Executive Stock Option Agreement Effective 2/19/98

EXECUTIVE
STOCK OPTION AGREEMENT
BEVERLY ENTERPRISES, INC. 1997 LONG-TERM INCENTIVE PLAN


This Stock Option Agreement is made effective as of the 19th day of February, 1998 (the "Date of Grant") between BEVERLY ENTERPRISES, INC., a Delaware Corporation (the "Corporation"), and David R. Banks (the "Executive"), under the following terms and conditions:


I
GRANT OF OPTION


The Corporation has on the Date of Grant, granted to Executive the option to purchase (the "Option"), any or all of 882,857 shares of Stock in accordance with the Beverly Enterprises, Inc. 1997 Long-Term Incentive Plan (the "Plan"). The Option is intended to qualify as a Nonqualified Stock Option and is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. Unless otherwise defined in this Stock Option Agreement, capitalized terms used herein have the meanings designated in the Plan or those designated in the Executive's Employment Contract with the Corporation dated August 22, 1997.


II
EXERCISE PRICE


With respect to the Option, the Exercise Price shall be $14.25 per share of Stock, which was the Fair Market Value of the underlying Stock on the Date of Grant of the Option.


III
VESTING


(a) Except as otherwise provided in the Plan, the Option shall not be exercisable until one (1) year following the Date of Grant of such Option. Thereafter, commencing one (1) year from the Date of Grant, the Option shall be exercisable with respect to shares of Stock according to the following schedule:


NUMBER OF
DATE SHARES VESTING

February 19, 1999 132,698
February 19, 2000 132,698
February 19, 2001 132,698
February 19, 2002 132,697
Executive's 65th Birthday 352,066


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(b) Notwithstanding paragraph (a) of this Article III, the Option shall be exercisable with respect to all shares of Stock upon the occurrence of any of the following:


(1) Upon a change in control of the Corporation at a time when
the Executive is still employed by the Corporation;


(2) Upon the involuntary termination of the Executive's
employment with the Corporation without Cause (as such term
is defined the employment agreement between the Corporation
and the Executive in effect at the time of such
termination);


(3) Upon the death of the Executive while employed by the
Corporation;


(4) Upon the Disability of the Executive while employed by the
Corporation; or


(5) Upon a determination by the Board of Directors or the
Committee, in their sole and absolute discretion, to
accelerate the vesting of all or any portion of the Option.


IV
TERM OF OPTION


The Option shall expire and shall no longer be exercisable after the expiration of ten (10) years from the Date of Grant.


V
NONTRANSFERABILITY


(a) Except as provided in (b) below, with respect to the Option, such Option shall not be transferable by the Executive except, after the Executive's death, to his or her spouse, child, estate, personal representative, heir or successor, by testamentary disposition or the laws of descent and distribution. More particularly (but without limiting the generality of the foregoing), such Option, except as provided in (b) below, may not be assigned, transferred (except as aforesaid), pledged or hypothecated in any way (whether by operation of law or otherwise), and shall not be subject to execution, attachment or similar process. Any assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, and the levy of any attachment or similar process upon the Option that would otherwise effect a change in the ownership of the Option, shall terminate the Option; provided, however, that in the case of the involuntary levy of any attachment or similar involuntary process upon the Option, the Executive shall have thirty (30) days after notice thereof to cure such levy or process before the Option terminates.


(b) Notwithstanding paragraph (a) of this Article V, the Option may be transferred by the Executive (i) pursuant to a qualified domestic relations order, or (ii) on such terms and conditions


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as the Committee in its sole discretion may require, to (A) the spouse, child, step-child, grandchild or step grandchild of the Executive (each an "Immediate Family Member'), (B) a trust the beneficiaries of which do not include persons other than the Executive and Immediate Family Members, (C) a partnership (either general or limited) the partners of which do not include persons other than the Executive and Immediate Family Members (or a corporation the shareholders of which do not include persons other than the Executive and Immediate Family Members), (D) a corporation the shareholders of which do not include persons other than the Executive and Immediate Family Members, or (E) any other transferee that is approved by the Committee in its sole discretion.


(c) This Stock Option Agreemen ...