Document:

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                                                                    EXHIBIT 10.6

CONFIDENTIAL: THIS DOCUMENT IS PROVIDED FOR SETTLEMENT PURPOSES ONLY AND IS
SUBJECT TO THE PROTECTIONS OF FEDERAL RULE OF EVIDENCE 408 AND ALL SIMILAR
PROVISIONS AND SUPPORTING AUTHORITIES.

                        ANCILLARY RESTRUCTURING AGREEMENT

         THIS ANCILLARY RESTRUCTURING AGREEMENT (this "Agreement") is made as of
this 21st day of December, 2000, by and among (a) OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation ("Omega"), (b) PROFESSIONAL HEALTH CARE MANAGEMENT,
INC., a Michigan corporation ("PHCM"), (c) each of the Michigan subsidiaries of
PHCM listed on the signature page hereto (the "Michigan Subsidiaries"), (d)
LIVING CENTERS - PHCM, INC., a North Carolina corporation ("LC-PHCM"), (e)
GRANCARE, INC., a Delaware corporation formerly known as New GranCare, Inc.
("GranCare"), and (f) MARINER POST-ACUTE NETWORK, INC., a Delaware corporation
formerly known as Paragon Health Network, Inc. ("Mariner," and, together with
PHCM, the Michigan Subsidiaries, LC-PHCM and GranCare, collectively, the
"Mariner Entities").

                                   WITNESSETH:

         WHEREAS, PHCM is the owner of thirteen (13) skilled nursing facilities
located in the State of Michigan and identified more particularly on Schedule A
hereto attached and incorporated herein by reference (the "Michigan
Facilities"), and leases each Michigan Facility to the Michigan Subsidiary
indicated opposite the name of such Michigan Facility on Schedule A under
separate facility leases (as amended, collectively, the "Michigan Facility
Leases"); and

         WHEREAS, LC-PHCM is the owner of the three (3) North Carolina skilled
nursing facilities more particularly identified on Schedule A hereto attached
and incorporated herein by this reference (the "North Carolina Facilities", and
together with the Michigan Facilities, the "Facilities") and has leased the
North Carolina Facilities to PHCM, which operates the North Carolina Facilities
under facility leases between LC-PHCM, as lessor, and PHCM, as lessee
(collectively, the "North Carolina Facility Leases", and together with the
Michigan Facility Leases, the "Facility Leases"); and

         WHEREAS, Omega has previously made a loan to PHCM in the original
principal amount of $58,800,000 (the "Omega Loan") pursuant to that certain
Michigan Loan Agreement

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dated as of June 7, 1992 (as heretofore amended, the "Omega Loan Agreement")
between Omega and PHCM; and

         WHEREAS, the Omega Loan is evidenced by that certain Mortgage Note
dated August 14, 1992 (as amended, the "Omega Note"), issued by PHCM and payable
to the order of Omega in the original principal amount of $58,800,000, is
guaranteed by LC-PHCM and the Michigan Subsidiaries, and such loan and guaranty
obligations are secured by, among other things, mortgages on the Facilities and
blanket security interests in the personal property of PHCM and the affiliated
guarantors (the Omega Loan Agreement, the Omega Note and all documents,
instruments and agreements evidencing, guaranteeing or securing the Omega Loan
being hereinafter collectively referred to as the "Omega Loan Documents"); and

         WHEREAS, the Mariner Entities have filed voluntary petitions under
chapter 11 of the United States Bankruptcy Code, 11 U.S.C. ss.ss.101 et seq., as
amended (the "Bankruptcy Code"), on January 18, 2000 (the "Petition Date"),
before the United States Bankruptcy Court for the District of Delaware (the
"Court"), bearing the case numbers set forth on Schedule B hereto attached and
incorporated herein by this reference (collectively, the "Cases"), which Cases
are currently pending and are being jointly administered; and

         WHEREAS, no payments have been made on or with respect to the Omega
Loan since the Petition Date, and various disputes have arisen and now exist
between Omega and the Mariner Entities with respect to the Omega Loan, Omega's
ability to foreclose on the Facilities and related matters; and

         WHEREAS, Omega and the Mariner Entities have been negotiating for an
extended period of time in an effort to resolve their disputes and restructure
the obligations of the Mariner Entities to Omega (the "Restructuring"); and

         WHEREAS, the Mariner Entities desire to proceed with a portion of the
Restructuring - namely, the conveyance of the four (4) Michigan Facilities
identified on Schedule A as the "Ciena Facilities" (the "Ciena Facilities") to
an affiliate of Ciena Healthcare Management, Inc. ("Ciena Buyer") on the terms
and conditions set forth in the Ciena Purchase Agreement (as hereinafter
defined), free and clear of the Facility Leases pertaining to such Facilities
and free and clear of the liens and security interests securing the Omega Loan
(the "Ciena Transaction") - prior to finalizing the terms of the rest of the
Restructuring; and

         WHEREAS, Omega is willing to permit the Ciena Transaction to occur
notwithstanding that the other aspects of the Restructuring have not been
finalized, subject to the terms and conditions of this Agreement;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Omega
and the Mariner Entities (collectively, the "Parties") hereby agree as follows:

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                                    ARTICLE 1

                                   DEFINITIONS

         1.1.     The following capitalized terms shall have the meanings set
forth below:

         "Applicable Prepayment Amount" shall mean, with respect to any
particular Mandatory Prepayment Date under the Maintenance Obligation Note, the
amount by which the Net Lowest Daily Cash Balance for the second preceding
calendar month exceeds $850,000. If the Net Lowest Daily Cash Balance is equal
to or less than $850,000, the Applicable Prepayment Amount will be zero.

         "Business Day" shall mean any day other than a Saturday, Sunday, or any
other day on which banking institutions in the State of Georgia are authorized
by law or executive action to close.

         "Ciena Closing" shall mean the consummation of the Ciena Transaction.

         "Ciena Event of Default" means an Event of Default by Ciena Buyer or
Ciena Guarantor as defined in the Purchase Money Financing Documents.

         "Ciena Facility Subsidiaries" shall mean the subsidiaries of PHCM
indicated opposite the names of the respective Ciena Facilities on Schedule A.

         "Ciena Purchase Agreement" shall mean that certain Asset Purchase
Agreement dated as of December 21, 2000, by and among PHCM, the Ciena Facility
Subsidiaries and the Ciena Buyer, pursuant to which PHCM has agreed to sell, and
the Ciena Buyer has agreed to buy, the Ciena Facilities, a copy of which is
attached hereto as Exhibit A.

         "Ciena Transaction" shall mean the purchase and sale of the Ciena
Facilities pursuant to the Ciena Purchase Agreement.

         "Final Audit Report" shall mean the final audit report for the Michigan
Facilities issued to PHCM by the applicable Governmental Authority of the State
of Michigan with respect to Medicaid cost reports for the years 1998 and 1999.

         "GAAP" shall mean generally accepted accounting principles in effect at
the time in question.

         "Governmental Authority" shall mean all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures and offices of any
nature whatsoever, of any government unit or political subdivision, whether
federal, state, county, district, municipal, city or otherwise, and whether now
or hereafter in existence.

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         "Mandatory Prepayment Date" shall mean the 15th day of the second
calendar month after the calendar month in which PHCM receives the Final Audit
Report, and the 15th day of each successive calendar month thereafter until the
non-contingent portion of the Maintenance Obligation Note shall have been paid
in full.

         "Medicaid Overpayment Claims" shall mean all claims for overpayment
under the State of Michigan Medicaid program asserted in the Final Audit Report
by any Governmental Authority of the State of Michigan against PHCM or the
Michigan Subsidiaries, whether or not relating to the Ciena Facilities, less any
amount thereof which has been waived or forgiven by the applicable Governmental
Authority or repaid by PHCM or the Michigan Subsidiaries.

         "Net Lowest Daily Cash Balance" shall mean (i) at the time of closing
of the Ciena Transaction, the amount determined by deducting Medicaid
Overpayment Claims from the lowest daily consolidated cash balances of PHCM and
the Michigan Subsidiaries for the thirty-one (31)-day period immediately
preceding the date of the Ciena Closing, and (ii) at any other date, the amount
determined by deducting the Medicaid Overpayment Claims from the lowest daily
consolidated cash balances of PHCM and the Michigan Subsidiaries for the second
preceding calendar month ending prior to the date.

         "Operators" shall mean PHCM, LC-PHCM and the Michigan Subsidiaries.

         "Person" shall mean all individuals, corporations, general and limited
partnerships, limited liability companies, stock companies or associations,
joint ventures, unincorporated associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Governmental Authorities and other
entities of every kind and nature.

         "Purchase Money Financing Documents" shall mean all documents
evidencing, guaranteeing and securing the Purchase Money Loan, including, but
not limited to the Purchase Money Note and all guaranties, mortgages, security
agreements, pledge agreements, and UCC financing statements.

         "Purchase Money Loan" shall mean the $9,000,000 purchase money loan to
be made by PHCM to Ciena Buyer in connection with the Ciena Transaction.

