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                                                                    EXHIBIT 10.6
                    SIXTEENTH AMENDMENT TO CREDIT AGREEMENT
                                     AMONG
                           BEVERLY ENTERPRISES, INC.,
               BEVERLY HEALTH AND REHABILITATION SERVICES, INC.,
                    THE SUBSIDIARY GUARANTORS LISTED HEREIN,
                           THE LENDERS LISTED HEREIN,
                         BANK OF MONTREAL, AS CO-AGENT,
                                      AND
                    THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
                          LOS ANGELES AGENCY, AS AGENT

                            DATED AS OF JUNE 5, 1996

                 THIS SIXTEENTH AMENDMENT, dated as of June 5, 1996 (this
"AMENDMENT"), is entered into by and among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
(formerly known as Beverly California Corporation), a California corporation
("BORROWER"), the SUBSIDIARY GUARANTORS listed on the signature pages hereof
(together with BEI, the "GUARANTORS"), the LENDERS listed on the signature
pages hereof (such lenders, together with each Person that may or has become a
party to the Credit Agreement (as defined below) pursuant to subsection 10.8
thereof, are referred to herein individually as a "LENDER" and collectively as
the "LENDERS"), BANK OF MONTREAL as co-agent for the Lenders (in such capacity,
the "CO-AGENT"), and THE LONG-TERM CREDIT BANK OF JAPAN, LTD., Los Angeles
Agency ("LTCB"), as agent for the Lenders (in such capacity, the "AGENT"). This
Amendment amends the Credit Agreement dated March 24, 1992 by and among BEI,
Borrower, Co-Agent, Agent and Lenders, as amended by that First Amendment to
Credit Agreement dated April 7, 1992 by and among BEI, Borrower, Co-Agent,
Agent and the Lenders, as further amended by that Second Amendment to Credit
Agreement dated as of May 11, 1992 by and among BEI, Borrower, Co-Agent, Agent
and the Lenders, as further amended by that Third Amendment to Credit Agreement
dated as of March 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Fourth Amendment to Credit Agreement dated
as of November 1, 1993 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Fifth Amendment to Credit Agreement dated
as of March 21, 1994 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Sixth Amendment to Credit Agreement dated
as of April 22, 1994 by and among BEI, Borrower, Co-Agent, Agent and the
Lenders, as further amended by that Seventh Amendment to Credit Agreement dated
as of May 2, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Eighth Amendment to Credit Agreement dated as of
November 1, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Ninth Amendment to Credit Agreement dated as of
November 9, 1994 by and among BEI, Borrower, Co-Agent, Agent and the Lenders,
as further amended by that Tenth Amendment to Credit Agreement dated as of
December 6, 1994 by and
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among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Eleventh Amendment to Credit Agreement dated as of March 27, 1995 by and
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Twelfth Amendment to Credit Agreement dated as of October 23, 1995 by and
among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Thirteenth Amendment to Credit Agreement dated as of September 29, 1995 by
and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Fourteenth Amendment to Credit Agreement dated as of December 7, 1995 by
and among BEI, Borrower, Co-Agent, Agent and the Lenders, as further amended by
that Fifteenth Amendment to Credit Agreement dated as of February 12, 1996 by
and among BEI, Borrower, Co-Agent, Agent and the Lenders (said Credit
Agreement, as so amended, the "CREDIT AGREEMENT"), as set forth herein.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.

                                    RECITALS

                 WHEREAS, Borrower desires to amend the Credit Agreement in
certain respects;

                 WHEREAS, Lenders, Co-Agent and Agent have agreed to approve
such amendments;

                 WHEREAS, Guarantors desire to reaffirm the effectiveness
respectively of the Subsidiary Guaranty Agreement and the BEI Guaranty
Agreement;

                 NOW, THEREFORE, in consideration of the terms and conditions
herein contained, BEI, Borrower, Guarantors, Co-Agent, Agent and Lenders agree
as follows:

