BETWEEN

1
EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

BETWEEN

XXXXXXX ENTERPRISES, INC.

AND

CAPSTONE PHARMACY SERVICES, INC.

DATED

APRIL 15, 1997
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TABLE OF CONTENTS

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 Xxxxxxx Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.02 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.03 Effect on Xxxxxxx 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

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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 XXXXXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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

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ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.01 Conduct of Business of Xxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.02 Conduct of Business of Capstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.03 No Solicitation by Xxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Xxxxxxx 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 XXXXXXX . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.01 Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.02 Xxxxxxx 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

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ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF XXXXXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Xxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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

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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 Xxxxxxx Counsel
H-2 Opinion of Capstone Counsel
7.08 Non-Competition Agreement

ATTACHMENTS TO MERGER AGREEMENT

Xxxxxxx Disclosure Statement
Capstone Disclosure Statement

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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 Xxxxxxx Enterprises, Inc., a Delaware corporation
("Xxxxxxx"). Capstone and Xxxxxxx are hereinafter sometimes collectively
referred to as the "Constituent Corporations."

RECITALS

WHEREAS, Capstone and Xxxxxxx, 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), Xxxxxxx 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
Xxxxxxx and a previously existing corporation, New Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx.

WHEREAS, after the Distribution Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx and is
fair to, and in the best interests of, Xxxxxxx 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 Xxxxxxx;

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

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

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, Xxxxxxx 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 Xxxxxxx shall cease.

(b) The Merger shall have the effects on Capstone and Xxxxxxx 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").

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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 Xxxxxxx 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 Xxxxxxx, 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) Xxxxxxx 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 "Xxxxxxx 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. Xxxxxxx, 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

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disclose such resolution in the event that (i) Xxxxxxx shall have received an
unsolicited written proposal for a Xxxxxxx Acquisition Transaction from a bona
fide financially capable third party, (ii) Xxxxxxx 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 Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx 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

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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 XXXXXXX SHARES.

(a) Except as provided in Section 2.04, each share of common
stock, $.10 par value, of Xxxxxxx (the "Xxxxxxx Common Stock") issued and
outstanding immediately prior to the Effective Time, (except for shares owned
by Xxxxxxx as treasury stock, shares owned by Capstone or any Subsidiary of
Xxxxxxx) 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 Xxxxxxx Common Stock outstanding
immediately prior to the Effective Time. The shares of Capstone Common Stock
delivered in exchange for shares of Xxxxxxx 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
Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Common Stock shall thereafter cease to
have any rights with respect to such shares of Xxxxxxx Common Stock, and
associated Rights, except the right to receive the Closing Consideration for
such shares of Xxxxxxx 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 Xxxxxxx 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.

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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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or the Surviving Corporation of the
shares of Xxxxxxx 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 Xxxxxxx Common Stock delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

SECTION 2.03 EFFECT ON XXXXXXX 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 Xxxxxxx Common
Stock that are outstanding under the Xxxxxxx 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 Xxxxxxx or any Subsidiary of Xxxxxxx 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"),

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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 Xxxxxxx 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 Xxxxxxx Common Stock that are outstanding under the Xxxxxxx
Option Plans immediately prior to the Effective Time (as reflected in Section
2.03(b) of the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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, Xxxxxxx
shall (i) obtain any consents from holders of outstanding options to purchase
Xxxxxxx Common Stock granted under the Xxxxxxx Option Plans and (ii) make any
amendments to the terms of the Xxxxxxx Option Plans, Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Special Meeting
specified in the Prospectus/Joint Proxy Statement. The fractional share
interests of each Xxxxxxx stockholder will be aggregated, and no Xxxxxxx
stockholder will receive cash in an amount equal

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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. Xxxxxxx 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 Xxxxxxx employee benefit plans relating to Retained Employees;
and all grants and awards under the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx. No amendments to the

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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
Xxxxxxx, 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 Xxxx-Xxxxx-Xxxxxx 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

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(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 Xxxxxxx 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

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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 Xxxxxxx and
Capstone in connection with the Xxxxxxx 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 Xxxxxxx and Capstone
stockholders, (v) at the date or dates of the Xxxxxxx 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

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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
Xxxxxxx, 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 Xxxxxxx. 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 Xxxxxxx 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 Xxxxxxx, 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

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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

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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.

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

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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 Xxxxxxx 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

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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

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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 Xxxxxxx 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 Xxxxxxx 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)

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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 Xxxxxxx. 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.

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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 Xxxxxxx.

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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all material listed in Section 3.24 of the Capstone Disclosure Statement have
been delivered or made available to Xxxxxxx.

