Document:

<PAGE>

                                                                   EXHIBIT 10.76

December 24, 2002

Beverly Enterprises - Washington, Inc.
1000 Beverly Way
Fort Smith, Arkansas 72919

                  Re:    $5,000,000 Term Loan

Ladies and Gentlemen:

         BANK OF AMERICA, N.A. (the "Lender") is pleased to make available to
BEVERLY ENTERPRISES - WASHINGTON, INC., a California corporation (the
"Borrower"), a term loan on the terms and subject to the conditions set forth
below. Terms not defined herein have the meanings assigned to them in Exhibit A
hereto.

1.       THE LOAN.

         (a)      THE LOAN. Subject to the terms and conditions set forth
                  herein, the Lender agrees to make available to the Borrower on
                  the date hereof a term loan (the "Loan") in an aggregate ----
                  principal amount of $5,000,000. Once repaid, the Loan may not
                  be reborrowed.

         (b)      BORROWINGS, CONVERSIONS, CONTINUATIONS. The Borrower may
                  request that the Loan be (i) made as or converted to a Base
                  Rate Loan by irrevocable notice to be received by the Lender
                  not later than 11:00 a.m. on the Business Day of the borrowing
                  or conversion, or (ii) made or continued as, or converted to,
                  a Eurodollar Rate Loan by irrevocable notice to be received by
                  the Lender not later than 11:00 a.m. three Business Days prior
                  to the Business Day of the borrowing, continuation or
                  conversion. If the Borrower fails to give a notice of
                  conversion or continuation prior to the end of any Interest
                  Period in respect of any Eurodollar Rate Loan, the Borrower
                  shall be deemed to have requested that such Loan be converted
                  to a Base Rate Loan on the last day of the applicable Interest
                  Period. If the Borrower requests that a Loan be continued as
                  or converted to a Eurodollar Rate Loan, but fails to specify
                  an Interest Period with respect thereto, the Borrower shall be
                  deemed to have selected an Interest Period of one month.
                  Notices pursuant to this Paragraph 1(b) may be given by
                  telephone if promptly confirmed in writing.

                  Each Eurodollar Rate Loan and each Base Rate Loan shall be in
                  a principal amount of $1,000,000 or a whole multiple of
                  $1,000,000 in excess thereof. There shall not be more than two
                  different Interest Periods in effect at any time.

         (c)      INTEREST. At the option of the Borrower, the Loan shall bear
                  interest at a rate per annum equal to (i) the Eurodollar Rate
                  plus the Applicable Margin; or (ii) the Base Rate plus the
                  Applicable Margin. Interest on a Base Rate Loan when the Base
                  Rate is determined by the Lender's "prime rate" shall be
                  calculated on the basis of a year of 365 or 366 days and
                  actual days elapsed. All other interest hereunder shall be
                  calculated on the basis of a year of 360 days and actual days
                  elapsed.

                  The Borrower promises to pay interest (i) for each Eurodollar
                  Rate Loan, (A) on the last day of the applicable Interest
                  Period, and, if the Interest Period is longer than three
                  months, on the respective dates that fall every three months
                  after the beginning of the Interest Period, and (B) on the
                  date of any conversion of such Loan to a Base Rate Loan; (ii)
                  for each Base Rate Loan, on the last Business Day of each
                  calendar quarter; and (iii)

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 2

                  for each Base Rate Loan and Eurodollar Rate Loan, on the
                  Maturity Date. If the time for any payment is extended by
                  operation of law or otherwise, interest shall continue to
                  accrue for such extended period.

                  After the date any principal amount of the Loan is due and
                  payable (whether on the Maturity Date, upon acceleration or
                  otherwise), or after any other monetary obligation hereunder
                  shall have become due and payable (in each case without regard
                  to any applicable grace periods), the Borrower shall pay, but
                  only to the extent permitted by law, interest (after as well
                  as before judgment) on such amounts at a rate per annum equal
                  to the Base Rate plus 2%. Furthermore, while any Event of
                  Default exists, the Borrower shall pay interest on the
                  principal amount of the Loan at a rate per annum equal to the
                  Base Rate plus 2%. Accrued and unpaid interest on past due
                  amounts shall be payable on demand.

                  In no case shall interest hereunder exceed the amount that the
                  Lender may charge or collect under applicable law.

         (d)      EVIDENCE OF THE LOAN. The Loan and all payments thereon shall
                  be evidenced by the Lender's loan accounts and records;
                  provided, however, that upon the request of the Lender, the
                  Loan may be evidenced by a promissory note in the form of
                  Exhibit B hereto in addition to such loan accounts and
                  records. Such loan accounts, records and promissory note shall
                  be conclusive absent manifest error of the amount of the Loan
                  and payments thereon. Any failure to record the Loan or
                  payment thereon or any error in doing so shall not limit or
                  otherwise affect the obligation of the Borrower to pay any
                  amount owing with respect to the Loan.

         (e)      REPAYMENT. The Borrower promises to pay the outstanding
                  principal amount of the Loan in six (6) consecutive quarterly
                  installments as follows, unless accelerated sooner pursuant to
                  paragraph 5:

<Table>
<Caption>
        PAYMENT DATES                  PAYMENT AMOUNT
        -------------                  --------------
        <S>                            <C>
        March 31, 2003,                 $833,333.33
        June 30, 2003,
        September 30, 2003,
        December 31, 2003
        and March 31, 2004

        Maturity Date                   $833,333.35
</Table>

                  The Borrower shall make all payments required hereunder not
                  later than 2:00 p.m. on the date of payment in same day funds
                  in Dollars at the office of the Lender located at 101 North
                  Tryon Street, Charlotte, North Carolina 28255 or such other
                  address as the Lender may from time to time designate in
                  writing.

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 3

                  All payments by the Borrower to the Lender hereunder shall be
                  made to the Lender in full without set-off or counterclaim and
                  free and clear of and exempt from, and without deduction or
                  withholding for or on account of, any present or future taxes,
                  levies, imposts, duties or charges of whatsoever nature
                  imposed by any government or any political subdivision or
                  taxing authority thereof. The Borrower shall reimburse the
                  Lender for any taxes imposed on or withheld from such payments
                  (other than taxes imposed on the Lender's income, and
                  franchise taxes imposed on the Lender, by the jurisdiction
                  under the laws of which the Lender is organized or any
                  political subdivision thereof).

         (g)      PREPAYMENTS.

                           (i) Optional. The Borrower may, upon three Business
                  Days' notice, in the case of a Eurodollar Rate Loan, and upon
                  same-day notice in the case of a Base Rate Loan, prepay the
                  Loan on any Business Day; provided that the Borrower pays all
                  Breakage Costs (if any) associated with such prepayment on the
                  date of such prepayment. Prepayments of a Eurodollar Rate Loan
                  must be accompanied by a payment of interest on the amount so
                  prepaid. Prepayments of a Eurodollar Rate Loan must be in a
                  principal amount of $1,000,000 or a whole multiple of
                  $1,000,000 in excess thereof. Prepayments of a Base Rate Loan
                  must be in a principal amount of $1,000,000 or, if less, the
                  entire principal amount thereof then outstanding.

