Exhibit 2.1

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- - ------------------------------------------------- x
:
In re : Chapter 11 Cases No.
:
GENESIS HEALTH VENTURES INC., et al., : 00-2692 (JHW)
:
Debtors. :
: (Jointly Administered)
- - ------------------------------------------------- x
:
In re : Chapter 11 Cases No.
:
MULTICARE AMC, INC., et al., : 00-2494 (JHW)
:
Debtors. :
: (Jointly Administered)
- - ------------------------------------------------- x

DISCLOSURE STATEMENT FOR
DEBTORS' JOINT PLAN OF REORGANIZATION

WEIL, GOTSHAL & MANGES LLP RICHARDS, LAYTON & FINGER P.A.
767 Fifth Avenue One Rodney Square
New York, New York 10153 P.O. Box 551
(212) 310-8000 Wilmington, Delaware 19899
(302) 658-6541

Co-Attorneys for the Genesis Debtors Co-Attorneys for the Genesis Debtors
as Debtors and Debtors in Possession as Debtors and Debtors in Possession

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

WILLKIE FARR & GALLAGHER YOUNG CONAWAY STARGATT & TAYLOR LLP
787 Seventh Avenue 11th Floor, Wilmington Trust Company
New York, New York 10019 P.O. Box 391
(212) 728-8000 Wilmington, Delaware 19899-0391
(302) 571-6600

Co-Attorneys for the Multicare Debtors Co-Attorneys for the Multicare Debtors
as Debtors and Debtors in Possession as Debtors and Debtors in Possession

Dated: June 5, 2001

GLOSSARY

The terms in the following table are used in the Disclosure Statement and Plan
of Reorganization. These definitions are summaries. Please refer to the Plan of
Reorganization for the complete definitions for these terms.
- - --------------------------------------------------------------------------------
Administrative Expense Any expense relating to the administration of the
Claim chapter 11 cases, including actual and necessary
costs and expenses of preserving the Debtors' estates
and operating the Debtors' businesses, any
indebtedness or obligations incurred or assumed
during the chapter 11 cases, allowances for
compensation and reimbursement of expenses to the
extent allowed by the Bankruptcy Court, claims
arising under (i) that certain Revolving Credit and
Guaranty Agreement, dated as of June 22, 2000, as
amended, among Genesis, certain subsidiary Genesis
Debtors named therein, Mellon Bank N.A., as
administrative agent, and the lenders party thereto,
or (ii) that certain Revolving Credit and Guaranty
Agreement, dated as of June 22, 2000, as amended,
among The Multicare Companies, Inc., certain
subsidiary Multicare Debtors named therein, Mellon
Bank N.A., as administrative agent, and the lenders
party thereto, and certain statutory fees chargeable
against the Debtors' estates.

Bankruptcy Code Title 11 of the United States Code.

Bankruptcy Court The United States Bankruptcy Court for the District
of Delaware.

Commencement Date The date the Debtors' chapter 11 cases were commenced
(June 22, 2000, for all the Debtors other than
Healthcare Resources Corp., whose Commencement Date
is July 31, 2000).

Debtors The Genesis Debtors and the Multicare Debtors.

Disclosure Statement This document together with the annexed exhibit.

Effective Date A business day selected by the Debtors on or after
the date of confirmation of the Plan of
Reorganization, on which any conditions to the
effectiveness of the Plan have been satisfied or
waived and there is no stay of the order confirming
the Plan of Reorganization.

Genesis Genesis Health Ventures, Inc.

Genesis Debtors Genesis and the entities listed on Exhibit "A" to the
Plan of Reorganization.

Genesis General Any general unsecured claim against any of the
Unsecured Claim Genesis Debtors.

Genesis Senior Lender Any claim against any of the Genesis Debtors based
Claim on the Genesis Senior Lender Agreements (as defined
in the Plan of Reorganization) net of all
postpetition cash payments made by the Genesis
Debtors.

Multicare Genesis ElderCare Corp. (the corporate parent of The
Multicare Companies, Inc.).

Multicare Debtors Multicare and the entities listed on Exhibit "B" to
the Plan of Reorganization.

Multicare General Any general unsecured claim against any of the
Unsecured Claim Multicare Debtors.
- - --------------------------------------------------------------------------------

- - --------------------------------------------------------------------------------
Multicare Senior Any claim against any of the Multicare Debtors based
Lender Claim on the Multicare Senior Lender Agreements (as defined
in the Plan or Reorganization).

New Common Stock New common stock of Reorganized Genesis to be issued
under the Plan of Reorganization as described in
section II.H.3 of this Disclosure Statement.

New Convertible New convertible 6% PIK preferred stock of Reorganized
Preferred Stock Genesis to be issued under the Plan of Reorganization
as described in section II.H.2 of this Disclosure
Statement.

New Multicare Stock New common stock of Reorganized Multicare to be
issued under the Plan of Reorganization as described
in section II.H.5 of this Disclosure Statement.

New Senior Notes New senior notes in the aggregate principal amount of
$248 million to be issued under the Plan of
Reorganization as described in section II.H.1 of this
Disclosure Statement.

New Warrants New warrants to purchase 5.8% of the New Common Stock
to be issued under the Plan of Reorganization, as
described in section II.H.4 of this Disclosure
Statement.

Plan of Merger The Plan of Merger among Genesis, Multicare
Acquisition Corporation, and Multicare, as set forth
in the Plan Supplement. The proposed merger is
described in section II.A of this Disclosure
Statement.

Plan or Plan of The Debtors' Joint Plan of Reorganization Under
Reorganization Chapter 11 of the Bankruptcy Code annexed as
Exhibit A to this Disclosure Statement.

Plan Securities The New Senior Notes, the New Convertible Preferred
Stock, the New Common Stock, and the New Warrants.

Plan Supplement A supplemental appendix to the Plan of
Reorganization. The Plan Supplement will be filed
with the Bankruptcy Court within 10 days before the
hearing to confirm the Plan, but no later than 5 days
before the last day to vote to accept or reject the
Plan. After the Plan Supplement is filed, copies may
be requested from the Voting Agent.

Reorganized Genesis Genesis as reorganized as of the Effective Date in
accordance with the Plan of Reorganization and after
giving effect to the merger described in section II.A
of this Disclosure Statement.

Voting Agent See section I of this Disclosure Statement for
contact information.
- - --------------------------------------------------------------------------------

Introduction

The Genesis Debtors and the Multicare Debtors are soliciting votes to accept or
reject their joint plan of reorganization. A copy of the Plan is attached as
Exhibit A to this Disclosure Statement. Please refer to the Glossary and the
Plan for definitions of terms used in this Disclosure Statement.

The purpose of the Disclosure Statement is to provide sufficient information to
enable the creditors of the Debtors who are entitled to vote to make an informed
decision on whether to accept or reject the Plan of Reorganization. The
Disclosure Statement describes:

o the proposed merger of Genesis and Multicare, the new capital
structure for the combined companies, how creditors and
shareholders of the Debtors are treated, and the terms of the
securities to be issued under the Plan (section II)

o how to vote on the Plan and who is entitled to vote (section
III)

o certain financial information about the Debtors, including
their 5-year cash flow projections, and a range of potential
enterprise valuations (section IV)

o the businesses of the Debtors and the reasons why they
commenced their chapter 11 cases (section V)

o significant events that have occurred in the Debtors' chapter
11 cases (section VI)

o how the Debtors will be governed when the Plan becomes
effective (section VII)

o how distributions under the Plan will be made and the manner
in which disputed claims are resolved (section VIII)

o certain factors creditors should consider before voting
(section IX)

o the procedure and requirements for confirming the Plan,
including a liquidation analysis (section X)

o alternatives to the Plan (section XI) and

o certain federal tax considerations (section XII)

Additional financial information about the Genesis Debtors can be found in the
annual report on Form 10-K for the fiscal year ended September 30, 2000, which
was filed by Genesis with the Securities and Exchange Commission on February 21,
2001, and the quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2001, which was filed by Genesis on May 17, 2001. Copies of these SEC
filings are included in the Plan Supplement and may be obtained over the
internet at www.sec.gov or www.freeedgar.com.