"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 Xxxxxxx); (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 Xxxxxxx); (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

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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 Xxxxxxx 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.

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(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.

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(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 Xxxxxxx: (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.

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(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 Xxxxxxx, 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

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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

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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 Xxxxxxx
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.

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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 Xxxxxxx 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.

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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 "Xxxxx" 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 xxxxxxxx were for goods actually
provided,

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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 XXXXXXX

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

SECTION 4.01 ORGANIZATION AND QUALIFICATION. Each of Xxxxxxx 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 Xxxxxxx SEC Reports (as hereinafter defined). Each of
Xxxxxxx 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 Xxxxxxx Material Adverse Effect. "Xxxxxxx 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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Neither Xxxxxxx 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 Xxxxxxx
and of each Pharmacy Subsidiary of Xxxxxxx 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 Xxxxxxx or any Pharmacy
Subsidiary have been authorized since December 31, 1996.

SECTION 4.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Xxxxxxx 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 Xxxxxxx Common Stock at the Xxxxxxx 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 Xxxxxxx, and except as stated in the
preceding sentence, no other corporate proceedings on the part of Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, enforceable against Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Material
Adverse Effect.

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(b) Except as set forth in Section 4.03(b) of the Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx Common Stock at the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx and its Subsidiaries (the
"Xxxxxxx Compensation and Benefit Plans") or any grant or award made under any
of the foregoing in any case for which Xxxxxxx 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 Xxxxxxx or any of its Pharmacy
Subsidiaries which relate to the Institutional Pharmacy Business ("Xxxxxxx
Contracts") or any law, rule, ordinance or regulation or judgment, decree,
order or award to which Xxxxxxx or any of its Pharmacy Subsidiaries is subject
or any governmental or non-governmental authorization, consent, approval,
registration, franchise, license or permit under which Xxxxxxx 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 Xxxxxxx
Contracts.

SECTION 4.04 BOARD ACTION. The Board of Directors of Xxxxxxx 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 Xxxxxxx Rights Plan to be
effective upon the Closing of the Merger, determined that the consideration to
be received by the holders of shares of Xxxxxxx 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.
Xxxxxxx 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

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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 Xxxxxxx
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 Xxxxxxx Material Adverse Effect or (ii) result in Remaining Health Care
Liabilities for which as between NBHI on the one hand and Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Contract or any lease,
permit, license or other agreement or instrument to which Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx
Material Adverse Effect or (ii) result in Remaining Health Care Liabilities for
which as between NBHI on the one hand and Xxxxxxx and Capstone on the other
hand, NBHI shall be solely liable).

SECTION 4.07 AFFILIATES. Xxxxxxx has delivered to Capstone a
letter identifying all persons who, as of the date hereof, may be deemed to be
"affiliates" of Xxxxxxx 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 Xxxxxxx and its
Pharmacy Subsidiaries has such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
governmental agencies and bodies ("Xxxxxxx Licenses") as are necessary to own,
lease or operate its properties or conduct the Institutional Pharmacy Business
in the manner described in the Xxxxxxx SEC Reports and as presently conducted,
and all such Xxxxxxx Licenses are valid and in full force and effect, other
than any failure to have any such Xxxxxxx License or any failure of any such
Xxxxxxx 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 Xxxxxxx Material
Adverse Effect. Each of Xxxxxxx and its Pharmacy Subsidiaries is, and within
the period of all applicable statutes of limitation has been, in compliance
with its obligations under such Xxxxxxx Licenses and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or termination
of such Xxxxxxx 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 Xxxxxxx Material

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Adverse Effect. Xxxxxxx has no knowledge of any facts or circumstances that
could reasonably be expected to result in an inability of Xxxxxxx or any of its
Pharmacy Subsidiaries to renew any Xxxxxxx License. Except as set forth in
Section 4.08 of the Xxxxxxx Disclosure Statement, neither the execution and
delivery by Xxxxxxx 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 Xxxxxxx
License or any requirement that the Surviving Corporation be licensed in
respect of any of the Xxxxxxx Licenses. Set forth in such Section 4.08 is a
true and complete list of all Xxxxxxx Licenses which are necessary for the
conduct of the Institutional Pharmacy Business as presently conducted by
Xxxxxxx and its Subsidiaries. The listed Xxxxxxx Licenses are held by Xxxxxxx
or the Pharmacy Subsidiaries.