                           (ii) Mandatory. At the Lender's option, the Loan and
                  all other sums outstanding hereunder and under the other Loan
                  Documents, including all interest thereon, shall be
                  immediately due and payable upon the occurrence of either of
                  the following events: (A) the replacement, restatement or
                  refinancing of the Parent Credit Agreement or (B) any sale,
                  transfer or other disposition of all or substantially all of
                  the Collateral.

2.       CONDITIONS PRECEDENT.

(a)      CONDITIONS PRECEDENT TO THE LOAN. As a condition precedent to the Loan
         hereunder, the Lender must receive the following from the Borrower in
         form and substance satisfactory to the Lender:

                  (i)      the enclosed duplicate of this Agreement duly
                           executed and delivered on behalf of the Borrower;

                  (ii)     a certified borrowing resolution or other evidence of
                           the Borrower's authority to borrow;

                  (iii)    a certificate of incumbency;

                  (iv)     if requested by the Lender, a promissory note as
                           contemplated in Paragraph 1(d) above;

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 4

                  (v)      an executed and notarized Mortgage, together with UCC
                           financing statements, a real estate title insurance
                           policy, a survey and an environmental report, in each
                           case as required by the Lender;

                  (vi)     an executed Parent Guaranty;

                  (vii)    a certificate of insurance naming the Lender as loss
                           payee and/or additional insured, as applicable; and

                  (viii)   such other documents and certificates (including
                           legal opinions of counsel to the Borrower and the
                           Parent) as the Lender may reasonably request.

         (b)      CONDITIONS TO EACH CONTINUATION AND CONVERSION.  As a
                  condition precedent to each continuation and conversion of the
                  Loan:

                  (i)      The Borrower must furnish the Lender with, as
                           appropriate, a notice of continuation and conversion;

                  (ii)     each representation and warranty set forth in
                           Paragraph 3 below shall be true and correct in all
                           material respects as if made on the date of such
                           continuation and conversion; and

                  (iii)    no Default shall have occurred and be continuing on
                           the date of such continuation and conversion.

                  Each notice of continuation and conversion shall be deemed a
                  representation and warranty by the Borrower that the
                  conditions referred to in clauses (ii) and (iii) above have
                  been met.

3.       REPRESENTATIONS AND WARRANTIES.  The Borrower represents and warrants
         that:

         (a)      EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. It
                  (i) is a corporation duly organized or formed, validly
                  existing and in good standing under the laws of the state of
                  its organization or formation, (ii) has the power and
                  authority and the legal right to (A) own and operate its
                  properties, to lease the properties it operates and to conduct
                  its business and (B) execute, deliver and perform its
                  obligations under the Loan Documents, (iii) is duly qualified
                  and in good standing under the laws of each jurisdiction where
                  its ownership, lease or operation of properties or the conduct
                  of its business requires such qualification, and (iv) is in
                  compliance with all laws (included tax laws), except in each
                  case referred to in clause (iii) or clause (iv), to the extent
                  that failure to do so could not reasonably be expected to have
                  a Material Adverse Effect.

         (b)      POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
                  delivery and performance of this Agreement and the other Loan
                  Documents by the Borrower are within its powers and have been
                  duly authorized by all necessary action, and this Agreement is
                  and the other Loan Documents, when executed, will be legal,
                  valid and binding obligations of the Borrower, enforceable in
                  accordance with their respective

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 5

                  terms. The execution, delivery and performance of this
                  Agreement and the other Loan Documents are not in
                  contravention of law or of the terms of the Borrower's organic
                  documents and will not result in the breach of or constitute a
                  default under, or result in the creation of a lien under any
                  indenture, agreement or undertaking to which the Borrower is a
                  party or by which it or its property may be bound or affected.
                  No approval, consent, exemption, authorization, or other
                  action by, or notice to, or filing with, any governmental
                  authority or any other Person is necessary or required in
                  connection with the execution, delivery or performance by, or
                  enforcement against, the Borrower of this Agreement or any
                  other Loan Document except for mortgage filings and financing
                  statement filings to perfect the security interest of the
                  Lender.

         (c)      NO MATERIAL ADVERSE EFFECT. Since December 31, 2001, there has
                  been no event or circumstance that has or could reasonably be
                  expected to have a Material Adverse Effect.

         (d)      NO MATERIAL LITIGATION. Except as disclosed in the Parent's
                  10-K filed for the period ending December 31, 2001, no
                  litigation or governmental proceeding is pending or, to the
                  best knowledge of the Borrower, threatened by or against the
                  Borrower or the Parent which, if adversely determined, could
                  reasonably be expected to have a Material Adverse Effect.

         (e)      NO DEFAULT.  No Default has occurred and is continuing.

         (f)      USE OF PROCEEDS. The proceeds of the Loan will be used solely
                  for general business purposes and in accordance with
                  requirements of law, and will not be used, directly or
                  indirectly, immediately, incidentally or ultimately, to
                  purchase or carry margin stock (within the meaning of
                  Regulation U of the Board of Governors of the Federal Reserve
                  System) or to extend credit to others for the purpose of
                  purchasing or carrying margin stock or to refund indebtedness
                  originally incurred for such purpose.

         (g)      ENVIRONMENTAL MATTERS. All facilities owned or leased by the
                  Borrower or its Subsidiaries have been and continue to be in
                  material compliance with all material environmental laws and
                  regulations.

4.       COVENANTS. So long as principal of and interest on the Loan or any
         other amount payable hereunder or under any other Loan Document remains
         unpaid or unsatisfied:

         (a)      INFORMATION.  The Borrower shall deliver to the Lender:

                  (i)      within 90 days after the end of its fiscal year, an
                           operating statement and balance sheet of the Borrower
                           (which shall not be required to be prepared in
                           accordance with GAAP) and within 90 days after the
                           end of its fiscal year, an operating statement of the
                           of the Borrower regarding the operations of the
                           facility encumbered by the Mortgage. Each such
                           financial statement shall accurately reflect the
                           financial position of the Borrower or such facility,
                           as applicable, in all material respects.

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 6

                  (ii)     promptly upon the Borrower's obtaining knowledge of
                           any Default, a certificate of the chief financial
                           officer of the Borrower setting forth the details
                           thereof and any action that the Borrower is taking or
                           proposes to take with respect thereto;

                  (iii)    promptly upon the Borrower's obtaining knowledge
                           thereof, notice of any matter that has resulted or
                           could reasonably be expected to result in a Material
                           Adverse Effect (including litigation and
                           environmental matters); and

                  (iv)     from time to time such additional information
                           regarding the financial condition or business of the
                           Borrower and its Subsidiaries as the Lender may
                           reasonably request.

