BEVERLY ENTERPRISES INC /DE/
8-K, 1997-05-20
SKILLED NURSING CARE FACILITIES
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K



                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                      The Securities Exchange Act of 1934



                                 April 15, 1997 
                       ---------------------------------
                                 Date of Report
                       (Date of earliest event reported)



                          Beverly Enterprises, Inc.
- --------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



                                    Delaware 
                 ----------------------------------------------
                 (State or other jurisdiction of incorporation)



       1-9550                                               95-4100309 
- ------------------------                       ---------------------------------
(Commission file number)                       (IRS employer identification no.)


          5111 Rogers Avenue
             Suite 40-A
         Fort Smith, Arkansas                                     72919 
- ----------------------------------------                        ----------
(Address of principal executive offices)                        (Zip code)



                                 (501) 452-6712 
              ----------------------------------------------------
              (Registrant's telephone number, including area code)





<PAGE>   2
Item 5.  Other Events

         On April 16, 1997, Beverly Enterprises, Inc. ("Beverly") and Capstone
Pharmacy Services, Inc. ("Capstone") announced that they have signed a
definitive agreement dated April 15, 1997(the "Merger Agreement") to combine
Beverly's institutional pharmacy subsidiary, Pharmacy Corporation of America
("PCA") with Capstone to create the nation's largest independent institutional
pharmacy company (the "Merger"). Capstone is expected to issue approximately 50
million shares of its common stock ("Capstone Common Stock") to Beverly
stockholders and assume $275 million of PCA debt incurred to repay Beverly for
certain intercompany indebtedness, with any remaining intercompany balance
contributed to PCA's capital. Beverly stockholders will receive, for each
share of Beverly Common Stock exchanged in the Merger, a fraction of a Capstone
share equal to the quotient of 50,000,000 divided by the number of Beverly
shares outstanding at the effective date of the Merger, or approximately .44 of
a Capstone share, based on the fully diluted number of shares of Beverly Common
Stock outstanding at March 31, 1997. The exact ratio will be determined on the
effective date of the Merger, and Beverly stockholders are expected to own
approximately 57% of the combined pharmacy company.

         Concurrently with execution of the Merger Agreement, Beverly, Capstone
and New Beverly Holdings, Inc. ("NBHI"), a wholly owned subsidiary of Beverly,
also entered into an Agreement and Plan of Distribution (the "Distribution
Agreement"). Under the Distribution Agreement, Beverly will transfer all of its
non-PCA business, including all related assets and liabilities (the "Remaining 
Health Care Business") to NBHI in exchange for the issuance of NBHI Common
Stock. Then, on the Distribution Date (as defined in the Distribution Agreement)
and prior to the Merger, Beverly will distribute to holders of Beverly Common
Stock as of the Distribution Record Date (as defined in the Distribution
Agreement) the NBHI Common Stock then owned by Beverly, on the basis of one
whole share of NBHI Common Stock for each outstanding whole share of Beverly
Common Stock (the "Distribution"). The Distribution Agreement also sets forth
various agreements between Beverly and NBHI to facilitate and accomplish the
separation of PCA and its institutional pharmacy business from Beverly's
Remaining Health Care Business.

         Thus, upon completion of the Distribution and the Merger, Beverly
stockholders will have received one share of NBHI Common Stock (reflecting an
interest in the Remaining Health Care Business) for each share of Beverly
Common Stock held as of the Distribution Record Date, and will have exchanged
their shares of Beverly Common Stock for shares of Capstone Common Stock
(reflecting an interest in the combined institutional pharmacy businesses of
PCA and Capstone) on the basis described above.

         The completion of the Merger is subject to certain conditions,
including but not limited to the approval of both Beverly and Capstone
stockholders, the completion of the Distribution, customary regulatory
approvals and the receipt, at the option of Beverly, of either a favorable tax
ruling from the IRS or an opinion reasonably acceptable to Beverly and 
Capstone concerning the tax-free nature of the transactions.

         This Current Report contains forward-looking information regarding
proposed transactions, the consummation of which are subject to various




                                      2
<PAGE>   3
conditions and uncertainties, and which information is being provided in
connection with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve known and unknown risks
and uncertainties that may cause actual results to differ materially from those
forecasted or contemplated. These risks and uncertainties include national and
local economic conditions, market conditions, the effect of government
regulation and the competitive environment in which the companies operate, and
regulatory review of the pending transactions described in this Report. These
and other risks and uncertainties which could affect future results may also be
addressed in filings with the Securities and Exchange Commission, including
Reports on Forms 10-K and 10-Q.

         The above summary of the Merger Agreement and the Distribution
Agreement is not intended to be complete and is qualified in its entirety by
reference to the detailed provisions of the Merger Agreement and the
Distribution Agreement, which are attached hereto as Exhibits 2.1 and 2.2,
respectively. In addition, a copy of the press release issued by Beverly in
connection with its announcement of the above-described transaction is attached
hereto as Exhibit 99.1.

Item 7.  Financial Statements and Exhibits.

         a)      Financial statements of businesses acquired. Not applicable.

         b)      Pro forma financial information. Not applicable.

         c)      Exhibits.

                 2.1      Agreement and Plan of Merger dated April 15, 1997 by
                          and between Beverly Enterprises, Inc. and Capstone
                          Pharmacy Services, Inc.

                 2.2      Agreement and Plan of Distribution by and among
                          Beverly Enterprises, Inc., New Beverly Holdings, Inc.
                          and Capstone Pharmacy Services, Inc., dated as of
                          April 15, 1997.

                 99.1     Press release, dated April 16, 1997, issued by
                          Beverly Enterprises, Inc.





                                       3
<PAGE>   4
                                   SIGNATURE


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                        BEVERLY ENTERPRISES, INC.



                                        /s/ SCOTT M. TABAKIN 
                                        -----------------------------------
                                        Scott M. Tabakin,
                                        Executive Vice President and
                                        Chief Financial Officer

Date: May 20, 1997





                                       4
<PAGE>   5
                              INDEX TO EXHIBITS

EXHIBIT 
NUMBER                            DESCRIPTION
- -------                           -----------

 2.1       Agreement and Plan of Merger dated April 15, 1997 by and between
           Beverly Enterprises, Inc. And Capstone Pharmacy Services, Inc.

 2.2       Agreement and Plan of Distribution by and among Beverly Enterprises,
           Inc., New Beverly Holdings, Inc. and Capstone Pharmacy Services, Inc.
           dated as of April 15, 1997.

99.1       Press release, dated April 16, 1997, issued by Beverly Enterprises,
           Inc.






<PAGE>   1
                                                                 EXHIBIT 2.1

                          AGREEMENT AND PLAN OF MERGER


                                    BETWEEN


                           BEVERLY ENTERPRISES, INC.


                                      AND


                        CAPSTONE PHARMACY SERVICES, INC.



                                     DATED


                                 APRIL 15, 1997
<PAGE>   2
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                    <C>
ARTICLE I. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
         Section 1.01     The Merger  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
         Section 1.02     Effective Time  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
         Section 1.03     Certificate of Incorporation and By-laws of Surviving Corporation . . . . . . . . . . . . . . 3
         Section 1.04     Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . 3
         Section 1.05     Stockholders' Meetings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
         Section 1.06     Filing of Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Section 1.07     Further Assurances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE II. CONVERSION OF SHARES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
         Section 2.01     Conversion of Beverly Shares  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
         Section 2.02     Exchange of Certificates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.03     Effect on Beverly Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.04     Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
         Section 2.05     Assumption of Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CAPSTONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
         Section 3.01     Organization and Qualification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
         Section 3.02     Authority Relative to This Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
         Section 3.03     Consents, No Conflicts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
         Section 3.04     Board Recommendation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
         Section 3.05     State Anti-takeover Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
         Section 3.06     No Existing Violation, Default, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
         Section 3.07     Licenses and Permits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 3.08     Registration Statement; Prospectus/Joint Proxy Statement  . . . . . . . . . . . . . . . . .  11
         Section 3.09     Finders or Brokers  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 3.10     SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 3.11     Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.12     Absence of Undisclosed Liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.13     Absence of Changes or Events  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.14     Capitalization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 3.15     Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 3.16     Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 3.17     Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 3.18     Title to and Condition of Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 3.19     Leases  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 3.20     Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 3.21     Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
         Section 3.22     No Change of Control Puts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
         Section 3.23     Employment and Labor Contracts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
</TABLE>





                                      -ii-
<PAGE>   3
<TABLE>
<S>                                                                                                                    <C>
         Section 3.24     Intellectual Property Rights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
         Section 3.25     Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 3.26     Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
         Section 3.27     Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 3.28     Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 3.29     Institutional Pharmacy Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 3.30     Fairness Opinion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
         Section 3.31     Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BEVERLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
         Section 4.01     Organization and Qualification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
         Section 4.02     Authority Relative to This Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
         Section 4.03     Consents, No Conflicts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
         Section 4.04     Board Action  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
         Section 4.05     State Anti-takeover Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
         Section 4.06     No Existing Violation, Default, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
         Section 4.07     Affiliates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
         Section 4.08     Licenses and Permits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
         Section 4.09     Registration Statement; Prospectus/Joint Proxy Statement; NBHI Registration Document  . . .  33
         Section 4.10     Finders or Brokers  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
         Section 4.11     SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
         Section 4.12     Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
         Section 4.13     Absence of Undisclosed Liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
         Section 4.14     Absence of Changes or Events  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
         Section 4.15     Capitalization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
         Section 4.16     Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37
         Section 4.17     Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37
         Section 4.18     Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  38
         Section 4.19     Title to and Condition of Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . .  38
         Section 4.20     Leases  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  39
         Section 4.21     Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
         Section 4.22     Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
         Section 4.23     No Change of Control Puts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
         Section 4.24     Employment and Labor Contracts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
         Section 4.25     Intellectual Property Rights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
         Section 4.26     Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
         Section 4.27     Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
         Section 4.28     Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
         Section 4.29     Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
         Section 4.30     Institutional Pharmacy Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
         Section 4.31     Fairness Opinion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
         Section 4.32     Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
</TABLE>





                                     -iii-
<PAGE>   4
<TABLE>
<S>                                                                                                                    <C>
 ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
         Section 5.01     Conduct of Business of Beverly  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
         Section 5.02     Conduct of Business of Capstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
         Section 5.03     No Solicitation by Beverly  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
         Section 5.04     No Solicitation by Capstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
         Section 5.05     Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
         Section 5.06     Registration Statement and Proxy Statement  . . . . . . . . . . . . . . . . . . . . . . . .  58
         Section 5.07     Commercially Reasonable Efforts; Other Actions  . . . . . . . . . . . . . . . . . . . . . .  58
         Section 5.08     Public Announcements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
         Section 5.09     Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
         Section 5.10     Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
         Section 5.11     Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
         Section 5.12     Stock Exchange Listings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
         Section 5.13     Beverly and Subsidiary Actions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
         Section 5.14     Capstone and Subsidiary Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
         Section 5.15     Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
         Section 5.16     Actions Regarding Outstanding Debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
         Section 5.17     Retroactive Insurance Coverage  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  62
         Section 5.18     Preferred Provider Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  62
         Section 5.19     Failure to Take Action  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  62
         Section 5.20     Exhibits, Closing Statements and Schedules  . . . . . . . . . . . . . . . . . . . . . . . .  62

ARTICLE VI. CONDITIONS TO THE OBLIGATIONS OF CAPSTONE AND BEVERLY . . . . . . . . . . . . . . . . . . . . . . . . . .  62
         Section 6.01     Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.02     Beverly Stockholder Approval  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.03     Capstone Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.04     Listings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.05     Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.06     Distribution  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.07     Debt Restructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
         Section 6.08     Opinions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63

ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF CAPSTONE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
         Section 7.01     Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.02     Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.03     Consents and Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.04     Certificates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.05     Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.06     Pharmacy Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.07     Auditors' Letter  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
         Section 7.09     Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
</TABLE>





                                      -iv-
<PAGE>   5
<TABLE>
<S>                                                                                                                    <C>
ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF BEVERLY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
         Section 8.01     Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
         Section 8.02     Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
         Section 8.03     Consents and Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
         Section 8.04     Certificates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 8.05     Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 8.06     Interim Quarterly Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 8.07     Voting Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 8.08     Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 8.09     Auditors' Letter  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

ARTICLE IX. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 9.01     Time And Place  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
         Section 9.02     Filings at the Closing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

ARTICLE X. TERMINATION AND ABANDONMENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
         Section 10.01    Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
         Section 10.02    Termination by Capstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
         Section 10.03    Termination by Beverly  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
         Section 10.04     Procedure for Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
         Section 10.05     Effect of Termination and Abandonment  . . . . . . . . . . . . . . . . . . . . . . . . . .  70

ARTICLE XI. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
         Section 11.01    Terms Defined in This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72

ARTICLE XII. MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
         Section 12.01    Amendment and Modification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
         Section 12.02    Waiver of Compliance; Consents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
         Section 12.03    Survivability; Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
         Section 12.04    Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
         Section 12.05    Assignment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
         Section 12.06    Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
         Section 12.07    Counterparts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
         Section 12.08    Severability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
         Section 12.09    Interpretation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
         Section 12.10    Entire Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
         Section 12.11    Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
</TABLE>





                                      -v-
<PAGE>   6
EXHIBITS TO MERGER AGREEMENT

A        Agreement and Plan of Distribution (including the Ancillary Agreements)
B        Form of Voting Agreement
C        Form of Amendments to Certificate of Incorporation of Capstone
D        Members of the Board of Directors of the Surviving Corporation at the
           Effective Time
E        Senior Officers of the Surviving Corporation at the Effective Time
F        Form of Affiliate Letter Agreement
G        Forms of Provider Agreements
H-1      Opinion of Beverly Counsel
H-2      Opinion of Capstone Counsel
7.08     Non-Competition Agreement


ATTACHMENTS TO MERGER AGREEMENT

Beverly Disclosure Statement
Capstone Disclosure Statement





                                      -vi-
<PAGE>   7
                          AGREEMENT AND PLAN OF MERGER

         AGREEMENT AND PLAN OF MERGER, dated as of April 15, 1997 (the
"Agreement"), by and between Capstone Pharmacy Services, Inc., a Delaware
corporation ("Capstone"), and Beverly Enterprises, Inc., a Delaware corporation
("Beverly").  Capstone and Beverly are hereinafter sometimes collectively
referred to as the "Constituent Corporations."

                                    RECITALS

         WHEREAS, Capstone and Beverly, among other things, own or operate
institutional pharmacy businesses serving the acute, post-acute, long-term and
institutional health care markets, and desire to combine these respective
institutional pharmacy businesses;

         WHEREAS, Capstone does not want to own Beverly's Remaining Health Care
Businesses (as hereinafter defined);

         WHEREAS, prior to the Merger (as hereinafter defined), Beverly and its
Subsidiaries (as hereinafter defined) will transfer on the terms and subject to
the conditions set forth in the Agreement and Plan of Distribution between
Beverly and a previously existing corporation, New Beverly Holdings, Inc., a
Delaware corporation ("NBHI"), in the form attached hereto as Exhibit A
(including the Ancillary Agreements as defined therein, the "Distribution
Agreement"), all of the Remaining Health Care Assets and Remaining Health Care
Liabilities of Beverly and its Subsidiaries (each as defined in the
Distribution Agreement) to NBHI (the "Restructuring"); following which all of
the capital stock of NBHI (the "NBHI Stock") will be distributed (the
"Distribution") immediately prior to the Merger to the shareholders of Beverly.

         WHEREAS, after the Distribution Beverly will own only the
Institutional Pharmacy Assets, and be subject only to the Institutional
Pharmacy Liabilities (each as defined in the Distribution Agreement);

         WHEREAS, the Board of Directors of Beverly has determined that the
Merger and the Distribution are advisable on the terms and conditions contained
in this Agreement and the Distribution Agreement, and that each of the other
transactions contemplated herein or in the Distribution Agreement is consistent
with and in furtherance of the long-term business strategy of Beverly and is
fair to, and in the best interests of, Beverly and Beverly's shareholders, and
has approved and adopted this Agreement and the Distribution Agreement and each
of the other transactions contemplated herein and intends to recommend the
approval and adoption of this Agreement and the Distribution Agreement by the
stockholders of Beverly;

         WHEREAS, the Board of Directors of Capstone has determined that the
Merger is advisable on the terms and conditions contained in this Agreement and
that each of the other transactions contemplated herein is consistent with and
in furtherance of the long-term business strategy of Capstone and is fair to,
and in the best interests of, Capstone and Capstone's





                                       1
<PAGE>   8
shareholders, and has approved and adopted this Agreement and each of the other
transactions contemplated herein and intends to recommend the approval and
adoption of this Agreement by the stockholders of Capstone;

         WHEREAS, Counsel Corporation, a Toronto, Ontario corporation
("Counsel"), and a principal stockholder of Capstone, has committed to vote its
shares of Capstone Common Stock (as hereinafter defined) in favor of approving
this Agreement and the transactions contemplated hereby and has agreed not to
approve or support any competing transaction, all as provided in a voting
agreement of even date, the form of which is attached hereto as Exhibit B to
this Agreement (the "Voting Agreement");

         WHEREAS, Capstone and Beverly intend that at the Effective Time (as
hereinafter defined) the Board of Directors of Capstone shall consist equally
of individuals designated by Capstone and by Beverly and that the senior
officers of the Surviving Corporation (hereinafter defined) shall be those
persons identified in Exhibit E to this Agreement; and

         WHEREAS, Capstone and Beverly desire to make certain representations,
warranties, covenants and agreements in connection with the merger of Capstone
and Beverly and the Distribution by Beverly.

         NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:

                             ARTICLE I. THE MERGER

         SECTION 1.01     THE MERGER.

         (a)     In accordance with the provisions of this Agreement and the
General Corporation Law of the State of Delaware (the "Delaware Act"), at the
Effective Time, Beverly shall be merged with and into Capstone (the "Merger"),
and Capstone shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Delaware. At the Effective Time, the separate
existence of Beverly shall cease.

         (b)     The Merger shall have the effects on Capstone and Beverly as
constituent corporations in the Merger as provided under the Delaware Act.

         SECTION 1.02     EFFECTIVE TIME. The Merger shall become effective at
the time of filing of, or at such later time specified in, a certificate of
merger, in the form required by and executed in accordance with the Delaware
Act, with the Secretary of State of the State of Delaware in accordance with
the provisions of Section 251 of the Delaware Act (the "Certificate of
Merger").





                                       2
<PAGE>   9
The date and time when the Merger shall become effective is herein referred to
as the "Effective Time."

         SECTION 1.03     CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING
                          CORPORATION.

         (a)     The Certificate of Incorporation of Capstone, as in effect
immediately prior to the Effective Time and with such amendments thereto as set
forth in Exhibit C hereto, incorporated herein by reference, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.

         (b)     The By-laws of Capstone, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law.

         SECTION 1.04     DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The
individuals respectively designated by Capstone and Beverly and identified on
Exhibit D to this Agreement, which Exhibit shall be attached to a certificate
signed by both parties and made a part of this Agreement no later than the time
of mailing the Prospectus/Joint Proxy Statement (as hereinafter defined) to the
stockholders of Capstone and Beverly, and which individuals shall be identified
in the Prospectus/Joint Proxy Statement as such, shall comprise all of the
members of the Board of Directors of the Surviving Corporation at the Effective
Time. The individuals identified on Exhibit E to this Agreement shall comprise
all of the senior officers of the Surviving Corporation at the Effective Time
and shall hold the positions set forth opposite their names.

         SECTION 1.05     STOCKHOLDERS' MEETINGS.

         (a)     Beverly will take all action necessary in accordance with
applicable law and its Restated Certificate of Incorporation and By-laws to
convene a special meeting of its stockholders (the "Beverly Special Meeting")
as soon as practicable to consider and vote upon the approval of this
Agreement, the Distribution Agreement and the other transactions contemplated
by this Agreement and the Distribution Agreement. Beverly, through its Board of
Directors, shall recommend to its stockholders approval of this Agreement, the
Distribution Agreement and the other transactions contemplated by this
Agreement and the Distribution Agreement (which recommendation shall be
contained in the Prospectus/Joint Proxy Statement (the "Prospectus/Joint Proxy
Statement") to be contained as part of the Registration Statement (as
hereinafter defined)) and shall use all commercially reasonable efforts to
solicit from its stockholders proxies in favor of approval and adoption of this
Agreement, the Distribution Agreement and the other transactions contemplated
by this Agreement and the Distribution Agreement. Beverly's Board of Directors
shall not withdraw, change, modify in any manner or take action inconsistent
with its recommendation of the Distribution, the Distribution Agreement, the
Merger, this Agreement or the other transactions contemplated hereby or thereby
and shall not resolve to do any of the foregoing and publicly disclose such
resolution; provided, however, that Beverly's Board of Directors may withdraw,
change, modify in any manner or take action inconsistent with such
recommendation or resolve to do any of the foregoing and publicly





                                       3
<PAGE>   10
disclose such resolution in the event that (i) Beverly shall have received an
unsolicited written proposal for a Beverly Acquisition Transaction from a bona
fide financially capable third party, (ii) Beverly shall have provided two
business days' written notice to Capstone of such proposal and (iii) Beverly's
Board of Directors, after having received advice from its investment banker or
bankers and outside counsel to Beverly, shall have determined that failure to
take the proposed action would be inconsistent with such Board of Directors'
fiduciary duties.

         (b)     Capstone will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and By-laws to convene a
special meeting of its stockholders (the "Capstone Special Meeting") as soon as
practicable to consider and vote upon the approval of this Agreement and the
other transactions contemplated by this Agreement. Capstone, through its Board
of Directors, shall recommend to its stockholders approval of this Agreement
and the other transactions contemplated by this Agreement (which recommendation
shall be contained in the Prospectus/Joint Proxy Statement) and shall use all
commercially reasonable efforts to solicit from its stockholders proxies in
favor of approval and adoption of this Agreement and the other transactions
contemplated by this Agreement. Capstone's Board of Directors shall not
withdraw, change, modify in any manner or take action inconsistent with its
recommendation of the Merger, this Agreement or the other transactions
contemplated hereby and shall not resolve to do any of the foregoing and
publicly disclose such resolution; provided, however, that Capstone's Board of
Directors may withdraw, change, modify in any manner or take action
inconsistent with such recommendation or resolve to do any of the foregoing and
publicly disclose such resolution in the event that (i) Capstone shall have
received an unsolicited written proposal for a Capstone Acquisition Transaction
from a bona fide financially capable third party, (ii) Capstone shall have
provided two business days' written notice to Beverly of such proposal, and
(iii) Capstone's Board of Directors, after having received advice from its
investment banker or bankers and outside counsel to Capstone, shall have
determined that failure to take the proposed action would be inconsistent with
such Board of Directors' fiduciary duties.

         SECTION 1.06     FILING OF CERTIFICATE OF MERGER. At the Closing (as
hereinafter defined), Capstone and Beverly shall cause a Certificate of Merger
to be executed and filed with the Secretary of State of the State of Delaware
as provided in Section 251 of the Delaware Act, and shall take any and all
other lawful actions and do any and all other lawful things to cause the Merger
to become effective.

         SECTION 1.07     FURTHER ASSURANCES. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise
in the Surviving Corporation its right, title or interest in, to or under any
of the rights, properties or assets of either of the Constituent Corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take





                                       4
<PAGE>   11
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.

                        ARTICLE II. CONVERSION OF SHARES

         SECTION 2.01     CONVERSION OF BEVERLY SHARES.

         (a)     Except as provided in Section 2.04, each share of common
stock, $.10 par value, of Beverly (the "Beverly Common Stock") issued and
outstanding immediately prior to the Effective Time, (except for shares owned
by Beverly as treasury stock, shares owned by Capstone or any Subsidiary of
Beverly) together with the associated Rights (as defined in Section 4.15)
shall, by virtue of the Merger and without any action on the part of the holder
thereof be converted into the right to receive a number of fully paid and
nonassessable shares of Common Stock, $.01 par value, of Capstone ("Capstone
Common Stock") equal to the Conversion Number. The term "Conversion Number"
shall mean a number, expressed to four decimal places, equal to the quotient of
50,000,000, divided by the number of shares of Beverly Common Stock outstanding
immediately prior to the Effective Time. The shares of Capstone Common Stock
delivered in exchange for shares of Beverly Common Stock, and associated
Rights, pursuant to this Section 2.01(a), are hereinafter sometimes called the
"Closing Consideration." In the event of any change in Capstone Common Stock or
Beverly Common Stock by reason of any stock split, readjustment, stock
dividend, exchange of shares, reclassification, recapitalization or otherwise
(other than the Distribution), the Conversion Number shall be correspondingly
adjusted.

         (b)     At the Effective Time, all shares of Beverly Common Stock, and
associated Rights, by virtue of the Merger and without any action on the part
of the holders thereof, shall no longer be outstanding and shall be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Beverly Common Stock shall thereafter cease to
have any rights with respect to such shares of Beverly Common Stock, and
associated Rights, except the right to receive the Closing Consideration for
such shares of Beverly Common Stock, and associated Rights, as specified in the
foregoing clause (a), upon the surrender of such certificate in accordance with
Section 2.02 and the right to receive the NBHI capital stock distributed with
respect to such shares of Beverly Common Stock in accordance with the terms of
the Distribution Agreement.

         (c)     Each share of Capstone Common Stock issued and outstanding at
and as of the Effective Time will remain issued and outstanding and become the
issued and outstanding capital stock of the Surviving Corporation and shall
continue to be held of record by the stockholders of Capstone, including those
receiving the Closing Consideration, at and after the Effective Time.





                                       5
<PAGE>   12
         SECTION 2.02     EXCHANGE OF CERTIFICATES.

         (a)     Promptly after the Effective Time, Capstone shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented shares
of Beverly Common Stock (the "Certificates") a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to Capstone) and instructions for use in effecting the surrender
of the Certificates for exchange thereof. Upon surrender to Capstone of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor that
number of shares of Capstone Common Stock which such holder has the right to
receive under this Article II, and such Certificate shall forthwith be
canceled. If any shares of Capstone Common Stock are to be issued to a person
other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of exchange that the Certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such exchange shall pay any transfer or other taxes required
by reason of the exchange of the Certificate surrendered to a person other than
the registered holder or such person shall establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.02, each
Certificate shall represent, for all purposes, the right to receive the Closing
Consideration in respect of the number of shares of Beverly Common Stock
evidenced by such Certificate, without any interest thereon.

         (b)     From and after the Effective Time there shall be no transfers
on the stock transfer books of Beverly or the Surviving Corporation of the
shares of Beverly Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided in this
Article II.

         (c)     The Surviving Corporation shall not be liable to any holder of
shares of Beverly Common Stock delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

         SECTION 2.03     EFFECT ON BEVERLY OPTIONS.

         (a)     As of the Time of Distribution (as defined in the Distribution
Agreement), by virtue of the provisions of the Employee Benefit Matters
Agreement (as defined in the Distribution Agreement) and without any action on
the part of the holders thereof, options to purchase shares of Beverly Common
Stock that are outstanding under the Beverly Option Plans (as hereinafter
defined) immediately prior to the Time of Distribution, whether or not
exercisable, and which are granted to each person employed or formerly employed
by Beverly or any Subsidiary of Beverly other than any employee or former
employee of any of the Pharmacy Subsidiaries, and any other person who becomes
an employee of NBHI immediately after the Time of Distribution other than the
Retained Employees (the "Transferred Employees"),





                                       6
<PAGE>   13
shall be assumed by NBHI in accordance with the Employee Benefit Matters
Agreement and such shares shall be exercisable upon the same terms and
conditions as under the applicable Beverly Option Plan and the applicable
option agreement issued thereunder, except that (i) the number of shares of
NBHI Common Stock for which such options may be converted and (ii) the option
exercise price per share of such options shall be adjusted in accordance with
the Employee Benefit Matters Agreement.

         (b)     As of the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, all remaining options to
purchase shares of Beverly Common Stock that are outstanding under the Beverly
Option Plans immediately prior to the Effective Time (as reflected in Section
2.03(b) of the Beverly Disclosure Statement) whether or not exercisable, shall
be assumed by Capstone and each such option shall be exercisable upon the same
terms and conditions as under the applicable Beverly Option Plan and the
applicable option agreement issued thereunder, except that (i) each such option
shall be exercisable for that number of shares of Capstone Common Stock
(rounded in accordance with established mathematical convention to the nearest
whole share) into which the number of shares of Beverly Common Stock subject to
such option immediately prior to the Effective Time, determined after giving
effect to the adjustments set forth in the Employee Benefit Matters Agreement,
would be converted under Section 2.01(a) if such option were exercised prior to
the Effective Time, and (ii) the option price per share of Capstone Common
Stock, determined after giving effect to the adjustments set forth in the
Employee Benefit Matters Agreement, shall be an amount equal to such adjusted
option price per share of Beverly Common Stock subject to such option in effect
immediately prior to the Effective Time divided by the Conversion Number
(rounded in accordance with established mathematical convention to the nearest
whole cent).

         (c)     Prior to the Effective Time or Time of Distribution, Beverly
shall (i) obtain any consents from holders of outstanding options to purchase
Beverly Common Stock granted under the Beverly Option Plans and (ii) make any
amendments to the terms of the Beverly Option Plans, Beverly Options or any
other award granted thereunder that are necessary to give effect to the
transactions contemplated by this Section 2.03 and the Employee Benefits
Matters Agreement referred to in clause (a) above.

         SECTION 2.04     FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, each holder of shares of Beverly Common Stock who
upon surrender of Certificates would be entitled to receive a fraction of a
share of Capstone Common Stock shall not be entitled to receive any dividends
on or vote such fractional share and shall receive, in lieu of such fractional
share, cash in an amount equal to such fraction multiplied by the Average
Market Value.  "Average Market Value" shall mean the arithmetic average of the
last reported sale price per share of Capstone Common Stock as reported on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq") for the fifteen (15) consecutive trading days ending with the last
trading day prior to the scheduled date of the Beverly Special Meeting
specified in the Prospectus/Joint Proxy Statement. The fractional share
interests of each Beverly stockholder will be aggregated, and no Beverly
stockholder will receive cash in an amount equal





                                       7
<PAGE>   14
to or greater than the value of one full share of Capstone Common Stock. All
references in this Agreement to shares of Capstone Common Stock to be issued as
Closing Consideration shall be deemed to include any cash in lieu of fractional
shares payable pursuant to this Section 2.04.

         SECTION 2.05     ASSUMPTION OF EMPLOYMENT AGREEMENTS. Beverly shall
retain (and not transfer to NBHI in the Restructuring and Distribution) and
Capstone shall assume in the Merger all employment, compensation, and benefit
agreements and plans relating to employees or former employees of the
Institutional Pharmacy Business, including without limitation, all employment
contracts, change of control agreements, severance, and indemnity agreements
with such employees and former employees, all PCA employee benefit plans; the
portion of all Beverly employee benefit plans relating to Retained Employees;
and all grants and awards under the Beverly Stock Incentive and Long-Term
Incentive Plans relating to current or former Institutional Pharmacy employees.

            ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CAPSTONE

         Except as set forth in the Capstone Disclosure Statement delivered by
Capstone to Beverly at or prior to the execution of this Agreement (the
"Capstone Disclosure Statement") (each section of which qualifies the
correspondingly numbered representation and warranty and covenant), Capstone
represents and warrants to Beverly as follows:

         SECTION 3.01     ORGANIZATION AND QUALIFICATION. Each of Capstone and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Capstone SEC Reports (as hereinafter
defined). Each of Capstone and its Subsidiaries is duly qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the conduct of its business or the ownership, leasing or operation of
its property requires such qualification, except for failures to be so
qualified or in good standing which would not, singly or in the aggregate with
all such other failures, have a Capstone Material Adverse Effect. "Capstone
Material Adverse Effect" means, (i) with respect to any event, occurrence,
failure of event or occurrence, change, effect, state of affairs, breach,
default, violation, fine, penalty or failure to comply (each, a
"circumstance"), individually or taken together with all other circumstances
contemplated by or in connection with any or all of the representations and
warranties made in this Agreement, a material adverse effect on the business,
properties, assets, condition (financial or otherwise), results of operations
or prospects of Capstone and its Subsidiaries, taken as a whole or (ii)
circumstances resulting in the impairment of Capstone's ability to perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. Neither Capstone nor any of its Subsidiaries is in
violation of any of the provisions of its certificate of incorporation (or
other applicable charter document) or By-laws. True and complete copies of the
certificate of incorporation and By-laws, as currently in effect, of Capstone
and of each Subsidiary of Capstone have been previously delivered or made
available to Beverly. No amendments to the





                                       8
<PAGE>   15
Certificate of Incorporation, as amended, and By-laws of Capstone have been
authorized since December 31, 1996.

         SECTION 3.02     AUTHORITY RELATIVE TO THIS AGREEMENT. Capstone has
full corporate power and authority to execute and deliver this Agreement and,
upon obtaining the approval of a majority of the outstanding shares of Capstone
Common Stock at the Capstone Special Meeting or any adjournment thereof as
authorized under the Delaware Act, including obtaining such approval to amend
Capstone's Certificate of Incorporation to increase the authorized number of
shares of Capstone Common Stock to an aggregate of 300 million shares (or such
other number as may be agreed to by the parties), to consummate the Merger and
the other transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Capstone, and except as stated in the preceding sentence, no other
corporate proceedings on the part of Capstone are necessary to authorize this
Agreement or to consummate the Merger and the other transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Capstone and, assuming the due authorization, execution and delivery hereof by
Beverly, constitutes a valid and binding agreement of Capstone, enforceable
against Capstone in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or by general equitable principles.

         SECTION 3.03     CONSENTS, NO CONFLICTS.

         (a)     Except for the filing of the Certificate of Merger, the filing
and effectiveness of the Registration Statement (as hereinafter defined), the
filings required under and in connection with the applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and filings required pursuant to any state securities or "blue sky"
laws, no filing or registration with, notification or disclosure to, or permit,
authorization, consent or approval of, (i) any court, (ii) any government
agency or body or (iii) any third party, whether acting in an individual,
fiduciary or other capacity, is required for the consummation by Capstone of
the Merger or the other transactions contemplated hereby, except such as are
set forth in Section 3.03(a) of the Capstone Disclosure Statement, all of which
will have been obtained or made prior to the Effective Time and which will then
be in full force and effect or which would not, singly or in the aggregate with
all other such consents which have not been obtained, have a Capstone Material
Adverse Effect.

         (b)     The execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
and compliance by Capstone with any of the provisions hereof do not and will
not: (i) subject to obtaining the approval of a majority of the outstanding
shares of Capstone Common Stock, conflict with or result in any breach or
violation of any provision of the certificate of incorporation (or other
comparable charter documents) or By-laws of Capstone or any of its
Subsidiaries, (ii) result in





                                       9
<PAGE>   16
(1) a breach or violation of, a default under or an event triggering any
payment or other obligation pursuant to any of Capstone's existing pension
plans, welfare plans, multiemployer plans, employee benefit plans, benefit
arrangements or similar plans, arrangements or policies including bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, health or group insurance, severance pay, retirement or
other benefit plans, and all similar arrangements or policies of Capstone and
its Subsidiaries (the "Capstone Compensation and Benefit Plans") or any grant
or award made under any of the foregoing, (2) a breach, violation or event
triggering a right of termination of, a default under, or the acceleration of
any obligation or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time or both) pursuant to any provision of, any agreement, lease of real or
personal property, marketing agreement, contract, note, mortgage, indenture,
arrangement or other obligation of Capstone or any of its Subsidiaries
("Capstone Contracts") or any law, rule, ordinance or regulation or judgment,
decree, order or award to which Capstone or any of its Subsidiaries is subject
or any governmental or non-governmental authorization, consent, approval,
registration, franchise, license or permit under which Capstone or any of its
Subsidiaries conducts any of its business, or (3) any other change in the
rights or obligations of any party under any of the Capstone Contracts.

         SECTION 3.04     BOARD RECOMMENDATION. The Board of Directors of
Capstone has, by a unanimous vote at a meeting of such Board duly held on April
15, 1997, approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby. At such meeting, the Board of Directors of
Capstone determined that the consideration to be paid by Capstone pursuant to
the Merger is fair to the holders of shares of Capstone Common Stock and
recommended that the holders of such shares approve and adopt this Agreement,
the Merger and the other transactions contemplated hereby.

         SECTION 3.05     STATE ANTI-TAKEOVER STATUTES. Capstone has granted
all approvals and taken all other steps necessary to exempt the Merger and the
other transactions contemplated hereby from the requirements and provisions of
Section 203 of the Delaware Act and any other state antitakeover statute or
regulation such that none of the other provisions of such "business
combination," "moratorium," "control share" or other state antitakeover statute
or regulation (x) prohibits or restricts either Capstone's ability to perform
its obligations under this Agreement or its ability to consummate the Merger
and the other transactions contemplated hereby, (y) would have the effect of
invalidating or voiding this Agreement or any provision hereof, or (z) would
subject Beverly to any material impediment or condition in connection with the
exercise of any of its rights under this Agreement.

         SECTION 3.06     NO EXISTING VIOLATION, DEFAULT, ETC. None of Capstone
or its Subsidiaries is in violation (except for any violations which would not,
singly or in the aggregate with all such other violations, have a Capstone
Material Adverse Effect) of (A) any applicable law, ordinance, administrative
or governmental rule or regulation or (B) any order, decree or judgment of any
court or governmental agency or body having jurisdiction over Capstone or any
of its Subsidiaries. No event of default or event that, but for the giving of
notice or the lapse of





                                       10
<PAGE>   17
time or both, would constitute an event of default, exists under any Capstone
Contract or any lease, permit, license or other agreement or instrument to
which Capstone or any of its Subsidiaries is a party or by which any of them is
bound or to which any of the properties, assets or operations of Capstone or
any of its Subsidiaries is subject (except for any events of default or other
defaults which would not, singly or in the aggregate with all such other
defaults, have a Capstone Material Adverse Effect).

         SECTION 3.07     LICENSES AND PERMITS. Each of Capstone and its
Subsidiaries has such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate governmental
agencies and bodies ("Capstone Licenses") as are necessary to own, lease or
operate its properties and to conduct its business in the manner described in
the Capstone SEC Reports and as presently conducted and all such Capstone
Licenses are valid and in full force and effect, other than any failure to have
any such Capstone License or any failure of any such Capstone License to be
valid and in full force and effect as would not, singly or in the aggregate
with all such other failures, have a Capstone Material Adverse Effect. Each of
Capstone and its Subsidiaries is and, within the period of all applicable
statutes of limitation, has been in compliance with its obligations under such
Capstone Licenses and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such Capstone Licenses,
other than any such failure to be in compliance with such obligations or any
such revocation or termination as would not, singly or in the aggregate with
all such other failures, revocations or terminations, have a Capstone Material
Adverse Effect. Capstone has no knowledge of any facts or circumstances that
could reasonably be expected to result in an inability of Capstone or any of
its Subsidiaries to renew any Capstone License. Neither the execution and
delivery by Capstone of this Agreement nor the consummation of any of the
transactions contemplated herein will result in any revocation or termination
of any Capstone License. Set forth in Section 3.07 of the Capstone Disclosure
Statement is a true and complete list of all Capstone Licenses which are
necessary for the conduct of the business presently conducted by Capstone and
its Subsidiaries.

         SECTION 3.08     REGISTRATION STATEMENT; PROSPECTUS/JOINT PROXY
STATEMENT. None of the information supplied by Capstone for inclusion or
incorporation by reference in the registration statement under the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "Securities Act") registering the Capstone Common Stock to be issued at
the Effective Time (such registration statement as amended by any amendments
thereto being referred to herein as the "Registration Statement") or the
Prospectus/Joint Proxy Statement to be sent to the stockholders of Beverly and
Capstone in connection with the Beverly Special Meeting and the Capstone
Special Meeting, including all amendments and supplements thereto, shall, in
the case of the Registration Statement, at (i) the time the Registration
Statement becomes effective, (ii) the Closing, (iii) the Effective Time, (iv)
in the case of the Prospectus/Joint Proxy Statement, on the date or dates the
Prospectus/Joint Proxy Statement is first mailed to Beverly and Capstone
stockholders, (v) at the date or dates of the Beverly Special Meeting and the
Capstone Special Meeting, (vi) at the Closing, and (vii) at the Effective Time,
contain any untrue statement of a material fact or omit to state a material
fact required to be





                                       11
<PAGE>   18
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event with respect
to Capstone or any of its Subsidiaries shall occur which is required to be
described in the Registration Statement or the Prospectus/Joint Proxy
Statement, such event shall be so described, and after due consultation with
Beverly, an amendment or supplement shall be promptly filed with the Securities
and Exchange Commission (the "SEC") and, as required by law, disseminated to
the stockholders of Capstone and Beverly. The Registration Statement and the
Prospectus/Joint Proxy Statement will (with respect to Capstone) comply as to
form in all material respects with the applicable provisions of the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), as the case may be.

         SECTION 3.09     FINDERS OR BROKERS. Except as set forth in Section
3.09 of the Capstone Disclosure Statement, neither Capstone nor any Subsidiary
of Capstone has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled
to a fee or any commission the receipt of which is conditioned in whole or part
upon consummation of the Merger.

         SECTION 3.10     SEC FILINGS.

         (a)     Capstone has filed with the SEC all required forms, reports
and documents required to be filed by it with the SEC since December 31, 1991
(collectively, the "Capstone SEC Reports"), all of which, when filed, complied
as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act, as the case may be. As of their respective
dates the Capstone SEC Reports (including documents included as exhibits
thereto or incorporated by reference therein) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

         (b)     Capstone will deliver to Beverly as soon as they become
available true and complete copies of any report or statement mailed by
Capstone to its security holders generally or filed by it with the SEC, in each
case subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports and statements (excluding any information
therein provided by Beverly, as to which Capstone makes no representation) will
comply as to form in all material respects with the applicable provisions of
the Securities Act and the Exchange Act, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and will further
comply in all material respects with all applicable requirements of law. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of Capstone and its Subsidiaries to be included or
incorporated by reference in such reports and statements will be prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, and in accordance with all
applicable accounting requirements under the Securities Act and the Exchange
Act, and will fairly present the consolidated financial





                                       12
<PAGE>   19
position of Capstone and its Subsidiaries as of the dates thereof and the
consolidated results of operations and consolidated cash flow for the periods
then ended (subject, in the case of any unaudited interim financial statements,
to normal year-end adjustments and to the extent they may not include footnotes
or may be condensed or summary statements).

         SECTION 3.11     FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
Capstone and its Subsidiaries included or incorporated by reference in the
Capstone SEC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved, and in accordance with all applicable accounting requirements under
the Securities Act and the Exchange Act, and fairly present the consolidated
financial position of Capstone and its Subsidiaries as of the dates thereof and
the consolidated results of operations and consolidated cash flows for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent they may not
include footnotes or may be condensed or summary statements) and such audited
financial statements have been certified as such (without exception) by
Capstone's independent accountants.

         SECTION 3.12     ABSENCE OF UNDISCLOSED LIABILITIES. Neither Capstone
nor any of its Subsidiaries has any liabilities or obligations of any nature,
whether absolute, accrued, unmatured, contingent or otherwise, or any
unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except for those liabilities recorded on the
Capstone Balance Sheet (as hereinafter defined) or described in the notes
thereto, and except for liabilities or obligations incurred in the ordinary
course of business and consistent with past practice since December 31, 1996
that would not, singly or in the aggregate, be reasonably expected to have a
Capstone Material Adverse Effect.

         SECTION 3.13     ABSENCE OF CHANGES OR EVENTS.

         (a)     Since December 31, 1996: (i) Capstone and its Subsidiaries
have conducted their business in the ordinary course and have not incurred any
material liability or obligation (indirect, direct or contingent) or entered
into any material oral or written agreement or other transaction that is not in
the ordinary course of business (other than the Voting Agreement, the
Shareholders Agreement (as hereinafter defined) and this Agreement) or that
could reasonably be expected to result in a Capstone Material Adverse Effect;
(ii) neither Capstone nor its Subsidiaries have sustained any material loss or
interference with their business or properties from fire, flood, windstorm,
accident, strike or other calamity (whether or not covered by insurance); (iii)
there has been no material change in the indebtedness of Capstone and its
Subsidiaries, no change in the capital stock of Capstone and no dividend or
distribution of any kind declared, paid or made by Capstone on any class of its
capital stock; (iv) there has been no event or condition which has caused a
Capstone Material Adverse Effect, nor any development, occurrence or state of
facts or circumstances that could, singly or in the aggregate, reasonably be
expected to result in a Capstone Material Adverse Effect; (v) there has been no
amendment, modification or supplement to any material term of any Capstone
Contract required to be





                                       13
<PAGE>   20
identified in Section 3.20 of the Capstone Disclosure Statement or any equity
security; and (vi) there has been no material change by Capstone in its
accounting principles, practices or methods.

         (b)     Since December 31, 1996, other than in the ordinary course of
business consistent with past practice, there has not been any increase in the
compensation or other benefits payable, or which could become payable, by
Capstone, to its officers or key employees, or any amendment of any of the
Capstone Compensation and Benefit Plans.

         SECTION 3.14     CAPITALIZATION.

         (a)     The authorized capital stock of Capstone consists of
50,000,000 shares of Capstone Common Stock and 500,000 shares of serial
preferred stock, par value $.01 per share (the "Capstone Preferred Stock"). As
of March 31, 1997, there were 33,999,766 shares of Capstone Common Stock and no
shares of Capstone Preferred Stock outstanding and no shares of Capstone Common
Stock were held in Capstone's treasury; and except for shares which were
reserved for issuance and which may have been issued pursuant to the following
sentence there have been no issuances of capital stock of Capstone since
December 31, 1996. As of March 31, 1997, 4,180,864 shares of Capstone Common
Stock were reserved for issuance upon the exercise of outstanding warrants (the
"Capstone Warrants"), 2,835,535 shares of Capstone Common Stock were reserved
for issuance upon the exercise of outstanding options (the "Capstone Options")
which may be granted under the stock option plans of Capstone covering an
aggregate of 3,705,000 shares of Capstone Common Stock (the "Capstone Option
Plans"), and no other shares of Capstone Common Stock are reserved for any
purpose. Except for the foregoing and as contemplated by this Agreement, there
are not any existing options, warrants, calls, subscriptions, or other rights
or other agreements or commitments obligating Capstone to issue, transfer or
sell any shares of capital stock of Capstone or any of its Subsidiaries or any
other securities convertible into or evidencing the right to subscribe for any
such shares. There are no outstanding stock appreciation rights with respect to
the capital stock of Capstone or any of its Subsidiaries. All issued and
outstanding shares of Capstone Common Stock are duly authorized and validly
issued, fully paid and nonassessable and have not been issued in violation of
(nor are any of the authorized shares of capital stock of, or other equity
interests in, Capstone subject to) any preemptive or similar rights created by
statute, the Certificate of Incorporation or By-laws of Capstone or any
agreement to which Capstone is a party or by which it may be bound. The
Capstone Common Stock to be issued in accordance with Section 2.01 of this
Agreement, when so issued, will be duly authorized and validly issued, fully
paid and nonassessable.

         (b)     Except as set forth in Section 3.14(b) of the Capstone
Disclosure Statement, there are no (i) obligations, contingent or otherwise, of
Capstone to repurchase, redeem or otherwise acquire any shares of Capstone
Common Stock; or provide funds to, or make any investment in (in the form of a
loan, capital contribution or otherwise), or provide any guarantee with respect
to the obligations of, any other person, or (ii) agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of





                                       14
<PAGE>   21
Capstone. Except for the Voting Agreement and the Shareholders Agreement (as
hereinafter defined), there are no voting trusts, proxies or other agreements
or understandings to which Capstone is a party or by which Capstone is bound
with respect to the voting of any shares of capital stock of Capstone.

