Document:

<PAGE>

                                                                    EXHIBIT 10.4

                             FIRST AMENDMENT OF THE
                      AMENDED AND RESTATED OPTION AGREEMENT

         This first amendment of that certain Amended and Restated Option
Agreement (the "Amendment") is made this 2nd day of April, 1999 between Mariner
Health Care of Nashville, Inc., a wholly owned subsidiary of Mariner Heath
Group, Inc., a Delaware corporation, and the successor by merger to Convalescent
Services, Inc., a Georgia corporation ("Lessee"), Mariner Health Group, Inc., a
Delaware corporation ("Mariner"), Stiles A. Kellett, Jr., individually; Samuel
B. Kellett, individually; and Houston-Northwest Medical Investors, Ltd. (L.P.),
a Georgia limited partnership; Dallas Medical Investors, Ltd. (L.P.), a Georgia
limited partnership; Ft. Bend Medical Investors, Ltd. (L.P.), a Georgia limited
partnership, Northwest Healthcare, L.P., a Georgia limited partnership; Belleair
East Medical Investors, Ltd. (L.P.), a Georgia limited partnership; Denver
Medical Investors, Ltd. (L.P.), a Georgia limited partnership; Tallahassee
Healthcare Associates, Ltd. (L.P.), a Georgia limited partnership; Port
Charlotte Healthcare Associates, Ltd. (L.P.), a Georgia limited partnership;
South Denver Healthcare Associates, Ltd. (L.P.), a Georgia limited partnership;
Melbourne Healthcare Associates, (L.P.) Ltd., a Georgia limited partnership;
Pinellas III Healthcare, Ltd. (L.P.), a Georgia limited partnership; Polk
Healthcare, Ltd. (L.P.), a Georgia limited partnership; Orange Healthcare, Ltd.
(L.P.), a Georgia limited partnership; and Creek Forest, Limited, a Georgia
limited partnership (each, a "Lessor" and, collectively, the "Lessors"):

                                   WITNESSETH:

         WHEREAS, Lessors and Lessee have previously entered into the Amended
and Restated Option Agreement dated May 24, 1995 (the "Agreement"), and recorded
in the official records of the following counties and states: (i) County Clerk's
Office (Records) of Fort Bend County, Texas, File No. 9601199; (ii) Clerk of
Courts of Brevard County, Florida at as File No. 96002657 in Official Record
Book 3533 Page 4823; (iii) County Clerk's Office of Harris County, Texas as
Recording No. r742088; (iv) Official Records of Pinellas County, FL as Inst. No.
96-004608 at Volume 9213 Page 569;(v) Public Records of Oklahoma County,
Oklahoma as Document No. 96002277 in Book 6837 Page 1596-1645; (vi) Official
Records of Leon County, Florida as File No. 1414194 in O.R. Book 1868 Page 1525;
(vii) Clerk of the Circuit Court of Charlotte County, Florida as File No. 394481
in O.R. Book 1441 Page 0743; (viii) Public Records of Arapahoe County, Colorado
as File No. A6002229; (ix) Official Records of Pinellas County, Florida as in
O.R. Book 9213 Page 697; (x) Official Records of Polk County, Florida as File
No. 02704 in Volume 3623 Page 1506; (xi) Official Records of Orange County,
Florida as Instrument No. 5479703 in O. R. Book 4999 Page 245; and (xii) County
Clerk's office of Harris County, Texas as Recording No. R-742091; and

         WHEREAS, Lessors and Lessee wish to amend the Amended and Restated
Option Agreement with the terms set forth in this amendment.

<PAGE>

                Amended and Restated Option Agreement -- Page 2

               THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that:

         1.       Schedule 2 attached to the Amended and Restated Option
Agreement (entitled "Revised Schedule 2") is hereby amended by revising the
dates (years) set forth under the column entitled "Exercise Year" and the values
set forth under the column entitled "Fair Market Value," so that said dates and
values now read as set forth on the "Second Revised Schedule 2" attached hereto
as Exhibit A and made a part hereof. Further, the term "Purchase Option Date" as
used in the Amended and Restated Option Agreement now refers to the date (year)
set forth under the "Exercise Year" column on the Second Revised Schedule 2.
Each reference in the Amended and Restated Option Agreement to "Schedule 2" is
deemed to refer to "Second Revised Schedule 2."

         2.       Each reference in the Amended and Restated Option Agreement to
"Lease" or "Leases" is deemed to refer to a Lease or the Leases (in each case as
defined in the Amended and Restated Option Agreement) as such Lease or the
Leases have been amended through July 31, 1998.

         3.       Article II of the Amended and Restated Option Agreement has
been amended by adding a new Section 2.10, which reads as follows:

                  2.10     Termination of Option. Notwithstanding anything to
         the contrary in this Agreement or any other Operative Agreement, the
         Option granted in this Article R with respect to a Facility shall
         terminate with respect to that Facility in the event (i) the Lessee
         under the Lease for such Facility shall fail or refuse to pay any rent,
         additional rent or other charges due under such Lease (within the
         meaning thereof contained in Section 23a. of such Lease), (ii) such
         failure or refusal shall continue for ten (10) days after written
         notice from the Lessor under such Lease to such Lessee (within the
         meaning thereof contained in Section 23a. of such Lease) and (iii) the
         Lessor under such Lease shall have terminated such Lease in accordance
         with Section 23a.(l) of such Lease. Furthermore, in the event an Option
         is so terminated, the Lessee shall forfeit the right to receive the
         Option Deposit (as defined in Section 2.3 hereof and as set forth on
         Revised Schedule 2 attached hereto, as the same may be revised from
         time to time) with respect to such Facility; and such Option Deposit
         shall be retained by the applicable Lessor as full and final damages
         arising from any and all defaults of the Lessee under such Lease and
         any other claims the applicable Lessor may have against the Lessee or
         any of its affiliates under such Lease, and upon such termination of
         such Option, the applicable Lessor, the Kelletts and their respective
         affiliates shall be deemed to have waived any and all claims they or
         any of them may have against the Lessee or any of its affiliates for
         any act or omission, or with respect to any event, occurring at or
         prior to such termination or arising under the Lease. If an Option is
         terminated in accordance with this Section 2.10, the Lessee shall, at
         the request of the Lessor, execute and deliver to such Lessor any
         agreements, instruments, notices or memoranda that such Lessor may
         reasonably request to properly reflect the termination of such Option.
         Notwithstanding anything to the contrary in this Section 2.10, the
         termination of any such Lease and any such Option shall not effect in
         any way any rights or obligations of Lessee and the Lessors under any
         other

<PAGE>

                Amended and Restated Option Agreement -- Page 3

         Lease or any other Option granted pursuant to this Agreement with
         respect to any other Facility and any term contained in any of the
         Leases as now existing or hereafter amended providing for a cross
         default in the event of the termination of any of the other Leases
         shall be deemed null and void for purposes of this Section 2.10.

                         [Signatures on following page]

<PAGE>

                Amended and Restated Option Agreement -- Page 4

         IN WITNESS WHEREOF, this Agreement has been duly executed under seal
and delivered by the parties on the date first above written.

WITNESSES:                                MARINER POST-ACUTE NETWORK, INC.

  /s/ Shannon Krippner                    By: /s/ Susan Thomas Whittle
-------------------------------              -----------------------------------
Name:  Shannon Krippner                      Name:  Susan Thomas Whittle
/s/ Joan E. Smith                            Title: Senior Vice President
-------------------------------
Name:  Joan E. Smith

                                          ATTEST:

                                          By:   /s/ Stefano Miele
                                             -----------------------------------
                                             Name: Stefano Miele
                                             Title: Vice President

WITNESSES:                                MARINER HEALTH CARE OF
                                          NASHVILLE, INC.