         (b)      OTHER AFFIRMATIVE COVENANTS. The Borrower shall, and shall
                  cause each of its Subsidiaries to:

                  (i)      preserve and maintain all of its rights, privileges,
                           and franchises necessary or desirable in the normal
                           conduct of its business;

                  (ii)     comply with the requirements of all applicable laws,
                           rules, regulations, and orders of governmental
                           authorities;

                  (iii)    pay and discharge when due all taxes, assessments,
                           and governmental charges or levies imposed on it or
                           on its income or profits or any of its property,
                           except for any such tax, assessment, charge, or levy
                           the payment of which is being contested in good faith
                           and by proper proceedings and against which adequate
                           reserves are being maintained;

                  (iv)     maintain all of its properties owned or used in its
                           business in good working order and condition ordinary
                           wear and tear excepted;

                  (v)      permit representatives of the Lender, during normal
                           business hours, to examine, copy, and make extracts
                           from its books and records, to inspect its
                           properties, and to discuss its business and affairs
                           with its officers, directors, and accountants;

                  (vi)     comply with its material contractual obligations; and

                  (vii)    maintain insurance in such amounts, with such
                           deductibles, and against such risks as is customary
                           for similarly situated businesses and otherwise in
                           compliance with the Mortgage.

         (c)      NEGATIVE COVENANTS.  The Borrower shall not, nor shall it
                  permit any of its Subsidiaries to:

                           (i)      after the date hereof, create, incur, assume
                                    or suffer to exist any other indebtedness or
                                    guaranty obligation, except (A) trade debt
                                    incurred in the ordinary course of business
                                    and (B) purchase money indebtedness to

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 7

                                    finance the purchase of fixed assets in an
                                    aggregate principal amount not to exceed
                                    $250,000;

                           (ii)     create, incur, assume or suffer to exist any
                                    lien upon any of its property, assets or
                                    revenues, whether now owned or hereafter
                                    acquired, other than liens securing purchase
                                    money indebtedness permitted to be incurred
                                    hereunder; or

                           (iii)    make any disposition (including pursuant to
                                    a sale and leaseback transaction) of any or
                                    all of the Collateral, other than the
                                    disposition of machinery and equipment no
                                    longer used or useful in the conduct of the
                                    Borrower's business.

5.       EVENTS OF DEFAULT.  The following are "Events of Default:"

         (a)      The Borrower fails to pay any principal of the Loan as and on
                  the date when due; or

         (b)      The Borrower fails to pay any interest on the Loan, or any
                  portion thereof, within three days after the date when due; or
                  the Borrower fails to pay any other fee or amount payable to
                  the Lender under any Loan Document, or any portion thereof,
                  within five days after the date due; or

         (c)      The Borrower fails to perform or observe any term, covenant or
                  agreement contained in Paragraph 4(c)hereof; or

         (d)      The Borrower fails to perform or observe any other covenant or
                  agreement (not specified above) contained in any Loan Document
                  on its part to be performed or observed and such failure
                  continues for 30 days after the earlier of (i) the Borrower
                  becoming aware of such failure or (ii) the Lender notifying
                  the Borrower of such failure; or

         (e)      Any representation, warranty, certification or statement of
                  fact made or deemed made by or on behalf of the Borrower
                  herein, in any other Loan Document, or in any document
                  delivered in connection herewith or therewith shall be
                  incorrect or misleading when made or deemed made; or

         (f)      The Borrower or any of its Subsidiaries (i) fails to make any
                  payment in respect of any indebtedness (other than
                  indebtedness hereunder) or guaranty obligation having an
                  aggregate principal amount in excess of $500,000 when due
                  (whether by scheduled maturity, required prepayment,
                  acceleration, demand, or otherwise), or (ii) fails to observe
                  or perform any other agreement or condition relating to any
                  such indebtedness or guaranty obligation or contained in any
                  instrument or agreement evidencing, securing or relating
                  thereto, or any other event shall occur, the effect of which
                  default or other event is to cause, or to permit the holder or
                  holders of such indebtedness or beneficiary or beneficiaries
                  of such guaranty obligation (or a trustee or agent on behalf
                  of such holder or holders or beneficiary or beneficiaries) to
                  cause, with the giving of notice if required, such
                  indebtedness to be demanded or become due or to be
                  repurchased, prepaid, defeased or redeemed (automatically or
                  otherwise), or an offer to repurchase, prepay, defease or

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 8

                  redeem such indebtedness to be made, prior to its stated
                  maturity, or such guaranty obligation to become payable or
                  cash collateral in respect thereof to be demanded. For
                  purposes of this clause (f), "indebtedness" shall not include
                  trade debt incurred in the ordinary course of business and due
                  within six months of the incurrence thereof); or

         (g)      The Borrower or any of its Subsidiaries institutes or consents
                  to the institution of any proceeding under Debtor Relief Laws,
                  or makes an assignment for the benefit of creditors; or
                  applies for or consents to the appointment of any receiver,
                  trustee, custodian, conservator, liquidator, rehabilitator or
                  similar officer for it or for all or any material part of its
                  property; or any receiver, trustee, custodian, conservator,
                  liquidator, rehabilitator or similar officer is appointed
                  without the application or consent of the Borrower or such
                  Subsidiary and the appointment continues undischarged or
                  unstayed for 60 calendar days; or any proceeding under Debtor
                  Relief Laws relating to the Borrower or any Subsidiary or to
                  all or any material part of the Borrower's or such
                  Subsidiary's property is instituted without the consent of the
                  Borrower or such Subsidiary and continues undismissed or
                  unstayed for 60 calendar days, or an order for relief is
                  entered in any such proceeding; or

         (h)      The Borrower is unable or admits in writing its inability or
                  fails generally to pay its debts as they become due; or

         (i)      A final judgment against the Borrower or any of its
                  Subsidiaries is entered for the payment of money in excess of
                  $500,000 (to the extent not covered by insurance by a carrier
                  that has not denied coverage and has the ability to perform)
                  and such judgment remains unsatisfied without procurement of a
                  stay of execution within 30 calendar days after the date of
                  entry of judgment; or

         (j)      Any Loan Document, at any time after its execution and
                  delivery and for any reason other than the agreement of the
                  Lender or satisfaction in full of all the indebtedness
                  hereunder, ceases to be in full force and effect or is
                  declared by a court of competent jurisdiction to be null and
                  void, invalid or unenforceable in any respect; or the Borrower
                  or the Parent denies that it has any or further liability or
                  obligation under any Loan Document, or purports to revoke,
                  terminate or rescind any Loan Document; or

         (k)      A Change of Control occurs;

         (l)      The failure of the Parent to comply with the Incorporated
                  Covenants (as defined in the Parent Guaranty); or

         (m)      The occurrence of an Event of Default (as defined in the
                  Parent Credit Agreement as in effect on the date hereof).

         Upon the occurrence of an Event of Default, the Lender may declare all
         sums outstanding hereunder and under the other Loan Documents,
         including all interest thereon, to be immediately due and payable,
         whereupon the same shall become and be immediately due and payable,
         without notice of default, presentment or demand for payment, protest
         or notice of nonpayment or dishonor, or other notices or demands of any
         kind or character, all of which are hereby expressly waived; provided,
         however, that upon the occurrence of an actual or deemed entry of an
         order for

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 9

         relief with respect to the Borrower under the Bankruptcy Code
         of the United States of America, all sums outstanding hereunder and
         under each other Loan Document, including all interest thereon, shall
         become and be immediately due and payable, without notice of default,
         presentment or demand for payment, protest or notice of nonpayment or
         dishonor, or other notices or demands of any kind or character, all of
         which are hereby expressly waived.

