Edgar Filing: BEVERLY ENTERPRISES INC

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)

Filed by the Registrant |_|

Filed by a Party other than the Registrant |X|

Check the appropriate box:

|X| Preliminary Proxy Statement |_| Confidential, for Use of the
|_| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Section 240.14a-11(c) or
Section 240.14a-2

BEVERLY ENTERPRISES, INC.
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(Name of Registrant as Specified In Its Charter)

ARNOLD M. WHITMAN
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-12.

(1) Title of each class of securities to which transaction
applies:

(2) Aggregate number of securities to which transaction
applies:

(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

PRELIMINARY PROXY STATEMENT
DATED FEBRUARY 18, 2005
SUBJECT TO COMPLETION

ARNOLD M. WHITMAN
C/O FORMATION CAPITAL, LLC
1035 POWERS PLACE
ALPHARETTA, GA 30004

Dear Fellow Beverly Stockholders:

As you may know, Formation Capital, LLC (of which I am the Chief
Executive Officer) and our partners, Appaloosa Management L.P. and Franklin
Mutual Advisers, LLC, are seeking to negotiate a transaction with Beverly
in which a company formed by us would acquire all of the outstanding shares
of Beverly. In that connection, we made a formal offer to Beverly's Board
of Directors to acquire all of the shares of Beverly at a price of $11.50
per share in cash. Our offer price reflects a premium of 47% to the average
closing price of Beverly's shares over the period from the beginning of 2004
through January 24, 2005, the last trading day before we made our proposal
public.

The Beverly Board has rejected our proposal and refused to engage in
any discussion with us or to permit us to conduct due diligence of Beverly,
despite the fact that we have said consistently that, if justified by due
diligence, we would be prepared to raise our offer.

Since the Beverly Board has refused to have discussions with us
regarding our offer, we are sending you the enclosed proxy statement and
the accompanying BLUE proxy card as we are soliciting proxies from
Beverly's stockholders to be used at Beverly's 2005 annual meeting to be
held on April 21, 2005. We are seeking your support for the election of six
independent, highly qualified nominees. If elected, these nominees will,
subject to their fiduciary duties, be committed to maximizing the value of
your investment in Beverly by implementing a process that would give due
consideration to our proposal as well as any other proposals Beverly may
receive from us or others. We are also soliciting proxies to approve other
proposals intended to prevent the current management of Beverly from taking
actions that could thwart the will of Beverly's stockholders.

WHETHER OR NOT YOU PLAN TO ATTEND THE 2005 ANNUAL MEETING, WE URGE YOU
TO VOTE FOR THE ELECTION OF THE SIX INDEPENDENT NOMINEES BY SIGNING, DATING
AND RETURNING THE ENCLOSED BLUE PROXY CARD IN THE POSTAGE-PAID ENVELOPE
TODAY. WE URGE YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY
BEVERLY. IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY BEVERLY,
YOU CAN REVOKE THAT PROXY AND VOTE FOR THE SIX INDEPENDENT NOMINEES AND FOR
OUR OTHER PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED BLUE
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

REMEMBER, IF YOU HOLD YOUR BEVERLY SHARES WITH A BROKERAGE FIRM OR
BANK, ONLY THEY CAN EXERCISE VOTING RIGHTS WITH RESPECT TO YOUR SHARES AND
ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, IT IS
CRITICAL THAT YOU PROMPTLY CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT
AND GIVE INSTRUCTIONS TO VOTE THE BLUE PROXY CARD FOR THE ELECTION OF THE
INDEPENDENT CANDIDATES NOMINATED BY US.

If you have any questions or require any assistance in executing or
delivering your proxy, please call our proxy solicitor, MacKenzie Partners,
Inc., at (800) 322-2885 (toll free) or (212) 929-5500 (collect).

Sincerely,

[SIGNATURE]

Arnold M. Whitman

March , 2005

PRELIMINARY COPY DATED FEBRUARY 18, 2005
SUBJECT TO COMPLETION

2005 ANNUAL MEETING OF STOCKHOLDERS
OF BEVERLY ENTERPRISES, INC.

PROXY STATEMENT OF ARNOLD M. WHITMAN
CHIEF EXECUTIVE OFFICER OF FORMATION CAPITAL, LLC

A consortium comprised of Formation Capital, LLC (Formation) (of which
Mr. Whitman is the Chief Executive Officer) and its partners, Appaloosa
Management L.P. (Appaloosa) and Franklin Mutual Advisers, LLC (Franklin
Mutual), is seeking to negotiate a transaction with Beverly Enterprises in
which a company formed by us would acquire all of the outstanding shares of
Beverly. In that connection, we made a formal offer to Beverly's board of
directors to acquire all of the shares of Beverly at a price of $11.50 per
share in cash. Our offer price reflects a premium of 47% to the average
closing price of Beverly's shares over the period from the beginning of 2004
through January 24, 2005, the last trading day before we made our proposal
public.

We are sending you this proxy statement and the accompanying BLUE
proxy card because we are soliciting proxies from Beverly's stockholders to
be used at Beverly's 2005 annual meeting.

We are seeking your support for the election of six independent,
highly qualified candidates who Mr. Whitman has nominated for election as
directors at the 2005 annual meeting. If elected, these nominees will
comprise a majority of the Beverly board. As directors of Beverly, they
will, subject to their fiduciary duties, be committed to maximizing the
value of your investment in Beverly by implementing a process that would
give due consideration to our proposal as well as any other proposals
Beverly may receive from us or others. We nominated these candidates
because they have the health-care experience and mergers and acquisitions
skills to maximize value for stockholders.

We are also soliciting proxies to amend Beverly's bylaws to ensure
that Beverly does not increase the size of its current eight-member board
in an effort to prevent the six nominees from comprising a majority of the
Beverly board if elected. We are also soliciting proxies to approve the
other proposals of Mr. Whitman described in "Matters to be Considered at
the 2005 Annual Meeting" below that are intended to prevent Beverly from
taking other actions that could thwart the will of Beverly's stockholders.

Beverly has announced that its 2005 annual meeting will be held at
10:00 a.m. (CDT) on April 21, 2005, at Beverly's Corporate Center located
at 1000 Beverly Way, Fort Smith, Arkansas. Beverly has also announced that
the record date for determining those stockholders who will be entitled to
vote at the meeting is March 7, 2005.

This proxy statement and the enclosed BLUE proxy card are first
being sent or given to stockholders of Beverly on or about March ___, 2005.
Beverly's principal executive offices are located at 1000 Beverly Way, Fort
Smith, Arkansas 72919.

THIS SOLICITATION IS BEING MADE BY MR. WHITMAN AND THE CONSORTIUM AND
NOT ON BEHALF OF BEVERLY OR ITS BOARD OF DIRECTORS.

Any proxy granted pursuant to this solicitation may be revoked by the
person granting the proxy at any time before it is voted at the annual
meeting. Proxies may be revoked by (i) delivering a written notice of
revocation bearing a later date than the proxy, (ii) duly executing and
delivering a later dated written proxy relating to the same shares or (iii)
attending the annual meeting and voting in person (although attendance at
the annual meeting will not in and of itself constitute a revocation of a
proxy). To be effective, any written notice of revocation or subsequent
BLUE proxy should be mailed or delivered to, and received by, MacKenzie
Partners, Inc., 105 Madison Avenue, New York, New York 10016 or Beverly's
corporate secretary before the taking of votes at the annual meeting. If
you hold your shares through a bank, broker or other nominee holder, only
they can revoke your proxy on your behalf.

IF YOU PREVIOUSLY VOTED FOR THE NOMINEES RECOMMENDED BY BEVERLY'S
EXISTING BOARD OF DIRECTORS, YOU MAY CHANGE YOUR VOTE. TO CHANGE YOUR VOTE,
SIMPLY SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD IN THE
ACCOMPANYING POSTAGE PAID ENVELOPE.

WE STRONGLY URGE YOU TO REVOKE ANY PROXY CARD YOU MAY HAVE RETURNED TO
BEVERLY AND TO VOTE FOR THE SIX NOMINEES OF MR. WHITMAN AND FOR MR.
WHITMAN'S OTHER PROPOSALS. ONLY YOUR LATEST DATED PROXY WILL BE COUNTED IN
THE VOTES CAST AT THE ANNUAL MEETING.

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QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION

WHO IS ARNOLD M. WHITMAN? WHO ARE THE MEMBERS OF THE CONSORTIUM?

Mr. Whitman is the Chief Executive Officer of Formation Capital LLC, a
finance company focused on the health care industry, providing equity to
the senior housing and long-term care industry since it was founded in
1999. Formation currently manages assets in excess of $650 million in
value. Over the last three years, Formation and its partners have acquired
an ownership interest in 152 facilities in 20 states, including 49 skilled
nursing facilities and four assisted living centers Formation acquired from
Beverly in 2002.

Formation's partners in the consortium are Appaloosa Management L.P.
and Franklin Mutual Advisers, LLC. Appaloosa, formed in 1993, is one of the
largest hedge funds in the country, with over $3.5 billion under
management. Franklin Mutual is a subsidiary of Franklin Resources, Inc.,
the largest publicly traded mutual fund company in the United States.
Franklin Mutual manages the Mutual Series family of public mutual funds,
with over $35 billion under management. The persons listed in Annex B
attached to this proxy statement may also assist the consortium in this
solicitation.

The members of the consortium, together with other Beverly
shareholders who are assisting the consortium in connection with the
proposed transaction, collectively beneficially own 8,737,000 Beverly
shares, constituting approximately 8.1% of the Beverly shares outstanding
as of January 25, 2005.

WHAT ARE WE SEEKING TO ACCOMPLISH?

We are seeking to negotiate a transaction with Beverly in which a
company formed by us would acquire all of the outstanding shares of
Beverly. In that connection, we made a formal offer to Beverly's board of
directors to acquire all of the shares of Beverly at a price of $11.50 per
share in cash. Our offer, which would provide significant value to
Beverly's shareholders, reflects a premium of 47% to the average closing
price of Beverly's shares over the period from the beginning of 2004
through January 24, 2005, the last trading day before we made our proposal
public. Moreover, we have said consistently that, if justified by due
diligence, we would be prepared to raise our offer. For more information
about the proposal we made to the Beverly board, see "Our Proposed
Transaction" below.

WHY ARE WE SOLICITING YOUR VOTE?

We are soliciting your vote because we believe that the current
directors are not acting, and will not act, in your best interests to
maximize the value of your investment in Beverly. In that regard, the
Beverly board has rejected our proposal and refused to engage in any
discussion with us or to permit us to conduct due diligence of Beverly
despite the fact that we have made an offer reflecting a significant
premium and have indicated a willingness to raise our offer if justified by
our due diligence. In addition, the Beverly board has taken steps to impede
any fair consideration of our proposal and any other proposal by adopting a
poison pill without the approval of stockholders and by accelerating the
date of the annual meeting and the deadline for submitting proposals and
director nominees.