         (c)     Capstone has delivered or made available to Beverly complete
and correct copies of each of the Capstone Warrants and Capstone Option Plans,
including all amendments thereto. Section 3.14(c) of the Capstone Disclosure
Statement sets forth a complete and correct list of all outstanding Capstone
Warrants and Capstone Options, setting forth (i) the exercise price of each
outstanding Capstone Warrant and Capstone Option, (ii) the number of Capstone
Warrants and Capstone Options and (iii) the date of issuance or grant of each
such Capstone Warrant or Capstone Option.  Section 3.14(c) of the Capstone
Disclosure Statement sets forth a complete and correct list of all restricted
stock awards including the recipients and the number of shares of Capstone
Common Stock received or to be received by each.

         SECTION 3.15     CAPITAL STOCK OF SUBSIDIARIES. The only direct or
indirect Subsidiaries of Capstone are those listed in Section 3.15 of the
Capstone Disclosure Statement. Capstone is directly or indirectly the record
and beneficial owner of all of the outstanding shares of capital stock of each
of its Subsidiaries, there are no proxies with respect to such shares, and
there are not any existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating Capstone or any of such
Subsidiaries to issue, transfer or sell any shares of capital stock of such
Subsidiary or any other securities convertible into or evidencing the right to
subscribe for any such shares. All of such shares beneficially owned by
Capstone are duly authorized and validly issued, fully paid, nonassessable and
free of preemptive rights with respect thereto and are owned by Capstone free
and clear of any claim, lien or encumbrance of any kind with respect thereto.
Except as set forth in Section 3.15 of the Capstone Disclosure Statement,
Capstone does not directly or indirectly own any interest in any corporation,
partnership, joint venture or other business association or entity.

         SECTION 3.16     LITIGATION. Except as set forth in Section 3.16 of
the Capstone Disclosure Statement, there are no pending actions, suits,
proceedings or, to the best knowledge of Capstone after due inquiry,
investigations by, against or affecting Capstone, any of its Subsidiaries or
any of their properties, assets or operations, or with respect to which
Capstone or any of its Subsidiaries is responsible by way of indemnity or
otherwise. No pending or, to the knowledge of Capstone, threatened actions,
suits, proceedings or investigations by, against or affecting Capstone, any of
its Subsidiaries or any of their properties, assets or operations, or with
respect to which they are responsible by way of indemnity or otherwise, whether
or not disclosed in such Capstone SEC Reports, would, singly or in the
aggregate with all such other actions, suits, investigations or proceedings,
reasonably be expected to have a Capstone Material Adverse Effect; and, to the
best knowledge of Capstone after due inquiry, no such actions, suits,
proceedings or investigations which would reasonably be expected to have a
Capstone Material Adverse Effect are threatened or contemplated and there is no
reasonable basis, to the best





                                       15
<PAGE>   22
knowledge of Capstone after due inquiry, for any such action, suit, proceeding
or investigation, whether or not threatened or contemplated.

         SECTION 3.17     INSURANCE. Capstone has insurance policies and
fidelity bonds covering it and its Subsidiaries' assets, business, equipment,
properties, operations, employees, officers and directors of the type and in
amounts customarily carried by persons conducting business similar to that of
Capstone and such Subsidiaries. All premiums due and payable under all such
policies and bonds have been paid, and Capstone is otherwise in full compliance
with the terms and conditions of all such policies and bonds, except where the
failure to have made payment or to be in full compliance would not,
individually or in the aggregate with all such other failures, have a Capstone
Material Adverse Effect. The reserves established by Capstone in respect of all
matters as to which Capstone self-insures or carries retention and/or
deductibles, including workers' medical coverage and workers' compensation, are
adequate and appropriate in light of Capstone's experience since December 31,
1991 with respect thereto, and Capstone is not aware, after due inquiry, of any
facts or circumstances existing as of the date hereof that could reasonably be
expected to cause such reserves to be inadequate or inappropriate. Section 3.17
of the Capstone Disclosure Statement sets forth a true and complete list of all
insurance policies, including retention and/or deductible programs, and
fidelity bonds of Capstone.

         SECTION 3.18     TITLE TO AND CONDITION OF PROPERTIES. Capstone and
its Subsidiaries have good title to all of the real property and personal
property reflected on Capstone's December 31, 1996 audited consolidated balance
sheet contained in Capstone's Form 10-K for the fiscal year ended December 31,
1996 filed with the SEC (the "Capstone Balance Sheet"), except for property
since sold or otherwise disposed of in the ordinary course of business and
consistent with past practice. Set forth in Section 3.18 of the Capstone
Disclosure Statement is a true and complete list of all real properties owned
by Capstone and its Subsidiaries, all of which real properties are reflected on
the Capstone Balance Sheet. No such real or personal property is subject to
claims, liens or other encumbrances of any kind or character, including,
without limitation, mortgages, pledges, liens, conditional sale agreements,
charges, security interests, easements, restrictive covenants, rights of way or
options, except for (i) liens for taxes not yet delinquent or which are being
contested in good faith by appropriate proceedings and in respect of which
Capstone or its appropriate Subsidiary has set aside on its books adequate
reserves in accordance with generally accepted accounting principles; (ii)
mechanics', carriers', workers', repairers', materialmen's and other similar
statutory liens incurred in the ordinary course of business for obligations not
yet delinquent or the validity of which is being contested in good faith by
appropriate proceedings and in respect of which Capstone or its appropriate
Subsidiary has set aside on its books adequate reserves in accordance with
generally accepted accounting principles; (iii) in the case of real property,
easements, rights of way, restrictions, minor defects or irregularities in
title that do not individually or in the aggregate have a material adverse
effect on the value or use of the real property encumbered thereby as currently
used in the operation of the business of Capstone or its Subsidiaries; or (iv)
those which would not materially interfere with the conduct of the business of
Capstone and its Subsidiaries or impair Capstone's ability to perform its
obligations under this Agreement and to consummate the transactions
contemplated





                                       16
<PAGE>   23
hereby (the encumbrances described in clauses (i) through (iv) of this
sentence, collectively, the "Capstone Permitted Encumbrances"). There are no
eminent domain proceedings pending or, to Capstone's knowledge, threatened
against any owned property or any material portion thereof which proceedings
(if resulting in a taking) could reasonably be expected to have a material
adverse effect on the value or use of such property as currently used in the
operation of the business of Capstone or its Subsidiaries. The real properties
and the improvements located thereon (including the roof and structural
portions of each building) are in good operating order and condition, subject
to ordinary wear and tear.  There are no structural, mechanical or other
defects of a material nature in any improvements located on the real
properties. All building systems in respect of the real properties are in all
material respects in good condition and working order, subject to ordinary wear
and tear. The real properties are served by all utilities required or necessary
for the present use thereof. Capstone has made available to Beverly true and
correct copies of all title insurance commitments, title insurance policies and
surveys in the possession of Capstone or its Subsidiaries relating to its real
properties set forth in Section 3.18 of the Capstone Disclosure Statement.

         SECTION 3.19     LEASES. There have been delivered or made available
to Beverly true and complete copies of each lease pursuant to which real or
personal property is held under lease by Capstone or any of its Subsidiaries
(limited in the case of personal property, to leases pursuant to which annual
rentals are reasonably expected to be at least $100,000 per year), and true and
complete copies of each lease pursuant to which Capstone or any of its
Subsidiaries leases real or personal property to others (limited in the case of
personal property, to leases pursuant to which annual rentals are reasonably
expected to be at least $100,000 per year). Section 3.19 of the Capstone
Disclosure Statement sets forth a true and complete list of all such leases,
and such leases are the only leases that are material to the business conducted
by Capstone and its Subsidiaries. All of the leases so listed (i) are valid and
subsisting and in full force and effect with respect to Capstone and its
Subsidiaries, as the case may be, and, to Capstone's knowledge, with respect to
any other party thereto, (ii) were entered into as a result of bona fide arm's
length negotiations with the other party or parties thereto, and (iii) Capstone
or its Subsidiaries, as the case may be, have valid leasehold interests in all
properties leased thereunder free and clear of all liens and encumbrances other
than Capstone Permitted Encumbrances. The leased real properties are in good
operating order and condition, subject to ordinary wear and tear.

         SECTION 3.20     CONTRACTS AND COMMITMENTS. Except as set forth in
Section 3.20 of the Capstone Disclosure Statement, neither Capstone nor any of
its Subsidiaries is a party to any existing contract, obligation or commitment
of any type in any of the following categories:

                 (a)      contracts for the purchase by Capstone or any of its
         Subsidiaries of medicines, materials, supplies or equipment which are
         not cancelable upon 90 days' or less notice and which either (i) have
         not been entered into in the ordinary course of business and
         consistent with past practice or (ii) provide for purchase prices
         substantially greater than those presently prevailing for such
         materials, supplies or equipment, or (iii)





                                       17
<PAGE>   24
         contracts obligating Capstone or its Subsidiaries to make capital
         expenditures in excess of $200,000;

                 (b)      contracts under which Capstone or any of its
         Subsidiaries has, except by way of endorsement of negotiable
         instruments for collection in the ordinary course of business and
         consistent with past practice, become absolutely or contingently or
         otherwise liable for (i) the performance of any other person, firm or
         corporation under a contract, or (ii) the whole or any part of the
         indebtedness or liabilities of any other person, firm or corporation;

                 (c)      powers of attorney outstanding from Capstone or any
         of its Subsidiaries other than as issued in the ordinary course of
         business and consistent with past practice with respect to customs,
         insurance, patent, trademark or tax matters, or to agents for service
         of process;

                 (d)      contracts under which any amount payable by Capstone
         or any of its Subsidiaries is dependent upon, or calculated in
         accordance with, the revenues or profits of Capstone or any of its
         Subsidiaries;

                 (e)      contracts with any director, officer, employee or
         affiliate of Capstone or any of its Subsidiaries other than in such
         person's capacity as a director, officer or employee of Capstone or
         any of its Subsidiaries;

                 (f)      contracts which limit or restrict where Capstone or
         any of its Subsidiaries may conduct its business or the type or line
         of business in which Capstone or any of its Subsidiaries may engage;

                 (g)      contracts with any party for the loan of money or
         availability of credit to or from Capstone or any of its Subsidiaries
         (except credit extended by Capstone or any of its Subsidiaries to its
         customers in the ordinary course of business and consistent with past
         practice); or

                 (h)      any hedging, option, derivative or other similar
         transaction.

         True and complete copies of all contracts, obligations and commitments
listed in Section 3.20 of the Capstone Disclosure Statement have been delivered
or made available to Beverly. All such contracts are in full force and effect.
None of Capstone or its Subsidiaries or, to the best knowledge of Capstone, any
other party is in breach of or default under any such contracts (and no facts
or circumstances exist which could reasonably support the assertion of any such
breach or default) except for breaches and defaults by parties other than
Capstone and its Subsidiaries which would not, singly or in the aggregate with
all other such breaches, have a Capstone Material Adverse Effect.





                                       18
<PAGE>   25
         SECTION 3.21     LABOR MATTERS. None of Capstone or its Subsidiaries
is a party to any union contract or other collective bargaining agreement. Each
of Capstone and its Subsidiaries is in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, safety, wages and hours, and neither Capstone nor any
of its Subsidiaries is engaged in any unfair labor practice. There is no labor
strike, slowdown or stoppage pending (or, to the best knowledge of Capstone,
any labor strike or stoppage threatened) against or affecting Capstone or any
of its Subsidiaries. To the best of Capstone's knowledge, no union organizing
activities with respect to any of its or its Subsidiaries' employees are
occurring or threatened.

         SECTION 3.22     NO CHANGE OF CONTROL PUTS. Neither the execution and
delivery by Capstone of this Agreement nor the consummation of any of the
transactions contemplated hereby gives rise to any obligation of Capstone or
any of its Subsidiaries to, or any right of any holder of any security of
Capstone or any of its Subsidiaries to, require Capstone to purchase, offer to
purchase, redeem or otherwise prepay or repay any such security, or deposit any
funds to effect the same.

         SECTION 3.23     EMPLOYMENT AND LABOR CONTRACTS. Except as set forth
in Section 3.23 of the Capstone Disclosure Statement, neither Capstone nor any
of its Subsidiaries is a party to any employment, management services,
consultation or other contract or agreement with any past or present officer,
director or employee or, to the best knowledge of Capstone, any entity
affiliated with any past or present officer, director or employee, other than
the agreements executed by employees generally, the forms of which have been
provided to Beverly.

         SECTION 3.24     INTELLECTUAL PROPERTY RIGHTS. Capstone or its
Subsidiaries own or have the right to use all Intellectual Property Rights (as
hereinafter defined) necessary to the conduct of their respective businesses.
Section 3.24 of the Capstone Disclosure Statement contains a list of all
patents, trade names, registered and unregistered copyrights, trademarks and
service marks, mask works and applications for the foregoing owned by Capstone
or its Subsidiaries. Except as set forth in Section 3.24 of the Capstone
Disclosure Statement, (i) Capstone and/or its Subsidiaries have clear and
unencumbered title to the Intellectual Property Rights set forth in such
Section 3.24 and such title has not been challenged (pending or threatened) by
others except for the encumbrances listed therein; (ii) no rights or licenses
to use Intellectual Property Rights have been granted or acquired by Capstone
or its Subsidiaries; (iii) there have been no claims or assertions made by
others that Capstone has infringed any Intellectual Property Rights of others
by the sale of products or any other activity in the preceding six-year period;
(iv) to the knowledge of Capstone, there has been no such infringement by
Capstone or any of its Subsidiaries during such six-year period; (v) Capstone
has no knowledge of any infringement of Intellectual Property Rights of
Capstone or any of its Subsidiaries by others, and (vi) all such patents,
registered trademarks, service marks and copyrights owned by Capstone or its
Subsidiaries are in good standing, and, to the extent recorded on the public
record, are recorded in the name of Capstone or its Subsidiaries. Such Section
3.24 also contains a list of unpatented inventions used or planned for use by
Capstone or its Subsidiaries. True and complete copies of





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<PAGE>   26
all material listed in Section 3.24 of the Capstone Disclosure Statement have
been delivered or made available to Beverly.

         "Intellectual Property Rights" shall mean and include rights relating
to patents, trademarks, service marks, trade names, copyrights, mask works,
inventions, processes, trade secrets, know-how, confidentiality agreements,
consulting agreements, software and any documentation relating to the
manufacture, marketing and maintenance of products.

         SECTION 3.25     TAXES. (i) Capstone and its Subsidiaries have
prepared and timely filed or will timely file with the appropriate governmental
agencies all franchise, income and all other Tax returns and reports
(hereinafter collectively referred to as "Tax Returns") required to be filed by
them on or before the Effective Time, taking into account any extension of time
to file granted to or obtained on behalf of Capstone and/or its Subsidiaries
(copies of which for the past three fiscal years have been delivered or made
available to Beverly); (ii) all Taxes of Capstone and its Subsidiaries have
been paid in full to the proper authorities or fully accrued or provided for
with respect to fiscal periods for which there are publicly available financial
statements and otherwise on the books of Capstone, other than such Taxes as are
being contested in good faith by appropriate proceedings and are adequately
reserved for in accordance with generally accepted accounting principles; (iii)
all deficiencies asserted in writing as a result of Tax examinations of
federal, state and foreign income, sales and franchise and all other Tax
Returns filed by Capstone and its Subsidiaries have either been paid or
adequately reserved for in accordance with generally accepted accounting
principles; (iv) to the best knowledge of Capstone, no unpaid deficiency has
been asserted or assessed against Capstone or any of its Subsidiaries, and no
examination of Capstone or any of its Subsidiaries is pending or threatened for
any material amount of Tax by any taxing authority (with respect to any such
action, Section 3.25 of the Capstone Disclosure Statement sets forth the
periods at issue and the category of Tax, and the examining authority's and any
corresponding revenue agents' reports relating to the issue have been delivered
or made available to Beverly); (v) except as set forth in the Capstone
Disclosure Statement, no extension of the period for assessment or collection
of any Tax of Capstone or any of its Subsidiaries is currently in effect and no
extension of time within which to file any Tax Return of Capstone or any of its
Subsidiaries has been requested, which Tax Return has not since been filed;
(vi) no Tax liens have been filed with respect to any Taxes of Capstone or any
of its Subsidiaries except for property taxes which have accrued but with
respect to which penalty for nonpayment has not occurred; (vii) neither
Capstone nor any of its Subsidiaries has agreed to make any adjustment by
reason of a change in its accounting methods that would affect the taxable
income or deductions of Capstone or any of its Subsidiaries for any period
ending after the Effective Time; (viii) Capstone and its Subsidiaries have made
timely payments of the Taxes required to be deducted and withheld from the
wages paid to their employees; (ix) there are no Tax sharing agreements or
arrangements under which Capstone or any Subsidiary will have any obligation or
liability on or after the Effective Time; (x) Capstone and its Subsidiaries
have no foreign losses as defined in Section 904(f)(2) of the Internal Revenue
Code of 1986, as amended (the "Code"); (xi) to the best knowledge of Capstone,
there are no transfer pricing agreements made by or on behalf of Capstone or
any of its Subsidiaries with any taxation





                                       20
<PAGE>   27
authority; (xii) no asset of Capstone or any of its Subsidiaries is held in an
arrangement for which partnership Tax Returns are being filed and neither
Capstone nor any of its Subsidiaries is a partner in any partnership; (xiii)
neither Capstone nor any of its Subsidiaries owns any interest in any
"controlled foreign corporation" (within the meaning of Section 957 of the
Code), "passive foreign investment company" (within the meaning of Section 1296
of the Code) or other entity the income of which is required to be included in
the income of Capstone or such Subsidiary; (xiv) neither Capstone nor any of
its Subsidiaries has made an election under Section 341(f) of the Code; and
(xv) neither Capstone nor any of its Subsidiaries is obligated to make any
payments that would constitute excess parachute payments within the meaning of
Section 280G of the Code.

         "Tax" or "Taxes" shall mean all federal, state, local and foreign
taxes, duties, levies, charges and assessments of any nature, including social
security payments and deductibles relating to wages, salaries and benefits and
payments to subcontractors (to the extent required under applicable Tax law),
and also including all interest, penalties and additions imposed with respect
to such amounts.

         SECTION 3.26     EMPLOYEE BENEFIT PLANS; ERISA.

         (a)     Except as set forth in Section 3.26 of the Capstone Disclosure
Statement, there are no "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), covering employees (or former employees), maintained or contributed
to by Capstone or any of its Subsidiaries or any of their ERISA Affiliates (as
hereinafter defined), or to which Capstone or any of its Subsidiaries or any of
their ERISA Affiliates contributes or is obligated to make payments thereunder
or otherwise may have any liability ("Capstone Pension Benefit Plans"). For
purposes of this Agreement, "ERISA Affiliate" shall mean any person (as defined
in Section 3(9) of ERISA) that is a member of any group of persons described in
Section 414(b), (c), (m) or (o) of the Code which includes the referent person
or its Subsidiaries.

         (b)     Capstone has delivered or made available to Beverly true and
complete copies of, and Section 3.26 of the Capstone Disclosure Statement
lists, all Capstone Pension Benefit Plans, "welfare benefit plans" (as defined
in Section 3(1) of ERISA) covering employees (or former employees), maintained
or contributed to by Capstone or any of its Subsidiaries ("Capstone Welfare
Plans"), all multiemployer plans (as defined in Section 3(37) of ERISA)
covering employees (or former employees) to which Capstone or any of its
Subsidiaries or any of their ERISA Affiliates is required to make contributions
or otherwise may have any liability, and, to the extent covering employees,
directors, or independent contractors (or former employees, directors, or
independent contractors), all stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, change of control, executive compensation, "top hat,"
other equity-based compensation, and vacation plans, agreements, or
arrangements maintained or contributed to by Capstone or a Subsidiary of
Capstone.





                                       21
<PAGE>   28
         (c)     Capstone and each of its Subsidiaries, and each of the
Capstone Pension Benefit Plans, Capstone Welfare Plans, and all other plans or
arrangement referenced in Section 3.26(b) (collectively, the "Capstone Employee
Benefit Plans") are administered in accordance with their terms and are in
compliance with the applicable provisions of ERISA and other applicable laws
except where the failure to comply would not, singly or in the aggregate,
reasonably be expected to have a Capstone Material Adverse Effect.

         (d)     All contributions to and payments from the Capstone Employee
Benefit Plans which are required to have been made in accordance with the
Capstone Employee Benefit Plans and, when applicable, Section 302 of ERISA or
Section 412 of the Code, have been timely made.

         (e)     The Capstone Pension Benefit Plans intended to qualify under
Section 401 of the Code are and have always been so qualified, have been
determined by the Internal Revenue Service ("IRS") to be so qualified, and
nothing has occurred with respect to such Capstone Pension Benefit Plans which
could cause the loss of such qualification or exemption or the imposition of
any material liability, penalty or tax under ERISA or the Code. Such plans have
been amended and submitted to the IRS on a timely basis to comply with changes
to the Code made by the Tax Reform Act of 1986 and other applicable
legislative, regulatory or administrative requirements.

         (f)     There are (i) no investigations or audits pending, to the best
knowledge of Capstone, by any governmental entity involving the Capstone
Pension Benefit Plans or Capstone Welfare Plans, (ii) no termination
proceedings involving the Capstone Pension Benefit Plans and (iii) no pending
or, to the best knowledge of Capstone, threatened claims (other than routine
uncontested claims for benefits), suits or proceedings relating to any Capstone
Employee Benefit Plan, against the assets of any of the trusts under any
Capstone Employee Benefit Plan or against any fiduciary of any Capstone
Employee Benefit Plan with respect to the operation of such plan or asserting
any rights or claims to benefits under any such Plan or against the assets of
any trust under such Plan, except for those which would not, singly or in the
aggregate, give rise to any liability which would reasonably be expected to
have a Capstone Material Adverse Effect, nor, to the best knowledge of
Capstone, are there any facts which could give rise to any such liability.
except for those which would not, singly or in the aggregate, reasonably be
expected to have a Capstone Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.

         (g)     None of Capstone, any of its Subsidiaries or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to the Capstone
Pension Benefit Plans or Capstone Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA) which could result in a tax or penalty on Capstone or any of its
Subsidiaries under Section 4975 of the Code or Section 502(i) of ERISA, except
any such event which would not, singly or in the aggregate, reasonably be
expected to have a Capstone Material Adverse Effect.





                                       22
<PAGE>   29
         (h)     Neither the Capstone Pension Benefit Plans subject to Title IV
of ERISA nor any trust created thereunder has been terminated nor have there
been any "reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect to either thereof, except any such event
which would not, singly or in the aggregate, reasonably be expected to have a
Capstone Material Adverse Effect, nor has there been any event with respect to
any Capstone Pension Benefit Plan requiring disclosure under Section 4063(a) of
ERISA or any event with respect to any Capstone Pension Benefit Plan requiring
disclosure under Section 4041(c)(3)(C) of ERISA, except any such event which
would not, singly or in the aggregate, reasonably be expected to have a
Capstone Material Adverse Effect.

         (i)     Neither Capstone nor any Subsidiary of Capstone nor any ERISA
Affiliate has incurred any currently outstanding liability to the Pension
Benefit Guaranty Corporation (the "PBGC") or to a trustee appointed under
Section 4042(b) or (c) of ERISA other than for the payment of premiums, all of
which have been paid when due. No Capstone Pension Benefit Plan has applied
for, or received, a waiver of the minimum funding standards imposed by Section
412 of the Code.

         (j)     Neither Capstone, any of its Subsidiaries nor any of their
ERISA Affiliates has any liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA.

         (k)     With respect to each of the Capstone Employee Benefit Plans,
true, correct and complete copies of the following documents have been
delivered or made available to Beverly: (i) the current plans and related trust
documents, including amendments thereto, (ii) any current summary plan
descriptions, (iii) the most recent Forms 5500, financial statements and
actuarial reports, if applicable, and (iv) the most recent IRS determination
letter, if applicable.

         (l)     Neither Capstone, any of its Subsidiaries, any organization to
which Capstone is a successor or parent corporation, within the meaning of
Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any
transaction, within the meaning of Section 4069(a) of ERISA, except where the
liability therefor would not, singly or in the aggregate, reasonably be
expected to have a Capstone Material Adverse Effect.

         (m)     None of the Capstone Welfare Plans maintained by Capstone or
any of its Subsidiaries include retiree life or retiree health benefits or
provide for continuing benefits or coverage for any participant or any
beneficiary of a participant following termination of employment, except as may
be required under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA"). Capstone and each of its Subsidiaries which maintain a
"group health plan" within the meaning of Section 5000(b)(1) of the Code have
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not, singly or in the
aggregate, reasonably be expected to have a Capstone Material Adverse Effect.





                                       23
<PAGE>   30
         (n)     No liability under any Capstone Employee Benefit Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which Capstone or any of its
Subsidiaries has received notice that such insurance company is in
rehabilitation.

         (o)     The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits, deemed satisfaction of goals or conditions, forgiveness or
modification of loans, or accelerate the vesting or timing of payment of any
benefits or compensation payable to or in respect of any employee or former
employee of Capstone or any of its Subsidiaries.

         (p)     Each Capstone Employee Benefit Plan can be amended or
terminated at any time without approval from any person, without advance
notice, and without any liability other than for benefits accrued prior to such
amendment or termination.

         (q)     With respect to each Capstone Employee Benefit Plan and any
other similar arrangement or plan either currently or previously terminated,
maintained, or contributed to by any entity which either is currently or was
previously under common control with Capstone or any of its Subsidiaries as
determined under Code Section 414, no event has occurred and no condition
exists that after the Merger could subject Capstone or Beverly, directly or
indirectly, to any liability (including liability under any indemnification
agreement) under Section 412, 4971, 4975, or 4980B of the Code or Section 502,
601 or 606 of ERISA.

         (r)     All contributions and payments to or with respect to each
Capstone Employee Benefit Plan have been timely made and Capstone has made
adequate provision for reserves to satisfy contributions and payments that have
not been made because they are not yet due under the terms of such plan or
related arrangement, document, or applicable law.  No Capstone Employee Benefit
Plan has any unfunded benefits that are not fully reflected in Capstone's most
recent audited financial statements.

         (s)     No agreement, commitment, or obligation exists to increase any
benefits under any Capstone Employee Benefit Plan or to adopt any new Capstone
Employee Benefit Plan.

         SECTION 3.27     ENVIRONMENTAL MATTERS.

         (a)     Except as would not, singly or in the aggregate with all other
such instances of non-compliance, have a Capstone Material Adverse Effect,
Capstone and its Subsidiaries are, and within the period of all applicable
statutes of limitation have been, in compliance with all applicable
Environmental Laws (as hereinafter defined), which compliance includes, without
limitation, the possession of all licenses, permits, registrations and other
governmental authorizations (collectively, "Environmental Authorizations")
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, and there are no circumstances of which Capstone is aware
which may materially prevent or interfere with





                                       24
<PAGE>   31
compliance in the future. To Capstone's knowledge, all Environmental
Authorizations currently held by Capstone and its Subsidiaries pursuant to
Environmental Laws are identified in Section 3.27(a)(1) of the Capstone
Disclosure Statement and represent all Environmental Authorizations necessary
for the conduct of the businesses of Capstone and its Subsidiaries as currently
conducted. Neither Capstone nor any of its Subsidiaries has been notified, or
has any reasonable basis to believe, that any such Environmental Authorizations
will be modified, suspended or revoked or cannot be renewed or otherwise
maintained in the ordinary course of business. To Capstone's knowledge after
due inquiry, the execution and delivery of this Agreement and the consummation
by Capstone of the transactions contemplated hereby will not affect the
validity or require the transfer of any Environmental Authorizations, and will
not require any notification, registration, reporting, filing, investigation or
remediation under any Environmental Law.

         (b)     There are no Environmental Notices (as hereinafter defined)
that, singularly or in the aggregate, reasonably could be expected to have a
Capstone Material Adverse Effect (i) pending or, to the best knowledge of
Capstone, threatened against Capstone or any of its Subsidiaries, (ii) to the
best knowledge of Capstone, pending or threatened against any person or entity
whose liability for such Environmental Notice may have been retained or assumed
by or could reasonably be imputed or attributed by law or contract to Capstone
or any of its Subsidiaries, (iii) that to the best knowledge of Capstone could
subject Capstone to any material risk of liability, loss or damages, or (iv)
that to the best knowledge of Capstone could reasonably be expected to require
investigation, removal or remedial or corrective action by Capstone or any of
its Subsidiaries. Since December 31, 1996 neither Capstone nor any of its
Subsidiaries has received any Environmental Notice alleging that Capstone or
any of its Subsidiaries is subject to liability under any Environmental Law or
that Capstone or any of its Subsidiaries is not in full compliance with
Environmental Laws.

         (c)     There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, notice or demand letter or request
for information or, to the best knowledge of Capstone, investigation pending or
threatened under any Environmental Law (i) against Capstone or any of its
Subsidiaries, or (ii) to the knowledge of Capstone against any person or entity
in connection with which liability could reasonably be imputed or attributed by
law or contract to Capstone or any of its Subsidiaries, except, with respect to
each of clauses (i) and (ii), for such demands, claims, notices of violation,
notice or demand letters or requests for information which singly or in the
aggregate could not reasonably be expected to have a Capstone Material Adverse
Effect.

         (d)     No property or facility presently or to the knowledge of
Capstone formerly owned, operated or leased by Capstone or any of its present
Subsidiaries, or to the knowledge of Capstone any of its former Subsidiaries,
or any of their respective predecessors in interest, is listed or proposed for
listing on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System, both promulgated under
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), or on any comparable list established under any
Environmental Law, nor has





                                       25
<PAGE>   32
Capstone or any of its Subsidiaries received any written notification of
potential or actual liability or any request for information under CERCLA or
any comparable foreign, state or local law.

         (e)     There has been no disposal, spill, discharge or release of any
Hazardous Materials (as hereinafter defined) generated, used, owned, stored or
controlled by Capstone, or to the best knowledge of Capstone any of its
Subsidiaries or any of their respective predecessors in interest, on, at or
under any property presently or formerly owned, leased or operated by Capstone,
or to the best knowledge of Capstone its Subsidiaries, or any predecessors in
interest, and to the best knowledge of Capstone there are no Hazardous
Materials located in, at, on or under, or in the vicinity of, any such facility
or property, or at any other location, that (i) could reasonably be expected to
subject Capstone to a material risk of liability, loss or damages, or result in
the incurrence by Capstone of costs under Environmental Laws, (ii) could
reasonably be expected to form the basis of any Environmental Notice against or
with respect to Capstone or any of its Subsidiaries, or against any person or
entity whose liability for any Environmental Notice may have been retained or
assumed by or could be imputed or attributed by law or contract to Capstone or
any of its Subsidiaries or (iii) could reasonably be expected to require
investigation, removal or remedial or corrective action by Capstone or any of
its Subsidiaries, that in any case singularly or in the aggregate, reasonably
could be expected to have a Capstone Material Adverse Effect.

         (f)     Without in any way limiting the generality of the foregoing,
to the best knowledge of Capstone (i) there are and have been no underground or
aboveground storage tanks or other storage receptacles, or related piping or
other disposal areas containing Hazardous Materials, located on, at or under
property owned, operated or leased by Capstone, any of its Subsidiaries or any
of their respective predecessors in interest, (ii) there are and have been no
polychlorinated biphenyls located on any properties owned, operated or leased
by Capstone or any of its Subsidiaries, and (iii) there is no asbestos
contained in or forming part of any building, building component, structure or
office space owned, operated or leased by Capstone or any of its Subsidiaries.

         (g)     To the best knowledge of Capstone no lien has been recorded
under Environmental Laws with respect to any properties, assets or facilities
owned, operated or leased by Capstone or any of its Subsidiaries.

         (h)     In accordance with Section 5.05, Capstone has given Beverly
and its authorized representatives access to all records and files in its
possession or control relating to actual or potential compliance or liability
issues of Capstone or its Subsidiaries and any of their respective predecessors
in interest under Environmental Laws, including, without limitation, all
reports, studies, analyses, tests or monitoring results pertaining to the
existence of Hazardous Material or any other environmental concern relating to
properties, assets or facilities currently or formerly owned, operated,
managed, leased, used or controlled by Capstone or any of its Subsidiaries, or
otherwise concerning compliance with or liability under Environmental Laws.





                                       26
<PAGE>   33
         For purposes of this Agreement:

                 (i)      "Environment" shall mean any surface water,
         groundwater or drinking water supply, land surface or subsurface
         strata or ambient air and includes, without limitation, any indoor
         location.

                 (ii)     "Environmental Laws" shall mean CERCLA, the Resource
         Conservation and Recovery Act of 1976, as amended, and any other
         federal, state, local or foreign statute, rule, regulation, order,
         judgment, directive, decree or common law, as now or previously in
         effect and regulating, relating to or imposing liability or standards
         of conduct concerning air emissions, water discharges, noise
         emissions, the release or threatened release or discharge of any
         Hazardous Material into the Environment, the generation, handling,
         treatment, storage, transport or disposal of any Hazardous Material or
         otherwise concerning pollution or the protection of the outdoor or
         indoor Environment, or employee health or safety. The term shall also
         include laws governing the transfer of real property that require
         notification, registration, reporting, filing, investigation or
         remediation prior to, concurrent with or following sale or transfer of
         control of any property, facility or establishment in connection with
         the actual or threatened presence or release of Hazardous Materials at
         such property, facility or establishment.

                 (iii)    "Environmental Notice" shall mean any written
         communication, notice or claim by any Governmental Authority or other
         third party alleging civil or criminal liability (including, without
         limitation, liability for investigatory costs, cleanup costs,
         governmental costs, compliance costs or harm, injuries or damages to
         any person, property, natural resources, or any fines or penalties) or
         alleging noncompliance arising out of, based upon, resulting from or
         relating to any Environmental Law.

                 (iv)     "Hazardous Material" shall mean any pollutant,
         contaminant or hazardous, toxic or dangerous waste, substance,
         constituent or material defined or regulated as such in, or for
         purposes of, any Environmental Law, including, without limitation, any
         medical waste, any biochemical waste, any asbestos, radon, any
         petroleum, oil (including crude oil or any fraction thereof), any
         radioactive substance, any polychlorinated biphenyls, any toxin,
         chemical, virus, infectious disease agent and any other substance that
         can give rise to liability under any Environmental Law.

         SECTION 3.28     DISCLOSURE. No representation or warranty by Capstone
and no statement or information relating to Capstone or any of its Subsidiaries
contained herein, or in any certificate furnished by or on behalf of Capstone
to Beverly in connection herewith, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.





                                       27
<PAGE>   34
         SECTION 3.29     INSTITUTIONAL PHARMACY BUSINESS.

         (a)     Section 3.29 of the Capstone Disclosure Statement lists each
Pharmacy utilized by Capstone in connection with its pharmacy business and
indicates (i) the location of each such Pharmacy and (ii) whether such Pharmacy
premises are owned or held pursuant to a leasehold interest, management
agreement or otherwise. No other person or entity has any beneficial ownership
or interest in or to any such Pharmacy nor does any other person or entity have
any right or option to acquire any beneficial ownership or interest in or to
any such Pharmacy.

         (b)     Section 3.29 of the Capstone Disclosure Statement lists all of
the customers to which Capstone and its Subsidiaries provided pharmacy services
pursuant to oral or written contracts which generated revenues in excess of
$5,000,000 for the year ended December 31, 1996 ("Capstone Pharmacy
Contracts"). Except as set forth in such Section 3.29, Capstone has not been
informed, and has no reason to believe, that any Capstone Pharmacy Contract
will be terminated for or without cause.

         (c)     None of Capstone nor any of its Subsidiaries has violated or
is in violation of any law or order of any court or governmental authority that
is applicable to any of them, their businesses or their properties, including
but not limited to the Medicare and Medicaid fraud and abuse provisions of the
Social Security Act, the Civil Monetary Penalties Law of the Social Security
Act, the so-called "Stark" law, 42 USC Section 1395nn, or any other federal or
state law, statute, rule or regulation prohibiting rebates, kickbacks,
fee-splitting or other financial incentives or inducements, including but not
limited to providing products or services below cost for the referral or
continuation of business. None of Capstone or its Subsidiaries is, to the best
knowledge of Capstone, under investigation by the Office of Inspector General
of the Department of Health and Human Services or other federal or state
investigatory or regulatory body or agency relating to their business
activities, nor is Capstone aware of any state of facts which could reasonably
be likely to subject any of them to a claim for civil penalties, criminal fines
or other sanctions with respect to a violation or claimed violation of any such
laws or regulations relating to the conduct of their business.

         (d)     Capstone and its Subsidiaries are duly licensed to provide
pharmacy services in all states in which they do business, and are participants
in the Medicare program and the Medicaid programs of the states listed in
Section 3.07 of the Capstone Disclosure Statement. Capstone and its
Subsidiaries are in substantial compliance with all laws, rules and regulations
affecting or in connection with Capstone and its Subsidiaries, the Pharmacies
and their licenses with respect thereto and their participation in the Medicare
and Medicaid programs.

         (e)     Capstone has delivered or made available true and correct
billing requests for reimbursement and underlying information to all
governmental programs, including but not limited to the Medicare and Medicaid
programs, in compliance with all rules, regulations, policies and procedures of
such governmental programs and of the fiscal intermediaries of such programs.
To the best knowledge of Capstone all such billings were for goods actually
provided,





                                       28
<PAGE>   35
and at appropriate charges or costs, and Capstone has appropriate documentation
to support such billing requests. All accounts receivable of Capstone and its
Subsidiaries reflected in the Capstone Balance Sheet represent valid claims
against debtors for sales of products or services or other charges on or before
the Capstone Balance Sheet Date, are not subject to discount except for normal
cash discounts and have been appropriately reduced to their estimated net
realizable value after establishing all necessary provisions or reserves with
respect to such accounts.

         SECTION 3.30     FAIRNESS OPINION. Capstone has received the opinion
of Adirondack Capital Advisors, L.L.C. to the effect that as of the date hereof
the financial terms of the Merger are fair to Capstone's stockholders from a
financial point of view.

         SECTION 3.31     SUFFICIENCY OF ASSETS. Capstone and its Subsidiaries
own, lease, hold or otherwise have the right to use all of the assets,
properties, Intellectual Property Rights and Capstone Licenses which are
material to the conduct of the business as presently conducted by Capstone and
its Subsidiaries.

             ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BEVERLY

         Except as set forth in the Beverly Disclosure Statement delivered by
Beverly to Capstone at or prior to the execution of this Agreement (the
"Beverly Disclosure Statement") (each section of which qualifies the
correspondingly numbered representation and warranty and covenant), Beverly
represents and warrants to Capstone as follows:

         SECTION 4.01     ORGANIZATION AND QUALIFICATION. Each of Beverly and
its Pharmacy Subsidiaries (as defined in the Distribution Agreement) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Beverly SEC Reports (as hereinafter defined). Each of
Beverly and its Pharmacy Subsidiaries is duly qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which the
conduct of its business or the ownership, leasing or operation of its property
requires such qualification, except for failures to be so qualified or in good
standing which would not, singly or in the aggregate with all such other
failures, have a Beverly Material Adverse Effect. "Beverly Material Adverse
Effect" means (i) with respect to any event, occurrence, failure of event or
occurrence, change, effect, state of affairs, breach, default, violation, fine,
penalty or failure to comply (each, a "circumstance"), individually or taken
together with all other circumstances contemplated by or in connection with any
or all of the representations and warranties made in this Agreement, (a) a
material adverse effect on the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of the
Institutional Pharmacy Business, taken as a whole, or (b) an impairment on the
ability of NBHI to conduct as a going concern the Remaining Health Care
Business (as defined in the Distribution Agreement) subsequent to the
Distribution or (ii) circumstances resulting in the impairment of Beverly's or
NBHI's ability to perform its obligations under this Agreement or the
Distribution Agreement and to consummate the transactions contemplated hereby
and thereby.





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<PAGE>   36
Neither Beverly nor any of its Pharmacy Subsidiaries is in violation of any of
the provisions of its respective certificate of incorporation (or other
applicable charter document) or By-laws. True and complete copies of the
certificate of incorporation and By-laws, as currently in effect, of Beverly
and of each Pharmacy Subsidiary of Beverly have been previously delivered or
made available to Capstone. No amendments to the certificate of incorporation
(or other similar charter documents) and By-laws of Beverly or any Pharmacy
Subsidiary have been authorized since December 31, 1996.

         SECTION 4.02     AUTHORITY RELATIVE TO THIS AGREEMENT. Beverly has
full corporate power and authority to execute and deliver this Agreement and
the Distribution Agreement and, upon obtaining the approval of a majority of
the outstanding shares of Beverly Common Stock at the Beverly Special Meeting
or adjournment thereof, as may be required by the Delaware Act, to consummate
the Merger and the Distribution and complete the other transactions
contemplated hereby.  The execution and delivery of this Agreement and the
Distribution Agreement and the consummation of the Merger, the Distribution and
the other transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Beverly, and except as stated in the
preceding sentence, no other corporate proceedings on the part of Beverly are
necessary to authorize this Agreement and the Distribution Agreement or to
consummate the Merger, the Distribution and the other transactions contemplated
hereby. This Agreement and the Distribution Agreement have been duly and
validly executed and delivered by Beverly and, assuming, in the case of this
Agreement and the Distribution Agreement, the due authorization, execution and
delivery of each such agreement by Capstone, constitute valid and binding
agreements of Beverly, enforceable against Beverly in accordance with their
terms, except to the extent that their enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.

         SECTION 4.03     CONSENTS, NO CONFLICTS.

         (a)     Except for the filing of the Certificate of Merger, the filing
and effectiveness of the Registration Statement and the NBHI Registration
Document (as hereinafter defined), the filings required under and in connection
with the applicable requirements of the HSR Act, and filings required pursuant
to any state securities or "blue sky" laws, no filing or registration with,
notification or disclosure to, or permit, authorization, consent or approval
of, (i) any court, (ii) any government agency or body or (iii) any third party,
whether acting in an individual, fiduciary or other capacity, is required for
the consummation by Beverly of the Merger, the Distribution or the other
transactions contemplated hereby or by the Distribution Agreement except such
as are set forth in Section 4.03(a) of the Beverly Disclosure Statement, which
will have been obtained or made prior to the Effective Time and will then be in
full force and effect or which would not, singly or in the aggregate with all
other such consents which have not been obtained, have a Beverly Material
Adverse Effect.





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<PAGE>   37
         (b)     Except as set forth in Section 4.03(b) of the Beverly
Disclosure Statement, the execution, delivery and performance of this
Agreement, the Distribution Agreement, the consummation of the Distribution,
the Merger and the other transactions contemplated hereby (or thereby) and
compliance by Beverly with any of the provisions hereof (or thereof) do not and
will not, (i) subject to obtaining the approval of a majority of the
outstanding shares of Beverly Common Stock at the Beverly Special Meeting or
any adjournment thereof as required by the Delaware Act, conflict with or
result in any breach or violation of any provision of the certificate of
incorporation (or other comparable charter documents) or By-laws of Beverly or
any of its Pharmacy Subsidiaries, (ii) result in (1) a breach or violation of,
a default under or an event triggering any payment or other obligation pursuant
to any of Beverly's existing pension plans, welfare plans, multiemployer plans,
employee benefit plans, benefit arrangements or similar plans, arrangements or
policies, including bonus, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, phantom stock performance shares,
health or group insurance, severance pay, retirement or other benefit plans,
and all similar arrangements or policies of Beverly and its Subsidiaries (the
"Beverly Compensation and Benefit Plans") or any grant or award made under any
of the foregoing in any case for which Beverly or any of the Pharmacy
Subsidiaries would be responsible after the Distribution, (2) a breach,
violation or event triggering a right of termination of, a default under, the
acceleration of any obligation, or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice
or the lapse of time or both) pursuant to any provision of any agreement, lease
of real or personal property, marketing agreement, contract, note, mortgage,
indenture, arrangement or other obligation of Beverly or any of its Pharmacy
Subsidiaries which relate to the Institutional Pharmacy Business ("Beverly
Contracts") or any law, rule, ordinance or regulation or judgment, decree,
order or award to which Beverly or any of its Pharmacy Subsidiaries is subject
or any governmental or non-governmental authorization, consent, approval,
registration, franchise, license or permit under which Beverly or any of its
Pharmacy Subsidiaries conducts the Institutional Pharmacy Business, or (3) any
other change in the rights or obligations of any party under any of the Beverly
Contracts.

         SECTION 4.04     BOARD ACTION. The Board of Directors of Beverly has,
by a unanimous vote at a meeting of such Board duly held on April 15, 1997,
approved and adopted this Agreement, the Distribution Agreement, the Merger and
the other transactions contemplated hereby or by the Distribution Agreement,
including but not limited to termination of the Beverly Rights Plan to be
effective upon the Closing of the Merger, determined that the consideration to
be received by the holders of shares of Beverly Common Stock pursuant to the
Merger is fair to the holders of such shares and recommended that the holders
of such shares approve and adopt this Agreement, the Distribution Agreement,
the Merger and the other transactions contemplated hereby.

         SECTION 4.05     STATE ANTI-TAKEOVER STATUTES; RIGHTS AGREEMENT.
Beverly has granted all approvals and taken all other steps necessary to exempt
the Merger and the other transactions contemplated hereby from the requirements
and provisions of Section 203 of the Delaware Act and the Rights Agreement (as
hereinafter defined), and any other state anti-takeover statute or





                                       31
<PAGE>   38
regulation such that none of the provisions of such "business combination,"
"moratorium," "control share," or other state anti-takeover statute or
regulation or the Rights Agreement (x) prohibits or restricts Beverly's ability
to perform its obligations under this Agreement or its ability to consummate
the Merger and the other transactions contemplated hereby, (y) would have the
effect of invalidating or voiding this Agreement or any provision hereof, or
(z) would subject Capstone to any material impediment or condition in
connection with the exercise of any of their respective rights under this
Agreement.

         SECTION 4.06     NO EXISTING VIOLATION, DEFAULT, ETC. None of Beverly
or any of its Subsidiaries is in violation (except for any violations which
would not, singly or in the aggregate with all such other violations, (i) have
a Beverly Material Adverse Effect or (ii) result in Remaining Health Care
Liabilities for which as between NBHI on the one hand and Beverly and Capstone
on the other hand, NBHI shall be solely liable) of (A) any applicable law,
ordinance, administrative or governmental rule or regulation or (B) any order,
decree or judgment of any court or governmental agency or body having
jurisdiction over Beverly or any of its Subsidiaries. No event of default or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default, exists under any Beverly Contract or any lease,
permit, license or other agreement or instrument to which Beverly or any of its
Subsidiaries is a party or by which any of them is bound or to which any of the
properties, assets or operations of Beverly or any of its Subsidiaries is
subject (except for any events of default or other defaults which would not,
singly or in the aggregate with all such other defaults, (i) have a Beverly
Material Adverse Effect or (ii) result in Remaining Health Care Liabilities for
which as between NBHI on the one hand and Beverly and Capstone on the other
hand, NBHI shall be solely liable).

         SECTION 4.07     AFFILIATES. Beverly has delivered to Capstone a
letter identifying all persons who, as of the date hereof, may be deemed to be
"affiliates" of Beverly for purposes of Rule 145 under the Securities Act
("Affiliates") and the written agreement of each such person, substantially in
the form of Exhibit F hereto.

