Performance-Based Stock Option Award Agreement between Beverly Enterprises and Darlene Burch

Summary

This agreement outlines a performance-based stock option award granted by Beverly Enterprises to Darlene Burch as part of the Process Improvement Team Award Program. Darlene is eligible to receive up to 75,000 stock options if the company achieves a $26 million reduction in G&A expenses by the end of 2005, with a lower award for partial achievement. The final award and evaluation are at the discretion of the Board's Nominating and Compensation Committee.

EX-10.7 9 d98895exv10w7.txt PERFORMANCE BASED STOCK OPTION AWARD - D. BURCH EXHIBIT 10.7 June 6, 2002 Darlene Burch Dear Darlene: I am pleased to announce that you have been selected to participate in the Beverly Process Improvement Team Award Program. The company is embarking on a long-term improvement initiative. As a member of the core implementation team, it is important to recognize your critical role and to reward you for the overall success of the initiative. Details of the program are outlined in the enclosure. I am excited about the potential impact and improvements we can make in the profitability of our company. I look forward to working with you in the months and years ahead. Sincerely, Jeffrey P. Freimark CFO PROCESS IMPROVEMENT TEAM AWARDS PROGRAM HIGHLIGHTS PROGRAM OBJECTIVE: Measure process improvement achievements against last reduction goals PROGRAM GOAL: Reduction of G & A expenses as a percent of revenue by $26 million for the year ended December 2005 PROGRAM BASELINE: G & A expenses as of the 12 month period ending June 2002 PROGRAM PAYMENT : GOAL PAYMENT = AMOUNT 26.0 MILLION OR GREATER 100% = ----------------------- ------ Jeff Freimark 150,000 shares Darlene Burch 75,000 shares 23.0 - 25.9 MILLION 50% = ------------------- ------ Jeff Freimark 75,000 shares Darlene Burch 37,500 shares Performance evaluation and awards are subject to the full discretion of the Nominating and Compensation Committee of the Board of Directors