         "Purchase Money Note" shall mean the promissory note from Ciena Buyer
and payable to the order of PHCM in the original principal amount of $9,000,000,
evidencing the Purchase Money Loan.

         "Retained Facilities" shall mean the Retained Michigan Facilities plus
the North Carolina Facilities.

         "Retained Michigan Facilities" shall mean the nine (9) Michigan
Facilities identified under the heading "Retained Facilities" on Schedule A
hereto.

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         "Stay" shall mean an order of a court of competent jurisdiction staying
the Approval Order pending appeal.

         "Subsidiary Guarantors" shall mean the Michigan Subsidiaries and
LC-PHCM, as guarantors of the Omega Loan.

         "Third Party Payor Programs" shall mean all third party payor programs
in which any Facility participates, including, without limitation, Medicare,
Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, TriCare, managed care plans,
other private insurance programs, workers compensation and employee assistance
programs.

         "Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, Blue Cross
and/or Blue Shield, TriCare, private insurers and any other Person which
maintains Third Party Payor Programs.

                                    ARTICLE 2

                               PROCEDURAL MATTERS

         2.1.     Court Approval. Promptly following execution of this Agreement
by all parties and otherwise within seven (7) days after such date, the Mariner
Entities will file a motion with the Court seeking authority to proceed with the
Ciena Transaction and other matters provided for in this Agreement (the
"Transaction Approval Motion"), together with a proposed form of order (the
"Approval Order"). The Approval Order shall satisfy the requirements of Section
4.1 hereof, and shall otherwise be in a form, and include such other provisions,
as Omega and the Mariner Entities may deem appropriate under the circumstances.
The Mariner Entities and Omega shall exercise good faith efforts to obtain the
Approval Order from the Court.

         2.2.     Effectiveness. Those provisions of this Agreement which
require the exercise of good faith efforts by the Parties hereto shall be
effective immediately while all other provisions of this Agreement shall be
effective upon entry of the Approval Order, unless implementation is stayed by
appeal.

                                    ARTICLE 3

                          CLOSING OF CIENA TRANSACTION

         3.1      Consent to Ciena Transaction. Omega hereby consents to the
closing of the Ciena Transaction in accordance with the terms of the Ciena
Purchase Agreement and this Agreement. At the Ciena Closing, the Facility Leases
relating to the Ciena Facilities will be surrendered and terminated by mutual
agreement of the Ciena Facility Subsidiaries, PHCM and Omega, and Omega agrees
to release the Ciena Facilities and related personal property being sold to the
Ciena Buyer from all mortgages, security interests and other liens arising under
or by virtue of the Omega Loan Documents.

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         3.2      Deferred Maintenance Obligations for Ciena Facilities. In
order to induce the Ciena Buyer to purchase the Ciena Facilities, PHCM has
agreed to reimburse Ciena for the cost of certain deferred maintenance repairs
required at the Ciena Facilities. Because PHCM does not have the funds to cover
the cost of the deferred maintenance repairs, Omega has agreed to assume PHCM's
obligations to Ciena with respect to the deferred maintenance repairs; and PHCM
has agreed to pay Omega for such assumption and for the other obligations of
Omega herein set forth the sum of $1,000,000, to be paid as follows:

                  (a)      (i) if the applicable Governmental Authority of the
                           State of Michigan has not issued the Final Audit
                           Report, PHCM will pay Omega $300,000 in immediately
                           available funds at the Ciena Closing, or (ii) if the
                           applicable Governmental Authority of the State of
                           Michigan has issued the Final Audit Report by the
                           time of the Ciena Closing, PHCM will pay Omega in
                           immediately available funds at the Ciena Closing an
                           amount equal to the greater of (1) $300,000, and (2)
                           the amount (not to exceed $600,000) by which the Net
                           Lowest Daily Cash Balance exceeds $850,000; and

                  (b)      at the Ciena Closing, PHCM will deliver to Omega the
                           Maintenance Obligation Note (as defined in Section
                           3.3 hereof).

         3.3      Maintenance Obligation Note. The Maintenance Obligation Note
to be delivered to Omega pursuant to Section 3.2(b) shall (1) be in the original
principal amount of $1,000,000, less the amount paid to Omega pursuant to
Section 3.2(a) hereof; (2) bear interest at the rate of eleven and one-quarter
percent (11.25%) per annum; (3) provide that PHCM's obligation to pay Contingent
Principal (as hereinafter defined) and interest thereon shall be contingent on
the consummation, on or before May 31, 2001, of a restructuring of the rest of
the Mariner Entities' obligations to Omega either as part of a restructuring or
a plan of reorganization approved by the Court; (4) be payable from PHCM's share
of Purchase Money Note Payments (as hereinafter defined) if, as and when they
are received; (5) be subject to mandatory prepayment in an amount equal to the
Applicable Prepayment Amount on each Mandatory Prepayment Date until the
non-contingent portion of the Maintenance Obligation Note has been paid in full
(and to the contingent portion, as well, once the applicable contingency has
been satisfied); (6) in any event be due and payable in full on the earlier of
(A) the tenth (10th) anniversary of the Ciena Closing, or (B) payment in full of
the Omega Loan; and (7) be substantially in the form attached hereto as Exhibit
B attached hereto. The term "Contingent Principal" shall mean a portion of the
principal amount of the Maintenance Obligation Note equal to $400,000.

         3.4      Partial Assignment of Purchase Money Financing Documents.
Contemporaneously with the Ciena Closing, PHCM shall assign, set over and
transfer to Omega (without recourse of any kind) an undivided fifty percent
(50%) interest in PHCM's right, title and interest in, to and under the Purchase
Money Financing Documents, in consideration of which PHCM shall receive a
$4,500,000 credit first against non-default interest owing on the Omega Loan and
second against the principal amount of the Omega Loan as of the Petition Date

         3.5      Pledge of PHCM's Interest in Purchase Money Financing
Documents. At the closing of the Ciena Transaction, PHCM shall pledge and
collaterally assign to Omega all of PHCM's right, title and interest in, to and
under the Purchase Money Financing Documents, as

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security for the obligations of PHCM under the Maintenance Obligation Note (if
any) and the Omega Loan Documents. Such pledge shall be made pursuant to a
collateral assignment in form and substance reasonably acceptable to Omega.

         3.6      Servicing of Purchase Money Loan and Application of Funds. For
the administrative convenience of the Mariner Entities, Omega hereby agrees to
administer and function as servicer for the Purchase Money Loan, including,
without limitation, to maintain custody of the Purchase Money Financing
Documents for the benefit of PHCM and Omega, as their interests may appear, to
receive and apply payments made from time to time in respect of the Purchase
Money Loan by the Ciena Buyer and to give, on behalf of the holders thereof, all
notices to the Ciena Buyer and any guarantors of the Purchase Money Loan (each,
a "Ciena Guarantor") which are necessary or appropriate in respect of the
Purchase Money Loan. Copies of each such notice, and each notice (if any)
received by Omega from the Ciena Buyer or any Ciena Guarantor, shall be given to
PHCM as soon as reasonably practicable after receipt thereof by Omega. As
between the Ciena Buyer, on the one hand, and the holders of the Purchase Money
Note, on the other, payments received by Omega on the Purchase Money Note
("Purchase Money Note Payments") shall be applied against the Purchase Money
Loan obligations as provided in the Purchase Money Financing Documents. As
between PHCM, on the one hand, and Omega, on the other, each Purchase Money Note
Payment shall be applied as follows:

                  (a)      an amount equal to fifty percent (50%) of each
                           Purchase Money Note Payment shall be retained by
                           Omega; and

                  (b)      the balance of each Purchase Money Note Payment shall
                           be applied, first, against the outstanding balance of
                           the Maintenance Obligation Note (if any), until all
                           principal and interest thereunder have been paid in
                           full, and thereafter shall be applied against the
                           outstanding principal balance of the Omega Loan.

         Omega shall not modify any of the Purchase Money Financing Documents,
without the prior written consent of PHCM, which consent shall not be
unreasonably withheld or delayed so long as the proposed modification is not
adverse to the interests of PHCM or the other Mariner Entities. Upon the
occurrence of a Ciena Event of Default, Omega may after consultation with PHCM
exercise such remedies or forbear from exercising remedies as Omega determines
in good faith to be in the best interest of both PHCM and Omega. Omega shall not
be entitled to any fee for servicing the Purchase Money Loan, but Omega shall be
entitled to reimbursement, on a pro rata basis, for 50% of all out-of-pocket
expenses which it reasonably incurs in so doing. Omega shall service the
Purchase Money Loan in good faith and with the same degree of care that it
exercises in servicing loans made directly by it; but Omega shall be liable to
PHCM in connection with servicing the Purchase Money Loan only for acts of bad
faith, gross negligence or willful dishonesty.