         SECTION 4.08     LICENSES AND PERMITS. Each of Beverly and its
Pharmacy Subsidiaries has such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
governmental agencies and bodies ("Beverly Licenses") as are necessary to own,
lease or operate its properties or conduct the Institutional Pharmacy Business
in the manner described in the Beverly SEC Reports and as presently conducted,
and all such Beverly Licenses are valid and in full force and effect, other
than any failure to have any such Beverly License or any failure of any such
Beverly License to be valid and in full force and effect as would not, singly
or in the aggregate with all such other failures, have a Beverly Material
Adverse Effect. Each of Beverly and its Pharmacy Subsidiaries is, and within
the period of all applicable statutes of limitation has been, in compliance
with its obligations under such Beverly Licenses and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or termination
of such Beverly Licenses, other than any such failure to be in compliance with
such obligations or any such revocation or termination as would not, singly or
in the aggregate with all such other failures, revocations or terminations,
have a Beverly Material





                                       32
<PAGE>   39
Adverse Effect. Beverly has no knowledge of any facts or circumstances that
could reasonably be expected to result in an inability of Beverly or any of its
Pharmacy Subsidiaries to renew any Beverly License. Except as set forth in
Section 4.08 of the Beverly Disclosure Statement, neither the execution and
delivery by Beverly of this Agreement or the Distribution Agreement nor the
consummation of the Distribution, the Merger or any of the other transactions
contemplated herein will result in any revocation or termination of any Beverly
License or any requirement that the Surviving Corporation be licensed in
respect of any of the Beverly Licenses. Set forth in such Section 4.08 is a
true and complete list of all Beverly Licenses which are necessary for the
conduct of the Institutional Pharmacy Business as presently conducted by
Beverly and its Subsidiaries. The listed Beverly Licenses are held by Beverly
or the Pharmacy Subsidiaries.

         SECTION 4.09     REGISTRATION STATEMENT; PROSPECTUS/JOINT PROXY
                          STATEMENT; NBHI REGISTRATION DOCUMENT.

         (a)     None of the information supplied by Beverly for inclusion or
incorporation by reference in the Registration Statement or the
Prospectus/Joint Proxy Statement to be sent to the stockholders of Capstone and
Beverly in connection with the Capstone Special Meeting and the Beverly Special
Meeting, including all amendments and supplements thereto, shall, in the case
of the Registration Statement, at (i) the time the Registration Statement
becomes effective, the Closing, (iii) the Effective Time, (iv) in the case of
the Prospectus/Joint Proxy Statement, on the date the Prospectus/Joint Proxy
Statement is first mailed to Capstone and Beverly stockholders, (v) at the time
of the Capstone Special Meeting and the Beverly Special Meeting, (vi) at the
Closing, and (vii) at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event with respect to Beverly or any of
its Subsidiaries shall occur which is required to be described in the
Registration Statement or the Prospectus/Joint Proxy Statement, such event
shall be so described, and after consultation with Capstone, an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Beverly and Capstone. The Registration
Statement and Prospectus/Joint Proxy Statement will (with respect to Beverly
and its Subsidiaries) comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act, as the case
may be.

         (b)     The Form S-1, Form 10 or other appropriate filings to be made
to register the NBHI Common Stock under the Securities Act and the Exchange
Act, as appropriate, as such filing or filings may be amended or supplemented
(collectively, the "NBHI Registration Document"), will not, at the date the
NBHI Registration Document (or any amendment or supplement thereto), at the
time that the NBHI Registration Document becomes effective, at the time of the
Beverly Special Meeting, at Closing and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein
not misleading. The NBHI Registration Document will comply as to form in all
material respects with the applicable provisions of the Securities Act or the
Exchange Act, as the case may be.





                                       33
<PAGE>   40
         SECTION 4.10     FINDERS OR BROKERS. Except as set forth in Section
4.10 of the Beverly Disclosure Statement, neither Beverly nor any Subsidiary of
Beverly has employed any investment banker, broker, finder or intermediary in
connection with the transactions contemplated hereby who might be entitled to a
fee or any commission the receipt of which is conditioned in whole or part upon
consummation of the Merger or the Distribution.

         SECTION 4.11     SEC FILINGS.

         (a)     Beverly has filed with the SEC all required forms, reports and
documents required to be filed by it with the SEC since December 31, 1991
(collectively, the "Beverly SEC Reports"), all of which, when filed, complied
in all material respects as to form with the applicable provisions of the
Securities Act and the Exchange Act, as the case may be. As of their respective
dates the Beverly SEC Reports (including documents incorporated by reference
therein) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

         (b)     Beverly will deliver to Capstone as soon as they become
available true and complete copies of any report or statement mailed by Beverly
to its security holders generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports and statements (excluding any information
therein provided by Capstone, as to which Beverly makes no representation) will
comply as to form in all material respects with the applicable provisions of
the Securities Act and the Exchange Act, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and will further
comply in all material respects with all applicable requirements of law. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of Beverly and its Subsidiaries to be included or
incorporated by reference in such reports and statements will be prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, and in accordance with all
applicable accounting requirements under the Securities Act and the Exchange
Act, and will fairly present the consolidated financial position of Beverly and
its Subsidiaries as of the dates thereof and the consolidated results of
operations and consolidated cash flow for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year-end
adjustments and to the extent they may not include footnotes or may be
condensed or summary statements).

         SECTION 4.12     FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
Beverly and its Subsidiaries included or incorporated by reference in the
Beverly SEC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved, and in accordance with all applicable accounting requirements under
the Securities Act and the Exchange Act, and fairly present the consolidated
financial position of Beverly and its





                                       34
<PAGE>   41
Subsidiaries as of the dates thereof and the consolidated results of operations
and consolidated cash flows for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end adjustments and
to the extent they may not include footnotes or may be condensed or summary
statements) and such audited financial statements have been certified as such
(without exception) by Beverly's independent accountants. The unaudited
Institutional Pharmacy Business Financial Statements as set forth in Section
4.12 of the Beverly Disclosure Statement have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, and fairly presented the consolidated financial position
of the Pharmacy Subsidiaries as of the dates thereof and the consolidated
results of operations and consolidated cash flows for the periods then ended
(subject, except as noted in the following sentence, to normal year-end
adjustments and subject to the extent they may not include footnotes or may be
condensed or summary statements). Without limiting the generality of the
foregoing, such unaudited Institutional Pharmacy Business Financial Statements
reflect all material adjustments to working capital components reflected
therein.

         SECTION 4.13     ABSENCE OF UNDISCLOSED LIABILITIES. Neither Beverly
nor its Subsidiaries has any liabilities or obligations of any nature, whether
absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments, except for (i) the liabilities recorded on the Institutional
Pharmacy Business Financial Statements or as set forth in the notes thereto,
(ii) liabilities or obligations incurred in the ordinary course of business and
consistent with past practice since December 31, 1996 that would not, singly or
in the aggregate, be reasonably expected to have a Beverly Material Adverse
Effect and (iii) Remaining Health Care Liabilities for which, as between NBHI
on the one hand and Beverly and Capstone on the other hand, NBHI and its
Subsidiaries shall be solely liable.

         SECTION 4.14     ABSENCE OF CHANGES OR EVENTS.

         (a)     Since December 31, 1996, except as set forth in Section
4.14(a) of the Beverly Disclosure Statement, (i) Beverly and its Subsidiaries
have conducted the Institutional Pharmacy Business in the ordinary course and
have not incurred any material liability or obligation (indirect, direct or
contingent) or entered into any material oral or written agreement or other
transaction that is not in the ordinary course of business (other than the
Distribution Agreement and this Agreement) or that could reasonably be expected
to result in any Beverly Material Adverse Effect; (ii) neither Beverly nor its
Pharmacy Subsidiaries have sustained any material loss or interference with
their business or properties from fire, flood, windstorm, accident, strike or
other calamity (whether or not covered by insurance); (iii) there has been no
material change in the indebtedness of Beverly and its Pharmacy Subsidiaries,
no change in the authorized capital stock of Beverly and no dividend or
distribution of any kind declared, paid or made by Beverly on any class of its
capital stock other than the Distribution; (iv) there has been no event or
condition which has caused a Beverly Material Adverse Effect, nor any
development, occurrence or state of facts or circumstances that could, singly
or in the aggregate, reasonably be expected to





                                       35
<PAGE>   42
result in a Beverly Material Adverse Effect; (v) there has been no amendment,
modification or supplement to any material term of any Beverly Contract
required to be identified in Section 4.21(a) of the Beverly Disclosure
Statement to which Beverly or a Pharmacy Subsidiary is a party, or to any
equity security; and (vi) there has been no material change by Beverly in its
accounting principles, practices or methods.

         (b)     Since December 31, 1996, other than in the ordinary course of
business consistent with past practice, there has not been any increase in the
compensation or other benefits payable, or which could become payable, by
Beverly, to its officers or key employees, or except for the transactions
contemplated by this Agreement and the Distribution Agreement, any amendment of
any of the Beverly Compensation and Benefit Plans. Copies of any such
amendments have been or will be provided to Capstone promptly upon adoption.

         SECTION 4.15     CAPITALIZATION.

         (a)     The authorized capital stock of Beverly consists of
300,000,000 shares of Beverly Common Stock and 25,000,000 shares of Preferred
Stock, $1.00 par value (the "Beverly Preferred Stock"). As of March 31, 1997,
there were (i) 99,171,864 shares of Beverly Common Stock outstanding, (ii) no
shares of Beverly Preferred Stock outstanding, (iii) 5,423,408 shares of
Beverly Common Stock held in treasury and (iv) 97,171,864 shares of Beverly
Common Stock were reserved for issuance in connection with the rights (the
"Rights") pursuant to the Rights Agreement dated as of September 19, 1994, as
amended April 6, 1995 (as so amended, the "Rights Agreement") between Beverly
and The Bank of New York, as Rights Agent. Except for shares which were
reserved for issuance and which may have been issued pursuant to the following
sentence there have been no issuances of capital stock of Beverly since
December 31, 1996. As of March 31, 1997, in addition to the Rights, 8,264,261
shares of Beverly Common Stock were reserved for issuance as restricted stock,
performance shares or upon the exercise of outstanding options (collectively,
the "Beverly Options") which may be granted under the incentive and stock
option plans of Beverly covering an aggregate of 4,740,029 shares of Beverly
Common Stock (collectively, the "Beverly Option Plans"), 4,881,842 shares were
reserved for issuance upon conversion of Beverly's 7 5/8% Convertible
Subordinated Debentures due March 15, 2003, 11,252,978 shares were reserved for
issuance upon conversion of Beverly's 5 1/2% Convertible Subordinated
Debentures due August 1, 2018 (collectively, the "Convertible Debentures"). No
other shares of Beverly Common Stock are reserved for any purpose. Except for
the foregoing, there are not any existing options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating
Beverly to issue, transfer or sell any shares of capital stock of Beverly or
any of its Subsidiaries or any other securities convertible into or evidencing
the right to subscribe for any such shares. There are no outstanding stock
appreciation rights with respect to the capital stock of Beverly or any of its
Subsidiaries.  All issued and outstanding shares of Beverly Common Stock are
duly authorized and validly issued, fully paid and non-assessable and have not
been issued in violation of (nor are any of the authorized shares of capital
stock of, or other equity interests in, Beverly subject to) any preemptive or
similar rights created by statute, the Amended and Restated Certificate of





                                       36
<PAGE>   43
Incorporation or By-laws of Beverly or any agreement to which Beverly is a
party or by which it may be bound.

         (b)     Except as set forth in Section 4.15(b) of the Beverly
Disclosure Statement, there are no (i) obligations, contingent or otherwise, of
Beverly to repurchase, redeem or otherwise acquire any shares of Beverly Common
Stock or to provide funds to, or make any investment in (in the form of a loan,
capital contribution or otherwise, except for transactions constituting part of
the Restructuring and described in Exhibit A to the Distribution Agreement), or
provide any guarantee with respect to the obligations of, any other person, or
(ii) agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of Beverly.  There are no voting trusts, proxies or other agreements
or understandings to which Beverly is a party or by which Beverly is bound with
respect to the voting of any shares of capital stock of Beverly.

         (c)     Beverly has delivered or made available to Capstone complete
and correct copies of each of the Beverly Option Plans, including all
amendments thereto. Section 4.15(c) of the Beverly Disclosure Statement sets
forth a complete and correct list of all outstanding options setting forth (i)
the exercise price of each outstanding Beverly Option, (ii) the number of
Beverly Options, (iii) the date of grant of each such Beverly Option. Section
4.15(c) of the Beverly Disclosure Statement sets forth a complete and correct
list of all restricted stock awards including the recipients and the number of
shares of Beverly Common Stock received or to be received by each.

         SECTION 4.16     CAPITAL STOCK OF SUBSIDIARIES. The only direct or
indirect Subsidiaries of Beverly are those listed in Section 4.16 of the
Beverly Disclosure Statement, which Section 4.16 separately sets forth the
Pharmacy Subsidiaries. As of the Effective Time, the Pharmacy Subsidiaries
shall constitute the only direct or indirect Subsidiaries of Beverly. Beverly
is directly or indirectly the record and beneficial owner of all of the
outstanding shares of capital stock of each of its Pharmacy Subsidiaries, there
are no proxies with respect to such shares, and there are not any existing
options, warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Beverly or any of such Subsidiaries to issue, transfer
or sell any shares of capital stock of such Subsidiary or any other securities
convertible into or evidencing the right to subscribe for any such shares. All
of such shares beneficially owned by Beverly are duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights with respect
thereto and, except as set forth in Section 4.16 of the Beverly Disclosure
Statement, are owned by Beverly free and clear of any claim, lien or
encumbrance of any kind with respect thereto. Except as set forth in Section
4.16 of the Beverly Disclosure Statement, Beverly does not directly or
indirectly own any interest in any corporation, partnership, joint venture or
other business association or entity.

         SECTION 4.17     LITIGATION. Except (i) as set forth in Section 4.17
of the Beverly Disclosure Statement or (ii) for Remaining Health Care
Liabilities for which, as between NBHI





                                       37
<PAGE>   44
on the one hand and Beverly and Capstone on the other hand, NBHI shall be
solely liable: (A) there are no pending actions, suits, proceedings or, to the
best knowledge of Beverly after due inquiry, pending or threatened
investigations by, against or affecting Beverly, any of its Subsidiaries or any
of their properties, assets or operations, or with respect to which Beverly or
any of its Subsidiaries is responsible by way of indemnity or otherwise,
whether or not disclosed in the Beverly SEC Reports, which would, singly or in
the aggregate with all such other actions, suits, investigations or
proceedings, reasonably be expected to have a Beverly Material Adverse Effect;
and (B) to the best knowledge of Beverly after due inquiry, no actions, suits,
proceedings or investigations which would reasonably be expected to have a
Beverly Material Adverse Effect are threatened or contemplated and there is no
reasonable basis, to the best knowledge of Beverly after due inquiry, for any
such action, suit, proceeding or investigation, whether or not threatened or
contemplated.

         SECTION 4.18     INSURANCE. Beverly has insurance policies, fidelity
bonds and/or self-insurance arrangements covering it and its Subsidiaries'
assets, business, equipment, properties, operations, employees, officers and
directors of the type and in amounts customarily carried by persons conducting
business similar to that of Beverly and such Subsidiaries. All applicable
premiums due and payable under all such policies and bonds have been paid, and
Beverly is otherwise in full compliance with the terms and conditions of all
such policies and bonds, except where the failure to have made payment or to be
in full compliance would not, singly or in the aggregate with all such other
failures, have a Beverly Material Adverse Effect. The reserves established by
Beverly in respect of all matters as to which Beverly self-insures or carries
retentions and/or deductibles, including workers' medical coverage and workers'
compensation, are adequate and appropriate in light of Beverly's experience
since December 31, 1991 with respect thereto and Beverly is not aware, after
due inquiry, of any facts or circumstances existing as of the date hereof that
could reasonably be expected to cause such reserves to be inadequate or
inappropriate. Section 4.18 of the Beverly Disclosure Statement sets forth a
true and complete list of all insurance policies and arrangements, including
retention and/or deductible programs and fidelity bonds of Beverly.

         SECTION 4.19     TITLE TO AND CONDITION OF PROPERTIES. Beverly and its
Pharmacy Subsidiaries have good title to all of the real property and personal
property which is reflected on the Institutional Pharmacy Business Financial
Statements at December 31, 1996, except for property since sold or otherwise
disposed of in the ordinary course of business and consistent with past
practice. Set forth in Section 4.19 of the Beverly Disclosure Statement is a
true and complete list of all real properties owned by Beverly and its Pharmacy
Subsidiaries and used in connection with the Institutional Pharmacy Business,
all of which real properties are reflected in the Institutional Pharmacy
Business Financial Statements. No such real or personal property is subject to
claims, liens or other encumbrances of any kind or character, including,
without limitation, mortgages, pledges, liens, conditional sale agreements,
charges, security interests, easements, restrictive covenants, rights of way or
options, except for (i) liens for taxes not yet delinquent or which are being
contested in good faith by appropriate proceedings and in respect of which
Beverly or its appropriate Pharmacy Subsidiary has set aside on its books
adequate





                                       38
<PAGE>   45
reserves in accordance with generally accepted accounting principles; (ii)
mechanics', carriers', workers', repairers', materialmen's and other similar
statutory liens incurred in the ordinary course of business for obligations not
yet delinquent or the validity of which are being contested in good faith by
appropriate proceedings and in respect of which Beverly or its appropriate
Pharmacy Subsidiary has set aside on its books adequate reserves in accordance
with generally accepted accounting principles; (iii) in the case of real
property, easements, rights of way, restrictions, minor defects or
irregularities in title that do not individually or in the aggregate have a
material adverse effect on the value or use of the real property encumbered
thereby as currently used in the operation of the Institutional Pharmacy
Business of Beverly or its Pharmacy Subsidiaries; or (iv) those which would not
materially interfere with the conduct of the Institutional Pharmacy Business of
Beverly and its Pharmacy Subsidiaries or impair Beverly's ability to perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby (the encumbrances described in clauses (i) through (iv) of
this sentence, collectively, the "Beverly Permitted Encumbrances"). There are
no eminent domain proceedings pending or, to the knowledge of Beverly,
threatened against any property or any material portion thereof owned by
Beverly or any Subsidiary and used in the Institutional Pharmacy Business of
Beverly and its Pharmacy Subsidiaries, which proceedings (if resulting in a
taking) could reasonably be expected to have a material adverse effect on the
value or use of such property as currently used in the operation of the
Institutional Pharmacy Business of Beverly and its Subsidiaries. Such real
properties and the improvements located thereon (including the roof and
structural portions of each building) are in good operating order and
condition, subject to ordinary wear and tear.  There are no structural,
mechanical or other defects of a material nature in any improvements located on
such real properties. All building systems in respect of such real properties
are in all material respects in good condition and working order, subject to
ordinary wear and tear. Such real properties are served by all utilities
required or necessary for the present use thereof. Beverly has made available
to Capstone true and correct copies of all title insurance commitments, title
insurance policies and surveys in the possession of Beverly or its Subsidiaries
relating to such real properties set forth in Section 4.19 of the Beverly
Disclosure Statement.

         SECTION 4.20     LEASES. There have been delivered or made available
to Capstone true and complete copies of each lease pursuant to which real or
personal property is held under lease by Beverly or any Subsidiary (other than
those properties not utilized primarily in the Institutional Pharmacy Business)
limited in the case of personal property, to leases pursuant to which annual
rentals are reasonably expected to be at least $100,000 per year, and true and
complete copies of each lease pursuant to which Beverly or any of its Pharmacy
Subsidiaries leases real or personal property to others for use in a
pharmacy-related business limited in the case of personal property, to leases
pursuant to which annual rentals are reasonably expected to be at least
$100,000 per year. Section 4.20(a) of the Beverly Disclosure Statement sets
forth a true and complete list of all such leases, and such leases are the only
leases that are material to the current operations of the Institutional
Pharmacy Business. All of the leases so listed are valid and subsisting and in
full force and effect with respect to Beverly and the Pharmacy Subsidiaries, as
the case may be, and, to Beverly's knowledge, with respect to any other party
thereto. Beverly or its Pharmacy Subsidiaries, as the case may be, have valid
leasehold interests in all properties leased thereunder





                                       39
<PAGE>   46
free and clear of all liens other than Beverly Permitted Encumbrances. The
leased real properties are in good operating order and condition, subject to
ordinary wear and tear. Section 4.20(b) of the Beverly Disclosure Statement
lists all other leases of the types described above not utilized solely with
respect to the Remaining Health Care Business.

         SECTION 4.21     CONTRACTS AND COMMITMENTS. With respect to the
Institutional Pharmacy Business, neither Beverly nor the Pharmacy Subsidiaries
are parties to any existing contract, obligation or commitment of any type in
any of the following categories:

                 (a)      contracts for the purchase by Beverly or any of its
         Pharmacy Subsidiaries of medicine, materials, supplies or equipment
         which are not cancelable upon 90 days' or less notice and which either
         (i) have not been entered into in the ordinary course of business and
         consistent with past practice or (ii) provide for purchase prices
         substantially greater than those presently prevailing for such
         materials, supplies or equipment, or (iii) contracts obligating
         Beverly or any of its Pharmacy Subsidiaries to make capital
         expenditures in excess of $200,000;

                 (b)      contracts under which Beverly or any Pharmacy
         Subsidiary has, except by way of endorsement of negotiable instruments
         for collection in the ordinary course of business and consistent with
         past practice, become absolutely or contingently or otherwise liable
         for (i) the performance of any other person, firm or corporation under
         a contract, or (ii) the whole or any part of the indebtedness or
         liabilities of any other person, firm or corporation, except in either
         case for any such contracts for which Beverly and its Pharmacy
         Subsidiaries would not be responsible after the Distribution;

                 (c)      powers of attorney outstanding from Beverly or any
         Pharmacy Subsidiary other than as issued in the ordinary course of
         business and consistent with past practice with respect to customs,
         insurance, patent, trademark or tax matters, or to agents for service
         of process;

                 (d)      contracts under which any amount payable by Beverly
         or any Pharmacy Subsidiary is dependent upon, or calculated in
         accordance with, the revenues or profits of Beverly or any of its
         Subsidiaries;

                 (e)      contracts with any director, officer, affiliate or
         employee of Beverly or any Pharmacy Subsidiary other than in such
         person's capacity as a director, officer or employee of Beverly or any
         Pharmacy Subsidiary ;

                 (f)      contracts which limit or restrict where Beverly or
         any of its Pharmacy Subsidiaries may conduct its or their business or
         the type or line of business in which Beverly or any of its Pharmacy
         Subsidiaries may engage;





                                       40
<PAGE>   47
                 (g)      other than as contemplated by the Distribution
         Agreement, any contracts, obligations or commitments which will exist
         following the Distribution between Beverly or the Pharmacy
         Subsidiaries on the one hand, and the Remaining Health Care Business
         on the other;

                 (h)      contracts with any party for the loan of money or
         availability of credit to or from Beverly or any of its Pharmacy
         Subsidiaries (except credit extended by Beverly or any of its Pharmacy
         Subsidiaries to its or their customers in the ordinary course of
         business and consistent with past practice); or

                 (i)      any hedging, option, derivative or other similar
         transaction.

True and complete copies of all contracts, obligations and commitments listed
in Section 4.21 of the Beverly Disclosure Statement have been delivered or made
available to Capstone. All such contracts are in full force and effect or, to
the extent so contemplated by the Distribution Agreement, will be in full force
and effect as of the Effective Time. None of Beverly or its Pharmacy
Subsidiaries or, to the best of Beverly's knowledge, any other party is in
breach of or default under any such contracts (and no facts or circumstances
exist which, to the knowledge of Beverly, could reasonably support the
assertion of any such breach or default) except for breaches and defaults by
parties other than Beverly and its Pharmacy Subsidiaries which would not,
singly or in the aggregate with all other such breaches, have a Beverly
Material Adverse Effect.

         SECTION 4.22     LABOR MATTERS. With respect to the Institutional
Pharmacy Business, (i) none of Beverly or any of its Pharmacy Subsidiaries is a
party to any union contract or other collective bargaining agreement, (ii) each
of Beverly and its Pharmacy Subsidiaries is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment, safety, wages and hours, (iii)
neither Beverly nor any of its Pharmacy Subsidiaries is engaged in any unfair
labor practice, (iv) there is no labor strike, slowdown or stoppage pending
(or, to the best knowledge of Beverly, any labor strike or stoppage threatened)
against or affecting Beverly or any of its Pharmacy Subsidiaries and (v) to the
best knowledge of Beverly, no union organizing activities with respect to any
of its or its Pharmacy Subsidiaries' employees are occurring or threatened.

         SECTION 4.23     NO CHANGE OF CONTROL PUTS. Except as set forth in
Section 4.23 of the Beverly Disclosure Statement, neither the execution and
delivery by Beverly of this Agreement or the Distribution Agreement nor the
consummation of the Distribution, the Merger or any of the other transactions
contemplated hereby and thereby gives rise to any obligation of Beverly or any
of its Subsidiaries to, or any right of any holder of any security of Beverly
or any of its Subsidiaries to, require Beverly to purchase, offer to purchase,
redeem or otherwise prepay or repay any such security, or deposit any funds to
effect the same.





                                       41
<PAGE>   48
         SECTION 4.24     EMPLOYMENT AND LABOR CONTRACTS. Except as set forth
in Section 4.24 of the Beverly Disclosure Statement, and other than the
agreements executed by employees generally, the forms of which have been
provided to Capstone, neither Beverly nor any of its Pharmacy Subsidiaries is a
party to any employment, management services, consultation or other contract or
agreement (except for any such contracts or agreements for which Beverly would
not be responsible after the Distribution) with any past or present officer,
director or employee or, to the best knowledge of Beverly, any entity
affiliated with any past or present officer, director or employee, in each case
true and complete copies of which contracts have been delivered or made
available to Capstone.

         SECTION 4.25     INTELLECTUAL PROPERTY RIGHTS. Beverly or its Pharmacy
Subsidiaries own or have the right to use all Intellectual Property Rights
necessary to the conduct of the Institutional Pharmacy Business. Section 4.25
of the Beverly Disclosure Statement contains a list of all patents, trade
names, registered and unregistered copyrights, trademarks and service marks,
mask works and applications for the foregoing owned by Beverly or its Pharmacy
Subsidiaries and used in the Institutional Pharmacy Business. Beverly and/or
its Pharmacy Subsidiaries have clear and unencumbered title to the Intellectual
Property Rights set forth in such Section 4.25 and such title has not been
challenged (pending or threatened) by others except for the encumbrances listed
therein. Such Section 4.25 also contains a list of unpatented inventions used
or planned for use by Beverly or its Pharmacy Subsidiaries in the Institutional
Pharmacy Business. Except as set forth in such Section 4.25: (i) no rights or
licenses to use such Intellectual Property Rights have been granted or acquired
by Beverly or its Pharmacy Subsidiaries; (ii) there have been no claims or
assertions made by others that Beverly has infringed any such Intellectual
Property Rights of others by the sale of products or any other activity in the
preceding six year period and to the knowledge of Beverly, there has been no
such infringement by Beverly or any of its Pharmacy Subsidiaries during such
period; (iv) Beverly has no knowledge of any infringement of such Intellectual
Property Rights of Beverly or any of its Pharmacy Subsidiaries by others; and
(v) all such patents, registered trademarks, service marks, and copyrights
owned by Beverly or its Pharmacy Subsidiaries relating to the Institutional
Pharmacy Business are in good standing, and are recorded on the public record
in the name of Beverly or its Pharmacy Subsidiaries. True and complete copies
of all material listed in Section 4.25 of the Beverly Disclosure Statement have
been delivered or made available to Capstone.

         SECTION 4.26     TAXES. (i) Beverly and its Subsidiaries have prepared
and timely filed or will timely file with the appropriate governmental agencies
all franchise, income and all other Tax Returns required to be filed by them on
or before the Effective Time, taking into account any extension of time to file
granted to or obtained on behalf of Beverly and/or its Subsidiaries (copies of
which for the past three fiscal years have been delivered or made available to
Capstone); (ii) all Taxes of Beverly and its Subsidiaries have been paid in
full to the proper authorities or fully accrued or provided for with respect to
fiscal periods for which there are publicly available financial statements and
otherwise on the books of Beverly, other than such Taxes as are being contested
in good faith by appropriate proceedings and are adequately reserved for in
accordance with generally accepted accounting principles; (iii) all
deficiencies





                                       42
<PAGE>   49
asserted in writing as a result of Tax examinations of federal, state and
foreign income, sales and franchise and all other Tax Returns filed by Beverly
and its Subsidiaries have either been paid or adequately reserved for in
accordance with generally accepted accounting principles; (iv) no unpaid
deficiency has been asserted or assessed against Beverly or any of its
Subsidiaries, and no examination of Beverly or any of its Subsidiaries is
pending or, to the best knowledge of Beverly, threatened for any material
amount of Tax by any taxing authority (with respect to any such action, Section
4.26 of the Beverly Disclosure Statement sets forth the periods at issue and
the category of Tax, and the examining authority's and any corresponding
revenue agents' reports relating to the issue have been delivered or made
available to Capstone); (v) no extension of the period for assessment or
collection of any Tax of Beverly or any of its Subsidiaries is currently in
effect and no extension of time within which to file any Tax Return of Beverly
or any of its Subsidiaries has been requested, which Tax Return has not since
been filed; (vi) no Tax liens have been filed with respect to any Taxes of
Beverly or any of its Subsidiaries except for property taxes which have accrued
but with respect to which penalty for non-payment has not occurred; (vii)
neither Beverly nor any of its Subsidiaries has agreed to make any adjustment
by reason of a change in their accounting methods that would affect the taxable
income or deductions of Beverly or any of its Subsidiaries for any period
ending after the Effective Time; (viii) Beverly and its Subsidiaries have made
timely payments of the Taxes required to be deducted and withheld from the
wages paid to their employees; (ix) there are no Tax sharing agreements or
arrangements under which Beverly or any Subsidiary will have any obligation or
liability on or after the Effective Time; (x) Beverly and its Subsidiaries have
no foreign losses as defined in Section 904(f)(2) of the Code; (xi) to the best
knowledge of Beverly, there are no transfer pricing agreements made by or on
behalf of Beverly or any of its Subsidiaries with any taxation authority; (xii)
no assets of Beverly or any of its Subsidiaries is held in an arrangement for
which partnership Tax Returns are being filed and neither Beverly nor any of
its Subsidiaries is a partner in any partnership; (xiii) neither Beverly nor
any of its Subsidiaries owns any interest in any "controlled foreign
corporation" (within the meaning of Section 957 of the Code), "passive foreign
investment company" (within the meaning of Section 1296 of the Code) or other
entity the income of which is required to be included in the income of Beverly
or such Subsidiary; and (xiv) neither Beverly nor any of its Subsidiaries has
made an election under Section 341(f) of the Code.

         SECTION 4.27     EMPLOYEE BENEFIT PLANS; ERISA.

         Except as set forth in Section 4.27 of the Beverly Disclosure
Statement:

         (a)     Except as set forth in Section 4.27(a) of the Beverly
Disclosure Statement, there are no "employee pension benefit plans" as defined
in Section 3(2) of ERISA, covering employees (or former employees), maintained
or contributed to by Beverly or any of its Subsidiaries or any of their ERISA
Affiliates (as hereinafter defined), or to which Beverly or any of its
Subsidiaries or any of their ERISA Affiliates contributes or is obligated to
make payments thereunder or otherwise may have any liability ("Beverly Pension
Benefit Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean
any person (as defined in Section 3(9) of





                                       43
<PAGE>   50
ERISA) that is a member of any group of persons described in Section 414(b),
(c), (m) or (o) of the Code which includes the referent person or its
Subsidiaries.

         (b)     Beverly has delivered or made available to Capstone true and
complete copies of, and Section 4.27(b) of the Beverly Disclosure Statement
lists, all Beverly Pension Benefit Plans, "welfare benefit plans" (as defined
in Section 3(1) of ERISA) covering employees (or former employees), maintained
or contributed to by Beverly or any of its Subsidiaries ("Beverly Welfare
Plans"), all multiemployer plans (as defined in Section 3(37) of ERISA)
covering employees (or former employees) to which Beverly or any of its
Subsidiaries or any of their ERISA Affiliates is required to make contributions
or otherwise may have any liability, and, to the extent covering employees,
directors, or independent contractors (or former employees, directors, or
independent contractors), all stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, change of control, executive compensation, "top hat,"
other equity-based compensation, and vacation plans, agreements, or
arrangements maintained or contributed to by Beverly or a Subsidiary of
Beverly.

         (c)     Beverly and each of its Subsidiaries, and each of the Beverly
Pension Benefit Plans, Beverly Welfare Plans, and all other plans or
arrangement referenced in Section 4.27(b) (collectively, the "Beverly Employee
Benefit Plans") are in compliance with the applicable provisions of ERISA and
other applicable laws except where the failure to comply would not, singly or
in the aggregate, reasonably be expected to have a Beverly Material Adverse
Effect.

         (d)     All contributions to and payments from the Beverly Employee
Benefit Plans which are required to have been made in accordance with the
Beverly Pension Benefit Plans and, when applicable, Section 302 of ERISA or
Section 412 of the Code, have been timely made.

         (e)     The Beverly Pension Benefit Plans intended to qualify under
Section 401 of the Code are and have always been so qualified, have been
determined by the IRS to be so qualified, and nothing has occurred with respect
to such Beverly Pension Benefit Plans which could cause the loss of such
qualification or exemption or the imposition of any material liability, penalty
or tax under ERISA or the Code. Such plans have been amended and submitted to
the IRS on a timely basis to comply with changes to the Code made by the Tax
Reform Act of 1986 and other applicable legislative, regulatory or
administrative requirements.

         (f)     There are (i) no investigations or audits pending, to the best
knowledge of Beverly, by any governmental entity involving the Beverly Pension
Benefit Plans or Beverly Welfare Plans, (ii) no termination proceedings
involving the Beverly Pension Benefit Plans and (iii) no pending or, to the
best knowledge of Beverly, threatened claims (other than routine claims for
benefits), suits or proceedings relating to any Beverly Employee Benefit Plan,
against the assets of any of the trusts under any Beverly Employee Benefit Plan
or against any fiduciary of any Beverly Employee Benefit Plan with respect to
the operation of such plan or asserting any rights or claims to benefits under
any such plan or against the assets of any trust under such plan, except for
those which would not, singly or in the aggregate, give rise to any liability
which





                                       44
<PAGE>   51
would reasonably be expected to have a Beverly Material Adverse Effect, nor, to
the best knowledge of Beverly, are there any facts which could give rise to any
liability except for those which would not, singly or in the aggregate,
reasonably be expected to have a Beverly Material Adverse Effect in the event
of any such investigation, claim, suit or proceeding.

         (g)     None of Beverly, any of its Subsidiaries or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to the Beverly
Pension Benefit Plans or Beverly Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA) which could result in a tax or penalty on Beverly or any of its
Subsidiaries under Section 4975 of the Code or Section 502(i) of ERISA, except
any such event which would not, singly or in the aggregate, reasonably be
expected to have a Beverly Material Adverse Effect.

         (h)     Neither the Beverly Pension Benefit Plans subject to Title IV
of ERISA nor any trust created thereunder has been terminated nor have there
been any "reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect to either thereof, except any such event
which would not, singly or in the aggregate, reasonably be expected to have a
Beverly Material Adverse Effect, nor has there been any event with respect to
any Beverly Pension Benefit Plan requiring disclosure under Section 4063(a) of
ERISA or any event with respect to any Beverly Pension Benefit Plan requiring
disclosure under Section 4041(c)(3)(C) of ERISA, except any such event which
would not, singly or in the aggregate, reasonably be expected to have a Beverly
Material Adverse Effect.

         (i)     Neither Beverly nor any Subsidiary of Beverly nor any ERISA
Affiliate has incurred any currently outstanding liability to the PBGC or to a
trustee appointed under Section 4042(b) or (c) of ERISA other than for the
payment of premiums, all of which have been paid when due. No Beverly Pension
Benefit Plan has applied for, or received, a waiver of the minimum funding
standards imposed by Section 412 of the Code.

         (j)     Neither Beverly, any of its Subsidiaries nor any of their
ERISA Affiliates has any liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA.

         (k)     With respect to each of the Beverly Employee Benefit Plans,
true, correct and complete copies of the following documents have been
delivered or made available to Capstone: (i) the current plans and related
trust documents, including amendments thereto, (ii) any current summary plan
descriptions, (iii) the most recent Forms 5500, financial statements and
actuarial reports, if applicable, and (iv) the most recent IRS determination
letter, if applicable.

         (l)     Neither Beverly, any of its Subsidiaries, any organization to
which Beverly is a successor or parent corporation, within the meaning of
Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any
transaction, within the meaning of Section 4069(a) of





                                       45
<PAGE>   52
ERISA, except where the liability therefor would not, singly or in the
aggregate, reasonably be expected to have a Beverly Material Adverse Effect.

         (m)     None of the Beverly Welfare Plans maintained by Beverly or any
of its Subsidiaries include retiree life or retiree health benefits or provide
for continuing benefits or coverage for any participant or any beneficiary of a
participant following termination of employment, except as may be required
under the COBRA. Beverly and each of its Subsidiaries which maintain a "group
health plan" within the meaning of Section 5000(b)(1) of the Code have complied
with the notice and continuation requirements of Section 4980B of the Code,
COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder
except where the failure to comply would not, singly or in the aggregate,
reasonably be expected to have a Beverly Material Adverse Effect.

         (n)     No liability under any Beverly Employee Benefit Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which Beverly or any of its
Subsidiaries has received notice that such insurance company is in
rehabilitation.

         (o)     Except as set forth in Section 4.27(o) of the Beverly
Disclosure Statement, the consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits, deemed satisfaction of goals or conditions, forgiveness or
modification of loans, or accelerate the vesting or timing of payment of any
benefits or compensation payable to or in respect of any employee or former
employee of Beverly or any of its Subsidiaries.

         (p)     Except as set forth in Section 4.27(p) of the Beverly
Disclosure Statement, each Beverly Employee Benefit Plan can be amended or
terminated at any time without approval from any person, without advance
notice, and without any liability other than for benefits accrued prior to such
amendment or termination.

         (q)     With respect to each Beverly Employee Benefit Plan and any
other similar arrangement or plan either currently or previously terminated,
maintained, or contributed to by any entity which either is currently or was
previously under common control with Beverly or any of its Subsidiaries as
determined under Code Section 414, no event has occurred and no condition
exists that after the Merger could subject Beverly or Capstone, directly or
indirectly, to any liability (including liability under any indemnification
agreement) under Section 412, 4971, 4975, or 4980B of the Code or Section 502,
601 or 606 of ERISA.

         (r)     All contributions and payments to or with respect to each
Beverly Employee Benefit Plan have been timely made and except as set forth in
Section 4.27(r) of the Beverly Disclosure Statement, Beverly has made adequate
provision for reserves to satisfy contributions and payments that have not been
made because they are not yet due under the terms of such plan or related
arrangement, document, or applicable law. No Beverly Employee Benefit Plan has
any





                                       46
<PAGE>   53
unfunded benefits that are not fully reflected in Beverly's most recent audited
financial statements.

         (s)     No agreement, commitment, or obligation exists to increase any
benefits under any Beverly Employee Benefit Plan or to adopt any new Beverly
Employee Benefit Plan, except for such plans as may be adopted by NBHI and
which will not be obligations of Beverly or any Pharmacy Subsidiary after the
Effective Time.

         SECTION 4.28     ENVIRONMENTAL MATTERS.

         (a)     Except (i) as would not, singly or in the aggregate with all
other such events of non-compliance, have a Beverly Material Adverse Effect, or
(ii) for Remaining Health Care Liabilities for which, as between NBHI on the
one hand and Beverly and Capstone on the other hand, NBHI shall be solely
liable: (A) Beverly and its Subsidiaries are, and within the period of all
applicable statutes of limitation have been, in compliance with all applicable
Environmental Laws, which compliance includes, without limitation, the
possession of all Environmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof, and
there are no circumstances of which Beverly is aware which may materially
prevent or interfere with compliance in the future; (B) Beverly and its
Subsidiaries have all Environmental Authorizations necessary for the conduct of
the businesses of Beverly and its Subsidiaries as currently conducted; and (C)
neither Beverly nor any of its Subsidiaries has been notified, or has any
reasonable basis to believe, that any such Environmental Authorizations will be
modified, suspended or revoked or cannot be renewed or otherwise maintained in
the ordinary course of business. To Beverly's knowledge after due inquiry, the
execution and delivery of this Agreement and the consummation by Beverly of the
Merger, the Distribution and the other transactions contemplated hereby will
not affect the validity or require the transfer of any Environmental
Authorizations associated with the Institutional Pharmacy Business, and will
not require any notification, registration, reporting, filing, investigation or
remediation under any Environmental Law.

         (b)     There are no Environmental Notices that, singularly or in the
aggregate, could reasonably be expected to have a Beverly Material Adverse
Effect (i) pending or, to the best knowledge of Beverly, threatened against
Beverly or any of its Subsidiaries, (ii) to Beverly's knowledge pending or
threatened against any person or entity whose liability for such Environmental
Notice may have been retained or assumed by or could reasonably be imputed or
attributed by law or contract to Beverly or any of its Subsidiaries, (iii) that
to Beverly's knowledge could subject Beverly to any material risk of liability,
loss or damages, or (iv) that to Beverly's knowledge could reasonably be
expected to require investigation, removal or remedial or corrective action by
Beverly or any of its Subsidiaries, except, in any of the circumstances
described in clauses (i), (ii), (iii) and (iv) above for Remaining Health Care
Liabilities for which, as between NBHI on the one hand and Beverly and Capstone
on the other hand, NBHI shall be solely liable. Since December 31, 1996,
neither Beverly nor any of its Subsidiaries has received any Environmental
Notice alleging that Beverly or any of its Subsidiaries is subject to liability





                                       47
<PAGE>   54
under any Environmental Law or that Beverly or any of its Subsidiaries is not
in full compliance with Environmental Laws, except for Remaining Health Care
Liabilities for which, as between NBHI on the one hand and Beverly and Capstone
on the other hand, NBHI shall be solely liable.

         (c)     There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, notice or demand letter or request
for information or to the best knowledge of Beverly, investigation pending or
threatened under any Environmental Law (i) against Beverly or any of its
Subsidiaries, or (ii) to the knowledge of Beverly, against any person or entity
in connection with which liability could reasonably be imputed or attributed by
law or contract to Beverly or any of its Subsidiaries except, with respect to
each of clause (i) and (ii), for such demands, claims, notices of violation,
notice or demand letters or requests for information which singly or in the
aggregate could not reasonably be expected to have a Beverly Material Adverse
Effect.

         (d)     No property or facility presently or to the knowledge of
Beverly formerly owned, operated or leased by Beverly or any of its present
Subsidiaries, or to the knowledge of Beverly any of its former Subsidiaries, or
any of their respective predecessors in interest, is listed or proposed for
listing on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System, both promulgated under
CERCLA, or on any comparable list established under any Environmental Law, nor
has Beverly or any of its Subsidiaries received any written notification of
potential or actual liability or any request for information under CERCLA or
any comparable foreign, state or local law.

         (e)     There has been no disposal, spill, discharge or release of any
Hazardous Materials generated, used, owned, stored or controlled by Beverly, or
to Beverly's knowledge any of its Subsidiaries, or any of their respective
predecessors in interest, on, at or under any property presently or formerly
owned, leased or operated by Beverly, or to Beverly's knowledge its
Subsidiaries, or any predecessors in interest, and to Beverly's knowledge,
except as disclosed in Section 4.28(e) of the Beverly Disclosure Statement,
there are no Hazardous Materials located in, at, on or under, or in the
vicinity of, any such facility or property, or at any other location, that (i)
could reasonably be expected to subject Beverly to a material risk of
liability, loss or damages, or result in the incurrence by Beverly of costs
under Environmental Laws, (ii) could reasonably be expected to form the basis
of any Environmental Notice against or with respect to Beverly or any of its
Subsidiaries, or against any person or entity whose liability for any
Environmental Notice may have been retained or assumed by or could be imputed
or attributed by law or contract to Beverly or any of its Subsidiaries or (iii)
could reasonably be expected to require investigation, removal or remedial or
corrective action by Beverly or any of its Subsidiaries, that in any case
singularly or in the aggregate reasonably could be expected to have a Beverly
Material Adverse Effect.

         (f)     Without in any way limiting the generality of the foregoing,
to Beverly's knowledge, except as disclosed in Section 4.28(f) of the Beverly
Disclosure Statement, (i) there are and have been no underground or aboveground
storage tanks or other storage receptacles, or





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<PAGE>   55
related piping or other disposal areas containing Hazardous Materials, located
on, at or under property owned, operated or leased by Beverly, any of its
Subsidiaries or any of their respective predecessors in interest, (ii) there
are and have been no polychlorinated biphenyls located on any properties owned,
operated or leased by Beverly or any of its Subsidiaries, and (iii) there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned, operated or leased by Beverly or any of its
Subsidiaries.

         (g)     To Beverly's knowledge no lien has been recorded under
Environmental Laws with respect to any properties, assets or facilities owned,
operated or leased by Beverly or any of its Subsidiaries.

         (h)     In accordance with Section 5.05, Beverly has given Capstone
and its authorized representatives access to all records and files in its
possession or control relating to actual or potential compliance or liability
issues of Beverly or its Subsidiaries and any of their respective predecessors
in interest under Environmental Laws, including, without limitation, all
reports, studies, analyses, tests or monitoring results pertaining to the
existence of Hazardous Material or any other environmental concern relating to
properties, assets or facilities currently or formerly owned, operated,
managed, leased, used or controlled by Beverly any of its Subsidiaries, or
otherwise concerning compliance with or liability under Environmental Laws.

         SECTION 4.29     DISCLOSURE. No representation or warranty by Beverly
and no statement or information relating to Beverly or any of its Subsidiaries
contained herein, or in any certificate furnished by or on behalf of Beverly to
Capstone in connection herewith contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.

         SECTION 4.30     INSTITUTIONAL PHARMACY BUSINESS.

         (a)     Section 4.30(a) of the Beverly Disclosure Statement lists each
Pharmacy utilized by Beverly in connection with its pharmacy business and
indicates (i) the location of such Pharmacy, (ii) whether such Pharmacy
premises are owned or held pursuant to a leasehold interest, management
contract or otherwise and (iii) whether any other person or entity has any
beneficial ownership or interest in or to any such Pharmacy or any right or
option to acquire any beneficial ownership or interest in or to any such
Pharmacy.

         (b)     Section 4.30(b) of the Beverly Disclosure Statement lists all
of the customers to which Beverly and its Subsidiaries provide pharmacy
services pursuant to oral or written contracts which generated revenues in
excess of $5,000,000 for the year ended December 31, 1996 ("Beverly Pharmacy
Contracts"). Beverly has not been informed and has no reason to believe that
any Beverly Pharmacy Contract will be terminated for or without cause.





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<PAGE>   56
         (c)      Except for Remaining Health Care Liabilities for which, as
between NBHI on the one hand and Beverly and Capstone on the other hand, NBHI
shall be solely liable, none of Beverly nor any of its Subsidiaries has
violated or is in violation of any law or order of any court or governmental
authority that is applicable to any of them, their businesses or their
properties, including but not limited to the Medicare and Medicaid fraud and
abuse provisions of the Social Security Act, the Civil Monetary Penalties Law
of the Social Security Act, the so-called "Stark" law, 42 USC Section 1395nn,
or any other federal or state law, statute, rule or regulation prohibiting
rebates, kickbacks, fee- splitting or other financial incentives or
inducements, including but not limited to providing products or services below
cost for the referral or continuation of business; and (ii) none of Beverly nor
its Subsidiaries is, to the best knowledge of Beverly, under investigation by
the Office of Inspector General of the Department of Health and Human Services
or other federal or state investigatory or regulatory body or agency relating
to their business activities, nor is Beverly aware of any state of facts which
could reasonably be likely to subject any of them to a claim for civil
penalties, criminal fines or other sanctions with respect to a violation or
claimed violation of any such laws or regulations relating to the conduct of
their business.