Additional financial information about the Multicare Debtors can be found in the
annual report on Form 10-K for the fiscal year ended September 30, 2000, which
was filed by The Multicare Companies, Inc. (the wholly-owned subsidiary of
Multicare) with the Securities and Exchange Commission on February 21, 2001, and
that company's quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2001, which was filed on May 17, 2001. Copies of these SEC filings are
included in the Plan Supplement and may be obtained over the internet at
www.sec.gov or www.freeedgar.com.

This Disclosure Statement and the attached Plan of Reorganization are the only
materials creditors should use to determine whether to vote to accept or reject
the Plan of Reorganization.

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The last day to vote to accept or reject the Plan of Reorganization
[_________].

The record date for determining which creditors may vote on the Plan of
Reorganization is [__________].

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The Plan of Reorganization is based on extensive negotiations with the holders
of the largest claims against the Genesis Debtors and the Multicare Debtors. The
Debtors believe that approval of the Plan is their best chance for emerging from
chapter 11 and returning their businesses to profitability. The agent and the
informal steering committee for the holders of the Genesis and Multicare Senior
Lender Claims and the official committee of unsecured creditors in the Genesis
Debtors' reorganization cases fully support the Plan of Reorganization.

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Recommendations: The Debtors believe that confirmation of the Plan is the
best chance for creditors to maximize their recoveries and for the business
operations of the Debtors to succeed. The Debtors encourage creditors to
vote in favor of the Plan.

The official unsecured creditors' committee in the Genesis Debtors'
reorganization cases has participated fully in the reorganization process
and also urges creditors of the Genesis Debtors to vote to accept the Plan.
Please review the letter from the Genesis unsecured creditors' committee
which is included with this Disclosure Statement.

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Additional copies of this Disclosure Statement or copies of the Plan Supplement
are available upon request made to the Voting Agent, at the following address:

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Voting Agent

[--------------------------------------------------]

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The summaries of the Plan and other documents related to the restructuring of
the Debtors are qualified in their entirety by the Plan, its exhibits, and the
documents and exhibits contained in the Plan Supplement. The Plan Supplement
will be filed with the Bankruptcy Court within 10 days prior to the hearing to
confirm the Plan, but no later than 5 days before the last day to vote to accept
or reject the Plan. The financial and other information included in this
Disclosure Statement is for purposes of soliciting acceptances of the Plan and
are being communicated for settlement purposes only.

The Bankruptcy Code provides that only creditors who vote on the Plan will be
counted for purposes of determining whether the requisite acceptances have been
attained. Failure to timely deliver a properly completed ballot by the voting
deadline will constitute an abstention and any improperly completed or late
ballot will not be counted.

II.

Treatment of Creditors and Shareholders
Under the Plan of Reorganization

The Plan of Reorganization governs the treatment of claims against and interests
in the Genesis Debtors and the Multicare Debtors. This section describes the
proposed merger of Genesis and Multicare, summarizes the new capital structure
of the combined companies, summarizes the treatment of each of the classes, and
describes which claims and interests are in each class, and discusses certain
legal issues affecting the trading of Plan Securities.

A. Merger of Genesis and Multicare

Genesis and Multicare are proposing a merger as part of the Plan of
Reorganization. Both Debtors believe that the merger of the two companies will
be beneficial to all creditors receiving distributions under the Plan due
primarily to the preservation of the benefits created by the significant
synergies each company already realizes under the current relationship, enhanced
by the incremental savings which may be achieved. Today, Multicare is a
significant subsidiary of Genesis which, while not wholly-owned, is consolidated
from an operational perspective as well as for public financial reporting
purposes. Multicare is managed by Genesis subject to a comprehensive management
agreement which includes all operational as well as financial and administrative
responsibilities and accordingly, has no management or administrative
infrastructure of its own. Together, the two companies create significant
critical mass which benefits both entities in numerous ways, including: a)
revenue enhancements through the marketing and provision of services under a
common "ElderCare" brand name and strategy, b) purchasing leverage, which both
reduces operating costs and expands access to services which are more difficult
to obtain, such as professional liability insurance, c) the ability to attract
and effectively utilize human resources, and d) providing better access to
capital markets in which size and diversification are critical factors. The
merger of the two companies would eliminate risks created by continuing
uncertainty regarding the permanence of these operating and administrative
efficiencies, as well as create additional administrative cost savings through
the reduction of duplicative staffing and other costs required to maintain
segregated accounts and financial reporting and separate governance structures.
For a more complete discussion of the benefits of the merger and the effects of
a separation of the companies, see section VIII.A, below.

At the present time, Genesis owns 43.6% of the common stock of Multicare. The
balance of that common stock presently is owned by persons who have no
affiliation with Genesis. Under the Plan of Reorganization, the common stock of
Multicare will be cancelled and new common stock of Reorganized Multicare will
be deemed to be allocated to certain of the creditors of the Multicare Debtors.
By voting for the Plan of Reorganization, such creditors, as persons otherwise
entitled to the new common stock of Multicare, will also be deemed to have voted
to adopt the Plan of Merger. The Plan of Merger provides that such creditors
will receive cash, New Senior Notes, New Convertible Preferred Stock, and New
Common Stock of Reorganized Genesis in exchange for the new common stock of
Reorganized Multicare allocated to them and that a newly created indirect
subsidiary of Genesis will be merged into Multicare. The creditors who will
participate in this exchange are described below. The Plan of Merger will be
effective on the Effective Date and will result in Multicare and all its
interests in the other Multicare Debtors becoming owned by Reorganized Genesis.
It is important to note that the merger of Genesis and Multicare is not based on
Genesis's present 43.6% ownership interest in Multicare. Reorganized Genesis
will be providing Plan Securities to the future owners of the Multicare Debtors
as consideration for agreeing to the proposed merger. By voting to accept the
Plan of Reorganization, the creditors of the Genesis Debtors will also be
approving the transaction, including the issuance of shares of the New Common
Stock of Reorganized Genesis to accomplish the merger.

B. Summary of New Capital Structure of Reorganized Genesis

The following table summarizes the proposed capital structure for Reorganized
Genesis, including the post-Effective Date financing arrangements Genesis
expects to execute to fund Administrative Expense Claims and the working capital
needs of the ongoing business operations of the restructured companies. The
post-Effective Date financing arrangements are anticipated to include a
revolving credit facility in the amount of at least $100,000,000. The Debtors'
administrative expenses will be paid through the incurrence of senior secured
debt of approximately $235,000,000. In the alternative, it may be desirable for
Reorganized Genesis to raise funds in the public debt markets. The Debtors will
determine the best form of such exit financing as the projected Confirmation
Date approaches. Possible terms of the exit financing are described in section
VIII.C., below. Except as otherwise provided in the Plan and described herein,
unless the underlying property is sold or surrendered, the Genesis Debtor or
Multicare Debtor that is the current obligor on a mortgage will continue as the
mortgagee. The securities to be issued to creditors are described in section
II.H, below.