         3.7      The Omega Improvement Loan. At the Ciena Closing, and as a
material inducement for the Ciena Buyer to close the Ciena Transaction, Omega
has agreed to enter into the Improvement Agreement with the Ciena Buyer,
pursuant to which Omega will agree to lend the Ciena Buyer up to Five Hundred
Thousand Dollars ($500,000) to be used to make certain

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repairs and improvements to the Ciena Facilities, all on the terms and
conditions set forth in the Improvement Agreement. The Improvement Loan will be
secured by the same security documents that secure the Purchase Money Loan. PHCM
agrees that repayment of the Purchase Money Loan is subordinate and junior to
repayment of the Improvement Loan. So long as no Improvement Loan Event of
Default exists, payments received by either PHCM or Omega from the Ciena Buyer
will be applied to the Purchase Money Loan and the Omega Improvement Loan as
designated by the Ciena Buyer. However, from and after the occurrence of any
Improvement Loan Event of Default, and so long as the Improvement Loan Event of
Default continues in effect, as between Omega and the PHCM Entities, any payment
received from the Ciena Buyer by either Omega or the PHCM on either the Purchase
Money Loan or the Improvement Loan shall be applied first to the Improvement
Loan until the Improvement Loan is paid in full. Subject to the payment in full
of the Improvement Loan, the holders of the Purchase Money Loan shall be
subrogated to the rights of the holder of the Improvement Loan until the
obligations arising under the Purchase Money Financing Documents have been paid
in full. For purposes of such subrogation, no payments or distributions to the
holder of the Improvement Loan of any cash, properties or securities to which
the holders of the Purchase Money Loan would, except for the operation of this
Section 3.7, be entitled shall, as among Ciena Buyer, its creditors other than
the holder of the Improvement Loan, and the holders of the Purchase Money Loan
be deemed to be a payment on or distribution by Ciena Buyer to or on account of
the Improvement Loan.

         3.8      Accounting by Omega for Application of Funds. Within twenty
(20) days after each application of funds against the Omega Loan or the
indebtedness evidenced by the Maintenance Obligation Note pursuant to the
provisions of Section 3.6 hereof, and also within twenty (20) days after the
application of any Ciena Loan Payments against the Omega Improvement Loan, Omega
shall confirm such application in writing to PHCM.

                                    ARTICLE 4

                               CLOSING CONDITIONS

                  The obligation of Omega and the Mariner Entities to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction of each of the conditions set forth in this Article 4.

         4.1.     Approval Order. The Court shall have entered the Approval
Order and no court of competent jurisdiction shall have entered an order staying
the Approval Order pending appeal, or, in the event a stay of the Approval Order
shall have been entered, then the Stay shall have been terminated. The Approval
Order as entered by the Court shall contain no modifications unacceptable to
Omega or the Mariner Entities and shall include, without limitation, provisions
substantially as follows (or as otherwise agreed in writing by Omega and the
Mariner Entities):

                  (a)      Findings determining that notice of the Transaction
                           Approval Motion and hearing thereon have been
                           adequate under the circumstances;

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                  (b)      Findings that the consideration provided to the
                           Mariner Entities by Omega and the Ciena Buyer in
                           connection with the Ciena Transaction is adequate;

                  (c)      Findings that proceeding with those matters provided
                           for in this Agreement and the Ciena Purchase
                           Agreement is in the best interest of the Mariner
                           Entities and their respective creditors; and

                  (d)      An Order that any claim of Medicare, the applicable
                           fiscal intermediary, HHS, or any other governmental
                           entity against Ciena or the Ciena Facility
                           Subsidiaries under the assumed and assigned Medicare
                           Provider Agreements arising prior to the January 18,
                           2000 petition date shall be treated as an expense of
                           administration of PHCM and the Michigan Subsidiaries.

         4.2.     Notice. Within a reasonable time following the filing with the
Court of the Transaction Approval Motion, and prior to the hearing and relevant
objection date, the Mariner Entities shall have served notice of the Transaction
Approval Motion in a form acceptable to Omega upon (i) those Persons entitled to
such notice under the terms of the notice procedures order entered by the Court
on or about the Petition Date, and (ii) those Persons who have alleged personal
injury claims against the Ciena Facility Subsidiaries based on the quality of
care received or the condition of the Ciena Facilities.

         4.3.     Chase/Lender Approval. Omega shall have received evidence
satisfactory to it that The Chase Manhattan Bank, in its capacity as
administrative agent for the Mariner Entities' pre-petition senior secured
lenders and as administrative agent for the Mariner Entities'
debtor-in-possession lender (individually and in its capacity as agent as
aforesaid, "Chase"), has approved and consented to the transactions contemplated
under this Agreement and the Ciena Purchase Agreement, and has agreed that Chase
shall not seek to set aside the contemplated transactions or any part thereof.

         4.4.     Hart-Scott-Rodino. There shall be no filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to
the consummation of the transactions contemplated by the Ciena Purchase
Agreement or this Agreement.

         4.5      Approval of Purchase Money Financing Documents. Omega and the
Mariner Entities shall have approved the form and substance of the Purchase
Money Financing Documents.

         4.6      Execution of Purchase Money Financing Documents. Each of the
Purchase Money Financing Documents shall have been executed and delivered by
each other Person party thereto.

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                                    ARTICLE 5

                     REPRESENTATIONS AND WARRANTIES OF OMEGA

         Omega hereby represents and warrants as follows to the Mariner Entities
as of the date of this Agreement, which representations and warranties will be
deemed to have been reaffirmed as of the date of the Ciena Closing:

         5.1.     Organization. Omega is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. Omega has
all requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby.

         5.2.     Required Consents. No material consent, approval or other
authorization of, or registration, declaration or filing with, any court or
Governmental Authority which has not been heretofore obtained or which will not
be obtained prior to the Ciena Closing is required for the due execution,
delivery or performance of its obligations under this Agreement by Omega, for
the consummation of the transactions contemplated herein or for the validity or
enforceability thereof against Omega.

         5.3.     Authorization; Enforceability. The execution and delivery by
Omega of this Agreement and each other document, instrument or agreement
contemplated herein to which Omega is a party, and the performance of its
obligations thereunder have been duly authorized by all necessary corporate and
stockholder action on the part of Omega. This Agreement has been duly authorized
executed by Omega and constitutes the valid and binding obligation of Omega,
enforceable in accordance with its terms, except as enforceability thereof may
be limited by general principles of equity.

         5.4.     Brokerage. Omega has not used the services of any broker or
finder in connection with the transactions contemplated by this Agreement or the
Ciena Transaction, and it will indemnify and hold harmless the Mariner Entities
from and against all claims, actions, causes of action, costs, expenses,
including attorneys' fees, and liabilities arising in or out of, or related to
any broker or finder claiming any compensation or fee by reason of an alleged
agreement or understanding with Omega.

                                    ARTICLE 6

             REPRESENTATIONS AND WARRANTIES OF THE MARINER ENTITIES

         Each of the Mariner Entities hereby represents and warrants as follows
to Omega as of the date of this Agreement, which representations and warranties
will be deemed to have been reaffirmed as of the date of the Ciena Closing:

         6.1.     Organization. Each of the Mariner Entities is a corporation,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Subject to the entry of the Approval Order,
each of the Mariner Entities has full power, authority

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and legal right to execute, deliver and perform under this Agreement, to enter
into, the Ciena Purchase Agreement and the other documents contemplated herein
and therein (collectively, the "Ciena Documents") to which they are a party and
to take all other actions necessary to carry out the intents and purposes of
this Agreement.

         6.2.     Required Consents. No material consent, approval or other
authorization of, or registration, declaration or filing with, any court or
Governmental Authority which has not been heretofore obtained or which will not
be obtained prior to the Ciena Closing is required for the due execution,
delivery or performance of this Agreement, the other Ciena Documents to which
they are a party, the transactions contemplated herein or therein or for the
validity or enforceability thereof against any of the Mariner Entities.

         6.3.     Authorization; Enforceability. The execution and delivery by
the Mariner Entities of this Agreement and each other document, instrument or
agreement contemplated herein to which they are a party and the performance of
their respective obligations thereunder have been duly authorized by all
necessary corporate and stockholder action on the part of the Mariner Entities.
This Agreement has been duly executed by each Mariner Entity and, subject to the
entry of the Approval Order, constitutes the valid and binding obligation of
each Mariner Entity, enforceable in accordance with its terms, except as
enforceability thereof may be limited by general principles of equity.

         6.4.     Brokerage. Each of the Mariner Entities represents that it has
not used the services of any broker or finder in connection with the
transactions contemplated by this Agreement and each of the Mariner Entities
will indemnify and hold harmless Omega from and against all claims, actions,
causes of action, costs, expenses, including attorneys' fees, and liabilities
arising in or out of, or related to any broker or finder claiming any
compensation or fee by reason of an alleged agreement or understanding with any
of the Mariner Entities.

                                    ARTICLE 7

                               GENERAL PROVISIONS

         7.1.     MUTUAL WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (A) THIS AGREEMENT, OR ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; OR (B) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN OR AMONG THEM; OR (C) ANY
CONDUCT, ACTS OR OMISSIONS OF ANY PARTY HERETO OR ANY OF THEIR DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
WITH THEM; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.