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

(a) None of the information supplied by Xxxxxxx 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
Xxxxxxx in connection with the Capstone Special Meeting and the Xxxxxxx 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 Xxxxxxx stockholders, (v) at the time
of the Capstone Special Meeting and the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx and Capstone. The Registration
Statement and Prospectus/Joint Proxy Statement will (with respect to Xxxxxxx
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
Xxxxxxx 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.

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SECTION 4.10 FINDERS OR BROKERS. Except as set forth in Section
4.10 of the Xxxxxxx Disclosure Statement, neither Xxxxxxx nor any Subsidiary of
Xxxxxxx 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) Xxxxxxx 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 "Xxxxxxx 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 Xxxxxxx 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) Xxxxxxx will deliver to Capstone as soon as they become
available true and complete copies of any report or statement mailed by Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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
Xxxxxxx and its Subsidiaries included or incorporated by reference in the
Xxxxxxx 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 Xxxxxxx and its

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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 Xxxxxxx 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 Xxxxxxx
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 Xxxxxxx Material Adverse
Effect and (iii) Remaining Health Care Liabilities for which, as between NBHI
on the one hand and Xxxxxxx 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 Xxxxxxx Disclosure Statement, (i) Xxxxxxx 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 Xxxxxxx Material Adverse Effect; (ii) neither Xxxxxxx 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 Xxxxxxx and its Pharmacy Subsidiaries,
no change in the authorized capital stock of Xxxxxxx and no dividend or
distribution of any kind declared, paid or made by Xxxxxxx on any class of its
capital stock other than the Distribution; (iv) there has been no event or
condition which has caused a Xxxxxxx Material Adverse Effect, nor any
development, occurrence or state of facts or circumstances that could, singly
or in the aggregate, reasonably be expected to

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result in a Xxxxxxx Material Adverse Effect; (v) there has been no amendment,
modification or supplement to any material term of any Xxxxxxx Contract
required to be identified in Section 4.21(a) of the Xxxxxxx Disclosure
Statement to which Xxxxxxx or a Pharmacy Subsidiary is a party, or to any
equity security; and (vi) there has been no material change by Xxxxxxx 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
Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx consists of
300,000,000 shares of Xxxxxxx Common Stock and 25,000,000 shares of Preferred
Stock, $1.00 par value (the "Xxxxxxx Preferred Stock"). As of March 31, 1997,
there were (i) 99,171,864 shares of Xxxxxxx Common Stock outstanding, (ii) no
shares of Xxxxxxx Preferred Stock outstanding, (iii) 5,423,408 shares of
Xxxxxxx Common Stock held in treasury and (iv) 97,171,864 shares of Xxxxxxx
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 Xxxxxxx
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 Xxxxxxx since
December 31, 1996. As of March 31, 1997, in addition to the Rights, 8,264,261
shares of Xxxxxxx Common Stock were reserved for issuance as restricted stock,
performance shares or upon the exercise of outstanding options (collectively,
the "Xxxxxxx Options") which may be granted under the incentive and stock
option plans of Xxxxxxx covering an aggregate of 4,740,029 shares of Xxxxxxx
Common Stock (collectively, the "Xxxxxxx 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 Xxxxxxx 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
Xxxxxxx to issue, transfer or sell any shares of capital stock of Xxxxxxx 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 Xxxxxxx or any of its
Subsidiaries. All issued and outstanding shares of Xxxxxxx 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, Xxxxxxx subject to) any preemptive or
similar rights created by statute, the Amended and Restated Certificate of

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Incorporation or By-laws of Xxxxxxx or any agreement to which Xxxxxxx is a
party or by which it may be bound.

(b) Except as set forth in Section 4.15(b) of the Xxxxxxx
Disclosure Statement, there are no (i) obligations, contingent or otherwise, of
Xxxxxxx to repurchase, redeem or otherwise acquire any shares of Xxxxxxx 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 Xxxxxxx. There are no voting trusts, proxies or other agreements
or understandings to which Xxxxxxx is a party or by which Xxxxxxx is bound with
respect to the voting of any shares of capital stock of Xxxxxxx.

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

SECTION 4.16 CAPITAL STOCK OF SUBSIDIARIES. The only direct or
indirect Subsidiaries of Xxxxxxx are those listed in Section 4.16 of the
Xxxxxxx 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 Xxxxxxx. Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Disclosure
Statement, are owned by Xxxxxxx 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 Xxxxxxx Disclosure Statement, Xxxxxxx 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 Xxxxxxx Disclosure Statement or (ii) for Remaining Health Care
Liabilities for which, as between NBHI

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

SECTION 4.18 INSURANCE. Xxxxxxx 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 Xxxxxxx and such Subsidiaries. All applicable
premiums due and payable under all such policies and bonds have been paid, and
Xxxxxxx 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 Xxxxxxx Material Adverse Effect. The reserves established by
Xxxxxxx in respect of all matters as to which Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx.

