO RESERVE SUFFICIENT SHARES. The Company shall at all times
      during the term of this Option reserve and keep available a sufficient
      number of Shares to satisfy this Agreement.

16.   BINDING EFFECT. This Agreement shall be binding in all respects on the
      heirs, representatives, successors and assigns of the Optionee.

                                       B-5
<PAGE>

17.   CHOICE OF LAW. This Agreement is entered into under the laws of the State
      of Delaware and shall be construed and interpreted thereunder (without
      regard to its conflict-of-law principles).

18.   ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire
      agreement and understanding of the parties hereto with respect to the
      grant and exercise of this Option and the administration of the Plan and
      supersede all prior agreements, arrangements, plans, and understandings
      relating to the grant and exercise of this Option and the administration
      of the Plan.

19.   AMENDMENT AND WAIVER. Except as provided in the Plan, this Agreement may
      be amended, waived, modified, or canceled only by a written instrument
      executed by the parties or, in the case of a waiver, by the party waiving
      compliance.

20.   ACKNOWLEDGMENT OF RECEIPT OF COPY. By execution hereof, the Optionee
      acknowledges having received a copy of the Plan.

      IN WITNESS WHEREOF, the Optionee and the Company have executed this
Agreement as of the _____ day of _________________________, _____.

HMN FINANCIAL, INC.                           OPTIONEE

By ________________________________           __________________________________
   Its ____________________________           Optionee

                                       B-6
<PAGE>

                                                                    ATTACHMENT 1

                       ________________________, __________

HMN Financial, Inc.
1016 Civic Center Drive Northwest
Rochester, MN 55901
Attention: President

Ladies and Gentlemen:

      I hereby exercise the following option (the "Option") granted to me with
respect to the number of shares of Common Stock, par value $0.01 ("Shares"), of
HMN Financial, Inc. (the "Company"), indicated below:

            NAME:                                   ____________________________

            DATE OF GRANT OF OPTION:                ____________________________

            EXERCISE PRICE PER SHARE:               ____________________________

            NUMBER OF SHARES WITH RESPECT TO
            WHICH THE OPTION IS HEREBY EXERCISED:   ____________________________

            TOTAL EXERCISE PRICE:                   ____________________________

            [ ]   Enclosed with this letter is a check, bank draft or money
            order in the amount of the Total Exercise Price.

            [ ]   I hereby agree to pay the Total Exercise Price within five
            business days of the date hereof and, as stated in the attached
            Broker's Letter, I have delivered irrevocable instructions to
            __________________________________ to promptly deliver to the
            Company the amount of sale or loan proceeds from the Shares to be
            issued pursuant to this exercise necessary to satisfy my obligation
            hereunder to pay the Total Exercise Price.

            [ ]   Enclosed with this letter is a certificate evidencing
            unencumbered Shares (duly endorsed in blank) having an aggregate
            Fair Market Value equal to or in excess of the Total Exercise Price.

      If I am enclosing Shares with this letter, I hereby represent and warrant
that I am the owner of such Shares free and clear of all liens, security
interests and other restrictions or encumbrances. I agree that I will pay any
required withholding taxes in connection with this exercise.

                                       B-7
<PAGE>

      Please issue a certificate (the "Certificate") for the number of Shares
with respect to which the Option is being exercised in the name of the person
indicated below and deliver the Certificate to the address indicated below:

            NAME IN WHICH TO ISSUE CERTIFICATE:     ____________________________

            ADDRESS TO WHICH CERTIFICATE
            SHOULD BE DELIVERED:                    ____________________________
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

            PRINCIPAL MAILING ADDRESS FOR
            HOLDER OF THE CERTIFICATE (IF DIFFERENT
            FROM ABOVE):                            ____________________________
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

                                             Very truly yours,

                                             ___________________________________
                                             Signature

                                             ___________________________________
                                             Name, please print

                                             ___________________________________
                                             Social Security Number

                                       B-8
<PAGE>

                                                                    ATTACHMENT 2

                       _________________________, ________

HMN Financial, Inc.
1016 Civic Center Drive Northwest
Rochester, MN 55901
Attention: President

Ladies and Gentlemen:

            NAME OF OPTIONEE:                       ____________________________

            DATE OF GRANT OF OPTION:                ____________________________

            EXERCISE PRICE PER SHARE:               ____________________________

            NUMBER OF SHARES WITH RESPECT TO
            WHICH THE OPTION IS TO BE EXERCISED:    ____________________________

            TOTAL EXERCISE PRICE:                   ____________________________

      The above Optionee has requested that we finance the exercise of the above
Option to purchase Shares of common stock of HMN Financial, Inc. (the "Company")
and has given us irrevocable instructions to promptly deliver to the Company the
amount of sale or loan proceeds from the Shares to be issued pursuant to such
exercise to satisfy the Optionee's obligation to pay the Total Exercise Price.

                                                  Very truly yours,

                                                  ______________________________
                                                  Broker Name

                                                  By ___________________________

                                       B-9exv10w2

 

Exhibit 10.2

INTEROFFICE MEMO

			
	TO:

	 	[name of recipient]
	DATE:

	 	August 9, 2004
	FROM:

	 	Larry Deans
	SUBJECT:

	 	2004 Long-Term Incentive Program

One Thousand Beverly Way

Fort Smith, AR 72919

(479) 201- 3438

Congratulations on your selection as a participant in the Beverly Enterprises,
Inc. 2004 Long-Term Incentive Program.

Your total target long-term
compensation under this program is based     % of
your base salary as of January 1, 2004 or
$        . This total target is
delivered evenly through the three components of the program – Time-Lapsed
Restricted Stock Units, Performance Based Cash and Performance Based Restricted
Units. A description of each program component follows.

Time-Lapsed Restricted Units

	 	•	 	You are granted         restricted shares1 ($       in initial value
divided by the strike price of $7.80 per share).
	 
	 	•	 	The effective date of the share grant is May 20, 2004 ($7.80 share
price above established on this date).
	 
	 	•	 	The grant will be 100% vested on May 20, 2007 (three years from the
grant date). There is no partial vesting prior to the three-year mark.
	 
	 	•	 	The Nominating and Compensation Committee may, at any time, exercise
its discretion to delay vesting of an award for one or more vesting
dates specified for such award.

1 Time-Lapsed Restricted shares are actual shares of Beverly stock assigned at
no cost to the participant. These shares are nontransferable until the
participant fulfills certain conditions (e.g. continued employment for specific
number of years defined by the grant).

     Performance Based Cash:

	 	•	 	You are granted a Performance Based Cash target of
$        .
	 
	 	•	 	The Performance Period for this grant is January 1, 2004 through December 31, 2006.
	 
	 	•	 	The Performance Based Cash Award is calculated using the following formula:
	 
	 	 	 	(Cumulative EBITDA Margin Payout + Cumulative EBITDA $ Payout) *
Modifier

	 	 	 	Cumulative EBITDA Margin Payout = Target Bonus * 50% * EBITDA Margin
Percentage
	 
	 	 	 	Cumulative EBITDA $ Payout = Target Bonus * 50% * Cumulative EBITDA
Percentage
	 
	 	 	 	(See Page 4 of 6)

	 	•	 	The Modifier shall be determined in accordance with the schedule on
Page 4 below. For purposes of calculating the Modifier, the Share Price
Gain will be calculated using the difference between the average Share
price during the 90-day period immediately preceding end of the
Performance Period (i.e. December 31, 2006) and $7.02 (the average Share
price during the 90-day period immediately preceding the beginning of
the Performance Period — December 31, 2003).

			
	 	 	 
	 	 	Page 1 of 6

 

 

INTEROFFICE MEMO

	 	•	 	This part of the program will be paid in cash on a date determined by
the Committee within 180 days of the Vesting Date of December 31, 2006.
	 
	 	•	 	The Nominating and Compensation Committee may, at any time, exercise
its discretion to delay vesting of an award for one or more vesting
dates specified for such award. All cash awards will vest on December
31, 2006.

Performance Based Restricted Units

	 	•	 	You are granted a Performance Based Restricted Unit award of
$        .
	 
	 	•	 	The Performance Period for this grant is January 1, 2004 through December 31, 2006.
	 