6.       MISCELLANEOUS.

         (a)      All references herein and in the other Loan Documents to any
                  time of day shall mean the local (standard or daylight, as in
                  effect) time of Charlotte, North Carolina.

         (b)      The Borrower shall be obligated to pay all Breakage Costs.

         (c)      If at any time the Lender, in its sole discretion, determines
                  that (i) adequate and reasonable means do not exist for
                  determining the Eurodollar Rate, or (ii) the Eurodollar Rate
                  does not accurately reflect the funding cost to the Lender of
                  making Eurodollar Rate Loans, the Lender's obligation to make
                  or maintain Eurodollar Rate Loans shall cease for the period
                  during which such circumstance exists.

         (d)      The Borrower shall reimburse or compensate the Lender, upon
                  demand, for all costs incurred, losses suffered or payments
                  made by the Lender which are applied or reasonably allocated
                  by the Lender to the transactions contemplated herein (all as
                  determined by the Lender in its reasonable discretion) by
                  reason of any and all future reserve, deposit, capital
                  adequacy or similar requirements against (or against any class
                  of or change in or in the amount of) assets, liabilities or
                  commitments of, or extensions of credit by, the Lender; and
                  compliance by the Lender with any directive, or requirements
                  from any regulatory authority, whether or not having the force
                  of law.

         (e)      No amendment, waiver or other modification of any provision of
                  this Agreement or of any other Loan Document shall be
                  effective unless such amendment, waiver or modification shall
                  be in writing and signed by the Borrower and the Lender, and
                  any such amendment, waiver or modification shall then be
                  effective only for the period and on the conditions and for
                  the specific instance specified in such writing. No failure or
                  delay by the Lender in exercising any right, power or
                  privilege hereunder shall operate as a waiver thereof, nor
                  shall any single or partial exercise thereof preclude any
                  other or further exercise thereof or the exercise of any other
                  rights, power or privilege.

         (f)      Except as otherwise expressly provided herein, notices and
                  other communications to each party provided for herein shall
                  be in writing and shall be delivered by hand or overnight
                  courier service, mailed or sent by telecopy to the address
                  provided from time to time by such party. Any such notice or
                  other communication sent by overnight courier service, mail or
                  telecopy shall be effective on the earlier of actual receipt
                  and (i) if sent by overnight courier service, the scheduled
                  delivery date, (ii) if sent by mail, the fourth Business Day
                  after deposit in the U.S. mail first class postage prepaid,
                  and (iii) if sent by telecopy, when transmission in legible
                  form is complete. All notices and other communications sent by
                  the other means listed in the first sentence of this paragraph
                  shall be effective upon receipt. Notwithstanding anything to
                  the contrary contained herein, all

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Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 10

                  notices (by whatever means) to the Lender pursuant to
                  Paragraph 1(b) hereof shall be effective only upon receipt.
                  Any notice or other communication permitted to be given, made
                  or confirmed by telephone hereunder shall be given, made or
                  confirmed by means of a telephone call to the intended
                  recipient at the number specified in writing by such Person
                  for such purpose, it being understood and agreed that a
                  voicemail message shall in no event be effective as a notice,
                  communication or confirmation hereunder.

                  The Lender shall be entitled to rely and act upon any notices
                  (including telephonic notices of borrowings, conversions and
                  continuations) purportedly given by or on behalf of the
                  Borrower even if (i) such notices were not made in a manner
                  specified herein, were incomplete or were not preceded or
                  followed by any other form of notice specified herein, or (ii)
                  the terms thereof, as understood by the recipient, varied from
                  any confirmation thereof. The Borrower shall indemnify the
                  Lender, its affiliates and the officers, directors, employees,
                  agents and attorneys-in-fact of the Lender and such affiliates
                  from all losses, costs, expenses and liabilities resulting
                  from the reliance by such Person on each notice purportedly
                  given by or on behalf of the Borrower. All telephonic notices
                  to and other communications with the Lender may be recorded by
                  the Lender, and the Borrower hereby consents to such
                  recording.

         (g)      This Agreement shall inure to the benefit of the parties
                  hereto and their respective successors and assigns, except
                  that the Borrower may not assign its rights and obligations
                  hereunder. The Lender may at any time (i) assign all or any
                  part of its rights and obligations hereunder to any other
                  Person with the consent of the Borrower, such consent not to
                  be unreasonably withheld, provided that no such consent shall
                  be required if the assignment is to an affiliate of the Lender
                  or if a Default exists, and (ii) grant to any other Person
                  participating interests in all or part of its rights and
                  obligations hereunder without notice to the Borrower. The
                  Borrower agrees to execute any documents reasonably requested
                  by the Lender in connection with any such assignment. All
                  information provided by or on behalf of the Borrower to the
                  Lender or its affiliates may be furnished by the Lender to its
                  affiliates and to any actual or proposed assignee or
                  participant.

         (h)      The Borrower shall pay the Lender, on demand, all reasonable
                  out-of-pocket expenses and legal fees (including the allocated
                  costs for in-house legal services) incurred by the Lender in
                  connection with any instruments or agreements executed in
                  connection herewith or, to the extent permitted by applicable
                  law, the enforcement of this Agreement.

         (i)      Whether or not the transactions contemplated hereby are
                  consummated, the Borrower shall indemnify and hold harmless
                  the Lender, its affiliates, and their respective directors,
                  officers, employees, counsel, agents and attorneys-in-fact
                  (collectively the "Indemnitees") from and against any and all
                  liabilities, obligations, losses, damages, penalties, claims,
                  demands, actions, judgments, suits, costs, expenses and
                  disbursements (including fees, disbursements and expenses of
                  counsel) of any kind or nature whatsoever which may at any
                  time be imposed on, incurred by or asserted against any such
                  Indemnitee in any way relating to or arising out of or in
                  connection with (a) the execution, delivery, enforcement,
                  performance or administration of any Loan Document or any
                  other agreement, letter or instrument delivered in connection
                  with the transactions

<PAGE>

Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 11

                  contemplated thereby or the consummation of the transactions
                  contemplated thereby, (b) the Loan or the use or proposed use
                  of the proceeds therefrom, or (c) any actual or prospective
                  claim, litigation, investigation or proceeding relating to any
                  of the foregoing, whether based on contract, tort or any other
                  theory (including any investigation of, preparation for, or
                  defense of any pending or threatened claim, investigation,
                  litigation or proceeding) and regardless of whether any
                  Indemnitee is a party thereto (all the foregoing,
                  collectively, the "Indemnified Liabilities"), in all cases,
                  whether or not caused by or arising, in whole or in part, out
                  of the negligence of the Indemnitee; provided that such
                  indemnity shall not, as to any Indemnitee, be available to the
                  extent that such liabilities, obligations, losses, damages,
                  penalties, claims, demands, actions, judgments, suits, costs,
                  expenses or disbursements are determined by a court of
                  competent jurisdiction by final and nonappealable judgment to
                  have resulted from the gross negligence or willful misconduct
                  of such Indemnitee. No Indemnitee shall be liable for any
                  damages arising from the use by others of any information or
                  other materials obtained through IntraLinks or other similar
                  information transmission systems in connection with this
                  Agreement, nor shall any Indemnitee have any liability for any
                  indirect or consequential damages relating to this Agreement
                  or any other Loan Document or arising out of its activities in
                  connection herewith or therewith (whether before or after the
                  Closing Date). The agreements in this Paragraph 6(i) shall
                  survive the repayment, satisfaction or discharge of all the
                  other Obligations. All amounts due under this Paragraph 6(i)
                  shall be payable within ten Business Days after demand
                  therefor.