SECTION 4.19 TITLE TO AND CONDITION OF PROPERTIES. Xxxxxxx 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 Xxxxxxx Disclosure Statement is a
true and complete list of all real properties owned by Xxxxxxx 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
Xxxxxxx or its appropriate Pharmacy Subsidiary has set aside on its books
adequate

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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 Xxxxxxx 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 Xxxxxxx or its Pharmacy Subsidiaries; or (iv) those which would not
materially interfere with the conduct of the Institutional Pharmacy Business of
Xxxxxxx 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 "Xxxxxxx Permitted Encumbrances"). There are
no eminent domain proceedings pending or, to the knowledge of Xxxxxxx,
threatened against any property or any material portion thereof owned by
Xxxxxxx or any Subsidiary and used in the Institutional Pharmacy Business of
Xxxxxxx 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 Xxxxxxx 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. Xxxxxxx has made available
to Capstone true and correct copies of all title insurance commitments, title
insurance policies and surveys in the possession of Xxxxxxx or its Subsidiaries
relating to such real properties set forth in Section 4.19 of the Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx and the Pharmacy Subsidiaries, as
the case may be, and, to Beverly's knowledge, with respect to any other party
thereto. Xxxxxxx or its Pharmacy Subsidiaries, as the case may be, have valid
leasehold interests in all properties leased thereunder

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free and clear of all liens other than Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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
Xxxxxxx or any of its Pharmacy Subsidiaries to make capital
expenditures in excess of $200,000;

(b) contracts under which Xxxxxxx 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 Xxxxxxx and its Pharmacy
Subsidiaries would not be responsible after the Distribution;

(c) powers of attorney outstanding from Xxxxxxx 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 Xxxxxxx
or any Pharmacy Subsidiary is dependent upon, or calculated in
accordance with, the revenues or profits of Xxxxxxx or any of its
Subsidiaries;

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

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

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(g) other than as contemplated by the Distribution
Agreement, any contracts, obligations or commitments which will exist
following the Distribution between Xxxxxxx 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 Xxxxxxx or any of its Pharmacy
Subsidiaries (except credit extended by Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, could reasonably support the
assertion of any such breach or default) except for breaches and defaults by
parties other than Xxxxxxx and its Pharmacy Subsidiaries which would not,
singly or in the aggregate with all other such breaches, have a Xxxxxxx
Material Adverse Effect.

SECTION 4.22 LABOR MATTERS. With respect to the Institutional
Pharmacy Business, (i) none of Xxxxxxx or any of its Pharmacy Subsidiaries is a
party to any union contract or other collective bargaining agreement, (ii) each
of Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, any labor strike or stoppage threatened)
against or affecting Xxxxxxx or any of its Pharmacy Subsidiaries and (v) to the
best knowledge of Xxxxxxx, 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 Xxxxxxx Disclosure Statement, neither the execution and
delivery by Xxxxxxx 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 Xxxxxxx or any
of its Subsidiaries to, or any right of any holder of any security of Xxxxxxx
or any of its Subsidiaries to, require Xxxxxxx to purchase, offer to purchase,
redeem or otherwise prepay or repay any such security, or deposit any funds to
effect the same.

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SECTION 4.24 EMPLOYMENT AND LABOR CONTRACTS. Except as set forth
in Section 4.24 of the Xxxxxxx Disclosure Statement, and other than the
agreements executed by employees generally, the forms of which have been
provided to Capstone, neither Xxxxxxx 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 Xxxxxxx would
not be responsible after the Distribution) with any past or present officer,
director or employee or, to the best knowledge of Xxxxxxx, 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. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or its Pharmacy
Subsidiaries and used in the Institutional Pharmacy Business. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or its Pharmacy Subsidiaries; (ii) there have been no claims or
assertions made by others that Xxxxxxx 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 Xxxxxxx, there has been no
such infringement by Xxxxxxx or any of its Pharmacy Subsidiaries during such
period; (iv) Xxxxxxx has no knowledge of any infringement of such Intellectual
Property Rights of Xxxxxxx or any of its Pharmacy Subsidiaries by others; and
(v) all such patents, registered trademarks, service marks, and copyrights
owned by Xxxxxxx 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 Xxxxxxx or its Pharmacy Subsidiaries. True and complete copies
of all material listed in Section 4.25 of the Xxxxxxx Disclosure Statement have
been delivered or made available to Capstone.