         7.2.     Survival. Except as otherwise provided by this Agreement, all
covenants, agreements, representations and warranties made by Omega or any
Mariner Entity herein and in all certificates delivered pursuant to this
Agreement shall survive for a period of one (1) year

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immediately following the Ciena Closing; provided, however, that the Mariner
Entities shall be and remain liable for breaches of the provisions of this
Agreement or contravention of the Approval Order only for the period including
the greater of one (1) year or the last administrative claims bar date that is
established by order of the Court. If, and to the extent, the Mariner Entities
shall emerge from the Cases pursuant to a confirmed plan of reorganization prior
to the expiration of such period, then the obligations provided herein shall be
a continuing obligation of the reorganized Mariner Entities and any plan
confirmed in the Cases shall so provide.

         7.3.     Notices. All notices, demands and other communications
hereunder shall be in writing and delivered by nationally recognized overnight
courier service, by facsimile transmission or by first class registered or
certified U.S. Mail, (with postage or courier charges prepaid) addressed as
follows:

                  (a)      if to Omega:

                           OMEGA HEALTHCARE INVESTORS, INC.
                           900 Victors Way, Suite 350
                           Ann Arbor, MI 48108
                           Attention: Chief Operating Officer
                           Fax No. (734) 887-0326

                           with copies to:

                           DYKEMA GOSSETT PLLC
                           39577 Woodward Avenue, Suite 300
                           Bloomfield Hills, MI  48304-2820
                           Attention: Fred J. Fechheimer, Esq.;
                           Fax No. (248) 203-0763; and

                           CONNOLLY BOVE LODGE & HUTZ LLP
                           220 Market Street
                           Wilmington, DE 19899-2207
                           Attention: Jeffrey C. Wisler, Esq.
                           Fax No. (302) 658-5614

                  (b)      if to any Mariner Entity:

                           MARINER POST-ACUTE NETWORK, INC.
                           One Ravinia Drive
                           Atlanta, GA 30346
                           Attention:  Senior Vice President and Treasurer
                           Fax No. (678) 443-6874

                                       12
<PAGE>   13

                           with copies to:

                           MARINER POST-ACUTE NETWORK, INC.
                           One Ravinia Drive
                           Atlanta, GA 30346
                           Attention:  Associate General Counsel
                           Fax No. (678) 443-6778; and

                           STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION
                           3699 Wilshire Boulevard, Suite 900
                           Los Angeles, CA 90010
                           Attention: Isaac M. Pachulski, Esq.
                           Fax No. (213) 251-5288; and

                           POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
                           191 Peachtree Street, N.E.
                           Atlanta, GA 30303
                           Attention: Robert C. Lewinson, Esq.
                           Fax No. (404) 572-6999

or to such other address as may hereafter be designated by any party for such
other purpose, and shall be effective upon receipt if hand delivered or sent by
overnight courier service, or upon receipt of transmission confirmation if sent
by facsimile transmission, upon the expiration of the fifth Business Day after
the day of mailing by certified or registered U.S. Mail.

         7.4.     Governing Law. This Agreement shall be governed by,
interpreted, construed, applied and enforced in accordance with the Bankruptcy
Code and the laws of the State of Michigan applicable to contracts between
residents of the State of Michigan which are to be performed entirely within the
State of Michigan, regardless of (a) where this Agreement is executed or
delivered; or (b) where any payment or other performance required by this
Agreement is made or required to be made; or (c) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(d) where any action or other proceeding is instituted or pending; or (e) the
nationality, citizenship, domicile, principal place of business or jurisdiction
of organization or domestication of any party; or (f) whether the laws of the
forum jurisdiction otherwise would apply the laws of the jurisdiction other than
the State of Michigan; or (g) any combination of the foregoing.

         To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement shall be brought and prosecuted in the Court. If and only if such
action cannot be brought and prosecuted in the Court, then such action may be
brought and prosecuted in such court or courts located in the State of Michigan
as is provided by law; and the parties consent to the jurisdiction of said court
or courts located in the State of Michigan and to service of process by
registered mail, return receipt requested, or by any other manner provided by
applicable law.

         7.5.     Successors and Assigns. This Agreement shall be binding upon
each party thereto and its successors and assigns. The rights and obligations of
any party hereto under this

                                       13
<PAGE>   14

Agreement may not be assigned by any party hereto without the prior written
consent of each of the parties hereto.

         7.6.     Entire Agreement. This Agreement, together with the exhibits
and schedules hereto and such other documents as are referred to herein,
constitute the entire agreement of the parties in respect of the subject matter
described herein. This Agreement may not be changed or modified except by an
agreement in writing signed by the parties hereto.

         7.7.     Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby and the Agreement shall thereupon be reformed and construed and enforced
to the maximum extent permitted by applicable law.

         7.8.     Attorneys' Fees. If any legal action is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable and documented attorneys' fees and other costs actually incurred in
that action in addition to any other relief to which it or they may be entitled.

         7.9.     Confidentiality. The parties agree not to disclose or permit
their respective representatives, attorneys, auditors or agents to disclose,
except as may be required by law or performance hereunder, any confidential,
non-public information of the others which is obtained by any of them in
connection with the transactions contemplated by this Agreement.

         7.10.    Reservation of Rights. Each Party hereto acknowledges that it
and the other Parties hereto have entered into this Agreement in connection with
negotiations concerning the Restructuring, that the Restructuring has not been
finalized and that all Parties expressly reserve their rights with respect to
the Omega Loan Documents and related disputes, and the Restructuring. The
execution, delivery and performance of this Agreement by the Parties hereto is
not an admission of any Party's obligations or liabilities whatsoever. This
document is subject to the protections of Federal Rule of Evidence 408 and all
similar provisions and supporting authorities.

         7.11.    Third Party Beneficiaries. This Agreement and all other
instruments executed and delivered in connection herewith are not intended to
benefit any third parties, including, without limitation, any such parties that
may have claims against any of the Mariner Entities.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>   15

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and their respective seals to
be hereunto affixed and attested by their respective duly authorized officers.

OMEGA:                              OMEGA HEALTHCARE INVESTORS, INC.

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

PHCM:                               PROFESSIONAL HEALTH CARE
                                      MANAGEMENT, INC.

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

MICHIGAN SUBSIDIARIES:              CAMBRIDGE BEDFORD, INC., CAMBRIDGE EAST,
                                    INC., CAMBRIDGE NORTH, INC., CAMBRIDGE
                                    SOUTH, INC., CLINTONAIRE NURSING HOME, INC.,
                                    CRESTMONT HEALTH CENTER, INC., HERITAGE
                                    NURSING HOME, INC., NIGHTINGALE EAST NURSING
                                    CENTER, INC. AND MIDDLEBELT - HOPE NURSING
                                    HOME, INC.

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

                                                                Signature Page 1

<PAGE>   16

LC-PHCM:                            LIVING CENTERS - PHCM, INC.

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

GRANCARE:                            GRANCARE, INC.

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

MARINER:                             MARINER POST-ACUTE NETWORK, INC.

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

                                                                Signature Page 1

<PAGE>   17
                                   SCHEDULE A

                               LIST OF FACILITIES

I.       RETAINED FACILITIES

         A.       RETAINED MICHIGAN FACILITIES

<TABLE>
<CAPTION>
                  Name of Facility                                     Subsidiary Lessee/Operator
                  ----------------                                     --------------------------

                  <S>      <C>                                         <C>
                  1.       Bedford Villa Healthcare Center             Cambridge Bedford, Inc.
                           Southfield, MI

                  2.       Cambridge East Healthcare Center            Cambridge East, Inc.
                           Madison Heights, MI

                  3.       Cambridge North Healthcare Center           Cambridge North, Inc.
                           Clawson, MI

                  4.       Cambridge South Healthcare Center           Cambridge South, Inc.
                           Beverly Hills, MI

                  5.       Clinton-Aire Healthcare Center              ClintonAire Nursing Home,
                           Clinton Township, MI                        Inc.

                  6.       Crestmont Health Care Center                Crestmont Health Center,
                           Fenton, MI                                  Inc.

                  7.       Heritage Manor Nursing Center               Heritage Nursing Home, Inc.
                           Flint, MI

                  8.       Nightingale Healthcare Center               Nightingale East Nursing
                           Warren, MI                                  Center, Inc.

                  9.       Hope Healthcare Center                      Middlebelt-Hope Nursing
                           Westland, MI                                Home, Inc.
</TABLE>

                                      A-1
<PAGE>   18

         B.       NORTH CAROLINA FACILITIES

<TABLE>
<CAPTION>
                  Name of Facility                                     Subsidiary Lessee/Operator
                  ----------------                                     --------------------------
                  <S>      <C>                                         <C>

                  1.       Brian Center Health and Rehabilitation
                           Center - Statesville                                 PHCM
                           Statesville, NC

                  2.       Brian Center Health and Rehabilitation
                           Center - Goldsboro                                   PHCM
                           Goldsboro, NC

                  3.       Brian Center Health and Rehabilitation
                           Center -Durham                                       PHCM
                           Durham, NC
</TABLE>

II.      CIENA FACILITIES (ALL LOCATED IN MICHIGAN)

<TABLE>
<CAPTION>
                  Name of Facility                                     Subsidiary Lessee/Operator
                  ----------------                                     --------------------------
                  <S>      <C>                                         <C>

                  1.       Frenchtown Healthcare Center                Frenchtown Nursing Home,
                           Monroe, MI                                  Inc.