Instrument Description Comments
- - ------------------------------------ ------------------------------------------------------ --------------------------

Revolver up to $150.0 million (exit financing)

Senior Secured Term Loans or New $235.0 million (exit financing)
Public Debt

Mortgages $141.4 million (reinstated or amended)

New Senior Notes $247.6 million (restructuring securities)

New Convertible Preferred Stock $42.6 million (restructuring securities)

New Common Stock 41,000,000 shares (restructuring securities)

New Warrants To purchase up to 5.8% of the New Common Stock (restructuring securities)

C. Summary of Classification and Treatment

The following tables divide the claims against, and equity interests in, the
Genesis Debtors and the Multicare Debtors into separate classes and summarize
the treatment for each class. The tables also identify which classes are
entitled to vote on the Plan of Reorganization based on rules set forth in the
Bankruptcy Code and an order of the Bankruptcy Court establishing voting
procedures. Finally, the tables indicate an estimated recovery for each class.
Important Note: As described in section IX, below, the long-term care industry
is affected by numerous uncertainties, including changes in Medicare and
Medicaid reimbursement, labor costs, professional liability exposure and the
ability to insure those risks, and regulatory enforcement. Those uncertainties
and other risks related to the Genesis Debtors and the Multicare Debtors make it
difficult to determine a precise value for the Debtors and the equity interests
to be distributed under the Plan of Reorganization. The recoveries described in
the following tables represent the Debtors' best estimates of those values given
the information available at this time. Unless otherwise specified, the
information in the following tables and in the sections below are based on
calculations as of June 30, 2001. The estimation of recoveries makes the
following assumptions:

o The new debt instruments to be issued under the Plan of
Reorganization have a value equal to their face amounts.

o The enterprise value for the Debtors is $1,525,000,000
(including cash on hand). This amount, less cash on hand of
$25,000,000, is the mid-point of the range of valuations for
the Genesis Debtors and the Multicare Debtors described in
section IV, below.

o The aggregate amount of allowed secured claims against the
Genesis Debtors (excluding the Genesis Senior Lender Claims)
is $115,077,000 and against the Multicare Debtors (excluding
the Multicare Senior Lender Claims) is $26,318,000.

o The aggregate amount of Genesis Senior Lender Claims is
$1,198,460,000 (excluding postpetition interest and before
giving effect to postpetition payments) and the aggregate
amount of the Multicare Senior Lender Claims is $443,400,000
(excluding postpetition interest).

o The aggregate amount of general unsecured claims against the
Genesis Debtors is $467,494,000 (excluding the claims of the
Multicare Debtors against the Genesis Debtors) and the
aggregate amount of the general unsecured claims against the
Multicare Debtors is $284,256,000 (excluding the claims of
the Genesis Debtors against the Multicare Debtors).

o For purposes of the recovery estimate in the table below, no
current value is included for the New Warrants because they
are priced at the approximate projected value of the New
Common Stock. However, under a Black-Scholes analysis, the
New Warrants would have a value between $8,500,000 and
$12,100,000.

Treatment of Genesis Creditors and Shareholders

- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
Class Description Treatment Entitled Estimated
to Vote Recovery
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------

*cash payments through June 30, 2001
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G3 Genesis Priority Non-Tax Claims Paid in full. No 100%
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G4 Genesis General Unsecured Claims Uninsured claims: Yes 6.94%
0.67% of the New Common Stock (exclusive
17.25% of the New Warrants. of the value
of the New
Insured claims: Paid in ordinary course of Warrants)
business from insurance proceeds to the
extent of such insurance; any portion of
such claims which are not covered by
insurance will be treated in same manner as
uninsured claims.
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G5 Genesis Senior Subordinated Note 3.22% of the New Common Stock Yes 6.94%
Claims 82.75% of the New Warrants. (exclusive
of the value
of the New
Warrants)
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G6 Genesis Intercompany Claims Unimpaired. No 100%
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G7 Genesis Punitive Damage Claims No distribution (except to the extent No None
covered by insurance).
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G8 Genesis Series G Preferred Stock No distribution. No None
Interests
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G9 Genesis Series H Preferred Stock No distribution. No None
Interests
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G10 Genesis Series I Preferred Stock No distribution. No None
Interests
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
G11 Genesis Common Stock Interests No distribution. No None
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------

Treatment of Multicare Creditors and Shareholders

-- Debtor in Possession Credit Payment of all amounts outstanding, and cash No 100%
Agreement Claims collateralization or replacement of
outstanding letters of credit by letters of
credit issued under the exit facility.
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
-- Other Administrative Expense Paid in full. No 100%
Claims
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
-- Priority Tax Claims Paid in full or with interest over a period No 100%
not to exceed six (6) years from the date of
assessment of the tax.
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M1 Multicare Other Secured Claims See separate descriptions below. See below See below
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M2 Multicare Senior Lender Claims $25,000,000 in cash Yes 81.68%
$147,682,000 in New Senior Notes
$11,600,000 in New Conv Preferred Stock
21.35% of the New Common Stock.
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M3 Multicare Priority Non-Tax Claims Paid in full. No 100%
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M4 Multicare General Unsecured Uninsured: 0.18% of the New Common Stock. Yes 5.67%
Claims
Insured: Paid in ordinary course of
business from insurance proceeds
to the extent of such insurance;
any portion of such claims which
are not covered by insurance
will be treated in same manner
as uninsured claims.
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M5 Multicare Senior Subordinated No distribution. No 0.00%
Note Claims
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M6 Multicare Intercompany Claims Unimpaired. No 100%
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M7 Multicare Punitive Damage Claims No distribution (except to the extent No None
covered by insurance).
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------
M8 Multicare Common Stock Interests No distribution. No None
- - ------------ ---------------------------------- ---------------------------------------------- ----------- --------------

D. Allocation of Value Under the Plan of Reorganization

The largest claims against the Genesis Debtors and the Multicare Debtors consist
of the Genesis Senior Lender Claims (Class G2) and the Multicare Senior Lender
Claims (Class M2). With minor exceptions discussed below, the claims in these
classes are secured by first priority liens on substantially all the property of
the Genesis Debtors and the Multicare Debtors, subject to the liens of the
lenders under the debtor in possession credit agreements and the liens of
pre-existing mortgagees and other secured creditors described in Classes G1 and
M1.

1. Senior Lender Deficiencies

After setting aside the value of the properties that are collateral for the
pre-existing secured claims (Classes G1 and M1), there is not enough enterprise
value remaining to provide a full recovery to the holders of the Genesis Senior
Lender Claims and the Multicare Senior Lender Claims, even if those classes
received 100% of the New Senior Notes, the New Convertible Preferred Stock, the
New Common Stock, and the New Warrants. In the absence of a consensual
restructuring and except as described in section II.D.3 below, the absolute
priority rule in section 1129(b) of the Bankruptcy Code would preclude the
distribution of any value to junior classes, including to holders of unsecured
claims in Classes G4, G5, M4, and M5. The following table, which draws
information from later sections of the Disclosure Statement, illustrates the
deficiencies on the Genesis Senior Lender Claims and the Multicare Senior Lender
Claims.

Value or Claim Section
------------------------------------------------------------- ------------------ ---------

Genesis Enterprise Value $1,125,000,000 IV.B.3
less: Debtor in Possession financing 200,000,000 II.E
Administrative Expenses 25,000,000
Other Secured Claims (Class G1) 115,077,000
--------------
Value Remaining $784,923,000

Amount of Genesis Senior Lender Claims (Class G2) $1,198,460,000 II.D.2
less: Adequate Protection Payments Received 195,979,000 II.E.2
--------------
Remaining Genesis Senior Lender Claims (Class G2) $1,002,481,000
Deficiency for Class G2 ($217,558,000)

------------------------------------------------------------- ------------------ ---------
Multicare Enterprise Value (including cash on hand) $400,000,000 IV.C.3
less: Administrative Expenses 10,000,000 II.F
Other Secured Claims (Class M1) 26,318,000
--------------
Value Remaining $363,682,000

Amount of Multicare Senior Lender Claims (Class M2) $443,400,000 II.F.2
--------------
Deficiency for Class M2 ($79,718,000)

In the case of the Genesis Debtors, the holders of the Genesis Senior Lender
Claims have a deficiency of over $217 million. As to the claims of holders of
the Genesis senior subordinated note claims (Class G5), the deficiency would
include postpetition interest on the Genesis Senior Lender Claims, for a total
deficiency, calculated as of June 30, 2001, of approximately $330 million. In
the case of the Multicare Debtors, the holders of the Multicare Senior Lender
Claims have a deficiency of over $79 million. As to the claims of holders of the
Multicare senior subordinated note claims (Class M5), the deficiency would
include postpetition interest on the Multicare Senior Lender Claims, for a total
deficiency, calculated as of June 30, 2001, of approximately $120 million.