         (j)      If any provision of this Agreement or the other Loan Documents
                  is held to be illegal, invalid or unenforceable, (i) the
                  legality, validity and enforceability of the remaining
                  provisions of this Agreement and the other Loan Documents
                  shall not be affected or impaired thereby and (ii) the parties
                  shall endeavor in good faith negotiations to replace the
                  illegal, invalid or unenforceable provisions with valid
                  provisions the economic effect of which comes as close as
                  possible to that of the illegal, invalid or unenforceable
                  provisions. The invalidity of a provision in a particular
                  jurisdiction shall not invalidate or render unenforceable such
                  provision in any other jurisdiction.

         (k)      This Agreement may be executed in one or more counterparts,
                  and each counterpart, when so executed, shall be deemed an
                  original but all such counterparts shall constitute but one
                  and the same instrument.

         (l)      This Agreement and the other Loan Documents are governed by,
                  and shall be construed in accordance with, the laws of the
                  State of New York and the applicable laws of the United States
                  of America. The Borrower hereby submits to the nonexclusive
                  jurisdiction of the United States District Court and each
                  state court in the City of New York for the purposes of all
                  legal proceedings arising out of or relating to any of the
                  Loan Documents or the transactions contemplated thereby. The
                  Borrower irrevocably consents to the service of any and all
                  process in any such action or proceeding by the mailing of
                  copies of such process to the Borrower at its address set
                  forth beneath its signature hereto. The Borrower irrevocably
                  waives, to the fullest extent permitted by law, any objection
                  which it may now or hereafter have to the laying of the venue
                  of any such proceeding brought in such a court and any claim
                  that any such proceeding brought in such a court has been
                  brought in an inconvenient forum.

<PAGE>

Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 12

         (m)      THE BORROWER AND THE LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS
                  TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
                  OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
                  DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

         (n)      THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
                  FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
                  CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
                  SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
                  UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

<PAGE>

Beverly Enterprises - Washington, Inc.
December 24, 2002
Page 13

         Please indicate your acceptance of the Loan on the foregoing terms and
conditions by returning an executed copy of this Agreement to the undersigned.

                                            BANK OF AMERICA, N.A.

                                            By:
                                               ---------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

Accepted and Agreed to as of the date first written above:

BEVERLY ENTERPRISES - WASHINGTON, INC.

By:
   ------------------------------------
Name:
     ----------------------------------
Title:
      ---------------------------------
Date:
     ----------------------------------

<PAGE>

                                                                       EXHIBIT A

                                   DEFINITIONS

Agreement:                 This letter agreement, as amended, restated,
                           extended, supplemented or otherwise modified in
                           writing from time to time.

Applicable Margin:         The following percentages per annum, based upon the
                           Pricing Ratio (as defined in the Parent Credit
                           Agreement as in effect on the date hereof) as set
                           forth in the most recent certificate delivered by the
                           Parent to the Lender pursuant to Section 5.01(d) of
                           the Parent Credit Agreement (as incorporated by
                           reference pursuant to Section 4 of the Parent
                           Guaranty):
<Table>
<Caption>
                           Pricing           Applicable Margin for           Applicable Margin for
                           Ratio             Eurodollar Rate Loans           Base Rate Loans
                           -------           ---------------------           ---------------------
<S>                        <C>               <C>                             <C>
                           I                         2.125%                          1.125%
                           II                        2.375%                          1.375%
                           III                       2.625%                          1.625%
                           IV                        2.875%                          1.875%
</Table>

                           The Applicable Rate in effect on the date hereof
                           shall be determined based upon Pricing Level II.

Base Rate:                 For any day, a fluctuating rate per annum equal to
                           the higher of (a) the Federal Funds Rate plus 1/2 of
                           1% and (b) the rate of interest in effect for such
                           day as publicly announced from time to time by the
                           Lender as its "prime rate." The Lender's prime rate
                           is a rate set by the Lender based upon various
                           factors including the Lender's costs and desired
                           return, general economic conditions and other
                           factors, and is used as a reference point for pricing
                           some loans, which may be priced at, above, or below
                           such announced rate. Any change in the prime rate
                           announced by the Lender shall take effect at the
                           opening of business on the day specified in the
                           public announcement of such change.

Base Rate Loan:            A Loan bearing interest based on the Base Rate.

Breakage Costs:            Any loss, cost or expense incurred by the Lender
                           (including any loss of anticipated profits and any
                           loss or expense arising from the liquidation or
                           reemployment of funds obtained by the Lender to
                           maintain the relevant Eurodollar Rate Loan or from
                           fees payable to terminate the deposits from which
                           such funds were obtained) as a result of (i) any
                           continuation, conversion, payment or prepayment of
                           any Eurodollar Rate Loan on a day other than the last
                           day of the Interest Period therefor (whether
                           voluntary, mandatory, automatic, by reason of
                           acceleration, or otherwise); or (ii) any failure by
                           the Borrower (for a reason other than the failure of
                           the Lender to make a Loan when all conditions to
                           making such Loan have been met by the Borrower in
                           accordance with the terms hereof) to prepay, borrow,
                           continue or convert any Eurodollar Rate Loan on a
                           date or in the amount notified by the Borrower. The
                           certificate of the Lender as to its costs of funds,
                           losses and expenses incurred shall be conclusive
                           absent manifest error.

<PAGE>

Business Day:              Any day other than a Saturday, Sunday, or other day
                           on which commercial banks are authorized to close
                           under the laws of, or are in fact closed in, the
                           State of New York or the state where the Lender's
                           lending office is located and, if such day relates to
                           any Eurodollar Rate Loan, means any such day on which
                           dealings in Dollar deposits are conducted by and
                           between banks in the London interbank eurodollar
                           market.

Change of Control:         The Parent fails to own 100% of the shares of capital
                           stock of, or other equity interests in, the Borrower.

Code:                      The Internal Revenue Code of 1986, as amended from
                           time to time.

Collateral:                The "Collateral" as defined in the Mortgage.

Debtor Relief Laws:        The Bankruptcy Code of the United States of America,
                           and all other liquidation, conservatorship,
                           bankruptcy, assignment for the benefit of creditors,
                           moratorium, rearrangement, receivership, insolvency,
                           reorganization, or similar debtor relief laws of the
                           United States of America or other applicable
                           jurisdictions from time to time in effect affecting
                           the rights of creditors generally.