                                  AGREEMENT

SECTION 1.       AMENDMENT TO SUBSECTION 5.18 OF THE CREDIT AGREEMENT

                 Subsection 5.18B of the Credit Agreement is hereby amended,
effective as of December 31, 1995, by deleting it in its entirety and replacing
it with the following:

         "B. CERTAIN APPRAISALS REQUIRED. The Borrower shall deliver to the
         Agent and the Collateral Agent an Appraisal with respect to Eligible
         Collateral that has Eligible Collateral Appraisal Value not less than
         125% (or, if the percentage set forth in the second line of subsection
         2.6B is hereafter amended, such amended percentage) of the aggregate
         outstanding principal amount of the Loans on each December 31 of 1996
         and 1997 (each such Appraisal shall be dated as of a date no more than
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         45 days prior to the date of its delivery and is referred to herein as
         a "SCHEDULED APPRAISAL"). The Agent may require the Borrower to
         provide any such Scheduled Appraisal on a date that is earlier than
         the applicable date set forth above by giving the Borrower a written
         request therefor at least 75 days prior to such earlier date;
         provided, however, that the Agent may not so require such Scheduled
         Appraisal on a date that is earlier than the first anniversary date of
         the most recent Scheduled Appraisal or Agent Appraisal that has been
         delivered or obtained hereunder; provided, further that if the
         Borrower requests the release of any Eligible Collateral pursuant to
         subsection 5.18D after December 31, 1995 and prior to December 31,
         1996, the Borrower shall provide the Scheduled Appraisal that is
         scheduled to be delivered on December 31, 1996 up to ten Business Days
         prior to the date of any such release. In addition to the Scheduled
         Appraisals, the Borrower shall, upon the occurrence and continuation
         of an Event of Default and if the Agent so requests, deliver to the
         Agent and the Collateral Agent a new Appraisal (the "DEFAULT
         APPRAISAL") with respect to all Collateral within 75 days of such
         request. In addition, the Borrower shall, concurrently with the
         pledge of any Additional Collateral to the Agent or the Collateral
         Agent, deliver to the Agent and the Collateral Agent an Additional
         Collateral Appraisal with respect to such Additional Collateral dated
         not earlier than the most recent Appraisal delivered or obtained
         hereunder. All Appraisals and Additional Collateral Appraisals
         delivered pursuant to this subsection 5.18B shall be at the expense of
         the Borrower."

SECTION 2. REPRESENTATIONS AND WARRANTIES

                 In order to induce Agent, Co-Agent and Lenders to enter into
this Amendment, each of BEI and Borrower represents and warrants to Agent,
Co-Agent and Lenders that:

                 (a)      The representations and warranties of each Loan Party
contained in the Credit Agreement are true, correct and complete in all
material respects on and as of the date hereof to the same extent as though
made on and as of the date hereof except to the extent that such
representations and warranties specifically relate to an earlier date, in which
case they are true, correct and complete in all material respects as of such
earlier date;

                 (b)      No event has occurred and is continuing or would
result from the execution of this Amendment that constitutes an Event of
Default or Potential Event of Default;

                 (c)      Each Loan Party has performed in all material
respects all agreements and satisfied all conditions that the
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Credit Agreement and this Amendment provide shall be performed by it on or
before the date hereof;

                 (d)      The execution, delivery and performance of this
Amendment and the Credit Agreement as amended by this Amendment, by each Loan
Party are within the corporate power and authority of each such Loan Party and,
as of the Sixteenth Amendment Effective Date (as hereinafter defined), will be
duly authorized by all necessary corporate action on the part of each Loan
Party, and this Amendment, as of the Sixteenth Amendment Effective Date, is
duly executed and delivered by each of such Loan Parties and will
constitute a valid and binding agreement of each of such Loan Parties,
enforceable against such Loan Parties in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability. The Credit
Agreement constitutes and, as of the Sixteenth Amendment Effective Date, the
Credit Agreement, as amended by this Amendment, will constitute, a valid and
binding agreement of BEI and Borrower, enforceable against BEI and Borrower in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles, relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability;