  /s/ Shannon Krippner                    By:     /s/ Stefano Miele
-------------------------------              -----------------------------------
Name:  Shannon Krippner                      Name:  Stefano Miele
/s/ Joan E. Smith                            Title:  Vice President
-------------------------------
Name:  Joan E. Smith

                                          ATTEST:

                                          By:   /s/ Susan Thomas Whittle
                                             -----------------------------------
                                             Name:  Susan Thomas Whittle
                                             Title: Senior Vice President

   /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                      /s/ Stiles A. Kellett, Jr.
-------------------------------            -------------------------------------
Name:                                      Stiles A. Kellett, Jr., individually
  /s/ Leslie R. Parter
-------------------------------
Name:
  /s/ JSM Kellett                            /s/ Samuel B. Kellett
-------------------------------            -------------------------------------
Name:                                      Samuel B. Kellett, individually

<PAGE>

                Amended and Restated Option Agreement -- Page 5

WITNESSES:                               DENVER MEDICAL INVESTORS, LTD.
                                           (L.P.), a Georgia limited partnership
      /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               MELBOURNE HEALTHCARE
                                           ASSOCIATES, LTD. (L.P.), a Georgia
                                           limited partnership
     /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:    /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               DALLAS MEDICAL INVESTORS, LTD.
                                           (L.P.), a Georgia limited partnership
    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:    /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                        Stiles A. Kellett, Jr.,
                                             General Partner

WITNESSES:                               NORTHWEST HEALTHCARE, L.P., a
                                           Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               ARLINGTON HEIGHTS MEDICAL
                                           INVESTORS, LTD. (L.P.), a Georgia
                                           limited partnership
-------------------------------
Name:

-------------------------------          By:    N.A.
Name:                                        -----------------------------------
                                             Stiles A. Kellett, Jr.,
                                             General Partner

WITNESSES:                               VILLA MEDICAL INVESTORS, LTD.
                                           (L.P.), a Georgia limited partnership

-------------------------------
Name:

-------------------------------          By:    N.A.
Name:                                       ------------------------------------
                                            Stiles A. Kellett, Jr.,
                                            General Partner

<PAGE>

                Amended and Restated Option Agreement -- Page 6

WITNESSES:                               HOUSTON-NORTHWEST MEDICAL
                                           INVESTORS, LTD. (L.P.), a Georgia
                                           limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               FT. BEND MEDICAL INVESTORS, LTD.
                                           (L.P.), a Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               BELLEAIR EAST MEDICAL INVESTORS,
                                           (L.P.), a Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               PORT CHARLOTTE HEALTHCARE
                                           ASSOCIATES, LTD. (L.P.), a Georgia
                                           limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               TALLAHASSEE HEALTHCARE
                                           ASSOCIATES, LTD. (L.P.), a Georgia
                                           limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               SOUTH DENVER HEALTHCARE
                                           ASSOCIATES, LTD. (L.P.), a Georgia
                                           limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

<PAGE>

                Amended and Restated Option Agreement -- Page 7

WITNESSES:                               PINELLAS III HEALTHCARE, LTD. (L.P.),
                                           a Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               POLK HEALTHCARE, LTD. (L.P.),
                                           a Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               ORANGE HEALTHCARE, LTD. (L.P.), a
                                           Georgia limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

WITNESSES:                               CREEK FOREST, LIMITED, a Georgia
                                           limited partnership

    /s/ Connie S. Pierce
-------------------------------
Name:
   /s/ Kimberly Messimer                 By:   /s/ Stiles A. Kellett, Jr.
-------------------------------             ------------------------------------
Name:                                       Stiles A. Kellett, Jr.,
                                            General Partner

<PAGE>

                Amended and Restated Option Agreement -- Page 8

STATE OF    Georgia                                               April 2, 1999
        ---------------

COUNTY OF    DeKalb
         --------------

         On this day, Susan T. Whittle, Senior Vice President, appeared before
me on behalf of Mariner Post-Acute Network, Inc. and acknowledged the foregoing
instrument to be the voluntary act of Mariner Post-Acute Network, Inc. He/She is
personally known to me or produced a driver's licenses as identification.

                                           /s/ Cristi Mills
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: April 22, 2000

STATE OF    Georgia                                               April 2, 1999
        ---------------

COUNTY OF    DeKalb
         --------------

         On this day, Stefano Miele, Vice President of Mariner Health Care of
Nashville, Inc., and                  ,                 , appeared before me on
behalf of Mariner Health Care of Nashville, Inc. and acknowledged the foregoing
instrument to be the voluntary act of Mariner Health Care of Nashville, Inc.
He/She is personally known to me or produced a driver's licenses as
identification.

                                             Cristi Mills
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: April 22, 2000

<PAGE>

                Amended and Restated Option Agreement -- Page 9

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., appeared before me and
acknowledged the foregoing instrument to be his voluntary act. He is personally
known to me or produced a driver's licenses as identification.

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Samuel B. Kellett, appeared before me and acknowledged the
foregoing instrument to be his voluntary act. He is personally known to me or
produced a driver's licenses as identification.

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Denver Medical
Investors, Ltd. (L.P.), appeared before me on behalf of Denver Medical
Investors, Ltd. (L.P.) and acknowledged the foregoing instrument to be his
voluntary act on behalf of Denver Medical Investors, Ltd. (L.P.)

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                Amended and Restated Option Agreement -- Page 10

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Melbourne
Healthcare Associates, Ltd. (L.P.), appeared before me on behalf of Melbourne
Healthcare Associates, Ltd. (L.P.) and acknowledged the foregoing instrument to
be his voluntary act on behalf of Melbourne Healthcare Associates, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Dallas Medical
Investors, Ltd. (L.P.), appeared before me on behalf of Dallas Medical
Investors, Ltd. (L.P.) and acknowledged the foregoing instrument to be his
voluntary act on behalf of Dallas Medical Investors, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Northwest
Healthcare, L.P., appeared before me on behalf of Northwest Healthcare, L.P. and
acknowledged the foregoing instrument to be his voluntary act on behalf of
Northwest Healthcare, L.P.

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                Amended and Restated Option Agreement -- Page 11

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of
Houston-Northwest Medical Investors, Ltd. (L.P.), appeared before me on behalf
of Houston-Northwest Medical Investors, Ltd. (L.P.) and acknowledged the
foregoing instrument to be his voluntary act on behalf of Houston-Northwest
Medical Investors, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Ft. Bend
Medical Investors, Ltd. (L.P.), appeared before me on behalf of Ft. Bend Medical
Investors, Ltd. (L.P.) and acknowledged the foregoing instrument to be his
voluntary act on behalf of Ft. Bend Medical Investors, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Belleair East
Medical Investors, Ltd. (L.P.), appeared before me on behalf of Belleair East
Medical Investors, Ltd. (L.P.) and acknowledged the foregoing instrument to be
his voluntary act on behalf of Belleair East Medical Investors, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                Amended and Restated Option Agreement -- Page 12

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Port Charlotte
Healthcare Associates, Ltd. (L.P.), appeared before me on behalf of Port
Charlotte Healthcare Associates, Ltd. (L.P.) and acknowledged the foregoing
instrument to be his voluntary act on behalf of Port Charlotte Healthcare
Associates, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Tallahassee
Healthcare Associates, Ltd. (L.P.), appeared before me on behalf of Tallahassee
Healthcare Associates, Ltd. (L.P.) and acknowledged the foregoing instrument to
be his voluntary act on behalf of Tallahassee Healthcare Associates, Ltd.
(L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of South Denver
Associates, Ltd. (L.P.), appeared before me on behalf of South Denver
Associates, Ltd. (L.P.) and acknowledged the foregoing instrument to be his
voluntary act on behalf of South Denver Associates, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                Amended and Restated Option Agreement -- Page 13

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Pinnellas III
Healthcare, Ltd. (L.P.), appeared before me on behalf of Pinnellas III
Healthcare, Ltd. (L.P.) and acknowledged the foregoing instrument to be his
voluntary act on behalf of Pinnellas III Healthcare, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Polk
Healthcare, Ltd. (L.P.), appeared before me on behalf of Polk Healthcare, L.P.
(Ltd.) and acknowledged the foregoing instrument to be his voluntary act on
behalf of Port Charlotte Healthcare Associates, L.P. (Ltd.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                Amended and Restated Option Agreement -- Page 14

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

         On this day, Stiles A. Kellett, Jr., General Partner of Orange
Healthcare, Ltd. (L.P.), appeared before me on behalf of Orange Healthcare, Ltd.
(L.P.) and acknowledged the foregoing instrument to be his voluntary act on
behalf of Orange Healthcare, Ltd. (L.P.).