	 	•	 	The Performance Bonus is calculated using the following formula:

	 	 	 	(Cumulative EBITDA Margin Payout + Cumulative EBITDA Payout)

	 	 	 	Cumulative EBITDA Margin Payout = Target Bonus * 50% * EBITDA Margin
Percentage
	 
	 	 	 	Cumulative EBITDA Payout = Target Bonus * 50% * Cumulative EBITDA
Percentage
	 
	 	 	 	(See Page 4 of 6)

	 	•	 	This portion of the award will be paid in Stock on a date determined
by the Committee after the Vesting Date.
	 
	 	•	 	The Nominating and Compensation Committee may, at any time, exercise
its discretion to delay vesting of an award for one or more vesting
dates specified for such award.

Administration Guidelines

Time-Lapsed Restricted Shares & Performance Based Restricted Units Vesting

	 	•	 	The Time-Lapsed Restricted Shares and Performance Based Restricted
Units grants will vest three years after the grant date on May 20, 2007,
assuming the Nominating and Compensation Committee has not exercised its
discretion to delay.
	 
	 	•	 	Any restricted shares that have vested can be sold during open
windows subject to the prior approval of the Nominating and Compensation
Committee.
	 
	 	•	 	You will be taxed on your vested distribution amount. Your vested
distribution amount is your vested number of shares multiplied by the
NYSE closing price on vesting date. You will be notified by the Legal
department the total number of shares due to you, the total value of
those shares and the related tax liability. You may either pay the
taxes by submitting a check made payable to Beverly Enterprises, Inc.
for the taxes due, or you may swap shares for the amount of your tax
liability. CEO approval is also needed if you are swapping shares to
pay for your tax liability.

   Examples:

	 	 	 	Time-Lapsed Restricted Shares
	 
	 	 	 	You receive an initial restricted share distribution of 4,103 shares. On
May 20, 2007, these shares will vest. If the share price is $11.00 on May
20, 2007 — you will owe taxes on the $45,133 value.

			
	 	 	 
	
	 	Page 2 of 6

 

 

INTEROFFICE MEMO

	 	 	 	Performance Based Restricted Units
	 
	 	 	 	The final and approved Cumulative EBITDA Margin Payout equals 8.00 and
Cumulative EBITDA Payout equals $525 MM. The Performance Bonus Restricted
award would equal $33,598 ($31,998* 50% * 100% — from chart) + ($31,998 *
50%* 110% — from chart). If the share price is $11.00 on May 20, 2007 -
you will receive 3,054 shares and owe taxes on this value.

Performance Based Cash Award Vesting

	 	•	 	The Performance based cash award vests on December 31, 2006 and
awards will be paid in cash upon approval of the Nominating and
Compensation Committee.
	 
	 	•	 	You will be taxed on your vested distribution amount. Tax treatment
is the same as with ordinary income.

Other conditions to the 2004 Long-Term Incentive Program

	 	•	 	Voluntary resignation of employment, lay-off, termination for cause,
or other termination shall result in forfeiture of any unvested
restricted shares and any unpaid cash award.
	 
	 	•	 	A participant who retires on or after attaining normal retirement
age, or takes disability retirement from the Company within the
Company’s long-term disability rules, shall vest in the restricted
shares and cash bonus for the year in which he retires as if the
Participant remained an employee through the end of the applicable
vesting periods.
	 
	 	•	 	Beverly Enterprises, Inc. reserves the right to amend, modify or
terminate these plans at any time without prior notice. Beverly
Enterprises, Inc. reserves the right to make all decisions and
interpretations with respect to these plans and their applications, and
the decision of Beverly Enterprises, Inc. shall be final and binding
upon all eligible associates. All statements set forth in these
materials are intended as a mater of information, and Beverly
Enterprises, Inc. always reserves the right to make final decisions over
any interpretation or application of the Plan. Nothing in these
materials shall constitute a promise or contract between Beverly
Enterprises, Inc. and its associates.

Also included in this package is your Time-Lapse Restricted Unit Award
agreement. Please sign both of the copies, keeping the one for your records
and return the other to Mona Brannon in the Legal department in Fort Smith.