         (d)     Beverly or the Pharmacy Subsidiaries are duly licensed to
provide pharmacy services in all states in which they engage in the
Institutional Pharmacy Business, and are also participants in the Medicare
program and the Medicaid programs of the states listed in Section 4.08 of the
Beverly Disclosure Statement. Beverly is in substantial compliance with all
material laws, rules and regulations affecting or in connection with the
Pharmacies, the Pharmacy Subsidiaries and their licenses with respect thereto
and their participation in the Medicare and Medicaid programs.

         (e)     Beverly has delivered or made available with respect to the
Institutional Pharmacy Business true and correct billing requests for
reimbursement and underlying information to all governmental programs,
including but not limited to the Medicare and Medicaid programs, in compliance
with all rules, regulations, policies and procedures of such governmental
programs and of the fiscal intermediaries of such programs. To the best
knowledge of Beverly, all such billings were for goods actually provided, and
at appropriate charges or costs, and Beverly has appropriate documentation to
support such billing requests.

         SECTION 4.31     FAIRNESS OPINION. Beverly has received the opinions
of Merrill Lynch, Pierce, Fenner & Smith, Incorporated and Stephens Inc. to the
effect that as of the date hereof the financial terms of the Merger are fair to
Beverly's stockholders from a financial point of view.

         SECTION 4.32     SUFFICIENCY OF ASSETS. Beverly and its Pharmacy
Subsidiaries own, lease, hold or otherwise have the right to use all of the
assets, properties, Intellectual Property Rights and Beverly Licenses which are
material to the conduct of the Institutional Pharmacy Business as presently
conducted by Beverly and its Subsidiaries.





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<PAGE>   57
                              ARTICLE V. COVENANTS

         SECTION 5.01     CONDUCT OF BUSINESS OF BEVERLY. Except as
contemplated by this Agreement, the Distribution Agreement and the Beverly
Disclosure Statement or as expressly agreed to in writing by Capstone, during
the period from the date of this Agreement to the Effective Time, Beverly will
and will cause its Pharmacy Subsidiaries each to conduct its operations
according to its ordinary and usual course of business consistent with past
practice, and will use all commercially reasonable efforts to preserve intact
its Institutional Pharmacy Business organization, to keep available the
services of the officers and employees of the Pharmacy Subsidiaries and to
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with the Pharmacy Subsidiaries, and will
take no action which would adversely affect its ability to consummate the
Merger, the Distribution or the other transactions contemplated hereby. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, the Distribution Agreement or the Beverly
Disclosure Statement, prior to the Effective Time, neither Beverly nor any of
its Pharmacy Subsidiaries will, without the prior written consent of Capstone
which shall not be unreasonably withheld:

                 (a)      amend its certificate of incorporation (or other
         applicable charter document) or By-laws;

                 (b)      authorize for issuance, issue, sell, deliver, grant
         any options for, or otherwise agree or commit to issue, sell or
         deliver any shares of any class of capital stock of Beverly or its
         Pharmacy Subsidiaries or any securities convertible into or
         exchangeable or exercisable for shares of any class of capital stock
         of Beverly or its Pharmacy Subsidiaries, other than (i) pursuant to
         and in accordance with the terms of Beverly Options outstanding on the
         date hereof under the Beverly Option Plans listed in Section 4.15 of
         the Beverly Disclosure Statement, (ii) in connection with the
         Distribution or (iii) except as set forth in Schedule 5.01(b) of the
         Beverly Disclosure Statement;

                 (c)      split, combine or reclassify any shares of its
         capital stock, declare, set aside or pay any dividend or other
         distribution (whether in cash, stock or property or any combination
         thereof) in respect of its capital stock or purchase, redeem or
         otherwise acquire any shares of its own capital stock or that of any
         of its Subsidiaries, except for intercompany transactions in the
         ordinary course of business consistent with past practice and as may
         be necessary to facilitate the Restructuring or the Distribution;

                 (d)      with respect to Beverly the Institutional Pharmacy
         Business or any Pharmacy Subsidiary, except as contemplated by this
         Agreement or the Distribution Agreement: (i) create, incur, assume,
         maintain or permit to exist any long-term debt or any short-term debt
         for borrowed money; (ii) assume, guarantee, endorse or otherwise
         become liable or responsible (whether directly, contingently or
         otherwise) for the obligations of any other person except wholly owned
         Pharmacy Subsidiaries in the





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<PAGE>   58
         ordinary course of business and consistent with past practice; or
         (iii) make any loans, advances or capital contributions to, or
         investments in, any other person; other than, in any of the foregoing
         cases, indebtedness, obligations, guarantees, endorsements, loans,
         advances or investments in any other person that are to be assigned to
         and assumed by NBHI prior to the Effective Time and as to which
         Beverly and each Pharmacy Subsidiary will be relieved of liability
         with respect thereto prior to the Effective Time;

                 (e)      except as contemplated by this Agreement with respect
         to the Pharmacy Subsidiaries or otherwise in connection with the
         Institutional Pharmacy Business, (i) increase in any manner the
         compensation of any of their respective directors, officers or
         employees, except in the ordinary course of business and consistent
         with past practice; (ii) pay or agree to pay any pension, retirement
         allowance or other employee benefit not required, or enter into or
         agree to enter into any agreement or arrangement with any of their
         respective past or present employees relating to any such pension,
         retirement allowance or other employee benefit, except as required
         under currently existing agreements, plans or arrangements; (iii)
         grant any severance or termination pay to, or enter into any
         employment or severance agreement with, any of their respective past
         or present employees; (iv) except to the extent permitted by the
         foregoing clause (i), enter into any contract, agreement or
         understanding with any of their respective past or present directors
         or officers; or (v) except in the ordinary course of business and
         consistent with past practice or as may be required to comply with
         applicable law, become obligated (other than pursuant to any new or
         renewed collective bargaining agreement) under any new pension plan,
         welfare plan, multiemployer plan, employee benefit plan, benefit
         arrangement, or similar plan, arrangement or policy which was not in
         existence on the date hereof, including any bonus, incentive, deferred
         compensation, stock purchase, stock option, stock appreciation right,
         health or group insurance, severance pay, retirement or other benefit
         plan, agreement or arrangement, or employment or consulting agreement
         with or for the benefit of any person, or amend any of such plans or
         any of such agreements in existence on the date hereof, other than as
         contemplated by the Employee Benefits Matters Agreement (as defined in
         the Distribution Agreement); (iv) enter into any loan or loan
         guarantee, forgive any loan, extend the repayment terms, or otherwise
         modify any loan or extend any credit to any current or former officer,
         director, or employee.

                 (f)      with respect to the Pharmacy Subsidiaries or
         otherwise in connection with the Institutional Pharmacy Business,
         except in the ordinary course of business and consistent with past
         practice or as disclosed in Section 5.01(f) of the Beverly Disclosure
         Statement or as otherwise expressly contemplated hereby or the
         Distribution Agreement, sell, transfer, lease, license, pledge,
         mortgage, or otherwise dispose of, or encumber, or agree to sell,
         transfer, lease, license, pledge, mortgage or otherwise dispose of or
         encumber, any material properties, real, personal or mixed;





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<PAGE>   59
                 (g)      with respect to the Pharmacy Subsidiaries or
         otherwise in connection with the Institutional Pharmacy Business,
         except as otherwise expressly contemplated hereby, enter into any
         other agreements, commitments or contracts, except agreements,
         commitments or contracts for the purchase, sale or lease of goods or
         services in the ordinary course of business and consistent with past
         practice and having a term of no more than one year;

                 (h)      authorize, recommend, propose or announce an
         intention to authorize, recommend or propose, or enter into any
         agreement in principle or an agreement with respect to, (i) any plan
         of liquidation or dissolution, or (ii) with respect to any Beverly
         Pharmacy Subsidiary, any acquisition of a material amount of assets or
         securities, any disposition of a material amount of assets or
         securities or any material change in its capitalization, or any entry
         into a material contract or any amendment or modification of any
         material contract or any release or relinquishment of any material
         contract rights not in the ordinary course of business and consistent
         with past practice except as expressly contemplated by this Agreement
         or the Distribution Agreement;

                 (i)      except as previously approved by Beverly prior to the
         date hereof and as listed in Section 5.01 (i) of the Beverly
         Disclosure Statement, authorize or commit to make capital expenditures
         in excess of $200,000 for which Beverly or any of its Pharmacy
         Subsidiaries would be responsible subsequent to the Merger;

                 (j)      permit any insurance policy naming it or any Pharmacy
         Subsidiary as a beneficiary or a loss payee to be canceled, terminated
         or materially altered, except in the ordinary course of business and
         consistent with past practice and following written notice to
         Capstone;

                 (k)      maintain its books and records or the books and
         records of the Pharmacy Subsidiaries in a manner not in the ordinary
         course of business or inconsistent with past practice;

                 (l)      except in the ordinary course of business, enter into
         any hedging, option, derivative or other similar transaction;

                 (m)      with respect to any Pharmacy Subsidiary, change any
         assumption underlying, or method of calculating, any bad debt,
         contingency, provision or other reserve;

                 (n)      with respect to any Pharmacy Subsidiary or otherwise
         in connection with the Institutional Pharmacy Business, pay, discharge
         or satisfy any claims, liabilities or obligations (absolute, accrued,
         contingent or otherwise), other than the payment, discharge or
         satisfaction of liabilities (including accounts payable) in the
         ordinary course of business and consistent with past practice, or
         collect, or accelerate the collection of,





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<PAGE>   60
         any amounts owed (including accounts receivable) other than the
         collection in the ordinary course of business; and

                 (o)      agree to do any of the foregoing.

         SECTION 5.02     CONDUCT OF BUSINESS OF CAPSTONE. Except as
contemplated by this Agreement, the Voting Agreement, the Shareholder Agreement
(as hereinafter defined) or the Capstone Disclosure Statement or as expressly
agreed to in writing by Beverly, during the period from the date of this
Agreement to the Effective Time, Capstone and its Subsidiaries will each
conduct its operations according to its ordinary and usual course of business
consistent with past practice, and will use all commercially reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships
with it and will take no action which would adversely affect its ability to
consummate the Merger or the other transactions contemplated hereby. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement or the Capstone Disclosure Statement, prior to
the Effective Time, neither Capstone nor any of its Subsidiaries will, without
the prior written consent of Beverly which shall not be unreasonably withheld:

                 (a)      amend its certificate of incorporation (or other
         applicable charter document) or By-laws;

                 (b)      authorize for issuance, issue, sell, deliver, grant
         any options for, or otherwise agree or commit to issue, sell or
         deliver any shares of any class of capital stock of Capstone or its
         Subsidiaries or any securities convertible into or exchangeable or
         exercisable for shares of any class of capital stock of Capstone or
         its Subsidiaries, other than pursuant to and in accordance with the
         terms of the Capstone Option Plans listed in Section 3.14(a) of the
         Capstone Disclosure Statement;

                 (c)      split, combine or reclassify any shares of its
         capital stock, declare, set aside or pay any dividend or other
         distribution (whether in cash, stock or property or any combination
         thereof) in respect of its capital stock or purchase, redeem or
         otherwise acquire any shares of its own capital stock or that of any
         of its Subsidiaries;

                 (d)      except in the ordinary course of business and
         consistent with past practice (i) create, incur, assume, maintain or
         permit to exist any long-term debt or any short-term debt for
         borrowed money other than under existing lines of credit; (ii) assume,
         guarantee, endorse or otherwise become liable or responsible (whether
         directly, contingently or otherwise) for the obligations of any other
         person except wholly owned Subsidiaries of Capstone; or (iii) make any
         loans, advances or capital contributions to, or investments in, any
         other person;





                                       54
<PAGE>   61
                 (e)      (i) increase in any manner the compensation of any of
         its directors, officers or employees, except in the ordinary course of
         business and consistent with past practice; (ii) pay or agree to pay
         any pension, retirement allowance or other employee benefit not
         required, or enter into or agree to enter into any agreement or
         arrangement with any of its past or present employees relating to any
         such pension, retirement allowance or other employee benefit, except
         as required under currently existing agreements, plans or
         arrangements; (iii) grant any severance or termination pay to, or
         enter into any employment or severance agreement with, any of its past
         or present employees; (iv) except to the extent permitted by the
         foregoing clause (i), enter into any contract, agreement or
         understanding with any of its past or present directors or officers;
         (v) except in the ordinary course of business and consistent with past
         practice or as may be required to comply with applicable law, become
         obligated (other than pursuant to any new or renewed collective
         bargaining agreement) under any new pension plan, welfare plan,
         multiemployer plan, employee benefit plan, benefit arrangement, or
         similar plan, arrangement or policy which was not in existence on the
         date hereof, including any bonus, incentive, deferred compensation,
         stock purchase, stock option, stock appreciation right, health or
         group insurance, severance pay, retirement or other benefit plan,
         agreement or arrangement, or employment or consulting agreement with
         or for the benefit of any person, or amend any of such plans or any of
         such agreements in existence on the date hereof; or (vi) enter into
         any loan or loan guarantee, forgive any loan, extend the repayment
         terms, or otherwise modify any loan or extend any credit to any
         current or former officer, director, or employee.

                 (f)      except in the ordinary course of business and
         consistent with past practice or as otherwise expressly contemplated
         hereby, sell, transfer, lease, license, pledge, mortgage, or otherwise
         dispose of, or encumber, or agree to sell, transfer, lease, license,
         pledge, mortgage or otherwise dispose of or encumber, any material
         properties, real, personal or mixed;

                 (g)      except as otherwise expressly contemplated hereby,
         enter into any other agreements, commitments or contracts, except
         agreements, commitments or contracts for the purchase, sale or lease
         of goods or services in the ordinary course of business and consistent
         with past practice and having a term of no more than one year;

                 (h)      authorize, recommend, propose or announce an
         intention to authorize, recommend or propose, or enter into any
         agreement in principle or an agreement with respect to, any plan of
         liquidation or dissolution, any acquisition of a material amount of
         assets or securities, any disposition of a material amount of assets
         or securities or any material change in its capitalization, or any
         entry into a material contract or any amendment or modification of any
         material contract or any release or relinquishment of any material
         contract rights not in the ordinary course of business and consistent
         with past practice except as expressly contemplated by this Agreement;





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<PAGE>   62
                 (i)      except as previously approved by the Board of
         Directors of Capstone prior to the date hereof and as identified to
         Beverly prior to the date hereof, authorize or commit to make capital
         expenditures in excess of $200,000;

                 (j)      permit any insurance policy naming it as a
         beneficiary or a loss payee to be canceled, terminated or materially
         altered, except in the ordinary course of business and consistent with
         past practice and following written notice to Beverly;

                 (k)      maintain its books and records in a manner not in the
         ordinary course of business or inconsistent with past practice;

                 (l)      except in the ordinary course of business, enter into
         any hedging, option, derivative or other similar transaction;

                 (m)      change any assumption underlying, or method of
         calculating, any bad debt, contingency, provision or other reserve;

                 (n)      pay, discharge or satisfy any claims, liabilities or
         obligations (absolute, accrued, contingent or otherwise), other than
         the payment, discharge or satisfaction of liabilities (including
         accounts payable) in the ordinary course of business and consistent
         with past practice, or collect, or accelerate the collection of, any
         amounts owed (including accounts receivable) other than the collection
         in the ordinary course of business; or

                 (o)      agree to do any of the foregoing.

         SECTION 5.03     NO SOLICITATION BY BEVERLY.

         (a)     Beverly agrees that, prior to the Effective Time, and subject
to subsection (b) below, it shall not, and shall not authorize or permit any of
its Subsidiaries or any of its or its Subsidiaries' directors, officers,
employees, agents or representatives to, directly or indirectly, solicit,
initiate, facilitate or encourage (including by way of furnishing or disclosing
information) any merger, consolidation, other business combination involving
Beverly or its Subsidiaries, an acquisition primarily relating to all or a
substantial portion of the assets or of the capital stock of Beverly or its
Subsidiaries or inquiries or proposals concerning or which may reasonably be
expected to lead to, any of the foregoing (a "Beverly Acquisition Transaction")
or negotiate, explore or otherwise communicate in any way with any third party
(other than Capstone or its affiliates) with respect to any Beverly Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement. Beverly shall be obligated to
immediately advise Capstone of any inquiries or proposals relating to a Beverly
Acquisition Transaction.





                                       56
<PAGE>   63
         (b)     Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for any merger, consolidation or other business
combination primarily involving the Institutional Pharmacy Business, an
acquisition primarily relating to all or a substantial portion of the assets
used in the Institutional Pharmacy Business or of the capital stock of any
Pharmacy Subsidiaries or inquiries or proposals concerning which or may
reasonably be expected to lead to, any of the foregoing (a "Pharmacy
Acquisition Transaction") from a bona fide financially capable third party,
Beverly may furnish non-public information to, and negotiate with, such third
party only if (i) Beverly shall have provided two business days' written notice
to Capstone of such proposal and (ii) Beverly's Board of Directors, after
having received advice from its investment banker or bankers and outside
counsel to Beverly, shall have determined that failure to take the proposed
action, furnish such information or to commence negotiations would be
inconsistent with such Board of Directors' fiduciary duties.

         SECTION 5.04     NO SOLICITATION BY CAPSTONE.

         (a)     Capstone agrees that, prior to the Effective Time, it shall
not, and shall not authorize or permit any of its Subsidiaries or any of its or
its Subsidiaries' directors, officers, employees, agents or representatives to,
directly or indirectly, solicit, initiate, facilitate or encourage (including
by way of furnishing or disclosing information) any merger, consolidation,
other business combination involving Capstone or its Subsidiaries, acquisition
of all or any substantial portion of the assets or capital stock of Capstone
and its Subsidiaries taken as a whole, or inquiries or proposals concerning or
which may reasonably be expected to lead to, any of the foregoing (a "Capstone
Acquisition Transaction") or negotiate, explore or otherwise communicate in any
way with any third party (other than Beverly or its affiliates) with respect to
any Capstone Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement. Capstone shall
be obligated to immediately advise Beverly of any inquiries or proposals
relating to a Capstone Acquisition Transaction.

         (b)     Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for a Capstone Acquisition Transaction from a bona
fide financially capable third party, Capstone may furnish non-public
information to, and negotiate with, such third party only if (i) Capstone shall
have provided two business days' written notice to Beverly of such proposal and
(ii) Capstone's Board of Directors, after having received advice from its
investment banker or bankers and outside counsel to Capstone, shall have
determined that failure to take the proposed action, furnish such information
or to commence negotiations regarding a Capstone Acquisition Transaction would
be inconsistent with such Board of Directors' fiduciary duties.

         SECTION 5.05     ACCESS TO INFORMATION.

         (a)     From the date of this Agreement until the Effective Time,
Beverly will give Capstone and its authorized representatives (including
counsel, environmental and other consultants, accountants, auditors, and
intellectual property counsel and agents) reasonable





                                       57
<PAGE>   64
access in light of the terms of this Agreement during normal business hours to
all facilities, personnel and operations and to all books and records of
Beverly and its Subsidiaries (as they pertain to the Institutional Pharmacy
Business), will permit Capstone to make such inspections as it may reasonably
require (including without limitation any air, water or soil testing or
sampling deemed necessary by it) and will cause its officers and those of its
Subsidiaries to furnish Capstone with such financial and operating data and
other information with respect to the Institutional Pharmacy Business carried
on by Beverly and its Pharmacy Subsidiaries as Capstone may from time to time
reasonably request.

         (b)     From the date of this Agreement until the Effective Time,
Capstone will give Beverly and its authorized representatives (including
counsel, environmental and other consultants, accountants, auditors, and
intellectual property counsel and agents) reasonable access in light of the
terms of this Agreement during normal business hours to all facilities,
personnel and operations and to all books and records of Capstone and its
Subsidiaries, will permit Beverly to make such inspections as it may reasonably
require (including without limitation any air, water or soil testing or
sampling deemed necessary by them) and will cause its officers and those of its
Subsidiaries to furnish Beverly with such financial and operating data and
other information with respect to the businesses and properties of Capstone and
its Subsidiaries as Beverly may from time to time reasonably request.

         SECTION 5.06     REGISTRATION STATEMENT AND PROXY STATEMENT. Beverly
shall file with the SEC as soon as is reasonably practicable after the date
hereof the NBHI Registration Document and Capstone shall file with the SEC the
Registration Statement in which the Prospectus/Joint Proxy Statement shall be
included. Capstone and Beverly shall use all commercially reasonable efforts to
have the Registration Statement declared effective by the SEC and the
Prospectus/Joint Proxy Statement cleared by the staff of the SEC as promptly as
practicable. Beverly shall use all commercially reasonable efforts to have the
NBHI Registration Document declared effective by the SEC. Capstone shall also
take any action required to be taken under applicable state blue sky or
securities laws in connection with shares of Capstone Common Stock to be issued
as Closing Consideration. Capstone and Beverly shall promptly furnish to each
other all information, and take such other actions (including without
limitation using all commercially reasonable efforts to provide any required
consents of their respective independent auditors and investment banking
advisors), as may reasonably be requested in connection with any action by any
of them in connection with the actions contemplated by this Section 5.06.

         SECTION 5.07     COMMERCIALLY REASONABLE EFFORTS; OTHER ACTIONS.

         (a)     Subject to the terms and conditions provided in this Agreement
and the Distribution Agreement, Capstone and Beverly shall use all commercially
reasonable efforts to take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Distribution Agreement,
including,





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<PAGE>   65
without limitation, (i) the filing of Notification and Report Forms under the
HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") and using all
commercially reasonable efforts to respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation and (ii) the obtaining of all necessary third
party consents, approvals or waivers which are required in order to consummate
the Merger, the Distribution and the other transactions contemplated hereby and
by the Distribution Agreement. To such party's knowledge Exhibits 5.07(a) and
5.07(b) list all such material consents, approvals or waivers that must be
obtained by Beverly and Capstone, respectively. Capstone shall not take any
action which would cause Beverly to fail to perform its obligations hereunder
or under the Distribution Agreement. Beverly shall not take any action which
would cause Capstone to fail to perform its obligations hereunder or under the
Distribution Agreement.

         (b)     Beverly shall use all commercially reasonable efforts to cause
to be delivered to Capstone a comfort letter of its independent auditors, dated
a date within five days of the effective date of the Registration Statement, in
form reasonably satisfactory to Capstone and customary in scope and substance
for such letters in connection with similar registration statements.

         (c)     Capstone shall use all commercially reasonable efforts to
cause to be delivered to Beverly a comfort letter of its independent auditors,
dated a date within five days of the effective date of the Registration
Statement, in form reasonably satisfactory to Beverly and customary in scope
and substance for such letters in connection with similar registration
statements.

         SECTION 5.08     PUBLIC ANNOUNCEMENTS. Before issuing any press
release or otherwise making any public statement with respect to the Merger,
the Distribution or any of the other transactions contemplated hereby, Capstone
and Beverly will consult with, and obtain the consent of, each other as to its
form and substance and shall not issue any such press release or make any such
public statement prior to obtaining such consent, except as may be required by
law or pursuant to any order of any court or governmental agency, tribunal or
regulatory authority.

         SECTION 5.09     NOTIFICATION OF CERTAIN MATTERS. Each of Beverly and
Capstone shall give prompt notice to the other party of any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by Beverly, Capstone or any of
their respective Subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, which could be reasonably expected to have a
Beverly Material Adverse Effect or Capstone Material Adverse Effect. Each of
Beverly and Capstone shall give prompt notice to the other party of (a) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the Merger, the
Distribution or any other transactions contemplated by this Agreement or the
Distribution Agreement, or (b) any Beverly Material Adverse Effect or Capstone
Material Adverse Effect.





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         SECTION 5.10     INDEMNIFICATION.

         (a)     For a period of six years Capstone shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
directors, officers and key employees of Beverly against all losses, claims,
damages, expenses or liabilities arising out of actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time, to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) permitted or required under applicable law, Beverly's
Amended and Restated Certificate of Incorporation and By-laws, and applicable
indemnification agreements listed in Section 5.10(a) of the Beverly Disclosure
Statement between Beverly and such respective individuals, all as in effect at
the date hereof.

         (b)     For a period of six years after the Effective Time and to the
reasonable satisfaction of NBHI, the Surviving Corporation shall cause to be
maintained in effect and shall assume the current policies of directors' and
officers' liability insurance maintained by Beverly with respect to claims
arising from facts or events which occurred before the Effective Time;
provided, however, that if the premiums with respect to such insurance exceed
200% of the annual premiums paid as of the date hereof by Beverly for such
insurance, the Surviving Corporation shall be obligated to purchase directors'
and officers' liability insurance with the maximum coverage as can be obtained
at an annual premium equal to 200% of the annual premiums paid by Beverly as of
the date hereof.

         SECTION 5.11     EXPENSES. Except as set forth in Section 10.05,
Capstone, on the one hand, and Beverly (before the Distribution) and NBHI
(after the Distribution), on the other hand, shall bear their respective
expenses incurred in connection with the Merger and the Distribution,
including, without limitation, the preparation, execution and performance of
this Agreement, the Distribution Agreement and the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants. Expenses incurred in
printing, mailing and filing (including without limitation, SEC filing fees,
fees related to any state securities or "blue sky" laws and stock exchange
listing application fees), (i) as to the Prospectus/Joint Proxy Statement, and
Registration Statement, shall be paid by Capstone and (ii) as to the NBHI
Registration Document shall be paid by NBHI.

         SECTION 5.12     STOCK EXCHANGE LISTINGS. Capstone shall use all
commercially reasonable efforts to have the Capstone Common Stock to be issued
in connection with the Merger authorized for quotation on The Nasdaq Stock
Market, Inc. or listed on the New York Stock Exchange subject to notice of
issuance.

         SECTION 5.13     BEVERLY AND SUBSIDIARY ACTIONS.

         (a)     Beverly shall not take or omit to take, and shall not cause or
permit any of its Subsidiaries to take or omit to take, any action within its
reasonable control which would (i) cause a breach of any representation or
warranty of Beverly contained in this Agreement or the





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Distribution Agreement such that the Closing conditions set forth in Section
7.01 would not be satisfied or (ii) prevent fulfillment of the conditions in
Articles 6 and 7.

         (b)     Beverly shall not and shall not authorize or permit any of its
Subsidiaries or any of its Subsidiaries' directors, officers, employees, agents
or representatives to amend, modify, waive or withdraw any term of, the
Distribution Agreement prior to the Effective Time without the prior written
consent of Capstone.

         (c)     Beverly shall use its commercially reasonable efforts to
prepare and submit as soon as practicable after executing this Agreement a
request for the private letter ruling referred to in Section 8.09.

         SECTION 5.14     CAPSTONE AND SUBSIDIARY ACTIONS. Capstone shall not
take or omit to take, and shall not cause or permit any of its Subsidiaries to
take or omit to take, any action within its reasonable control which would (i)
cause a breach of any representation or warranty of Capstone contained in this
Agreement such that the Closing conditions set forth in Section 8.01 would not
be satisfied or (ii) prevent fulfillment of the conditions in Articles 6 and 8.

         SECTION 5.15     ENVIRONMENTAL MATTERS.

         (a)     Beverly shall promptly provide Capstone with any Environmental
Notices it receives with respect to the Institutional Pharmacy Business, and
shall make all filings and take all actions necessary to materially comply with
all Environmental Laws, including but not limited to those applicable to the
Merger and other non-routine transactions contemplated hereby. Beverly shall
keep Capstone informed of all actions taken in connection with the foregoing
and all such actions shall be on terms and conditions satisfactory to Capstone
whose consent to such actions shall not be unreasonably withheld.

         (b)     Capstone shall promptly provide Beverly with any Environmental
Notices it receives and shall make all filings and take all actions necessary
to materially comply with all Environmental Laws, including but not limited to
those applicable to the Merger and other transactions contemplated hereby.
Capstone shall keep Beverly informed of all non-routine actions taken in
connection with the foregoing and all such actions shall be on terms and
conditions satisfactory to Beverly whose consent to such actions shall not be
unreasonably withheld.

         SECTION 5.16     ACTIONS REGARDING OUTSTANDING DEBT.

         (a)     Prior to the Effective Time, Beverly agrees to use its
reasonable best efforts to cause its outstanding indebtedness for borrowed
money to be restructured, modified or amended, as appropriate, to cause such
indebtedness to be assumed by NBHI prior to the Effective Time, and to obtain
all necessary consents, approvals, waivers or other agreements by the holders
of





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such indebtedness as may be required in order to effect the assignment to and
assumption by NBHI of, and release of Beverly from liability with respect to,
such indebtedness.

         (b)     Prior to the Effective Time, Beverly and Capstone shall use
all commercially reasonable efforts to cause Beverly's Pharmacy Subsidiaries to
borrow from third party lenders $275,000,000 on terms mutually agreeable to
Beverly and Capstone for the purpose of repaying such amount to Beverly prior
to the Distribution in settlement of the Assumed Pharmacy Indebtedness (as
defined in the Distribution Agreement), which borrowing shall continue after
the Effective Time as an obligation of the Pharmacy Subsidiaries or the
Surviving Corporation.

         SECTION 5.17     RETROACTIVE INSURANCE COVERAGE. Immediately following
the execution hereof, Capstone and Beverly will use their joint best efforts to
expeditiously obtain a commitment for retroactive insurance coverage, which
shall be reasonably acceptable to Beverly, with respect to both known
liabilities and unreported losses which are related to the Institutional
Pharmacy Business which may have occurred or may occur at any time prior to the
Effective Time. Capstone hereby covenants that at the Effective Time, it shall,
at its expense, cause such insurance coverage to be in effect and shall provide
evidence thereof at the Closing.

         SECTION 5.18     PREFERRED PROVIDER AGREEMENTS. Beverly and Capstone
agree that as promptly as practicable upon the execution of this Agreement they
will commence negotiations in good faith to reach an agreement or agreements to
provide for the delivery of pharmacy services and products and ancillary
services and products after the Effective Time by Capstone to Beverly long-term
care facilities which will be owned or operated by NBHI after the Time of
Distribution.  The forms of such agreements will be initialed by both parties
and attached to a certificate to be signed by the parties and attached to this
Agreement as Exhibit G.

         SECTION 5.19     FAILURE TO TAKE ACTION. None of Beverly or Capstone
or their respective Subsidiaries will take any action, or fail to take any
action, if such action (or failure to act) would reasonably be expected to
cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code.

         SECTION 5.20     EXHIBITS, CLOSING STATEMENTS AND SCHEDULES. Beverly
and Capstone agree that as promptly as possible upon the execution of this
Agreement they will negotiate in good faith, finalize and attach all necessary
exhibits to this Agreement and the exhibits and schedules to the Distribution
Agreement, to be completed within five (5) business days of the date hereof.

       ARTICLE VI. CONDITIONS TO THE OBLIGATIONS OF CAPSTONE AND BEVERLY

         The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:





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<PAGE>   69
         SECTION 6.01     REGISTRATION STATEMENTS. The Registration Statement
and the NBHI Registration Document shall have become effective in accordance
with the provisions of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement and the NBHI Registration Document
shall have been issued by the SEC and remain in effect. All necessary state
securities or blue sky authorizations for the Merger and the Distribution shall
have been received.

         SECTION 6.02     BEVERLY STOCKHOLDER APPROVAL. The approval of the
Merger and the Distribution, including the execution and performance of this
Agreement, the Distribution Agreement and all of the transactions contemplated
hereby or thereby, by a majority of the outstanding shares of Beverly Common
Stock cast at the Beverly Special Meeting or any adjournment thereof, shall
have been obtained.

         SECTION 6.03     CAPSTONE STOCKHOLDER APPROVAL. The approval of the
Merger, including the execution and performance of this Agreement and all of
the transactions contemplated hereby, by a majority of the outstanding shares
of Capstone Common Stock cast at the Capstone Special Meeting or any
adjournment thereof, shall have been obtained.

         SECTION 6.04     LISTINGS. The Capstone Common Stock issuable in the
Merger shall have been authorized for quotation on The Nasdaq Stock Market,
Inc., or listed on the New York Stock Exchange subject to official notice of
issuance.

         SECTION 6.05     CERTAIN PROCEEDINGS. No writ, order, decree or
injunction of a court of competent jurisdiction or governmental entity shall
have been entered against Capstone or Beverly which, and no proceedings
therefor shall have been threatened or commenced by any governmental entity
which seek to, prohibit or restrict the consummation of the Merger or the
Distribution or would otherwise restrict Capstone's or the Surviving
Corporation's exercise of full rights to own and operate the Institutional
Pharmacy Business of Beverly.

         SECTION 6.06     DISTRIBUTION. (i) The Distribution Agreement shall
have been executed and shall be in full force and effect on and as of the
Effective Time; and (ii) the Distribution shall have been completed.

         SECTION 6.07     DEBT RESTRUCTURE. All action required in order to
effect the restructure, modification and amendment of Beverly's indebtedness
for borrowed money, as contemplated by Section 5.16(a), shall have been
completed.

         SECTION 6.08     OPINIONS.

         (a)     Beverly and Capstone shall have received the respective
opinions of Caplin & Drysdale, Chartered, or Ernst & Young, LLP, reasonably
acceptable to Beverly and Capstone, to the effect that:





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                 (i)      the Merger will qualify as a reorganization within
         the meaning of Section 368(a) of the Code;

                 (ii)     no gain or loss will be recognized by Capstone or
         Beverly as a result of the Merger; and

                 (iii)    no gain or loss will be recognized by Beverly's
         stockholders upon the receipt of Capstone Common Stock solely in
         exchange for Beverly Common Stock in connection with the Merger
         (except with respect to cash received in lieu of a fractional interest
         in Capstone Common Stock).

         (b)     Beverly and Capstone shall have received, at Beverly's
election, either a favorable private letter ruling from the IRS or the
favorable opinion of Caplin & Drysdale, Chartered or Ernst & Young, LLP,
reasonably acceptable to Beverly and Capstone, to the effect that:

                 (i)      The transfer by Beverly to NBHI of the Remaining
         Health Care Assets, solely in exchange for NBHI Stock, and the
         assumption by NBHI of the Remaining Health Care Liabilities of
         Beverly, followed by Beverly's distribution of the NBHI Stock to
         Beverly's stockholders, will constitute a reorganization within the
         meaning of Section 368(a)(1)(D) of the Code;

                 (ii)     Beverly will recognize no gain or loss in connection
         with the transactions described in (i) above except to the extent that
         gain or loss is required to be recognized on intercompany
         transactions;

                 (iii)    NBHI will recognize no gain or loss upon the receipt
         of the Remaining Health Care Assets form Beverly in exchange for the
         NBHI Stock; and

                 (iv)     Beverly's stockholders will recognize no gain or loss
         (and no amount will be included in the income of Beverly's
         stockholders) upon the receipt of the NBHI Stock in the Distribution.

         (c)     The respective counsels of Beverly and Capstone shall have
delivered opinions covering the matters set forth on Exhibit H-1 and H-2
hereto.

             ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF CAPSTONE

         The obligation of Capstone to effect the Merger and to perform its
other obligations to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by Capstone:





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         SECTION 7.01     REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of Beverly contained herein and in the
Distribution Agreement (without regard to any materiality exceptions or
provisos contained in this Agreement or the Distribution Agreement) shall be
true and correct in all material respects on the date of this Agreement, the
date of the Distribution Agreement and the Closing Date as though such
representations and warranties were made at and on such date, except (i) for
those untruths or inaccuracies which would not, singly or in the aggregate,
reasonably be expected to have a Beverly Material Adverse Effect and (ii) for
changes expressly permitted or contemplated by this Agreement or the
Distribution Agreement.

         SECTION 7.02     PERFORMANCE. Beverly shall have performed and
complied in all material respects with all agreements, obligations, covenants
and conditions required by this Agreement and the Distribution Agreement to be
performed or complied with by it on or prior to the Closing Date except for
those failures to so perform or comply which would not, singly or in the
aggregate, reasonably be expected to have a Beverly Material Adverse Effect.

         SECTION 7.03     CONSENTS AND APPROVALS. All necessary consents and
approvals of, and notifications and disclosures to, and filings and
registrations with, any United States or any other governmental authority or
any other third party required for the consummation of the Merger and the other
transactions contemplated hereby (including without limitation any consents,
approvals, notifications, disclosures, filings and registrations required under
any Environmental Law) shall have been obtained except where failure to obtain
such consents or approvals would not, singly or in the aggregate with all such
other failures, have a Beverly Material Adverse Effect, and any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.

         SECTION 7.04     CERTIFICATES. Beverly shall furnish such certificates
of its officers to evidence compliance with the conditions set forth in
Sections 7.01, 7.02 and 7.04 as may be reasonably requested by Capstone.

         SECTION 7.05     MATERIAL ADVERSE CHANGE. There shall not have
occurred since December 31, 1996 any event, condition, change, occurrence or
circumstance which has had or is reasonably likely to have, singly or in the
aggregate, a Beverly Material Adverse Effect.

         SECTION 7.06     PHARMACY FINANCIAL STATEMENTS. The Pharmacy
Subsidiaries' unaudited consolidated results of operations for the interim
period between January 1, 1997 and the end of the month immediately prior to
the month in which the Effective Time occurs, shall not have materially
declined compared to the forecasted results of operations provided by the
Pharmacy Subsidiaries to Capstone prior to the date of this Agreement.

         SECTION 7.07     AUDITORS' LETTER. Capstone shall have received from
Beverly's independent auditors a letter dated the Closing Date confirming the
matters set forth in the letter contemplated by Section 5.07(b).





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         SECTION 7.08     NON-COMPETITION AGREEMENT. Capstone shall have
received from NBHI a non-competition agreement in the form attached as Exhibit
7.08.

         SECTION 7.09     WORKING CAPITAL. The Pharmacy Subsidiaries' unaudited
consolidated working capital (defined as consolidated cash, cash equivalents,
accounts receivable and inventory, less accounts payable) shall not have
declined below the level of such working capital reflected in the unaudited
Institutional Pharmacy Business Financial Statements set forth in Section 4.12
of the Beverly Disclosure Statement, except for such changes (i) attributable
to decline in inventories resulting from purchases under the Prime Vendor
Service Agreement dated as of April 3, 1997 between Pharmacy Corporation of
America ("PCA") and Bergen Brunswig Drug Company (a copy of which is set forth
in Section 4.21 of the Beverly Disclosure Statement, and (ii) as do not singly
or in the aggregate constitute a Beverly Material Adverse Effect.

             ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF BEVERLY

         The obligations of Beverly under this Agreement to effect the Merger
shall be subject to the fulfillment on or before the Closing Date of each of
the following additional conditions, any one or more of which may be waived by
Beverly:

         SECTION 8.01     REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of Capstone contained herein (without regard to
any materiality exceptions or provisos therein) shall be true and correct in
all material respects on the date of this Agreement and the Closing Date as
though such representations and warranties were made at and on such date,
except (i) for those untruths or inaccuracies which would not, singly or in the
aggregate, reasonably be expected to have a Capstone Material Adverse Effect
and (ii) for changes permitted or contemplated by this Agreement.

         SECTION 8.02     PERFORMANCE. Capstone shall have performed and
complied in all material respects with all agreements, obligations, covenants
and conditions required by this Agreement to be performed or complied with by
it on or prior to the Closing Date except for those failures to so perform or
comply which would not, singly or in the aggregate, reasonably be expected to
have a Capstone Material Adverse Effect.

         SECTION 8.03     CONSENTS AND APPROVALS. All necessary consents and
approvals of, and notifications and disclosures to, and filings and
registrations with, any United States or any other governmental authority or
any other third party required for the consummation of the Merger and the other
transactions contemplated hereby (including without limitation any consents,
approvals, notifications, disclosures, filings and registrations required under
any Environmental Law) shall have been obtained except where failure to obtain
such consents or approvals would not, singly or in the aggregate with all such
other failures, have a Capstone Material Adverse Effect, and any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.





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         SECTION 8.04     CERTIFICATES. Capstone shall furnish such
certificates of its officers to evidence compliance with the conditions set
forth in Sections 8.01, 8.02 and 8.04 as may be reasonably requested by
Beverly.

         SECTION 8.05     MATERIAL ADVERSE CHANGE. There shall not have
occurred since December 31, 1996 any event, condition, change, occurrence or
circumstance which has had or is reasonably likely to have, singly or in the
aggregate, a Capstone Material Adverse Effect.

         SECTION 8.06     INTERIM QUARTERLY RESULTS. Capstone's unaudited
consolidated results of operations for the interim period between January 1,
1997 and the end of the month immediately prior to the month in which the
Effective Time occurs, shall not have materially declined compared to the
forecasted results of operations provided by Capstone to Beverly prior to the
date of this Agreement.

         SECTION 8.07     VOTING AGREEMENT. Concurrently with the execution of
this Agreement; Counsel shall have entered into the Voting Agreement in the
form attached as Exhibit B, and each such party shall have performed and
complied with its obligations under the Voting Agreement.

         SECTION 8.08     REPAYMENT OF INDEBTEDNESS. The Pharmacy Subsidiaries
shall have repaid to Beverly the Assumed Pharmacy Indebtedness described in
Section 5.16(b) hereof.

         SECTION 8.09     AUDITORS' LETTER. Beverly shall have received from
Capstone's independent auditors a letter dated the Closing Date confirming the
matters set forth in the letter contemplated by Section 5.07(c).

                              ARTICLE IX. CLOSING

         SECTION 9.01     TIME AND PLACE. Subject to the provisions of Articles
VI, VII, VIII and X, the closing of the Merger (the "Closing") shall take place
at the offices of Giroir, Gregory, Holmes & Hoover, plc, Little Rock, Arkansas,
or such other place as the parties may agree upon, as soon as practicable but
in no event later than 9:30 A.M., local time, on the second business day after
the date on which each of the conditions set forth in Articles VI, VII and VIII
have been satisfied or waived by the party or parties entitled to the benefit
of such conditions; or at such other place, at such other time, or on such
other date as Capstone and Beverly may mutually agree. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."

         SECTION 9.02     FILINGS AT THE CLOSING. Subject to the provisions of
Articles VI, VII, VIII and X hereof, Beverly, and Capstone shall cause to be
executed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be filed and recorded in accordance with the
applicable provisions of the Delaware Act, and shall take any and all other
lawful actions and do any and all other lawful things necessary to cause the
Merger to become effective.





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                     ARTICLE X. TERMINATION AND ABANDONMENT

         SECTION 10.01    TERMINATION. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time, whether before or
after approval by the stockholders of Beverly or Capstone:

                 (a)      by mutual consent of the Boards of Directors of
         Capstone and Beverly;

                 (b)      by either Capstone or Beverly if, without fault of
         such terminating party, the Merger shall not have been consummated on
         or before January 31, 1998, which date may be extended by mutual
         consent of the parties hereto; provided, that if the only conditions
         remaining to be satisfied on January 31, 1998 are (i) the receipt of a
         favorable private letter ruling from IRS regarding the Distribution,
         as contemplated by Section 8.09, (ii) the conditions expressed in
         Section 6.08 and (iii) the Distribution, and if any of such conditions
         shall not be waived by the party for whose benefit the condition is
         expressed, then the date on which either Capstone or Beverly may
         terminate this Agreement for failure of the Merger to be consummated
         in accordance with this Agreement shall be extended to and including
         April 30, 1998;

                 (c)      by either Capstone or Beverly, if any court of
         competent jurisdiction in the United States or other governmental body
         in the United States, other than at the request of the parties, or any
         affiliate thereof, seeking to terminate this Agreement pursuant to
         this clause (c), shall have issued an order (other than a temporary
         restraining order), decree or ruling or taken any other action
         restraining, enjoining or otherwise prohibiting the Merger or the
         Distribution, and such order, decree, ruling or other action shall
         have become final and nonappealable;

                 (d)      by either Capstone or Beverly, if the approval of a
         majority of the outstanding shares of Beverly Common Stock cast at the
         Beverly Special Meeting or any adjournment thereof is not obtained
         with respect to each of the Merger and the Distribution; or

                 (e)      by either Capstone or Beverly, if the approval of a
         majority of the outstanding shares of Capstone Common Stock cast at
         the Capstone Special Meeting or any adjournment thereof is not
         obtained with respect to the Merger.

         SECTION 10.02    TERMINATION BY CAPSTONE. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of Capstone, at any time prior to the Effective Time, before or after the
approval by the stockholders of Capstone, if (a) Beverly shall have failed to
comply in any material respect with any of the covenants or agreements
contained in Articles I and V of this Agreement to be complied with or
performed by Beverly at or prior to such date of termination, (b) there exists
a breach or breaches of any representation or warranty of Beverly contained in
this Agreement or the Distribution Agreement such that the





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<PAGE>   75
Closing condition set forth in Section 7.01 would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to
the Effective Time, such breaches shall not have been cured within 15 calendar
days of delivery to Beverly of written notice of such breach or breaches, (c)
Beverly shall have furnished or disclosed non-public information to, or
commenced negotiations with, a third party with respect to a Pharmacy
Acquisition Transaction or Beverly Business Combination Transaction (as
hereinafter defined) or shall have resolved to do either of the foregoing and
publicly disclosed such resolution, (d) the Board of Directors of Beverly shall
have withdrawn, changed, modified in any manner or taken action inconsistent
with its recommendation of the Distribution Agreement, the Distribution, this
Agreement, the Merger or the other transactions contemplated hereby or thereby
or shall have resolved to do any of the foregoing and publicly disclosed such
resolution; or (e) a definitive agreement with respect to a Capstone
Acquisition Transaction or Capstone Business Combination Transaction (as
hereinafter defined) shall have been negotiated and Capstone's Board of
Directors, after having received advice from its investment banker or bankers
and outside counsel to Capstone, shall have determined in good faith that
failure to terminate this Agreement would be inconsistent with the Board's
fiduciary duties; provided, however, that two business days' prior written
notice shall have been given to Beverly (which notice shall include the
material terms and conditions, and financing arrangements of, and the identity
of the third party proposing, the Capstone Acquisition Transaction or Capstone
Business Combination Transaction) and that prior to terminating this Agreement
Capstone shall have made all the Capstone Payments required by the terms of
Section 10.05(c) hereof.

         SECTION 10.03    TERMINATION BY BEVERLY. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the stockholders of Beverly, by action of
the Board of the Directors of Beverly, if (a) Capstone shall have failed to
comply in any material respect with any of the covenants or agreements
contained in Articles I and V of this Agreement to be complied with or
performed by Capstone at or prior to such date of termination, (b) there exists
a breach or breaches of any representation or warranty of Capstone contained in
this Agreement such that the Closing conditions set forth in Section 8.01 would
not be satisfied; provided, however, that if such breach or breaches are
capable of being cured prior to the Effective Time, such breaches shall not
have been cured within 15 calendar days of delivery to Capstone of written
notice of such breach or breaches, (c) Capstone shall have furnished or
disclosed non-public information to, or commenced negotiations with, a third
party with respect to a Capstone Acquisition Transaction or Capstone Business
Combination Transaction or shall have resolved to do either of the foregoing
and publicly disclosed such resolution, (d) the Board of Directors of Capstone
shall have withdrawn, changed, modified in any manner or taken action
inconsistent with its recommendation of this Agreement and the Merger or shall
have resolved to do any of the foregoing and publicly disclosed such
resolution, (e) a definitive agreement with respect to a Pharmacy Acquisition
Transaction or a Beverly Business Combination Transaction (as hereinafter
defined) shall have been negotiated and Beverly's Board of Directors, after
having received advice from its investment banker or bankers and outside
counsel to Beverly, shall have determined in good faith that failure to
terminate this Agreement would be inconsistent with the Board's fiduciary
duties;





                                       69
<PAGE>   76
provided, however, that two business days' prior written notice shall have been
given to Capstone (which notice shall include the material terms and
conditions, and financing arrangements of, and the identity of the third party
proposing, the Pharmacy Acquisition Transaction or the Beverly Business
Combination Transaction) and that prior to terminating this Agreement Beverly
shall have made all the Beverly Payments required by the terms of Section
10.05(b) hereof; or (f) Counsel shall have breached its obligations pursuant to
Section 1.2 of the Voting Agreement.