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

STATE OF    Georgia                                              March 31, 1999
        ---------------

COUNTY OF    Cobb
         --------------

               On this day, Stiles A. Kellett, Jr., General Partner of Creek
Forest, Limited, appeared before me on behalf of Creek Forest, Limited and
acknowledged the foregoing instrument to be his voluntary act on behalf of Creek
Forest, Limited.

                                            Belinda Busby Stone
                                         ---------------------------------------
                                         Notary Public
                                         My commission expires: May 10, 2002

<PAGE>

                                                                       EXHIBIT A

                            SECOND REVISED SCHEDULE 2

<TABLE>
<CAPTION>
Facility                     Exercise Year             Option Deposit               Fair Market Value
-------                      -------------             --------------               -----------------
<S>                          <C>                       <C>                          <C>
Colony House                     2005                    (1,025,000)                   $4,400,000
Melbourne Terrace                2005                      (860,000)                    5,200,000
Villa Northwest                  2004                    (1,010,000)                    4,300,000
Belleair East                    2006                    (1,215,000)                    3,545,000
South Monaco*                    2008                      (780,000)                    2,280,000
Centerville                      2006                      (975,000)                    4,300,000
Palmview                         2006                    (1,330,000)                    2,330,000
Heritage Park                    2005                    (1,130,000)                    5,900,000
East Bay                         2005                    (1,205,000)                    4,900,000
Spring Lake                      2010                    (1,250,000)                    5,500,000
Conway Lakes                     2010                    (1,155,000)                    5,100,000
Woodwind Lakes                   2003                    (1,220,000)                    5,300,000
Meadowgreen
Bethany
</TABLE>

---------------
*    Exercise year shall begin on December 1, 2008 (all others begin on
     May 24 of each exercise year).<PAGE>

                                                                   EXHIBIT 10.27

               SETTLEMENT AGREEMENT RE: PHARMACY SUPPLY CONTRACTS

         This "Settlement Agreement Re: Pharmacy Supply Contracts" ("Agreement")
is entered into as of October 9, 2001, by and among Mariner Post-Acute Network,
Inc. ("MPAN"), for itself and on behalf of each of its affiliates ("Affiliates,"
as the term "affiliate" is defined in section 101(2) of title 11 of the United
States Code (the "Bankruptcy Code")) (collectively, with MPAN, the "MPAN Group")
which has engaged in the past or is presently engaged in the purchase of
pharmaceutical products and services ("Pharmacy Products and Services") from any
member of the NeighborCare Group (as hereafter defined) on the one hand, and
NeighborCare Pharmacy Services, Inc., for itself and on behalf of each of its
Affiliates which has engaged in the past or is presently engaged in the sale or
supply of Pharmacy Products and Services to any member of the MPAN Group
(collectively, with NeighborCare, the "NeighborCare Group") on the other hand,
with each of the foregoing hereinafter referred to collectively as the "Parties"
and individually as a "Party", with reference to the following facts and
recitals:

                                    RECITALS

         A.       MPAN and the other members of the MPAN Group are debtors and
debtors in possession in cases pending under in chapter 11 of the Bankruptcy
Code, Case Nos. 00-00113 through 00-00214, which cases are jointly administered
and consolidated for procedural purposes only under Case No. 00-00113
(collectively, the "MPAN Bankruptcy Case") pending in the United States
Bankruptcy Court for the District of Delaware (the "MPAN Bankruptcy Court"),
having filed their voluntary petitions on January 18, 2000 (the "MPAN Petition
Date").

         B.       NeighborCare and the other members of the NeighborCare Group
are the revested debtors in cases pending under chapter 11 of Bankruptcy Code,
Case Nos. 00-2691 (JHW) through 00-2836 (JHW), which cases are jointly
administered and consolidated for procedural purposes only under Case
No. 00-2692 (JHW) (collectively, the "NeighborCare Bankruptcy Case") pending
in the United States Bankruptcy Court for the District of Delaware (the
"NeighborCare Bankruptcy Court"), having confirmed their plan of reorganization
on September 20, 2001, the effective date of which occurred on October 2, 2001.

         C.       On the MPAN Petition Date, members of the MPAN Group and
members of the NeighborCare Group were parties to numerous executory contracts,
including, without limitation, an Omnibus Reconciliation Services Agreement
("ORSA"), various pharmaceutical supply agreements, whether or not in the form
appended to the ORSA, and various pharmaceutical consultant agreements, whether
or not in the form appended to the ORSA (collectively, including all executory
contracts and all other rights, duties and obligations among the MPAN Group on
the one hand and the NeighborCare Group on the other hand, the "Contracts"),
whereby members of the

<PAGE>

NeighborCare Group supplied members of the MPAN Group with Pharmacy Products and
Services. The Contracts were assumed in the NeighborCare Bankruptcy Case;
however, to date, the Contracts have not been assumed or rejected in the MPAN
Bankruptcy Case.

         D.       In connection with the performance by the NeighborCare Group
and the MPAN Group under the Contracts prior to the MPAN Petition Date, the
NeighborCare Group asserts monetary defaults in the aggregate amount of
approximately $22.5 million, which amount the MPAN Group believes exceeds the
amount owing under the Contracts.

         E.       The NeighborCare Group additionally asserts administrative and
pre-petition claims in the MPAN Bankruptcy Case for liquidated damages under the
Contracts arising from the activities of the MPAN Group both prior and
subsequent to the MPAN Petition Date relating to the closure or divestiture of
operating locations. The MPAN Group has not paid any such liquidated damage
claims to NeighborCare and disputes the allowability of such claims as a cost of
administration in the MPAN Bankruptcy Case.

         F.       Members of the NeighborCare Group have filed numerous proofs
of claims in the MPAN Bankruptcy Case, including, without limitation, those
claims set forth on Schedule 1 hereto (collectively, the "NeighborCare Claims").

         G.       The NeighborCare Group has continued to provide Pharmacy
Products and Services to the MPAN Group following the MPAN Petition Date at the
prices and on the terms established by the Contracts. The MPAN Group has paid
the NeighborCare Group for such shipments within standard business terms.

         H.       NeighborCare, for an on behalf of the NeighborCare Group, has
filed a motion (the "NeighborCare Motion") in the MPAN Bankruptcy Case to (1)
compel assumption or rejection of the Contracts; (2) allow an administrative
claim; and (3) compel immediate payment thereof. MPAN has not yet filed the
reply of the MPAN Group to the Motion. The response and hearing dates on the
NeighborCare Motion have been continued from time to time.

         I.       The alternatives to entry into this Agreement are outright
assumption or rejection of the Contracts by the MPAN Group. The MPAN Group has
indicated that it will not assume the Contracts except as provided in this
Agreement. This Agreement is preferable to rejection of the Contracts because
the resolution of all outstanding claims and disputes relating to the Contracts
and the Motion will (A) avoid the costly and disruptive process that could be
occasioned by a transition to a new supplier of Pharmacy Products and Services,
(B) provide an uninterrupted supply of Pharmacy Products and Services to the
MPAN Group and its patients, and (C) avoid costly litigation over (1) the
continuation of services by the NeighborCare Group pending

<PAGE>

transition to a new supplier, (2) the NeighborCare Group's right to critical
vendor funds, (3) the NeighborCare Group's prepetition claims for (a) arrearages
due under the Contracts, (b) breach of the Contracts, and (c) liquidated
damages, and (4) the appropriate amount of any administrative claim due
NeighborCare as a result of its asserted claim for liquidated damages and based
on the Pharmacy Products and Services delivered after the MPAN Petition Date.

                NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                                   AGREEMENT

         1.       Assumption Of Contracts, As Modified; Transition Of Part B
Business; Rights Upon Assignment And Termination. On the Effective Date (as
defined in Paragraph 15 hereof):

                  a.       Assumption of Contracts, As Modified. The MPAN Group
and the NeighborCare Group shall execute and deliver amended and restated
contracts relating only to the MPAN facilities which are presently serviced by
the NeighborCare Group under the Contracts in the form attached hereto as
Exhibit "A" (the "Pharmacy Dispensing Services Agreement"), as Exhibit "B" (the
Consultant Pharmacist Agreement") and as Exhibit "C" (the "Service Agreement")
(collectively, the "Amended And Restated Contracts"), which Amended And Restated
Contracts shall then be assumed in the MPAN Bankruptcy Case and shall replace
and supersede in their entirety any and all of the Contracts, which thereupon
shall be of no further force or effect except as provided for herein. Schedule 2
hereto identifies (1) the MPAN facilities which are presently serviced by the
NeighborCare Group (each a "Contracting Facility"); (2) the particular member of
the MPAN Group that will enter into the Amended And Restated Contracts for each
such facility; and (3) the particular member of the NeighborCare Group that will
enter into the Amended And Restated Contracts for each such facility.

                  b.       Cure Of Defaults; Adequate Assurance Of Future
Performance. The MPAN Group and the NeighborCare Group each agree that in
connection with MPAN's assumption of the Amended And Restated Contracts, except
as provided in Paragraph 2 hereof, there are no monetary defaults that require
cure or compensation; accordingly, the Parties agree that the requirements of
sections 365(b)(1)(A) and (B) of the Bankruptcy Code shall be deemed satisfied
in connection with the Amended and Restated Contracts. Further, the NeighborCare
Group agrees that assumption of the Amended and Restated Contracts by members of
the MPAN Group provides the NeighborCare Group with adequate assurance of future
performance in satisfaction of the requirements of section 365(b)(1)(C) of the
Bankruptcy Code.

<PAGE>

                  c.       Part B Transition. Notwithstanding the execution of
the Service Agreement, Exhibit "C" hereto, members of the MPAN Group shall be
entitled to terminate such services without liability and transition the
services back to members of the MPAN group at a rate not to exceed ten
facilities per month. Upon termination of a Service Agreement for a particular
facility, the term "Amended and Restated Contracts" as it relates to such
facility shall mean only the Pharmacy Dispensing Services Agreement and the
Consultant Pharmacist Agreement applicable to such facility. The MPAN Group
shall not be entitled to terminate the Pharmacy Dispensing Services Agreement or
the Consultant Pharmacist Agreement except as set forth in those respective
agreements or as provided for in this Agreement.

                  d.       Assignment of Contracts. If a member of the MPAN
Group transitions operations at a Contracting Facility to a new operator by any
means, including without limitation, by sale, lease rejection or termination
combined with an operations transfer agreement, or sublease, then such member of
the MPAN Group shall use its commercially reasonable efforts to assign to the
new operator the Amended and Restated Contracts applicable to such facility,
subject to the consent of the contracting member of the NeighborCare Group,
which consent shall not be unreasonably withheld. Any such assignment shall
relieve the member of the MPAN Group from any further liability thereunder
except for amounts payable under the Amended and Restated Contracts for goods
sold, services rendered and other claims and charges attributable to the period
prior to the effective date of the assignment of the Amended and Restated
Contracts.

                  e.       Liquidated Damages. A Contracting Facility may
terminate its Amended and Restated Contracts in connection with (i) a sale,
divestiture or other disposition of the Contracting Facility to a third party
which is not then an Affiliate of MPAN; (ii) the rejection of the real property
lease applicable to the Contracting Facility in one of the pending chapter 11
cases of MPAN or one of its Affiliates; or (iii) the closure of cessation of
operations of the Contracting Facility, at which point it shall no longer be
counted as a Contracting Facility under this Agreement; provided, however, that
as of the first day of each calendar month through the initial term of the
Amended and Restated Contracts (the "Calculation Period") on which date there
are less than 53 remaining Contracting Facilities (the "Mariner Facilities
Threshold") MPAN shall promptly pay NeighborCare for the benefit of the members
of the NeighborCare Group which were parties to the terminated Amended and
Restated Contracts liquidated damages monthly in an amount equal to the product
of (i) $12,500 multiplied by (ii) the number by which the then-existing number
of Contracting Facilities is less than the Mariner Facilities Threshold;
provided, however, that the payment of such liquidated damages will continue
only for such period as would have remained on the Amended and Restated
Contracts to which each former Contracting Facility was a party had such Amended
and Restated Contracts not been terminated. For the purposes of calculating
liquidated damages pursuant to the preceding sentence, if the successor operator
(if any) of a Contracting Facility either: (x) assumes the Pharmacy Dispensing
Services

<PAGE>

Agreement in effect at such Contracting Facility, or (y) enters into agreements
with a member of the NeighborCare Group, or an Affiliate thereof, with a term of
one year or more (or a shorter period if less than one year remains on the
terminated Pharmacy Dispensing Services Agreement, provided that the term of the
new Pharmacy Dispensing Services Agreement is coterminous with that which
remained on the terminated Pharmacy Dispensing Services Agreement) for the
provision of the services provided under the Pharmacy Dispensing Services
Agreement, then such facility in the hands of the new operator shall continue to
be counted as a Contracting Facility. In addition, the number of Contracting
Facilities shall be increased by each facility owned, managed, or operated by
any member of the MPAN Group or any of their Affiliates which: (1) (a) is not
currently subject to the Amended and Restated Contracts, or (b) does not
currently receive the types of services provided under the Amended and Restated
Contracts from any member of the NeighborCare Group or any Affiliate thereof,
(2) (s) enters into a Pharmacy Dispensing Services Agreement, or (t) enters into
an agreement with a member of the NeighborCare Group, or an Affiliate thereof,
for the provision of the services provided under the Pharmacy Dispensing
Services Agreement which is coterminous with the terminated Pharmacy Dispensing
Services Agreement which such contract is intended to replace, and (3)
specifically declares solely under this Agreement that the contractual
arrangements described in (s) or (t) above are intended to increase the number
of Contracting Facilities for purposes of calculation of liquidated damages
solely under this Paragraph. The Parties acknowledge and agree that the damages
which the NeighborCare Group would suffer upon the termination of the Amended
and Restated Contracts would be difficult to calculate, and that the liquidated
damages set forth herein represent the Parties' reasonable estimate of the
actual damages that would be incurred by the NeighborCare Group in the event of
any such termination. The liquidated damages payable under this subparagraph
shall be in addition to amounts payable under the Amended and Restated Contracts
for goods sold, services rendered and other claims and charges attributable to
the period prior to the effective date of the termination of the Amended and
Restated Contracts. MPAN shall have no obligation to pay any liquidated damages
pursuant to this section following the Calculation Period.

         2.       Cure; Withdrawal of Claims; Allowance of General Unsecured
Non-Priority Claims In Favor of NeighborCare Group. On the Effective Date:

                  a.       In full and complete satisfaction of all disputes and
claims arising prior to the MPAN Petition Date among the members of the MPAN
Group on the one hand and the members of the NeighborCare Group on the other
hand by reason of, arising from, relating to, or in connection with the
Contracts, the delivery of Pharmacy Products and Services, or otherwise,
including, without limitation, claims for unpaid invoices, accounts receivables,
late charges, attorneys' fees, liquidated damages for the closure of MPAN
facilities, and any cure and compensation required to be paid in connection
with the assumption of the Amended and Restated Contracts pursuant to
section 365(b)(1)(A) and (B) of the Bankruptcy Code, Claim No. 004773 shall be

<PAGE>

allowed as a general unsecured, non-priority claim in the MPAN Bankruptcy Case
in the name of NeighborCare, for and on behalf of the NeighborCare Group, in the
amount of $6,000,000.00, which allowed claim can be allocated among the members
of the MPAN Group in the discretion of NeighborCare; provided, however, that
(i) the amount allowed against any member of the MPAN Group shall not exceed the
amount of the proof of claim originally filed by the NeighborCare Group against
such member of the MPAN Group, and (ii) the NeighborCare Group shall not oppose
the substantive consolidation of the members of the MPAN Group or the collective
treatment under a plan of reorganization of all claims allowed against the
members of the MPAN Group.