                 (e)      The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Credit Agreement as
amended by this Amendment, do not and will not (i) violate any provision of any
law or any governmental rule or regulation applicable to any Loan Party, the
Certificate or Articles of Incorporation or Bylaws of any Loan Party or any
order, judgment or decree of any court or other agency of government binding on
any Loan Party, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any instrument that is
material, individually or in the aggregate, and that is binding on such Loan
Party, (iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets of any Loan Party (other than any Liens created
under any of the Loan Documents in favor of Agent on behalf of Lenders), or
(iv) require any approval or consent of any Person under any instrument that is
material, individually or in the aggregate, and that is binding on such Loan
Party; and

                 (f)      The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Credit Agreement as
amended by this Amendment, 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.
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SECTION 3.       CONDITIONS TO EFFECTIVENESS

                 Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SIXTEENTH
AMENDMENT EFFECTIVE DATE"):

                 A.       On or before the Sixteenth Amendment Effective Date,
BEI, Borrower and each Subsidiary Guarantor shall deliver to Lenders (or to
Agent for Lenders with sufficient originally executed copies, as appropriate,
for each Lender and its counsel) the following, each, unless otherwise noted,
dated the Sixteenth Amendment Effective Date:

                          (i)     Signature and incumbency certificates of its
         officers executing this Amendment certified by its secretary or an
         assistant secretary; and

                          (ii)    Executed counterparts of this Amendment.

                 B.       On or before the Sixteenth Amendment Effective Date,
Requisite Lenders shall have delivered to Agent a counterpart of this Amendment
originally executed by a duly authorized officer of such Lender or by telex or
telephonic confirmation.

SECTION 4.       THE GUARANTIES

                 Each Guarantor acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment.
Each Guarantor hereby confirms that the Guaranty Agreement and the Collateral
Documents to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all Obligations,
Guarantied Obligations (as defined in the applicable Guaranty Agreements) and
Secured Obligations (as defined in the Collateral Documents), as the case may
be, including, without limitation, the payment and performance of all
Obligations of Borrower now or hereafter existing under or in respect of the
Credit Agreement as amended by this Amendment and the Notes defined therein.

                 Each Guarantor acknowledges and agrees that any of the
Guaranty Agreements and the Collateral Documents to which it is a party or
otherwise bound shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall not be impaired
or limited by the execution or effectiveness of this Amendment. Each Guarantor
represents and warrants that all representations and warranties contained in
the Credit Agreement as amended by this Amendment and the Guaranty Agreements
and the Collateral Documents to which it is a party or otherwise bound are
true, correct and complete in all material respects on and as of the Sixteenth
Amendment Effective Date to the
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same extent as though made on and as of that date except to the extent that
such representations and warranties specifically relate to an earlier date, in
which case they are true, correct and complete in all material respects as of
such earlier date.

                 Each Guarantor acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Guarantor is not required by the terms of the Credit Agreement or any
other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment or any other Loan Document and (ii) that
neither the terms of the Credit Agreement, any other Loan Document nor this
Amendment shall be deemed to require the consent of any Guarantor to any future
amendments to the Credit Agreement.

SECTION 5. COUNTERPARTS; EFFECTIVENESS

                 This Amendment may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Amendment
(other than the provisions of Section 1 hereof) shall become effective upon the
execution of a counterpart hereof by Requisite Lenders and each of the Loan
Parties and receipt of written or telephonic notification of such execution and
authorization of delivery thereof.

SECTION 6. FEES AND EXPENSES

                 Borrower acknowledges that all costs, fees and expenses as
described in subsection 10.4 of the Credit Agreement incurred by Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Borrower.

SECTION 7. EFFECT OF AMENDMENT

                 It is hereby agreed that, except as specifically provided
herein, this Amendment does not in any way affect or impair the terms and
conditions of the Credit Agreement, and all terms and conditions of the Credit
Agreement are to remain in full force and effect unless otherwise specifically
amended or changed pursuant to the terms and conditions of this Amendment.

SECTION 8. APPLICABLE LAW

                 This Amendment and the rights and obligations of the parties
hereto and all other aspects hereof shall be deemed to be made under, shall be
governed by, and shall be construed and
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enforced in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.

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