2. Compromise and Settlement with Unsecured Classes

The Genesis Debtors, the Genesis unsecured creditors' committee, and the holders
of the Genesis Senior Lender Claims have had extensive negotiations concerning a
consensual restructuring and the advantages of facilitating a rapid conclusion
to these chapter 11 cases. Based on those discussions and notwithstanding the
deficiencies specified above, the holders of the Genesis Senior Lender Claims
have agreed to provide a portion of the value to which they would otherwise be
entitled to holders of unsecured claims in Classes G4 and G5. The treatment of
those classes in the Plan reflects this settlement and is not an admission by
the holders of the Genesis Senior Lender Claims that such classes would
otherwise be entitled to any recovery. Conversely, the support of the Plan by
the Genesis unsecured creditors' committee is not an agreement as to the
enterprise value of the Genesis Debtors described in the Disclosure Statement or
the validity of the liens of the holders of the Genesis Senior Lender Claims.
The Multicare Debtors, the Multicare unsecured creditors' committee, and the
holders of the Multicare Senior Lender Claims have also engaged in negotiations
concerning a consensual restructuring. Those discussions have not resulted in an
agreement. Accordingly, the treatment specified for the Multicare unsecured
classes (Classes M4 and M5) strictly follows the absolute priority rule in
section 1129 of the Bankruptcy Code.

3. Exceptions to the Liens of the Senior Lenders

As to Classes G4 and M4, the absolute priority rule would not apply to any
properties of the Debtors that are not encumbered. As the following analysis
indicates, Classes G4 and M4 would receive small recoveries in a nonconsensual
restructuring.

Recovery for Class G4 Under the Absolute Priority Rule. The aggregate value of
the properties owned by the Genesis Debtors that are unencumbered or likely
would become unencumbered through the exercise of the Genesis Debtors' avoidance
powers is approximately [$____________]. In a nonconsensual restructuring, the
value of these two properties would be available to the holders of unsecured
claims, including the deficiency claims of the holders of the Genesis Senior
Lender Claims. The following table shows how the value of those properties would
be allocated, giving effect to the contractual subordination provisions of the
holders of claims in Class G5 in favor of the Genesis Senior Lender Claims in
Class G2.

Recovery
claim % distribution %
-------------------------------- --------------- ------------ --------------- ------------

Genesis Sr Lender Deficit * **
G4 (Gen Unsecured Claims) 80,069,000
G5 (Subordinated Claims) 387,425,000 **
-------------------------------- --------------- ------------ --------------- ------------
total unsecured claims 100.00%

* This amount is greater than the deficiency calculated in section
II.D.1 above because it includes the value of the property on which the
liens securing the Genesis Senior Lender Claims may be avoidable.

**All value otherwise allocable to Class G5 would be distributed to
Class G2 until the deficiency in Class G2 is paid in full, in
accordance with the subordination provisions in the indentures
governing the senior subordinated notes in Class G5.

As the table illustrates, the recovery under the Plan is superior to the
application of the absolute priority rule for Class G4 (6.94% compared to ___%)
and Class G5 (6.94% compared to 0.00%).

Recovery for Class M4 Under the Absolute Priority Rule. The aggregate value of
the properties owned by the Multicare Debtors that are unencumbered or likely
would become unencumbered through the exercise of the Multicare Debtors'
avoidance powers is approximately [$____________]. The following table shows how
such value would be allocated, giving effect to the contractual subordination
provisions of the holders of claims in Class M5 in favor of the Multicare Senior
Lender Claims in Class M2.

Recovery
claim % distribution %
--------------------------------- -------------- ------------ --------------- ------------

Multicare Sr Lender Deficit * **
M4 (Mul Unsecured Claims) 26,439,000
M5 (Subordinated Claims) 257,817,000 **
--------------------------------- -------------- ------------ --------------- ------------
total unsecured claims 100.00%

* This amount is greater than the deficiency calculated in section
II.D.1 above because it includes the value of the property on which the
liens securing the Multicare Senior Lender Claims may be avoidable.

**All value otherwise allocable to Class M5 would be distributed to
Class M2 until the deficiency in Class M2 is paid in full, in
accordance with the subordination provisions in the indentures
governing the senior subordinated notes in Class M5.

E. Description of the Genesis Classes

Unless otherwise indicated, the characteristics and amount of the claims or
equity interests in the following classes are based on the books and records of
the Genesis Debtors. Each subclass is treated as a separate class for purposes
of the Plan of Reorganization and the Bankruptcy Code. However, the following
discussion may refer to a group of subclasses as a single class for ease of
reference.

1. Genesis Other Secured Claims (Class G1)

Description. Class G1 is a group of subclasses, including aggregate allowed
mortgage secured claims of approximately $115,077,000 as of the date of this
Disclosure Statement (exclusive of interest and net of reinstatement payments).
For the most part, claims in these subclasses are mortgage financings of various
properties owned and/or operated by the Genesis Debtors and equipment financings
of various types. Each subclass represents a separate mortgage or collateral
pool. The following table describes the material subclasses in Class G1.
The Plan of Reorganization reinstates the claims in subclasses G1-1 through
G1-12. The aggregate cost to cure defaults and reinstate the debt in these
subclasses is projected to be $6,604,000 as of June 30, 2001. These claims are
not impaired, and the holders of the debt are not entitled to vote to accept or
reject the Plan of Reorganization. Subclasses G1-13 through G1-17 are impaired
and are entitled to vote. The following table identifies and summarizes the
treatment for each of the material subclasses in Class G1. The interest rates
for the new notes proposed for certain of the impaired classes will be as
specified below, unless modified by the Bankruptcy Court at the time of
confirmation of the Plan of Reorganization. The proposed notes will be secured
by the same collateral securing the existing obligations. In the event any of
those impaired classes rejects the Plan of Reorganization, the Genesis Debtors
reserve the right to return the collateral in full satisfaction of the claims
secured by such property or adjust the principal amount of the proposed note to
the value of the collateral as determined by the Bankruptcy Court. The
percentage recovery indicated in the following table is based on the value of
the collateral securing these obligations.

Treatment of Subclasses

- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
Description Entitled Estimated
Class Collateral (lender or guarantor) Treatment to Vote Recovery
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------

G1-1 Broad Street Office Building $1,600,000 mortgage reinstated No 100%
148 West State Street, Kennett
Square, Pa. (Pa. IDA)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-2 Broad Street Office Building $985,039 mortgage reinstated No 100%
148 West State Street, Kennett
Square, Pa. (Pa. IDA)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-3 Pleasant View Center (HUD) $8,864,446 mortgage reinstated No 100%
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-4 Country Village Center (HUD) $1,810,259 mortgage reinstated No 100%
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-5 Abington Manor (Lackawanna County $3,475,000 mortgage reinstated No 100%
IDA)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-6 Silver Lake Center (Del. EDA Bonds) $2,155,000 mortgage reinstated No 100%
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-7 River Street Center (Luzerne $2,430,000 mortgage reinstated No 100%
County IDA)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-8 Kresson View Center (NJEDA $5,535,000 mortgage reinstated No 100%
Refunding Bonds)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-9 Mifflin Court (ElderTrust) $2,474,000 mortgage reinstated (as No 100%
previously reduced and approved by
the Bankruptcy Court)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-10 Oaks Center (ElderTrust) $3,500,086 mortgage reinstated (as No 100%
previously reduced and approved by
the Bankruptcy Court)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-11 Coquina Assisted Living $1,400,000 mortgage reinstated (as No 100%
(ElderTrust) previously reduced and approved by
the Bankruptcy Court)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-12 Homestead Center $19,325,829 mortgage reinstated No 100%
Kimberly Hall South Center
Kimberly Hall North Center
Seaford Center
Milford Center
Windsor Center
(U.S. Bank, N.A., as trustee for
the "Bradford Bonds")
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------