We are seeking your support for the election of six independent,
highly qualified candidates who Mr. Whitman has nominated for election as
directors of Beverly at the 2005 annual meeting. If elected, these nominees
will, subject to their fiduciary duties, be committed to maximizing the
value of your investment in Beverly by implementing a process that would
give due consideration to our proposal as well as any other proposals
Beverly may receive from us or others.

Please see "Reasons to Vote for the Proposals" for a more
complete description of the reasons we are seeking your vote.

WHAT ARE WE ASKING YOU TO VOTE FOR?

We are asking you to vote on Mr. Whitman's proposals to:

o amend Beverly's bylaws to fix the size of the Board at its
current size, eight directors;

o elect six independent, highly qualified nominees of Mr.
Whitman who, if elected, will comprise a majority of the
Beverly board;

o repeal each provision of, or amendment to, Beverly's bylaws
(other than the amendment to fix the Board's size at eight)
adopted after the version of the bylaws, as of May 29, 1997,
filed by Beverly with the Securities and Exchange Commission;
and

o require that Beverly allow the three proposals outlined
above to be voted on at the annual meeting in the order set
out above before any other proposals are voted on at the
annual meeting.

Please see "Matters to be Considered at 2005 Annual Meeting" for a complete
description of these proposals.

We urge you to return the BLUE proxy card and vote in favor of the
six nominees and in favor of the other proposals referred to above.

WHO ARE THE INDEPENDENT NOMINEES THAT MR. WHITMAN HAS NOMINATED FOR
ELECTION TO THE BOARD? WILL THEIR ELECTION MEAN BEVERLY WILL BE SOLD TO THE
CONSORTIUM?

Mr. Whitman has nominated Jeffrey A. Brodsky, John J. Durso, Philip L.
Maslowe, Charles M. Masson, Mohsin Y. Meghji and Guy Sansone for election
as directors of Beverly. These nominees are independent, highly qualified
persons who are not affiliated with Mr. Whitman, any member of the
consortium or Beverly.

The election of these nominees does not mean that Beverly will be sold
to the consortium. If elected, these nominees will act in your best
interests. In that connection, subject to their fiduciary duties, the
nominees are committed to maximizing the value of your investment in
Beverly by implementing a process that would give due consideration to our
proposal as well as any other proposals Beverly may receive from us or
others. We provide detailed biographical information regarding the nominees
below under the heading "The Independent Nominees."

WHY IS MR. WHITMAN PROPOSING TO AMEND THE BYLAWS?

Mr. Whitman is proposing to amend Beverly's bylaws to fix the size of
the Beverly board at eight to ensure that Beverly does not increase the
size of its current eight-member board in an effort to prevent the nominees
from comprising a majority of the Beverly board if elected.

Mr. Whitman is also proposing to repeal each provision of, or
amendment to, Beverly's bylaws (other than the amendment to fix the Board's
size at eight) adopted after the version of its bylaws that Beverly last
made public (on May 29, 1997 in a filing with the Securities and Exchange
Commission ("SEC")), including bylaw amendments that Beverly's board may
adopt after the date of this proxy statement and before the annual meeting,
to ensure that no such amendment will operate to thwart the will of the
Beverly stockholders.

WHAT OTHER MATTERS WILL BE VOTED ON BY BEVERLY STOCKHOLDERS AT THE 2005
ANNUAL MEETING?

Beverly has not yet announced the other matters that Beverly
stockholders will be asked to vote on at the 2005 annual meeting.

WHO CAN VOTE AT THE 2005 ANNUAL MEETING?

If you owned shares of Beverly common stock at the close of business
on March 7, 2005, you have the right to vote for the six independent
nominees of Mr. Whitman, for the proposals to amend Beverly's bylaws and on
all other matters presented at the 2005 annual meeting. Each share of
common stock held by you at the close of business on March 7, 2005 entitles
you to one vote on all matters presented at the meeting.

HOW MANY SHARES MUST BE PRESENT AT THE ANNUAL MEETING TO ESTABLISH A
QUORUM?

According to Beverly's bylaws, the presence in person or by
proxy of the holders of a majority of the shares of Beverly
entitled to vote at the annual meeting will constitute a quorum
for the transaction of business at the meeting.

HOW MANY SHARES MUST BE VOTED IN FAVOR OF THE SIX NOMINEES TO
ELECT THEM? HOW MANY SHARES MUST BE VOTED TO APPROVE THE BYLAW
PROPOSALS AND THE OTHER PROPOSALS?

If a quorum is established at the annual meeting, nominees for
election as directors of Beverly will be elected by a plurality of the
votes cast, in person or by proxy, at the annual meeting. This means that
the eight director positions to be filled at the annual meeting will be
filled by the eight nominees receiving the highest number of votes.

The affirmative vote of the holders of a majority of the shares of
Beverly entitled to be voted at the annual meeting (i.e. all shares
outstanding as of the record date for the annual meeting) is required to
approve Mr. Whitman's two proposals to amend Beverly's bylaws.

The affirmative vote of the holders of a majority of the shares of
Beverly present in person or represented by proxy and entitled to vote at
the annual meeting is required to approve Mr. Whitman's proposal on the
sequence of business at the annual meeting.

According to the Form 8-A filed by Beverly with the SEC on January 27,
2005, there were 108,384,266 shares of Beverly outstanding on January 26,
2005.

HOW WILL ABSTENTIONS, VOTES WITHHELD AND BROKER NON-VOTES BE TREATED?

Broker non-votes, abstentions and proxy cards on which stockholders
withhold voting authority will be counted as present for purposes of
determining whether a quorum is established at the annual meeting. "Broker
non-votes" are shares for which a bank, broker or other nominee holder has
not received voting instructions and which the nominee holder does not have
discretionary power to vote on a particular matter. We do not believe that
banks, brokers or other nominee holders will have discretion to vote on any
matter voted on at the 2005 annual meeting.

Broker non-votes and proxy cards on which stockholders withhold
authority for nominees will not be counted in determining the election of
directors. Broker non-votes and abstentions with respect to Mr. Whitman's
other proposals will have the same effect as votes against the proposals.

WHAT SHOULD YOU DO TO VOTE FOR THE SIX NOMINEES AND FOR THE OTHER
PROPOSALS?

Sign, date and return the enclosed BLUE proxy card today to our
proxy solicitor MacKenzie Partners, Inc., 105 Madison Avenue, New York, New
York 10016 in the envelope provided.

WHOM SHOULD YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?

Please call our proxy solicitor MacKenzie Partners toll free at (800)
322-2885 or collect at (212) 929-5500.

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OUR PROPOSED TRANSACTION;
BACKGROUND TO THE SOLICITATION

OUR PROPOSED TRANSACTION

We are seeking to negotiate a transaction with Beverly in which a
company formed by us would acquire all of the outstanding shares of
Beverly. In that connection, we made a formal offer to Beverly's Board of
Directors to acquire all of the shares of Beverly at a price of $11.50 per
share in cash. Our offer, which would provide significant value to
Beverly's shareholders, reflects a premium of 47% to the average closing
price of Beverly's shares over the period from the beginning of 2004
through January 24, 2005, the last trading day before we made our proposal
public. MOREOVER, IF JUSTIFIED BY DUE DILIGENCE, WE WOULD BE PREPARED TO
RAISE OUR OFFER.

As an alternative to this proposal, we are also prepared to discuss
with the Beverly board a transaction whereby we would purchase Beverly's
real estate assets and nursing facilities operations, leaving Beverly with
the ancillary operations. As part of such a transaction, we would enter
into contractual agreements whereby Beverly would continue to provide
ancillary services to the nursing facilities. This transaction could be
structured in several ways and the consortium would seek to adopt an
approach which is most tax efficient for Beverly's stockholders. We are
prepared to pay the equivalent of $9.00 per share in cash for these assets
and operations and assume all liabilities not related to the ancillary
businesses, leaving Beverly with a pure-play ancillary company consisting
of the Aegis Therapies business and Home Care operating segment.

Our proposal would be financed with $375 million of committed equity
financing and the balance in debt. We have received numerous expressions of
interest from financial institutions interested in providing this debt
financing and are confident in our ability to obtain the financing
necessary to complete a transaction with Beverly.

BACKGROUND TO THE SOLICITATION

During the week of December 13, 2004, Mr. Whitman contacted William R.
Floyd, the Chairman of the Board, President and Chief Executive Officer of
Beverly, and discussed with him the possibility of a transaction between
Beverly and the consortium.

On December 22, 2004, Mr. Whitman sent a letter to Mr. Floyd offering
to acquire the outstanding Beverly shares at a price of $11.50 per share in
cash. The letter stated that Formation was prepared to immediately commence
due diligence review of Beverly, and if due diligence suggests that there
is more value in Beverly, Formation would be prepared to raise its offer
price accordingly. The letter also indicated that Formation was prepared to
discuss a transaction whereby Formation would purchase Beverly's real
estate assets and nursing facilities operations.

In a letter to Mr. Whitman dated January 5, 2005, Mr. Floyd indicated
that he had shared Mr. Whitman's December 22 letter with the Beverly board.

On January 13, 2005, Mr. Whitman telephoned Mr. Floyd to discuss
further the consortium's proposed transactions. Mr. Whitman offered to
provide the Beverly board with additional information regarding the
consortium's proposed transactions in an effort to assist the Beverly board
in evaluating the consortium's proposals. In that connection, on January
19, 2005, Mr. Whitman sent a follow-up letter to Beverly expanding on the
proposals set out in his letter of December 22. In his letter, Mr. Whitman
reiterated that the consortium remains prepared to increase its $11.50 in
cash offer price if due diligence suggested that there is more value in
Beverly.

On January 21, 2005, Beverly announced that it was accelerating the
date of Beverly's 2005 annual meeting to April 21, 2005 from the expected
May 19, 2005 date for that meeting disclosed in Beverly's previous public
filings. At the same time, Beverly accelerated the deadline for submitting
proposals and director nominees to February 5, 2005 from the March 6, 2005
date previously disclosed in Beverly's public filings. In its announcement,
Beverly stated that it had accelerated the date of the annual meeting and
the deadline for submitting proposals and director nominees because it had
adopted a "policy to hold the Company's Annual Meeting of Stockholders as
early as practicable in each calendar year."

As required by the rules of the SEC, on January 24, 2005, Mr. Whitman,
the members of the consortium and certain other parties filed with the SEC
a Schedule 13D disclosing their ownership of approximately 8.1% of the
outstanding shares of Beverly as well as the proposals previously made to
the Beverly board.

On January 24, 2005, Beverly announced that its board was reviewing
the consortium's proposal and would "respond in due course." Mr. Whitman
subsequently received a letter from Mr. Floyd, dated January 24, 2005,
stating that the Beverly board would attempt to meet within the next week
to ten days to evaluate the consortium's proposal.

On January 25, 2005, Beverly announced that it was adopting a poison
pill without the approval of Beverly's stockholders.