SECTION 4.26 TAXES. (i) Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, 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

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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 Xxxxxxx
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 Xxxxxxx or any of its
Subsidiaries, and no examination of Xxxxxxx or any of its Subsidiaries is
pending or, to the best knowledge of Xxxxxxx, threatened for any material
amount of Tax by any taxing authority (with respect to any such action, Section
4.26 of the Xxxxxxx 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 Xxxxxxx or any of its Subsidiaries is currently in
effect and no extension of time within which to file any Tax Return of Xxxxxxx
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
Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or any of its Subsidiaries for any period
ending after the Effective Time; (viii) Xxxxxxx 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 Xxxxxxx or any Subsidiary will have any obligation or
liability on or after the Effective Time; (x) Xxxxxxx and its Subsidiaries have
no foreign losses as defined in Section 904(f)(2) of the Code; (xi) to the best
knowledge of Xxxxxxx, there are no transfer pricing agreements made by or on
behalf of Xxxxxxx or any of its Subsidiaries with any taxation authority; (xii)
no assets of Xxxxxxx or any of its Subsidiaries is held in an arrangement for
which partnership Tax Returns are being filed and neither Xxxxxxx nor any of
its Subsidiaries is a partner in any partnership; (xiii) neither Xxxxxxx 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 Xxxxxxx
or such Subsidiary; and (xiv) neither Xxxxxxx 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 Xxxxxxx Disclosure
Statement:

(a) Except as set forth in Section 4.27(a) of the Xxxxxxx
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 Xxxxxxx or any of its Subsidiaries or any of their ERISA
Affiliates (as hereinafter defined), or to which Xxxxxxx 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 ("Xxxxxxx Pension
Benefit Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean
any person (as defined in Section 3(9) of

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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) Xxxxxxx has delivered or made available to Capstone true and
complete copies of, and Section 4.27(b) of the Xxxxxxx Disclosure Statement
lists, all Xxxxxxx Pension Benefit Plans, "welfare benefit plans" (as defined
in Section 3(1) of ERISA) covering employees (or former employees), maintained
or contributed to by Xxxxxxx or any of its Subsidiaries ("Xxxxxxx Welfare
Plans"), all multiemployer plans (as defined in Section 3(37) of ERISA)
covering employees (or former employees) to which Xxxxxxx 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 Xxxxxxx or a Subsidiary of
Xxxxxxx.

(c) Xxxxxxx and each of its Subsidiaries, and each of the Xxxxxxx
Pension Benefit Plans, Xxxxxxx Welfare Plans, and all other plans or
arrangement referenced in Section 4.27(b) (collectively, the "Xxxxxxx 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 Xxxxxxx Material Adverse
Effect.

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

(e) The Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, by any governmental entity involving the Xxxxxxx Pension
Benefit Plans or Xxxxxxx Welfare Plans, (ii) no termination proceedings
involving the Xxxxxxx Pension Benefit Plans and (iii) no pending or, to the
best knowledge of Xxxxxxx, threatened claims (other than routine claims for
benefits), suits or proceedings relating to any Xxxxxxx Employee Benefit Plan,
against the assets of any of the trusts under any Xxxxxxx Employee Benefit Plan
or against any fiduciary of any Xxxxxxx 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

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would reasonably be expected to have a Xxxxxxx Material Adverse Effect, nor, to
the best knowledge of Xxxxxxx, 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 Xxxxxxx Material Adverse Effect in the event
of any such investigation, claim, suit or proceeding.

(g) None of Xxxxxxx, 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 Xxxxxxx
Pension Benefit Plans or Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Material Adverse Effect.

(h) Neither the Xxxxxxx 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
Xxxxxxx Material Adverse Effect, nor has there been any event with respect to
any Xxxxxxx Pension Benefit Plan requiring disclosure under Section 4063(a) of
ERISA or any event with respect to any Xxxxxxx 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 Xxxxxxx
Material Adverse Effect.

(i) Neither Xxxxxxx nor any Subsidiary of Xxxxxxx 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 Xxxxxxx Pension
Benefit Plan has applied for, or received, a waiver of the minimum funding
standards imposed by Section 412 of the Code.

(j) Neither Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx, any of its Subsidiaries, any organization to
which Xxxxxxx 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

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

(m) None of the Xxxxxxx Welfare Plans maintained by Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx Material Adverse Effect.

(n) No liability under any Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx
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 Xxxxxxx or any of its Subsidiaries.