G1-13 Brakeley Park Center (HUD) New secured note maturing on Yes 100%*
January 1, 2033, in $7,985,079
principal amount with annual
interest at 8.5% and level monthly
payments of principal and interest
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-14 North Cape Center (HUD) New secured note maturing on March Yes 100%*
1, 2036, in $5,573,020 principal
amount with annual interest at
8.0% and level monthly payments of
principal and interest
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-15 Oak Hill Center (HUD) Return the collateral Yes 100%*
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-16 Rittenhouse Pine Center (Meditrust) New secured 10 year note in Yes 100%*
$5,000,000 principal amount with
annual interest at 8% and level
monthly payments of principal and
interest based on a 25-year
amortization schedule (unsecured
deficiency of $1,690,441)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------
G1-17 Atlantis Center New secured 5-1/2 year note in Yes 100%*
Bowmans Center $45,000,000 principal amount with
Fairway Center annual interest at LIBOR plus 3.5%
Oakwood Center and no amortization before
Riverwood Center maturity (secured deficiency of
Tierra Center $33,236,000)
Willimsburg Center
Windham Center
Woodmont Center
(synthetic lease lenders)
- - ------------ ------------------------------------ ------------------------------------ ----------- ------------

* Based on a valuation of the collateral securing these claims. Section
506(a) of the Bankruptcy Code provides that a claim is secured only to
the extent of the value of the underlying collateral. The deficiency
claims of the holders of claims in Class G1-16 are part of Class G4
(Genesis General Unsecured Claims). The obligations of the Genesis
Debtors under the synthetic lease (Class G1-17) are secured by the
property identified above and by all the property of the Genesis
Debtors that secures the claims in Class G2. Therefore the deficiency
claims of the holders of claims in Class G1-17 are part of Class G2
(Genesis Senior Lender Claims).

In addition to subclasses G1-1 through G1-17, there are other subclasses of
miscellaneous secured claims of approximately $3,536,000 against the Genesis
Debtors, each of which will be treated as a separate class. This class also
includes certain contingent claims of Bank of America, N.A. in connection with a
guaranty by Genesis of the obligations of the Age Institute. Under the Plan of
Reorganization, either these claims will be reinstated or the Reorganized
Debtors will return the property securing such claim. These claims are not
impaired and the holders are not entitled to vote to accept or reject the Plan
of Reorganization.

2. Genesis Senior Lender Claims (Class G2)

Description. The prepetition claims in this class aggregate approximately $1.2
billion and are the largest claims against the Genesis Debtors. This class
consists of the following prepetition claims.

Instrument Amount
----------------------------------------------- ------------------
Revolver $650,000,000
Term Loan A 110,445,000
Term Loan B 152,131,000
Term Loan C 151,378,000
Tranche II 40,000,000*
Swap termination claims 17,291,000
Synthetic Lease deficiency claims 33,236,000
------------------
Subtotal $1,154,481,000
Prepetition interest 43,979,000*
------------------
Total prepetition claims $1,198,460,000

* Paid as part of adequate protection payments pursuant to the cash
collateral order described in sections VI.C and VI.D, below.

The claims under the Revolver, Term Loan A, Term Loan B, Term Loan C, and
Tranche II arise under Genesis's Fourth Amended and Restated Credit Agreement,
dated as of August 20, 1999, among Genesis, certain subsidiary Genesis Debtors
named therein, Mellon Bank N.A., as administrative agent, certain co-agents
named therein, and the lenders participating in such agreement. To secure those
claims, the Genesis Debtors granted first priority security interests in
substantially all their assets and junior security interests in certain
properties already subject to liens.

The swap termination claims arise from the prepetition termination of certain
interest rate hedging agreements between Citibank, N.A. and Genesis. Prior to
the commencement of these chapter 11 cases, Genesis hedged a portion of the
floating interest rate risk associated with the obligations under the credit
agreement identified above. In accordance with that credit agreement, Genesis's
obligations under those hedging agreements were entitled to share in the
collateral securing the other Genesis Senior Lender Claims. Citibank, N.A.
asserted $28,548,000 of claims against Genesis due to the termination of the
hedging agreements. Genesis and Citibank, N.A. have agreed that $17,290,962 of
those claims share the same collateral as the other Genesis Senior Lender
Claims. The balance of the claims of Citibank, N.A. are part of Class G4. That
agreement was approved by the Bankruptcy Court on May 11, 2001. Certain
properties owned by the Genesis Debtors were financed through a "synthetic
lease." The claims of the lenders under that financing arise under the Amended
and Restated Synthetic Lease Financing Facility, dated as of October 7, 1996,
among Genesis, Genesis Eldercare Properties, Inc., Mellon Bank N.A., as
administrative agent, certain co-agents named therein, and the lender parties
thereto. For purposes of bankruptcy law, the "synthetic lease" is treated as a
loan rather than a true lease. The synthetic lease claims, which total
$78,236,000, are secured by the properties leased under the Synthetic Lease
Financing Facility referred to above, as well as by the same collateral securing
the other Genesis Senior Lender Claims. Accordingly, a portion of such claims is
classified in Class G1-17 (to the extent of the value of the properties financed
- - -- see the discussion for Class G1, above). The remaining portion of the claims
(the deficiency claims) are part of this Class G2.

At the commencement of these chapter 11 cases, the Bankruptcy Court entered a
cash collateral order which permitted the Genesis Debtors to grant senior
postpetition liens on their properties to the lenders under their debtor in
possession financing. The debtor in possession financing and the cash collateral
order are described in sections VI.C and VI.D, below. Under the cash collateral
order, the Genesis Debtors expect that they will have made approximately
$195,979,000 of payments by June 30, 2001, with respect to the Genesis Senior
Lender Claims. Based on the valuation of the Genesis Debtors presented in
section IV, below, these postpetition payments are assumed to apply against the
prepetition Genesis Senior Lender Claims, resulting in an outstanding Genesis
Senior Lender Claim of approximately $1,002,481,000. However, in the event the
Bankruptcy Court determines that the value of the Genesis Debtors is higher, the
Genesis Senior Lender Claims would include postpetition interest. In that case
the postpetition payments would be allocated to repay the Tranche II facility,
prepetition interest, and approximately $112,000,000 of postpetition interest at
contractual nondefault rates.

The claims in Class G2 have the benefit of subordination provisions in the
various instruments representing the claims in Class G5 (Genesis Senior
Subordinated Note Claims). The effect of these subordination provisions is to
require that distributions that would otherwise be made to Class G5 be made to
the holders of Genesis Senior Lender Claims. The Plan of Reorganization does not
give effect to those provisions, and the distribution of New Common Stock and
New Warrants to the holders of claims in Class G5 (Genesis Senior Subordinated
Note Claims) represents a negotiated settlement between the official committee
of unsecured creditors in the Genesis reorganization cases and the holders of
the Genesis Senior Lender Claims.
Treatment. Class G2 will receive

o cash in an amount equal to the interest on the Genesis Senior
Lender Claims at contractual, nondefault rates, as paid
pursuant to certain cash collateral and adequate protection
stipulations described in section VI.D.1 below (as of June
30, 2001, such amount is $195,979,000)

o New Senior Notes in the principal amount of $99,923,000

o shares of New Convertible Preferred Stock with an aggregate
liquidation preference of $31,000,000

o approximately 74.58% of the New Common Stock

The allocation of New Common Stock is also subject to dilution based on future
issuances of additional shares of New Common Stock, including in connection with
the conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees. Distributions to
Class G2 will be made to the individual holders of the Genesis Senior Lender
Claims in such denominations and registered in the names of the holders as
Mellon Bank, N.A. shall have directed in writing.