On January 27, 2005, the Northwest Arkansas Democrat-Gazette reported
in an article by Cristal Cody that, during a conference call with Beverly
employees on January 26, 2005, Mr. Floyd stated that Beverly's acceleration
of the date of its annual meeting and the deadline for submission of
proposals and director nominations "short-circuits the Formation Capital
financial group... If they wanted to put their directors up for election,
by moving up the meeting, it would eliminate some of the time they would
have to prepare." Although Mr. Floyd indicated in his January 24 letter as
well as in a January 27, 2005 letter he sent to Mr. Whitman that the
Beverly board was in the process of evaluating the consortium's proposal,
according to the Northwest Arkansas Democrat-Gazette article, Mr. Floyd
told Beverly employees on the January 26 conference call that "the company
is not for sale."*

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

* We have not sought or obtained consent from the Northwest Arkansas
Democrat-Gazette to include these quotes in the proxy statement.

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

On January 27, 2005, Fried, Frank, Harris, Shriver & Jacobson LLP,
counsel to the consortium, sent a letter on the consortium's behalf to
Douglas J. Babb, Executive Vice President, Chief Administrative Officer and
Legal Officer of Beverly. This letter reiterated the consortium's desire to
pursue a mutually beneficial, negotiated transaction with Beverly and its
willingness to raise its offer to reflect additional value revealed during
due diligence.

On February 3, 2005, Beverly rejected Formation's proposals -- without
engaging in any discussion with Formation regarding its proposals or
permitting the consortium to conduct any due diligence.

Later that day, Mr. Whitman sent to Mr. Floyd a letter on the
consortium's behalf indicating the consortium's intention to nominate a
slate of nominees for election to the Beverly board at the annual meeting.
On February 4, 2005, Mr. Whitman submitted to Beverly's Secretary a notice
of the business and proposals he intends to bring before the annual meeting
and his intention to nominate a slate consisting of the independent
nominees discussed below.

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THE INDEPENDENT NOMINEES

At the 2005 annual meeting, Mr. Whitman will propose that Jeffrey A.
Brodsky, John J. Durso, Philip L. Maslowe, Charles M. Masson, Mohsin Y.
Meghji and Guy Sansone be elected as directors of Beverly. If elected,
these nominees would hold office until Beverly's 2006 annual meeting (or
until their successors are elected and qualified), and would constitute a
majority of Beverly's board of directors.

EACH OF THE NOMINEES HAS AGREED, UPON ELECTION TO BEVERLY'S BOARD OF
DIRECTORS, TO EXERCISE HIS INDEPENDENT JUDGMENT IN ACCORDANCE WITH HIS
FIDUCIARY DUTIES IN ALL MATTERS THAT COME BEFORE THE BEVERLY BOARD OF
DIRECTORS.

The nominees have furnished the following information regarding their
principal occupations and certain other matters:

JEFFREY A. BRODSKY, age 46, has since 2000 been a Managing Director of
Quest Turnaround Advisors, LLC, a turnaround management consulting services
firm. Since 2002, he has served as Chairman and Chief Executive Officer of
PTV, Inc. (formerly NTL Europe, Inc. and NTL Incorporated), a new media
company in the United Kingdom located at Trafalgar House, 11 Waterloo
Place, London SW1Y 4AU, United Kingdom. Mr. Brodsky is currently a director
of AboveNet, Inc., a provider of fiber connectivity for business. From 2002
to 2004, Mr. Brodsky served as a director of Comdisco Holding Company,
Inc., a provider of equipment lease financing of information and technology
equipment to a variety of industries. From 2002 to 2003, he served as
Chairman of Cablecom GmbH, a cable network operator in Switzerland. From
1994 to 1996, he served as a director of Hawaiian Airlines.

JOHN J. DURSO, age 53, has since 2002 been a partner of the Chicago
office of the law firm Michael Best & Friedrich LLP, where he has chaired
the national Long-Term Care Practice Group. Prior to joining Michael Best,
Mr. Durso was for 17 years a partner with the law firm of Katten Muchin &
Zavis, during which time he chaired the firm's national health care
practice.

PHILIP L. MASLOWE, age 57, served from 1997 until 2002 as Executive
Vice President and Chief Financial Officer of The Wackenhut Corporation, a
security, staffing and privatized prisons corporation. Prior to that, from
1993 to 1997, Mr. Maslowe served as Executive Vice President and Chief
Financial Officer of KinderCare Learning Centers, Inc., the largest
preschool and childcare provider in the U.S. Mr. Maslowe is currently a
director of NorthWestern Corporation, a public utility company. Mr. Maslowe
previously served as non-executive Chairman of AMF Bowling Worldwide, Inc.,
the world's largest owner and operator of bowling centers. From August 2002
to December 2004, Mr. Maslowe served on the Board of Directors of Mariner
Health Care, Inc., a publicly held integrated health care services
provider.

CHARLES M. MASSON, age 51, has since September 2002 been managing
partner of Masson & Company, LLC, a firm providing interim and crisis
management, turnaround consulting and assessment, and financial
restructuring services. From April 1999 to September 2002, Mr. Masson was a
managing partner of Leary, Masson & Associates, LLC, a firm providing
similar services. Since 2005, he has been serving as Chairman and Chief
Restructuring Officer of Kinetic Systems, Inc., an engineering and
construction provider of process piping to the semi-conductor and
bio-pharmaceutical industries. In 2001, he served as Chief Executive
Officer of Maidenform, Inc., an intimate apparel maker. Mr. Masson is
currently a director of Algoma Steel Inc., an integrated steel producer.

MOHSIN Y. MEGHJI, age 40, has since 2002 been a Principal of Loughlin
Meghji + Company, a financial advisory boutique specializing in advising
management, investors and lenders in relation to transactions involving
financially challenged companies. From 1998 to 2002, he was a member of the
Global Corporate Finance Group of Arthur Andersen LLP, the accounting firm.
From May 2002 when it emerged from Chapter 11 to December 2004 upon its
sale, Mr. Meghji served on the Board of Directors of Mariner Health Care,
Inc., a publicly held integrated health care services provider. From July
1999 to May 2002, Mr. Meghji served as financial advisor to various
creditors in relation to the restructuring of Mariner Health Care.

GUY SANSONE, age 40, has since 1999 been with Alvarez & Marsal, LLC, a
global professional services firm specializing in turnaround management and
corporate restructuring, where he has been a Managing Director since 2002.
From March 2003 to September 2004, he served as Interim Chief Financial
Officer of Healthsouth Corporation, a provider of outpatient surgery,
diagnostic imaging and rehabilitative healthcare services. In 2002, he
served as Interim President and Chief Executive Officer of Rotech
Healthcare Inc., a provider of home medical equipment, respiratory
equipment and services and respiratory medications for home use. From 2000
to 2003, he served as Senior Vice President, focusing on the restructuring
of Integrated Health Services Inc., a provider of post-acute healthcare
services. From 1999 to 2000, he served as Chief Financial Officer of
Telegroup, Inc., an alternative provider of domestic and international
telecommunications services. Mr. Sansone is currently a director of Rotech
Healthcare Inc.

Each of the nominees has agreed to be named in this proxy statement
and to serve as a director of Beverly, if elected. We do not expect that
any of the six nominees will be unable to stand for election or serve as a
director, but if any vacancy in the slate of nominees occurs for any reason
the shares represented by the enclosed BLUE proxy card will be voted for
a substitute candidate nominated by Mr. Whitman.

COMPENSATION OF BEVERLY DIRECTORS

If elected to the Beverly board of directors, Mr. Whitman's nominees
will not receive any compensation or indemnification from Mr. Whitman or
the consortium for their service as directors of Beverly.

According to Beverly's public filings, if the nominees are elected as
directors of Beverly, as non-employee directors they would receive from
Beverly an annual retainer of $35,000 plus $1,000 for each Board or
committee meeting attended in the manner in which attendance was requested
or $500 for attending in any other manner (with an additional $1,000 paid
for chairing a committee meeting attended in the manner requested or $500
for chairing a committee meeting attended in any other manner). In addition
to cash compensation, non-employee directors were eligible to receive stock
and performance-based awards, including stock options, stock appreciation
rights, restricted stock and restricted stock units, and other similar
awards, that the Beverly Board may grant from time to time. Each such award
granted will become vested and/or exercisable in accordance with the terms
and conditions, and at the price (if applicable), determined by the Board
on the grant date. Each non-employee director also has the right to defer
cash compensation in exchange for deferred share units (each of which is
equivalent to one Beverly share), plus a 25% Beverly match on deferred
share units, and the right to receive an annual grant of 675 deferred share
units. Distributions in respect of deferred share units begin upon
retirement, termination, death or disability. Each of the nominees, if
elected, would be indemnified by Beverly for service as a director to the
same extent indemnification is provided to other directors under Beverly's
certificate of incorporation and bylaws. In addition, we believe that upon
election, the nominees would be covered by Beverly's officer and director
liability insurance, if any, and be entitled to any other benefits made
available to directors by Beverly. Other than as described above, we are
not aware of any arrangements under which non-employee directors of Beverly
are compensated for services as a director of Beverly.

ARRANGEMENTS BETWEEN THE CONSORTIUM AND THE INDEPENDENT NOMINEES

Appaloosa, on behalf of certain funds for which it acts as investment
adviser, Franklin Mutual, on behalf of certain funds for which it acts as
investment adviser, and Formation entered into an indemnification agreement
with each of Mr. Whitman's nominees. The indemnification agreement provides
that the consortium will indemnify each nominee against any and all
damages, judgments, fines, penalties, losses and expenses suffered,
incurred or sustained by that nominee or to which that nominee becomes
subject, resulting from, arising out of or relating to a claim by reason of
(a) the nominee's standing for election to the Beverly board of directors
at the annual meeting or (b) any event or occurrence relating to or arising
out of, or any action taken or omitted to be taken in connection with the
solicitation of proxies in support of the nominee's election as a director
of Beverly at the annual meeting, but not in the nominee's capacity as a
director of Beverly if he is so elected. Under the indemnification
agreement, responsibility for payments or losses for which the consortium
is liable will be allocated 40% to Appaloosa, 46.67% to Franklin Mutual and
13.33% to Formation, and each member of the consortium's liability under
the indemnification agreement is limited to 40%, 46.67% and 13.33%,
respectively, of $25,000,000.

ADDITIONAL INFORMATION CONCERNING THE SIX INDEPENDENT NOMINEES

The six nominees have also furnished additional miscellaneous
information located in Annex A of this proxy statement as required by the
SEC.

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MATTERS TO BE CONSIDERED AT BEVERLY'S 2005 ANNUAL MEETING

OUR PROPOSALS

We are soliciting proxies to take the following actions at Beverly's
2005 annual meeting:

PROPOSAL 1: To amend Beverly's bylaws to fix the number of directors
constituting the entire Board of Directors at eight, by
revising Article III, Section 2 of Beverly's bylaws to read
in its entirety as follows:

"Number of Directors. The number of Directors of the
Corporation which shall comprise the full Board of Directors
shall be fixed at eight."