         SECTION 10.04     PROCEDURE FOR TERMINATION. In the event of
termination and abandonment of the Merger by Capstone or Beverly pursuant to
this Article X, written notice thereof shall forthwith be given to the other.

         SECTION 10.05     EFFECT OF TERMINATION AND ABANDONMENT.

         (a)     In the event of termination of this Agreement and abandonment
of the Merger pursuant to this Article X, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except as provided in Section 5.11 and this
Section 10.05, and except that nothing herein shall relieve any party from
liability for any breach of this Agreement.

         (b)     In the event of (i) a termination of this Agreement by Beverly
pursuant to Section 10.01(b), or (c) or by either party hereto pursuant to
Section 10.01(d) and if prior thereto any person shall have made a bona fide
proposal concerning a Pharmacy Acquisition Transaction or a Beverly Business
Combination Transaction or (ii) any termination of this Agreement by Capstone
pursuant to Section 10.02(a), (b), (c) or (d) or (iii) any termination of this
Agreement by Beverly pursuant to Section 10.03(e), then Beverly shall promptly
pay Capstone by wire transfer of immediately available funds to an account
specified by Capstone up to $2,000,000 for all documented fees and expenses
incurred by Capstone (including the fees and expenses of counsel, accountants,
consultants and advisors) in connection with this Agreement and the
transactions contemplated hereby (the "Beverly Expense Payments"). In the event
of a termination of this Agreement by Beverly pursuant to Section 10.03(e),
Beverly shall be obligated to pay Capstone an additional fee of $35,000,000
(the "Beverly Termination Payment"), payable in immediately available funds
prior to and as a condition of such termination and entering into the
transaction contemplated by such definitive agreement (the amount of such
payments and the manner specified herein for making such payments being
collectively called the "Beverly Payments"). To the extent a Beverly
Termination Payment has not already become payable and been paid and if, prior
to any termination described in clauses (i) or (ii) above, any person shall
have submitted a bona fide proposal concerning a Pharmacy Acquisition
Transaction or Beverly Business Combination Transaction and within 18 months
after the termination of this Agreement, Beverly or any of its Subsidiaries
proposes to enter into a definitive agreement with a third party with respect
to a Pharmacy Acquisition Transaction or Beverly Business Combination
Transaction or a Pharmacy Acquisition Transaction or Beverly Business
Combination Transaction is proposed to be effected, then Beverly, prior to
entering into





                                       70
<PAGE>   77
any such definitive agreement or any such Pharmacy Acquisition Transaction or
Beverly Business Combination Transaction being effected, shall be obligated to
pay Capstone an additional fee of $35,000,000 payable in immediately available
funds prior to and as a condition of entering into such definitive agreement
for a Pharmacy Acquisition Transaction or Beverly Business Combination
Transaction, to an account specified by Capstone. As used in this Section
10.05, the term "Beverly Business Combination Transaction" shall mean any of
the following involving Beverly or any Pharmacy Subsidiary that is material to
the business, results of operation, prospects or financial condition of the
Institutional Pharmacy Business taken as a whole: (1) any merger,
consolidation, share exchange, business combination or other similar
transaction (other than the Merger) which includes the Remaining Health Care
Business; (2) any sale, lease, exchange, transfer or other disposition of 25%
or more of the assets of Beverly (other than assets related to the Remaining
Health Care Business) and its Pharmacy Subsidiaries, taken as a whole, in a
single transaction or series of transactions; or (3) the acquisition by a
person or entity, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of beneficial
ownership of 33 1/3% or more of Beverly Common Stock, whether by tender offer,
exchange offer or otherwise. In the event that this Agreement is terminated
without Closing, and Beverly either (i) subsequently distributes all or part of
the stock ("spin-off") of PCA or its successors or any other entity primarily
engaged in operating Beverly's Institutional Pharmacy Business, to Beverly
stockholders pro rata, or (ii) engages an Underwriter with respect to a bona
fide firm commitment underwriting concerning a public offering of securities of
PCA or its successor or any other entity primarily engaged in operating
Beverly's Institutional Pharmacy Business at any time after the date of this
Agreement and within six (6) months after the termination of this Agreement,
and (iii) a termination of this Agreement by Beverly occurs pursuant to
Sections 10.01(b) or 10.01(c) or by either party hereto pursuant to Section
10.01(d), and such public offering occurs at any time within eighteen (18)
months of such termination or such spin-off occurs within six (6) months after
such termination, then Beverly shall cause the Beverly Termination Payment to
be paid to Capstone concurrently with the consummation of such public offering
or spin-off, as the case may be.

         (c)     In the event of (i) a termination of this Agreement by
Capstone pursuant to Section 10.01(b) or, (c) or by either party pursuant to
Section 10.01(e) and if prior thereto any person shall have made a bona fide
proposal concerning a Capstone Acquisition Transaction or Capstone Business
Combination Transaction (as hereinafter defined) or (ii) any termination of
this Agreement by Beverly pursuant to Section 10.03(a), (b), (c), (d) or (f) or
(iii) any termination of this Agreement by Capstone pursuant to Section
10.02(e), then Capstone shall promptly pay Beverly by wire transfer of
immediately available funds to an account specified by Beverly up to $2,000,000
for all documented fees and expenses incurred by Beverly (including the fees
and expenses of counsel, accountants, consultants and advisors) in connection
with this Agreement, the Distribution Agreement and the transactions
contemplated hereby or thereby (the "Capstone Expense Payments"). In the event
of a termination of this Agreement pursuant to Section 10.02(e), Capstone shall
be obligated to pay Beverly an additional fee of $35,000,000 (the "Capstone
Termination Payment"), payable in immediately available funds prior to and as a
condition of such termination and entering into the Capstone Acquisition
Transaction or





                                       71
<PAGE>   78
Capstone Business Combination Transaction contemplated by such definitive
agreement (the amount of such payments and the manner specified herein for
making such payments being collectively called the "Capstone Payments"). To the
extent a Capstone Termination Payment has not already become payable and been
paid and if, prior to any termination described in clauses (i) or (ii) above,
any person shall have submitted a bona fide proposal concerning a Capstone
Business Combination Transaction and within 18 months after the termination of
this Agreement, Capstone or any of its Subsidiaries proposes to enter into a
definitive agreement with a third party with respect to a Capstone Acquisition
Transaction Capstone or Capstone Business Combination Transaction or a Capstone
Acquisition Transaction or Capstone Business Combination Transaction is
proposed to be effected, then Capstone, prior to entering into any such
definitive agreement or any such Capstone Acquisition Transaction or Capstone
Business Combination Transaction being effected, shall be obligated to pay
Beverly an additional fee of $35,000,000 payable by wire transfer of
immediately available funds to an account specified by Beverly. As used in this
Section 10.05, the term "Capstone Business Combination Transaction" shall mean
any of the following involving Capstone or any Subsidiary that is material to
the business, results of operation, prospects or financial condition of
Capstone and its Subsidiaries taken as a whole: (1) any merger, consolidation,
share exchange, business combination or other similar transaction (other than
the Merger); (2) any sale, lease, exchange, transfer or other disposition of
25% or more of the assets of Capstone and its Subsidiaries, taken as a whole,
in a single transaction or series of transactions; or (3) the acquisition by a
person or entity, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of beneficial
ownership of 33 1/3% or more of Capstone Common Stock, whether by tender offer,
exchange offer or otherwise.

                            ARTICLE XI. DEFINITIONS

         SECTION 11.01    TERMS DEFINED IN THIS AGREEMENT. The following
capitalized terms used herein shall have the meanings ascribed in the indicated
sections.

<TABLE>
         <S>                                                  <C>
         Affiliates                                           4.07
         Agreement                                            Preamble
         Antitrust Division                                   5.07(a)
         Assumed Pharmacy Indebtedness                        Distribution Agreement
         Average Market Value                                 2.04
         Beverly                                              Preamble
         Beverly Acquisition Transaction                      5.03(a)
         Beverly Business Combination Transaction             10.05(b)
         Beverly Common Stock                                 2.01(a)
         Beverly Compensation and Benefit Plans               4.03(b)
         Beverly Contracts                                    4.03(b)
         Beverly Disclosure Statement                         Article IV
         Beverly Employee Benefit Plans                       4.27(c)
         Beverly Expense Payments                             10.05(b)
</TABLE>                                               
                                                       
                                                       
                                                       
                                                       
                                                       
                                       72              
<PAGE>   79
<TABLE>                                                
         <S>                                                  <C>
         Beverly Licenses                                     4.08
         Beverly Material Adverse Effect                      4.01
         Beverly Option Plans                                 4.15(a)
         Beverly Options                                      4.15(a)
         Beverly Payments                                     10.05(b)
         Beverly Pension Benefit Plans                        4.27(a)
         Beverly Permitted Encumbrances                       4.19
         Beverly Pharmacy Contracts                           4.32(b)
         Beverly Preferred Stock                              4.15(a)
         Beverly SEC Reports                                  4.11(a)
         Beverly Special Meeting                              1.05(a)
         Beverly Termination Payment                          10.05(b)
         Beverly Welfare Plans                                4.27(b)
         Capstone                                             Preamble
         Capstone Acquisition Transaction                     5.04(a)
         Capstone Balance Sheet                               3.18
         Capstone Business Combination Transaction            10.02
         Capstone Common Stock                                2.01(a)
         Capstone Compensation and Benefit Plans              3.03(b)
         Capstone Contracts                                   3.03(b)
         Capstone Disclosure Statement                        Article III
         Capstone Employee Benefit Plans                      3.26(c)
         Capstone Expense Payments                            10.05(c)
         Capstone Licenses                                    3.07
         Capstone Material Adverse Effect                     3.01
         Capstone Option Plans                                3.14(a)
         Capstone Options                                     3.14(a)
         Capstone Payments                                    10.05(c)
         Capstone Pension Benefit Plans                       3.26(a)
         Capstone Permitted Encumbrances                      3.18
         Capstone Pharmacy Contracts                          3.31(b)
         Capstone Preferred Stock                             3.14(a)
         Capstone SEC Reports                                 3.10(a)
         Capstone Special Meeting                             1.05(b)
         Capstone Termination Payment                         10.05(c)
         Capstone Warrant                                     3.14(a)
         Capstone Welfare Plans                               3.26(b)
         CERCLA                                               3.27(d)
         Certificate of Merger                                1.02
         Certificates                                         2.02(a)
         circumstance (Capstone)                              3.01
         circumstance (Beverly)                               4.01
         Closing                                              9.01
</TABLE>                                               
                                                       
                                                       
                                                       
                                                       
                                                       
                                       73              
<PAGE>   80
<TABLE>                                                
         <S>                                                  <C>
         Closing Consideration                                2.01(a)
         Closing Date                                         9.01
         COBRA                                                3.26(m)
         Code                                                 3.25
         Constituent Corporations                             Preamble
         Conversion Number                                    2.01(a)
         Convertible Debentures                               4.15(a)
         Counsel                                              Recitals
         Delaware Act                                         1.01(a)
         Distribution                                         Recitals
         Distribution Agreement                               Recitals
         Effective Time                                       1.02
         Employee Benefit Matters Agreement                   Distribution Agreement
         Environment                                          3.27(h)(i)
         Environmental Authorizations                         3.27(a)
         Environmental Laws                                   3.27(h)(ii)
         Environmental Notice                                 3.27(h)(iii)
         ERISA                                                3.26(a)
         ERISA Affiliate                                      3.26(a)
         Exchange Act                                         3.08
         FTC                                                  5.07(a)
         Hazardous Material                                   3.27(h)(iv)
         HSR Act                                              3.03(a)
         Institutional Pharmacy Liabilities                   Distribution Agreement
         Intellectual Property Rights                         3.24
         IRS                                                  3.26(e)
         Merger                                               1.01(a)
         Nasdaq                                               2.04
         NBHI                                                 Recitals
         NBHI Registration Document                           4.09(b)
         NBHI Stock                                           Recitals
         PBGC                                                 3.26(i)
         PCA                                                  7.09
         person                                               12.09
         Pharmacy Acquisition Transaction                     5.03(a)
         Pharmacy Subsidiaries                                Distribution Agreement
         Prospectus/Joint Proxy Statement                     1.05(a)
         Registration Statement                               3.08
         Remaining Health Care Assets                         Distribution Agreement
         Remaining Health Care Business                       Distribution Agreement
         Remaining Health Care Liabilities                    Distribution Agreement
         Restructuring                                        Recitals
         Rights                                               4.15(a)
</TABLE>                                               
                                                       
                                                       
                                                       
                                                       
                                                       
                                       74              
<PAGE>   81
<TABLE>                                                
         <S>                                                  <C>
         Rights Agreement                                     4.15(a)
         SEC                                                  3.08
         Securities Act                                       3.08
         spin-off                                             10.05(b)
         Subsidiary                                           12.09
         Surviving Corporation                                1.01(a)
         Tax or Taxes                                         3.25
         Tax Returns                                          3.25
         Time of Distribution                                 Distribution Agreement
         Transferred Employees                                2.03(a)
         Voting Agreement                                     Recitals
</TABLE>                                               

                           ARTICLE XII. MISCELLANEOUS

         SECTION 12.01    AMENDMENT AND MODIFICATION. Subject to applicable
law, this Agreement may be amended, modified or supplemented only by written
agreement of Capstone and Beverly at any time prior to the Effective Time with
respect to any of the terms contained herein; provided, however, that after
this Agreement is adopted by the stockholders of Beverly or Capstone, no such
amendment or modification shall change the amount or form of the Closing
Consideration.

         SECTION 12.02    WAIVER OF COMPLIANCE; CONSENTS. Any failure of
Capstone, on the one hand, or Beverly, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Beverly or
Capstone, respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
12.02.

         SECTION 12.03    SURVIVABILITY; INVESTIGATIONS. The respective
representations and warranties of Capstone and Beverly contained herein or in
any certificates or other documents delivered prior to or at the Closing shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto and shall not survive the Closing.

         SECTION 12.04    NOTICES. All notices and other communications
hereunder shall be in writing and shall be delivered personally, by next-day
courier or mailed by registered or certified mail (return receipt requested)
with first class postage prepaid, or telecopied with written machine generated
confirmation of receipt, to the parties at the addresses specified below (or at
such other address for a party as shall be specified by like notice; provided,
that notices of a change of address shall be effective only upon receipt
thereof). Any such notice shall be effective upon receipt, if personally
delivered or telecopied, one day after delivery to a courier for





                                       75
<PAGE>   82
next-day delivery, or three days after mailing, if deposited in the U.S. mail,
first class postage prepaid.

         (a)     if to Beverly, to

                 Beverly Enterprises, Inc.
                 5111 Rogers Avenue, Suite 40-A
                 Fort Smith, AR 72919-1000
                 ATTN: Scott M. Tabakin
                 Telephone:       (501) 484-8907
                 Facsimile:       (501) 484-8489

         with copy to:

                 Giroir, Gregory, Holmes & Hoover, plc
                 111 Center Street, Suite 1900
                 Little Rock, AR 72201
                 ATTN: H. Watt Gregory, III, Esq.
                 Telephone:       (501) 372-3000
                 Facsimile:       (501) 374-2380

         (b)     if to Capstone, to

                 Capstone Pharmacy Services, Inc.
                 9901 East Valley Ranch Parkway
                 Suite 3001
                 Irving, TX 75063
                 ATTN: R. Dirk Allison, President & CEO
                 Telephone:       (972) 401-1541
                 Facsimile:       (972) 401-2972

         with copy to:

                 Harwell Howard Hyne Gabbert & Manner, P.C.
                 1800 First American Center
                 315 Deaderick Street
                 Nashville, TN 37238
                 ATTN: Mark Manner, Esq.
                 Telephone:       (615) 256-0500
                 Facsimile:       (615) 251-1057

         SECTION 12.05    ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and





                                       76
<PAGE>   83
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties, nor is this Agreement intended
to confer any rights or remedies hereunder upon any other person except the
parties hereto and, with respect to Section 5.10, the officers and directors of
Beverly.

         SECTION 12.06    GOVERNING LAW. This Agreement shall be governed by
the laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable Delaware principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction,
effect, performance and remedies.

         SECTION 12.07    COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

         SECTION 12.08    SEVERABILITY. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made.

         SECTION 12.09    INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, (i) the
term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an association, a company, an unincorporated
organization, a government or any department, political subdivision or agency
thereof; and (ii) the term "Subsidiary" of any specified corporation shall mean
any corporation of which a majority of the outstanding securities having
ordinary voting power to elect a majority of the board of directors is directly
or indirectly beneficially owned by such specified corporation or any other
person of which a majority of the equity interests therein is, directly or
indirectly, owned by such specified corporation.

         SECTION 12.10    ENTIRE AGREEMENT. This Agreement, including the
exhibits hereto and the documents and instruments referred to herein (including
the Confidentiality Agreement dated December 10, 1996 between Capstone and
Beverly), embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter. There are no representations, promises, warranties, covenants,
or undertakings, other than those expressly set forth or referred to herein and
therein.

         SECTION 12.11    CHOICE OF FORUM. Any litigation commenced by either
party hereto or its successors and assigns and related to this Agreement may be
maintained only in the United





                                       77
<PAGE>   84
States District Court, District of Delaware or in a Delaware state court, and
each party hereby irrevocably consents and submits for the purpose of such
litigation to the jurisdiction of that federal or state court and irrevocably
waives any objection the party may have based upon improper venue, forum non
conveniens, or other similar doctrines or rules.





                                       78
<PAGE>   85
         IN WITNESS WHEREOF, Capstone and Beverly have caused this Agreement to
be signed by their respective duly authorized officers as of the date first
above written.

                                        CAPSTONE PHARMACY SERVICES, INC.



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


                                        BEVERLY ENTERPRISES, INC.



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

<PAGE>   86
                                                                       EXHIBIT B
                                                        Prepared pursuant to the
                                                Recitals in the Merger Agreement


                                VOTING AGREEMENT

         This Voting Agreement dated April 15, 1997 (the "Agreement") by and
between Beverly Enterprises, Inc., a Delaware corporation ("Beverly"), and
Counsel Corporation, a Toronto, Ontario corporation ("Counsel"). Capitalized
terms used herein and not otherwise defined shall have the meaning set forth in
the Merger Agreement.

         WHEREAS, simultaneously with the execution of this Agreement, Beverly
is entering into an Agreement and Plan of Merger dated the date hereof (the
"Merger Agreement") with Capstone Pharmacy Services, Inc., a Delaware
corporation ("Capstone") pursuant to which Beverly will merge with and into
Capstone, with Capstone as the surviving corporation on the terms specified or
referred to therein (the "Merger"); and

         WHEREAS, the Merger is structured to be a tax-free "reorganization"
under Section 368 of the Internal Revenue Code; and

         WHEREAS, Counsel currently beneficially owns, as determined in
accordance with Rule 13d-3 as promulgated under the Exchange Act, 8,356,815
shares of Capstone Common Stock, par value $.01 per share (collectively with
any Capstone Common Stock acquired hereafter, the "Shares"); and

         WHEREAS, in order to induce Beverly to enter into the Merger
Agreement, Counsel and Capstone wish to set forth certain understandings
regarding their relationship prior to the Merger.

         NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
agree as follows.

         1.      Agreements of Counsel.

                 1.1.     The Merger. Counsel agrees to vote the Shares in
favor of the Merger and the transactions contemplated thereby, and further
agrees not to withdraw, change or otherwise rescind such vote prior to the
earlier of the Effective Time or the termination of the Merger Agreement in
accordance with its terms.

                 1.2.     No Solicitation.

                          (a)     Until the earlier of the Effective Time or
the termination of the Merger Agreement in accordance with its terms, Counsel
shall not, directly or indirectly, solicit





                                       1
<PAGE>   87

or respond to any inquiries or the making of any proposal by any person or
entity (other than Beverly) with respect to any sale, transfer or other
disposition of Counsel's Shares, and Counsel shall not sell, transfer or
dispose of the Shares except (i) in the amounts described in Rule 144 (e)(i)
pursuant to the Securities Act, and (ii) nothing herein shall prevent a pledge
of such shares as collateral in a bona fide borrowing transaction; provided,
however, that such pledge shall preserve and be subject to the rights of
Beverly under this Agreement.

                          (b)     Until the earlier of the Effective Time or
nine months after the termination of the Merger Agreement in accordance with
its terms, Counsel shall not, directly or indirectly, solicit or respond to any
inquiries or the making of any proposal by any person or entity (other than
Beverly) with respect to any acquisition or purchase of a substantial amount of
assets of Capstone or any merger, consolidation, business combination or
similar transaction involving Capstone.

                          (c)     Until the earlier of the Effective Time or
nine months after the termination of the Merger Agreement in accordance with
its terms, Counsel shall not vote in favor of, propose, endorse or solicit
proxies with respect to any matter to be proposed to the stockholders of
Capstone, the approval of which would restrict, hinder, prevent or otherwise be
inconsistent with the consummation of the Merger.

                 1.3.     Reasonable Efforts. Counsel agrees, from and after
the date hereof, to use all commercially reasonable efforts to assist in the
Merger becoming effective as contemplated by the Merger Agreement.

         2.      Waiver of Section 203 of the Delaware General Corporation Law.
The obligations of Counsel and Beverly under this Agreement shall be subject to
the condition that the Merger, the Merger Agreement and this Agreement shall
have been approved by the Board of Directors of Capstone with the effect that
neither Counsel nor Beverly will be subject to the restrictions of Section 203
of the Delaware General Corporation Law.

         3.      Representations and Warranties.

                 3.1.     Representations and Warranties of Beverly. Counsel is
duly organized, validly existing in good standing under the laws of and has the
requisite corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by Counsel and constitutes a valid and
binding obligation of Counsel enforceable against it in accordance with its
terms.

                 3.2.     Representations and Warranties of Counsel. Beverly is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and





                                       2
<PAGE>   88
delivered by Beverly and constitutes a valid and binding obligation of Beverly,
enforceable against it in accordance with its terms.

         4.      Termination. This Agreement shall terminate upon the later of
(a) the consummation of the Merger in accordance with the terms of the Merger
Agreement and (b) the termination of the Merger Agreement in accordance with
its terms.

         5.      Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal, substantive laws of the
State of Delaware without regard for the principles of conflict of laws.

         6.      Entire Agreement. This Agreement contains the entire agreement
among the parties and supersedes all prior or contemporaneous discussions,
negotiations, representations, or agreements relating to the subject matter of
this Agreement. No changes to this Agreement shall be made or be binding on any
party unless made in writing and signed by each party.

         7.      Successors. No party may assign this agreement or any of its
rights or obligations hereunder without the prior written consent of the other
parties, except that Beverly's rights hereunder may be assigned to any wholly
owned subsidiary of Beverly. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by and
against the respective successors and assigns of each party.

         8.      Injunctive Relief. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.

         9.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.





                                       3
<PAGE>   89
         IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date above written.

                                        BEVERLY ENTERPRISES, INC.



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


                                        COUNSEL CORPORATION



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




                                       4
<PAGE>   90
                                                                       EXHIBIT F
                                                            Prepared pursuant to
                                            Section 4.07 of the Merger Agreement


                              AFFILIATE AGREEMENT

         This Affiliate Agreement ("Agreement") is executed by Capstone
Pharmacy Services, Inc. ("Capstone"), a Delaware corporation, and the
undersigned director, shareholder, or executive officer ("Executive") of
Beverly Enterprises, Inc., a Delaware corporation ("Beverly"), in connection
with the Agreement and Plan of Merger dated April 15, 1997 (the "Merger
Agreement"), among Beverly and Capstone. All defined terms used herein and not
otherwise defined shall have the meaning set forth in the Merger Agreement.

         WHEREAS, pursuant to the terms of the Merger Agreement Beverly will be
merged with and into Capstone (the "Merger"), with stockholders of Beverly
receiving in exchange for their shares of Beverly Common Stock issued and
outstanding immediately prior to the Effective Time newly issued shares of
Capstone Common Stock; and

         WHEREAS, Executive beneficially owns an amount of shares of Beverly
Common Stock, as determined in accordance with Rule 13d-3 as promulgated under
the Exchange Act, as set forth below; and

         WHEREAS, as of the date of this Agreement, Executive may be deemed to
be an "affiliate" of Beverly, as the term "affiliate" is defined for purposes
of paragraphs (c) and (d) of Rule 145 under the Securities Act.

         NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows.

         1.      Background. The Merger Agreement provides for the Merger of
Beverly with and into Capstone in a transaction in which the issued and
outstanding shares of Beverly Common Stock will be converted into shares of
Capstone Common Stock, on the terms and conditions set forth in the Merger
Agreement. The parties to the Merger Agreement intend for the Merger to qualify
as a tax-free "reorganization" for federal income tax purposes.

         2.      Purpose and Scope. This Agreement is executed by the Executive
and Capstone to qualify the Merger for the tax treatment described above and to
ensure compliance with the Securities Act in connection with resales of any
securities acquired by Executive as a result of the Merger. This Agreement
applies to the following securities that are beneficially owned by Executive
after the Effective Time (collectively, the "Restricted Securities"): (a) all
shares of Capstone Common Stock that Executive acquires in the Merger in
exchange and substitution for



                                      1
<PAGE>   91
shares of Beverly Common Stock; (b) any shares of Capstone Common Stock issued
pursuant to the exercise of any option, warrant, or other right to acquire
shares of Beverly Common Stock that is held by Executive as of the effective
date of the Merger specified in the Merger Agreement (the "Effective Time");
(c) any securities (whether or not Capstone Common Stock) issued or distributed
to Executive in respect of, or in exchange and substitution for, any of the
shares of Capstone Common Stock described in the preceding clauses, whether
pursuant to a split-up, spin-off, stock split, stock dividend, capital
adjustment, recapitalization, reorganization, reclassification, or other
similar transaction; and (d) any right, option, or other interest with respect
to any of the foregoing securities.

         3.      Representations, Warranties and Covenants of Executive.

         Executive hereby represents, warrants and covenants to Capstone that
in the event Executive receives any Capstone Common Stock as a result of the
Merger:

                 (a)      Executive shall not make any sale, transfer or other
         disposition of the Capstone Common Stock in violation of the
         Securities Act or the rules and regulations as promulgated thereunder.

                 (b)      Executive has carefully read this Agreement and the
         Merger Agreement and discussed the requirements of such documents and
         other applicable limitations upon Executive's ability to sell,
         transfer or otherwise dispose of Capstone Common Stock to the extent
         Executive felt necessary, with Executive's counsel or counsel for
         Beverly.

                 (c)      Executive has full power and authority to execute
         this Agreement, to make the representations and warranties set forth
         in it, and to perform the obligations to be performed by Executive
         under it.

                 (d)      Executive currently does not own any Capstone Common
         Stock, except as indicated at the end of this Agreement.

                 (e)      Executive is the beneficial owner, as determined
         pursuant to Rule 13d-3 under the Exchange Act, of the number of shares
         of Beverly Common Stock set forth on the signature page of this
         Agreement, which includes all shares of Beverly Common Stock as to
         which Executive has sole or shared voting or investment power and all
         shares of Beverly Common Stock issuable upon the exercise of any
         outstanding rights, options, and warrants to acquire Beverly Common
         Stock.

                 (f)      Executive has been advised that the issuance of
         Capstone Common Stock to Executive pursuant to the Merger has been
         registered with the Securities and Exchange Commission ("SEC") under
         the Securities Act on a Registration Statement Form S-4. Executive has
         also been advised that, because Executive may be deemed to be an
         affiliate of Beverly and because as of the date of this Agreement any
         proposed distribution by





                                       2
<PAGE>   92
         Executive of the Capstone Common Stock has not been registered under
         the Securities Act, Executive may not sell, transfer or otherwise
         dispose of Capstone Common Stock issued to Executive in the Merger
         unless (i) such sale, transfer or other disposition is made in
         conformity with the volume and other limitations of Rule 145 under the
         Securities Act, (ii) such sale, transfer or other disposition has been
         registered under the Securities Act, (iii) in the opinion of counsel
         such sale, transfer or other disposition is otherwise exempt from
         registration under the Securities Act, provided that such opinion is
         reasonably acceptable in form and substance to Capstone, or (iv)
         Executive has delivered to Capstone a "no-action" or interpretative
         letter from an authorized representative of the SEC to the effect that
         the SEC would not take enforcement action, or the SEC staff would not
         recommend that the SEC take enforcement action, if the transaction is
         effected without registration under the Securities Act.

                 (g)      Executive understands that Capstone is under no
         obligation to register the sale, transfer or other disposition of the
         Capstone Common Stock by Executive or on behalf of Executive under the
         Securities Act or to take any other action necessary in order to make
         compliance with an exemption from such registration available solely
         as a result of the Merger or the transactions contemplated thereby, or
         this Agreement.

                 (h)      Executive understands that there will be placed on
         the certificates for the Capstone Common Stock issued to Executive, or
         any substitutions therefor, a legend stating in substance:

                 THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
                 TRANSACTION SUBJECT TO RULE 145 PROMULGATED BY THE SECURITIES
                 EXCHANGE COMMISSION (THE "SEC") UNDER THE SECURITIES ACT OF
                 1933, AS AMENDED (THE "SECURITIES ACT"), AND, CONSEQUENTLY,
                 CANNOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME ABSENT (A)
                 COMPLIANCE WITH THE CONDITIONS OF RULE 145(D), (B)
                 REGISTRATION OF THE TRANSACTION WITH THE SEC UNDER THE
                 SECURITIES ACT, OR (C) RECEIPT BY THE ISSUER OF THESE SHARES
                 OF A WRITTEN OPINION OF LEGAL COUNSEL OR OTHER EVIDENCE THAT
                 REGISTRATION OF THE TRANSACTION IS NOT REQUIRED UNDER THE
                 SECURITIES ACT.

         Executive also understands that Capstone will cause a legend
         substantially identical to the one described above to be placed on
         every new stock certificate that is issued upon a transfer or exchange
         of any Restricted Securities, unless the transferee acquires the
         securities in a transaction that is registered with the SEC under the
         Securities Act or that





                                       3
<PAGE>   93
         is executed in compliance with all the applicable conditions of Rule
         145(d) of the Securities Act.

         4.      Covenants, Warranties, and Representations of Capstone.
Capstone covenants, warrants, and represents to Executive the following:

                 (a)      On and after the Effective Time and for as long as is
         necessary to permit Executive to sell all the Restricted Securities
         pursuant to Rule 145 of the Securities Act and, to the extent
         applicable, Rule 144 of the Securities Act, Capstone shall use its
         best efforts to file on a timely basis all reports required to be
         filed by it pursuant to Section 13 or 15(d) of the Exchange Act.

                 (b)      Capstone shall remove the restrictive legend
         described above and cancel all stop transfer instructions applicable
         to any certificates representing Restricted Securities that are sold
         or otherwise transferred by Executive to a third party in compliance
         with the provisions of this Agreement.

                 (c)      Capstone acknowledges that it will promptly authorize
         a transfer of any Restricted Securities that are sold by Executive
         pursuant to Rule 145(d) of the Securities Act if it receives separate
         representation letters in customary form from Executive and the broker
         making the sale that confirm that all applicable conditions of Rule
         145(d) of the Securities Act have been satisfied in connection with
         the transaction, and that it does not have any reasonable basis to
         believe that the sale was not made in compliance with the conditions
         of Rule 145(d) of the Securities Act.

                 (d)      Upon request of Executive, Capstone shall remove the
         restrictive legend on, and cancel any stop transfer instructions
         applicable to, every certificate representing Restricted Securities,
         if the provisions of Rule 145(d)(2) of the Securities Act have been
         satisfied.

         5.      Legal Matters.

                 (a)      The validity, construction, enforcement, and
interpretation of this Agreement are governed by the laws of the State of
Delaware and the federal laws of the United States of America, excluding the
laws of those jurisdictions pertaining to the resolution of conflicts with laws
of other jurisdictions.

                 (b)      Execution of this Agreement by Executive should not
be considered an admission on the part of Executive that Executive is an
"affiliate" of Beverly or as a waiver of any rights Executive may have to
object to any claim that Executive is an affiliate on or after the date of this
Agreement.





                                       4
<PAGE>   94
         6.      Termination. Before the Merger occurs, the obligations,
responsibilities and agreements contained in this Agreement will terminate
concurrently with any termination of the Merger Agreement. After the Merger
occurs, this Agreement will terminate, all restrictive legends will be promptly
removed from all certificates representing the Restricted Securities that are
then beneficially owned by Executive, and all stop transfer instructions
regarding those Restricted Securities will be promptly canceled, if: (i) all
those Restricted Securities are registered with the SEC for sale and sold by
Executive pursuant to an effective registration statement under the Securities
Act; (ii) Executive notifies Capstone that Executive has held all the
Restricted Securities for at least two years since the Effective Time (or such
shorter period as prescribed in or pursuant to the Securities Act) and is not,
and has not been for at least three months, an affiliate of Capstone; or (iii)
Executive delivers to Capstone a written opinion of legal counsel or a
"no-action" or interpretative letter from an authorized representative of the
SEC, to the effect that Executive may publicly sell or otherwise transfer all
the Restricted Securities without registration under the Securities Act and,
therefore, the restrictive legend and stock transfer instructions are no longer
required.

         7.      Binding Effect. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective legal
representatives, successor and assigns.

         8.      Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall
be made.

         9.      Notices, Communications. All notices and other communications
hereunder shall be in writing and shall be delivered in the manner and at the
address (unless subsequently notified to the contrary in the manner provided
therein) as provided in the Merger Agreement.

         10.     Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         11.     Amendment. This Agreement may be amended, modified or
supplemented only with the written agreement of Capstone and Executive.

         12.     Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto with respect to the subject matter
contained herein and supersedes all prior agreements and understandings between
the parties with respect to such subject matter. There are no representations,
promises, warranties, covenants or undertakings, other than those expressly set
forth or referred to herein.





                                       5
<PAGE>   95
         IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date above written.


                                        CAPSTONE PHARMACY SERVICES, INC.



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


                                        EXECUTIVE




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



                                        Number of Shares of Beverly Common
                                        Stock Beneficially Owned:

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

                                        Number of Shares of Beverly Common
                                        Stock Issuable under Outstanding 
                                        Options Owned:

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

                                        Number of Shares of Capstone Common
                                        Stock Beneficially Owned:
                                        
                                        ---------------------------------





                                       6
<PAGE>   96
                                                                   EXHIBIT 7.08
                                                           Provided Pursuant to 
                                           Section 7.08 of the Merger Agreement

                           NON-COMPETITION AGREEMENT

         This Non-competition Agreement (the "Agreement") by and between New
Beverly Holdings, Inc., a Delaware corporation ("NBHI") and Capstone Pharmacy
Services, Inc. ("Capstone"), dated as of __________, 1997. Unless the context
otherwise requires, capitalized terms not otherwise defined herein shall have
the respective meanings ascribed to such terms pursuant to the Merger Agreement
(as defined below) or the Distribution Agreement (as described below).

         WHEREAS, pursuant to an Agreement and Plan of Merger dated April 15,
1997 (the "Merger Agreement") between Beverly Enterprises, Inc. ("Beverly") and
Capstone, Beverly will merge with and into Capstone with Capstone as the
Surviving Corporation (the "Merger"); and

         WHEREAS, prior to the Merger Beverly will distribute the Remaining
Health Care Business to NBHI pursuant to an Agreement and Plan of Distribution
dated as of April 15, 1997 (the "Distribution Agreement"); and

         WHEREAS, in connection with the Merger, the Merger Agreement and the
Distribution Agreement NBHI has agreed to enter into a non-competition
agreement with Capstone;

         NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound (subject to shareholder approval), the parties
hereto hereby agree as follows:

         1.      NON-COMPETITION AGREEMENT. NBHI, on behalf of itself and all
NBHI Subsidiaries, agrees that none of NBHI or the NBHI Subsidiaries
(collectively, the "Bound Parties"), will, directly or indirectly, for a period
of five (5) years after the Closing, whether as an owner, partner, shareholder,
member, manager, consultant, agent or otherwise, wholly or partially own or
engage in the operation, management or conduct of any business or enterprise
that provides pharmaceutical products and services as currently provided in the
Institutional Pharmacy Business, as further described in Exhibit A hereto,
within a one hundred twenty (120) mile radius of any pharmacy included in the
Institutional Pharmacy Assets or operated by Capstone; provided, however, that
nothing in this Agreement shall be construed to restrict or impair any
activities of NBHI or any NBHI Subsidiaries as currently provided in connection
with the provision of health care services or products in acute, acute exempt
or rehabilitation hospitals, hospice or home health care settings or other
settings where long-term health care is not the primary service furnished; and
further provided that no Bound Party would be prohibited from acquiring and
owning any otherwise prohibited pharmacy dispensing services business as part
of the acquisition of a larger business if such pharmacy dispensing services
business does not constitute the principal component of the larger business and
the purchaser thereof agrees to offer to sell such pharmacy dispensing services
business to Capstone within a reasonable period of time after purchasing such
business, not to exceed six (6) months, pursuant to paragraph 2 hereof. For
purposes of this Agreement, "NBHI Subsidiary" shall
<PAGE>   97
mean any person or entity which on the date in question, directly or indirectly
is controlled by NBHI; and, for such purposes, NBHI shall be deemed to
"control" another entity if NBHI is the "beneficial owner" (as that term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) of greater than twenty-five percent (25%) of any class of voting
securities (or other voting interests) of a controlled entity which is a
publicly-traded entity, or fifty-one percent (51%) of any privately-held
entity, or NBHI possesses, directly or indirectly, the power to direct or cause
the direction of the management of policies of the controlled entity with
respect to the matters covered by the Non-Competition Agreement, whether
through ownership of stock, election of directors, by contract or otherwise.

         2.      APPRAISAL RIGHTS AND PURCHASE OPTION. (a) Capstone shall have
the right to require that the fair market value of any (or all) businesses
described in subsection 1 above which are acquired by NBHI or any NBHI
Subsidiary (each a "Permitted Acquisition Business") be appraised by an
appraisal firm of national standing, as selected by NBHI, and which does not
have any material business relationship with NBHI or any NBHI Subsidiary, with
the costs and expenses of such appraisal to be paid by Capstone in the event
that Capstone elects not to exercise its purchase option hereunder, and the
costs and expenses of such appraisal to be shared equally by Capstone and NBHI
in the event that Capstone exercises its purchase option hereunder.

                 (b)      For a period of thirty (30) days after the fair
market value of any such Permitted Acquisition Business has been so determined,
Capstone may elect by written notice to purchase such Permitted Acquisition
Business for cash at such fair market price by delivery of written notice
exercising such option. In the event Capstone exercises such election, Capstone
shall close such acquisition within sixty (60) days after its exercise of its
election, subject to reasonable extensions required for regulatory approvals
not to exceed a total of more than one hundred and eighty (180) days after the
determination of fair market value, as appraised. NBHI and the NBHI
Subsidiaries will make available to such appraiser and to Capstone, its
potential lender(s) and their respective professional advisors all information
reasonably requested by them with respect to any such Permitted Acquisition
Business, and will assign any representations, warranties or indemnities it may
have received in connection with such acquisition to the extent that such
representations, warranties or indemnities are assignable.

         3.      MODIFICATION. In the event that any court of competent
jurisdiction finds the restrictions set forth in the Non-Competition Agreement
unenforceable as applied to any act or condition in any specific instance, but
such act or condition would nonetheless be prohibited if the Non-Competition
Agreement were to impose a lesser time, geographic or scope-of-business
restriction, then, as applied to such act or condition of such Bound Party,
then the temporal, geographic and/or scope of business limitations contained in
the Non-Competition Agreement shall automatically be modified to restrict only
such acts and conditions as such court may determine to be the maximum,
enforceable under law; and the parties hereto agree that such restrictions
shall be





                                       2
<PAGE>   98
enforced as amended, except as limited by the application of legal principles
affecting the availability of specific performance, injunction and other
equitable remedies.

         4.      CHANGES. This Agreement cannot be changed or modified except
by another agreement that both parties sign.

         5.      HEADINGS. The article and paragraph headings contained herein
are for convenience of reference only and are not intended to define, limit, or
describe the scope of intent of any provision of this Agreement.

         6.      GOVERNING LAW. This Agreement shall be deemed to have been
made and shall be construed and interpreted in accordance with the laws of the
State of Delaware.

         7.      COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.





                                       3
<PAGE>   99
         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Non-Competition Agreement effective as of the day and year first above
written.

                                        Capstone:

                                        CAPSTONE PHARMACY SERVICE, INC.



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


                                        Beverly:

                                        BEVERLY ENTERPRISES, INC.


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


                                        NBHI:

                                        NEW BEVERLY HOLDINGS, INC.


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




                                       4
<PAGE>   100
                                   EXHIBIT A

         The Institutional Pharmacy Business provides institutional pharmacy
drugs and related products and services, infusion therapy and other healthcare
products (enteral and urological) to nursing facilities, acute care and
transitional care hospitals, home care providers, psychiatric facilities,
correctional facilities, assisted living centers, retirement homes and their
patients. It also includes consultant pharmacist services and mail order
pharmacy products and medical equipment.





                                       5

<PAGE>   1
                                                                 EXHIBIT 2.2



                       AGREEMENT AND PLAN OF DISTRIBUTION

                                  BY AND AMONG

                           BEVERLY ENTERPRISES, INC.

                           NEW BEVERLY HOLDINGS, INC.

                                      AND

                        CAPSTONE PHARMACY SERVICES, INC.

                                  DATED AS OF

                                 APRIL 15, 1997
<PAGE>   2
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                     <C>
ARTICLE I. DEFINITIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
         Section 1.1      General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
         Section 1.2      Incorporation of Merger Agreement Definitions . . . . . . . . . . . . . . . . . . . . . . . . 8
         Section 1.3      References; Interpretation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS  . . . . . . . . . . . . . . . . . . . . . . . . . . 8
         Section 2.1      Transfer of Assets and Liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
                 (a)      Certain Transactions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
                 (b)      Exchange of Stock with Beverly  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                 (c)      Charters; By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                 (d)      Directors; Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                 (e)      Certain Licenses and Permits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                 (f)      Transfer of Agreements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                 (g)      Services Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
                 (h)      Delivery of Shares to Transfer Agent  . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
                 (i)      Assumed Pharmacy Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
                 (j)      Other Transactions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
         Section 2.2      Certain Financial and Other Arrangements  . . . . . . . . . . . . . . . . . . . . . . . . .  11
                 (a)      Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
                 (b)      Operations in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 2.3      Assumption of Indebtedness; Payment or Provision for Certain Debts; 
                          Settlement of Expenses and Other Items. . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 2.4      Assumption and Satisfaction of Liabilities; Management Responsibility 
                          for Shared Liabilities; Obligations, Rights and Assets Relating to Shared Liabilities . . .  13
         Section 2.5      Resignations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 2.6      Further Assurances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 2.7      No Representations or Warranties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 2.8      Guarantees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 2.9      Witness Services  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 2.10     Certain Post-Distribution Transactions  . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 2.11     Directors and Officers Liability Insurance  . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 2.12     Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 2.13     Ancillary Agreements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 2.14     Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

ARTICLE III. INDEMNIFICATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 3.1      Indemnification by Beverly  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 3.2      Indemnification by NBHI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 3.3      Limitations on Indemnification Obligations  . . . . . . . . . . . . . . . . . . . . . . . .  18
</TABLE>





                                      -i-
<PAGE>   3
<TABLE>
<S>                                                                                                                    <C>
         Section 3.4      Procedures for Indemnification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
         Section 3.5      Indemnification Payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 3.6      Other Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 3.7      Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20

ARTICLE IV. ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.1      Provision of Corporate Records  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.2      Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
         Section 4.3      Reimbursement; Other Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
         Section 4.4      Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

ARTICLE V. INSURANCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.1      Policies and Rights Included Within Assets; Maintenance of Coverage . . . . . . . . . . . .  22
         Section 5.2      Post-Distribution Date Claims Against NBHI  . . . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.3      Administration; Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
                          (b)     Allocation of Insurance Proceeds  . . . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.4      Agreement for Waiver of Conflict and Shared Defense . . . . . . . . . . . . . . . . . . . .  23
         Section 5.5      Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

ARTICLE VI. DISPUTE RESOLUTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.1      Distribution Agreement Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.2      Arbitration in Accordance with American Arbitration Association Rules . . . . . . . . . . .  24
         Section 6.3      Final and Binding Awards  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.4      Costs of Arbitration  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.5      Settlement by Mutual Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25

ARTICLE VII. MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 7.1      Complete Agreement; Construction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 7.2      Counterparts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 7.3      Survival of Agreements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 7.4      Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 7.5      Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
         Section 7.6      Amendments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
         Section 7.7      Assignment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
         Section 7.8      Successors and Assigns  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.9      Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.10     Subsidiaries  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.11     Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.12     Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.13     Title and Headings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
</TABLE>





                                      -ii-
<PAGE>   4
<TABLE>
         <S>              <C>                                                                                          <C>
         Section 7.14     Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 7.15     Specific Performance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 7.16     Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 7.17     Severability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28

         Exhibit A -      Plan of Restructuring
</TABLE>





                                     -iii-
<PAGE>   5
                       AGREEMENT AND PLAN OF DISTRIBUTION

         THIS AGREEMENT AND PLAN OF DISTRIBUTION (the "Distribution
Agreement"), dated as of April 15, 1997 by and among Beverly Enterprises, Inc.,
a Delaware corporation (the "Company" or "Beverly"), New Beverly Holdings,
Inc., a Delaware corporation ("NBHI" ) and Capstone Pharmacy Services, Inc., a
Delaware corporation ("Capstone").

                                  WITNESSETH:

         WHEREAS, the Company and Capstone Pharmacy Services, Inc., a Delaware
corporation ("Capstone"), previously entered into an Agreement and Plan of
Merger, dated as of April 15, 1997 (the "Merger Agreement"), providing for the
merger (the "Merger") of the Company's Institutional Pharmacy Business with
Capstone;

         WHEREAS, prior to the Effective Time (as defined in the Merger
Agreement) of the Merger the Company intends to transfer its Remaining Health
Care Business (as hereinafter defined) to NBHI in exchange for the issuance of
shares of NBHI Common Stock;

         WHEREAS, the Company's Board of Directors, subject to the approval of
the Company's stockholders, expects to complete the Distribution (as
hereinafter defined) immediately prior to the Effective Time of the Merger; and

         WHEREAS, the purpose of the Distribution is to make possible the
Merger by divesting the Company of the Remaining Health Care Business, with
which Capstone is unwilling to merge, and this Distribution Agreement sets
forth the various agreements between Beverly and NBHI relating to the
separation of the Institutional Pharmacy Business from the Remaining Health
Care Business.

         NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound (subject to shareholder approval), the parties
hereto hereby agree as follows:

                             ARTICLE I. DEFINITIONS

         SECTION 1.1      GENERAL. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

         "Accrued Interest Cost" shall mean, with respect to the Assumed
Pharmacy Indebtedness, an amount equal to the Assumed Pharmacy Indebtedness
multiplied by nine per cent (9%) per annum for the period between the date
hereof and the Distribution Date.





                                       1
<PAGE>   6
         "Action" shall mean any action, suit, claim, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any arbitration
tribunal.

         "Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.