3. Genesis Priority Non-Tax Claims (Class G3)

Description. The claims in Class G3 are the types of claims identified in
section 507(a) of the Bankruptcy Code that are entitled to priority in payment
(other than administrative expense claims and priority tax claims). For the
Genesis Debtors, these claims relate primarily to prepetition wages and employee
benefit plan contributions that had not yet been paid as of the Commencement
Date. The Genesis Debtors believe that all of these claims have already been
paid pursuant to an order entered by the Bankruptcy Court on the Commencement
Date.

Treatment. Claims in Class G3 that have not already been paid will be paid on
the later of (i) the Effective Date, (ii) the date such claim becomes allowed,
and (iii) the date for payment provided by any agreement or understanding
between the parties, except to the extent the holders of such claims agree to a
different treatment.

4. Genesis General Unsecured Claims (Class G4)

Description. The aggregate amount of general unsecured claims filed against the
Genesis Debtors on or before the December 19, 2000 bar date was approximately
$1,131,655,000. However, the Genesis Debtors estimate that the aggregate amount
of allowed claims in Class G4 will be approximately $80,069,000, after deducting
duplicate claims, claims not supported by the Genesis Debtors' books and
records, claims that are covered by insurance, and claims that are subject to
other objections. The claims in Class G4 consist of the claims of suppliers and
other vendors, landlords with prepetition rent claims and/or claims based on
rejection of leases, personal injury and other litigation claimants to the
extent not covered by insurance, parties to contracts with the Genesis Debtors
that are being rejected, deficiency claims of mortgage lenders, the unsecured
portion of the claims arising from the prepetition termination of certain
interest rate hedging agreements, claims (if any) arising from the remaining qui
tam suit identified in section V.D.6, and other general unsecured claims. The
following table lists the types of claims and the estimated amount in these
groups to the extent material.

Type of claim Amount
----------------------------------------------------- ---------------------

Suppliers and vendors (estimated amount) $51,329,000
Mortgage deficiency claims 7,483,000
Swap deficiency claims 11,257,000
Other (including estimate of rejection damages) 10,000,000
---------------------
Total $80,069,000

For completeness, this class also includes claims covered by insurance in whole
or in part maintained by the Genesis Debtors. However, such claims will be
entitled to share in the treatment of this class only to the extent they are not
covered by such insurance.

Treatment. The holders of claims in Class G4 which are uninsured in whole or in
part will share 3.89% of the New Common Stock and the New Warrants with the
holders of claims in Class G5. Based on the books and records of the Genesis
Debtors, the holders of claims in Class G4 will receive

o approximately 0.67% of the New Common Stock and

o 17.25% of the New Warrants

Holders of claims in this class that are covered by insurance in whole or in
part will be paid in the ordinary course of the business of the Reorganized
Debtors to the extent of such insurance, and to the extent that these claims are
not covered by insurance will be treated in the same manner as the holders of
uninsured claims in this class. All shares of New Common Stock are subject to
dilution based on future issuances of additional shares of New Common Stock,
including in connection with the conversion of the New Convertible Preferred
Stock, the exercise of the New Warrants, and the issuance of restricted shares
of New Common Stock and options under the New Management Incentive Plan for key
employees.

5. Genesis Senior Subordinated Note Claims (Class G5)

Description. The claims in this class total $387,425,000 and consist of the
principal and interest accrued and unpaid through the Commencement Date under
four separate series of senior subordinated notes issued by Genesis. The
following table describes the notes:

Subordinated Note Amount
------------------------------------------------------ ------------------

9-3/4% Senior Subordinated Notes due 2005 $120,000,000
Indenture, dated as of June 15, 1995,
between Genesis and State Street Bank and
Trust Company, as trustee

9-1/4% Senior Subordinated Notes due 2006 125,000,000
Indenture, dated as of October 7, 1996,
between Genesis and State Street Bank and
Trust Company, as successor trustee

9-7/8% Senior Subordinated Notes due 2009 125,000,000
Indenture, dated as of December 23, 1998,
between Genesis and The Bank of New York,
as trustee

9-3/8% Senior Subordinated Notes due 2005 1,590,000
Indenture, dated as of September 15, 1995,
between Grancare, Inc. and Marine Midland
Bank, as trustee

Less original issue discount 4,080,000
Plus prepetition interest 19,915,000
------------------
Total $387,425,000

The claims in Class G5 are contractually subordinated to the Genesis Senior
Lender Claims in Class G2.

Treatment. The holders of claims in Class G5 will share 3.89% of the New Common
Stock and the New Warrants with the holders of claims in Class G4. Based on the
books and records of the Genesis Debtors, Class G5 will receive

o approximately 3.22% of the New Common Stock

o 82.75% of the New Warrants

All shares of New Common Stock are subject to dilution based on future issuances
of additional shares of New Common Stock, including in connection with the
conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees.

6. Genesis Intercompany Claims (Class G6)

Description. The Genesis Debtors record transfers of funds among themselves as
intercompany claims. For example, funds raised by Genesis through the issuance
of securities to the public (both stock and debt), as well as amounts borrowed
under its prepetition credit agreement, have been used to fund and build the
operations of many of the other Genesis Debtors. In addition, funds earned by
the subsidiaries of Genesis have been transferred to Genesis as partial
repayment of such advances. Treatment.

For purpose of the Plan, these claims are unimpaired.

7. Genesis Punitive Damage Claims (Class G7)

Description. Class G7 consists of any claim against any of the Genesis Debtors
for any fine, penalty, forfeiture, or attorney's fees, or for multiple,
exemplary, or punitive damages, to the extent that such fine, penalty,
forfeiture, attorney's fees, or damages is not compensation for actual pecuniary
loss suffered by the holder of such claim. The Genesis Debtors do not believe
that there will be any allowed claims in this class. However, several proofs of
claim have been filed concerning personal injury or wrongful death claims that
include punitive or exemplary damage amounts and this class has been included in
the Plan for completeness.

Treatment. To the extent there are any allowed claims in this class, they are
subordinated to the claims in other classes. No property will be distributed to
the holders of any allowed claims in this class from the Genesis Debtors'
estates. To the extent these claims are covered by applicable insurance
policies, and such insurance is permitted under state law, holders of allowed
claims in this class shall receive insurance proceeds.

8. Genesis Series G Preferred Stock Interests (Class G8)

Description. Class G8 consists of the equity interests represented by the
outstanding shares of Genesis's Series G Cumulative Convertible Preferred Stock.
This issue consists of 586,240 shares of preferred stock issued to HCR Manor
Care, Inc. in connection with Genesis's 1998 acquisition of the pharmacy
business of that company. This class also includes any claims that HCR Manor
Care, Inc. has or may assert against Genesis in connection with the issuance of
this preferred stock, whether based on state or federal securities laws or
otherwise (although no proof of claim for such amounts has been filed).

Treatment. Holders of equity interests in Class G8 will receive no property
under the Plan, and these equity interests will be cancelled on the Effective
Date.

9. Genesis Series H Preferred Stock Interests (Class G9)

Description. Class G9 consists of the equity interests represented by the
outstanding shares of Genesis's Series H Senior Convertible Participating
Cumulative Preferred Stock. This issue consists of 24,369 shares of preferred
stock issued to The Cypress Group and certain of its affiliates, TPG Partners
II, L.P., and Nazem, Inc. in connection with a 1999 restructuring of Genesis's
obligations. That restructuring is described in detail in Genesis's Form 10-K
for the fiscal year ended September 30, 2000.

Treatment. Holders of equity interests in Class G9 will receive no property
under the Plan and these equity interests will be cancelled on the Effective
Date.

10. Genesis Series I Preferred Stock Interests (Class G10)

Description. Class G10 consists of the equity interests represented by the
outstanding shares of Genesis's Series I Senior Convertible Exchangeable
Participating Cumulative Preferred Stock. This issue consists of 17,631 shares
of preferred stock issued to The Cypress Group and certain of its affiliates,
TPG Partners II, L.P., and Nazem, Inc. in connection with a 1999 restructuring
of Genesis's obligations. That restructuring is described in detail in Genesis's
Form 10-K for the fiscal year ended September 30, 2000.