PROPOSAL 2: To repeal each provision of or amendment to Beverly's bylaws
(other than the provisions and amendments added or effected
pursuant to Proposal 1) adopted after the version of the
bylaws, purportedly as of May 29, 1997, filed by Beverly
with the SEC as Exhibit 3.4 to Beverly's Registration
Statement on Form S-1 filed on June 4, 1997 (File No.
333-28521).

PROPOSAL 3: To elect each of Mr. Whitman's nominees to Beverly's board
of directors, in lieu of any persons who may be nominated by
Beverly's incumbent board of directors or by any other
person.

PROPOSAL 4: To require that action be taken at the annual meeting on
proposals 1 through 3 above in the sequence indicated and
before any other business is conducted.

In accordance with Beverly's bylaws, on February 4, 2005, Mr. Whitman
delivered written notice to the Secretary of Beverly of his intention to
nominate for election to Beverly's board at the annual meeting his six
independent nominees and to present the proposals described above to the
stockholders of Beverly for their approval at that meeting.

PURPOSES OF OUR PROPOSALS

The purpose of each of the proposals is as follows:

o The purpose of Proposal 1 is to ensure that Beverly does not increase
the size of its current eight-member board in an effort to prevent the
nominees from comprising a majority of the Beverly board if elected.

o The purpose of Proposal 2 is to ensure that the provisions governing
or related to the election of Beverly directors contained in the
latest publicly available version of Beverly's bylaws have not been
changed and will remain unchanged through the annual meeting. Proposal
2 is designed to repeal any amendments to the bylaws that the Beverly
board may have previously adopted and not disclosed to stockholders
and any amendments the board may adopt prior to the annual meeting, in
each case to ensure that no such amendment will operate to thwart the
will of the Beverly stockholders.

o The purpose of Proposal 3 is to elect the six independent nominees of
Mr. Whitman.

o The purpose of Proposal 4 is to ensure that action is taken at the
annual meeting in a logical manner and to prevent results that would
thwart the will of Beverly's stockholders as expressed by their votes
at the annual meeting.

WE STRONGLY RECOMMEND A VOTE FOR THE ELECTION OF THE SIX NOMINEES AND FOR
EACH OF THE OTHER PROPOSALS DESCRIBED ABOVE.

-------------------------------------------------------------------------------
REASONS TO VOTE FOR THE SIX INDEPENDENT NOMINEES
AND MR. WHITMAN'S OTHER PROPOSALS

We believe that the incumbent Beverly board is not acting on behalf of
all Beverly stockholders. Mr. Whitman and the members of the consortium
urge all Beverly stockholders to vote FOR the election of the six
independent nominees, FOR the proposal to fix the size of the board at
eight and FOR the other proposals that are designed to ensure that the will
of the Beverly stockholders is not thwarted.

A VOTE FOR THE INDEPENDENT NOMINEES AND MR. WHITMAN'S OTHER PROPOSALS
LETS BEVERLY KNOW THAT YOU WANT DIRECTORS WHO WILL REPRESENT THE BEST
INTERESTS OF THE STOCKHOLDERS AND, SUBJECT TO THEIR FIDUCIARY DUTIES, WILL
BE COMMITTED TO MAXIMIZING THE VALUE OF YOUR INVESTMENT IN BEVERLY BY
IMPLEMENTING A PROCESS THAT WILL GIVE DUE CONSIDERATION TO THE CONSORTIUM'S
PROPOSALS AND ANY OTHER PROPOSALS BEVERLY MAY RECEIVE FROM US OR OTHERS.

We believe that the incumbent Beverly board has placed the interests
of Mr. Floyd and the other members of Beverly's senior management above the
interests of the stockholders by refusing to engage in any discussion with
us to discuss the merits of our proposal, not permitting us to conduct due
diligence of Beverly, despite the fact that we have said consistently that,
if justified by due diligence, we would be prepared to raise our offer,
putting in place a "poison pill" rights plan without stockholder approval
and abruptly accelerating the date of the annual meeting and the deadline
for submitting proposals and director nominees.

The incumbent Beverly board has refused to meet with us to discuss the
merits of our proposal despite the fact that the $11.50 per share in cash
price offered by us reflects a premium of 47% to the average closing price
of Beverly's shares over the period from the beginning of 2004 through
January 24, 2005, the last trading day before we made our proposal public.

Although the six independent nominees have not given Mr. Whitman or
the consortium any commitments relating to our proposal or otherwise, and
neither Mr. Whitman nor the consortium has sought any commitments from them
relating to our proposals, the nominees have indicated that, if elected,
they will, subject to their fiduciary duties, be committed to maximizing
the value of your investment in Beverly by implementing a process that
would give due consideration to our proposal as well as any other proposals
Beverly may receive from us or others. Even if the six nominees are
elected, there is no guarantee that Beverly or any of its assets will be
sold to us or any other third party. However, by voting for Mr. Whitman's
nominees, Beverly's stockholders will endorse a process that will give due
consideration to our proposals and any other proposals Beverly may receive.

YOU CAN TAKE SOME IMMEDIATE STEPS TO HELP OBTAIN THE MAXIMUM VALUE OF
YOUR SHARES:

(1) SIGN, DATE AND RETURN YOUR BLUE PROXY CARD TODAY, VOTING FOR THE
ELECTION OF THE SIX NOMINEES, FOR OUR PROPOSAL TO AMEND THE BYLAWS TO FIX
THE SIZE OF THE BOARD AT EIGHT, AND FOR OUR OTHER PROPOSALS; AND

(2) MAKE YOUR VIEWS KNOWN TO BEVERLY'S INCUMBENT BOARD OF DIRECTORS.

-------------------------------------------------------------------------------
VOTING

For the proxy solicited hereby to be voted, the enclosed BLUE proxy
card must be signed, dated, and returned in the envelope enclosed, in time
to be voted at the 2005 annual meeting. If you wish to vote "FOR" the
election of the six nominees and "FOR" the adoption of each of Mr.
Whitman's other proposals you must submit the enclosed BLUE proxy card and
must NOT submit Beverly's proxy card. If you have already returned
Beverly's proxy card, you have the right to revoke it as to all matters
covered thereby and may do so by subsequently signing, dating, and mailing
the enclosed BLUE proxy card. Only your latest dated proxy will count at
the annual meeting. Execution of a BLUE proxy card will not affect your
right to attend the annual meeting and to vote in person.

Any proxy may be revoked as to all matters covered thereby at any time
prior to the time a vote is taken by (i) delivering a written notice of
revocation bearing a later date than the proxy, (ii) duly executing and
delivering a later dated written proxy relating to the same shares or (iii)
attending the annual meeting and voting in person (although attendance at
the annual meeting will not in and of itself constitute a revocation of a
proxy). To be effective, any written notice of revocation or subsequent
BLUE proxy should be mailed or delivered to, and received by, MacKenzie
Partners, Inc., 105 Madison Avenue, New York, New York 10016 or Beverly's
corporate secretary before the taking of votes at the annual meeting.
Beverly shares represented by a valid, unrevoked BLUE proxy card will be
voted as specified. Shares represented by a BLUE proxy card where no
specification has been made will be voted "FOR" the election of Mr.
Whitman's six nominees, and "FOR" the adoption of each of Mr. Whitman's
proposals. Except as set forth in this proxy statement, we are not aware of
any other matter to be considered at the annual meeting. If you return a
BLUE proxy card and any other matter is presented at the annual meeting,
the persons named on the enclosed BLUE proxy card will vote your shares in
accordance with their best judgment concerning such matter.

If any of your shares were held in the name of a brokerage firm, bank,
bank nominee or other institution on March 7, 2005, the record date for the
annual meeting, only that institution can vote your shares and only upon
its receipt of your specific instructions. Accordingly, please promptly
contact the person responsible for your account at the relevant institution
and instruct that person to execute and return the BLUE proxy card on your
behalf. You should also promptly sign, date and mail the voting instruction
form (or BLUE proxy card) that your broker or banker sends you. Please do
this for each account you maintain to ensure that all of your shares are
voted. If any of your shares were held in the name of a brokerage firm,
bank, bank nominee or other institution on the record date, to revoke your
proxy you will need to give appropriate instructions to the relevant
institution. If you do not give instructions to your broker or other
nominee, your shares will not be voted.

-------------------------------------------------------------------------------
CHANGE IN CONTROL PROVISIONS IN BEVERLY'S
EMPLOYMENT AGREEMENTS AND BENEFIT PLANS

Beverly's board of directors has taken affirmative steps to impose
transaction costs on any person that may seek to acquire control of
Beverly.

According to Beverly's public filings, Beverly has entered into
employment agreements with five executive officers: William R. Floyd,
Douglas J. Babb, David R. Devereaux, Jeffrey P. Freimark and Cindy H.
Susienka. (Beverly has not publicly filed any other employment agreements
that are currently in effect.) Upon termination of employment in connection
with a change in control, these employment agreements generally provide for
severance benefits equal to three years of base salary and target bonus,
vesting in all stock-based compensation, continuation of medical, dental
and disability coverage for three years and relocation reimbursement.

In addition, Beverly's 1997 Long-Term Incentive Plan provides that the
Nominating and Compensation Committee of the Beverly board may accelerate
the payment or vesting and release any restrictions on any awards in the
event of a change in control. Under Beverly's Non-Employee Directors' Stock
Option Plan, stock options and other awards will automatically vest in the
case of a change in control of Beverly.

On January 1, 2004, Beverly adopted its Enhanced Supplemental
Executive Retirement Plan (Enhanced SERP) for a select group of Beverly's
senior executive employees. The Enhanced SERP is a nonqualified, unsecured
deferred compensation plan, informally funded through a "rabbi trust." Each
year Beverly may make a contribution on each participant's behalf equal to
a percentage of his or her salary and compensation for the year. Following
any change in control, contributions will equal at least the amount made on
each participant's behalf immediately prior to the change in control. If a
participant is terminated without cause within two years following a change
in control, contributions will continue to be made on the participant's
behalf based on the participant's compensation and the Enhanced SERP
contributions that were made immediately prior to such termination, until
the earlier of the time the participant attains age 60 or would have
completed ten years of plan participation.

On December 31, 2002, Beverly adopted an Executive Deferred
Compensation Plan (EDC Plan) for a designated group of management or highly
compensated employees. The EDC Plan is a nonqualified, unsecured deferred
compensation plan, informally funded through a "rabbi trust." Each year,
Beverly may make certain matching contributions to participants under the
EDC Plan. Beverly contributions generally vest after five years of combined
EDC Plan and SERP Participation. However, upon a change in control, all
vesting is accelerated.