         "Ancillary Agreements" shall mean, collectively, all of the written
agreements, instruments, understandings, assignments or other arrangements
(other than this Distribution Agreement and the Merger Agreement) entered or to
be entered into in connection with the transactions contemplated hereby,
including, without limitation, the Transfer and Assumption Instruments, the
Employee Benefit Matters Agreement, the Tax Allocation Agreement, the Interim
Services Agreement and the Non-Competition Agreement, all in the respective
forms attached hereto as exhibits, and as any of such agreements may be
subsequently modified or amended, together with any additional or supplemental
agreement entered into by the parties in connection with or to facilitate the
Distribution; provided, however, that in no event shall any agreement
constitute an Ancillary Agreement or be further modified or amended unless
consented to by each of Beverly, NBHI and Capstone.

         "Assignee" shall have the meaning as defined in Section 2.1(f)(ii).

         "Assumed Pharmacy Indebtedness" shall mean the principal sum of
$275,000,000, which amount is included as part of the pro forma Institutional
Pharmacy Liabilities in the Institutional Pharmacy Business Financial
Statements set forth in the Beverly Disclosure Statement, and which amount is
to be paid to Beverly by one or more of the Pharmacy Subsidiaries on or prior
to the Distribution Date.

         "Beverly Common Stock" shall mean the common stock, $.10 par value, of
Beverly.

         "Beverly Disclosure Statement" shall mean the Disclosure Statement
delivered by Beverly to Capstone prior to or contemporaneously with Beverly's
execution and delivery of the Merger Agreement.

         "Beverly Indemnitees" shall mean Beverly (and after the Effective Time
of the Merger, Capstone as successor to Beverly), each Pharmacy Subsidiary, the
directors and officers of Beverly and the Pharmacy Subsidiaries and each of the
heirs, executors, successors and assigns of any of the foregoing.

         "Beverly Policy" or "Beverly Policies" shall mean any one or more
Policies which are or at any time were maintained by or on behalf of or for the
benefit or protection of Beverly or NBHI or any of their respective
predecessors or Subsidiaries which relate to any Shared Liability,





                                       2
<PAGE>   7
the Remaining Health Care Business or the Institutional Pharmacy Business, or
current or past directors, officers, employees or agents of any of the
foregoing businesses.

         "Capstone Common Stock" shall mean the common stock, $.01 par value,
of Capstone.

         "Capstone Liabilities" shall mean Liabilities of Capstone, if any,
under the Merger Agreement and this Agreement.

         "Claims Administration" shall mean the processing of claims made under
the Beverly Policies, including, without limitation, the reporting of claims to
the insurance carriers, as well as the management and defense of claims and
providing for appropriate releases upon settlement of claims.

         "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury regulations promulgated thereunder, including any successor
legislation.

         "Commission" shall mean the Securities and Exchange Commission.

         "D&O Insurance Policies" shall have the meaning as defined in Section
2.11.

         "Distribution" shall mean the distribution on the Distribution Date to
holders of record of shares of Beverly Common Stock as of the Distribution
Record Date of the NBHI Common Stock owned by Beverly on the basis of one whole
share of NBHI Common Stock for each outstanding whole share of Beverly Common
Stock.

         "Distribution Agreement Dispute" shall have the meaning as defined in
Article VI.

         "Distribution Date" shall mean such date as may hereafter be
determined by Beverly's Board of Directors as the date on which the
Distribution shall be effected.

         "Distribution Record Date" shall mean such date as may hereafter be
determined by Beverly's Board of Directors as the record date for determining
the stockholders of Beverly entitled to receive the Distribution.

         "Employee Benefit Matters Agreement" shall mean that certain Employee
Benefit Matters Agreement to be dated as of the Distribution Date among
Beverly, NBHI and Capstone, setting forth the manner in which various employee
benefit plans and entitlements will be treated in connection with the
Distribution.

         "Indemnifiable Losses" shall mean any and all losses, Liabilities,
claims, damages, penalties, fines, demands, awards and judgments, including
reasonable costs and expenses (including, without limitation, attorneys' fees
and any and all out-of-pocket expenses) whatsoever





                                       3
<PAGE>   8
reasonably incurred in investigating, preparing for or defending against any
Actions or potential Actions involving an Indemnifiable Loss, incurred by an
Indemnitee.

         "Indemnifying Party" shall have the meaning as defined in Section 3.3.

         "Indemnitee" shall have the meaning as defined in Section 3.3.

         "Institutional Pharmacy Assets" shall mean, collectively, all the
rights and assets of Beverly and its Subsidiaries that are used primarily in
the conduct of the Institutional Pharmacy Business, including, without
limitation, (i) the assets included on the balance sheet dated as of December
31, 1996, forming part of the Institutional Pharmacy Business Financial
Statements, prepared on a pro forma basis to give effect to the Distribution
and included in the Beverly Disclosure Statement attached to the Merger
Agreement, and not disposed of in the ordinary course of business prior to the
Distribution Date, (ii) any assets acquired by Beverly or any of its
Subsidiaries that are used primarily in the conduct of the Institutional
Pharmacy Business from December 31, 1996 to the Distribution Date and not
disposed of in the ordinary course of business, (iii) all the outstanding
capital stock or other interests of Beverly in the Subsidiaries listed on
Schedule 1.1(b) and (iv) rights arising pursuant to the Beverly Policies to the
extent set forth in Article V hereof. Notwithstanding the foregoing, the
Institutional Pharmacy Assets shall not include any assets retained by or to be
transferred to NBHI or any of the NBHI Subsidiaries, or intended to be so
retained or transferred, as the case may be, pursuant to the terms of the
Merger Agreement, this Distribution Agreement or any Ancillary Agreement.

         "Institutional Pharmacy Business" shall mean the business of providing
pharmaceutical products and services by Beverly through its Pharmacy
Subsidiaries (including but not limited to Medicare Part B services and
supplies), primarily to health care institutions, including but not limited to
certain sub-acute and long-term health care facilities forming part of the
Remaining Health Care Business conducted by Beverly.

         "Institutional Pharmacy Liabilities" shall mean, collectively: (i) the
Liabilities included on the balance sheet dated as of December 31, 1996,
forming part of the Institutional Pharmacy Business Financial Statements,
prepared on a pro forma basis to give effect to the Distribution and included
in the Beverly Disclosure Statement attached to the Merger Agreement, and any
Liabilities of the same kind or nature incurred by Beverly or any of its
Subsidiaries relating primarily to or arising primarily in connection with the
conduct of the Institutional Pharmacy Business from December 31, 1996 to the
Distribution Date, other than indebtedness for borrowed money (except as may
otherwise be permitted elsewhere herein or in the Merger Agreement to be shown
as an Institutional Pharmacy Liability); (ii) all the Liabilities of Beverly
and the Pharmacy Subsidiaries, if any, under this Distribution Agreement and
any of the Ancillary Agreements, other than as set forth in Section 3.2(c),
(iii) all the Liabilities of Beverly or its Subsidiaries (whenever arising,
whether prior to, at or following the Distribution Date) to the extent the
Liabilities arise out of or in connection with or otherwise relate primarily to
(a) the management or conduct before or after the Distribution Date of the
Institutional Pharmacy Business or (b) any





                                       4
<PAGE>   9
properties owned, leased, operated or otherwise used primarily in the conduct
of the Institutional Pharmacy Business at any time; (iv) the Assumed Pharmacy
Indebtedness, together with any other indebtedness outstanding at the
Distribution Date that is described on Schedule 2.3; (v) the Pharmacy
Employment, Compensation and Benefit Obligations (hereinafter defined) (the
Liabilities listed in clauses (i) through (v) above are collectively referred
to as the "True Beverly Liabilities") and (vi) one-half ( 1/2) of the amount of
all Shared Liabilities unless otherwise allocated in this Distribution
Agreement.

         "Insurance Administration" shall mean, with respect to each Beverly
Policy, the accounting for Insurance Proceeds, premiums, defense costs,
indemnity payments, deductibles and retentions, as appropriate, under the terms
and conditions of each of the Beverly Policies; and the report to excess
insurance carriers of any losses or claims which may cause the per occurrence,
per claim or aggregate limits of any Beverly Policy to be exceeded, and the
distribution of Insurance Proceeds as contemplated by this Distribution
Agreement.

         "Insurance Proceeds" shall mean those monies (i) received by an
insured from an insurance carrier or (ii) paid by an insurance carrier on
behalf of an insured.

         "Insured Claims" shall mean those Liabilities that, individually or in
the aggregate, are covered within the terms and conditions of any of the
Beverly Policies, whether or not subject to deductibles, co-insurance,
uncollectability or premium adjustments, but only to the extent that such
Liabilities are within applicable Beverly Policy limits, including aggregates.

         "Liabilities" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, order or consent decree of any court,
any governmental or other regulatory or administrative agency or commission or
any award of any arbitration tribunal, and those arising under any contract,
guarantee, commitment or undertaking.

         " NBHI Common Stock" shall mean the common stock, $.10 par value, of
NBHI.

         " NBHI Indemnitees" shall mean NBHI, each NBHI Subsidiary, the
directors and officers of NBHI and the NBHI Subsidiaries and each of the heirs,
executors, successors and assigns of any of the foregoing.

         " NBHI Subsidiaries" shall mean all of the subsidiaries of Beverly
other than NBHI and the Pharmacy Subsidiaries, including, without limitation,
those Subsidiaries listed on Schedule 1.1(a) hereto.

         "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an association, a company, an unincorporated
organization, a government or any department, political subdivision or agency
thereof.





                                       5
<PAGE>   10
         "Pharmacy Employment, Compensation and Benefit Obligations" shall mean
all employment, compensation and benefit agreements, arrangement and plans
relating to employees or former employees of the Institutional Pharmacy
Business, including without limitation all employment contracts, change of
control agreements, severance and indemnity agreements or arrangements with
such employees or former employees; all employee benefit plans (or portions of
plans) maintained for the benefit of such employees or former employees; and
all grants and awards (including performance awards) under any Stock Incentive,
Long Term Incentive and Stock Option Plans relating to such employees or former
employees.

         "Pharmacy Subsidiaries" shall mean those subsidiaries of Beverly
listed on Schedule 1.1(b) hereto, together with any entities acquired by
Beverly or any of the Pharmacy Subsidiaries as part of Beverly's growth plans
with respect to the Institutional Pharmacy Business between the date of this
Agreement and the Distribution Date.

         "Policy" or "Policies" shall mean any or all insurance policies and
insurance contracts of any kind (other than life and benefits policies or
contracts), including, without limitation, primary, excess and umbrella
policies, comprehensive general liability, fiduciary liability, automobile,
aircraft, property and casualty, environmental, workers' compensation and
employee dishonesty insurance policies and bonds and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.

         "Prospectus/Joint Proxy Statement" shall mean the Prospectus/Joint
Proxy Statement contained in the Registration Statement on Form S-4 relating to
the shares of Capstone Common Stock to be issued in connection with the Merger
and sent to the holders of shares of Beverly Common Stock and Capstone Common
Stock in connection with obtaining Beverly and Capstone stockholder approval
of, among other things, the Distribution and the Merger, including any
amendment or supplement thereto.

         "Records" shall have the meaning as defined in Section 4.1(a).

         "Remaining Health Care Assets" shall mean, collectively, all the
rights and assets of Beverly and its Subsidiaries immediately prior to the
Distribution Date that are not Institutional Pharmacy Assets, including,
without limitation, (i) all outstanding capital stock or other interests of
Beverly in the Beverly Subsidiaries listed on Schedule 1.1(a), (ii) the right
to the name "Beverly" and the other trademarks, trade names, logos, symbols and
similar marks listed in Schedule 1.1(d) and (iii) rights arising pursuant to
the Beverly Policies to the extent set forth in Article V hereof.
Notwithstanding the foregoing, the Remaining Health Care Assets shall not
include any assets to be transferred to or retained by Beverly or any of the
Pharmacy Subsidiaries pursuant to the terms of any Ancillary Agreement.

         "Remaining Health Care Business" shall mean the long-term acute care,
hospice, sub-acute, exempt hospital and skilled nursing facilities,
rehabilitation therapy and consulting services, home health care, assisted
living, physician practice management and other health care





                                       6
<PAGE>   11
and related services and businesses, other than the Institutional Pharmacy
Business, conducted by Beverly, NBHI and their respective Subsidiaries and
successors.

         "Remaining Health Care Liabilities" shall mean, collectively, (i) all
of the Liabilities of Beverly and its Subsidiaries immediately prior to the
Distribution on the Distribution Date other than the Institutional Pharmacy
Liabilities, (ii) all the Liabilities of NBHI and the NBHI Subsidiaries, if
any, under this Distribution Agreement and any of the Ancillary Agreements,
(iii) Liabilities of Beverly, if any, under the Merger Agreement (the
Liabilities listed in clauses (i) through (iii) above being collectively
referred to as the "True NBHI Liabilities") and (iv) one-half ( 1/2) of the
amount of all Shared Liabilities unless otherwise allocated in this
Distribution Agreement. .

         "Services Agreement" shall mean the Interim Services Agreement to be
dated as of the Distribution Date by and between NBHI, Beverly and Capstone,
pursuant to which NBHI shall provide on an interim basis, during a reasonable
transition period following the Distribution, for the benefit of Capstone as
the successor to Beverly, such services ( at fair market value) as may be
requested from time to time by Capstone as were provided on a centralized basis
by Beverly for the benefit of Beverly and its Subsidiaries prior to the
Distribution.

         "Settling Party" shall have the meaning as defined in Section 2.4(b).

         "Shared Liability" means any Liability of the parties hereto or their
respective Subsidiaries (whether arising prior to, on or following the
Distribution Date) (i) which is not a True Beverly Liability, True NBHI
Liability or Capstone Liability or (ii) the responsibility for which is
separately allocated between Beverly and NBHI in this Distribution Agreement or
the Ancillary Agreements. Shared Liability includes, without limitation, the
Shared Liabilities listed on Schedule 1.1(c) hereto.

         "Solicitation" shall have the meaning set forth in Section 2.3(b).

         "Subsidiary" shall mean any Person of which another Person (i) owns,
directly or indirectly, ownership interests sufficient to elect a majority of
the Board of Directors (or persons performing similar functions (irrespective
of whether at the time any other class or classes of ownership interests of
such Person shall or might have such voting power upon the occurrence of any
contingency)) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).

         "Tax" or "Taxes" shall mean all federal, state, local and foreign
taxes, duties, levies, charges and assessments of any nature, including social
security payments and deductibles relating to wages, salaries and benefits and
payments to subcontractors (to the extent required under applicable Tax law),
and also including all interest, penalties and additions imposed with respect
to such amounts.





                                       7
<PAGE>   12
         "Tax Allocation Agreement" shall mean the Tax Allocation and
Indemnification Agreement to be dated as of the Distribution Date among Beverly
and NBHI and the other Subsidiaries of Beverly named therein.

         "Third Party Claim" shall have the meaning as set forth in Section
3.4.

         "Time of Distribution" shall mean the time on the Distribution Date as
of which the Distribution is effective, and unless otherwise agreed between the
parties, shall be immediately prior to the Effective Time.

         "Transfer Agent" shall mean The Bank of New York, and its successors
and assigns.

         "Transfer and Assumption Instruments" shall mean, collectively, the
various agreements, instruments and other documents to be entered into among or
between any of Beverly, NBHI, the Pharmacy Subsidiaries and the NBHI
Subsidiaries and approved by Capstone (which approval shall not be unreasonably
withheld) to effect the transfer of assets and the assumption of Liabilities
relating to the Remaining Health Care Business and the Institutional Pharmacy
Business in the manner contemplated by this Distribution Agreement, including,
without limitation, real estate transfer documents and leases and all other
instruments, documents and agreements delivered in accordance with Section 2.6
hereof.

         "True Beverly Liabilities" shall have the meaning as set forth under
"Institutional Pharmacy Liabilities."

         "True NBHI Liabilities" shall have the meaning as set forth under
"Remaining Health Care Liabilities."

         SECTION 1.2      INCORPORATION OF MERGER AGREEMENT DEFINITIONS. Except
where otherwise defined herein, capitalized terms used herein shall have the
same definitions as such terms have in the Merger Agreement.

         SECTION 1.3      REFERENCES; INTERPRETATION. References to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to one of the
Schedules or Exhibits attached to this Distribution Agreement, and references
to a "Section" are, unless otherwise specified, to one of the Sections of this
Distribution Agreement.

       ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS

         SECTION 2.1      TRANSFER OF ASSETS AND LIABILITIES.

         (a)     Certain Transactions. On or prior to the Distribution Date
Beverly shall, on behalf of itself and its Subsidiaries, transfer to NBHI all
of Beverly's right, title and interest in the Remaining Health Care Assets in
the manner contemplated by the internal restructuring plan





                                       8
<PAGE>   13
attached hereto as Exhibit A and incorporated herein by reference (the
"Restructuring") and, as between NBHI and Beverly, NBHI or its Subsidiaries
shall assume and be responsible for the Remaining Health Care Liabilities.

         (b)     Exchange of Stock with Beverly. On or prior to the
Distribution Date NBHI shall issue to Beverly, in exchange for the contribution
to NBHI of the Remaining Health Care Assets, such number of shares of NBHI
Common Stock as shall be required to effect the Distribution, as certified by
the Transfer Agent. In connection therewith Beverly shall deliver to NBHI for
cancellation the share certificate currently held by Beverly representing
shares of NBHI Common Stock.

         (c)     Charters; By-laws. On or prior to the date of filing of the
NBHI Registration Document with the Commission, all necessary actions shall
have been taken to provide for the adoption of the form of Certificate of
Incorporation and Bylaws filed or to be filed by NBHI with the Commission.

         (d)     Directors; Officers. On or prior to the Distribution Date,
Beverly, as the sole stockholder of NBHI, (i) shall have taken all necessary
action by written consent to elect to the Board of Directors of NBHI, the
individuals to be identified in the Prospectus/Joint Proxy Statement as
directors of NBHI, effective upon the Distribution, and (ii) shall have caused
the directors of NBHI to elect as officers of NBHI the individuals to be
identified in the Prospectus/Joint Proxy Statement as the officers of NBHI,
effective upon the Distribution.

         (e)     Certain Licenses and Permits. On or prior to the Distribution
Date or as soon as reasonably practicable thereafter, all transferable
licenses, permits and authorizations issued by governmental or regulatory
entities which relate to the Remaining Health Care Business but which are held
in the name of Beverly or any of the Pharmacy Subsidiaries, shall be duly and
validly transferred by Beverly (or such Pharmacy Subsidiaries) to NBHI or such
NBHI Subsidiary as NBHI may designate.

         (f)     Transfer of Agreements.

                 (i)      On or prior to the Distribution Date, subject to the
         limitations set forth in this Section 2.1(f), Beverly will, and it
         will cause the Pharmacy Subsidiaries to, assign, transfer and convey
         to NBHI or such NBHI Subsidiary as NBHI may designate, all of
         Beverly's or such Pharmacy Subsidiary's respective right, title and
         interest in and to any and all agreements that do not relate primarily
         to the Institutional Pharmacy Business, to the extent such agreements
         were not previously so transferred in connection with the transactions
         contemplated by Sections 2.1(a) and 2.1(b)hereof.

                 (ii)     The assignee of any agreement assigned in whole or in
         part hereunder (an "Assignee") shall assume and agree to pay, perform,
         and fully discharge all obligations of





                                       9
<PAGE>   14
         the assignor under such agreement and shall indemnify the assignor
         against any and all liabilities in connection therewith.

                 (iii)    Notwithstanding anything in this Distribution
         Agreement to the contrary, this Distribution Agreement shall not
         constitute an agreement to assign any agreement, in whole or in part,
         or any rights thereunder if the agreement to assign or any attempted
         assignment, without the consent of a third party, would constitute a
         breach thereof or in any way adversely affect the rights of the
         Assignee thereof; provided, however, that the provisions of Section
         2.6 shall be applicable thereto.

         (g)     Services Agreement. On or prior to the Distribution Date,
Beverly and NBHI will execute and deliver the Services Agreement setting forth
the terms upon which NBHI shall, subsequent to the Distribution Date, provide
such centralized office and staff support services to Beverly (and Capstone as
the successor to Beverly) as may be determined by the parties to be appropriate
and as may be requested by Capstone from time to time during the transition
after the Distribution Date until such time (not to exceed the term established
in such agreement) as Capstone, as the successor to Beverly, shall no longer
require such services.

         (h)     Delivery of Shares to Transfer Agent. Beverly shall deliver to
the Transfer Agent on or prior to the Distribution Date the share certificates
representing the shares of NBHI Common Stock issued to Beverly by NBHI pursuant
to Section 2.1(b), and shall instruct the Transfer Agent to distribute, on or
as soon as practicable following the Distribution Date, such NBHI Common Stock
to holders of record of shares of Beverly Common Stock on the Distribution
Record Date as further contemplated by the Prospectus/Joint Proxy Statement and
herein. NBHI shall provide all share certificates that the Transfer Agent shall
require in order to effect the Distribution.

         (i)     Assumed Pharmacy Indebtedness. On or prior to the Distribution
Date, Beverly and the Pharmacy Subsidiaries shall cause the Assumed Pharmacy
Indebtedness to be separately incurred by the Pharmacy Subsidiaries, pursuant
to agreements and instruments approved by Beverly, the appropriate Pharmacy
Subsidiaries, NBHI, Capstone and the appropriate lenders, and the Pharmacy
Subsidiaries shall borrow sufficient funds from third party lenders to pay to
Beverly in full, prior to the Distribution, an amount equal to the Assumed
Pharmacy Indebtedness and the Accrued Interest Cost.

         (j)     Other Transactions.

                 (i)      On or prior to the Distribution Date, Beverly will,
         and it will cause the Pharmacy Subsidiaries to, assign, transfer and
         convey to NBHI (or such NBHI Subsidiary as NBHI may direct) all of
         Beverly's right, title and interest in and to (a) all items of
         Beverly's intellectual property except for those items listed on
         Schedule 2.1(j), which shall be retained by Beverly and (b) all real
         estate leases, utility accounts, trade organization





                                       10
<PAGE>   15
         memberships, vendor service contracts, warranty contracts and items of
         a similar nature except for those items listed on Schedule 2.1(j),
         which shall be retained by Beverly.

                 (ii)     On or prior to the Distribution Date, Beverly and the
         Pharmacy Subsidiaries shall take or cause to be taken such action as
         shall be necessary to assign and transfer all pending litigation,
         arbitration, mediation and matters of a similar nature ("Pending
         Litigation Matters") to NBHI or such NBHI Subsidiary as NBHI may
         designate, including, without limitation, instructing counsel of
         record to enter appropriate motions or pleadings to accomplish the
         foregoing, except for such Pending Litigation Matters which involve
         the Institutional Pharmacy Business, which shall be retained by
         Beverly. NBHI and Beverly will each indemnify the other against any
         and all Liabilities incurred in connection with any of the Pending
         Litigation Matters for which it is responsible pursuant to this
         Section 2(j)(ii) following the Time of Distribution, and each of
         Beverly and NBHI shall, subsequent to the Distribution Date, be solely
         responsible for the prosecution, defense, settlement or other conduct
         of Pending Litigation Matters as are to be retained by each of them
         pursuant to this Section 2 (j)(ii).

         SECTION 2.2      CERTAIN FINANCIAL AND OTHER ARRANGEMENTS.

         (a)     Intercompany Accounts. At the Time of Distribution, all
intercompany receivables, payables and loans (other than receivables, payables,
loans, debits and credits otherwise specifically provided for in any of the
Ancillary Agreements or hereunder, including but not limited to the Assumed
Pharmacy Indebtedness and related Accrued Interest Cost and the other payments
to be made pursuant to Section 2.3(c)), including, without limitation, in
respect of any cash balances, any cash balances representing deposited checks
or drafts for which only a provisional credit has been allowed or any cash held
in any centralized cash management system, between Beverly and any of its
Subsidiaries (other than the Pharmacy Subsidiaries), on the one hand, and the
Pharmacy Subsidiaries, on the other hand, shall be netted out, in each case in
such manner and amount as may be agreed in writing by duly authorized
representatives of Beverly, Capstone and NBHI; and (i) the resulting net
balance due, if any, from the Pharmacy Subsidiaries to Beverly and any of its
Subsidiaries (other than the Pharmacy Subsidiaries) shall be contributed to the
appropriate Pharmacy Subsidiaries as additional capital; and (ii) the resulting
net balance due, if any, from Beverly and any of its Subsidiaries (other than
the Pharmacy Subsidiaries) shall be distributed to Beverly as a dividend.

         (b)     Operations in Ordinary Course. Each of Beverly and NBHI
covenants and agrees that, except as otherwise provided in any the Merger
Agreement, this Distribution Agreement or any Ancillary Agreement, during the
period from the date of this Distribution Agreement through the Distribution
Date, it will, and will cause any entity that is a Subsidiary of such party at
any time during such period to, conduct its business in a manner substantially
consistent with current and past operating practices and in the ordinary
course, including, without limitation, with respect to the payment and
administration of accounts payable and the collection and administration of
accounts receivable, the purchase of capital assets and equipment, the
management of inventories,





                                       11
<PAGE>   16
cash management practices, the allocation of interest, corporate overhead,
costs of legal, insurance and other centralized functions and shall, at all
times prior to the Distribution Date, conduct its business in a manner
consistent with the provisions of Section 5.01 of the Merger Agreement.

         SECTION 2.3      ASSUMPTION OF INDEBTEDNESS; PAYMENT OR PROVISION FOR
                          CERTAIN DEBTS; SETTLEMENT OF EXPENSES AND OTHER ITEMS.

         (a)     Beverly and NBHI shall take such action as shall be necessary
or appropriate to cause NBHI or the appropriate NBHI Subsidiary to assume all
of the items of Beverly's consolidated indebtedness other than (i) the Assumed
Pharmacy Indebtedness and related Accrued Interest Cost, (ii) the Closing Debt
(as defined in Section 2.3(d), (iii) other permitted indebtedness constituting
Institutional Pharmacy Liabilities and (iv) those capital leases and other
items, if any, listed on Schedule 2.3(a).

         (b)     Prior to the Time of Distribution, Beverly, and after the Time
of Distribution, NBHI, shall pay or cause to be paid, or otherwise provide for
by bond, indemnification or other appropriate assurances, in each case,
satisfactory to Capstone, to the extent Beverly or NBHI is unable to effect
releases of Beverly and the Pharmacy Subsidiaries from liability thereunder,
all Beverly or NBHI indebtedness or other non-contingent liabilities as to
which Beverly or any of the Pharmacy Subsidiaries is a direct obligor, other
than the Assumed Pharmacy Indebtedness and Institutional Pharmacy Liabilities.

         (c)     In connection with accomplishing the various transactions
contemplated by the Merger Agreement, this Distribution Agreement and the
Ancillary Agreements, NBHI shall provide an accounting to Capstone of the
settlement of the intercompany accounts described in Section 2.2(a) as soon as
reasonably practicable following the Effective Time of the Merger. To the
extent that the aggregate cash collected by Beverly from the Pharmacy
Subsidiaries during the period from the date of this Agreement to the
Distribution Date, is greater than the sum of (i) the Assumed Pharmacy
Indebtedness and the related Accrued Interest Cost, (ii) Beverly's normal
management fees collected from the Pharmacy Subsidiaries during such period in
amounts consistent with past practices in the ordinary course of business, and
(iii) the Closing Debt pursuant to the provisions of Section 2.3(d) hereof
(collectively, the "Beverly Interim Period Cash Entitlements"), then NBHI shall
reimburse Capstone for the amount in excess of the Beverly Interim Period Cash
Entitlements. To the extent that the amount of Beverly Interim Period Cash
Entitlements is in excess of the aggregate cash collected by Beverly from the
Pharmacy Subsidiaries during the period from the date of this Agreement to the
Distribution Date, Capstone shall reimburse NBHI for the amount of such
difference.

         (d)     Prior to or contemporaneously with the accounting described in
Section 2.3(c), representatives of Capstone and NBHI shall determine jointly
the amount of Beverly's indebtedness incurred in connection with the
acquisition of Institutional Pharmacy Businesses approved by Capstone during
the period commencing on the date of this Agreement and ending at the
Distribution Date, which amount shall be in addition to the Assumed Pharmacy
Indebtedness





                                       12
<PAGE>   17
(such foregoing amounts exclusive of the Assumed Pharmacy Indebtedness are
referred to collectively as "Closing Debt").  NBHI shall be reimbursed for the
Closing Debt pursuant and subject to the provisions of Section 2.3(c).

         (e)     Settlement of amounts payable between Capstone and NBHI
pursuant to Section 2.3(c) shall be made within one business day after the
parties shall have approved the net amount to be paid, by wire transfer of
immediately available funds to an account designated by the person entitled to
receive such payment.

         SECTION 2.4      ASSUMPTION AND SATISFACTION OF LIABILITIES;
                          MANAGEMENT RESPONSIBILITY FOR SHARED LIABILITIES; 
                          OBLIGATIONS, RIGHTS AND ASSETS RELATING TO SHARED 
                          LIABILITIES.

         (a)     Except as otherwise specifically set forth in any Ancillary
Agreement, at all times from and after the Time of Distribution, (i) Beverly
shall, and shall cause the Pharmacy Subsidiaries and any and all successors and
assigns to assume, pay, perform and discharge all Institutional Pharmacy
Liabilities as and when due, (ii) Capstone shall, and shall cause any and all
successors and assigns to assume, pay, perform and discharge all Capstone
Liabilities as and when due, and (ii) NBHI shall, and shall cause the NBHI
Subsidiaries and any and all successors and assigns to assume, pay, perform and
discharge all Remaining Health Care Liabilities as and when due.

         (b)     NBHI and Beverly (and Capstone as successor to Beverly) shall
each direct its own defense of any Shared Liability at its own expense;
provided, however, that (i) each party shall provide the other with copies of
all pleading, motions, items of correspondence and other documentation
pertaining to any Shared Liability contemporaneously with the first release of
any such material and (ii) no party hereto (or its successor) will admit any
liability with respect to, or settle, compromise or discharge, any Shared
Liability without the other party's prior written consent (which consent shall
not be unreasonably withheld) except as hereinafter provided. Any party seeking
to settle, compromise or discharge a Shared Liability (a "Settling Party")
shall have the right to settle, compromise or discharge a Shared Liability
without the other party's consent if the Settling Party releases the
non-settling party from any obligation in respect of the Settling Party's
portion of such Shared Liability and indemnifies the non-settling party against
any and all liabilities in connection therewith and such settlement, compromise
or discharge would not otherwise adversely affect the non-settling party.

         (c)     Upon the compromise, settlement or other resolution of any
Shared Liability, except as otherwise provided in the last sentence of clause
(b) of this Section 2.4, NBHI and Beverly (and Capstone as the successor to
Beverly) shall share in any obligation or liability arising as a result thereof
in the same proportion in which the Shared Liability is shared. The parties
hereto shall share in any rights and assets (including, without limitation,
recoveries, claims, rights of subrogation and proceeds of asset sales) that
relate to Shared Liabilities in the same proportion in which the related Shared
Liability is shared.





                                       13
<PAGE>   18
         SECTION 2.5      RESIGNATIONS. Beverly shall cause all its officers
who shall not continue as employees of NBHI subsequent to the Distribution Date
to resign, effective as of the Distribution Date, from all positions as
directors or officers of NBHI or as officers or directors of any NBHI
Subsidiary in which they serve. NBHI shall cause all its officers who shall not
continue as employees of Beverly subsequent to the Distribution Date to resign,
effective as of the Distribution Date, from all positions as directors or
officers of Beverly or as officers or directors of any Pharmacy Subsidiary in
which they serve.

         SECTION 2.6      FURTHER ASSURANCES.

         (a)     In case at any time after the Distribution Date any further
action is reasonably necessary or desirable to carry out the purposes of this
Distribution Agreement and the Ancillary Agreements, the proper officers of
each party to this Distribution Agreement shall take, or cause the proper
officers of their respective Subsidiaries to take, all such necessary action.
Without limiting the foregoing, Capstone, Beverly and NBHI shall, and shall
cause their respective Subsidiaries to, use their commercially reasonable
efforts to obtain all required consents and approvals of third parties, to
enter into all amendatory agreements and to make all filings and applications
that may be required for the consummation of the transactions contemplated by
this Distribution Agreement, the Merger Agreement and the Ancillary Agreements,
including, without limitation, all applicable governmental and regulatory
filings.

         (b)     In the event that subsequent to the Distribution Date, Beverly
(or Capstone as successor to Beverly) or any Pharmacy Subsidiaries shall either
(i) receive written notice from NBHI that certain assets or Liabilities of
Beverly or any Pharmacy Subsidiaries which properly constitute Remaining Health
Care Assets or Remaining Health Care Liabilities were not transferred to NBHI
on or prior to the Distribution Date or (ii) determine that certain assets or
Liabilities of Beverly or any Pharmacy Subsidiaries which properly constitute
Remaining Health Care Assets or Remaining Health Care Liabilities were not
transferred to NBHI on or prior to the Distribution Date, then as promptly as
practical thereafter, Beverly shall, and shall cause the Pharmacy Subsidiaries
to, take all steps reasonably necessary to (A) transfer and deliver any and all
of such assets to NBHI without the payment by NBHI of any consideration
therefor or (B) assign and transfer any and all such Liabilities to NBHI which
shall assume and discharge the same without payment to or by Beverly of any
consideration in respect thereof. In the event that, subsequent to the
Distribution Date, NBHI or any NBHI Subsidiaries shall either (i) receive
written notice from Beverly or any of the Pharmacy Subsidiaries that certain
assets or Liabilities were transferred to NBHI which properly constitute
Institutional Pharmacy Assets or Institutional Pharmacy Liabilities or (ii)
determine that certain assets or Liabilities were transferred to NBHI which
properly constitute Institutional Pharmacy Assets or Institutional Pharmacy
Liabilities were transferred to NBHI, then as promptly as practicable
thereafter, NBHI shall, and shall cause the NBHI Subsidiaries to, take all
steps reasonably necessary to (A) transfer and deliver any and all such assets
to Beverly or the Pharmacy Subsidiaries without the payment by Beverly of any
consideration therefor or (B) assign and transfer any and all such liabilities
to Beverly which shall





                                       14
<PAGE>   19
assume and discharge the same without payment to or by NBHI of any
consideration in respect thereof.

         (c)     Nothing in this Distribution Agreement shall be deemed to
require the transfer of any assets or the assumption of any Liabilities which
by their terms or operation of law cannot be transferred; provided, however,
that the parties hereto and their respective Subsidiaries shall cooperate to
seek to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities contemplated to be transferred pursuant to this Article
II. In the event that any such transfer of assets or Liabilities has not been
consummated as of the Distribution Date, from and after the Distribution Date
the party retaining such asset shall hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto, with the party retaining such asset to be promptly reimbursed all
reasonable expenses incurred in holding such asset) or retain such Liability
for the account of the party by whom such Liability is to be assumed pursuant
hereto, as the case may be (at the expense of the party by which such Liability
is to be assessed, with the party retaining such Liability to be promptly
reimbursed all reasonable expenses incurred in retaining such Liability), and
take such other action as may be reasonably requested by the party to whom such
asset is to be transferred, or by whom such Liability is to be assumed, as the
case may be, in order to place such party, insofar as is reasonably possible,
in the same position as would have existed had such asset or Liability been
transferred as contemplated hereby. As and when any such asset or Liability
becomes transferable, such transfer shall be effected forthwith. As of the
Distribution Date, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all of the assets held by it, together with
all rights, powers and privileges incident thereto, and shall be deemed to have
assumed in accordance with the terms of this Distribution Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Distribution Agreement. Notwithstanding anything to the contrary
contained herein, Capstone shall have no Liability under this Agreement if the
Merger does not occur.

         SECTION 2.7      NO REPRESENTATIONS OR WARRANTIES. Each of the parties
hereto understands and agrees that, except as otherwise expressly provided in
the Merger Agreement, no party hereto is, in this Distribution Agreement or in
any other agreement or document contemplated by this Distribution Agreement or
otherwise, making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency. It is also agreed and
understood that all assets either transferred to or retained by the parties, as
the case may be, shall be "as is, where is" and that (subject to Section 2.6)
the party to which such assets are to be transferred hereunder shall bear
economic and legal risk that any conveyances of such assets shall prove to be
insufficient or that such party's or any Subsidiary's title to any such assets
shall be other than good and marketable and free from encumbrances.

         SECTION 2.8      GUARANTEES. Except as otherwise specified in any
Ancillary Agreement, each of Beverly and NBHI shall use its best reasonable
efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, (a) Beverly and any of the Pharmacy





                                       15
<PAGE>   20
Subsidiaries removed as guarantor of or obligor for any Remaining Health Care
Liability and (b) NBHI and any of the NBHI Subsidiaries removed as a guarantor
of or obligor for any Institutional Pharmacy Liability.

         SECTION 2.9      WITNESS SERVICES. At all times from and after the
Distribution Date, each of Beverly and NBHI shall use their commercially
reasonable efforts to make available to the other, upon reasonable written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that (a) such persons may reasonably be required in
connection with the prosecution or defense of any Action in which the
requesting party may from time to time be involved and (b) there is no conflict
of interest in the Action between the requesting party and Beverly or NBHI, as
applicable. A party providing witness services to the other party under this
Section shall be entitled to receive from the recipient of such services, upon
the presentation of invoices therefor, payments for such amounts, relating to
supplies, disbursements and other out-of-pocket expenses and direct costs of
employees who are witnesses, as may be reasonably incurred in providing such
witness services.

         SECTION 2.10     CERTAIN POST-DISTRIBUTION TRANSACTIONS.

         (a)     Beverly (and Capstone as Beverly's successor) shall comply and
otherwise not take any action inconsistent with each representation, covenant
and statement made, or to be made, to Beverly's tax counsel in connection with
such firm's rendering of an opinion to Beverly and NBHI as to certain tax
aspects of the Distribution.

         (b)     NBHI shall comply with and otherwise not take any action
inconsistent with each representation, covenant and statement made, or to be
made, to NBHI's tax counsel in connection with such firm's rendering of an
opinion to Beverly and NBHI as to certain tax aspects of the Distribution.

         SECTION 2.11     DIRECTORS AND OFFICERS LIABILITY INSURANCE. From and
after the Distribution Date to the sixth anniversary of the Distribution Date,
Beverly (and Capstone as the successor to Beverly) will maintain in full force
and effect in such manner as is contemplated by Section 5.10 of the Merger
Agreement, all indemnification agreements, charter and by-law provisions and
Beverly Policies providing directors and officers liability insurance ("D&O
Insurance Policies") (or, through the purchase of a runoff policy, the full
benefits and coverage of such D&O Insurance Policies) and shall not consent to
any amendment of the terms of such agreements, provisions or policies that may
be adverse to any persons covered by such insurance except as may otherwise be
permitted by Section 5.10 of the Merger Agreement. All premium costs associated
or incurred in connection with obtaining and maintaining the D&O Policies or
runoff policy, as applicable, shall be deemed a Shared Liability, the
allocation for payment of which is set forth on Schedule 1.1(c) hereto. The
provisions of this Section 2.11 are intended for the benefit of, and shall be
enforced by, each of the persons covered by the D&O Insurance Policies.





                                       16
<PAGE>   21
         SECTION 2.12     INSURANCE. Except as contemplated by Article V hereof
and the Merger Agreement, any and all omnibus coverage of Beverly and its
Subsidiaries as it applies to the Institutional Pharmacy Business under Beverly
Policies will terminate (and will not be replaced) as of the Time of
Distribution, and from and after the Time of Distribution NBHI shall operate
pursuant to such continuing coverage as the Board of Directors of NBHI may deem
necessary or appropriate for the Remaining Health Care Business.

         SECTION 2.13     ANCILLARY AGREEMENTS. Effective as of the
Distribution Date, each of Beverly and NBHI shall enter into, and/or (where
applicable) shall cause their respective Subsidiaries to enter into, the
Ancillary Agreements and, subject to Capstone's prior approval, which shall not
be unreasonably withheld, any other agreements in respect of the Distribution
reasonably necessary or appropriate in connection with the transactions
contemplated hereby and thereby.

         SECTION 2.14     LISTING OF SHARES. Beverly shall use its reasonable
best efforts to list the shares of NBHI Common Stock to be issued pursuant to
the Distribution on the New York Stock Exchange, subject to official notice of
issuance, or to have such shares designated as a national market system
security on the interdealer quotation system by the National Association of
Securities Dealers, Inc.

                          ARTICLE III. INDEMNIFICATION

         SECTION 3.1      INDEMNIFICATION BY BEVERLY. Subsequent to the
Distribution Date, except as otherwise specifically set forth in any provision
of this Distribution Agreement or of any Ancillary Agreement, Beverly (and
Capstone as Beverly's successor) shall indemnify, defend and hold harmless the
NBHI Indemnitees from and against any and all Indemnifiable Losses of the NBHI
Indemnitees arising out of, by reason of or otherwise in connection with (a)
the Institutional Pharmacy Liabilities, (b) the breach, whether before or after
the Distribution Date, by Beverly or the Pharmacy Subsidiaries of any provision
of this Distribution Agreement or any Ancillary Agreement or (c) any Capstone
Liabilities.

         SECTION 3.2      INDEMNIFICATION BY NBHI. Subsequent to the
Distribution Date, except as otherwise specifically set forth in any provision
of this Distribution Agreement or of any Ancillary Agreement, NBHI shall
indemnify, defend and hold harmless the Beverly Indemnitees from and against
any and all Indemnifiable Losses of the Beverly Indemnitees arising out of, by
reason of or otherwise in connection with (a) the Remaining Health Care
Liabilities, (b) the breach, whether before or after the Distribution Date, by
NBHI or the NBHI Subsidiaries of any provision of this Distribution Agreement
or any Ancillary Agreement, or (c) the NBHI Registration Document (as defined
in the Merger Agreement) that shall be prepared by NBHI and filed with the
Commission pertaining to the registration of the NBHI Common Stock to be issued
in the Distribution.





                                       17
<PAGE>   22
         SECTION 3.3      LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.

         (a)     The amount that any party (an "Indemnifying Party") is or may
be required to pay to any other person (an "Indemnitee") pursuant to Section
3.1 or Section 3.2, as applicable, shall be reduced (retroactively or
prospectively) by any Insurance Proceeds or other amounts actually recovered by
or on behalf of such Indemnitee in respect of the related Indemnifiable Loss.
If an Indemnitee shall have received the payment required by this Distribution
Agreement from an Indemnifying Party in respect of an Indemnifiable Loss and
shall subsequently receive Insurance Proceeds or other amounts in respect of
such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying
Party a sum equal to the amount of such Insurance Proceeds or other amounts
actually received, up to the aggregate amount of any payments received from
such Indemnifying Party pursuant to this Distribution Agreement in respect of
such Indemnifiable Loss.

         (b)     Any loss, liability, claim, damage, demand, cost or expense
relating to or arising out of information contained in the Prospectus/Joint
Proxy Statement that does not specifically relate to either Capstone, on the
one hand, or NBHI or Beverly, on the other hand, shall constitute a Shared
Liability for purposes of this Distribution Agreement and no party hereto or
its successor shall be entitled to indemnification in respect thereof.

         SECTION 3.4      PROCEDURES FOR INDEMNIFICATION.

         (a)     If a claim or demand is made against an Indemnitee by any
person, other than Capstone, who is not a party to this Distribution Agreement
(a "Third Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Distribution Agreement, such Indemnitee shall
notify the Indemnifying Party in writing, and in reasonable detail, of the
Third Party Claim promptly (and in any event within 20 business days) after
receipt by such Indemnitee of written notice of the Third Party Claim;
provided, however, that failure to give such notification within such 20
business day period shall not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually prejudiced
as a result of such failure (except that the Indemnifying Party shall not be
liable for any expenses incurred during the period in which the Indemnitee
failed to give such notice).  Thereafter, the Indemnitee shall deliver to the
Indemnifying Party, promptly (and in any event within 20 business days) after
the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.

         (b)     If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof except as





                                       18
<PAGE>   23
otherwise expressly provided for in Section 2.9 of this Distribution Agreement.
If the Indemnifying Party assumes such defense, the Indemnitee shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the fees and expenses of counsel
employed by the Indemnitee (i) for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the 20
business day period prior to the time the Indemnitee shall have given notice of
the Third Party Claim as provided above) or (ii) in the event the Indemnitee
reasonably determines, based on the advice of its counsel that there shall
exist a conflict of interest between the Indemnitee and the Indemnifying Party
or that there are defenses available to the Indemnitee that are not available
to the Indemnifying Party, the effect of which shall be to make it impractical
for the Indemnitee and the Indemnifying Party to be jointly represented by the
same counsel, in which case the Indemnifying Party shall be liable for the fees
and expenses of one counsel for all Indemnitees in any single or series of
related Actions. If the Indemnifying Party so elects to assume the defense of
any Third Party Claim, the Indemnitee shall cooperate with the Indemnifying
Party in the defense or prosecution thereof.

         (c)     If the Indemnifying Party acknowledges in writing liability
for indemnification of a Third Party Claim, then in no event will the
Indemnitee admit any liability with respect to, or settle, compromise or
discharge, any Third Party Claim without the Indemnifying Party's prior written
consent; provided, however, that the Indemnitee shall have the right to settle,
compromise or discharge such Third Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases the Indemnifying Party from its
indemnification obligation hereunder with respect to such Third Party Claim and
such settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party. If the Indemnifying Party acknowledges in writing
liability for indemnification of a Third Party Claim, the Indemnitee will agree
to any settlement, compromise or discharge of a Third Party Claim that the
Indemnifying Party may recommend that by its terms (i) obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim, (ii) releases the Indemnitee completely in connection
with such Third Party Claim and (iii) would not otherwise adversely affect the
Indemnitee; provided, however, that the Indemnitee may refuse to agree to any
such settlement, compromise or discharge and may assume the defense of such
Third Party Claim if the Indemnitee agrees (A) that the Indemnifying Party's
indemnification obligation with respect to such Third Party Claim shall not
exceed the amount that would have been required to be paid by or on behalf of
the Indemnifying Party in connection with such settlement, compromise or
discharge and (B) to assume all costs and expenses thereafter incurred in
connection with the defense of such Third Party Claim (other than those
contemplated by subclause (A) herein above).

         (d)     Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense of any Third Party Claim (and shall be
liable for the fees and expenses of counsel incurred by the Indemnitee in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief other than money damages against
the Indemnitee which the Indemnitee reasonably determines, based on the advice
of its counsel,





                                       19
<PAGE>   24
cannot be separated from any related claim for money damages. If such equitable
or other relief portion of the Third Party Claim can be so separated from the
claim for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.

         SECTION 3.5      INDEMNIFICATION PAYMENTS. Indemnification required by
this Article III shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or loss, liability, claim, damage or expense is incurred.

         SECTION 3.6      OTHER ADJUSTMENTS.

         (a)     The amount of any Indemnifiable Loss shall be (i) increased to
take into account any net Tax cost actually incurred by the Indemnitee arising
from any payments received from the Indemnifying Party (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit or recovery
of insurance proceeds actually realized by the Indemnitee arising from the
incurrence or payment of any such Indemnifiable Loss. In computing the amount
of such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize
all other items of income, gain, loss, deduction or credit before recognizing
any item arising from the receipt of any payment with respect to an
Indemnifiable Loss or the incurrence or payment of any Indemnifiable Loss.

         (b)     In addition to any adjustments required pursuant to Section
3.3 hereof or clause (a) of this Section 3.6, if the amount of any
Indemnifiable Loss shall, at any time subsequent to the payment required by
this Distribution Agreement, be reduced by recovery, settlement or otherwise,
the amount of such reduction, less any expenses incurred in connection
therewith, shall promptly be repaid by the Indemnitee to the Indemnifying
Party, up to the aggregate amount of any payments received from such
Indemnifying Party pursuant to this Distribution Agreement in respect of such
Indemnifiable Loss.