Treatment. Holders of equity interests in Class G10 will receive no property
under the Plan, and these equity interests will be cancelled on the Effective
Date.

11. Genesis Common Stock Interests (Class G11)

Description. This class consists of the common equity interests in Genesis
represented by Genesis's outstanding 48,641,456 shares of common stock, $0.02
par value. The class includes all shares owned by affiliates or members of the
management of the Genesis Debtors and any outstanding options, warrants, or
rights to purchase such stock, including conversion or exchange rights under the
Series G Cumulative Convertible Preferred Stock, the Series H Senior Convertible
Participating Cumulative Preferred Stock, and the Series I Senior Convertible
Exchangeable Participating Cumulative Preferred Stock.

Treatment. Holders of equity interests in Class G11 will receive no property
under the Plan, and these equity interests will be cancelled on the Effective
Date.

F. Description of the Multicare Classes

Unless otherwise indicated, the characteristics and amount of the claims or
equity interests in the following classes are based on the books and records of
the Multicare Debtors. Each subclass is treated as a separate class for purposes
of the Plan of Reorganization and the Bankruptcy Code. However, the following
discussion may refer to a group of subclasses as a single class for ease of
reference.

1. Multicare Other Secured Claims (Class M1)

Description. Class M1 is a group of subclasses, with aggregate allowed secured
claims of approximately $26,318,000 as of the date of this Disclosure Statement
(exclusive of interest and net of reinstatement payments). For the most part,
claims in these subclasses are mortgage financings of various properties owned
and/or operated by the Multicare Debtors and equipment financings of various
types. Each subclass represents a separate mortgage or collateral pool. The
following table describes the material subclasses in Class M1.
The Plan of Reorganization reinstates the claims in subclasses M1-1 through
M1-6. The aggregate cost to cure defaults and reinstate the debt in these
subclasses is projected to be $3,522,000 as of June 30, 2001. These claims are
not impaired, and the holders of the debt are not entitled to vote to accept or
reject the Plan. Subclass M1-7 is impaired and is entitled to vote. The
following table identifies and summarizes the treatment for each of the material
subclasses in Class M1. The percentage recovery indicated in the following table
is based on the value of the collateral securing these obligations.

Treatment of Subclasses

- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
Class Description Entitled Estimated
Collateral (lender or guarantor) Treatment to Vote Recovery
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------

M1-1 Rosewood Center (Tyler County, WV) $825,000 mortgage reinstated No 100%
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-2 Sisterville Center (Tyler County, WV) $1,960,000 mortgage reinstated No 100%
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-3 Raleigh Center (WV Hospital $1,840,000 mortgage bonds reinstated No 100%
Authority)
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-4 Westford Center (HUD) $6,637,992 mortgage reinstated No 100%
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-5 Willows Center $11,900,815 mortgage reinstated No 100%
Cedar Ridge Center
Dawn View Center
(MediTrust)
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-6 Teays Valley (West Virginia Hospital $3,665,000 mortgage reinstated No 100%
Authority)
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------
M1-7 Point Pleasant (Mason County WV) Return of collateral Yes 100%*
- - -------------- -------------------------------------- --------------------------------------- ----------- -------------

* Based on a valuation of the collateral securing these claims.
Section 506(a) of the Bankruptcy Code provides that a claim is
secured only to the extent of the value of the underlying collateral.

In addition to subclasses M1-1 through M1-7, there are other subclasses of
miscellaneous secured claims of approximately $71,000 against the Multicare
Debtors, each of which will be treated as a separate class. Under the Plan of
Reorganization, either these claims will be reinstated or the Reorganized
Debtors will return the property securing such claim. These claims are not
impaired, and the holders are not entitled to vote to accept or reject the Plan
of Reorganization.

2. Multicare Senior Bank Claims (Class M2)

Description. The prepetition claims in this class aggregate approximately
$443,400,000 and are the largest claims against the Multicare Debtors. This
class consists of the following prepetition claims.

Instrument Amount
----------------------------------------------- -------------------

Revolver $112,700,000
Term Loan A 116,400,000
Term Loan B 145,800,000
Term Loan C 49,100,000
-------------------
Subtotal $424,000,000
Prepetition interest 19,400,000
-------------------
Total prepetition claims $443,400,000

The claims under the Revolver, Term Loan A, Term Loan B, and Term Loan C arise
under Multicare's Fourth Amended and Restated Credit Agreement, dated as of
August 20, 1999, among The Multicare Companies, Inc., certain subsidiary
Multicare Debtors named therein, Mellon Bank N.A., as administrative agent,
certain co-agents named therein, and the lenders participating in such
agreement. To secure those claims, the Multicare Debtors granted first priority
security interests in substantially all their assets and junior security
interests in certain properties already subject to liens.

The claims in Class M2 have the benefit of subordination provisions in the
instruments representing the claims in Class M5 (Multicare Senior Subordinated
Note Claims). The effect of these subordination provisions is to require that
distributions that would otherwise be made to Class M5 be made to the holders of
Multicare Senior Lender Claims. The Plan of Reorganization gives effect to those
provisions.

Treatment. Class M2 will be entitled to receive 99.16% of the shares of the New
Multicare Stock. However, approval of the Plan will implement the Plan of
Merger, under which all such stock will be deemed to be immediately exchanged
for

o $25,000,000 in cash

o New Senior Notes in the principal amount of $147,682,000

o shares of New Convertible Preferred Stock with an aggregate
liquidation preference of $11,600,000

o approximately 21.35% of the New Common Stock.

The allocation of New Common Stock is also subject to dilution based on future
issuances of additional shares of New Common Stock, including in connection with
the conversion of the New Convertible Preferred Stock, the exercise of the New
Warrants, and the issuance of restricted shares of New Common Stock and options
under the New Management Incentive Plan for key employees. Distributions to
Class M2 will be made to the individual holders of the Multicare Senior Lender
Claims in such denominations and registered in the names of the holders as
Mellon Bank, N.A. shall have directed in writing.

3. Multicare Priority Non-Tax Claims (Class M3)

Description. The claims in Class M3 are the types of claims identified in
section 507(a) of the Bankruptcy Code that are entitled to priority in payment
(other than administrative expense claims and priority tax claims). For the
Multicare Debtors, these claims relate primarily to prepetition wages and
employee benefit plan contributions that had not yet been paid as of the
Commencement Date. The Multicare Debtors believe that all of these claims have
already been paid pursuant to an order entered by the Bankruptcy Court on the
Commencement Date.

Treatment. Claims in Class M3 that have not already been paid will be paid on
the later of (i) the Effective Date, (ii) the date such claim becomes allowed,
and (iii) the date for payment provided by any agreement or understanding
between the parties, except to the extent the holders of such claims agree to a
different treatment.

4. Multicare General Unsecured Claims (Class M4)

Description. The aggregate amount of general unsecured claims filed against the
Multicare Debtors on or before the December 19, 2000 bar date was approximately
$1,702,490,000. However, the Multicare Debtors estimate that the aggregate
amount of allowed claims in Class M4 will be approximately $26,439,000, after
deducting duplicate claims, claims not supported by the Multicare Debtors' books
and records, claims covered by insurance, and claims that are subject to other
objections. The claims in Class M4 consist of the claims of suppliers and other
vendors, landlords with prepetition rent claims and/or claims based on rejection
of leases, personal injury and other litigation claimants to the extent not
covered by insurance, parties to contracts with the Multicare Debtors that are
being rejected, deficiency claims of mortgage lenders, and other general
unsecured claims. For completeness, this class also includes claims covered by
insurance in whole or in part maintained by or on behalf of the Multicare
Debtors. However, such claims will be entitled to share in the treatment of this
class only to the extent they are not covered by such insurance.