If you have any questions regarding this program or would like to receive a
full copy of the governing plan document, please contact myself at 479-201-5262
or Michael Karicher at 479-201-3438.

	 	 	 
	CC:

	 	Doug Babb
	

	 	John Fowler — Chairman, Nominating and Compensation Committee

			
	 	 	 
	
	 	Page 3 of 6

 

 

INTEROFFICE MEMO

2004 Long-Term Incentive Program

Performance Based Cash, Performance Based Restricted Units Measures and Modifier

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CUMULATIVE EBITDA MARGIN %
	 	CUMULATIVE EBITDA $(MM)*
	 	SHARE PRICE GAIN from $7.02**

	From
	 	To
	 	 	 	 	 	Equals Payout
	 	From
	 	To
	 	 	 	 	 	Equals Payout
	 	From
	 	To
	 	Modifier

	7.00
	 	 	7.07	 	 	 	=	 	 	 	50	%	 	$	458	 	 	$	462	 	 	 	=	 	 	 	50	%	 	$	2.69	 	 	$	2.81	 	 	 	0.10	 
	7.08
	 	 	7.22	 	 	 	=	 	 	 	55	%	 	$	463	 	 	$	467	 	 	 	=	 	 	 	55	%	 	$	2.82	 	 	$	2.94	 	 	 	0.20	 
	7.23
	 	 	7.35	 	 	 	=	 	 	 	60	%	 	$	468	 	 	$	472	 	 	 	=	 	 	 	60	%	 	$	2.95	 	 	$	3.06	 	 	 	0.30	 
	7.36
	 	 	7.47	 	 	 	=	 	 	 	65	%	 	$	473	 	 	$	477	 	 	 	=	 	 	 	65	%	 	$	3.07	 	 	$	3.19	 	 	 	0.40	 
	7.48
	 	 	7.57	 	 	 	=	 	 	 	70	%	 	$	478	 	 	$	482	 	 	 	=	 	 	 	70	%	 	$	3.20	 	 	$	3.31	 	 	 	0.50	 
	7.58
	 	 	7.67	 	 	 	=	 	 	 	75	%	 	$	483	 	 	$	487	 	 	 	=	 	 	 	75	%	 	$	3.32	 	 	$	3.44	 	 	 	0.60	 
	7.68
	 	 	7.74	 	 	 	=	 	 	 	80	%	 	$	488	 	 	$	492	 	 	 	=	 	 	 	80	%	 	$	3.45	 	 	$	3.56	 	 	 	0.70	 
	7.75
	 	 	7.81	 	 	 	=	 	 	 	85	%	 	$	493	 	 	$	498	 	 	 	=	 	 	 	85	%	 	$	3.57	 	 	$	3.69	 	 	 	0.80	 
	7.82
	 	 	7.85	 	 	 	=	 	 	 	90	%	 	$	499	 	 	$	503	 	 	 	=	 	 	 	90	%	 	$	3.70	 	 	$	3.81	 	 	 	0.90	 
	7.86
	 	 	7.88	 	 	 	=	 	 	 	95	%	 	$	504	 	 	$	508	 	 	 	=	 	 	 	95	%	 	$	3.82	 	 	$	3.94	 	 	 	0.95	 
	7.89
	 	 	8.00	 	 	 	=	 	 	 	100	%	 	$	509	 	 	$	513	 	 	 	=	 	 	 	100	%	 	$	3.95	 	 	$	4.06	 	 	 	1.00	 
	8.01
	 	 	8.05	 	 	 	=	 	 	 	105	%	 	$	514	 	 	$	524	 	 	 	=	 	 	 	105	%	 	$	4.07	 	 	$	4.19	 	 	 	1.01	 
	8.06
	 	 	8.10	 	 	 	=	 	 	 	110	%	 	$	525	 	 	$	534	 	 	 	=	 	 	 	110	%	 	$	4.20	 	 	$	4.32	 	 	 	1.02	 