In 2004, Beverly established the Retention Enhancement Program (REP)
to provide enhanced benefits to Mr. Floyd. Pursuant to the REP, Beverly
will make contributions each year to an account established for Mr. Floyd
under the EDC Plan. It is intended that when the total contributions under
the REP and earnings on the contributions are added to Mr. Floyd's SERP
benefits, this will provide him with a combined retirement benefit equal to
40% of his total final compensation. Upon a change in control, all of Mr.
Floyd's benefits under the REP will be vested.

According to Beverly's public filings, if the persons serving as
directors of Beverly before any contested election for the Beverly board
cease to make up more than 50% of the Beverly board, a "change in control"
will be deemed to have occurred for purposes of the employment agreements,
plans and programs referenced above. However, Beverly's public filings do
not quantify the costs Beverly would be required to incur if these change
in control provisions were to be triggered under these agreements, plans
and programs.

-------------------------------------------------------------------------------
OTHER INFORMATION

SOLICITATION OF PROXIES

We have retained MacKenzie Partners to assist in soliciting BLUE
proxies from banks, brokers, nominees, institutions and individuals. We
have agreed to pay MacKenzie a fee of $[ ] for assisting in soliciting
proxies for the 2005 annual meeting, and have agreed to reimburse MacKenzie
for its reasonable out-of-pocket expenses. The consortium's agreement with
MacKenzie contains customary indemnification provisions. Responsibility for
the fees, expenses and other amounts payable to MacKenzie will be allocated
40% to Appaloosa, 46.67% to Franklin Mutual and 13.33% to Formation.
MacKenzie anticipates that it will use approximately [ ] persons in its
solicitation efforts. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding proxy solicitation materials to
beneficial owners of shares held as of the record date of the annual
meeting. The consortium will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith. In
addition, Mr. Whitman's nominees and the persons listed on Annex B attached
to this proxy statement may solicit BLUE proxies. Information regarding
such persons is included in Annex B. No additional compensation will be
paid for such services. Solicitation may be conducted in person, by
telephone, electronically or by other means of communication.

The consortium has engaged Eureka Capital Markets LLC (Eureka) as its
financial advisor to provide certain financial advisory and investment
banking services in connection with the consortium's proposal to Beverly
and related matters. Eureka is also party to a term sheet entered into with
Appaloosa, Franklin Mutual and Formation relating to the proposed
transaction under which Eureka will be entitled to a financial advisory
fee, if a transaction with Beverly is completed, and further amounts if the
consortium's acquisition of Beverly or its assets yields a specified
return, as described more fully in Schedule III to Annex B. Neither Eureka
nor any of its employees was retained by the consortium to solicit proxies
for the annual meeting. Eureka does not acknowledge that it or any of its
directors, officers, employees, affiliates or controlling persons is a
"participant," as defined in Schedule 14A promulgated under the Exchange
Act, in the solicitation of proxies for the annual meeting, or that
Schedule 14A requires the disclosure of certain information concerning
them. However, Eureka and certain of its respective directors, officers,
employees, affiliates or controlling persons may assist the consortium or
Mr. Whitman in its solicitation as part of their broader engagement,
although neither Eureka nor any such directors, officers, employees,
affiliates or controlling persons will receive any fee for, or in
connection with, any solicitation activities apart from the fees Eureka is
otherwise entitled to receive under the term sheet. Information regarding
Eureka and its directors, officers, employees, affiliates or controlling
persons who may assist Mr. Whitman or the consortium in soliciting proxies
is included in Annex B.

All costs incidental to the solicitations of proxies on behalf of the
consortium and Mr. Whitman will be borne by the consortium and allocated
40% to Appaloosa, 46.67% to Franklin Mutual and 13.33% to Formation. Total
expenditures for these solicitations are estimated to be approximately
$[ ]. Total expenditures to date are approximately $[ ]. The consortium will
seek reimbursement from Beverly upon completion of the solicitation of all
expenses incurred in connection with the nomination of the six nominees,
the submission of our proposals and this solicitation. Mr. Whitman does not
intend to seek the approval of Beverly's stockholders for that
reimbursement.

APPRAISAL RIGHTS

Beverly's stockholders do not have dissenter's rights of appraisal as
a result of this solicitation or the adoption of any of the proposals
included in this proxy statement.

DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL
MEETING

According to publicly available documents and under Rule 14a-8 of the
Exchange Act, stockholder proposals may be eligible for inclusion in
Beverly's 2006 proxy statement and form of proxy. To be included in the
2006 proxy statement and form of proxy, stockholder proposals must be
received by Beverly's Corporate Secretary not less than 120 calendar days
before the date Beverly's 2005 proxy statement is released to stockholders.
In addition, according to Beverly's advance notice bylaw, any stockholder
proposal to be presented from the floor at the 2006 annual meeting of the
stockholders must be received by the Corporate Secretary at least
seventy-five days before the meeting.

ARNOLD M. WHITMAN
Dated: March , 2005

ANNEX A

MISCELLANEOUS INFORMATION CONCERNING
THE INDEPENDENT NOMINEES

The business address of each the nominees is as follows:

Jeffrey A. Brodsky
Quest Turnaround Advisors, LLC
RiverView at Purchase
287 Bowman Avenue
Purchase, NY 10577

John J. Durso
Michael Best & Friedrich LLP
401 North Michigan Avenue
Suite 1900
Chicago, Illinois 60611

Philip L. Maslowe
12900 Brynwood
Palm Beach Gardens, Florida 33418

Charles M. Masson
Masson & Company, LLC
420 Lexington Avenue
Suite 2045
New York, New York 10170

Mohsin Y. Meghji
Loughlin Meghji + Company
148 Madison Avenue
New York, NY 10016

Guy Sansone
Alvarez & Marsal, Inc.
600 Lexington Avenue
New York, NY 10022

Mr. Whitman believes that his six independent nominees, including any
independent nominee elected to fill a newly created directorship, if
elected will exercise their independent judgment and fiduciary duties as
directors of Beverly. In that connection, the nominees have indicated that,
if elected, they will, subject to their fiduciary duties, be committed to
maximizing the value of your investment in Beverly by implementing a
process that would give due consideration to our proposal as well as any
other proposals Beverly may receive from us or others. Mr. Whitman and
certain of the persons listed on Annex B, who may be participants in the
solicitation, beneficially own shares of Beverly. To the extent that the
election of these nominees and the approval of Mr. Whitman's other
proposals may have an impact on the consummation of our proposed
transaction or any other transaction in which Beverly shares are acquired
by a third party, Mr. Whitman and the other participants in the
solicitation could be considered to have an interest in the matters to be
acted upon at the 2005 annual meeting.

Except as set forth in this Annex A or the proxy statement to which
this is attached, to the knowledge of Mr. Whitman, there is no other
information regarding any of his nominees that is required to be disclosed
in a proxy statement filed pursuant to the proxy rules of the SEC.

ANNEX B

PERSONS WHO MAY BE PARTICIPANTS IN THE SOLICITATION OF PROXIES

Set forth below are the names, principal business addresses and
principal occupations or employment of the persons who may assist Mr.
Whitman in the solicitation of proxies in connection with Beverly's 2005
annual meeting, and the name, principal business and address of any
corporation or other organization in which their employment is carried on.
Information with respect to Mr. Whitman's nominees is included in the
attached proxy statement and in Annex A thereto. To the extent any of these
individuals assists Mr. Whitman in the solicitation of proxies for the
annual meeting, these persons may be deemed "participants" as defined in
Schedule 14A promulgated under the Securities Exchange Act of 1934, as
amended. The fact that a person is listed below shall not be deemed an
admission that such person is a participant. To the extent that a
participant is a Beverly stockholder and/or an officer or equityholder of a
member of the consortium, such participant's interest in the matters to be
acted upon at the annual meeting rests in electing directors committed to
proceeding with a process that would give due consideration to our proposal
and any other proposals Beverly may receive from us or others.

PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT ADDRESS OF PRINCIPAL EMPLOYER
---- ----------------------- -----------------------------

Appaloosa Hedge fund c/o Appaloosa Partners
Investment Inc., 26 Main Street,
Limited 1st Floor, Chatham, New
Partnership I Jersey 07928
(AILP)

Palomino Fund Hedge fund c/o Appaloosa Partners
Ltd. Inc., 26 Main Street,
(Palomino) 1st Floor, Chatham, New
Jersey 07928

Appaloosa General partner of AILP c/o Appaloosa Partners
and investment adviser to Inc., 26 Main Street,
Palomino 1st Floor, Chatham, New
Jersey 07928

Appaloosa General partner of 26 Main Street, 1st
Partners Inc. Appaloosa Floor, Chatham, New
(API) Jersey 07928

David Tepper President of API 26 Main Street, 1st
Floor, Chatham, New
Jersey 07928

Ronald Goldstein Vice President and 26 Main Street, 1st
Secretary of API Floor, Chatham, New
Jersey 07928

Franklin Mutual Investment adviser 51 John F. Kennedy
registered with the SEC Parkway, Short Hills,
and investment adviser to New Jersey 07078
certain investment
companies within the
Franklin/Templeton Group
of Fund

Michael J. Embler Senior Vice President of 51 John F. Kennedy
Franklin Mutual Parkway, Short Hills,
New Jersey 07078

Northbrook NBV, General investment 500 Skokie Boulevard,
LLC activities Suite 310, Northbrook,
(Northbrook) Illinois 60062

David Hokin Chief Strategist of DH2, 500 Skokie Boulevard,
Inc. Suite 310, Northbrook,
Illinois 60062

Rob Rubin Managing Director of DH2, 500 Skokie Boulevard,
Inc. Suite 310, Northbrook,
Illinois 60062

Robert Hartman Chairman of Nucare 6633 N. Lincoln Avenue,
Services Corp Lincolnwood, Illinois
60712

David Reis Managing Member of Senior 19 Post Road East,
Care Development, LLC Westport, Connecticut
06880

Baylor Holds selected securities c/o Formation Capital, LLC
Enterprises, LLC 1035 Powers Place,
Alpharetta, Georgia 30004

Arnold M. Whitman Chief Executive Officer, 1035 Powers Place,
Treasurer and Co-Chairman Alpharetta, Georgia 30004
of Formation

Steve Fishman President of Formation 1035 Powers Place,
Alpharetta, Georgia
30004

Formation Investing in the senior 1035 Powers Place,
housing and long-term Alpharetta, Georgia
care industry 30004

Eureka Financial advisory firm 21 East 40th St, Suite 1300
NY, NY 10016

Stephen A. Greene Managing Director of 21 East 40th St, Suite 1300
Eureka NY, NY 10016

Mark Hyman Managing Director of 21 East 40th St, Suite 1300
Eureka NY, NY 10016

Leslie Feldman Executive Director of 21 East 40th St, Suite 1300
Eureka NY, NY 10016

INTERESTS OF POTENTIAL PARTICIPANTS

Information regarding the interests of the potential participants
described above that is required to be disclosed under the rules of the SEC
is set forth in Schedules I, II and III.