                  2.       St. Anthony Health Care Center              St. Anthony Nursing Home,
                           Warren, MI                                  Inc.

                  3.       Madonna Healthcare Center                   Madonna Nursing Center, Inc.
                           Detroit, MI

                  4.       Middlebelt Healthcare Center                Middlebelt Nursing Home,
                           Livonia, MI                                 Inc.
</TABLE>

Note:    The Ciena Facilities and the Retained Michigan Facilities together
----     constitute the "Michigan Facilities."

                                      A-2

<PAGE>   19

                                   SCHEDULE B

                                      CASES

<TABLE>
<CAPTION>
         Name of Entity                                       Case No.
         --------------                                       --------
         <S>                                                  <C>

         Mariner                                              00-00113

         PHCM                                                 00-00198

         Cambridge Bedford, Inc.                              00-00134

         Cambridge East, Inc.                                 00-00135

         Cambridge North, Inc.                                00-00136

         Cambridge South, Inc.                                00-00137

         ClintonAire Nursing Home, Inc.                       00-00138

         Crestmont Health Center, Inc.                        00-00141

         Heritage Nursing Home, Inc.                          00-00172

         Nightingale East Nursing Center, Inc.                00-00196

         Middlebelt-Hope Nursing Home, Inc.                   00-00193

         Frenchtown Nursing Home, Inc.                        00-00148

         St. Anthony Nursing Home, Inc.                       00-00202

         Madonna Nursing Center, Inc.                         00-00190

         Middlebelt Nursing Home, Inc.                        00-00192

         LC-PHCM                                              00-00183
</TABLE>

                                       B-1<PAGE>   1

                      IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

In re:                              )        Chapter 11
                                    )
MARINER POST-ACUTE                  )        Case No. 00-00113(MFW)
NETWORK, NC.,                       )        through 00-214 (NMW)
a Delaware corporation,             )
                                    )        (Jointly Administered)
and affiliates,                     )
                                    )
                  Debtors.          )
                                    )
------------------------------------

ORDER. UNDER 11 U.S.C.SS.SS.105, 363, 364, 365 AND 1146(C) AND FED. R. BANKR. P.
     6004, 6906 AND 9019: (I) AUTHORIZING THE SALE TO AN AFFILIATE OF CIENA
           HEALTHCARE MANAGEMENT, INC. OF FOUR FACILITIES AND RELATED
         PERSONAL PROPERTY FREE AND CLEAR OF CLAIMS, LIENS, ENCUMBRANCES
         AND INTERESTS; (II) APPROVING A RELATED ANCILLARY RESTRUCTURING
              AGREEMENT WITH OMEGA HEALTHCARE INVESTORS, INC., THE
         MORTGAGEE OF THE SUBJECT PROPERTY; (III) DETERMINING THAT SUCH
         SALE IS EXEMPT FROM ANY STAMP, TRANSFER, RECORDING, OR SIMILAR
            TAX; (IV) AUTHORIZING THE REJECTION OF CERTAIN EXECUTORY
                   CONTRACTS; AND (V) GRANTING RELATED RELIEF

                  Upon the motion dated December 22, 2000, as amended by the
Amendment thereto dated January 5, 2001 (collectively, the "Motion"), of Mariner
Post-Acute Network, Inc. ("MPAN") and certain subsidiaries which are also
debtors and debtors-in-possession in the above-captioned cases (collectively,
the "Subject Debtors") for an order under 11 U.S.C. ss.ss. 105, 363, 364, 365
and 1146(c) and Rules 6004, 6006, and 9019 of the Federal Rules of Bankruptcy
Procedure: (i) authorizing the sale by PHCM of the four Ciena Facilities(1) and
the related personal property to Ciena Buyer, free and clear of all liens,
claims, encumbrances and interests, other than those permitted in the Ciena
Buyer Purchase Agreement, on terms providing for 100% purchase money financing;
(ii) approving a related Ancillary Restructuring Agreement with Omega Healthcare
Investors, Inc. ("Omega"), the mortgagee of the subject property; (iii)

---------------
  1 All capitalized terms not otherwise defined herein shall have the meaning
  assigned to them in the Motion, the Omega Agreement or the Ciena Buyer
  Purchase Agreement.

                                       1
<PAGE>   2

determining that such sale is exempt from any stamp, transfer, recording, or
similar tax; (v) authorizing the rejection of executory contracts relating to
the Ciena Facilities in connection with the sale to Ciena Buyer; and (vi)
granting related relief, and upon the record in these cases; and after due
deliberation thereon; and good and sufficient cause appearing therefor; it is
hereby

                  FOUND THAT:

         A.       This Court has jurisdiction over the Motion pursuant to 28
U.S.C. ss. ss. 157 and 1334. Venue is proper pursuant to 28 U.S.C. ss. ss. 1408
and 1409. This is a core proceeding under 28 U.S.C. ss. 157(b)(2)(A), (M), (N),
and (O). The statutory predicates for the relief sought herein are 11 U.S.C. ss.
ss. 105(a), 363, 364, 365, and 1146(c) and Fed. R. Bankr. P. 6004, 6006, and
9019.

         B.       Due and proper notice of the Motion, the objection period and
the hearing thereon has been given in accordance with the Order Establishing
Notice Procedures entered in these cases, to (i) the United States Trustee for
the District of Delaware; (ii) counsel to the Official Committee of Unsecured
Creditors; (iii) The Chase Manhattan Bank and its counsel, in its capacity as
Agent for the Debtors' senior secured prepetition lenders and as Agent for the
Debtors' DIP Lenders; (iv) the Internal Revenue Service; (v) the Office of the
United States Attorney; (vi) the United States Department of Justice; (vii)
counsel to Omega, (viii) counsel to Ciena Buyer; (ix) all parties to the
contracts and leases listed on Exhibit "A" hereto; (x) persons who have filed
suit alleging personal injury claims against PACM or any of the Michigan
Subsidiaries which operate the Ciena Facilities based on quality of care
received at, or the condition of, the Ciena Facilities, as identified on Exhibit
"D" to the Motion; and (xi) all parties that are on the Debtors' general service
list. Such notice and the hearing thereon have been adequate and appropriate
under the circumstances.

         C.       Without in any way limiting the findings in paragraph B,
proper and adequate service of the Motion by the Subject Debtors seeking the
relief granted by this Order and proper and adequate notice and an opportunity
for a hearing has been given to all holders of any liens and encumbrances upon
the assets to be transferred under the Ciena Buyer Purchase Agreement and to all
other parties required by law to receive notice of the sale or transfer of such
assets.

                                       2
<PAGE>   3

         D.       In response to the Motion and the notice thereof, the Subject
Debtors received an objection to the relief sought in the Motion. Such objection
has been resolved as reflected herein.

         E.       The Subject Debtors have: (i) full corporate power and
authority to execute the Omega Agreement, the Ciena Buyer Purchase Agreement,
and all other documents contemplated thereby; and (ii) all corporate power and
authority necessary to consummate the transactions contemplated by the Omega
Agreement and the Ciena Buyer Purchase Agreement.

         F.       The Subject Debtors have exercised sound business judgment in
deciding to proceed with the matters and transactions provided in the Omega
Agreement and the Ciena Buyer Purchase Agreement, including the sale of the
Ciena Facilities and personal property located thereat to Ciena Buyer.

         G.       Approval of the Motion, Omega Agreement, and Ciena Buyer
Purchase Agreement and consummation of the transactions provided therein at this
time is necessary, appropriate and in the best interests of the Subject Debtors,
their estates and their creditors and equity holders.

         H.       Pursuant to section 363(b) of the Bankruptcy Code, the Subject
Debtors have articulated good and sufficient business justification for
proceeding with those transactions provided for in the Omega Agreement and the
Ciena Buyer Purchase Agreement, and there exist valid business reasons for the
prompt and speedy sale of the assets to be sold under the Ciena Buyer Purchase
Agreement.

         I.       The Subject Debtors and Omega negotiated the Omega Agreement
in good faith, without collusion, and at arm's length.

         J.       The Subject Debtors, Omega, and Ciena Buyer negotiated the
Ciena Buyer Purchase Agreement in good faith, without collusion, and at arm's
length. Ciena Buyer is a good faith purchaser and is purchasing the "Acquired
Assets" (as defined under the Ciena Buyer Purchase Agreement) in good faith
under section 363(m) of the Bankruptcy Code and, as such, is entitled to the
protections afforded thereby.