	8.11
	 	 	8.20	 	 	 	=	 	 	 	115	%	 	$	535	 	 	$	544	 	 	 	=	 	 	 	115	%	 	$	4.33	 	 	$	4.45	 	 	 	1.03	 
	8.21
	 	 	8.30	 	 	 	=	 	 	 	120	%	 	$	545	 	 	$	554	 	 	 	=	 	 	 	120	%	 	$	4.46	 	 	$	4.58	 	 	 	1.04	 
	8.31
	 	 	8.40	 	 	 	=	 	 	 	125	%	 	$	555	 	 	$	564	 	 	 	=	 	 	 	125	%	 	$	4.59	 	 	$	4.71	 	 	 	1.05	 
	8.41
	 	 	8.50	 	 	 	=	 	 	 	130	%	 	$	565	 	 	$	575	 	 	 	=	 	 	 	130	%	 	$	4.72	 	 	$	4.84	 	 	 	1.06	 
	8.51
	 	 	8.60	 	 	 	=	 	 	 	135	%	 	$	576	 	 	$	585	 	 	 	=	 	 	 	135	%	 	$	4.85	 	 	$	4.97	 	 	 	1.07	 
	8.61
	 	 	8.70	 	 	 	=	 	 	 	140	%	 	$	586	 	 	$	595	 	 	 	=	 	 	 	140	%	 	$	4.98	 	 	$	5.08	 	 	 	1.08	 
	8.71
	 	 	8.80	 	 	 	=	 	 	 	145	%	 	$	596	 	 	$	606	 	 	 	=	 	 	 	145	%	 	$	5.09	 	 	$	5.21	 	 	 	1.09	 
	8.81
	 	 	8.90	 	 	 	=	 	 	 	150	%	 	$	607	 	 	$	616	 	 	 	=	 	 	 	150	%	 	$	5.22	 	 	and above	 	 	1.10	 
	8.91
	 	 	9.00	 	 	 	=	 	 	 	155	%	 	$	617	 	 	$	626	 	 	 	=	 	 	 	155	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.01
	 	 	9.10	 	 	 	=	 	 	 	160	%	 	$	627	 	 	$	636	 	 	 	=	 	 	 	160	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.11
	 	 	9.20	 	 	 	=	 	 	 	165	%	 	$	637	 	 	$	646	 	 	 	=	 	 	 	165	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.21
	 	 	9.30	 	 	 	=	 	 	 	170	%	 	$	647	 	 	$	657	 	 	 	=	 	 	 	170	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.31
	 	 	9.40	 	 	 	=	 	 	 	175	%	 	$	658	 	 	$	667	 	 	 	=	 	 	 	175	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.41
	 	 	9.50	 	 	 	=	 	 	 	180	%	 	$	668	 	 	$	677	 	 	 	=	 	 	 	180	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.51
	 	 	9.60	 	 	 	=	 	 	 	185	%	 	$	678	 	 	$	687	 	 	 	=	 	 	 	185	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.61
	 	 	9.70	 	 	 	=	 	 	 	190	%	 	$	688	 	 	$	698	 	 	 	=	 	 	 	190	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.71
	 	 	9.80	 	 	 	=	 	 	 	195	%	 	$	699	 	 	$	708	 	 	 	=	 	 	 	195	%	 	 	 	 	 	 	 	 	 	 	 	 
	9.81
	 	and above	 	 	=	 	 	 	200	%	 	$	709	 	 	and above	 	 	=	 	 	 	200	%	 	 	 	 	 	 	 	 	 	 	 	 