Schedule I

Beneficial Ownership of Potential Participants
in Beverly Common Stock

The following table sets forth the amount of each class of securities
of Beverly which each of the potential participants listed above in this
Annex B owns beneficially, directly or indirectly:

NAME CLASS OF SECURITY NUMBER OF SHARES
--------- --------------------- --------------------
Appaloosa Common Stock 1,873,122
Investment Limited
Partnership I

Palomino Fund Ltd. Common Stock 1,641,178

Appaloosa Common Stock 3,514,300

Appaloosa Partners Common Stock 3,514,300
Inc.

David Tepper Common Stock 3,514,300

Franklin Mutual Common Stock 3,508,900

Northbrook NBV, LLC Common Stock 1,487,200

David Hokin Common Stock 1,487,200

Rob Rubin Common Stock 1,487,200

Robert Hartman Common Stock 1,487,200

David Reis Common Stock 200,000

Baylor Enterprises Common Stock 21,900
LLC

Arnold M. Whitman Common Stock 26,600 [1]

[1] Includes 100 shares of Beverly Common Stock held of record by Mr.
Whitman.

Schedule II

Transactions in Beverly Common Stock Since February 18, 2003+

The following table contains a summary description of all purchases
and sales of the common stock of Beverly effected within the past two years
by the potential participants set forth above in this Annex B:

DATE OF AMOUNT OF BUY/SELL
TRANSACTION SHARES

Appaloosa Investment
Limited Partnership
I October 4, 2004 54,899 Buy
October 5, 2004 37,310 Buy
October 6, 2004 26,330 Buy
October 6, 2004 79,950 Buy
October 7, 2004 14,018 Buy
October 8, 2004 51,914 Buy
October 11, 2004 42,640 Buy
October 12, 2004 106,600 Buy
October 13, 2004 87,945 Buy
October 14, 2004 30,594 Buy
October 15, 2004 26,597 Buy
October 18, 2004 103,935 Buy
October 19, 2004 20,094 Buy
October 26, 2004 27,343 Buy
October 26, 2004 2,665 Buy
October 27, 2004 46,371 Buy
October 27, 2004 5,330 Buy
October 27, 2004 7,462 Sell
October 28, 2004 136,555 Buy
October 28, 2004 15,777 Buy
October 29, 2004 45,305 Buy
November 1, 2004 39,975 Buy
November 1, 2004 1,759 Sell
January 7, 2005 73,074 Buy
January 13, 2005 68,224 Buy
January 14, 2005 87,945 Buy
January 18, 2005 213,200 Buy
January 19, 2005 213,200 Buy
January 20, 2005 139,433 Buy
January 21, 2005 39,229 Buy
January 24, 2005 45,891 Buy

Palomino Fund Ltd. October 4, 2004 48,101 Buy
October 5, 2004 32,690 Buy
October 6, 2004 23,070 Buy
October 6, 2004 70,050 Buy
October 7, 2004 12,282 Buy
October 8, 2004 45,486 Buy
-----------
+ No part of the purchase price or market value of any of the shares
specified in this Schedule II to Annex B is represented by funds
borrowed or otherwise obtained for the purpose of acquiring or holding
such securities.

October 11, 2004 37,360 Buy
October 12, 2004 93,400 Buy
October 13, 2004 77,055 Buy
October 14, 2004 26,806 Buy
October 15, 2004 23,303 Buy
October 18, 2004 91,065 Buy
October 19, 2004 17,606 Buy
October 26, 2004 23,957 Buy
October 26, 2004 2,335 Buy
October 27, 2004 40,629 Buy
October 27, 2004 4,670 Buy
October 27, 2004 6,538 Sell
October 28, 2004 119,645 Buy
October 28, 2004 13,823 Buy
October 29, 2004 39,695 Buy
November 1, 2004 35,025 Buy
November 1, 2004 1,541 Sell
January 7, 2005 64,026 Buy
January 13, 2005 59,776 Buy
January 14, 2005 77,055 Buy
January 18, 2005 186,800 Buy
January 19, 2005 186,800 Buy
January 20, 2005 122,167 Buy
January 21, 2005 34,371 Buy
January 24, 2005 40,209 Buy

Appaloosa October 4, 2004 103,000 Buy
October 5, 2004 70,000 Buy
October 6, 2004 49,400 Buy
October 6, 2004 150,000 Buy
October 7, 2004 26,300 Buy
October 8, 2004 97,400 Buy
October 11, 2004 80,000 Buy
October 12, 2004 200,000 Buy
October 13, 2004 165,000 Buy
October 14, 2004 57,400 Buy
October 15, 2004 49,900 Buy
October 18, 2004 195,000 Buy
October 19, 2004 37,700 Buy
October 26, 2004 51,300 Buy
October 26, 2004 5,000 Buy
October 27, 2004 87,000 Buy
October 27, 2004 10,000 Buy
October 27, 2004 14,000 Sell
October 28, 2004 256,200 Buy
October 28, 2004 29,600 Buy
October 29, 2004 85,000 Buy
November 1, 2004 75,000 Buy
November 1, 2004 3,300 Sell
January 7, 2005 137,100 Buy
January 13, 2005 128,000 Buy
January 14, 2005 165,000 Buy
January 18, 2005 400,000 Buy
January 19, 2005 400,000 Buy
January 20, 2005 261,600 Buy
January 21, 2005 73,600 Buy
January 24, 2005 86,100 Buy

Appaloosa Partners
Inc. October 4, 2004 103,000 Buy
October 5, 2004 70,000 Buy
October 6, 2004 49,400 Buy
October 6, 2004 150,000 Buy
October 7, 2004 26,300 Buy
October 8, 2004 97,400 Buy
October 11, 2004 80,000 Buy
October 12, 2004 200,000 Buy
October 13, 2004 165,000 Buy
October 14, 2004 57,400 Buy
October 15, 2004 49,900 Buy
October 18, 2004 195,000 Buy
October 19, 2004 37,700 Buy
October 26, 2004 51,300 Buy
October 26, 2004 5,000 Buy
October 27, 2004 87,000 Buy
October 27, 2004 10,000 Buy
October 27, 2004 14,000 Sell
October 28, 2004 256,200 Buy
October 28, 2004 29,600 Buy
October 29, 2004 85,000 Buy
November 1, 2004 75,000 Buy
November 1, 2004 3,300 Sell
January 7, 2005 137,100 Buy
January 13, 2005 128,000 Buy
January 14, 2005 165,000 Buy
January 18, 2005 400,000 Buy
January 19, 2005 400,000 Buy
January 20, 2005 261,600 Buy
January 21, 2005 73,600 Buy
January 24, 2005 86,100 Buy

David Tepper October 4, 2004 103,000 Buy
October 5, 2004 70,000 Buy
October 6, 2004 49,400 Buy
October 6, 2004 150,000 Buy
October 7, 2004 26,300 Buy
October 8, 2004 97,400 Buy
October 11, 2004 80,000 Buy
October 12, 2004 200,000 Buy
October 13, 2004 165,000 Buy
October 14, 2004 57,400 Buy
October 15, 2004 49,900 Buy
October 18, 2004 195,000 Buy
October 19, 2004 37,700 Buy
October 26, 2004 51,300 Buy
October 26, 2004 5,000 Buy
October 27, 2004 87,000 Buy
October 27, 2004 10,000 Buy
October 27, 2004 14,000 Sell
October 28, 2004 256,200 Buy
October 28, 2004 29,600 Buy
October 29, 2004 85,000 Buy
November 1, 2004 75,000 Buy
November 1, 2004 3,300 Sell
January 7, 2005 137,100 Buy
January 13, 2005 128,000 Buy
January 14, 2005 165,000 Buy
January 18, 2005 400,000 Buy
January 19, 2005 400,000 Buy
January 20, 2005 261,600 Buy
January 21, 2005 73,600 Buy
January 24, 2005 86,100 Buy

Franklin Mutual October 26, 2004 240,000 Buy
October 27, 2004 134,800 Buy
October 28, 2004 18,900 Buy
October 28, 2004 150,000 Buy
October 28, 2004 420,800 Buy
October 29, 2004 190,400 Buy
November 1, 2004 639,700 Buy
November 2, 2004 200,000 Buy
January 13, 2005 128,000 Buy
January 14, 2005 165,000 Buy
January 18, 2005 400,000 Buy
January 19, 2005 400,000 Buy
January 20, 2005 261,600 Buy
January 21, 2005 73,600 Buy
January 24, 2005 86,100 Buy

Northbrook NBV LLC
("Northbrook")

Note [1] October 6, 2004 500 Buy
Note [1] October 8, 2004 31,600 Buy
Note [1] October 11, 2004 57,400 Buy
Note [1] October 13, 2004 5,000 Buy
Note [1] October 14, 2004 59,500 Buy
Note [1] October 15, 2004 6,000 Buy
Note [1] October 19, 2004 140,000 Buy
Note [1] October 20, 2004 117,300 Buy
Note [1] October 21, 2004 1,000 Buy
Note [1] October 22, 2004 5,700 Buy
Note [1] October 25, 2004 18,300 Buy
Note [1] October 26, 2004 20,000 Buy
Note [1] October 27, 2004 27,700 Buy
Note [1] October 29, 2004 60,500 Sell
Note [1] November 1, 2004 4,500 Sell
Note [1] November 2, 2004 118,500 Buy
Note [1] November 3, 2004 1,000 Buy
Note [1] November 4, 2004 2,000 Buy
Note [1] November 4, 2004 2,000 Sell
Note [1] November 8, 2004 44,500 Sell
Note [1] November 9, 2004 100,000 Buy
Note [1] November 11, 2004 100,000 Buy
Note [1] November 11, 2004 400 Sell
Note [1] November 12, 2004 4,600 Sell
Note [1] November 17, 2004 5,400 Buy
Note [1] November 18, 2004 14,600 Buy
Note [1] November 22, 2004 7,800 Buy
Note [1] November 23, 2004 7,200 Buy
Note [1] December 1, 2004 2,000 Sell
Note [6] December 1, 2004 300[2] Sell
Note [1] December 2, 2004 17,000 Sell
Note [1] December 3, 2004 10,000 Buy
Note [1] December 6, 2004 14,000 Buy
Note [1] December 7, 2004 15,000 Buy
Note [6] December 8, 2004 3,000[2] Sell
Note [6] December 9, 2004 1,000[2] Sell
Note [6] December 10, 2004 1,000[2] Sell
Note [6] December 13, 2004 1,000[2] Sell
Note [6] December 15, 2004 1,000[2] Sell
Note [1] December 17, 2004 1,000 Sell
Note [6] December 17, 2004 1,000[2] Sell
Note [1] December 20, 2004 1,000 Buy
Note [6] December 20, 2004 300[2] Sell
Note [6] December 21, 2004 1,000[2] Sell
Note [1] January 12, 2005 5,000 Sell
Note [1] January 13, 2005 5,000 Buy
Northbrook [3] January 13, 2005 750,000 Buy
Notes[1], [3] January 13, 2005 750,000 Sell
Northbrook January 13, 2005 64,000 Buy
Northbrook January 14, 2005 82,500 Buy
Northbrook January 18, 2005 200,000 Buy
Northbrook January 19, 2005 200,000 Buy
Note [6] January 19, 2005 1,000[2] Sell
Northbrook January 20, 2005 130,800 Buy
Note [7] January 20, 2005 10,600[2] Buy
Northbrook [7] January 20, 2005 10,600[2] Sell
Northbrook January 21, 2005 10,600[2] Buy
Northbrook January 21, 2005 36,800 Buy
Northbrook January 24, 2005 23,100 Buy