Default:                   Any event or condition that constitutes an Event of
                           Default or that, with the giving of any notice, the
                           passage of time, or both, would be an Event of
                           Default.

Dollar or $:               The lawful currency of the United States of America.

Eurodollar Rate:           For any Interest Period with respect to any
                           Eurodollar Rate Loan, a rate per annum determined
                           pursuant to the following formula:

                           Eurodollar Rate =        Eurodollar Base Rate
                                            ------------------------------------
                                            1.00 - Eurodollar Reserve Percentage

                           Where,

                                    "Eurodollar Base Rate" means, for such
                                    Interest Period:

                                         (a) the rate per annum equal to the
                                    rate determined by the Lender to be the
                                    offered rate that appears on the page of the
                                    Telerate screen (or any successor thereto)
                                    that displays an average British Bankers
                                    Association Interest Settlement Rate for
                                    deposits in Dollars (for delivery on the
                                    first day of such Interest Period) with a
                                    term equivalent to such Interest Period,
                                    determined as of approximately 11:00 a.m.
                                    (London time) two Business Days prior to the
                                    first day of such Interest Period, or

<PAGE>
                                         (b) if the rate referenced in the
                                    preceding clause (a) does not appear on such
                                    page or service or such page or service
                                    shall not be available, the rate per annum
                                    equal to the rate determined by the Lender
                                    to be the offered rate on such other page or
                                    other service that displays an average
                                    British Bankers Association Interest
                                    Settlement Rate for deposits in Dollars (for
                                    delivery on the first day of such Interest
                                    Period) with a term equivalent to such
                                    Interest Period, determined as of
                                    approximately 11:00 a.m. (London time) two
                                    Business Days prior to the first day of such
                                    Interest Period, or

                                         (c) if the rates referenced in the
                                    preceding clauses (a) and (b) are not
                                    available, the rate per annum determined by
                                    the Lender as the rate of interest at which
                                    deposits in Dollars for delivery on the
                                    first day of such Interest Period in same
                                    day funds in the approximate amount of the
                                    Eurodollar Rate Loan being made, converted
                                    or continued and with a term equivalent to
                                    such Interest Period would be offered by the
                                    Lender's London Branch to major banks in the
                                    London interbank eurodollar market at their
                                    request at approximately 4:00 p.m. (London
                                    time) two Business Days prior to the first
                                    day of such Interest Period.

                                    "Eurodollar Reserve Percentage" means, for
                           any day during any Interest Period, the reserve
                           percentage (expressed as a decimal, carried out to
                           five decimal places) in effect on such day applicable
                           to the Lender under regulations issued from time to
                           time by the Board of Governors of the Federal Reserve
                           System for determining the maximum reserve
                           requirement (including any emergency, supplemental or
                           other marginal reserve requirement) with respect to
                           Eurocurrency funding (currently referred to as
                           "Eurocurrency liabilities"). The Eurodollar Rate for
                           each outstanding Eurodollar Rate Loan shall be
                           adjusted automatically as of the effective date of
                           any change in the Eurodollar Reserve Percentage.

Eurodollar Rate Loan:      A Loan bearing interest based on the Eurodollar Rate.

Event of Default:          Has the meaning set forth in Paragraph 5.

Federal Funds Rate:        For any day, the rate per annum equal to the weighted
                           average of the rates on overnight Federal funds
                           transactions with members of the Federal Reserve
                           System arranged by Federal funds brokers on such day,
                           as published by the Federal Reserve Bank of New York
                           on the Business Day next succeeding such day;
                           provided that (a) if such day is not a Business Day,
                           the Federal Funds Rate for such day shall be such
                           rate on such transactions on the next preceding
                           Business Day as so published on the next succeeding
                           Business Day, and (b) if no such rate is so published
                           on such next succeeding Business Day, the Federal
                           Funds Rate for such day shall be the average rate
                           (rounded upward, if necessary, to a whole multiple of
                           1/100 of 1%) charged to the Lender on such day on
                           such transactions as determined by the Lender.
<PAGE>
Interest Period:           For each Eurodollar Rate Loan, (a) initially, the
                           period commencing on the date the Eurodollar Rate
                           Loan is disbursed or converted from a Base Rate Loan
                           and (b) thereafter, the period commencing on the last
                           day of the preceding Interest Period, and, in each
                           case, ending on the earlier of (x) the Maturity Date
                           and (y) one, two, three or six months thereafter, as
                           requested by the Borrower; provided that:

                                         (i) any Interest Period that would
                                    otherwise end on a day that is not a
                                    Business Day shall be extended to the next
                                    succeeding Business Day unless such Business
                                    Day falls in another calendar month, in
                                    which case such Interest Period shall end on
                                    the next preceding Business Day; and

                                         (ii) any Interest Period which begins
                                    on the last Business Day of a calendar month
                                    (or on a day for which there is no
                                    numerically corresponding day in the
                                    calendar month at the end of such Interest
                                    Period) shall end on the last Business Day
                                    of the calendar month at the end of such
                                    Interest Period.

Loan Documents:            This Agreement, the Parent Guaranty, the Mortgage and
                           the promissory note and fee letter, if any, delivered
                           in connection with this Agreement.

Material Adverse Effect:   (a) A material adverse change in, or a material
                           adverse effect upon, the business, financial
                           position, results of operations or prospects of the
                           Borrower and its Subsidiaries taken as a whole; (b) a
                           material adverse change in, or a material adverse
                           effect upon, the business, financial position,
                           results of operations or prospects of the Parent and
                           its Subsidiaries taken as a whole; (c) a material
                           impairment of the ability of the Borrower or the
                           Parent to perform its obligations under any Loan
                           Document; or (d) a material adverse effect upon the
                           legality, validity, binding effect or enforceability
                           against the Borrower or the Parent of any Loan
                           Document. The term "Material Adverse Effect" shall
                           not include any reduction or adverse modification of
                           amounts or rates payable to healthcare providers
                           generally pursuant to a federal or state health care
                           program that results from the action or inaction of a
                           federal, state, or local government or agency.

Maturity Date:             June 24, 2004.

Mortgage:                  That certain Deed of Trust, Assignment of Rents and
                           Leases, Fixture Filing and Security Agreement dated
                           as of the date hereof executed by the Borrower in
                           favor of Fidelity National Title Insurance Company of
                           Washington for the benefit of the Lender, as amended,
                           restated, extended, supplemented or otherwise
                           modified in writing from time to time.

Parent:                    Beverly Enterprises, Inc., a Delaware corporation.

Parent Credit Agreement:   That certain Amended and Restated Credit Agreement
                           dated as of April 25, 2001 among the Parent, the
                           financial institutions party thereto and Morgan
                           Guaranty Trust Company of New York, as issuing bank
                           and administrative agent.

<PAGE>

Parent Guaranty:           That certain Guaranty dated as of the date hereof
                           executed by the Parent in favor of the Lender, as
                           amended, restated, extended, supplemented or
                           otherwise modified in writing from time to time.