(p) Except as set forth in Section 4.27(p) of the Xxxxxxx
Disclosure Statement, each Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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
Xxxxxxx Employee Benefit Plan have been timely made and except as set forth in
Section 4.27(r) of the Xxxxxxx Disclosure Statement, Xxxxxxx 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 Xxxxxxx Employee Benefit Plan has
any

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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 Xxxxxxx Employee Benefit Plan or to adopt any new Xxxxxxx
Employee Benefit Plan, except for such plans as may be adopted by NBHI and
which will not be obligations of Xxxxxxx 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 Xxxxxxx Material Adverse Effect, or
(ii) for Remaining Health Care Liabilities for which, as between NBHI on the
one hand and Xxxxxxx and Capstone on the other hand, NBHI shall be solely
liable: (A) Xxxxxxx 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 Xxxxxxx is aware which may materially
prevent or interfere with compliance in the future; (B) Xxxxxxx and its
Subsidiaries have all Environmental Authorizations necessary for the conduct of
the businesses of Xxxxxxx and its Subsidiaries as currently conducted; and (C)
neither Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Material Adverse
Effect (i) pending or, to the best knowledge of Xxxxxxx, threatened against
Xxxxxxx 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 Xxxxxxx or any of its Subsidiaries, (iii) that
to Beverly's knowledge could subject Xxxxxxx 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
Xxxxxxx 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 Xxxxxxx and Capstone
on the other hand, NBHI shall be solely liable. Since December 31, 1996,
neither Xxxxxxx nor any of its Subsidiaries has received any Environmental
Notice alleging that Xxxxxxx or any of its Subsidiaries is subject to liability

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54
under any Environmental Law or that Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, investigation pending or
threatened under any Environmental Law (i) against Xxxxxxx or any of its
Subsidiaries, or (ii) to the knowledge of Xxxxxxx, against any person or entity
in connection with which liability could reasonably be imputed or attributed by
law or contract to Xxxxxxx 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 Xxxxxxx Material Adverse
Effect.

(d) No property or facility presently or to the knowledge of
Xxxxxxx formerly owned, operated or leased by Xxxxxxx or any of its present
Subsidiaries, or to the knowledge of Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, 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 Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx to a material risk of
liability, loss or damages, or result in the incurrence by Xxxxxxx of costs
under Environmental Laws, (ii) could reasonably be expected to form the basis
of any Environmental Notice against or with respect to Xxxxxxx 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 Xxxxxxx or any of its Subsidiaries or (iii)
could reasonably be expected to require investigation, removal or remedial or
corrective action by Xxxxxxx or any of its Subsidiaries, that in any case
singularly or in the aggregate reasonably could be expected to have a Xxxxxxx
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 Xxxxxxx
Disclosure Statement, (i) there are and have been no underground or aboveground
storage tanks or other storage receptacles, or

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related piping or other disposal areas containing Hazardous Materials, located
on, at or under property owned, operated or leased by Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx or any of its Subsidiaries.

(h) In accordance with Section 5.05, Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx any of its Subsidiaries, or
otherwise concerning compliance with or liability under Environmental Laws.

SECTION 4.29 DISCLOSURE. No representation or warranty by Xxxxxxx
and no statement or information relating to Xxxxxxx or any of its Subsidiaries
contained herein, or in any certificate furnished by or on behalf of Xxxxxxx 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 Xxxxxxx Disclosure Statement lists each
Pharmacy utilized by Xxxxxxx 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 Xxxxxxx Disclosure Statement lists all
of the customers to which Xxxxxxx 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 ("Xxxxxxx Pharmacy
Contracts"). Xxxxxxx has not been informed and has no reason to believe that
any Xxxxxxx Pharmacy Contract will be terminated for or without cause.

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(c) Except for Remaining Health Care Liabilities for which, as
between NBHI on the one hand and Xxxxxxx and Capstone on the other hand, NBHI
shall be solely liable, none of Xxxxxxx 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 "Xxxxx" 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 Xxxxxxx nor
its Subsidiaries is, to the best knowledge of Xxxxxxx, 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 Xxxxxxx 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) Xxxxxxx 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
Xxxxxxx Disclosure Statement. Xxxxxxx 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) Xxxxxxx 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 Xxxxxxx, all such xxxxxxxx were for goods actually provided, and
at appropriate charges or costs, and Xxxxxxx has appropriate documentation to
support such billing requests.

SECTION 4.31 FAIRNESS OPINION. Xxxxxxx has received the opinions
of Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx, Incorporated and Xxxxxxxx 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. Xxxxxxx and its Pharmacy
Subsidiaries own, lease, hold or otherwise have the right to use all of the
assets, properties, Intellectual Property Rights and Xxxxxxx Licenses which are
material to the conduct of the Institutional Pharmacy Business as presently
conducted by Xxxxxxx and its Subsidiaries.