David Reis May 13, 2003 295,400 Sold
May 13, 2003 4,600 Sold
May 14, 2003 5,000 Sold
May 14, 2003 1,000 Sold
May 14, 2003 1,000 Sold
May 14, 2003 1,000 Sold
May 14, 2003 1,500 Sold
May 14, 2003 5,000 Sold
May 14, 2003 10,000 Sold
May 14, 2003 5,000 Sold
May 14, 2003 5,000 Sold
May 14, 2003 2,500 Sold
May 14, 2003 10,000 Sold
May 14, 2003 2,800 Sold
May 14, 2003 500 Sold
May 14, 2003 9,400 Sold
May 14, 2003 3,300 Sold
May 14, 2003 6,700 Sold
May 14, 2003 5,000 Sold
May 14, 2003 3,300 Sold
May 14, 2003 10,000 Sold
May 14, 2003 10,000 Sold
May 14, 2003 2,000 Sold
May 14, 2003 2,000 Sold
May 14, 2003 2,000 Sold
May 14, 2003 500 Sold
May 14, 2003 4,400 Sold
May 14, 2003 300 Sold
May 14, 2003 700 Sold
May 14, 2003 1,400 Sold
May 14, 2003 5,000 Sold
May 14, 2003 6,100 Sold
May 14, 2003 1,500 Sold
May 14, 2003 1,000 Sold
May 15, 2003 3,600 Sold
May 15, 2003 1,400 Sold
May 15, 2003 5,000 Sold
May 15, 2003 100 Sold
May 15, 2003 28,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 600 Sold
May 15, 2003 200 Sold
May 15, 2003 100 Sold
May 15, 2003 900 Sold
May 15, 2003 1,300 Sold
May 15, 2003 2,500 Sold
May 15, 2003 4,800 Sold
May 15, 2003 5,000 Sold
May 15, 2003 5,000 Sold
May 15, 2003 6,200 Sold
May 15, 2003 2,500 Sold
May 15, 2003 1,400 Sold
May 15, 2003 5,000 Sold
May 15, 2003 5,000 Sold
May 15, 2003 9,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 100 Sold
May 15, 2003 5,000 Sold
May 15, 2003 800 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,000 Sold
May 15, 2003 1,500 Sold
May 15, 2003 2,000 Sold
May 15, 2003 2,500 Sold
May 15, 2003 2,500 Sold
May 15, 2003 2,500 Sold
May 15, 2003 2,500 Sold
May 15, 2003 4,000 Sold
May 15, 2003 4,000 Sold
May 15, 2003 4,100 Sold
May 15, 2003 3,600 Sold
May 15, 2003 1,400 Sold
May 15, 2003 5,000 Sold
May 15, 2003 3,600 Sold
May 15, 2003 4,400 Sold
May 16, 2003 400 Sold
May 16, 2003 3,100 Sold
May 16, 2003 900 Sold
May 16, 2003 5,600 Sold
October 18, 2004 10,000 Buy
October 18, 2004 15,000 Buy
October 18, 2004 15,000 Buy
October 18, 2004 15,000 Buy
October 18, 2004 15,000 Buy
October 19, 2004 50,000 Buy
October 19, 2004 15,000 Buy
October 28, 2004 5,000 Buy
October 28, 2004 5,000 Buy
October 28, 2004 5,000 Buy
November 1, 2004 10,000 Buy
November 1, 2004 10,000 Buy
November 1, 2004 5,000 Buy
November 5, 2004 10,000 Buy
November 5, 2004 10,000 Buy
January 4, 2005 2,500 Buy
January 4, 2005 2,500 Buy
January 21, 2005 20,000[4] Buy
February 11, 2005 20,000[4] Sell

Baylor Enterprises
LLC May 14, 2003 4,500 Sold
May 14, 2003 3,521 Sold
May 14, 2003 579 Sold
May 28, 2003 1,600 Sold
May 28, 2003 3,400 Sold
May 30, 2003 579 Sold
May 30, 2003 3,400 Sold
May 30, 2003 1,021 Sold
June 2, 2003 2,400 Sold
June 2, 2003 1,600 Sold
June 2, 2003 800 Sold
June 2, 2003 200 Sold
June 2, 2003 1,000 Sold
June 2, 2003 4,000 Sold
June 5, 2003 2,000 Sold
June 5, 2003 1,000 Sold
June 5, 2003 3,000 Sold
June 5, 2003 5,000 Sold
June 5, 2003 5,000 Sold
June 5, 2003 3,500 Sold
October 18, 2004 5,000 Buy
October 18, 2004 1,200 Buy
October 19, 2004 5,000 Buy
October 19, 2004 1,200 Buy
October 25, 2004 2,600 Buy
October 25, 2004 1,000 Buy
October 25, 2004 2,400 Buy
November 10, 2004 900 Buy
November 10, 2004 700 Buy
November 10, 2004 200 Buy
November 10, 2004 4,800 Buy
November 10, 2004 3,400 Buy
November 15, 2004 5,000 Sold
November 15, 2004 1,200 Sold
November 15, 2004 5,000 Sold
November 15, 2004 1,200 Sold
November 15, 2004 2,600 Sold
November 17, 2004 1,000 Sold
November 17, 2004 2,400 Sold
November 17, 2004 900 Sold
November 17, 2004 700 Sold
November 17, 2004 200 Sold
November 17, 2004 4,800 Sold
November 18, 2004 3,400 Sold
December 20, 2004 22,000 Buy
February 1, 2005 100 Transfer [5]

Arnold M. Whitman December 20, 2004 1,100 Buy
December 20, 2004 3,400 Buy
January 28, 2005 100 Buy
February 1, 2005 100 Transfer [5]

-------------------------------
Notes:

[1] An entity controlled by Messrs. Hokin and Rubin effected this
transaction. Each of the Beverly shares purchased by this entity was
sold to Northbrook on January 13, 2005 in a private transaction at a
price of $8.60 per share. See Note 3.

[2] Consists of a transaction in respect of July 2005 call options
exercisable for Beverly shares at a strike price of $10.00.

[3] Northbrook acquired these Beverly shares in a private transaction from
an entity managed by Messrs. Hokin and Rubin. See Note 1.

[4] Consists of a transaction in respect of April 2005 Call Options
exercisable for Beverly shares at a strike price of $10.00.

[5] These shares were transferred from Baylor to Arnold M. Whitman.

[6] The entity controlled by Messrs. Hokin and Rubin as referenced in Note
1 effected this transaction.

[7] Northbrook sold these call options in a private transaction to the
entity controlled by Messrs. Hokin and Rubin as referenced in Note 1.

Schedule III

Transactions

The following describes certain transactions required to be disclosed
under the rules of the SEC:

1. Appaloosa, Eureka, Formation and Franklin Mutual are parties to a
term sheet, dated as of December 14, 2004, setting forth terms on which
they would work together to effect a transaction pursuant to which they
would acquire, through a newly formed acquisition entity, either (x) no
less than 80% of the outstanding Beverly shares or (y) Beverly's real
estate assets and nursing facilities operations. Pursuant to this term
sheet, Appaloosa, Franklin Mutual and Formation have agreed that, in
connection with a transaction with Beverly on terms acceptable to them,
they would make an aggregate cash equity contribution of $375 million to
the newly formed acquisition entity, consisting of $150 million from
Appaloosa, $175 million from Franklin Mutual and $50 million from
Formation. Before completion of a transaction with Beverly, each party
would contribute to the acquisition entity all shares of Beverly it then
owns. Each party's share contributions would serve to reduce the amount of
its required cash equity contribution based on a value of those shares
reflecting the price paid with respect to each Beverly share in the
transaction.

Under the term sheet, if a transaction with Beverly is completed,
after Appaloosa, Franklin Mutual and Formation have received a return equal
to their initial equity investment plus 10%, Formation and Eureka will be
entitled to receive 13.5% and 2.5%, respectively, of any additional returns
generated by the acquisition entity. After Appaloosa, Franklin Mutual and
Formation have received an additional 40% return on their initial equity
investment, Formation and Eureka will be entitled to receive 18.375% and
6.625% of any further return generated by the acquisition entity. Formation
or its designee will also be entitled to an annual asset management fee of
$15,000 per facility of Beverly held by the acquisition entity plus
reasonable reimbursement of third party expenses less $500,000.

Under the term sheet, if the transaction with Beverly is completed,
Formation will receive as a financial advisory fee 37.5%, and Eureka will
receive as a financial advisory fee 50%, of the lesser of $8.2 million or
0.5% of the total consideration paid in the transaction. Each of Formation
and Eureka will be required to pay to invest at least 50% of their
financial advisory fee in the acquisition entity.

2. In January 2002, an affiliate of Beverly sold to an affiliate of
Formation 49 skilled nursing facilities and four assisted living centers in
Florida for an aggregate amount equal to $165 million in cash (the "Sale").
In connection with the Sale, 4F Funding, Inc., an affiliate of Beverly ("4F
Funding"), financed the purchase of a pool of ten of those facilities and
assisted living centers by Formation Properties I, LLC (as successor to
Formation Properties II, LLC), an affiliate of Formation, in exchange for
Formation Properties I, LLC's issuing a note to 4F Funding for a principal
amount of $12.5 million, as secured by the underlying properties. In the
refinancing of the debt incurred in connection with the Sale, Formation
Properties I, LLC paid off its note to 4F Funding for approximately
$13,895,455.01 (including interest, fees and legal expenses) on July 30,
2004.

3. AEGIS Therapies, Inc., a wholly-owned subsidiary of Beverly
("AEGIS"), has contracted for a period of one year beginning on March 1,
2004 to provide physical, occupational and speech therapy services to
residents of California Gardens Corp. (d/b/a California Gardens Nursing and
Rehabilitation Center) and Chevy Chase Corp. (d/b/a Chevy Chase Nursing and
Rehabilitation Center), as well as provide consultations on rehabilitative
programs (the "Services Agreement"). California Gardens Corp. is 57.482%
owned by Mr. Robert Hartman and 25.00% owned by a trust, of which Mr. Rob
Rubin is a trustee and certain family members of Mr. David Hokin are
beneficiaries (the "Trust"). Chevy Chase Corp. is 60.75% owned by Mr.
Robert Hartman and 25.00% owned by the Trust. In addition, Mr. Hartman is a
director and President, and Mr. Hokin is Treasurer, of each of California
Gardens Corp. and Chevy Chase Corp. Under the Services Agreement (which is
expected to be renewed upon its expiration), AEGIS received $380,755 and
$252,231 in 2004, and is expected to receive $500,000 and $350,000 to
$400,000 in 2005 (assuming renewal of the agreement upon substantially
similar terms), from California Gardens Corp. and Chevy Chase Corp.,
respectively.