                                       3
<PAGE>   4

         K.       In the absence of a stay pending appeal, Ciena Buyer shall be
deemed to be acting in good faith within the meaning of section 363(m) of the
Bankruptcy Code in consummating the Ciena Buyer Purchase Agreement and closing
the sale contemplated thereby at any time after the entry of this Order.

         L.       The transactions proposed under the Omega Agreement and the
Ciena Buyer Purchase Agreement are fair and reasonable to the Subject Debtors.
The value to be received thereunder by the Subject Debtors for the Ciena
Facilities is fair and reasonable. The consideration provided to the Subject
Debtors by Omega and Ciena Buyer is adequate. The transfer of the Ciena
Facilities and other "Acquired Assets" under the Ciena Buyer Purchase Agreement
constitute transfers for reasonably equivalent value and fair consideration.

         M.       The "Acquired Assets" under the Ciena Buyer Purchase Agreement
and the business represented by such assets have been adequately marketed and
will lose value and continue to generate losses for the Subject Debtors absent a
prompt and speedy sale thereof.

         N.       Proceeding with the sales and other matters and transactions
provided for in the Omega Agreement and the Ciena Buyer Purchase Agreement is in
the best interests of the Subject Debtors and their respective estates,
creditors and holders of equity interests.

         O.       All requirements of section 363 of the Bankruptcy Code with
respect to the sale or transfer of assets under the Ciena Buyer Purchase
Agreement have been met.

         P.       All amounts, if any, to be paid by the Subject Debtors
pursuant to the Omega Agreement and the Ciena Buyer Purchase Agreement
constitute administrative expenses (secured or unsecured as provided in the
Omega Agreement and the Ciena Buyer Purchase Agreement) under sections 503(b)
and 507(a)(1) of the Bankruptcy Code which are payable, if any, without further
order of the Court.

         Q.       The Subject Debtors are hereby authorized to sell the Ciena
Facilities free and clear of all claims, liens, encumbrances, and other
interests, other than those expressly assumed, or taken subject to, by Ciena
under the Ciena Buyer Purchase Agreement, because each entity with such a lien,
security interest, or other interest in the Facilities has consented to, or is
deemed

                                       4
<PAGE>   5

to have consented to, the sale of such property, or each entity could be
compelled in a legal or equitable proceeding to accept a money satisfaction of
such interest, including the acceptance of substitute collateral.

         R.       The Subject Debtors have good title to the Ciena Facilities.
The transfer of the Ciena Facilities to Ciena Buyer under the Ciena Buyer
Purchase Agreement shall be legal, valid and effective transfers of property of
the Subject Debtors' estates to Ciena Buyer, and, except as provided under the
Ciena Buyer Purchase Agreement, the sale of the Ciena Facilities shall be free
and clear of any and all liens, claims, interests, and encumbrances under
section 363(f) of the Bankruptcy Code.

         S.       Consummation of the sale of the Ciena Facilities does not and
shall not subject Ciena Buyer to any debts, liabilities, obligations,
commitments, responsibilities or claims of any kind or nature whatsoever,
whether known or unknown, contingent or otherwise, existing as of the date
hereof or hereafter arising, of or against any of the Subject Debtors or any
affiliate of the Subject Debtors by reason of such transfers and assignments
under the laws of the United States, any state, territory or possession thereof,
or the District of Columbia applicable to such transactions, other than as
expressly provided in the Ciena Buyer Purchase Agreement, and any transaction
documents executed pursuant thereto in connection with the transactions
contemplated therein. Ciena Buyer is not, as a result of the consummation of the
transactions contemplated by the Ciena Buyer Purchase Agreement, subject to any
liabilities or obligations of any Subject Debtor, except as specifically set
forth in the Ciena Buyer Purchase Agreement.

         T.       Ciena Buyer does not constitute a successor to the Subject
Debtors because, among other reasons:

                  1.       Other than as expressly set forth in the Ciena Buyer
Purchase Agreement, Ciena Buyer is not expressly or impliedly agreeing to assume
any of the Subject Debtors' debts;

                  2.       The transaction does not amount to a consolidation,
merger, or de facto merger of Subject Debtors and Ciena Buyer;

                  3.       Ciena Buyer is not merely a continuation of the
Subject Debtors; and

                                       5
<PAGE>   6

                  4.       The transactions are not being entered into
fraudulently or in order to escape liability for the Subject Debtors' debts.

         U.       The Subject Debtors have demonstrated that it is an exercise
of their sound business judgment to reject executory contracts and unexpired
leases pertaining to the Ciena Facilities as provided in this Order, and that
doing so is in the best interests of the Subject Debtors, their estates and
their creditors.

         V.       Pursuant to section 363(b) of the Bankruptcy Code, the Subject
Debtors have articulated good and sufficient business justification for the sale
of the Ciena Facilities.

         W.       All of the provisions of this Order are non-severable and
mutually dependent.

         X.       The sale of the Ciena Facilities to Ciena Buyer is a
prerequisites to the Subject Debtors' ability to restructure the Omega Debt and
confirm and consummate a plan or plans of reorganization. Such sale is a sale in
contemplation of a plan, and, accordingly, is a transfer pursuant to section
1146(c) of the Bankruptcy Code, which shall not be taxed under any law imposing
a stamp tax or similar tax.

                  NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED THAT:

                  1.       The Motion and the relief sought therein are GRANTED,
and the terms and conditions of the Omega Agreement annexed thereto as Exhibit
"B" and the Ciena Buyer Purchaser Agreement annexed to the Omega Agreement as
Exhibit "A" thereto are approved.

                  2.       Any objections to the Motion or the relief requested
therein that have not been withdrawn with prejudice, waived, or settled, are
overruled on the merits.

                  3.       Pursuant to section 363(b) of the Bankruptcy Code,
the Subject Debtors are hereby authorized to consummate the sale of the Ciena
Facilities, pursuant to and in accordance with the terms and conditions of the
Omega Agreement and the Ciena Buyer Purchase Agreement, respectively, and
otherwise to proceed with those matters set forth in the Omega Agreement and the
Ciena Buyer Purchase Agreement and consummate the transactions

                                       6
<PAGE>   7

set forth therein immediately upon entry of this Order, and the stay otherwise
arising under Bankruptcy Rule 6004(g) shall not apply and is waived.

                  4.       Without in any manner limiting the scope of paragraph
3, pursuant to sections 363 and 364 of the Bankruptcy Code, the transfer by PHCM
of an undivided 50% interest in the Ciena Buyer Note to Omega, the liens granted
to Omega, and the secured financing in the form of the Maintenance Obligation
Note, as provided in the Omega Agreement, are hereby approved and authorized.

                  5.       The Subject Debtors are authorized to execute and
deliver, and empowered to perform under, consummate and implement, the Omega
Agreement and the Ciena Buyer Purchase Agreement, together with all additional
instruments, agreements and documents that may be reasonably necessary or
desirable to implement the Omega Agreement and the Ciena Buyer Purchase
Agreement, and to take all further actions as may reasonably be requested by
Omega and Ciena Buyer, respectively, for the purpose of assigning, transferring,
granting, conveying, and conferring to Ciena Buyer, or reducing to possession
the Ciena Facilities, or as may be necessary or appropriate to the performance
of the obligations as contemplated by the Omega Agreement and the Ciena Buyer
Purchase Agreement.

                  6.       Pursuant to sections 105(a) and 363(f) of the
Bankruptcy Code, upon the closing under the Ciena Buyer Purchase Agreement,
Ciena Buyer shall acquire all right, title and interest in the Ciena Facilities,
and all tangible personal property owned by the PHCM Debtors located thereat and
used solely in connection with such Ciena Facilities. Pursuant to sections
105(a) and 363(f) of the Bankruptcy Code, the transfer of the Ciena Facilities,
and such personal property pursuant to the Ciena Buyer Purchase Agreement, shall
be free and clear of all mortgages, security interests, conditional sale or
other title retention agreements, pledges, liens, judgments, demands,
encumbrances, constructive or resulting trusts, right to future income,
easements, restrictions, rights of first refusal or charges of any kind or
nature, if any, including, but not limited to, any restriction on the use,
voting, transfer, or other exercise of any attributes of ownership
(collectively, "Interests"), and free and clear of all debts arising in any way
in

                                       7
<PAGE>   8

connection with any acts, or failures to act, of the Subject Debtors or the
Subject Debtors' predecessors or affiliates, any claims (as that term is defined
in the Bankruptcy Code) and preclosing obligations or otherwise, including
obligations, demands, guaranties, options, rights, contractual commitments,
restrictions, interests and matters of any kind and nature, whether arising
prior to or subsequent to the Ciena Closing or commencement of these cases, and
whether imposed by agreement, understanding, law, equity, or otherwise
(collectively, the "Claims"), except for any encumbrances which Ciena Buyer has
expressly agreed to assume under the Ciena Buyer Purchase Agreement, with all
such Interests and Claims to attach to PHCM's undivided 50% interest in the
Ciena Buyer Note that is not being transferred to Omega in the order of and
subject to their existing priority as to the transferred assets, with the same
validity, force, and effect which they now have as against the transferred
assets, subject to any claims and defenses the Subject Debtors may possess with
respect thereto.