                  b.       With the exception of claims for amounts due but
unpaid under the Contracts for Pharmacy Products and Services actually delivered
from and after the Petition Date (the "Remaining Contract Claims"), the
NeighborCare Group waives and releases any right to recover and any right to
payment under the Contracts arising after the MPAN Petition Date, including,
without limitation, claims for unpaid invoices, accounts receivable, late
charges, attorneys' fees, liquidated damages for the closure of MPAN facilities,
and any cure and compensation required to be paid in connection with the
assumption of the Amended and Restated Contracts pursuant to section
365(b)(1)(A) and (B) of the Bankruptcy Code. The MPAN Group agrees to pay the
NeighborCare Group for Pharmacy Products and Services actually delivered from
and after the Petition Date through the date that the pricing for the Amended
and Restated Contracts goes into effect. The pricing for the Amended and
Restated Contracts shall go into effect as of the Effective Date for any
billings not yet issued and transmitted to the MPAN Group under the Contracts.

                  c.       NeighborCare shall withdraw the NeighborCare Motion
and shall, for itself and on behalf of the NeighborCare Group, execute and
deliver the "Amendment To Claim No. 004773 and Withdrawal of Other Claims of
NeighborCare Pharmacy Services, Inc. and Affiliates" in the form annexed hereto
as Exhibit "D". The NeighborCare Group agrees (i) to withdraw any other
prepetition claims it may have against MPAN or any of its Affiliates including,
without limitation, any claims filed against Mariner Health Group or any of its
Affiliates whose chapter 11 cases are consolidated under Case No. 00-00215
(MFW), and (ii) not to file or assert against MPAN and its Affiliates any
further or additional pre- or post-MPAN Petition Date or claims with respect to
the Contracts except for the Remaining Contract Claims as authorized by
Paragraph 2.b. of this Agreement if not paid on a timely basis.

         3.       Mutual Release.

                  a.       Mutual Release. Except for (i) the general unsecured
non-priority claim allowed pursuant to Paragraph 2.a hereof, (ii) the Remaining
Contract Claims, and (iii) claims arising under the Amended and Restated
Contracts, as of the Effective Date, the NeighborCare Group on the one hand and
the MPAN Group on the other hand, hereby release and discharge the other, and
their respective successors,

<PAGE>

representatives, subsidiaries, Affiliates, assigns, agents, officers, directors,
employees, shareholders, and attorneys, and each of them, from and waive and
relinquish any and all claims, demands, debts, liabilities, obligations,
actions, causes of action, suits, sums of money, accounts, reckoning, covenants,
contracts, complaints, objections, controversies, agreements, promises and
rights whatsoever, whenever and however arising, known or unknown, suspected or
unsuspected, contingent or fixed, liquidated or unliquidated, matured or
unmatured, in law, equity, or otherwise, which either of them, or any person or
entity claiming from, through or under either of them, ever had, now has, or
hereafter can, shall, or may have against the other by reason of, arising from,
relating to, or in connection with the Contracts and the delivery of Pharmacy
Products and Services, including, without limitation, claims for unpaid
invoices, accounts receivables, late charges, attorneys' fees, liquidated
damages for the closure of MPAN facilities, or the reasonable value of the goods
sold and services rendered.

                  b.       Subsequently Discovered Claims. In connection with
such release, waiver and relinquishment, each Party acknowledges that it is
aware that it may hereafter discover claims presently unknown or unsuspected, or
facts in addition to or different from those which it now knows or believes to
be true, with respect to the matters released herein. Nevertheless, it is the
intent of each Party in executing this Agreement fully, finally, and forever to
settle and release all such matters, and all claims relative thereto, which
exist, may exist or might have existed (whether or not previously or currently
asserted in any action) which are the subject of the release granted under
Paragraph 3.a hereof.

         4.       Payment of Expenses. Each Party hereto shall bear its own
legal, accounting, due diligence and other expenses incurred in connection with
the preparation and negotiation of this Agreement and the consummation of the
transactions contemplated hereby, whether or not the transactions are
consummated.

         5.       Attorneys' Fees. In the event of any dispute or controversy
arising out of this Agreement, including in connection with the interpretation
of any term or condition of this Agreement, the enforcement of the Agreement,
damages for breach of any provision hereof, or in the situation where any
provision of this Agreement is validity asserted as a defense, the prevailing
Party shall be entitled to recover costs of suit, including reasonable
attorneys' fees, from the other Party in addition to any other available remedy.

         6.       Representation By Counsel. The Parties acknowledge that they
have been represented by independent legal counsel of their choosing throughout
all of the negotiations which preceded the execution of this Agreement, and that
each Party has executed this Agreement with the consent and on the advice of
such independent legal counsel. This Agreement is a negotiated document. As a
result, any rule of construction providing for any ambiguity in the terms of
this Agreement to be construed

<PAGE>

against the draftsperson of this Agreement shall be inapplicable to the
interpretation of this Agreement.

         7.       Due Authorization. Each Party to this Agreement hereby
represents and warrants that (a) such Party is duly authorized to enter into
this Agreement without the permission of any third party; and (b) the person
purporting to execute this Agreement on behalf of such Party has been duly
authorized to execute this Agreement on behalf of and bind such Party; provided,
however, that this representation and warranty shall be of no force and effect
with respect to matters that require the approval of the MPAN Bankruptcy Court
in the MPAN Bankruptcy Case unless and until such approval is obtained.

         8.       Entire Agreement; Amendment; Waiver. This Agreement, together
with the Exhibits hereto, constitutes the entire understanding among the Parties
with respect to the subject matter hereof, superseding all negotiations, all
prior discussions, preliminary agreements, representations, warranties, and
understandings of the Parties, whether oral, written or implied, as to the
subject matter hereof. No supplement, modification, or amendment of this
Agreement (including the Exhibits hereto) shall be binding unless executed in
writing by all Parties affected thereby.

         9.       Limitation on Third-Party Beneficiaries. Except as expressly
provided in Paragraph 3.a hereof, no provision contained in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any person or entity other than the Parties hereto.

         10.      Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the Parties and their respective legal
representatives, successors and assigns, including any trustee appointed under
chapters 11 or 7 of the Bankruptcy Code, and any responsible officer or examiner
appointed for any of the Parties.

         11.      No Representations or Warranties. Except as expressly set
forth in this Agreement, none of the Parties hereto makes any representation or
warranty, written or oral, express or implied.

         12.      Admissions. Neither this Agreement, nor any of the terms
hereof, nor any negotiations or proceedings in connection herewith, shall
constitute, be construed as or be deemed to be evidence of any admission on the
part of any Party of any liability or wrongdoing whatsoever, or the truth or
untruth, or merit or lack of merit of any claim or defense of any Party; nor
shall this Agreement, any of the terms hereof, any negotiations or proceedings
in connection herewith, any pleading filed in connection with seeking its
approval from the MPAN Bankruptcy Court, or any performance or forbearance
hereunder, be offered or received in evidence or used in any proceeding against
any

<PAGE>

Party, or be used in any proceeding, or otherwise, for any purpose whatsoever
except with respect to the effectuation and enforcement of this Agreement.

         13.      Applicable Law. Except for issues related to the approval of
this Agreement by the MPAN Bankruptcy Court, which issues shall be governed by
the Bankruptcy Code, this Agreement shall be governed in all respects, including
the validity, interpretation and effect, by the laws of the State of Georgia.

         14.      Subsequent Events. The terms of any plan of reorganization
confirmed by the MPAN Group in the MPAN Bankruptcy Case shall not affect the
terms and conditions of this Agreement or any of the Exhibits hereto.