Person:                    Any natural person, corporation, limited liability
                           company, trust, joint stock company, association,
                           company, partnership, governmental authority or other
                           entity.

Subsidiary:                With respect to any Person, a corporation,
                           partnership, joint venture, limited liability company
                           or other business entity of which a majority of the
                           shares of securities or other interests having
                           ordinary voting power for the election of directors
                           or other governing body (other than securities or
                           interests having such power only by reason of the
                           happening of a contingency) are at the time
                           beneficially owned, or the management of which is
                           otherwise controlled, directly, or indirectly through
                           one or more intermediaries, or both, by such Person.
                           Unless otherwise specified, all references herein to
                           a "Subsidiary" or to "Subsidiaries" refer to a
                           Subsidiary or Subsidiaries of the Borrower.

<PAGE>

                                                                       EXHIBIT B

                             FORM OF PROMISSORY NOTE

$5,000,000                                                     December 24, 2002

         FOR VALUE RECEIVED, the undersigned, BEVERLY ENTERPRISES - WASHINGTON,
INC., a California corporation (the "Borrower"), hereby promises to pay to the
order of BANK OF AMERICA, N.A. (the "Lender") the principal sum of Five Million
Dollars ($5,000,000) or, if less, the aggregate unpaid principal amount of all
the Loan made by the Lender to the Borrower pursuant to the letter agreement,
dated as of even date herewith (such letter agreement, as it may be amended,
restated, extended, supplemented or otherwise modified from time to time, being
hereinafter called the "Agreement"), between the Borrower and the Lender, at
such times as provided in the Agreement. The Borrower further promises to pay
interest on the unpaid principal amount of the Loan evidenced hereby from time
to time at the rates, on the dates, and otherwise as provided in the Agreement.

         The loan account records maintained by the Lender shall at all times be
conclusive evidence, absent manifest error, as to the amount of the Loan and
payments thereon; provided, however, that any failure to record any payment
thereon or any error in doing so shall not limit or otherwise affect the
obligation of the Borrower to pay any amount owing with respect to the Loan.

         This promissory note is the promissory note referred to in, and is
entitled to the benefits of, the Agreement, which Agreement, among other things,
contains provisions for acceleration of the maturity of the Loan evidenced
hereby upon the happening of certain stated events and also for prepayments on
account of principal of the Loan prior to the maturity thereof upon the terms
and conditions therein specified.

         Unless otherwise defined herein, terms defined in the Agreement are
used herein with their defined meanings therein. This promissory note shall be
governed by, and construed in accordance with, the laws of the State of New
York.

                                          BEVERLY ENTERPRISES - WASHINGTON, INC.

                                          By
                                            ------------------------------------
                                          Name
                                                --------------------------------
                                          Title
                                                --------------------------------<PAGE>
                                                                   EXHIBIT 10.77

                                    GUARANTY

         This GUARANTY, dated as of December 24, 2002, is made by BEVERLY
ENTERPRISES, INC., a Delaware corporation, as Guarantor, in favor of and for the
benefit of Bank of America, N.A., as lender (the "Lender).

         WHEREAS Beverly Enterprises - Washington, Inc., a California
corporation and wholly owned direct subsidiary of the Guarantor (the
"Borrower"), is entering into a Loan Agreement, dated as of December 24, 2002,
among the Borrower and the Lender (as amended, supplemented, amended and
restated or otherwise modified from time to time, the "Loan Agreement"); and

         WHEREAS it is a condition to the obligation of the Lender to enter into
and perform their respective obligations under the Loan Documents that the
Guarantor execute and deliver this Guaranty; and

         WHEREAS the Guarantor, in furtherance of its business objectives, is
willing to provide such guaranty on the terms and conditions hereinafter set
forth.

         NOW, THEREFORE, for valuable consideration (receipt whereof is hereby
acknowledged), the parties hereto agree as follows:

         SECTION 1.     Definitions. Capitalized terms used in this Guaranty
and not otherwise defined herein shall have the respective meanings set forth in
the Loan Agreement.

         SECTION 2      The Guaranty.

              2.01      Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees to the Lender and its successors and permitted
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Loan made by
the Lender to the Borrower and all other amounts from time to time owing to the
Lender by the Borrower under the Loan Agreement and any of the other Loan
Documents, in each case strictly in accordance with the terms hereof or thereof
(such obligations being herein collectively called the "Guaranteed
Obligations"). The Guarantor hereby further agrees that if the Borrower shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal. This Guaranty is a primary obligation of the Guarantor.

              2.02      Obligations Unconditional. The obligations of the
Guarantor under Section 2.01 are absolute and unconditional, irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations of
the Borrower under the Loan Agreement or the other Loan Documents or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guaranty of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 2.02 that the obligations of the Guarantor
hereunder shall be absolute and unconditional, under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of the Guarantor hereunder, which shall remain absolute and
unconditional as described above:

<PAGE>

              (a) at any time or from time to time, without notice to the
         Guarantor, the time for any performance of or compliance with any of
         the Guaranteed Obligations shall be extended, or such performance or
         compliance shall be waived;

              (b) any of the acts mentioned in any of the provisions of the
         Loan Agreement or the other Loan Documents or any other agreement or
         instrument referred to therein shall be done or omitted;

              (c) the maturity of any of the Guaranteed Obligations shall be
         accelerated, or any of the Guaranteed Obligations shall be modified,
         supplemented or amended in any respect, or any rights under the Loan
         Agreement or any other Loan Document or any other agreement or
         instrument referred to therein shall be waived or any other guaranty of
         the Guaranteed Obligations or any security therefor shall be released
         or exchanged in whole or in part or otherwise dealt with; or

              (d) any lien or security interest granted to, or in favor of the
         Lender as security for any of the Guaranteed Obligations shall fail to
         be perfected.

The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices (except as expressly provided herein) whatsoever, and
any requirement that the Lender exhaust any right, power or remedy or proceed
against the Borrower under the Loan Agreement or other Loan Document or any
other agreement or instrument referred to therein, or against any other Person
under any other guaranty of, or security for, any of the Guaranteed Obligations.
The guaranty in Section 2.01 is a guaranty of payment and not of collection.

              2.03      Reinstatement. The obligations of the Guarantor under
this Guaranty shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Guarantor agrees that it will
indemnify the Lender on demand for all reasonable costs and expenses (including,
without limitation, reasonable fees of counsel) incurred by the Lender in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

              2.04      Subrogation. The Guarantor hereby agrees that until the
payment and satisfaction in full of all Guaranteed Obligations, the Guarantor
shall not exercise any right or remedy arising by reason of any performance by
it of its guaranty in Section 2.01 hereof, whether by subrogation or otherwise,
against the Borrower or any other guarantor of any of the Guaranteed Obligations
or any security for any of the Guaranteed Obligations.

              2.05      Remedies. The Guarantor agrees that, as between the
Guarantor and the Lender, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in Paragraph 5 of the Loan Agreement for
purposes of Section 2.01 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower, and that, in the event
of any such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Borrower) shall forthwith become due and payable by the Guarantor for
purposes of said Section 2.01.