                  7.       Any currently existing prospective liens for taxes
due for periods from and after the date of the Ciena Closing shall remain
attached to and be a lien on the Ciena Facilities.

                  8.       Neither the purchase of the Ciena Facilities by Ciena
Buyer, nor the subsequent operation by Ciena Buyer of any business previously
operated by the Subject Debtors, will cause Ciena Buyer to be deemed, under any
theory of law or equity, a successor in any respect to the Subject Debtors'
business within the meaning of any revenue, pension, ERISA, tax, labor,
environmental, Medicare, Medicaid, or other health care reimbursement law, rule,
or regulation, or under any personal injury, tort, contract, medical
malpractice, fiduciary or product liability law with respect to the Subject
Debtors' liability or any other law, rule, or regulation, and Ciena Buyer shall
not be treated either as a Subject Debtor nor as a successor to a Subject Debtor
and shall have no liability for any Claim against any Subject Debtor, except as
expressly provided in the Ciena Buyer Purchase Agreement.

                  9.       Ciena Buyer shall not be responsible for any
obligations of the Subject Debtors except those expressly assumed under the
Ciena Buyer Purchase Agreement.

                                       8
<PAGE>   9

                  10.      Except as specifically provided in paragraph 16, no
person or entity, including, without limitation, any federal, state, or local
governmental agency, department, or instrumentality, shall assert by suit or
otherwise, against Ciena Buyer, or its respective successors in interest any
Claims or Interests that they had, have, or may have against any of the Subject
Debtors, their affiliates, subsidiaries, or predecessors, or any liability,
debt, or obligation relating to or arising from the Ciena Facilities, or the
Subject Debtors', their affiliates', subsidiaries', or predecessors' operations
or use of the Ciena Facilities before the consummation of the transaction
contemplated by the Ciena Buyer Purchase Agreement, and all persons and entities
are hereby enjoined from asserting against Ciena Buyer in any way any such
Claims, Interests, liabilities, debts, or obligations.

                  11.      All holders of any encumbrances and of any claims
against the Subject Debtors (including, but not limited to, any claims of any
taxing authorities in respect of taxes asserted to be due and owing ("Tax
Claims")) will be forever barred from asserting any encumbrances or claims
against Ciena Buyer, its successors and assigns, the assets transferred pursuant
to the Ciena Buyer Purchase Agreement, or any other assets of Ciena Buyer, or
its successors and assigns as a consequence of such encumbrances, claims or Tax
Claims. All claims and encumbrances against and interests in such transferred
assets shall be channeled to PHCM's undivided 50% interest in the Ciena Buyer
Note that is not being transferred to Omega as set forth in paragraph 6;
following the closing date under the Ciena Buyer Purchase Agreement, the sole
and exclusive right and remedy available to such claimants and interest holders
with respect to the Claims or Interests respecting any such assets shall be the
right to assert claims against the PHCM Debtors and PHCM's undivided 50%
interest in the Ciena Buyer Note that is not being transferred to Omega as set
forth in paragraph 6.

                  12.      The transfer of the Ciena Facilities pursuant to the
Ciena Buyer Purchase Agreement is a transfer pursuant to section 1146(c) of the
Bankruptcy Code, and, accordingly, shall not be taxed under any law imposing a
stamp tax or similar tax. Accordingly, the deeds

                                       9
<PAGE>   10

given by PHCM to Ciena Buyer are given pursuant to section 1146(c) of the
Bankruptcy Code and are exempt from all state and county-imposed transfer,
stamp, recording and similar taxes.

                  13.      No bulk sales law or any similar law of any state or
other jurisdiction shall apply in any way to the Subject Debtors' sale of the
Ciena Facilities to Ciena Buyer.

                  14.      The Subject Debtors are hereby authorized to reject
all executory contracts and unexpired leases listed on Exhibit "A" hereto
("Rejected Contracts"), effective as of the closing under the Ciena Buyer
Purchase Agreement or such other date to which the Subject Debtors and Ciena
Buyer shall agree. Nothing in the Motion or this Order shall constitute or be
deemed to be an admission, finding, or determination that any of the Rejected
Contracts constitute executory contracts or unexpired leases pursuant to
Bankruptcy Code section 365 or to limit or modify any right of any Debtor to
object to any claim based thereon.

                  15.      Except as specifically provided in the next paragraph
of this Order, and notwithstanding anything else to the contrary in the Motion,
nothing contained in this Order shall be deemed to authorize or provide for the
assumption, the assumption and assignment, or the rejection of any Medicare
and/or Medicaid provider agreement or similar agreement (collectively, "Provider
Agreements"); and this Order is without prejudice to any future motion of any
Debtor respecting any such assumption, assumption and assignment, or rejection,
and any opposition which may be interposed thereto.

                  16.      The applicable Subject Debtor or Subject Debtors
hereby assume and assign the Medicare Provider Agreement and provider number
applicable to each of the Ciena Facilities to Ciena Buyer or its designee(s);
provided, however, that nothing in this Order shall be construed to relieve
Ciena Buyer from complying with all procedures, rules and regulations of the
Medicare program, including, but not limited to, the requirement that the
assignee apply for and obtain HCFA approval of a change of ownership on form
855; and provided further that: (i) by reason of such assumption and assignment,
any claim of Medicare, the applicable fiscal intermediary, HHS, or any other
governmental entity against the applicable Subject Debtor under such assumed and
assigned Medicare Provider Agreement arising prior to the January 18, 2000

                                       10
<PAGE>   11

petition date shall be treated as an expense of administration of such Debtor,
and shall be paid either in accordance with a confirmed plan of reorganization
for such Debtor or, if such Debtor's case is converted to a case under chapter 7
of the Bankruptcy Code, shall constitute a chapter 11 cost of administration in
such converted case; and (ii) notwithstanding the foregoing and such assumption
and assignment, any claim of Medicare, the applicable fiscal intermediary, HHS,
or any other party against any Debtor under such assumed and assigned Medicare
Provider Agreement arising prior to the January 18, 2000 petition date may not
be offset against any claim of any Debtor arising after the filing of these
chapter 11 cases (except that the United States reserves all rights set forth in
the stipulation between the United States and Debtors approved by the Court on
January 18, 2000 ("HHS Stipulation")), and provided further that,
notwithstanding anything to the contrary in this Order, Ciena Buyer will not be
released from any otherwise applicable successor liability for any claim against
the applicable Subject Debtor under such assumed and assigned Provider Agreement
arising prior to the effective date of the assignment of such Provider Agreement
to Ciena Buyer, but, as set forth in the Ciena Buyer Purchase Agreement, Ciena
Buyer shall have an administrative claim for indemnification against PHCM with
respect to any such successor liability; and provided further, that
notwithstanding the foregoing: (i) no claim for successor liability under any
such assumed and assigned Provider Agreement shall be made or prosecuted against
Ciena Buyer and no request for payment of any administrative claim under such
assumed and assigned Provider Agreement shall be made against the applicable
Subject Debtor until the earlier of: (a) the confirmation of a plan of
reorganization for the applicable Subject Debtor under such assumed and assigned
Provider Agreement; (b) the conversion of such Subject Debtor's chapter 11 case
to a case under chapter 7 of the Bankruptcy Code; or (c) an agreement by the
Debtors and HCFA to resolve the claims which HCFA has asserted against the
Debtors on terms which do not include as part of such agreement a release of
successor liability with respect to the assumed and assigned Provider Agreements
or the satisfaction of the administrative claim respecting the assumed and
assigned Provider Agreements; and (ii) the running of any applicable statute of
limitations or other time

                                       11
<PAGE>   12

period for asserting a claim for successor liability against Ciena Buyer under
any such assumed and assigned Provider Agreement shall be tolled from the date
of entry of this Order until the earliest of the three dates described in clause
(i).

                  17.      Notwithstanding any other provision of this Order,
Ciena Buyer shall succeed to the quality of care history of the Subject Debtors
as to the Ciena Facilities.

                  18.      This Order (a) is and shall be effective as a
determination that, on and as of the closing under the Ciena Buyer Purchase
Agreement, and except as provided in Paragraph 6, all Interests or Claims
existing as and to the Cigna Facilities and all personal property being
transferred in connection therewith before the closing have been unconditionally
released, discharged, and eliminated (with such Interests or Claims to attach to
PHCM's undivided 50% interest in the Ciena Buyer Note that is not being
transferred to Omega as provided in paragraph 6), and that the conveyance of the
Ciena Facilities and all personal property being transferred in connection
therewith described herein has been effected; and (b) is and shall be binding
upon and govern the acts of all entities including without limitation all filing
agents, filing officers, title agents, title companies, recorders of mortgages,
recorders of deeds, registrars of deeds, registrars of patents, trademarks, or
other intellectual property, administrative agencies, governmental departments,
secretaries of federal, state, and focal officials, and all other persons and
entities who may be required by operation of law, the duties of their office, or
contract, to accept, file, register, or otherwise record or release any
documents or instruments, or who may be required to report or insure any title
or state of title in or to any of the Assets.