         15.      Effective Date. With the exception of Paragraph 16 hereof,
which shall be effective immediately, this Agreement is subject to the entry of
an order of the MPAN Bankruptcy Court in the MPAN Bankruptcy Case approving this
Agreement (including the Exhibits hereto) and authorizing the consummation of
the transactions contemplated thereby after notice and an opportunity for a
hearing (the "Closing Condition") and shall become effective, and the
transactions contemplated hereby shall close, on the first business day that is
more than 10 days following the satisfaction of the Closing Condition (the
"Effective Date"); provided, however, that if the Bankruptcy Courts enter orders
pursuant to Federal Rules of Bankruptcy Procedure 6006(d) so providing, the
Effective Date shall occur on the first business day following the satisfaction
of the Closing Condition (or such later date as the MPAN Bankruptcy Court may
order) so long as a court of competent jurisdiction has not issued a stay
pending appeal prior to the Effective Date. In the event of such a stay, the
Effective Date shall be the first business day that any such stay pending appeal
is dissolved, abrogated, or otherwise rendered unenforceable by a court of
competent jurisdiction. If the Closing Condition is not satisfied by November
20, 2001, notwithstanding the Parties' compliance with Paragraph 16 hereof, this
Agreement shall be of no further force and effect and the Parties shall be
returned to the status quo ante as if this Agreement had not been entered into
by the Parties.

         16.      Cooperation of the Parties. The Parties agree to seek promptly
and use their best efforts to obtain the approval of this Agreement (including
the Exhibits hereto) in the MPAN Bankruptcy Case.

         17.      Consent To Jurisdiction and Venue. The parties hereto consent
to the determination by the MPAN Bankruptcy Court without a jury trial and in a
contested matter as a "core proceeding" (as such term is defined in 28 U.S.C.
ss. 157 or any successor provision) of any and all disputes concerning this
Agreement, including, without limitation, disputes involving the validity,
interpretation, effect, or enforcement of this Agreement, and the Parties agree
that the MPAN Bankruptcy Court shall be the exclusive forum to hear, determine
and enter appropriate orders and judgments regarding all such disputes until the
closing of the MPAN Bankruptcy Case, after which any and all disputes arising
out of this Agreement shall be adjudicated by any court of competent
jurisdiction.

<PAGE>

         18.      Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement.

         19.      Public Announcements. Subject to the requirements of
applicable law, and the content of pleadings in the MPAN Bankruptcy Case, the
timing and content of any press releases, public announcements, or other public
communications concerning this Agreement or the transactions contemplated hereby
shall be subject to the mutual agreement of MPAN and NeighborCare.

         20.      Counterparts. This Agreement may be executed in two or more
counterparts by the Parties, and all such counterparts taken together shall be
considered as and construed to be part of a single agreement.

         IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.

                               NEIGHBORCARE PHARMACY SERVICES, INC.,
                               FOR ITSELF AND AS AUTHORIZED AGENT FOR THE OTHER
                               MEMBERS OF THE NEIGHBORCARE GROUP (AS
                               DEFINED HEREIN)

                               By
                                 -----------------------------------------------

                               Its
                                  ----------------------------------------------

                               MARINER POST-ACUTE NETWORK, INC.,
                               DEBTOR AND DEBTOR IN POSSESSION, FOR ITSELF AND
                               AS AUTHORIZED AGENT FOR THE OTHER MEMBERS OF
                               THE MPAN GROUP (AS DEFINED HEREIN)

                               By
                                 -----------------------------------------------

                               Its
                                  ----------------------------------------------

<PAGE>

                       SCHEDULE OF SCHEDULES AND EXHIBITS

Schedule "1"          The NeighborCare Group Claims

Schedule "2"          The Parties Executing The Amended and Restated Contracts

Exhibit "A"           Form of Pharmacy Dispensing Services Agreement

Exhibit "B"           Form of Consultant Pharmacy Agreement

Exhibit "C"           Form of Services Agreement

Exhibit "D"           Form of Claim Withdrawal

<PAGE>

                                   SCHEDULE 1

                            CLAIMS FILED ON BEHALF OF

                      NEIGHBORCARE PHARMACY SERVICES, INC.

                  IN THE MARINER POST-ACUTE NETWORK, INC. CASE

<TABLE>
<CAPTION>
                                     CASE                                                     CLAIM          DATE
      MPAN DEBTOR                     NO.             CLAIMANT              CLAIM AMOUNT        NO           FILED
      -----------                   ------      ---------------------      --------------     -----         -------
<S>                                 <C>         <C>                        <C>                <C>           <C>
Mariner Post-Acute                  00-113      NeighborCare Pharmacy      $22,503,000.00      4773         9/15/00
Network, Inc.                                   Services, Inc.

Nightingale East Nursing            00-196      NeighborCare Pharmacy         $331,084.24      8161         9/29/00
Center, Inc.                                    Services, Inc.

Middlebelt Nursing                  00-192      NeighborCare Pharmacy         $279,234.97      8162         9/29/00
Home, Inc.                                      Services, Inc.

Madonna Nursing                     00-190      NeighborCare Pharmacy         $121,966.33      8163         9/29/00
Center, Inc.                                    Services, Inc.

Middlebelt-Hope Nursing             00-193      NeighborCare Pharmacy         $192,029.04      8164         9/29/00
Home, Inc.                                      Services, Inc.

Frenchtown Nursing                  00-148      NeighborCare Pharmacy         $276,968.86      8165         9/29/00
Home, Inc.                                      Services, Inc.

GCI Prince George, Inc.             00-158      NeighborCare Pharmacy         $138,844.02      8166         9/29/00
                                                Services, Inc.

GCI Camellia Care                   00-151      NeighborCare Pharmacy         $102,093.42      8167         9/29/00
Center, Inc.                                    Services, Inc.

GCI Colter Village, Inc.            00-152      NeighborCare Pharmacy         $138,945.45      8168         9/29/00
                                                Services, Inc.

GCI East Valley Medical             00-153      NeighborCare Pharmacy          $76,168.98      8169         9/29/00
& Rehab Center                                  Services, Inc.

GCI Village Green, Inc.             00-162      NeighborCare Pharmacy          $61,095.61      8170         9/29/00
                                                Services, Inc.

Cambridge South, Inc.               00-137      NeighborCare Pharmacy         $222,230.00      8171         9/29/00
                                                Services, Inc.

Cambridge North, Inc.               00-136      NeighborCare Pharmacy         $281,241.77      8172         9/29/00
                                                Services, Inc.

Cambridge East, Inc.                00-135      NeighborCare Pharmacy         $199,834.08      8173         9/29/00
                                                Services, Inc.

Cambridge Bedford, Inc.             00-134      NeighborCare Pharmacy         $237,871.76      8174         9/29/00
                                                Services, Inc.

GCI Springdale Village,             00-160      NeighborCare Pharmacy         $234,617.06      8175         9/29/00
Inc.                                            Services, Inc.

AMS Green Tree, Inc.                00-119      NeighborCare Pharmacy         $339,367.66      8176         9/29/00
                                                Services, Inc.

St. Anthony Nursing                 00-202      NeighborCare Pharmacy         $281,850.53      8177         9/29/00
Home, Inc.                                      Services, Inc.

Living Centers-                     00-186      NeighborCare Pharmacy          $31,537.00      8178         9/29/00
Southeast, Inc.                                 Services, Inc.

Crestmont Health                    00-141      NeighborCare Pharmacy         $342,645.36      8179         9/29/00
Center, Inc.                                    Services, Inc.

Clintonaire Nursing                 00-138      NeighborCare Pharmacy         $562,457.98      8180         9/29/00
Home, Inc.                                      Services, Inc.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                     CASE                                                     CLAIM          DATE
      MPAN DEBTOR                     NO.             CLAIMANT              CLAIM AMOUNT        NO           FILED
      -----------                   ------      ---------------------      --------------     -----         -------
<S>                                 <C>         <C>                        <C>                <C>           <C>
Mariner Post-Acute                  00-113      NeighborCare Pharmacy      $18,653,395.43      8231         9/29/00
Network, Inc.                                   Services, Inc.

Mariner Post-Acute                  00-113      NeighborCare Pharmacy      $22,503,000.00      8232         9/29/00
Network, Inc.                                   Services, Inc.

GCI Bella Vita, Inc.                00-150      NeighborCare Pharmacy         $185,758.61      8238         9/29/00
                                                Services, Inc.

Hostmasters, Inc.                   00-176      NeighborCare Pharmacy         $103,305.03      8239         9/29/00
                                                Services, Inc.