* - In $Millions

** - $7.02 is average close price from October 3, 2003 through December 31,
2003 – The 90 day period preceding the beginning of the performance period (see
Page 6 of 6).

			
	 	 	 
	
	 	Page 4 of 6

 

 

INTEROFFICE MEMO

Questions and Answers

1. Did everyone in my Pay Band receive the grant?

No. Management decided to award the “best athletes” with grants. Assessment
on performance and potential were conducted.

2. Will the value of my restricted shares change?

Your distribution value will be the number of shares vested times NYSE
closing price on vesting date. At any time prior to each vesting date, you
can place an estimated value on your grant by multiplying the Beverly Common
Stock price times the number of shares you were granted.

3. Once a share is vested, what can I do?

Once a share is vested you can hold it or sell it. If you sell it (exercise)
you must do so during the Company’s open window period and you must obtain
prior written approval from the CEO.

4. Can I exercise only a portion of my vested awards?

Yes. Once the award is vested, you may exercise all or a portion of your
grant. If you hold the share for at least one year after vesting, the
incremental gain in share price will be taxed as a long-term capital gain.

5. When do I pay taxes on the grant?

You pay taxes on the grant (restricted shares, performance units and cash
awards) at the time these awards vest.

6. Does my grant count as part of pay for other compensation or benefit
calculations?

The cash bonus paid shall only be considered as compensation under the
employee benefit plans of the company as determined and provided under the
provisions of such plans. The restricted shares are not benefits bearing.

7. Do I have shareholder rights on the Restricted Shares granted?

You have rights as a shareholder of Beverly stock.

8. What happens if I leave the Company?

If you voluntarily resign, are terminated for cause, laid off, or other
termination occurs, the unpaid cash award and unvested restricted shares are
forfeited.

			
	 	 	 
	
	 	Page 5 of 6

 

 

INTEROFFICE MEMO

Beverly Enterprises, Inc.