ANNEX C

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF BEVERLY

The following information is based solely upon Mr. Whitman's review of
Beverly's website and publicly available filings with the SEC. The
following table sets forth certain information with respect to the
beneficial ownership of Beverly's common stock by (i) each person reported
by Beverly to own, or who has reported to own, beneficially more than 5% of
the outstanding shares of Beverly's common stock ("Principal Stockholder"),
(ii) each director of Beverly, (iii) each executive officer named in the
Summary Compensation Table in Beverly's proxy statement for the 2004 annual
meeting, and (iv) all directors and executive officers of Beverly as a
group included in Beverly's proxy statement for the 2004 annual meeting.
Unless otherwise indicated, each stockholder has sole voting and investment
power with respect to the shares shown. Unless otherwise indicated, the
information in this table was derived from Beverly's 2004 proxy statement.

SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)

DIRECTORS, NAMED EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS ------------------------------------------------------------

---------------------------------------------------------------------- ------------------------------------------------------------
Number Percentage Ownership
---------------------------------------------------------------------- ----------------------------------- ------------------------

NAMED EXECUTIVE OFFICERS
Douglas J. Babb (2), (3) 420,550 *
David R. Devereaux (2), (3) 406,519 *
William R. Floyd (also a director) (2), (3) 1,545,967 1.43%
Jeffrey P. Freimark (2), (3), (4) 206,450 *
Cindy H. Susienka (2), (3) 180,701 *
DIRECTORS (WHO ARE NOT ALSO NAMED EXECUTIVE OFFICERS)
Melanie Creagan Dreher, Ph.D, RN, FAAN (a), (2)
John D. Fowler, Jr. (2), (5) 61,725 *
John P. Howe III, M.D. (2), (5) 44,489 *
James W. McLane (2), (5) 41,313 *
Ivan R. Sabel 0 *
Donald L. Seeley (2) 35,833 *
Marilyn R. Seymann, Ph.D. (2), (5) 68,558
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (24 PERSONS) (3), 4,568,445 4.22%
(4), (5)
PRINCIPAL STOCKHOLDERS
Strong Capital Management, Inc. (b) 6,253,247 5.8%
100 Heritage Reserve
Menomonee Falls, WI 53051
Barclays Global Investors, N.A. 5,402,927 4.98%
45 Fremont St.
San Francisco, CA 94105
Members of the Consortium and Assisting Stockholders (19 persons): 8,757,000 8.1%
Appaloosa Investment Limited Partnership I (6), (7) 1,873,122 1.7%
Palomino Fund Ltd. (6) 1,641,178 1.5%
c/o Trident Trust Company (Cayman) Ltd.
1 Capital Place, P.O. Box 847
Grand Cayman, Cayman Islands
Appaloosa Management L.P. (6), (7) 3,514,300 3.2%
Appaloosa Partners Inc. (6), (7) 3,514,300 3.2%
David A. Tepper (6), (7) 3,514,300 3.2%
Franklin Mutual Advisers, LLC 3,508,900 3.2%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Northbrook NBV, LLC (6), (8) 1,487,200 1.4%
David Hokin (6), (8) 1,487,200 1.4%
Rob Rubin (6), (8) 1,487,200 1.4%
Robert Hartman (6), (9) 1,487,200 1.4%
David Reis (10) 200,000 *
c/o Senior Care Development, LLC
19 Post Road East
Westport, CT 06880
Baylor Enterprises LLC (6), (11) 21,900 *
Arnold M. Whitman (11), (12) 26,600 *

* Less than 1.0%.
(a) There is no publicly available information with respect to Ms. Dreher's beneficial ownership in Beverly shares as of the
date of this proxy statement.
(b) Derived from Amendment No. 2 to the Schedule 13G filed by Strong Capital Management, Inc. on February 11, 2005 with respect
to its Beverly shares.

(1) The percentage of ownership indicated is based on the shares of Common Stock reported by Beverly outstanding as of January
26, 2005, together with applicable options for such stockholder. Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting or investment power with respect to such shares. Shares subject to options exercisable
on March 31, 2004 or within 60 days thereafter are deemed outstanding for computing the percentage ownership of the person
holding such options.

(2) Unless otherwise noted, the address of each person is One Thousand Beverly Way, Fort Smith, Arkansas 72919.

(3) Includes the following number of shares issuable upon exercise of options that were exercisable on or within 60 days after
March 31, 2004: Mr. Babb (275,550); Mr. Devereaux (193,025); Mr. Floyd (1,050,000); Mr. Freimark (75,000); Ms. Susienka
(107,100); Mr. Fowler (14,667); Dr. Howe (21,083); Mr. McLane (23,968); Mr. Seeley (12,833); and Dr. Seymann (45,625).

(4) Includes shares of Beverly Common Stock owned by family members.

(5) Includes the following number of shares credited under the Non-Employee Director Deferred Compensation Plan: Mr. Fowler
(42,058); Dr. Howe (23,406); Mr. McLane (17,345); and Dr. Seymann (21,933).

(6) Exercises shared voting and shared dispositive power over these shares of Beverly Common Stock.

(7) The address is c/o Appaloosa Partners Inc., 26 Main Street, 1st Floor, Chatham, New Jersey 07928.

(8) The address is 500 Skokie Boulevard, Suite 310, Northbrook, Illinois 60062.

(9) The address is 6633 N. Lincoln Avenue, Lincolnwood, Illinois 60712.

(10) Exercises sole voting and sole dispositive power over 75,000 of these shares of Beverly Common Stock and shared voting
and shared dispositive power over 125,000 shares of Beverly Common Stock. These 125,000 shares of Beverly Common Stock
are held by six trusts, of whom Mr. David Reis serves as trustee, as follows: 1995 David Reis Family Trust (10,000),
1995 Donna Reis Family Trust (25,000), Aaron Reis Spray Trust (20,000), Anna Reis Spray Trust (22,500), Alexander Reis
Spray Trust (22,500) and David Reis Family Trust (25,000).

(11) The address is c/o Formation Capital, LLC, 1035 Powers Place, Alpharetta, GA 30004.

(12) Exercises shared voting and shared dispositive power over 21,900 of these shares of Beverly Common Stock and sole voting
and sole dispositive power over 4,700 shares of Beverly Common Stock.

PRELIMINARY COPY
SUBJECT TO COMPLETION
DATED FEBRUARY 18, 2005

[BLUE]

THIS PROXY IS SOLICITED ON BEHALF OF ARNOLD M. WHITMAN
FOR USE AT
THE 2005 ANNUAL MEETING OF STOCKHOLDERS OF
BEVERLY ENTERPRISES, INC.

THIS IS NOT A SOLICITATION ON BEHALF, OR IN SUPPORT OF, THE BOARD OF
DIRECTORS OF BEVERLY ENTERPRISES, INC. (THE "COMPANY"). The undersigned
hereby appoints Arnold M. Whitman and [_______], and each or any of them,
proxies and attorneys-in-fact, with full power of substitution, on behalf
of and in the name of the undersigned, and authorizes them to represent and
vote, as designated, all of the shares of common stock of the Company held
of record by the undersigned that the undersigned would be entitled to vote
if personally present on the matters set below, at the 2005 Annual Meeting
of the stockholders of the Company, to be held at 10:00 a.m. (CDT), at the
Company's Corporate Center, located at 1000 Beverly Way, Fort Smith,
Arkansas, on April 21, 2005, and at any adjournments, postponements,
reschedulings or continuations thereof, and with discretionary authority as
to any other matters that may properly come before the 2005 Annual Meeting,
including substitute nominees if any of the named nominees for director
should be unavailable to serve for election, in accordance with and as
described in Arnold M. Whitman's proxy statement.

THIS PROXY WILL BE VOTED AS DIRECTED. IF YOU VALIDLY EXECUTE AND RETURN
THIS CARD WITHOUT INDICATING YOUR VOTE ON ONE OR MORE OF THE FOLLOWING
PROPOSALS, YOU WILL BE DEEMED TO HAVE VOTED AS FOLLOWS WITH RESPECT TO ANY
SUCH PROPOSALS: FOR ALL NOMINEES FOR DIRECTOR IN PROPOSAL 3 AND FOR EACH OF
PROPOSALS 1, 2 AND 4 SET FORTH ON THE REVERSE SIDE OF THIS CARD. THIS PROXY
CARD REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED WITH RESPECT TO ALL
MATTERS COVERED HEREBY.

YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY FORM IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.

[continued and to be signed on the reverse side]

DETACH HERE

[X] Please mark votes as in this example.

ARNOLD M. WHITMAN RECOMMENDS A VOTE FOR HIS PROPOSALS 1, 2, 3 AND 4:

1. To amend the Company's bylaws to fix the number
of directors constituting the entire Board [ ] For [ ] Against [ ] Abstain
of Directors at eight (8).

2. To repeal each provision of or amendment to the [ ] For [ ] Against [ ] Abstain
Company's bylaws (other than provisions and
amendments added or effected pursuant to
Proposal 1) adopted after May 29, 1997.

3. To elect each of Jeffrey A. Brodsky, John J. [ ] For All Candidates [ ] Withheld from All Candidates
Durso, Philip L. Maslowe, Charles M. Masson,
Mohsin Y. Meghji and Guy Sansone to the
Company's Board of Directors, in lieu of any To withhold authority to vote for one or more of the
persons who may be nominated by the nominees, check the "For All Candidates" box above and
Company's incumbent Board of Directors or write the candidate(s') name(s) in the space below.
any other person. _______________________________

For all nominees except those written above

4. To require that action be taken at the 2005 [ ] For [ ] Against [ ] Abstain
Annual Meeting on proposals 1 through 3
above in the sequence indicated and before
any other business is conducted.

TO ENSURE YOUR REPRESENTATION AT THE 2005 ANNUAL MEETING, PLEASE MARK,
SIGN AND DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.

Please sign exactly as your name appears on this proxy. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or corporate officer, stating his or her title. If a
partnership, please sign in partnership name by authorized person. The undersigned hereby revokes all proxies
heretofore given by the undersigned to vote at the 2005 Annual Meeting of the Company and any adjournment,
postponement, continuation or rescheduling thereof, and hereby grants the proxies named on the front of this card
the authority to vote in their discretion upon such other business as may properly come before the 2005 Annual
Meeting or any adjournment, postponement, continuation or rescheduling thereof.

Signature:________________ Date:_______ Signature:_______________ Date :______
Title: ________________ Title: ________________