                                       2
<PAGE>

         SECTION 3      Representations and Warranties.  The Guarantor
represents and warrants to the Lender that:

              3.01      Organization, Power and Authority. The Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Guarantor has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to enter into this Guaranty and to
carry out the transactions contemplated hereby.

              3.02      Foreign Qualification. The Guarantor is qualified to do
business and in good standing in every jurisdiction wherever necessary to carry
out its business and operations, except in jurisdictions where the failure to be
so qualified or in good standing would not in the reasonable determination of
the Guarantor be expected to impair the ability of the Guarantor to perform its
payment or other material obligations under this Guaranty.

              3.03      Authorization.  The Guarantor has duly authorized by all
necessary corporate action the execution, delivery and performance of this
Guaranty.

              3.04      No Conflicts. The execution, delivery and performance by
the Guarantor of this Guaranty and the consummation of the transactions
contemplated hereby do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to the Guarantor, the certificate
of incorporation or bylaws of the Guarantor or any order, judgment or decree of
any court or other agency of government binding on the Guarantor, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any contractual obligation of the Guarantor, except for
any such default which would not in the reasonable determination of the
Guarantor be expected to impair the ability of the Guarantor to perform its
payment or other material obligations hereunder, (iii) result in or require the
creation or imposition of any lien upon any of the properties or assets of the
Guarantor or (iv) require any approval of stockholders or any approval or
consent of any Person under any contractual obligation of the Guarantor, except
for such approvals or consents (A) which will have been obtained on or before
the Closing Date and have been disclosed in writing to the Lender and (B) with
respect to any contractual obligation, would not in the reasonable determination
of the Guarantor be expected to impair the ability of the Guarantor to perform
its payment or other material obligations hereunder.

              3.05      No Consents, Approvals, etc. The execution, delivery and
performance by the Guarantor of this Guaranty and the consummation of the
transactions contemplated by this Guaranty do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body or any other Person which is required to be obtained or made on or prior to
the date hereof and which has not previously been obtained or made.

              3.06      Execution, Delivery. Enforceability.  The Guarantor has
duly executed and delivered this Guaranty and this Guaranty is the valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws relating
to or affecting the enforcement of creditors' rights generally, including
materiality, reasonableness, good faith and fair dealing, and by general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).

         SECTION 4      Incorporated Covenants. Reference is made to the Parent
Credit Agreement and the covenants contained in Article V of the Parent Credit
Agreement. Such covenants shall hereinafter be

                                       3
<PAGE>

referred to as the "Incorporated Covenants." Guarantor agrees with Lender that
the Incorporated Covenants (and all other relevant provisions of the Parent
Credit Agreement related thereto, including without limitation the defined terms
contained in Article I thereof which are used in the Incorporated Covenants,
hereinafter referred to as the "Additional Incorporated Terms") are hereby
incorporated by reference into this Guaranty to the same extent and with the
same effect as if set forth fully herein and shall inure to the benefit of the
Lender, without giving effect to any waiver, amendment, modification or
replacement of the Parent Credit Agreement or any term or provision of the
Incorporated Covenants occurring subsequent to the date of this Guaranty, except
to the extent otherwise specifically provided in the following provisions of
this paragraph. Guarantor agrees to, and to the extent applicable will cause its
subsidiaries to, comply with the Incorporated Covenants as to the matters
specified therein, except that references to the terms "Administrative Agent,"
"Required Banks," and "Banks" as used therein shall be interpreted to mean the
Lender, unless, in any case, such interpretation is inappropriate under any
reasonable interpretation. In the event a waiver is granted under the Parent
Credit Agreement or an amendment or modification is executed with respect to the
Parent Credit Agreement, and such waiver, amendment and/or modification affects
the Incorporated Covenants or the Additional Incorporated Terms, then such
waiver, amendment or modification shall be effective with respect to the
Incorporated Covenants and the Additional Incorporated Terms as incorporated by
reference into this Guaranty only if consented to in writing by the Lender.

         SECTION 5      Miscellaneous.

              5.01      No Waiver. No failure on the part of any beneficiary of
this Guaranty to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by any such beneficiary
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies herein
are cumulative and are not exclusive of any remedies provided by law.

              5.02      Governing Law; Waiver of Jury Trial. THIS GUARANTY SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). EACH OF THE
PARTIES HERETO HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY.

              5.03      Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof shall be in writing and
shall be made or given in accordance with Paragraph 6(g) of the Loan Agreement;
provided that, for this purpose, the address of the Guarantor shall be the one
specified below its signature below.

              5.04      Amendments.  This Guaranty may be terminated, amended,
supplemented, waived or modified only in a writing signed by the Lender and the
Guarantor.

              5.05      Successors and Assigns. This Guaranty shall be binding
upon and inure to the benefit of the respective successors and permitted assigns
of the Guarantor and each other party hereto; provided, that the Guarantor shall
not assign or transfer its rights or obligations hereunder without the prior
written consent of the Lender.

              5.06      Taxes. All payments by the Guarantor to the Lender
hereunder shall be made to the Lender in full without set-off or counterclaim
and free and clear of and exempt from, and without

                                      4
<PAGE>

deduction or withholding for or on account of, any present or future taxes,
levies, imposts, duties or charges of whatsoever nature imposed by any
government or any political subdivision or taxing authority thereof. The
Guarantor shall reimburse the Lender for any taxes imposed on or withheld from
such payments (other than taxes imposed on the Lender's income, and franchise
taxes imposed on the Lender, by the jurisdiction under the laws of which the
Lender is organized or any political subdivision thereof).

              5.07      Counterparts. This Guaranty may be executed in multiple
counterparts, all of which together shall constitute one and the same
instrument, and each of the parties hereto may execute this Guaranty by signing
any such counterpart.

              5.08      Severability. Any provision of this Guaranty that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable laws, the Guarantor hereby waives any provision of applicable laws
that renders any provision hereof prohibited or unenforceable in any respect.

              5.09      Set-Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, to the
fullest extent permitted by law, the Lender is hereby authorized by the
Guarantor at any time or from time to time, upon notice to the Guarantor or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other Indebtedness at any time held or owing by
the Lender to or for the credit or the account of the Guarantor against and on
account of the obligations and liabilities of the Guarantor to the Lender under
this Guaranty and the other Loan Documents, including, but not limited to, all
claims of any nature or description arising out of or connected with this
Guaranty or any other Loan Document, irrespective of whether or not (i) the
Lender shall have made any demand hereunder or (ii) the principal of or the
interest on the Loan or any other amounts due hereunder shall have become due
and payable pursuant to Paragraph 5 of the Loan Agreement and although said
obligations and liabilities, or any of them, may be contingent or unmatured.

                           [Signature page to follow]

                                       5
<PAGE>

         IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the day
and year first above written.

                                            BEVERLY ENTERPRISES, INC.

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:

                                            Address for notices:

                                            --------------------

                                            --------------------

                                            Attention:
                                                      --------------------------
                                            Telecopy:

                                       6

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