         SECTION 3.7      SURVIVAL OF INDEMNITIES. The obligations of Beverly
and NBHI under this Article III shall survive the sale or other transfer by
either of them of any assets or businesses or the assignment by either of them
of any Liabilities, with respect to any Indemnifiable Loss of any Indemnitee
related to such assets, businesses or Liabilities and shall be binding on the
successors and assigns of all, or substantially all, of their respective assets
and business.

                       ARTICLE IV. ACCESS TO INFORMATION

         SECTION 4.1      PROVISION OF CORPORATE RECORDS.

         (a)     Unless otherwise specified in the procedures set forth in
Schedule 4.3(b) hereto, after the Distribution Date, upon the prior written
request by NBHI for specific and identified agreements, documents, books,
records or files (collectively, "Records") relating to or affecting NBHI,
Beverly shall arrange, as soon as reasonably practicable following the receipt
of such request, for the provision of appropriate copies of such Records (or
the originals thereof if NBHI





                                       20
<PAGE>   25
has a reasonable need for such originals) in the possession of Beverly or any
of its Subsidiaries, but only to the extent such items are not already in the
possession of NBHI.

         (b)     Unless otherwise specified in the procedures set forth in
Schedule 4.3(b) hereto, after the Distribution Date, upon the prior written
request by Beverly for specific and identified Records relating to or affecting
Beverly or any Pharmacy Subsidiary, NBHI shall arrange, as soon as reasonably
practicable following the receipt of such request, for the provision of
appropriate copies of such Records (or the originals thereof if Beverly has a
reasonable need for such originals) in the possession of NBHI or any of its
Subsidiaries, but only to the extent such items are not already in the
possession of Beverly.

         SECTION 4.2      ACCESS TO INFORMATION.

         (a)     Unless otherwise specified in the procedures set forth in
Schedule 4.3(b) hereto, from and after the Distribution Date, each of Beverly
and NBHI shall afford to the other and its authorized accountants, counsel and
other designated representatives reasonable access during normal business
hours, subject to appropriate restrictions for classified, privileged or
confidential information, to the personnel, properties, books and records of
such party and its Subsidiaries insofar as such access is reasonably required
by the other party.

         (b)     Each of Beverly and NBHI shall afford to the other access
during normal business hours to their respective properties, subject to
appropriate restrictions and limitations, and will consult and cooperate with
each other for the purpose of conducting air, water or soil testing reasonably
necessary in connection with the determination and fulfillment of
indemnification obligations or in connection with Shared Liabilities under this
Distribution Agreement.

         SECTION 4.3      REIMBURSEMENT; OTHER MATTERS.

         (a)     Except to the extent otherwise contemplated by any Ancillary
Agreement and except as limited by any indemnification obligation set forth in
this Distribution Agreement, a party providing Records or access to information
or properties under this Article IV shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such Records or access to
information or properties.

         (b)     The parties hereto shall comply with those document retention
policies as shall be set forth in Schedule 4.3(b) hereto.

         SECTION 4.4      CONFIDENTIALITY. Each of (a) Beverly and the Pharmacy
Subsidiaries and (b) NBHI and the NBHI Subsidiaries shall not use or permit the
use of (without the prior written consent of the other) and shall hold, and
shall cause its consultants and advisors to hold, in strict confidence, all
information concerning the other party in its possession, its custody or under
its control (except to the extent that (i) such information has been in the
public domain through no





                                       21
<PAGE>   26
fault of such party or (ii) such information has been later lawfully acquired
from other sources by such party or (iii) this Distribution Agreement or any
other Ancillary Agreement or any other agreement entered into pursuant hereto
permits the use or disclosure of such information) to the extent such
information (A) relates to the period up to the Distribution Date, (B) relates
to any Ancillary Agreement or (C) is obtained in the course of performing
pursuant to any Ancillary Agreement, and each party shall not (without the
prior written consent of the other) otherwise release or disclose such
information to any other person, except such party's auditors, consultants or
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party prior to such disclosure. To the extent that a party hereto is
compelled by judicial or administrative process to disclose such information
under circumstances in which any evidentiary privilege would be available, such
party agrees to assert (or permit the other party a commercially reasonable
opportunity to assert) such privilege in good faith prior to making such
disclosure.  Each of the parties hereto agrees to consult with the other party
in connection with any such judicial or administrative process, including,
without limitation, in determining whether any privilege is available, and
further agrees to allow such other party and its counsel to participate in any
hearing or other proceeding (including, without limitation, any appeal of an
initial order to disclose) in respect of such disclosure and assertion of
privilege.

                              ARTICLE V. INSURANCE

  SECTION 5.1      POLICIES AND RIGHTS INCLUDED WITHIN ASSETS; MAINTENANCE OF
                   COVERAGE.

         (a)     The Remaining Health Care Assets shall include any and all
rights of an insured party under each of the Beverly Policies, subject to the
terms of such Beverly Policies and any limitations or obligations of NBHI
contemplated by this Article V, specifically including rights of indemnity and
the right to be defended by or at the expense of the insurer, with respect to
all claims, suits, actions, proceedings, injuries, losses, liabilities, damages
and expenses incurred or claimed to have been incurred prior to the
Distribution Date by any party in or in connection with the conduct of the
Remaining Health Care Business which claims are asserted subsequent to the
Distribution Date.

         (b)     Except as otherwise agreed to in writing between Beverly and
NBHI (which agreement shall be acknowledged and consented to by Capstone),
Beverly shall maintain in effect until the Distribution Date all Beverly
Policies (as renewed consistent with past practice) in effect as of the date
hereof and the insurance coverages and limits will be maintained at
substantially the same levels as are reflected on the schedule of Beverly
Policies attached hereto as Schedule 5.1(b). Subsequent to the Distribution
Date, the parties hereto will be responsible for maintaining their respective
risk management programs.

         SECTION 5.2      POST-DISTRIBUTION DATE CLAIMS AGAINST NBHI. If,
subsequent to the Time of Distribution, any person shall assert a claim against
NBHI or any of the NBHI Subsidiaries (including, without limitation, where NBHI
or the NBHI Subsidiaries are co-


                                       22
<PAGE>   27
defendants with other persons) with respect to any claim, suit, action,
proceeding, injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Time of Distribution in or in connection with
the conduct of the Remaining Health Care Business, and which claim, suit,
action, proceeding, injury, loss, liability, damage or expense may arise out of
an insured or insurable occurrence under one or more of the Beverly Policies,
Beverly shall, at the time such claim is asserted, to the extent any such
Beverly Policy may require that Insurance Proceeds thereunder be collected
directly by the party against whom the Insured Claim is asserted, be deemed to
designate, without need of further documentation, NBHI as the agent and
attorney-in-fact to assert and to collect any related Insurance Proceeds under
such Beverly Policy, and shall further be deemed to assign, without need of
further documentation, to NBHI any and all rights of an insured party under
such Beverly Policy with respect to such asserted claim, specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer and the right to any applicable Insurance Proceeds thereunder.

         SECTION 5.3      ADMINISTRATION; OTHER MATTERS.

         (a)     From and after the Time of Distribution, NBHI shall be
responsible for (i) Insurance Administration of the Beverly Policies as related
to the Remaining Health Care Business and (ii) Claims Administration under such
Beverly Policies with respect to Remaining Health Care Liabilities that relate
to claims asserted prior to the Distribution Date. NBHI shall be responsible
for any premiums, deductibles and retentions in respect of such Beverly
Policies as related to the Remaining Health Care Business, and the cost of any
such claims shall be the sole responsibility and obligation of NBHI, including,
without limitation, claims (and related costs and expenses) that exceed the
limits of the applicable Beverly Policy or where the limits of the applicable
Beverly Policy have been exhausted, and any resulting actuarial gains or losses
shall inure solely to NBHI.

         (b)     Allocation of Insurance Proceeds. Insurance Proceeds received
with respect to claims, costs and expenses under the Beverly Policies shall be
paid to NBHI.

         SECTION 5.4      AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE.
With respect to any claims asserted subsequent to the Time of Distribution that
relate to occurrences prior to the Time of Distribution arising out of or in
connection with the Institutional Pharmacy Business if Beverly and NBHI are
named as co-defendants in respect of such claim then, at the election of NBHI,
the Claims Administration relating thereto will be shared equally by Beverly
and NBHI and any waiver of a conflict of interest necessary to the conduct of
the joint defense shall be deemed waived.  Nothing in this Section 5.4 shall be
construed to limit or otherwise alter in any way the obligations of the parties
to this Distribution Agreement, including those created by this Distribution
Agreement, the Merger Agreement, by operation of law or otherwise.

         SECTION 5.5      COOPERATION. The parties agree to use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated by this Agreement.





                                       23
<PAGE>   28
                         ARTICLE VI. DISPUTE RESOLUTION

         SECTION 6.1      DISTRIBUTION AGREEMENT DISPUTES. In the event of a
controversy, dispute or claim arising out of, in connection with, or in
relation to the interpretation, performance, nonperformance, validity or breach
of this Distribution Agreement or otherwise arising out of, or in any way
related to this Distribution Agreement, including, without limitation, any
claim based on contract, tort, statute or constitution (singly, a "Distribution
Agreement Dispute" and collectively, "Distribution Agreement Disputes"), the
party asserting the Distribution Agreement Dispute shall give written notice to
the other party of the existence and nature of such Distribution Agreement
Dispute.  Thereafter, the general counsels (or other designated
representatives) of the respective parties shall negotiate in good faith for a
period no less than 60 days after the date of the notice in an attempt to
settle such Distribution Agreement Dispute. If after such 60 calendar day
period such representatives are unable to settle such Distribution Agreement
Dispute, any party hereto may commence arbitration by giving written notice to
all other party that such Distribution Agreement Dispute has been referred to
the American Arbitration Association for arbitration in accordance with the
provisions of this Article.

         SECTION 6.2      ARBITRATION IN ACCORDANCE WITH AMERICAN ARBITRATION
ASSOCIATION RULES. All Distribution Agreement Disputes shall be settled by
arbitration in Dallas, Texas, before a single arbitrator in accordance with the
rules of the American Arbitration Association (the "Rules"). The arbitrator
shall be selected by the mutual agreement of all parties, but if they do not so
agree within twenty (20) days after the date of the notice of arbitration
referred to above, the selection shall be made pursuant to the Rules from the
panels of arbitrators maintained by the American Arbitration Association. The
arbitrator shall be an individual with substantial professional experience with
regard to resolving or settling sophisticated commercial disputes.

         SECTION 6.3      FINAL AND BINDING AWARDS. Any award rendered by the
arbitrator shall be conclusive and binding upon the parties hereto; provided,
however, that any such award shall be accompanied by a written opinion of the
arbitrator giving the reasons for the award. This provision for arbitration
shall be specifically enforceable by the parties and the decision of the
arbitrator in accordance therewith shall be final and binding, and there shall
be no right of appeal therefrom. The parties agree to comply with any award
made in any such arbitration proceedings that has become final in accordance
with the Rules, and agree to the entry of a judgment in any jurisdiction upon
any award rendered in such proceedings becoming final under the Rules.

         SECTION 6.4      COSTS OF ARBITRATION. In the award the arbitrator
shall allocate, in his or her discretion, among the parties to the arbitration
all costs of the arbitration, including, without limitation, the fees and
expenses of the arbitrator and reasonable attorneys' fees, costs and expert
witness expenses of the parties. Absent such an allocation by the arbitrator,
each party shall pay its own expenses of arbitration, and the expenses of the
arbitrator shall be equally shared.





                                       24
<PAGE>   29
         SECTION 6.5      SETTLEMENT BY MUTUAL AGREEMENT. Nothing contained in
this Article shall prevent the parties from settling any Distribution Agreement
Dispute by mutual agreement at any time.

                           ARTICLE VII. MISCELLANEOUS

         SECTION 7.1      COMPLETE AGREEMENT; CONSTRUCTION. This Distribution
Agreement, including the Schedules and the Ancillary Agreements constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this
Distribution Agreement and any Schedule hereto, the Schedule shall prevail. In
the event and to the extent that there shall be a conflict between the
provisions of this Distribution Agreement and the Schedules and the provisions
of (i) the Merger Agreement, the Merger Agreement shall control and (ii) an
Ancillary Agreement, such Ancillary Agreement shall control; provided, however,
that the provisions of this Distribution Agreement shall govern in the event of
and to the extent of any conflict between the provisions of this Distribution
Agreement and the provisions of the Transfer and Assumption Instruments.

         SECTION 7.2      COUNTERPARTS. This Distribution Agreement may be
executed in one or more counterparts, each of which shall be considered one and
the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
parties.

         SECTION 7.3      SURVIVAL OF AGREEMENTS. Except as otherwise
contemplated by this Distribution Agreement, all covenants and agreements of
the parties contained in this Distribution Agreement shall survive the
Distribution Date.

         SECTION 7.4      NOTICES. All notices and other communications
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or automatic machine
generated confirmation) to the parties at the following address (or at such
other addresses for a party as shall be specified by like notice) and will be
deemed given on the date on which such notice is received:

         To Beverly (before the Distribution Date) or NBHI:
         c/o Beverly Enterprises, Inc.
         5111 Rogers Avenue, Suite 40-A
         Fort Smith, AR 72919-1000
         Attention: Chairman of the Board
         Telephone:       (501) 452-6712
         Facsimile:       (501) 452-5131





                                       25
<PAGE>   30
         with a copy to:

         Giroir, Gregory, Holmes & Hoover, plc
         111 Center Street, Suite 1900
         Little Rock, Arkansas 72201
         Attention: H. Watt Gregory, III
         Telephone:        (501) 372-3000
         Facsimile:        (501) 374-2380

         To Beverly (after the Distribution Date) or Capstone:
         Capstone Pharmacy Services, Inc.
         9901 East Valley Ranch Parkway, Suite 3001
         Irving, TX 75063
         Attention: R. Dirk Allison, President & CEO
         Telephone:       (972) 401-1541
         Facsimile:       (972) 401-2972

         with a copy to:

         Harwell, Howard, Hyne, Gabbert & Manner, P.C.
         1800 First American Center
         315 Deaderick Street
         Nashville, TN 37238
         Attention: Mark Manner
         Telephone:       (615) 256-0500
         Facsimile:       (615) 251-1059

         SECTION 7.5      WAIVERS. The failure of either party to require
strict performance by the other party of any provision in this Distribution
Agreement will not waive or diminish that party's right to demand strict
performance thereafter of that or any other provision hereof.

         SECTION 7.6      AMENDMENTS. Subject to the terms of Section 7.9
hereof, this Distribution Agreement and the Ancillary Agreements may not be
modified or amended except by an agreement in writing signed by the parties
and, for so long as the Merger Agreement shall be in effect, approved by
Capstone.

         SECTION 7.7      ASSIGNMENT. This Distribution Agreement shall be
assignable in whole in connection with a merger or consolidation or the sale of
all or substantially all the assets of a party hereto. Otherwise this
Distribution Agreement shall not be assignable, in whole or in part, directly
or indirectly, by any party hereto without the prior written consent of the
other party, and any attempt to assign any rights or obligations arising under
this Distribution Agreement without such consent shall be void.





                                       26
<PAGE>   31
         SECTION 7.8      SUCCESSORS AND ASSIGNS. The provisions of this
Distribution Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns, including, without limitation, Capstone.

         SECTION 7.9      TERMINATION. This Agreement (including, without
limitation, Section 2.11 and Article III hereof) may be terminated and the
Distribution may be amended, modified or abandoned at any time prior to the
Distribution by and in the sole discretion of Beverly without the approval of
NBHI or the stockholders of Beverly. In the event of such termination, no party
shall have any liability of any kind to any other party or any other person.
After the Distribution, this Distribution Agreement may not be terminated
except by an agreement in writing signed by the parties; provided, however,
that Section 2.11 shall not be terminated or amended after the Distribution in
respect of the third party beneficiaries thereto without the consent of such
persons.

         SECTION 7.10     SUBSIDIARIES. Each of the parties hereto shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary
of such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.

         SECTION 7.11     THIRD PARTY BENEFICIARIES. The parties expressly
acknowledge that at the Effective Time Beverly will be merged with and into
Capstone, all obligations of Beverly hereunder shall become obligations of
Capstone, and actions of Beverly hereunder to be taken after the Distribution
Date shall be taken by Capstone. Except as provided in Section 2.11 relating to
directors' and officers' liability insurance, this Distribution Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and Affiliates and permitted successors and assigns and shall not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, claim of
action or other right in excess of those existing without reference to this
Distribution Agreement.

         SECTION 7.12     ATTORNEY FEES. Except as contemplated by an
arbitrator's decision pursuant to Article VI hereof, a party in breach of this
Distribution Agreement shall, on demand, indemnify and hold harmless the other
party hereto for and against all reasonable out-of-pocket expenses, including,
without limitation, reasonable legal fees, incurred by such other party by
reason of the enforcement and protection of its rights under this Distribution
Agreement. The payment of such expenses is in addition to any other relief to
which such other party may be entitled hereunder or otherwise.

         SECTION 7.13     TITLE AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Distribution
Agreement.

         SECTION 7.14     SCHEDULES. The Schedules shall be construed with and
as an integral part of this Distribution Agreement to the same extent as if the
same had been set forth verbatim herein.





                                       27
<PAGE>   32
         SECTION 7.15     SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that there is no adequate remedy at law for failure by such
parties to comply with the provisions of this Distribution Agreement and that
such failure would cause immediate harm that would not be adequately
compensable in damages, and therefore agree that their agreements contained
herein may be specifically enforced without the requirement of posting a bond
or other security, in addition to all other remedies available to the parties
hereto under this Distribution Agreement.

         SECTION 7.16     GOVERNING LAW. This Distribution Agreement shall be
governed by and construed in accordance with the laws of the state of Delaware
applicable to contracts executed in and to be performed in that state.

         SECTION 7.17     SEVERABILITY. In the event any one or more of the
provisions contained in this Distribution Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions, the economic effect of which shall, to the
greatest extent possible, approximate that of the invalid, illegal or
unenforceable provisions.





                                       28
<PAGE>   33
         IN WITNESS WHEREOF, the parties have caused this Distribution
Agreement to be duly executed as of the day and year first written above.



                                        BEVERLY ENTERPRISES, INC.



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


                                        NEW BEVERLY HOLDINGS, INC.




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



                                        CAPSTONE PHARMACY SERVICES, INC.



                                        By:
                                           -----------------------------
                                        Name: 
                                        Title:
<PAGE>   34
                                   EXHIBIT A

                      INTERNAL BEVERLY RESTRUCTURING PLAN

         The following is an outline of the restructuring action (the
"Restructuring") that will be taken prior to and to facilitate the Distribution
and the Merger. Capitalized terms used in this Plan and not otherwise defined
shall have the meanings ascribed thereto in the Agreement and Plan of Merger
dated as of April 15, 1997 (the "Merger Agreement") by and between Beverly
Enterprises, Inc., a Delaware corporation ("BEI") and Capstone Pharmacy
Services, Inc., a Delaware corporation ("Capstone").

1.       New Beverly Holdings, Inc., a Delaware corporation ("NBHI"), a
         first-tier subsidiary of BEI shall be authorized to provide for the
         issuance of the number of shares of capital stock, and reservation of
         sufficient authorized but unissued shares of capital stock, of NBHI to
         BEI stockholders and other holders of interests convertible or
         exercisable into shares of BEI, as may be required to cause BEI's
         compliance with the terms and conditions of the Merger Agreement and
         the Agreement and Plan of Distribution dated as of April 15, 1997 by
         and between BEI and NBHI, and (iii) provide for sufficient additional
         authorized classes or series within any class of capital stock or
         other rights or interests therein, as may be deemed appropriate by the
         boards of directors of BEI and NBHI and the stockholder of NBHI.

2.       BEI will transfer or contribute all of the stock of the corporations
         engaged in the Remaining Health Care Business, which are subsidiaries
         of BEI, to NBHI as set forth on Schedule 1.1(a) to the Distribution
         Agreement.

3.       BEI will transfer to NBHI any assets that are owned by BEI, its wholly
         owned first-tier subsidiary, Pharmacy Corporation of America, a
         Delaware corporation ("PCA"), or any of their then existing pharmacy
         subsidiaries, including those set forth on Schedule 1.1(b) to the
         Distribution Agreement, that are not used or useful in the conduct of
         the institutional pharmacy business, as soon as practicable, and in
         any event prior to the Distribution.

4.       Any institutional pharmacy assets owned by BEI or any of its
         subsidiaries engaged in the Remaining Health Care Business which are
         used or useful in the conduct of the institutional pharmacy business
         will be transferred and delivered to PCA, as soon as practicable and
         in any event prior to the Distribution.

            [STEPS 1 THROUGH 4 WILL BE TAKEN AS SOON AS PRACTICABLE
                   ONCE THE MERGER AGREEMENT HAS BEEN SIGNED
              OR APPROVED BY BEI'S STOCKHOLDERS, AS APPROPRIATE.]



                                     A-1
<PAGE>   35
5.       It is anticipated that as soon as practicable after stockholder
         approval of the Merger and the Distribution, PCA will borrow
         approximately $275 million from an unrelated third party or parties.
         PCA will use the proceeds from such borrowing to repay intercompany
         indebtedness to BEI. Any cash in excess of the intercompany
         indebtedness will be distributed prior to the Distribution as a
         dividend to BEI. BEI will then contribute any such cash to NBHI. The
         payments will be eliminated from BEI's taxable income under the
         provisions of the consolidated return regulations.

6.       BEI will use all of the cash distributed to BEI by PCA to pay down BEI
         indebtedness.

7.       BEI will distribute all of the stock of NBHI to BEI's stockholders pro
         rata.

8.       BEI will merge with and into Capstone, with Capstone as the survivor.

9.       NBHI will change its name to Beverly Enterprises, Inc.





                                      A-2
<PAGE>   36
                                                                       EXHIBIT B
                                                            Prepared Pursuant to
                                    Section 2.1(g) of the Distribution Agreement


                           INTERIM SERVICES AGREEMENT

         THIS INTERIM SERVICES AGREEMENT (the "Agreement"), dated as of April
15, 1997, by and between Beverly Enterprises, Inc., a Delaware corporation
("Beverly") and New Beverly Holdings, Inc. a Delaware corporation ("NBHI").

                              W I T N E S S E T H:

         WHEREAS, Beverly and Capstone Pharmacy Services, Inc., a Delaware
corporation ("Capstone"), have entered into an Agreement and Plan of Merger,
dated as of April 15, 1997 (the "Merger Agreement"), providing for the merger
(the "Merger") of Beverly's Institutional Pharmacy Business with Capstone; and

         WHEREAS, prior to the Effective Time (as defined in the Merger
Agreement) of the merger Beverly intends to transfer its Remaining Health Care
Businesses (as defined in the Merger Agreement) to NBHI in exchange for the
issuance of shares of NBHI Common Stock; and

         WHEREAS, immediate prior to the Effective Time, Beverly's Board of
Directors, subject to the approval of Beverly's shareholders, expects to
complete the Distribution (as defined in the Merger Agreement) pursuant to the
Agreement and Plan of Distribution dated as of April 15, 1997 by and between
Beverly and NBHI (the "Distribution Agreement"); and

         WHEREAS, the purpose of the Distribution is to make possible the
Merger by divesting Beverly of the Remaining Health Care Businesses which
Capstone is unwilling to acquire; and

         WHEREAS, in the interest of an orderly transition, NBHI desires to
provide, and Beverly (for the benefit of Capstone after the Effective Time)
desires to receive, certain support services from NBHI, as hereinafter
specifically provided (collectively, the "Services" and, individually, a
"Service"), for a limited period after the date hereof, and the parties desire
to set forth herein the basis on which the Services shall be provided to NBHI
(and Capstone following the Effective Time).

         NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, NBHI and Beverly agree as follows:

         1.      Definitions. Unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to such terms pursuant to the Merger Agreement or the
Distribution Agreement.
<PAGE>   37
         2.      Services. The specific Services to be provided by NBHI to
Beverly are comprised of the administrative services more particularly set
forth on Attachment 1 hereto. Subject to the terms of this Agreement, upon the
written request of the Chief Financial Officer of Beverly or a person
designated to act on his behalf in an instrument executed by the Beverly Chief
Financial Officer (a "Beverly Authorized Officer") and delivered to NBHI, NBHI
will provide each of the Services with respect to the Institutional Pharmacy
Business retained by Beverly in the manner and to the same general extent as
such Services have been provided by Beverly in connection with its
Institutional Pharmacy Business prior to the Distribution Date.

         3.      Term. Except with respect to Section 13, the term of this
Agreement shall commence on the date hereof and terminate on (a) April 30, 1998
or (b) such other date on which the parties hereto shall mutually agree in
writing to terminate this Agreement (the "Term"). Services shall be provided
only as specified in Attachment 1 hereto, unless otherwise agreed to by the
parties. In addition, Beverly shall have the right to terminate a Service or
Services upon sixty (60) days prior written notice to NBHI. Termination of one
or more Services by Beverly shall not affect the obligation of NBHI to furnish
all other Services for the remainder of the Term.

         4.      Cost. Unless otherwise expressly agreed in writing executed by
a duly authorized officer of Beverly and NBHI, the Services shall be provided
to Beverly at the costs specified for such services on Attachment 1 or
Attachment 2 hereto. To the extent the Attachments hereto do not specify the
cost of a specific Service, Beverly will pay NBHI (i) the allocated portion of
the base salaries of NBHI's employees providing such Service and (ii) the
amount of NBHI's direct and indirect costs (excluding any amounts attributable
to lost productivity), expenses and disbursements incurred in connection with
providing such Service to Beverly; provided, however, that in no event shall
such costs be less than the fair market value of such services based on terms
and conditions arrived at by the parties bargaining at arm's length.

         5.      Delegation. NBHI may retain the Services of such third
parties, either by oral or written contract, as NBHI may, from time to time,
deem necessary or appropriate to facilitate the expeditious discharge of NBHI's
responsibilities hereunder, and NBHI shall be entitled to full reimbursement
from Beverly for all fees and expenses paid by NBHI to such third parties
(whose services were obtained for Beverly) as provided in Section 4 hereof;
provided, however, that the amount to be reimbursed to NBHI shall be no greater
than the cost for such services had they been provided by NBHI directly.

         6.      Transition Services Team. To facilitate administration,
communication, and problem resolution related to the Services, Beverly and NBHI
shall appoint a transition services team ("Transition Services Team")
consisting of two (2) persons, one (1) of whom shall be appointed by Beverly
(the "Beverly Appointee") and one (1) of whom shall be appointed by NBHI (the
"NBHI Appointee"). The NBHI Appointee shall be authorized to make all decisions
concerning the pricing, provision, continuation after the Term, and cessation
of Services on



                                      2
<PAGE>   38
behalf of NBHI. The Beverly Appointee shall be authorized to make all decisions
concerning the pricing, provision, continuation after the Term, and cessation
of Services on behalf of Beverly.

         7.      Independence. All employees and representatives of NBHI
providing Services to Beverly will be deemed for purposes of all compensation
and employee benefits to be employees or representatives of NBHI and not
employees or representatives of Beverly. In performing such Services, such
employees or representatives will be under the direction, control and
supervision of NBHI (and not Beverly) and NBHI will have the sole right to
exercise all authority with respect to the employment (including termination of
employment), assignment and compensation of such employees and representatives.
NBHI shall be solely responsible for the payment of all payroll and withholding
taxes relating to its employees for services provided to Beverly during the
Term.

         8.      Impracticability. NBHI shall not be required to provide any
Service to the extent the performance of provision of such Service becomes
impracticable as a result of a cause or causes outside the reasonable control
of NBHI including unfeasible technological requirements, or to the extent the
performance of such Service would require NBHI to violate any applicable laws,
rules or regulations or result in the breach of any license, permit or
applicable contract.

         9.      Additional Resources. In providing the Services, NBHI shall
not be obligated to: (i) hire any additional employees, (ii) maintain the
employment of any specific employee or (iii) purchase, lease or license any
additional equipment or software.

         10.     Force Majeure. The obligations of NBHI under this Agreement,
except as to payment for Services actually provided, are subject to conditions
of Force Majeure, as below defined. "Force Majeure" means an act of God, strike
or walkout or other labor dispute, act of a public enemy, war declared or
undeclared, blockade, revolution, riot, insurrection, civil commotion,
lightning, fire, storm, flood, earthquake, explosion, governmental action or
restraint, embargo, and any other cause, whether of the kind specifically
enumerated above or otherwise, which is not reasonably within the control of
the party affected thereby.

         11.     Nondisclosure. In the event that, during the term hereof and
in connection with a party's performance of its obligations hereunder, either
party shall receive information concerning the other party hereto which the
receiving party knows, or has reason to believe, is confidential or proprietary
to the party to whom such information relates,the party receiving such
information shall take all reasonable steps to: (a) protect and hold such
information in confidence and prevent its disclosure to third parties unless
such third parties are under a duty of confidentiality to the party to which
such information relates; and (b) restrict its use to those purposes consented
to in writing by the party to whom such information relates; provided, however,
that the party receiving such information shall not be required to protect or
hold in confidence any information or data which (a) is or becomes available to
the public without the fault of the receiving party, (b) is independently
developed by the receiving party, (c) is disclosed to the receiving party by a
third party known to the receiving party not to be under any duty of





                                       3
<PAGE>   39
confidentiality to the party to whom such information relates with respect to
such information, or (d) except as may otherwise be required by law. This
Section 11 shall not limit the obligation of the parties under the Distribution
Agreement to provide access to records after the date hereof.

         12.     Limitation Of Liability. NBHI's liability to Beverly in
connection with this Agreement and the Services to be provided by NBHI
hereunder shall be limited to (i) actual damages arising from NBHI's gross
negligence or willful misconduct in the performance of its duties and
responsibilities hereunder, and (ii) in all other cases of breach of this
Agreement, repetition of a Service for the purpose of correcting an error or
omission where reasonable or appropriate under the circumstances; provided that
in no event shall NBHI be liable for any incidental or consequential damages.

         13.     Indemnity.

         (a)     NBHI agrees to defend, indemnify and hold Beverly and its
officers, directors, employees and agents harmless from and against and all
liabilities, losses, claims, damages, and expenses of any nature, including
reasonable attorneys' fees, that are actually suffered by Beverly arising out
of the performance of the Services hereunder, except where such liability,
loss, claim, damage or expense shall have been caused by Beverly's gross
negligence or willful misconduct in the performance of its duties and
responsibilities hereunder. Nothing in this paragraph shall be construed to
relieve Beverly of its responsibilities pursuant to this Agreement.

         (b)     Beverly agrees to defend, indemnify and hold NBHI and its
officers, directors, employees and agents harmless from and against any and all
liabilities, losses, claims, damages, and expenses of any nature, including
reasonable attorneys' fees, that are actually suffered by NBHI arising out of
the performance of the Services hereunder, except where such liability, loss,
claim, damage or expense shall have been caused by NBHI's gross negligence or
willful misconduct in the performance of its duties and responsibilities
hereunder. Nothing in this paragraph shall be construed to relieve NBHI of its
responsibilities pursuant to this Agreement.

         14. Mutual Cooperation. Beverly and NBHI will provide each other with
information and assistance reasonably necessary to investigate, defend or
prosecute any claims, suits, charges, including, but not limited to, equal
employment opportunity, workers compensation, personal injury, insurance and
similar claims brought by or against Beverly or NBHI relating to either of
their businesses. This provision shall survive the termination of this
Agreement.

         15.     Third Party Rights. Nothing in this Agreement, express or
implied, is intended to confer upon any person (including, without limitation,
employees), other than the parties hereto and their respective successors and
assigns (including, without limitation, Capstone as provided in Section 17
hereof), any rights or remedies of any nature whatsoever under or by reason of
this Agreement.





                                       4
<PAGE>   40
         16.     Relationship Of Parties. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of independent contractor nor be deemed to
vest any rights, interest or claims in any third parties.

         17.     Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties hereto, provided that this Agreement may not be assigned by either of
the parties hereto without the prior written consent of the other. Capstone has
entered into the Merger Agreement pursuant to which Beverly shall be merged
with and into Capstone. At the Effective Time, Capstone shall succeed to all of
the rights and obligations of Beverly hereunder.

         18.     Notices. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed to be sufficient if contained
in a written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the respective addresses set forth in the Distribution Agreement
(or at such other address for a party as shall be specified by like notice).
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the second Business Day following
dispatch and (d) in the case of mailing, on the fifth Business Day following
such mailing.

         19.     Entire Agreement; Amendment Or Waiver.

         (a)     This Agreement (together with all of the exhibits hereto,
which are incorporated by reference herein and constitute an integral part
hereof) constitutes the entire agreement and understanding among NBHI and
Beverly with respect to the subject matter hereof, and supersedes any and all
prior oral and written agreements, commitments and understandings among the
parties hereto with respect to such subject matter.

          (b)    This Agreement may be amended, supplemented or modified, and
the observance of any provision hereof may be waived, only by a written
instrument making specific reference to this Agreement, signed by the party (or
parties) against whom the enforcement of any amendment, supplement or
modification or waiver is sought. No waiver by any party of any condition, and
no breach of any provision, term, covenant, representation or warranty
contained in this Agreement (whether by conduct or otherwise) in any one or
more instances, shall be deemed to be a waiver of such condition for any other
purpose, or, as the case may be, a breach of any other provision, term,
covenant, representation or warranty set forth in this Agreement.





                                       5
<PAGE>   41
         20.     Severability. If at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be invalid, void or otherwise unenforceable (whether as a
matter of law or equity) the invalidity or unenforceability of such provision
shall have no effect upon and shall not impair the validity or enforceability
of any other provision of this Agreement.

         21.     Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Delaware without
regard to the conflict of laws principles of such state.

         22.     Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, and all of which together
shall constitute but one and the same original instrument.

         23.     Headings. The headings of the paragraphs and sections of this
Agreement have been inserted for convenience of reference only and are not
intended to, and shall not, restrict, modify or otherwise affect any of the
terms or provisions hereof.





                                       6
<PAGE>   42
         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

                                        BEVERLY ENTERPRISES, INC.



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


                                        NEW BEVERLY HOLDINGS, INC.




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




                                       7
<PAGE>   43
                                  ATTACHMENT 1

                                    SERVICES

         1.      Cash Management. Services include setting up or closing-out
unit bank accounts, drafting funds out of unit bank accounts, distribution of
accounts payable checks, reconciliation of accounts payable and payroll
checking accounts, investment of excess funds, handling credit card issues and
other banking services as required

         2.      Compensation & Benefits. Administrative services, if any,
relating to the transfer of compensation and benefit plans to Beverly and
providing information in connection therewith as agreed to by the parties.

         3.      Management Information Systems. Includes all services related
to the processing of computer systems such as general ledger, payroll, fixed
assets, accounts receivable, accounts payable, etc ("MIS"). Also includes the
printing of all computer generated reports.

         4.      License & Taxes. Services include handling anything to do with
personal property tax to include filing and payment of taxes due on a timely
basis.

         5.      MIS Support. Services associated with the implementation and
support of MIS data processing hardware, software and systems.

         6.      HR Support. Services associated with maintaining the human 
resources system.

         7.      Risk Management. Services include procuring and maintaining
insurance coverage against risks as are ordinarily insured against by owners of
an Institutional Pharmacy Business and administering claims thereunder.

         8.      Legal. Services include providing legal advice and service to
Beverly in connection with the Institutional Pharmacy Business. In connection
therewith, NBHI may retain the services of outside counsel, who may be counsel
to NBHI, and bill Beverly for the fees and expenses of such counsel.





                                       8
<PAGE>   44
                                  ATTACHMENT 2


Schedule of Costs for Administrative Services

Costs for all Services provided hereby shall be as agreed to by the parties to
this Agreement and by Capstone; provided, however, that in no event shall such
costs be less than the fair market value of such costs based upon the terms and
conditions arrived at by Beverly, NBHI and Capstone bargaining at arm's length.





                                       9
<PAGE>   45
                                                                      EXHIBIT C
                                                           Provided Pursuant to 
                                     Section 2.13 of the Distribution Agreement


                  TAX ALLOCATION AND INDEMNIFICATION AGREEMENT

                 TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (this
"Agreement") dated as of , 1997, among Beverly Enterprises Inc. ("BEI"), a
Delaware Corporation, New Beverly Holdings, Inc. ("NBHI"), a Delaware
Corporation, and their respective subsidiaries (hereinafter "BEI and
Subsidiaries" and "NBHI and Subsidiaries").

                 WHEREAS, the parties to this Agreement are currently members
("Members") of an affiliated group (the "Group") within the meaning of Section
1504(a) of the Internal Revenue Code of 1986 (the "Code"), of which BEI is the
common parent;

                 WHEREAS, BEI, as the common parent of the Group, has filed and
will file consolidated federal income tax returns ("Group Tax Returns") and
other tax returns on behalf of the Group for certain periods relevant hereto;

                 WHEREAS, as a result of the proposed distribution by BEI of
its entire stockholdings in NBHI to BEI's shareholders (the "Distribution"),
pursuant to an Agreement and Plan of Distribution By and Among Beverly
Enterprises, Inc., New Beverly Holdings, Inc., and Capstone Pharmacy Services,
Inc. ("Capstone"), dated as of April 15, 1997 (the "Distribution Agreement"),
NBHI and Subsidiaries will cease to be Members of the Group as of the date of
the distribution (the "Distribution Date");

                 WHEREAS, Members of the Group may be subject to state income
and franchise tax liabilities on a combined or consolidated basis for periods
both before and after the aforementioned transactions; and

                 WHEREAS, BEI and Subsidiaries (the "BEI Subgroup" as
constituted following the Distribution) and NBHI and Subsidiaries (the "NBHI
Subgroup" as constituted following the Distribution) desire to set forth their
rights and obligations with respect to certain tax liabilities.

                 NOW THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
<PAGE>   46
                                     - 2 -


                 1.       Applicable Period; Tax Period. For purposes of this
Agreement, the term "Applicable Period" shall refer to the period January 1,
1996 through the date on which NBHI and Subsidiaries cease to be Members of the
Group. The term "Tax Period" shall refer to all taxable periods beginning or
ending in the Applicable Period.

                 2.       Return Filing Responsibilities.

                          a.      If the Group Tax Return for taxable year 1996
is filed before the Distribution Date, BEI shall be responsible for preparing
and filing such Group Tax Return in a manner which fairly reflects the
interests of BEI and Subsidiaries and NBHI and Subsidiaries. If the Group Tax
Return for taxable year 1996 is filed after the Distribution Date, NBHI shall
be responsible for preparing such Group Tax Return in a manner which fairly
reflects the interests of BEI and Subsidiaries and for furnishing the completed
Group Tax Return to BEI in time to permit the timely signing and filing of such
Return by BEI. BEI shall be responsible for preparing and filing the Group Tax
Return for taxable year 1997 in a manner which fairly reflects the interests of
NBHI and Subsidiaries. NBHI will be responsible for providing to BEI for
taxable year 1997 the information relating to NBHI and Subsidiaries which is
needed for the preparation of the taxable year 1997 Group Tax Return, and the
information so provided will be included in such Group Tax Return without
modification, provided that positions taken by NBHI have a realistic
possibility of being sustained on their merits. NBHI will determine the items
of income, gain, loss, deduction and credit of the NBHI Subgroup to be included
on the Group Tax Return for taxable year 1997 by using the "closing of the
books" method described in Treas.  Reg. Section 1.502-76(b)(2)(i) as modified
by Treas. Reg. Section 1.502-76(b)(2)(iii) to permit a ratable allocation of
the closing month's items if the Date of Distribution occurs at a time other
than the last day of a month. NBHI shall provide such assistance and documents,
without charge, as may reasonably be requested by BEI in the preparation of the
1997 Group Tax Return. BEI shall provide to NBHI a copy of each Group Tax
Return as filed for each Tax Period.

                          b.      All Group Tax Returns filed after the date of
this Agreement, in the absence of a controlling change in law or
<PAGE>   47
                                     - 3 -


circumstances, shall be prepared on a basis consistent with the elections,
accounting methods, conventions and principles of taxation used for the most
recent taxable periods for which Group Tax Returns have been filed, and in a
manner that does not unreasonably accelerate deductions or defer income to the
advantage of one Subgroup and corresponding disadvantage of the other Subgroup.

                 3.       Group Tax Liability. For purposes of this Agreement,
the term "Group Tax Liability" shall mean the consolidated federal income tax
liability, if any, reported on the Group Tax Return (as adjusted under Section
6 of this Agreement).

                 4.       Allocation of Group Tax Liability. If the Group Tax
Liability for any Tax Period includes alternative minimum tax imposed by
section 55 of the Code, the total amount of such alternative minimum tax shall
be allocated to the NBHI Subgroup. The remaining portion of the Group Tax
Liability (after reduction for alternative minimum tax) shall be apportioned as
follows: The amount allocable to the BEI Subgroup shall be equal to the federal
income tax liability of the Pharmacy Subsidiaries (as defined in the
Distribution Agreement) (the "Pharmacy Subsidiaries") for the Tax Period
determined as though the Pharmacy Subsidiaries had filed a separate
consolidated federal income tax return for that period; and the amount
allocable to the NBHI Subgroup shall be equal to (a) for taxable year 1996 the
remaining portion of the Group Tax Liability, and (b) for taxable year 1997 the
remaining portion of the Group Tax Liability determined as if the Group Tax
Return had included only amounts relating to the BEI Subgroup and the NBHI
Subgroup and no amounts relating to Capstone.

                 5.       Payments Relating to Allocable Tax Liability. For any
Tax Period for which a Group Tax Return is filed after April 15, 1997, the NBHI
Subgroup shall be liable for the amount allocated to the NBHI Subgroup under
Section 4 reduced by the excess of (a) the total amount of estimated federal
income taxes paid by BEI with respect to any portion of such Tax Period which
occurs on or before the Distribution Date, over (b) the amount included as a
payable to BEI for federal income taxes with respect to such Tax Period by
Pharmacy Subsidiaries on the
<PAGE>   48
                                     - 4 -


audited financial statements of Pharmacy Corporation of America. In applying
clause (b) of the preceding sentence, for the Tax Period commencing January 1,
1997, the amount to be used is the payable described in clause (b) but
determined as of April 15, 1997. If the amount allocated to the NBHI Subgroup
under Section 4 for any Tax Period reduced as provided above is a positive
number, such net amount shall be a joint and several liability of NBHI and
Subsidiaries enforceable by BEI and Subsidiaries under the terms of this
Agreement, and requiring NBHI and Subsidiaries promptly to transmit payment of
such net amount to BEI so that such payment may be included with the filing of
the Group Tax Return for such Tax Period. NBHI and Subsidiaries shall be
jointly and severally liable for any interest or penalties resulting from their
failure to tender such payment timely. If the amount allocated to the NBHI
Subgroup under Section 4 for any Tax Period reduced as provided above is a
negative number, BEI and Subsidiaries shall be jointly and severally liable for
the payment of an amount equal to such negative number to NBHI. In addition, if
an estimated payment for federal income taxes is required after the Date of
Distribution for a period that includes the Date of Distribution, NBHI shall
pay to BEI the share of such estimated tax payment attributable to NBHI and
Subsidiaries so that BEI may timely pay required estimated federal income taxes
for that period. BEI shall promptly provide NBHI with evidence of the timely
payment of the Group Tax Liability for each Tax Period and each installment of
estimated taxes.

                 6.       Audits and Other Adjustments.

                          a.      If as a result of any (i) filing of an
amended return or claim for refund (other than an amended return or claim to
which section 6b applies), (ii) final determination or settlement with the
Internal Revenue Service (the "IRS"), or (iii) court decision, relating to a
Group Tax Return for any Tax Period or any taxable period prior to the
Applicable Period:

                                  (1) there is an increase in the Group Tax
Liability, then each Subgroup shall be allocated the portion of the increase in
the Group Tax Liability that is attributable to it under the apportionment
method described in Section 4, plus any allocable interest and penalties ; or
<PAGE>   49
                                     - 5 -



                                  (2) there is a reduction in the Group Tax
Liability, then each Subgroup shall be allocated the portion of the refund from
such reduction in the Group Tax Liability that is attributable to it under the
apportionment method described in Section 4, plus any allocable interest.

                          b.      If an amended return or claim for refund is
filed by the BEI Subgroup as a result of a net operating loss carryback, or is
filed by the BEI Subgroup or the NBHI Subgroup as a result of a capital loss
carryback, from a taxable period commencing after the Distribution Date to any
Tax Period or any taxable period prior to the Applicable Period, and such
amended return or claim for refund results in a reduction in the Group Tax
Liability, then the Subgroup which filed the amended return or claim for refund
shall be entitled to the entire refund (including any interest thereon)
resulting from such reduction. If, however, as a result of any subsequent
determination, settlement or court decision, there is an increase in such Group
Tax Liability, then the increase shall be allocated first to the party which
obtained the refund up to the amount of the refund of tax, and then to both
Subgroups in accordance with Section 6a. NBHI agrees to elect under Code
section 172(b)(3) to waive its net operating loss carryback period with respect
to each of the first three taxable years of the NBHI Subgroup commencing after
the Distribution Date.

                          c.      If, for a taxable period commencing after the
Distribution Date, any member of the NBHI Subgroup incurs a capital loss which
it would be entitled to carry back to reduce income of the NBHI Subgroup
included on a Group Tax Return for a prior period, but such carryback or any
portion thereof is not allowable because the prior period's income has already
been reduced by a capital loss incurred by the BEI Group (including Capstone
and subsidiaries) for any period ending after the Distribution Date, BEI shall
reimburse NBHI for the amount of income taxes plus interest that would have
been refunded by the IRS had such NBHI capital loss carryback been allowable.
To the extent any portion of a carryback which was not allowable to NBHI, and
in respect of which NBHI received reimbursement from BEI, is allowed as a
carryover within the first five taxable years of NBHI commencing after the
Distribution Date, NBHI shall pay BEI the amount of the reduction in income
taxes resulting
<PAGE>   50
                                     - 6 -


from the use of such carryover, but not in excess of the reimbursement of
income taxes received from BEI under the preceding sentence.

                          d.      To the extent that the computation under
Section 6(a) or (b) results in NBHI having a net payment liability, such amount
shall be paid by NBHI to BEI; and, to the extent that it results in NBHI having
a net amount receivable, such amount shall be paid by BEI to NBHI. The
appropriate liability or receivable, as the case may be, together with any
interest or penalties thereon, shall be paid in a timely fashion and shall be a
joint and several liability of BEI and Subsidiaries or NBHI and Subsidiaries,
as the case may be.

                 7.       Conduct of Disputes. If BEI as common parent of the
Group receives notice of any audit or other examination by the IRS of any Group
Tax Return, BEI shall promptly notify NBHI of such audit or examination. BEI
may, at its option upon timely notice to NBHI, control the conduct of any audit
and the defense of any suit, action or proceeding resulting therefrom relating
to the tax liability of the BEI Subgroup as determined under Section 4. NBHI
may, at its option upon timely notice to BEI, control the conduct of any audit
and the defense of any suit, action or proceeding resulting therefrom relating
to the tax liability of the NBHI Subgroup as determined under Section 4. Each
party will cooperate with the other in these proceedings and provide such
assistance and documents, without charge, as may reasonably be requested by the
other party for such purpose.

                 8.       Certain Post-Applicable Period Returns. For any
taxable year in which the federal income tax liability of NBHI and Subsidiaries
is not reported on the same tax return as that of BEI and Subsidiaries, the
person or persons preparing the returns and representing the taxpayers in any
examination or appeal shall do so in a manner which fairly reflects the
interests of all taxpaying entities.