NYSE Closing Prices

October 3 2003 — December 31 2003

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date	 	Open	 	High	 	Low	 	Close	 	Volume	 	Adj. Close
	31-Dec-03
	 	$	8.37	 	 	$	8.60	 	 	$	8.22	 	 	$	8.59	 	 	 	1,077,200	 	 	$	8.59	 
	30-Dec-03
	 	$	8.27	 	 	$	8.45	 	 	$	8.27	 	 	$	8.41	 	 	 	577,500	 	 	$	8.41	 
	29-Dec-03
	 	$	8.25	 	 	$	8.34	 	 	$	8.22	 	 	$	8.30	 	 	 	458,100	 	 	$	8.30	 
	26-Dec-03
	 	$	8.22	 	 	$	8.30	 	 	$	8.18	 	 	$	8.24	 	 	 	121,800	 	 	$	8.24	 
	24-Dec-03
	 	$	8.15	 	 	$	8.25	 	 	$	8.12	 	 	$	8.24	 	 	 	156,000	 	 	$	8.24	 
	23-Dec-03
	 	$	8.25	 	 	$	8.33	 	 	$	8.11	 	 	$	8.23	 	 	 	266,200	 	 	$	8.23	 
	22-Dec-03
	 	$	8.23	 	 	$	8.25	 	 	$	8.08	 	 	$	8.25	 	 	 	301,100	 	 	$	8.25	 
	19-Dec-03
	 	$	8.20	 	 	$	8.24	 	 	$	8.06	 	 	$	8.23	 	 	 	496,500	 	 	$	8.23	 
	18-Dec-03
	 	$	8.10	 	 	$	8.24	 	 	$	8.03	 	 	$	8.19	 	 	 	580,400	 	 	$	8.19	 
	17-Dec-03
	 	$	8.13	 	 	$	8.15	 	 	$	7.95	 	 	$	8.08	 	 	 	431,300	 	 	$	8.08	 
	16-Dec-03
	 	$	7.99	 	 	$	8.24	 	 	$	7.70	 	 	$	8.23	 	 	 	1,016,500	 	 	$	8.23	 
	15-Dec-03
	 	$	8.49	 	 	$	8.53	 	 	$	7.96	 	 	$	8.00	 	 	 	880,500	 	 	$	8.00	 
	12-Dec-03
	 	$	8.45	 	 	$	8.45	 	 	$	8.05	 	 	$	8.39	 	 	 	679,300	 	 	$	8.39	 
	11-Dec-03
	 	$	7.70	 	 	$	8.50	 	 	$	7.70	 	 	$	8.44	 	 	 	1,461,200	 	 	$	8.44	 
	10-Dec-03
	 	$	7.97	 	 	$	7.97	 	 	$	7.46	 	 	$	7.75	 	 	 	1,521,300	 	 	$	7.75	 
	9-Dec-03
	 	$	8.20	 	 	$	8.25	 	 	$	7.99	 	 	$	8.10	 	 	 	1,344,500	 	 	$	8.10	 
	8-Dec-03
	 	$	8.20	 	 	$	8.40	 	 	$	8.20	 	 	$	8.25	 	 	 	785,400	 	 	$	8.25	 
	5-Dec-03
	 	$	8.40	 	 	$	8.40	 	 	$	8.17	 	 	$	8.30	 	 	 	1,412,300	 	 	$	8.30	 
	4-Dec-03
	 	$	8.40	 	 	$	8.48	 	 	$	8.35	 	 	$	8.45	 	 	 	1,637,700	 	 	$	8.45	 
	3-Dec-03
	 	$	8.45	 	 	$	8.60	 	 	$	8.20	 	 	$	8.35	 	 	 	3,501,100	 	 	$	8.35	 
	2-Dec-03
	 	$	7.92	 	 	$	8.50	 	 	$	7.91	 	 	$	8.45	 	 	 	3,025,700	 	 	$	8.45	 
	1-Dec-03
	 	$	7.92	 	 	$	8.00	 	 	$	7.86	 	 	$	7.92	 	 	 	1,151,000	 	 	$	7.92	 
	28-Nov-03
	 	$	7.80	 	 	$	7.93	 	 	$	7.77	 	 	$	7.83	 	 	 	485,600	 	 	$	7.83	 
	26-Nov-03
	 	$	7.83	 	 	$	7.89	 	 	$	7.63	 	 	$	7.82	 	 	 	797,400	 	 	$	7.82	 
	25-Nov-03
	 	$	7.65	 	 	$	7.89	 	 	$	7.64	 	 	$	7.81	 	 	 	891,900	 	 	$	7.81	 
	24-Nov-03
	 	$	7.51	 	 	$	7.65	 	 	$	7.50	 	 	$	7.63	 	 	 	878,300	 	 	$	7.63	 
	21-Nov-03
	 	$	7.70	 	 	$	7.70	 	 	$	7.45	 	 	$	7.49	 	 	 	989,900	 	 	$	7.49	 
	20-Nov-03
	 	$	7.42	 	 	$	7.85	 	 	$	7.39	 	 	$	7.65	 	 	 	1,660,900	 	 	$	7.65	 
	19-Nov-03
	 	$	7.40	 	 	$	7.60	 	 	$	7.23	 	 	$	7.52	 	 	 	1,481,800	 	 	$	7.52	 
	18-Nov-03
	 	$	7.10	 	 	$	7.48	 	 	$	7.09	 	 	$	7.35	 	 	 	1,539,200	 	 	$	7.35	 
	17-Nov-03
	 	$	7.10	 	 	$	7.20	 	 	$	6.93	 	 	$	7.06	 	 	 	1,531,500	 	 	$	7.06	 
	14-Nov-03
	 	$	7.55	 	 	$	7.83	 	 	$	7.12	 	 	$	7.25	 	 	 	2,743,500	 	 	$	7.25	 
	13-Nov-03