                  19.      To the greatest extent allowed by applicable law, and
except as otherwise provided in the Ciena Buyer Purchase Agreement and in
Paragraph 6 hereof, Ciena Buyer is not acquiring or assuming, and the
consummation of the Ciena Buyer Purchase Agreement shall not subject Ciena Buyer
to, any debts, liabilities, obligations, commitments, responsibilities, or
claims of any kind or nature whatsoever, whether known or unknown, contingent or
otherwise, existing as of the date hereof or hereafter arising, of or against
the Subject Debtors or any affiliate of the Subject Debtors by reason of such
transfer, assignment, and delivery under the

                                       12
<PAGE>   13

laws of the United States, any state, territory, or possession thereof, or the
District of Columbia, applicable to such transactions.

                  20.      If any person or entity that has filed financing
statements or other documents or agreements evidencing Interests or Claims on or
in the Ciena Facilities shall not have delivered to the Subject Debtors before
the Closing, in proper form for filing and executed by the appropriate parties,
termination statements, instruments of satisfaction or releases of all Interests
or Claims or other interests that the person or entity has with respect to any
of the Ciena Facilities and related personal property, free and clear of which
the Ciena Facilities are being transferred under this Order, the Subject Debtors
are hereby authorized to execute and file such statements, instruments,
releases, and other documents on behalf of the person or entity with respect to
any such Ciena Facility.

                  21.      The Omega Agreement, the Ciena Buyer Purchase
Agreement, and the transactions contemplated thereby shall be enforceable
against and binding upon, and not subject to rejection or avoidance by, the
Subject Debtors or any chapter 7 or chapter 11 trustee of the Subject Debtors
and their respective estates.

                  22.      The Omega Agreement, the Ciena Buyer Purchase
Agreement, and any related agreements, documents, or other instruments may be
modified, amended, or supplemented by the parties thereto in accordance with the
terms thereof without further order of the Court, provided that any such
modification, amendment, or supplement is not material.

                  23.      The Subject Debtors shall not reject the Omega
Agreement, the Ciena Buyer Purchaser Agreement, or any agreements executed
pursuant thereto under section 365 of the Bankruptcy Code and shall not modify
or amend any of such agreements under any plan or plans of reorganization.

                  24.      Ciena Buyer is a good-faith purchasers, entitled to
the protection of section 363(m) of the Bankruptcy Code in the event that this
Order is reversed or modified on appeal.

                                       13
<PAGE>   14

                  25.      The consideration provided by Omega pursuant to the
Omega Agreement and by Ciena Buyer pursuant to the Ciena Buyer Purchase
Agreement shall be deemed to constitute reasonably equivalent value and fair
consideration under the Bankruptcy Code or tinder the laws of the United States,
any state, territory, possession, or the District of Columbia.

                  26.      The sale of the Ciena Facilities is fair and
reasonable and may not be avoided under section 363(n) of the Bankruptcy Code.

                  27.      Any claim of the Ciena Buyer against any of the PHCM
Debtors under the Ciena Buyer Purchase Agreement, including, without limitation,
any indemnification claim, shall constitute and be treated as a cost of
administration against such PHCM Debtor or Debtors under section 503(a) of the
Bankruptcy Code.

                  28.      Ciena Buyer is hereby ordered to handle payments
received by Ciena Buyer after the Effective Time (as defined in the Ciena Buyer
Purchase Agreement), whether from private pay sources, including patients, or
from third-party payers, such as Medicare, Medicaid and VA, for services
rendered by any of the PHCM Debtors in the cost reporting period in which the
Effective Time occurs, as follows:

                           a.       If and to the extent such payments either
         specifically indicate on the accompanying remittance advice that they
         relate, or are agreed by the parties to relate, to the period prior to
         the Effective Time the same shall be remitted by Ciena Buyer to PHCM
         within seven (7) days after receipt thereof; provided, however, during
         the first sixty (60) days following the Effective Time, in the event
         payment is received without remittance advice such payments shall be
         first applied to any pre-Closing balances of the PHCM Debtors, with any
         remaining portion of the payment remitted to Ciena Buyer;

                           b.       If and to the extent such payments either
         specifically indicate on the accompanying remittance advice that they
         relate, or are agreed by the parties to relate, to the period on or
         after the Effective Time, they shall be retained by Ciena Buyer;

                           c.       In the event Ciena Buyer and PHCM mutually
         determine that any payment was misapplied by the parties, the party
         which erroneously received said

                                       14
<PAGE>   15

         payment shall remit the same to the other within three (3) days after
         said determination is made; and

                           d.       PHCM shall have the right to inspect all
         pertinent records of Ciena Buyer, and Ciena Buyer shall have the right
         to inspect all pertinent records of PHCM, in order to confirm the
         parties' mutual compliance with the obligations imposed on them under
         this paragraph 27.

                  29.      Ciena Buyer will cooperate with PHCM and the other
PHCM Debtors in the continued collection of the Receivables (as defined in the
Ciena Buyer Purchase Agreement). For a period of twenty-four (24) months after
the Closing Date, Ciena Buyer shall permit PHCM's accountants and other agents
access, at times designated by Ciena Buyer, upon reasonable prior notice, to its
books and records relating to the Ciena Facilities, including all such records
relating to the posting of receipts and payments to enable PHCM to verify that
Ciena Buyer has fully performed its obligations under this Order. Ciena Buyer
shall have the right to have a representative present in connection with any
review of such books and records.

                  30.      Funds which may be due and owing from HCFA as result
of the appeals as to, settlement of, or the reversal of, the disallowance of
costs of therapy services rendered to patients at the Ciena Facilities (which
funds are commonly referred to as, and included as part of, the "Prudent Buyer
Appeals Monies") are not being sold, assigned, or in any way transferred by the
entry of this Order or the sale to the Ciena Buyer authorized thereby. Further,
this Order and the documents authorized for execution by the Debtors by this
Order are not intended to determine, and shall not be construed as a
determination or admission, by this Court or any party as to the classification
of the Prudent Buyer Appeal Monies as an account receivable due to the Seller or
the Subsidiary Lessees or as to any right, title or interest held by any party
in the Prudent Buyer Appeal Monies.

                  31.      The rejection of the Nonexclusive Ancillary Therapy
Services Agreement between NovaCare, Inc. and Frenchtown Nursing Home, Inc.
dated October 1, 1995 and amendments, if any, thereto ("NovaCare-Frenchtown
Agreement") shall not constitute or be

                                       15
<PAGE>   16

deemed to be an admission, finding, or determination that the
NovaCare-Frenchtown Agreement is an executory contract pursuant to Bankruptcy
Code 365.

                  32.      Except for any determination which the Court may
subsequently make as to the effect, if any, of the rejection of the
NovaCare-Frenchtown Agreement, this Order and the documents authorized for
execution by the Debtors by this Order, shall not impact, impair, or in any way
effect the rights and interests, if any, presently held by NovaCare, Inc. or
NovaCare Holdings, Inc. (collectively "NCH") in the Prudent Buyer Appeal Monies
or the relief being sought with respect thereto by NCH in the pending adversary
proceeding captioned NovaCare Holdings, Inc. v. Mariner Post-Acute Network,
Inc., et al., Adversary Proceeding No. 00-1577 (MFW).

                  33.      The failure specifically to include any particular
provision of the Omega Agreement or the Ciena Buyer Purchase Agreement in this
Order shall not diminish or impair the effectiveness of such provision, it being
the intent of the Court that the Omega Agreement and the Ciena Buyer Purchase
Agreement be authorized and approved in their entirety.

                  34.      This Order shall be effective and enforceable
immediately upon entry, notwithstanding Bankruptcy Rule 6004(g).

                  35.      This Court shall retain jurisdiction to decide any
disputes arising among Omega, Ciena Buyer, the Subject Debtors, or any other
person or entity with respect to the Omega Agreement, the Ciena Buyer Purchase
Agreement, this Order or any other documents, instruments or agreements executed
in connection with the transactions approved herein. In addition, and without in
any manner limiting the scope of the foregoing, this Court shall retain
jurisdiction to enforce this Order in order to bar the enforcement or assertion
of any encumbrances or other claims against the Ciena Buyer and its successors
and assigns, the assets being transferred pursuant to the Ciena Buyer Purchase
Agreement, or any other assets of Ciena Buyer and its successors and assigns, to
the extent that the assertion of such encumbrances or

                                       16
<PAGE>   17

other claims by any holder of Claims or Interests against any of the Subject
Debtors is prohibited by the terms of this Order.

Dated: January 11, 2001
       Wilmington, Delaware

                                             /s/ Mary F. Walrath
                                             -----------------------------------
                                             The Honorable Mary F. Walrath
                                             U.S. Bankruptcy Judge

                                       17

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