GCI Palm Court, Inc.                00-157      NeighborCare Pharmacy         $850,804.30      8240         9/29/00
                                                Services, Inc.

American-Cal Medical                00-117      NeighborCare Pharmacy         $510,806.38      8241         9/29/00
Services, In.                                   Services, Inc.

Evergreen Healthcare,               00-147      NeighborCare Pharmacy         $108,986.33      8242         9/29/00
Ltd. L.P.                                       Services, Inc.

Connerwood Healthcare,              00-139      NeighborCare Pharmacy         $242,849.74      8243         9/29/00
Inc.                                            Services, Inc.

GCI Health Care                     00-155      NeighborCare Pharmacy         $192,473.11      8244         9/29/00
Centers, Inc.                                   Services, Inc.

Grancare of South                   00-169      NeighborCare Pharmacy         $460,603.77      8245         9/29/00
Carolina, Inc.                                  Services, Inc.

GCI Wisconsin                       00-163      NeighborCare Pharmacy         $577,698.91      8246         9/29/00
Properties, Inc.                                Services, Inc.

EH Acquisition Corp.                00-143      NeighborCare Pharmacy       $1,048,609.36      8247         9/29/00
                                                Services, Inc.

EH Acquisition Corp. III            00-145      NeighborCare Pharmacy         $327,276.43      8248         9/29/00
                                                Services, Inc.

Grancare of Northern                00-168      NeighborCare Pharmacy           $4,724.68      8249         9/29/00
California, Inc.                                Services, Inc.

Grancare, Inc.                      00-170      NeighborCare Pharmacy       $1,508,378.31      8250         9/29/00
                                                Services, Inc.

AMS Properties, Inc.                00-120      NeighborCare Pharmacy       $3,252,176.85      8251         9/29/00
                                                Services, Inc.

National Heritage Reality           00-195      NeighborCare Pharmacy         $668,630.89      8252         9/29/00
                                                Services, Inc.

EH Acquisition Corp. II             00-144      NeighborCare Pharmacy          $54,998.37      8253         9/29/00
                                                Services, Inc.

GCI Jolley Acres, Inc.              00-156      NeighborCare Pharmacy          $67,119.15      8254         9/29/00
                                                Services, Inc.

GCI Faith Nursing                   00-154      NeighborCare Pharmacy         $101,730.79      8255         9/29/00
Home, Inc.                                      Services, Inc.

HMI Convalescent Care,              00-174      NeighborCare Pharmacy         $109,076.69     Unknown       9/29/00
Inc.                                            Services, Inc.
</TABLE>

<PAGE>

                                   SCHEDULE 2

                  LIST OF FACILITIES AND CONTRACTING MEMBERS OF
                        THE MPAN AND NEIGHBORCARE GROUPS

<TABLE>
<CAPTION>
CONTRACTING
NEIGHBORCARE                     CONTRACTING
ENTITY                           MPAN GROUP
(PHARMACY)                       ENTITY                      NAME OF FACILITY                               LOCATION
--------------                   -----------------           ----------------                               --------
<S>                              <C>                         <C>                                            <C>
                                                             CALIFORNIA FACILITIES

NeighborCare of Northern         GRANCARE, INC.              ALMADEN HEALTH AND REHABILITATION CENTER       San Jose, CA
California, Inc. (Lodi)

NeighborCare of Northern         GRANCARE OF NORTHERN        CREEKSIDE HEALTHCARE CENTER                    San Pablo, CA
California, Inc. (Lodi)          CALIFORNIA, INC.

NeighborCare of Northern         GRANCARE OF NORTHERN        DIAMOND RIDGE HEALTH AND                       Pittsburg, CA
California, Inc. (Lodi)          CALIFORNIA, INC.            REHABILITATION CENTER

NeighborCare of Northern         GRANCARE, INC.              DRIFTWOOD HEALTHCARE CENTER - HAYWARD          Hayward, CA
California, Inc. (Lodi)

NeighborCare of Northern         GRANCARE, INC.              DRIFTWOOD HEALTHCARE CENTER - SANTA CRUZ       Santa Cruz, CA
California, Inc. (Lodi)

NeighborCare-TCI,                GRANCARE, INC.              DRIFTWOOD HEALTHCARE CENTER - TORRANCE         Torrance, CA
Inc. (Cerritos)

NeighborCare-TCI,                GRANCARE, INC.              EL RANCHO VISTA HEALTHCARE CENTER              Pico Rivera, CA
Inc. (Cerritos)

NeighborCare of Northern         HMI CONVALESCENT CARE,      EXCELL HEALTH CARE CENTER                      Oakland, CA
California, Inc. (Lodi)          INC.

NeighborCare-TCI,                AMS PROPERTIES, INC.        FLAGSHIP HEALTHCARE CENTER                     Newport Beach, CA
Inc. (Cerritos)

NeighborCare of Northern         GRANCARE, INC.              FLORIN HEALTHCARE CENTER                       Sacramento, CA
California, Inc. (Lodi)

NeighborCare of Northern         GRANCARE, INC.              FREMONT HEALTHCARE CENTER                      Fremont, CA
California, Inc. (Lodi)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONTRACTING
NEIGHBORCARE                     CONTRACTING
ENTITY                           MPAN GROUP
(PHARMACY)                       ENTITY                      NAME OF FACILITY                               LOCATION
--------------                   -----------------           ----------------                               --------
<S>                              <C>                         <C>                                            <C>
NeighborCare of Northern         HMI CONVALESCENT CARE,      FRUITVALE HEALTHCARE CENTER                    Oakland, CA
California, Inc. (Lodi)          INC.

NeighborCare of Northern         GRANCARE, INC.              HAYWARD HILLS HEALTH CARE CENTER               Hayward, CA
California, Inc. (Lodi)

NeighborCare-TCI,                AMERICAN-CAL MEDICAL        INGLEWOOD HEALTHCARE CENTER                    Inglewood, CA
Inc. (Cerritos)                  SERVICES, INC.

NeighborCare-TCI,                AMS PROPERTIES, INC.        PALM SPRINGS HEALTHCARE CENTER                 Palm Springs, CA
Inc. (Cerritos)                  (TO BE TRANSFERRED TO
                                 GRANCARE OF NORTHERN
                                 CALIFORNIA, INC.)

NeighborCare of Northern         GRANCARE, INC.              PARKVIEW HEALTHCARE CENTER                     Hayward, CA
California, Inc. (Lodi)

NeighborCare-TCI,                AMERICAN-CAL MEDICAL        SANTA MONICA HEALTHCARE CENTER                 Santa Monica, CA
Inc. (Chatsworth)                SERVICES, INC.

NeighborCare-TCI,                GRANCARE, INC.              SKYLINE HEALTHCARE CENTER - LOS ANGELES        Los Angeles, CA
Inc. (Cerritos)

NeighborCare of Northern
California, Inc. (Lodi)          GRANCARE, INC.             SKYLINE HEALTHCARE CENTER - SAN JOSE            San Jose, CA

NeighborCare-TCI,                AMS PROPERTIES, INC.       TARZANA HEALTH AND REHABILITATION CENTER        Tarzana, CA
Inc. (Chatsworth)

NeighborCare of Northern         HOST MASTER'S INC.         VALE HEALTHCARE CENTER                          San Pablo, CA
California, Inc. (Lodi)

NeighborCare-TCI,                GRANCARE, INC.             VERDUGO VISTA HEALTHCARE CENTER                 La Crescenta, CA
Inc. (Chatsworth)

NeighborCare-TCI,                GRANCARE, INC.             AUTUMN HILLS HEALTHCARE CENTER                  Glendale, CA
Inc. (Chatsworth)

NeighborCare of Northern         GRANCARE OF NORTHERN       SKY PARK GARDENS ASSISTED LIVING CENTER         Sacramento, CA
California, Inc. (Lodi)          CALIFORNIA, INC.