                 9. State and Local Income and Franchise Taxes.

                          a.      In the case of any taxable year for which a
consolidated income or franchise tax return is filed with any
<PAGE>   51
                                     - 7 -


state or local jurisdiction, which return includes any member of NBHI and
Subsidiaries, NBHI shall pay to BEI the proportionate share of any taxes
reported on such return attributable to NBHI and Subsidiaries computed in a
manner consistent with the principles set forth in Section 4 of this Agreement.
The principles set forth in Sections 2, 5, 6, 7 and 8 shall also be applicable
to state and local income and franchise tax returns.

                          b.      If the state income or franchise tax
liability of BEI or any one or more of its direct or indirect subsidiaries
(other than NBHI and Subsidiaries) is determined by reference to the income,
loss, assets, expenses, or activities of any member of NBHI and Subsidiaries:

                                  (i)      NBHI shall cause a payment to be
made to BEI equal to the amount, if any, by which the State tax liability of
BEI and Subsidiaries (determined on a with and without basis) is increased
because of the income, loss, assets, expenses, or activities of that member or
members of NBHI and Subsidiaries;

                                  (ii)     BEI shall cause a payment to be made
to NBHI equal to the amount, if any, by which the State tax liability of BEI
and Subsidiaries (determined on a with and without basis) is reduced because of
the income, loss, assets, expenses, or activities of that member or members of
NBHI and Subsidiaries; and

                                  (iii) Such payments shall be adjusted to
reflect any examination adjustments or amended returns consistent with the
principles set forth in Section 6.

                          c.      Principles similar to those set forth in
Section 9(b) shall apply if the state income or franchise tax liability of any
member of NBHI and Subsidiaries is determined by reference to the income, loss,
assets, expenses, or activities of BEI or one or more of its direct or indirect
subsidiaries (other than NBHI and Subsidiaries).

                          d.      No state income or franchise tax return or
report shall be made on a basis that combines or consolidates the income of any
member of NBHI and Subsidiaries with any member of BEI and Subsidiaries, unless
such combined reporting has been
<PAGE>   52
                                     - 8 -


approved by the boards of directors of both BEI and NBHI or has been determined
to be required by the taxing authority of the state in which such return or
report is filed.

                          e.      NBHI agrees to pay all state taxes that arise
from the transfer of assets of the Pharmacy Subsidiaries to NBHI and
Subsidiaries in connection with the restructuring related to the Distribution.

                 10.      Indemnification. Each party shall pay and be
responsible for, and shall indemnify, defend and hold harmless all other
parties to this Agreement from and against all liabilities allocated to it
under this Agreement.  If any party pays or has paid any Group Tax Liability or
state or local income or franchise tax liability for which another party to
this Agreement is or becomes liable pursuant to the terms of this Agreement,
appropriate reimbursement shall be made no later than 10 days after demand
therefore The portion of any refund, rebate or reimbursement received by any
party to which another party is entitled pursuant to this Agreement shall be
paid over within 10 days of receipt to the party which is entitled thereto. Any
payments required to be made between the parties pursuant to this Agreement
which are not made in a timely fashion shall bear interest calculated at the
rate specified under Section 6621(a)(2) of the Code (the "Underpayment Rate")
from the date such payment is due pursuant to this Agreement to the date the
payment is made. In all other respects Section 3.4 and Section 3.5 of the
Distribution Agreement shall govern the indemnification procedures and payments
under this Agreement.

                 11.      Record Retention. BEI agrees to (i) retain all Group
Tax Returns, related schedules and workpapers, and all material records and
other documents as required under Section 6001 of the Code and the regulations
promulgated thereunder relating thereto ("Tax Records") existing on the date
hereof or relating to Tax Periods ending with the Distribution Date, for 7
years following the Distribution Date, or such longer period as a tax
deficiency may be assessed or a refund claim filed under applicable periods of
limitation, and (ii) allow NBHI and its representatives (and representatives of
any of its affiliates), at times and dates reasonably acceptable to BEI, to
inspect, review and make copies of such records, and have access to such
<PAGE>   53
                                     - 9 -


employees, as NBHI may reasonably deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours and without
disruption to BEI's business.

                 12.      Complete Agreement. This Agreement shall constitute
the entire agreement among the parties with respect to the subject matter
hereof and shall supersede any previous negotiations, commitments and writings
with respect to such subject matter.

                 13.      Successors and Assigns. This Agreement and all of its
provisions hereof shall be binding upon and shall inure to the benefit of the
parties and their respective successors and permitted assigns.

                 14.      Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to its principles of conflicts of law.

                 15.      Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties hereto.

                 16.      Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made.

                 17.      Notices, Communications. All notices and other
communications hereunder shall be in writing and shall be delivered in the
manner and at the address (unless subsequently notified to the contrary in the
manner provided therein) as provided in the Distribution Agreement.


<PAGE>   54
                                     - 10 -

                 IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the ____ day of , 1997.




Attest                                     BEVERLY ENTERPRISES, INC.,
                                           On Behalf Of Itself And Its
                                           SUBSIDIARIES


By:                                        By:
   ---------------------------                -----------------------------

Attest                                     NEW BEVERLY HOLDINGS, INC.,
                                           On Behalf Of Itself And Its
                                           SUBSIDIARIES

By:                                        By:
   ---------------------------                -----------------------------
<PAGE>   55

                                                                     EXHIBIT D


                                                           Provided pursuant to
                                      Section 2.13 of the Distribution Agreement


                       EMPLOYEE BENEFIT MATTERS AGREEMENT

         This Employee Benefit Matters Agreement ("Agreement"), effective as of
April 15, 1997 between BEVERLY ENTERPRISES, INC., a Delaware corporation
("Beverly"), NEW BEVERLY HOLDINGS, INC., a Delaware corporation ("NBHI"), and
Capstone Pharmacy Services, Inc., a Delaware corporation ("Capstone"), shall
govern the rights and obligations of Beverly, NBHI, and Capstone and their
respective subsidiaries (present and future), as contemplated by the
Distribution Agreement (as hereinafter defined) and the Restructuring (as
hereinafter defined) with respect to compensation and benefits of the employees
and former employees of each of Beverly and NBHI and their respective
subsidiaries, in connection with the transactions effected by the Distribution,
as described below. The term Beverly, when used in this Agreement, shall be
construed to mean Beverly, Pharmacy Corporation of America, a Delaware
corporation ("PCA") and each subsidiary of PCA or Beverly which is engaged
primarily in the institutional pharmacy business (collectively, the "Pharmacy
Subsidiaries"), and shall not be construed to include NBHI where such
construction would have the effect of negating any obligation of Beverly or
Capstone hereunder. The term NBHI, when used in this Agreement, shall be
construed to mean NBHI and each other subsidiary of Beverly which is not a
Pharmacy Subsidiary, and shall not be construed to include Beverly where such
construction would have the effect of negating any obligation of NBHI
hereunder. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Merger Agreement or in the Distribution Agreement
(both as defined below).

                                    RECITALS

         WHEREAS, Beverly is entering into an Agreement and Plan of Merger
dated as of April 15, 1997 (the "Merger Agreement") with Capstone Pharmacy
Services, Inc., a Delaware corporation ("Capstone") pursuant to which Beverly
will merge with and into Capstone, with Capstone as the Surviving Corporation
on the terms specified or referred to therein (the "Merger"); and

         WHEREAS, prior to the Merger, Beverly and its subsidiaries will
transfer to NBHI, upon the terms and subject to the conditions set forth in the
Agreement and Plan of Distribution by and between Beverly and NBHI dated as of
April 15, 1997 (the "Distribution Agreement"), all of the Remaining Health Care
Assets and Remaining Health Care Liabilities of Beverly and its subsidiaries
(the "Restructuring"), following which all of the NBHI Stock will be
distributed (the "Distribution") to the stockholders of Beverly immediately
prior to the Merger; and


<PAGE>   56


         WHEREAS, the purpose of the Restructuring is to make possible the
Merger by divesting Beverly of the businesses and operations conducted or to be
conducted by NBHI, which Capstone is unwilling to acquire; and

         WHEREAS, the Distribution Agreement sets forth or provides for certain
agreements between Beverly and NBHI in consideration of the separation of their
ownership, including this Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises contained in this Agreement, the Distribution Agreement and in the
other agreements and instruments provided for in such agreements, the parties
hereto agree as follows.

                                   ARTICLE I

                                  Definitions

         "Beverly Stock Plans" means the 1981 Beverly Incentive Stock Option 
Plan, 1985 Beverly Nonqualified Stock Option Plan, Amended and Restated Beverly
Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, Beverly Enterprises,
Inc. Annual Incentive Plan, Beverly Enterprises, Inc. Non-Employee Directors'
Stock Option Plan, the 1996 Beverly Enterprises, Inc. Long-Term Incentive Plan,
Beverly Enterprises, Inc. Equity Incentive Plan, American Transitional
Hospitals, Inc. 1993 Nonqualified Stock Option Plan assumed by Beverly, PMSI
1990 Incentive and Nonstatutory Stock Option Plan assumed by Beverly, and
Insta-Care Holdings, Inc. First Employees Stock Option Plan assumed by Beverly.

         "Capstone Conversion Number" means the number of shares of Capstone
stock into which a single share of Beverly stock outstanding immediately prior
to the Effective Time of the Merger would have been converted pursuant to the
Merger Agreement.

         "Consent and Release" means an agreement executed by a Transferred
Employee or Retained Employee consenting to the substitution of stock options,
performance shares and phantom shares issued by NBHI or Capstone, as the case
may be, for Beverly stock options, performance shares and phantom shares,
releasing Beverly, NBHI and Capstone from any and all liability under any
Beverly stock option, performance share or phantom share, and agreeing to the
amendment of all option, incentive, employment, change in control or similar
agreements and plans to which he or she is a party or beneficiary, to exclude
the Distribution and Merger and the accompanying restructuring transactions
from the definition of a "change in control".

         "Distributed Stock Fraction" means a fraction representing (i) the
Fair Market Value of a share of NBHI stock immediately after the Time of
Distribution which, for purposes of this determination, shall mean such value
of a share of NBHI stock, trading on a "when issued" basis, on the Ex-Dividend
Date, divided by (ii) the Fair Market Value of a share of Beverly stock
immediately before the Time of Distribution which, for purposes of this
determination, shall mean such value on the Last Trading Date.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Ex-Dividend Date" means the date on which shares of Beverly stock
will commence trading on the New York Stock Exchange on an ex-dividend basis
(i.e., shares purchased on or after such date will not entitle the holder to
receive shares of NBHI stock in the Distribution).

         "Fair Market Value" means, on any given date, (i) if the stock to be
valued is listed on the New York Stock Exchange, the last reported sales price
per share of such stock as reported on the New York Stock Exchange composite
tape on such date, as reported by The Wall Street Journal, and (ii) if the
stock to be valued is not listed on the New York Stock Exchange, the last
reported sales price per share of such stock on the NASDAQ National Market
System on such date, as reported by The Wall Street Journal.


                                       2
<PAGE>   57

         "Last Trading Date" means the last trading day before the Ex-Dividend
Date.

         "Retained Employee" means each person employed by Beverly or any of
the Pharmacy Subsidiaries primarily in connection with the Institutional
Pharmacy Business. Where appropriate, such term shall also include former
employees and current and former independent contractors of Beverly or any of
the Pharmacy Subsidiaries who provide or previously provided services primarily
in connection with the Institutional Pharmacy Business.

         "Retained Stock Fraction" means a fraction representing (i) the Fair
Market Value of a share of Beverly stock immediately after the Time of
Distribution which, for purposes of this determination, shall mean such value
on the Ex-Dividend Date, divided by (ii) the Fair Market Value of a share of
Beverly stock immediately before the Time of Distribution which, for purposes
of this determination, shall mean such value on the Last Trading Date.

         "Transferred Employee" means each person employed by Beverly or any
subsidiary (excluding the Pharmacy Subsidiaries) of Beverly, other than the
Retained Employees. Where appropriate, such term shall also include former
employees and current and former independent contractors who provide or
previously provided services to Beverly or a Beverly Subsidiary other than a
Pharmacy Subsidiary or the Institutional Pharmacy Business.

         Non-Tax Qualified Benefit Plans" means the Beverly Enterprises
Deferred Compensation Plan, Beverly Enterprises Executive Deferred Compensation
Plan, Beverly Enterprises Executive Retirement Plan, Beverly Enterprises
Executive Life Insurance Plan, Beverly Enterprises Retirement Plan for Board of
Directors, Beverly Enterprises Non-Employee Director Deferred Compensation
Plan, Beverly Enterprises Executive Survivorship Income Plan, Beverly
Enterprises Executive Split Dollar Life Insurance Plan, Beverly Enterprises
and/or Pharmacy Corporation of America Change of Control Agreements, Beverly
Enterprises and/or Pharmacy Corporation of America Employment Agreements, and
Beverly Enterprises and/or Pharmacy Corporation of America Severance Agreements
for Robert Van Tuyle, Robert Wotil, Michael Hayden, and Ronald C. Kayne.

         "Welfare Plans" means the Beverly Enterprises, Inc. Associates Group 
Health Plan, Beverly Enterprises, Inc. Dental Plan--Management and
Non-Management, Beverly Enterprises, Inc. Life Insurance Plan, Beverly
Enterprises, Inc. Executive Long-Term Disability Plan, Beverly Enterprises,
Inc. Executive Physical Program, Beverly Enterprises, Inc. Executive Medical
Reimbursement Plan, Beverly Enterprises, Inc. Group Long-Term Disability Plan,
Beverly Enterprises, Inc. Group Business Travel Accident Plan, Beverly
Enterprises, Inc. Severance Plan, Pharmacy Corporation of America Severance
Plan, Beverly Enterprises, Inc. Health Care Spending Account, Beverly
Enterprises, Inc. Dependent Care Assistance Plan, Beverly Enterprises, Inc.
Vacation Policy, Pharmacy Corporation of America Vacation Policy, Beverly
Enterprises, Inc. Sick Pay Policy for Exempt Associates, Beverly Enterprises,
Inc. Sick Pay Policy for Non-Exempt Associates, Pharmacy Corporation of America
Sick Pay Policy for Exempt Co-Workers, Pharmacy Corporation of America Sick Pay
Policy for Non-Exempt Co-Workers, Beverly Enterprises, Inc. Pre-Tax Premium
Plan, Beverly Enterprises, Inc. Group Universal Life 


                                       3
<PAGE>   58


Insurance Program, Beverly Enterprises, Inc. Insurance At Work Program, Beverly 
Enterprises, Inc. Vision One Discount Program, and Beverly Enterprises, Inc.
Voluntary Coverage Program.

                                   ARTICLE II

                  Salary, Wages, Payroll and Related Benefits

         2.1 Prior to the Time of Distribution, Beverly and NBHI shall
cooperate to transfer each Transferred Employee to the employ of NBHI or the
appropriate subsidiary of NBHI, if required, effective as of the Time of
Distribution.

         2.2 With respect to the Transferred Employees but not the Retained
Employees, except as specifically provided in this Agreement, NBHI shall assume
the liabilities and obligations regarding, and continue to be responsible for,
all claims made by or on behalf of such Transferred Employees in respect of
salary, wages, benefits, stock based compensation, non-qualified plans,
qualified plans, welfare plans, severance pay, salary continuation, COBRA
continuation and similar obligations relating to the continued employment, or
the termination or alleged termination of such persons' employment with NBHI or
Beverly, including, without limitation, by reason of consummation of the
transactions contemplated in the Distribution Agreement or the Merger Agreement
or otherwise. All such liabilities and obligations shall be deemed Remaining
Health Care Liabilities, and Beverly shall not assume nor be liable in any way
whatsoever for any such liabilities after the Time of Distribution, and NBHI
shall indemnify and hold Beverly and Capstone harmless with respect thereto.

         2.3 With respect to Retained Employees, except as specifically
provided in this Agreement, Beverly shall retain and Capstone shall assume the
liabilities and obligations with respect to, and continue to be responsible
for, all liabilities and obligations whatsoever in connection with claims made
by or on behalf of such persons, including, without limitation, claims for
salary, wages, benefits, stock based compensation, non-qualified plans,
qualified plans, welfare plans, severance pay, salary continuation, COBRA
continuation, all other obligations relating to the continued employment,
unpaid and unused vacation benefits accrued and earned prior to the Time of
Distribution, and the termination or alleged termination of such persons'
employment with Beverly, Capstone, or any of the Pharmacy Subsidiaries,
including by reason of the consummation of the transactions contemplated in the
Distribution Agreement or the Merger Agreement or otherwise and NBHI shall not
assume nor be liable in any way whatsoever for any such liabilities on or after
the Time of Distribution, and Beverly and Capstone hereby indemnify and hold
NBHI harmless with respect thereto.

                                  ARTICLE III

                              Beverly Stock Plans

         3.1 Prior to the Time of Distribution, Beverly, NBHI and Capstone
shall (i) cooperate to (x) amend the Beverly Stock Plans in such manner, if
any, as may be necessary to provide for the assumption of such plans and
certain options to purchase shares of Beverly Common Stock ("Beverly Options"),
and certain restricted shares, performance shares and phantom shares of 


                                       4
<PAGE>   59


Beverly stock granted thereunder or elsewhere, by Capstone, as Beverly's
successor under the Merger Agreement, to the extent set forth in Section 3.6
below, and (y) cause NBHI to adopt new stock plans as described in Section 3.2
hereof, and (ii) take such other steps (consistent with applicable law and the
terms of such affected plans) as may be necessary to prevent consummation of
the transactions contemplated by this Employee Benefits Matters Agreement, the
Distribution Agreement and the Merger Agreement (including the transfer of
employment of any Transferred Employee) from causing, resulting in or being
treated as a termination of employment or a change in control with respect to
the Beverly Stock Plans, except to the extent set forth herein.

         3.2 Prior to the Time of Distribution, NBHI shall adopt one or more
stock option plans, the participants in which, initially, shall be all
Transferred Employees who (i) at the Time of Distribution, hold outstanding
Beverly Options and/or restricted shares, performance shares or phantom shares
of Beverly stock, and (ii) where applicable, agree to release Beverly, NBHI and
Capstone from any and all liability under the Beverly Stock Plans, including
any liability that would arise by virtue of a change in control arising under
such Plans or under any option or share granted thereunder.

         3.3 Effective immediately before the Time of Distribution, with
respect to each Retained Employee and Transferred Employee who has executed and
delivered to Beverly a Consent and Release, (i) each Beverly Option then
outstanding, regardless of whether an incentive stock option or a nonqualified
stock option, shall become fully vested and exercisable; (ii) the restrictions
(e.g., risk of forfeiture) to which each restricted share of Beverly stock then
outstanding is subject shall lapse and each such share shall become fully
vested; (iii) each phantom share granted with respect to Beverly stock, to the
extent any such grant is then outstanding, shall become fully vested; and (iv)
each performance share of Beverly stock then outstanding shall become vested to
the extent of fifty percent (50%) of such share. No such vesting shall occur at
such time with respect to any Retained Employee or Transferred Employee who has
declined to execute and deliver to Beverly a Consent and Release.

         3.4 (a) Effective immediately after the Time of Distribution, NBHI
shall substitute for each outstanding Beverly Option held by a Transferred
Employee, subject to the optionee's consent to the extent required, a new NBHI
option to acquire shares of NBHI Common Stock, which option shall be of the
same character (i.e., incentive stock option or nonqualified stock option, as
the case may be, though recognizing that any such substituted NBHI option will
not qualify as an incentive stock option in the hands of an optionee who is not
an employee of NBHI or one of its subsidiaries) and subject to substantially
the same terms and conditions, including the vesting schedule, as the Beverly
Option for which it is substituted; provided, however, that, solely with
respect to Transferred Employees who have executed and delivered to Beverly a
Consent and Release, (i) the exercise price per share of NBHI stock for which
the option may be exercised shall be an amount equal to the product of (x) the
per share exercise price under the Beverly Option immediately prior to the Time
of Distribution, and (y) the Distributed Stock Fraction, and (ii) the number of


                                       5
<PAGE>   60


NBHI shares for which the option may be exercised shall be an amount equal to
the quotient of (x) the number of shares of Beverly stock for which the Beverly
Option could have been exercised, had it been fully vested, immediately prior
to the Time of Distribution, divided by (y) the Distributed Stock Fraction. No
such adjustment to the exercise price and number of NBHI shares for which the
option may be exercised shall apply to options held by Transferred Employees
who have declined to execute and deliver to Beverly a Consent and Release. NBHI
shall indemnify Capstone and hold Capstone harmless for any costs, expenses, or
liabilities incurred by Capstone directly attributable to the refusal of any
Transferred Employee to consent to the substitution of NBHI options and/or NBHI
phantom shares for Beverly Options and/or phantom shares granted with respect
to Beverly stock. Capstone shall promptly notify NBHI of any claim attributable
to any such refusal to consent and shall cooperate with NBHI in responding
thereto; provided, however, that NBHI shall have sole discretion in determining
whether and how to respond to any such claim, at its sole expense, including,
without limitation, contesting or settling any such claim.

                  (b) Effective immediately after the Time of Distribution,
NBHI shall also substitute, with the grantee's consent to the extent required,
(i) for each then outstanding unvested phantom share granted with respect to
Beverly stock and held by a Transferred Employee, new unvested phantom shares
which shall be granted with respect to NBHI stock, and (ii) for each then
outstanding unvested performance share or restricted share of Beverly stock
held by either (A) a Transferred Employee or (B) a Retained Employee who
declines to execute and deliver to Beverly a Consent and Release, new unvested
performance shares or restricted shares of NBHI stock, as the case may be;
provided, however, that, with respect to a Transferred Employee who has
executed and delivered to Beverly a Consent and Release, the number of new
phantom or performance shares, as the case may be, substituted for each phantom
or performance share of Beverly stock, shall be equal to the quotient of one
divided by the Distributed Stock Fraction; but no such adjustment to the number
of phantom, performance or restricted shares of NBHI stock shall be made with
respect to shares held by persons, whether Transferred Employees or Retained
Employees, who have declined to execute and deliver to Beverly a Consent and
Release; provided, further, that, with respect to a Retained Employee who has
executed and delivered to Beverly a Consent and Release, no new phantom,
performance or restricted shares of NBHI stock shall be issued in substitution
for outstanding unvested phantom, performance or restricted shares of Beverly
stock; and provided, further, that, in all other respects, all such shares
shall be subject to the same terms and conditions, including vesting
requirements (as adjusted to take into account the transactions referred to
herein, including, without limitation, the requirement that employment services
be performed for NBHI or one of its subsidiaries), as the phantom, performance
or restricted share, as the case may be, for which they have been substituted.

         3.5 (a) Effective immediately after the Time of Distribution, solely
with respect to each Retained Employee who has executed and delivered to
Beverly a Consent and Release, Beverly shall adjust each outstanding Beverly
Option held by a Retained Employee so as to preserve the terms and conditions
of the Beverly Option, except that, (i) the exercise price per share of Beverly
stock for which the option may be exercised shall be an amount equal to the
product of (x) the per share exercise price under the Beverly Option
immediately prior to the Time of Distribution, and (y) the Retained Stock
Fraction, and (ii) the number of Beverly shares for which the 


                                       6
<PAGE>   61


option may be exercised shall be an amount equal to the quotient of (x) the
number of shares of Beverly stock for which the Beverly Option could have been
exercised, had it been fully vested, immediately prior to the Time of
Distribution, divided by (y) the Retained Stock Fraction. No such adjustment to
the exercise price and number of Beverly shares for which the option may be
exercised shall apply to options held by Retained Employees who have declined
to execute and deliver to Beverly a Consent and Release.

                  (b) Effective immediately after the Time of Distribution,
with respect to each Retained Employee who has executed and delivered to
Beverly a Consent and Release, the number of Beverly shares represented by each
outstanding unvested performance or phantom share of Beverly stock shall be
equal to the quotient of one divided by the Retained Stock Fraction; but no
such adjustment to the number of unvested restricted, performance or phantom
shares of Beverly stock shall be made with respect to Retained Employees who
have declined to execute and deliver to Beverly a Consent and Release. With
respect to each Transferred Employee who has executed and delivered to Beverly
a Consent and Release, all outstanding unvested phantom, performance and
restricted shares of Beverly stock shall be cancelled or forfeited, as the case
may be.

         3.6 (a) As of the Effective Time of the Merger, Capstone shall assume
the Beverly Stock Plans and each Beverly Option granted thereunder that is held
by a Retained Employee, and each such option so assumed shall be exercisable
upon the same terms and conditions as under the applicable Beverly Stock Plan
and the applicable option agreement issued thereunder, except that (i) each
such option shall be exercisable for that number of shares of Capstone Common
Stock into which the number of shares of Beverly stock subject to such option
immediately prior to the Effective Time of the Merger, but after giving effect
to the adjustments described in Section 3.5 hereof, would have been converted
pursuant to the Merger Agreement if such option, had it been fully vested, had
been exercised immediately prior to the Effective Time of the Merger, and (ii)
the exercise price per share of Capstone for which the option may be exercised,
determined after giving effect to the adjustments described in Section 3.5
hereof, shall be an amount equal to the quotient of (x) such adjusted exercise
price per share of Beverly stock for which the option could have been
exercised, had it been fully vested, immediately prior to the Effective Time of
the Merger, divided by (y) the Capstone Conversion Number.

                  (b) As of the Effective Time of the Merger, Capstone shall
also assume each outstanding unvested phantom share granted with respect to
Beverly stock and held by a Retained Employee, and each outstanding unvested
performance share and/or restricted share of Beverly stock held by either a
Transferred Employee or Retained Employee, in each instance after giving effect
to the adjustments described in Section 3.5 hereof, and shall substitute (i)
for each such phantom share new unvested phantom shares which shall be granted
with respect to Capstone stock, and (ii) for each such performance share or
restricted share, as the case may be, new unvested performance shares or
restricted shares of Capstone stock; provided, however, that, the number of new
phantom, performance or restricted shares of Capstone stock substituted for
each phantom, performance or restricted share of Beverly stock, as the case may
be, shall be equal to the Capstone Conversion Number; provided, further, that,
with respect to each Transferred Employee who has executed and delivered to
Beverly a Consent and Release, all outstanding unvested phantom, performance
and restricted shares of Beverly stock shall be cancelled or forfeited, as the
case may be, and no new phantom, performance or restricted shares of Capstone
stock shall be issued in substitution therefor; and provided, further, that, in
the case of any such assumption and substitution, in all other respects all
such shares shall be subject to the same terms and conditions, including
vesting requirements (as adjusted to take into account the transactions


                                       7
<PAGE>   62


referred to herein, including, without limitation, the requirement that
employment services be performed for Capstone or one of its subsidiaries), as
the phantom, performance or restricted share, as the case may be, for which it
has been substituted.

         3.7 Capstone's obligation hereunder to assume Beverly Options, and
phantom shares of Beverly stock, and to substitute therefor options to acquire
and phantom shares of Capstone stock, shall not be subject to any provision of
the Merger Agreement limiting to 50 million the maximum number of Capstone
shares which may be issued as part of the Closing Consideration. As of April
15, 1997, to NBHI's knowledge, before taking into account the adjustments
described in this Article III, (i) the number of shares subject to Beverly
Options held by Retained Employees was 719,168, and the number of shares to
Beverly Options or unvested phantom shares held by Transferred Employees was
4,004,973; (ii) the number of unvested restricted shares of Beverly stock held
by Retained Employees was 33,500, and the number of unvested restricted and
performance shares held by Transferred Employees was 970,950; (iii) the number
of unvested performance shares of Beverly stock held by Retained Employees was
93,000; and (iv) the number of unvested phantom shares granted with respect to
Beverly stock held by Retained Employees was 888. Notwithstanding the above,
NBHI represents and warrants that the aggregate number of outstanding Beverly
Options, unvested phantom shares of Beverly stock, unvested restricted shares
of Beverly stock, and unvested performance shares of Beverly stock issued to
Retained Employees as of April 15, 1997, before taking into account the
adjustments described in this Article III, does not exceed 900,000, and
Capstone's obligation hereunder to assume Beverly Options and phantom shares of
Beverly stock for Retained Employees shall not exceed 900,000 before taking
into account the adjustments described in this Article III (reduced by the
outstanding number of unvested restricted shares of Beverly stock and unvested
performance shares of Beverly stock issued to Retained Employees, before taking
into account the adjustments described in this Article III, and assumed
hereunder); and provided further that NBHI shall indemnify and hold Capstone
harmless with respect to any assumption of Beverly Options and phantom shares
of Beverly stock issued to Retained Employees in excess of such limitation. The
parties hereto also agree that no further additional Beverly Options or phantom
shares of Beverly stock will be granted after April 15, 1997 to Retained
Employees.

         3.8 To the extent, if any, that, subsequent to the Distribution, any
unvested performance share or restricted share of NBHI stock held by a Retained
Employee shall be forfeited, any and all such forfeited shares shall revert to
NBHI. Similarly, to the extent, if any, that, subsequent to the Distribution,
any unvested performance share or restricted share of Beverly or Capstone stock
held by a Transferred Employee shall be forfeited, any and all such forfeited
shares shall revert to Beverly or Capstone, as the case may be.

                                   ARTICLE IV

                        Non-Tax Qualified Benefit Plans

         4.1 Prior to the Time of the Distribution, Capstone, Beverly and NBHI
shall cooperate to amend the Non-Tax Qualified Benefit Plans as may be
necessary to provide for (i) the assumption of such Non-Tax Qualified Benefit
Plans by NBHI to the extent set forth in Section 4.2 below and to provide for
the ongoing participation in such plans by all Transferred Employees who
previously participated therein and who execute and deliver to Beverly and NBHI
a Consent and Release, (ii) the cessation of participation, contributions, and
accruals under such assumed Non-Tax Qualified Benefit Plans by all Retained
Employees, (iii) the retention by Beverly and assumption by Capstone of all
liabilities under the Non-Tax Qualified Benefit Plans with respect to Retained
Employees, which, except in the case of individual insurance policies, annuity
contracts, severance agreements, employment contracts, or change in control
agreements relating to Retained Employees, which shall remain with Beverly and
be assumed by Capstone (the 


                                       8
<PAGE>   63


"Assumed Instruments"), shall take the form of NBHI maintaining such Plans (on
a "frozen" basis with respect to Retained Employees) and Beverly and Capstone
indemnifying and holding NBHI harmless from all costs, expenses, and
liabilities relating thereto (net of any assets attributable thereto previously
transferred to NBHI); and (iv) take such other steps (consistent with
applicable law and the terms of the affected plans) as may be necessary to
prevent the consummation of the transactions contemplated by this Agreement,
the Distribution Agreement and the Merger Agreement (including the transfer of
employment of any Transferred Employee) from causing, resulting in or being
treated as a termination of employment, cessation of service as a director or a
change of control with respect to such plans.

         4.2 Effective as of the Time of Distribution, except for the Assumed
Instruments, each of the Non-Tax Qualified Benefit Plans and any related rabbi
trusts, related trust assets, insurance policies, and annuity contracts, shall
be transferred from Beverly to NBHI and to the extent provided herein NBHI
shall assume such plans, trusts, policies, and contracts and (i) succeed
Beverly as the plan sponsor, plan administrator, employer or other party under
such plan and any agreements related thereto and be vested with any and all of
the powers, duties, rights and privileges of such plan sponsor, plan
administrator, employer or other party thereunder; (ii) with respect to the
Transferred Employees, assume and agree to perform and discharge all of the
duties and obligations of the employer, sponsor and/or plan administrator
thereunder and to pay, and be solely responsible for all of the liabilities and
obligations of any kind (whether absolute, accrued, contingent or otherwise) of
the employer, sponsor and/or plan administrator thereunder in respect of,
arising under or required to be performed with respect to the Transferred
Employees under any such plan, agreement or arrangement; and (iii) with respect
to the Retained Employees, assume and agree to perform and discharge all of the
liabilities accrued prior to the Time of Distribution under each Non-Tax
Qualified Benefit Plan other than the Assumed Instruments, and, with respect to
all such assumed Non-Tax Qualified Benefit Plan liabilities, Beverly and
Capstone hereby agree to indemnify and hold NBHI harmless from all costs,
expenses, and liabilities relating thereto, including, without limitation, any
employer matching or other contributions due thereunder (net of any assets
attributable thereto previously transferred to NBHI). Notwithstanding anything
to the contrary herein, Beverly shall retain and Capstone shall assume and be
solely responsible for all Assumed Instruments and any and all liabilities
thereunder or relating thereto (including, without limitation, any employer
matching or other contributions due thereunder).


                                       9
<PAGE>   64


                                   ARTICLE V

                         Employee Welfare Benefit Plans

         5.1 Prior to the Time of the Distribution, Beverly, Capstone, and NBHI
shall cooperate to amend the Welfare Plans as may be necessary to provide for
(i) the transfer by Beverly of such Welfare Plans and any related VEBA trusts,
trust assets, insurance policies, HMO contracts, and plan assets to NBHI and
the assumption by NBHI of the liabilities of such plans to the extent set forth
below, (ii) the ongoing participation in such plans by all Transferred
Employees (to the extent such Employees are otherwise eligible thereunder but
for the Distribution and restructuring), (iii) the cessation of participation
in such plans as of the Time of Distribution by all Retained Employees, and
(iv) take such other steps (consistent with applicable law and the terms of the
affected plan) as may be necessary to prevent the consummation of the
transactions contemplated by this Agreement, the Distribution Agreement and the
Merger Agreement (including the transfer of employment of any Transferred
Employee) from causing, resulting in or being treated as a termination of
employment with respect to such plans.

         5.2 Effective as of the Time of Distribution, except to the extent
provided below, NBHI shall assume the Welfare Plans and have transferred to it
all related trust funds, insurance policies, HMO contracts, and plan assets,
and, pursuant to the terms of such plans NBHI shall assume the liability with
respect to and honor or cause its insurance carriers to honor all claims for
benefits incurred by (i) Transferred Employees (or their dependents or
beneficiaries) under such plans at any time without interruption as a result of
the transactions contemplated by this Agreement, the Distribution Agreement or
the Merger Agreement, and (ii) Retained Employees but only for claims actually
incurred during periods ending immediately prior to the Time of Distribution,
in accordance with the terms of such plans. Beverly shall be relieved of and
shall not assume nor be liable in any way whatsoever for such above enumerated
liabilities after the Time of Distribution. On or before the Time of
Distribution, Beverly and its subsidiaries shall transfer all funds of such
plans (including funds for any contributions or premiums due from Beverly or
any subsidiaries of Beverly which have accrued as of the Time of Distribution)
either to NBHI or to the respective plans entitled to receive such transfers.
Notwithstanding the above, Beverly shall retain and Capstone shall assume all
coverage obligations and benefit liabilities for Retained Employees under the
Welfare Plans with respect to periods beginning on or after the Time of
Distribution. This retention by Beverly and assumption by Capstone shall
include, without limitation, all obligations for Retained Employees under (i)
COBRA, (ii) severance pay plans, (iii) short-term disability, sick pay and
leave of absence, (iv) waiver of premium, (v) vacation pay, and (vi) the
Beverly Executive Life Insurance Plan, Executive Survivorship Income Plan, and
Executive Split Dollar Life Insurance Plan, regardless of when such benefits
accrued or vested, as long as such Retained Employees were alive as of the Time
of Distribution.

         5.3 Notwithstanding the above, Beverly's and Capstone's liability for
Retained Employee COBRA obligations existing as of the Time of Distribution
shall be discharged by NBHI administering and paying for such obligations and
Beverly and Capstone indemnifying and holding NBHI harmless for all costs,
expenses, and liabilities relating thereto.



                                      10
<PAGE>   65


                                   ARTICLE VI

                    Tax-Qualified Defined Contribution Plans

         6.1 Prior to the Time of the Distribution, Beverly, Capstone and NBHI
shall cooperate to amend each of the Beverly Enterprises 401(k) Savings Plus
Plan and the Beverly Enterprises, Inc. 1988 Employee Stock Purchase Plan as may
be necessary to provide for (i) the assumption of such plans by NBHI as set
forth below, (ii) the ongoing participation therein by the Transferred
Employees (to the extent otherwise eligible thereunder), (iii) the cessation of
participations, contributions, and accruals with respect to Retained Employees,
(iv) the amendment of the Pharmacy Corporation of America Retirement Savings
Plan to provide for the assumption and sponsorship of such Plan by Capstone,
whereby Beverly will retain such Plan and after the Merger Capstone will become
the plan sponsor, named employer and fiduciary, and plan administrator
thereunder, and (v) the taking of such other steps (consistent with applicable
law and the terms of the affected plan) as may be necessary to prevent the
consummation of the transactions contemplated by this Agreement, the
Distribution Agreement and the Merger Agreement (including the transfer of
employment of any Transferred Employee) from causing, resulting in or being
treated as a termination of employment with respect to the Transferred
Employees who are participants in such plans.

         6.2 Effective as of the Time of Distribution, the Beverly Enterprises
401(k) Savings Plus Plan and the Beverly Enterprises, Inc. 1988 Employee Stock
Purchase Plan shall be transferred from Beverly to NBHI and Beverly shall
transfer the related trusts and trust assets (including funds for any
contributions due from Beverly or subsidiaries of Beverly which have accrued or
that have been deducted from payroll as of the Time of Distribution) and NBHI
shall assume such plans and (i) succeed Beverly as the plan sponsor, plan
administrator, employer or other party under such plans and any agreements
related thereto and be vested with any and all of the powers, duties, rights
and privileges of such plan sponsor, plan administrator, employer or other
party thereunder; and (ii) except as provided below, assume and agree to
perform and discharge all of the duties and obligations of the employer,
sponsor and/or plan administrator thereunder and to pay and be solely
responsible for all of the liabilities and obligations of any kind (whether
absolute, accrued, contingent or otherwise) of the employer, sponsor and/or
plan administrator thereunder in respect of, arising under or required to be
performed under any such plan, agreement or arrangement. Notwithstanding
anything to the contrary above, Beverly and Capstone shall remain solely liable
and responsible for and shall pay to the respective NBHI plan or trust the
matching and other employer contributions due for all Retained Employees under
the Beverly Enterprises 401(k) Savings Plus Plan and the Beverly Enterprises
1988 Employee Stock Purchase Plan.

         6.3 As soon as practicable following the Time of Distribution, and to
the extent permitted by law, NBHI shall cause the accounts (and related assets
and liabilities) of Retained Employees in the Beverly Enterprises 401(k)
Savings Plus Plan to be transferred, in cash or property acceptable to
Capstone, in a trust to trust transfer (without the election of any other
participant), to either the Pharmacy Corporation of America Retirement Savings
Plan or another tax-qualified 401(k) plan sponsored by Capstone, at Capstone's
election, and Beverly and 


                                      11
<PAGE>   66


Capstone hereby agree to indemnify and hold NBHI and all NHBI plans and plan
fiduciaries harmless from any liability, obligation, claim, damage, cost or
expense relating thereto.

                                  ARTICLE VII

                               Retained Employees

         7.1 Rights. The rights of Retained Employees with respect to the
periods following the Time of Distribution will be governed by this Agreement
and the Merger Agreement.

                                  ARTICLE VIII

                                 Miscellaneous

         8.1 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with and governed by the internal,
substantive laws of the State of Delaware applicable to contracts executed in
that state, without regard for the law of conflict of laws.

         8.2 Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof;
superseding all negotiations, prior discussions and prior agreements. To the
extent a subject is specifically covered in this Agreement and to the extent
any other agreement is in conflict herewith, this Agreement, if more specific,
shall control.

         8.3 Parties In Interest. No party may assign its rights or delegate
any of its duties under this Agreement without prior written consent of the
others. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies, except that as of the Effective
Time of the Merger, Capstone shall be entitled to exercise any and all of the
benefits, rights and remedies afforded Beverly and shall be responsible for all
of the obligations and liabilities assumed, retained, or imposed upon Beverly
under this Agreement.

         8.4      Effectiveness.  This Agreement shall become effective at the
Time of Distribution and may be terminated by the parties at any time prior
thereto by written agreement.

         8.5 Reformation and Severability. If any provision of this Agreement
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement. Such holding shall not affect or impair the validity, enforceability
or legality of such provision in any other jurisdiction or under any other
circumstances. Neither such holding nor such reformation or severance shall
affect or impair the legality, validity or enforceability of any other
provision of this agreement to the extent that such other provision is not
itself actually in conflict with any applicable law.


                                      12
<PAGE>   67


         8.6 Titles and Heading. All titles and headings have been inserted
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.

         8.7 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.

         8.8      Counterparts.  This Agreement may be executed in multiple 
counterparts, each of which shall be deemed an original.

         IN WITNESS WHEREOF the Parties have caused this Agreement to be 
executed by their duly authorized officers this ____ day of April, 1997, but to
be effective as of April 15, 1997.


                                        BEVERLY ENTERPRISES, INC.


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


                                        NEW BEVERLY HOLDINGS, INC.


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


                                        CAPSTONE PHARMACY SERVICES, INC.


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



                                      13

<PAGE>   1
                                                                EXHIBIT 99.1

                                  NEWS RELEASE

        The following is a joint announcement by Beverly Enterprises (NYSE:BEV)
        and Capstone Pharmacy Services, Inc. (NASDAQ:DOSE):

      BEVERLY, CAPSTONE CREATE LARGEST INDEPENDENT INSTITUTIONAL PHARMACY

(FORT SMITH, ARKANSAS, April 16, 1997) -- Beverly Enterprises, Inc. (NYSE:BEV)
and Capstone Pharmacy Services, Inc. (NASDAQ:DOSE) announced today that they
have signed a definitive agreement to combine Beverly's Pharmacy Corporation of
America (PCA) unit with Capstone to create the nation's largest independent
institutional pharmacy company.

Capstone will issue approximately 50 million shares of its stock to Beverly
shareholders (valued at approximately $587.5 million, based on the April 15,
1997 Capstone closing price) and assume $275 million of PCA debt. The
transaction, which utilizes a "Morris Trust" structure, is intended to create
incremental value for Beverly shareholders. It will be accretive to Capstone,
increasing annual earnings per share by at least 10 percent.

After the transaction, Capstone will have revenues totalling about $900
million, some 30 percent higher than its nearest competitor. The combined
company will serve the pharmaceutical and medical needs of nearly 500,000
customers, and operate some 100 institutional pharmacies in 32 states.

Beverly shareholders will receive approximately forty-four one-hundredths
(0.44) of a share of Capstone stock for each share of Beverly stock (on a fully
diluted basis), and cumulatively will own approximately 57 percent of the
combined pharmacy company. Beverly Enterprises will not retain any ownership
position in it. The exact ratio of Capstone-to-Beverly shares will be based on
the total number of shares of Beverly stock outstanding on the record date of
the transaction, which has not yet been set.

"This agreement is designed to maximize PCA's growth potential by combining it
with a leading publicly traded institutional pharmacy to create the largest
provider in the industry." said David R. Banks, Beverly's Chairman and Chief
Executive Officer. "There are significant synergies between PCA and Capstone
that should enable the expanded company to improve customer service, reduce
purchasing and operating costs, and broaden the scope of its operations to take
full advantage of market opportunities. We estimate the annual value of these
potential synergies at about $25 million, which represents a significant
financial advantage for the combined company.
<PAGE>   2
"This transaction provides a very satisfying return on the investments we've
made to build PCA," Banks added. "Beverly shareholders can continue to benefit
from opportunities within the institutional pharmacy industry. But now, they'll
own a market leader that can more aggressively pursue growth through
acquisitions and geographic expansion. At the same time, Beverly shareholders
continue to own the market leader in long-term healthcare. We've been
strengthening our position in this key industry, and we believe we're
well-prepared to build on the operating and financial improvements we've
already achieved. We'll now be able to focus even more sharply on maximizing
profitable growth within our core businesses."

Allan Silber, Capstone's Chairman, said: "The growth of managed care is
pressuring the institutional pharmacy industry to become increasingly
competitive on price and service. This transaction gives us the opportunity to
become a highly focused industry leader with the scope of operations, the
financial resources and the management talent to effectively address these 
competitive pressures. Capstone and its shareholders should benefit from the
much stronger base we're building in an industry where consolidation and
cost-effectiveness are becoming increasingly important. As market leader, we
are excited about the prospects of shaping the future of this industry. We will
continue to seek out those situations that will allow us to set the standards
for quality, service, efficiency and innovation."

Commenting on growth prospects, Silber added: "Capstone and PCA are an
excellent strategic fit, with complementary strengths that should promote
continued growth and increased profitability. For example, PCA has an excellent
mail service capability and a stronger presence in ancillary services,
including the infusion therapy business. Capstone has taken a more aggressive
approach to acquisitions, has developed a much larger share of the correctional
institution business and broadens PCA's geographic coverage in key markets.
These complementary strengths, in combination with sophisticated information
systems, should enable us to more fully develop our current business base, and
expand our scope beyond long-term care to cover a broader spectrum of the
healthcare market."

C. Arnold Renschler, M.D., will serve as President and Chief Executive Officer
of Capstone. He currently is President of PCA and Executive Vice President of
Beverly. Continuing in their current positions with Capstone will be Allan
Silber, Chairman; Bob Della Valle, Chief Operating Officer; and Jim Shelton,
Chief Financial Officer. Dirk Allison, currently Capstone's President, will
become Senior Vice President of Counsel Corporation, where he will take on
significant responsibilities for executing Counsel's strategic initiatives.

As part of the transaction, PCA will repay $275 million of debt to Beverly.
Beverly then will use these proceeds to reduce its own debt. This will improve
Beverly's debt structure and debt coverage ratios. To facilitate the
transaction and prior to its close, Beverly intends to refinance a substantial
portion of its overall debt portfolio.
<PAGE>   3
The transaction, which is intended to be tax-free, will occur in two stages:

        -  First, Beverly will transfer all its businesses except PCA to a new
           company, which will retain the Beverly name. Shares of the "new
           Beverly" company (comprised of skilled nursing centers, transitional
           care hospitals and rehabilitation therapy operations) will be
           distributed to Beverly shareholders on the effective date of the
           transaction on a one-for-one share basis. The new Beverly will be
           listed on the New York Stock Exchange.

        -  Second, Beverly's remaining operations -- PCA -- then will be merged
           with Capstone, which will continue to be listed on the Nasdaq Stock
           Market. The appropriate number of shares of the combined pharmacy
           company will be distributed to Beverly stockholders.

The transaction is subject to approval by the shareholders of both Beverly and
Capstone, favorable tax ruling from the Internal Revenue Service and customary
regulatory reviews. It is expected to close by year-end.

Capstone is a leading provider of institutional pharmacy services to long-term
care facilities and correctional institutions throughout the United States.

Beverly Enterprises is the leading provider of post-acute healthcare in the
United States. In addition to institutional and mail-service pharmacies,
Beverly operates 630 skilled nursing and rehabilitation centers, as well as
outpatient therapy clinics, assisted living facilities, and hospice and home
health agencies.

This news release contains forward-looking statements regarding continued
performance improvements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risk and uncertainties that may cause either
company's actual results in future periods to differ materially from forecasted
results. These risks and uncertainties include national and local economic
conditions, the effect of government regulation, the competitive environment in
which the companies operate, and the availability and cost of labor and
materials. These and other risks and uncertainties that could affect future
results will be addressed in filings with the Securities and Exchange
Commission, including Forms 10K and 10Q.


                                     #####


                                    Contacts


Beverly Enterprises, Inc.                      Capstone Pharmacy Services, Inc.
Jim Griffith                                   Morris Perlis
Senior Vice President, Investor Relations      Vice Chairman
  and Corporate Communications                 (416) 866-3193
(501) 484-6912


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