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ARTICLE V. COVENANTS

SECTION 5.01 CONDUCT OF BUSINESS OF XXXXXXX. Except as
contemplated by this Agreement, the Distribution Agreement and the Xxxxxxx
Disclosure Statement or as expressly agreed to in writing by Capstone, during
the period from the date of this Agreement to the Effective Time, Xxxxxxx 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 Xxxxxxx
Disclosure Statement, prior to the Effective Time, neither Xxxxxxx 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 Xxxxxxx or its
Pharmacy Subsidiaries or any securities convertible into or
exchangeable or exercisable for shares of any class of capital stock
of Xxxxxxx or its Pharmacy Subsidiaries, other than (i) pursuant to
and in accordance with the terms of Xxxxxxx Options outstanding on the
date hereof under the Xxxxxxx Option Plans listed in Section 4.15 of
the Xxxxxxx Disclosure Statement, (ii) in connection with the
Distribution or (iii) except as set forth in Schedule 5.01(b) of the
Xxxxxxx 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 Xxxxxxx 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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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
Xxxxxxx 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 Xxxxxxx 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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(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 Xxxxxxx
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 Xxxxxxx prior to the
date hereof and as listed in Section 5.01 (i) of the Xxxxxxx
Disclosure Statement, authorize or commit to make capital expenditures
in excess of $200,000 for which Xxxxxxx 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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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 Xxxxxxx, 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 Xxxxxxx 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;

(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;

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(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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(i) except as previously approved by the Board of
Directors of Capstone prior to the date hereof and as identified to
Xxxxxxx 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 Xxxxxxx;

(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 XXXXXXX.

(a) Xxxxxxx 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
Xxxxxxx or its Subsidiaries, an acquisition primarily relating to all or a
substantial portion of the assets or of the capital stock of Xxxxxxx or its
Subsidiaries or inquiries or proposals concerning or which may reasonably be
expected to lead to, any of the foregoing (a "Xxxxxxx 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 Xxxxxxx 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. Xxxxxxx shall be obligated to
immediately advise Capstone of any inquiries or proposals relating to a Xxxxxxx
Acquisition Transaction.

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(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,
Xxxxxxx may furnish non-public information to, and negotiate with, such third
party only if (i) Xxxxxxx 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 Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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,
Xxxxxxx will give Capstone and its authorized representatives (including
counsel, environmental and other consultants, accountants, auditors, and
intellectual property counsel and agents) reasonable

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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
Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 xxxxxxx Xxxxxxx with such financial and operating data and
other information with respect to the businesses and properties of Capstone and
its Subsidiaries as Xxxxxxx may from time to time reasonably request.

SECTION 5.06 REGISTRATION STATEMENT AND PROXY STATEMENT. Xxxxxxx
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 Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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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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 Xxxxxxx and Capstone, respectively. Capstone shall not take any
action which would cause Xxxxxxx to fail to perform its obligations hereunder
or under the Distribution Agreement. Xxxxxxx shall not take any action which
would cause Capstone to fail to perform its obligations hereunder or under the
Distribution Agreement.

(b) Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, 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
Xxxxxxx Material Adverse Effect or Capstone Material Adverse Effect. Each of
Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Disclosure
Statement between Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx as of
the date hereof.

SECTION 5.11 EXPENSES. Except as set forth in Section 10.05,
Capstone, on the one hand, and Xxxxxxx (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 XXXXXXX AND SUBSIDIARY ACTIONS.

(a) Xxxxxxx 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 Xxxxxxx 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) Xxxxxxx 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) Xxxxxxx 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) Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx informed of all non-routine actions taken in
connection with the foregoing and all such actions shall be on terms and
conditions satisfactory to Xxxxxxx whose consent to such actions shall not be
unreasonably withheld.

SECTION 5.16 ACTIONS REGARDING OUTSTANDING DEBT.

(a) Prior to the Effective Time, Xxxxxxx 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 Xxxxxxx from liability with respect to,
such indebtedness.

(b) Prior to the Effective Time, Xxxxxxx 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
Xxxxxxx and Capstone for the purpose of repaying such amount to Xxxxxxx 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 Xxxxxxx will use their joint best efforts to
expeditiously obtain a commitment for retroactive insurance coverage, which
shall be reasonably acceptable to Xxxxxxx, 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. Xxxxxxx 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 Xxxxxxx xxxx-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 Xxxxxxx 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. Xxxxxxx
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 XXXXXXX

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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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 XXXXXXX 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 Xxxxxxx Common
Stock cast at the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx.