	 	$	7.00	 	 	$	7.63	 	 	$	6.99	 	 	$	7.55	 	 	 	4,554,000	 	 	$	7.55	 
	12-Nov-03
	 	$	6.60	 	 	$	7.00	 	 	$	6.53	 	 	$	7.00	 	 	 	3,622,500	 	 	$	7.00	 
	11-Nov-03
	 	$	6.80	 	 	$	6.90	 	 	$	6.19	 	 	$	6.30	 	 	 	3,064,200	 	 	$	6.30	 
	10-Nov-03
	 	$	6.75	 	 	$	6.76	 	 	$	6.66	 	 	$	6.66	 	 	 	965,400	 	 	$	6.66	 
	7-Nov-03
	 	$	6.54	 	 	$	6.78	 	 	$	6.50	 	 	$	6.74	 	 	 	1,976,100	 	 	$	6.74	 
	6-Nov-03
	 	$	6.40	 	 	$	6.65	 	 	$	6.31	 	 	$	6.64	 	 	 	2,027,100	 	 	$	6.64	 
	5-Nov-03
	 	$	6.70	 	 	$	6.74	 	 	$	6.25	 	 	$	6.35	 	 	 	2,507,800	 	 	$	6.35	 
	4-Nov-03
	 	$	6.40	 	 	$	6.40	 	 	$	6.19	 	 	$	6.21	 	 	 	682,700	 	 	$	6.21	 
	3-Nov-03
	 	$	6.09	 	 	$	6.40	 	 	$	6.03	 	 	$	6.35	 	 	 	2,849,100	 	 	$	6.35	 
	31-Oct-03
	 	$	5.76	 	 	$	6.09	 	 	$	5.70	 	 	$	6.07	 	 	 	1,528,700	 	 	$	6.07	 
	30-Oct-03
	 	$	5.73	 	 	$	5.85	 	 	$	5.65	 	 	$	5.69	 	 	 	909,400	 	 	$	5.69	 
	29-Oct-03
	 	$	5.53	 	 	$	5.71	 	 	$	5.52	 	 	$	5.71	 	 	 	1,029,500	 	 	$	5.71	 
	28-Oct-03
	 	$	5.47	 	 	$	5.58	 	 	$	5.45	 	 	$	5.58	 	 	 	1,066,800	 	 	$	5.58	 
	27-Oct-03
	 	$	5.44	 	 	$	5.57	 	 	$	5.40	 	 	$	5.49	 	 	 	411,800	 	 	$	5.49	 
	24-Oct-03
	 	$	5.41	 	 	$	5.47	 	 	$	5.35	 	 	$	5.39	 	 	 	531,900	 	 	$	5.39	 
	23-Oct-03
	 	$	5.43	 	 	$	5.53	 	 	$	5.42	 	 	$	5.46	 	 	 	1,329,000	 	 	$	5.46	 
	22-Oct-03
	 	$	5.52	 	 	$	5.58	 	 	$	5.45	 	 	$	5.49	 	 	 	1,032,600	 	 	$	5.49	 
	21-Oct-03
	 	$	5.35	 	 	$	5.60	 	 	$	5.35	 	 	$	5.58	 	 	 	810,700	 	 	$	5.58	 
	20-Oct-03
	 	$	5.46	 	 	$	5.46	 	 	$	5.23	 	 	$	5.45	 	 	 	1,737,900	 	 	$	5.45	 
	17-Oct-03
	 	$	5.52	 	 	$	5.53	 	 	$	5.44	 	 	$	5.48	 	 	 	2,320,200	 	 	$	5.48	 
	16-Oct-03
	 	$	5.40	 	 	$	5.58	 	 	$	5.35	 	 	$	5.52	 	 	 	3,969,500	 	 	$	5.52	 
	15-Oct-03
	 	$	5.47	 	 	$	5.51	 	 	$	5.28	 	 	$	5.40	 	 	 	3,758,100	 	 	$	5.40	 
	14-Oct-03
	 	$	5.28	 	 	$	5.71	 	 	$	5.06	 	 	$	5.42	 	 	 	5,342,500	 	 	$	5.42	 
	13-Oct-03
	 	$	5.39	 	 	$	5.75	 	 	$	5.37	 	 	$	5.70	 	 	 	636,500	 	 	$	5.70	 
	10-Oct-03
	 	$	5.69	 	 	$	5.70	 	 	$	5.35	 	 	$	5.38	 	 	 	1,190,900	 	 	$	5.38	 
	9-Oct-03
	 	$	5.91	 	 	$	5.96	 	 	$	5.75	 	 	$	5.77	 	 	 	637,000	 	 	$	5.77	 
	8-Oct-03
	 	$	6.00	 	 	$	6.02	 	 	$	5.77	 	 	$	5.89	 	 	 	419,600	 	 	$	5.89	 
	7-Oct-03
	 	$	5.99	 	 	$	6.01	 	 	$	5.94	 	 	$	6.00	 	 	 	508,900	 	 	$	6.00	 
	6-Oct-03
	 	$	6.05	 	 	$	6.20	 	 	$	5.90	 	 	$	6.09	 	 	 	477,100	 	 	$	6.09	 
	3-Oct-03
	 	$	6.31	 	 	$	6.39	 	 	$	5.97	 	 	$	6.09	 	 	 	592,600	 	 	$	6.09	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	435.25	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	62	 	 	Trading Days	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	7.0202	 	 	Avg Stock Price	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 

			
	 	 	 
	
	 	Page 6 of 6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}]]