NeighborCare of Northern         GRANCARE OF NORTHERN       MISSION CARMICHAEL HEALTHCARE CENTER            Carmichael, CA
California, Inc. (Lodi)          CALIFORNIA, INC.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONTRACTING
NEIGHBORCARE                     CONTRACTING
ENTITY                           MPAN GROUP
(PHARMACY)                       ENTITY                      NAME OF FACILITY                               LOCATION
--------------                   -----------------           ----------------                               --------
<S>                              <C>                         <C>                                            <C>
                                                             COLORADO FACILITIES

NeighborCare-TCI,                GCI CAMELLIA CARE           CAMELLIA HEALTHCARE CENTER                     Aurora, CO
Inc. (Denver)                    CENTER, INC. (FORMERLY
                                 NEW DS, INC.)

NeighborCare-TCI,                GCI BELLA VITA, INC.        RED ROCKS HEALTHCARE CENTER                    Denver, CO
Inc. (Denver)

                                                             ILLINOIS FACILITIES

NeighborCare Pharmacy            EH ACQUISITION CORP. II     BELVIDERE HEALTHCARE CENTER                    Belvidere, IL
Services, Inc. (Elgin)

NeighborCare Pharmacy            EH ACQUISITION CORP. III    CRESTVIEW HEALTHCARE CENTER                    Clinton, IL
Services, Inc. (Monticello)

NeighborCare Pharmacy            EH ACQUISITION CORP. III    DIXON HEALTH CARE CENTER                       Dixon, IL
Services, Inc. (Elgin)

NeighborCare Pharmacy            EH ACQUISITION CORP. III    FLORA HEALTHCARE CENTER                        Flora, IL
Services, Inc. (Monticello)

NeighborCare Pharmacy            NATIONAL HERITAGE           GOOD SAMARITAN HEALTH CARE CENTER              East Peoria, IL
Services, Inc. (Monticello)      REALTY, INC.

NeighborCare Pharmacy            EVERGREEN HEALTHCARE,       LASALLE HEALTHCARE CENTER                      LaSalle, IL
Services, Inc. (Elgin)           LTD., L.P.

NeighborCare Pharmacy            EVERGREEN HEALTHCARE,       LITCHFIELD HEALTHCARE CENTER                   Litchfield, IL
Services, Inc. (Monticello)      LTD., L.P.

NeighborCare Pharmacy            NATIONAL HERITAGE           MONTEBELLO HEALTHCARE CENTER                   Hamilton, IL
Services, Inc. (Bettendorf)      REALTY, INC.

NeighborCare Pharmacy            EH ACQUISITION CORP. II     NATURE TRAIL HEALTH CARE CENTER                Mount Vernon, IL
Services, Inc. (Monticello)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONTRACTING
NEIGHBORCARE                     CONTRACTING
ENTITY                           MPAN GROUP
(PHARMACY)                       ENTITY                      NAME OF FACILITY                               LOCATION
--------------                   -----------------           ----------------                               --------
<S>                              <C>                         <C>                                            <C>
NeighborCare Pharmacy            EH ACQUISITION CORP.        ODIN HEALTHCARE CENTER                         Odin, IL
Services, Inc. (Monticello)

NeighborCare Pharmacy            EH ACQUISITION CORP. III    PARKWAY HEALTH CARE CENTER                     Wheaton, IL
Services, Inc. (Elgin)

                                                             MICHIGAN FACILITIES

NeighborCare of                  PHCMI/CAMBRIDGE             BEDFORD VILLA HEALTH CARE CENTER               Southfield, MI
Indiana, Inc. Lansing)           BEDFORD, INC.

NeighborCare of                  PHCMI/CAMBRIDGE             CAMBRIDGE EAST HEALTHCARE CENTER               Madison Heights, MI
Indiana, Inc. (Lansing)          EAST, INC.

NeighborCare of                  PHCMI/CAMBRIDGE             CAMBRIDGE NORTH HEALTHCARE CENTER              Clawson, MI
Indiana, Inc. (Lansing)          NORTH, INC.

NeighborCare of                  PHCMI/CAMBRIDGE             CAMBRIDGE SOUTH HEALTHCARE CENTER              Beverly Hills, MI
Indiana, Inc. (Lansing)          SOUTH, INC.

NeighborCare of                  PHCMI/CLINTONAIRE           CLINTON-AIRE HEALTHCARE CENTER                 Clinton Township, MI
Indiana, Inc. (Lansing)          NURSING HOME, INC.

NeighborCare of                  PHCMI/CRESTMONT             CRESTMONT HEALTH CARE CENTER                   Fenton, MI
Indiana, Inc. (Lansing)          HEALTH CENTER, INC.

NeighborCare of                  PHCMI/HERITAGE NURSING      HERITAGE MANOR NURSING CENTER                  Flint, MI
Indiana, Inc. (Lansing)          HOME, INC.

NeighborCare of                  PHCMI/MIDDLEBELT-HOPE       HOPE HEALTHCARE CENTER                         Westland, MI
Indiana, Inc. (Lansing)          NURSING HOME, INC.

NeighborCare of                  PHCMI/NIGHTINGALE EAST      NIGHTINGALE HEALTHCARE CENTER                  Warren, MI
Indiana, Inc. (Lansing)          NURSING CENTER, INC.

                                                             SOUTH CAROLINA FACILITIES

NeighborCare-TCI,                GRANCARE SOUTH              BROOKVIEW HEALTHCARE CENTER                    Gaffney, SC
Inc. (Charlotte)                 CAROLINA, INC.

NeighborCare-TCI,                GCI FAITH NURSING           FAITH HEALTH CARE CENTER                       Florence, SC
Inc. (Florence)                  HOME, INC.

NeighborCare-TCI,                GRANCARE SOUTH              HALLMARK HEALTHCARE CENTER                     Summerville, SC
Inc. (Georgetown)                CAROLINA, INC.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONTRACTING
NEIGHBORCARE                     CONTRACTING
ENTITY                           MPAN GROUP
(PHARMACY)                       ENTITY                      NAME OF FACILITY                               LOCATION
--------------                   -----------------           ----------------                               --------
<S>                              <C>                         <C>                                            <C>
NeighborCare-TCI,                GCI JOLLEY ACRES, INC.      JOLLEY ACRES HEALTH CARE CENTER                Orangeburg, SC
Inc. (Georgetown)

NeighborCare-TCI,                GCI VILLAGE GREEN, INC.     LAKE CITY SCRANTON HEALTHCARE CENTER           Scranton, SC
Inc. (Florence)

NeighborCare-TCI,                GRANCARE SOUTH              OAKBROOK HEALTH AND REHABILITATION CENTER      Summerville, SC
Inc. (Georgetown)                CAROLINA, INC.

NeighborCare-TCI,                GCI PRINCE GEORGE, INC.     PRINCE GEORGE HEALTH CARE CENTER               Georgetown, SC
Inc. (Georgetown)

NeighborCare-TCI,                GCI SPRINGDALE              SPRINGDALE HEALTHCARE CENTER                   Camden, SC
Inc. (Florence)                  VILLAGE, INC.

NeighborCare-TCI,                GRANCARE SOUTH              ST. GEORGE HEALTH CARE CENTER                  Saint George, SC
Inc. (Georgetown)                CAROLINA, INC.

                                                             WISCONSIN FACILITIES

NeighborCare-TCI,                LIVING CENTERS--            PARK MANOR HEALTH CARE CENTER                  Milwaukee, WI
Inc. (Milwaukee)                 SOUTHEAST, INC.

NeighborCare-TCI,                GCI-WISCONSIN               SOUTHPOINTE HEALTH CARE CENTER                 Greenfield, WI
Inc. (Milwaukee)                 PROPERTIES, INC.
</TABLE>

<PAGE>

                                   EXHIBIT "A"

                 FORM OF PHARMACY DISPENSING SERVICES AGREEMENT

<PAGE>

                                   EXHIBIT "B"

                     FORM OF CONSULTANT PHARMACIST AGREEMENT

<PAGE>

                                   EXHIBIT "C"

                           FORM OF SERVICES AGREEMENT

<PAGE>

                                   EXHIBIT "D"

                           FORM OF WITHDRAWAL OF CLAIM

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]