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) Xxxxxxx and Capstone shall have received the respective
opinions of Xxxxxx & Drysdale, Chartered, or Ernst & Young, LLP, reasonably
acceptable to Xxxxxxx 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
Xxxxxxx 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 Xxxxxxx Common Stock in connection with the Merger
(except with respect to cash received in lieu of a fractional interest
in Capstone Common Stock).

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

(i) The transfer by Xxxxxxx 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
Xxxxxxx, 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) Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx Material Adverse Effect and (ii) for
changes expressly permitted or contemplated by this Agreement or the
Distribution Agreement.

SECTION 7.02 PERFORMANCE. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx 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 Xxxxxxxx Drug Company (a copy of which is set forth
in Section 4.21 of the Xxxxxxx Disclosure Statement, and (ii) as do not singly
or in the aggregate constitute a Xxxxxxx Material Adverse Effect.

ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF XXXXXXX

The obligations of Xxxxxxx 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
Xxxxxxx:

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
Xxxxxxx.

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 Xxxxxxx 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 Xxxxxxx the Assumed Pharmacy Indebtedness described in
Section 5.16(b) hereof.

SECTION 8.09 AUDITORS' LETTER. Xxxxxxx 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 Xxxxxx, Xxxxxxx, Xxxxxx & Xxxxxx, 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 Xxxxxxx 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, Xxxxxxx, 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 Xxxxxxx or Capstone:

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

(b) by either Capstone or Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx, 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 Xxxxxxx, if the approval of a
majority of the outstanding shares of Xxxxxxx Common Stock cast at the
Xxxxxxx 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 Xxxxxxx, 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) Xxxxxxx 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 Xxxxxxx at or prior to such date of termination, (b) there exists
a breach or breaches of any representation or warranty of Xxxxxxx contained in
this Agreement or the Distribution Agreement such that the

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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 Xxxxxxx of written notice of such breach or breaches, (c)
Xxxxxxx shall have furnished or disclosed non-public information to, or
commenced negotiations with, a third party with respect to a Pharmacy
Acquisition Transaction or Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx (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 XXXXXXX. 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 Xxxxxxx, by action of
the Board of the Directors of Xxxxxxx, 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 Xxxxxxx 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 Xxxxxxx, shall have determined in good faith that failure to
terminate this Agreement would be inconsistent with the Board's fiduciary
duties;

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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 Xxxxxxx Business
Combination Transaction) and that prior to terminating this Agreement Xxxxxxx
shall have made all the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx pursuant to Section 10.03(e), then Xxxxxxx 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 "Xxxxxxx Expense Payments"). In the event
of a termination of this Agreement by Xxxxxxx pursuant to Section 10.03(e),
Xxxxxxx shall be obligated to pay Capstone an additional fee of $35,000,000
(the "Xxxxxxx 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 "Xxxxxxx Payments"). To the extent a Xxxxxxx
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 Xxxxxxx Business Combination Transaction and within 18 months
after the termination of this Agreement, Xxxxxxx or any of its Subsidiaries
proposes to enter into a definitive agreement with a third party with respect
to a Pharmacy Acquisition Transaction or Xxxxxxx Business Combination
Transaction or a Pharmacy Acquisition Transaction or Xxxxxxx Business
Combination Transaction is proposed to be effected, then Xxxxxxx, prior to
entering into

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any such definitive agreement or any such Pharmacy Acquisition Transaction or
Xxxxxxx 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 Xxxxxxx Business Combination
Transaction, to an account specified by Capstone. As used in this Section
10.05, the term "Xxxxxxx Business Combination Transaction" shall mean any of
the following involving Xxxxxxx 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 Xxxxxxx (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 Xxxxxxx Common Stock, whether by tender offer,
exchange offer or otherwise. In the event that this Agreement is terminated
without Closing, and Xxxxxxx 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 Xxxxxxx
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 Xxxxxxx 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 Xxxxxxx shall cause the Xxxxxxx 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 Xxxxxxx 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 Xxxxxxx by wire transfer of
immediately available funds to an account specified by Xxxxxxx up to $2,000,000
for all documented fees and expenses incurred by Xxxxxxx (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

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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.

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)

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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

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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)

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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

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

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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

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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

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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.

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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:

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

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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

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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.

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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:
--------------------------

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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

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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

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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

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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.

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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.

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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:

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

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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
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

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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.

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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:
--------------------------

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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.

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