Treatment. The holders of claims in Class M4 which are uninsured in whole or in
part will receive 0.84% of the shares of the New Multicare Stock. However,
approval of the Plan will implement the Plan of Merger, under which all such
stock will be deemed to be immediately exchanged for 0.18% of the New Common
Stock. Holders of claims in this class that are covered by insurance will be
paid in the ordinary course of the business of the Reorganized Debtors to the
extent of such insurance, and to the extent that these claims are not covered by
insurance will be treated in the same manner as the holders of uninsured claims
in this class. All shares of New Common Stock are subject to dilution based on
future issuances of additional shares of New Common Stock, including in
connection with the conversion of the New Convertible Preferred Stock, the
exercise of the New Warrants, and the issuance of restricted shares of New
Common Stock and options under the New Management Incentive Plan for key
employees.

5. Multicare Senior Subordinated Note Claims (Class M5)

Description. The claims in this class total $257,817,000 and consist of the
principal and interest accrued and unpaid through the Commencement Date, less
unamortized original issue discount, under Multicare's 9% Senior Subordinated
Notes due 2007, issued and governed by the Indenture, dated as of August 11,
1997, between Multicare and PNC Bank, National Association, as trustee. The
claims in Class M5 are contractually subordinated to the Multicare Senior Lender
Claims in Class M2.

Treatment. The holders of claims in Class M5 will receive no distribution under
the Plan.

6. Multicare Intercompany Claims (Class M6)

Description. The Multicare Debtors record transfers of funds among themselves as
intercompany claims. For example, funds borrowed by Multicare under its
prepetition credit agreement have been used to fund and build the operations of
many of the other Multicare Debtors. In addition, funds earned by the
subsidiaries of Multicare have been transferred to Multicare as partial
repayment of such advances.

Treatment. For purpose of the Plan, these claims are unimpaired.

7. Multicare Punitive Damage Claims (Class M7)

Description. Class M7 consists of any claim against any of the Multicare Debtors
for any fine, penalty, forfeiture, or attorney's fees, or for multiple,
exemplary, or punitive damages, to the extent that such fine, penalty,
forfeiture, attorney's fees, or damages is not compensation for actual pecuniary
loss suffered by the holder of such claim. The Multicare Debtors do not believe
that there will be any allowed claims in this class. However, several proofs of
claim have been filed concerning personal injury or wrongful death claims that
include punitive or exemplary damage amounts and this class has been included in
the Plan for completeness.

Treatment. To the extent there are any allowed claims in this class, they are
subordinated to the claims in other classes. No property will be distributed to
the holders of any allowed claims in this class from the Multicare Debtors'
estate. To the extent these claims are covered by applicable insurance policies,
and such insurance is permitted under state law, holders of allowed claims in
this class shall receive insurance proceeds.

8. Multicare Common Stock Equity Interests (Class M8)

Description. This class consists of all the common equity interests in Genesis
ElderCare Corp., including any outstanding options, warrants, or rights to
acquire such equity interests, represented by that company's 745,000 outstanding
shares of common stock, $0.01 par value, of which approximately 43.6% is
currently owned by Genesis.

Treatment. Holders of equity interests in Class M8 will receive no property
under the Plan, and these equity interests will be cancelled on the Effective
Date.

G. Administrative Expenses for the Genesis Debtors and the Multicare
Debtors

In order to confirm the Plan of Reorganization, Administrative Expense Claims
and Priority Tax Claims must be paid in full or in a manner otherwise agreeable
to the holders of those claims. Administrative expenses are the actual and
necessary costs and expenses of the chapter 11 cases of the Genesis Debtors and
the Multicare Debtors. Those expenses include, but are not limited to,
postpetition salaries and other benefits for employees, postpetition rent for
facilities and offices, amounts owed to vendors providing goods and services
during the chapter 11 cases, tax obligations incurred after the commencement of
the chapter 11 cases, and certain statutory fees and expenses. Other
administrative expenses include the actual, reasonable, and necessary
professional fees and expenses of the professionals retained by the Genesis
Debtors, the Multicare Debtors, and their respective creditors' committees, as
well as the obligations outstanding under the separate debtor in possession
financing agreements for the Genesis Debtors and the Multicare Debtors.

Consistent with the requirements of the Bankruptcy Code, the Plan of
Reorganization generally provides for allowed Administrative Expense Claims to
be paid in full on the later of the Effective Date and the first business day
after the date that is thirty (30) days after the date such Administrative
Expense Claim becomes allowed, except for Administrative Expense Claims relating
to ordinary course of business transactions or for money borrowed, both of which
will be paid in accordance with the past practice of the Debtors and the terms
of the agreements governing such obligations. Administrative Expense Claims
relating to compensation of the professionals retained by the Genesis Debtors,
the Multicare Debtors, their respective creditors' committees, or for the
reimbursement of expenses for certain members of their respective creditors'
committees will, unless otherwise agreed by the claimant, be paid on the later
of the Effective Date and the date on which an order allowing such
Administrative Expense Claim is entered.

Allowed tax claims entitled to priority under the Bankruptcy Code will be paid
either in full on the later of the Effective Date and the first business day
after the date that is thirty (30) days after the date such claim becomes
allowed or with interest at a fixed annual rate equal to eight percent (8%) over
a period not exceeding six (6) years from the date of assessment of the tax.

1. Debtor in Possession Financing

The Genesis Debtors estimate that there will be approximately $200,000,000
outstanding under their debtor in possession financing agreements on the
Effective Date. Of that amount, approximately $2,500,000 will relate to
outstanding letters of credit. With the exception of those letters of credit,
obligations under the debtor in possession financing agreements will be paid on
the Effective Date. On the Effective Date, outstanding letters of credit will
either be replaced or will remain outstanding and will be backed up with new
letters of credit or cash collateralized on the Effective Date. The Multicare
Debtors do not expect that any amounts will be outstanding under their debtor in
possession financing agreements on the Effective Date, other than approximately
$500,000 of letters of credit, which will either be replaced or will remain
outstanding and will be backed up with new letters of credit or cash
collateralized on the Effective Date.

2. Federal Medicare Claims

The Health Care Financing Administration has asserted that the Genesis Debtors
and the Multicare Debtors have received overpayments from the federal Medicare
program in connection with certain final Notices of Program Reimbursement.
Genesis and Multicare believe that the asserted overpayments do not reflect
certain underpayment amounts owed to Genesis and Multicare under the Medicare
program that will offset the amount of these claims. No other claims have been
asserted by the Health care Financing Administration. Separately, the Genesis
Debtors have entered into an agreement to resolve four pending civil qui tam
suits filed by private citizens under the federal False Claims Act, 31 U.S.C.
ss. 3729 et seq. relating to alleged overbilling to the federal Medicare
program. The terms of that settlement, which involve a payment of approximately
$2.1 million to the federal government, are described in section II.K.1, below.

3. State Medicaid Claims

Certain of the Genesis Debtors have accrued credits or overpayments due to
various state Medicaid programs. The aggregate amount of such credits and
overpayments is approximately $8,000,000. As part of the assumption of certain
agreements and/or programs related to participation in the Medicaid programs in
those states, the Genesis Debtors expect to make such payments in the ordinary
course of their businesses.

4. Fees and Expenses of Professionals

The Genesis Debtors estimate that the fees and expenses of the various
professionals in their chapter 11 cases will be approximately [$8,000,000],
including amounts paid on an interim basis during the chapter 11 cases. The
Multicare Debtors estimate that the fees and expenses of the various
professionals in their chapter 11 cases will be approximately [$10,000,000],
including amounts paid on an interim basis during the chapter 11 cases.

5. Payments to Employees

The Bankruptcy Court has approved retention programs for key employees of the
Genesis Debtors and has approved the reimbursement of a portion of those
expenses from the estates of the Multicare Debtors. Under those programs,
approximately $4.4 million in retention payments has not yet been made and
approximately $2.1 million in plan of reorganization incentive payments will be
made (assuming an Effective Date of August 31, 2001).

6. Fees and Expenses of Indenture Trustees

The Debtors estimate that the fees and expenses of the trustees under the
indentures described in section II.E.5, above, including the fees and expenses
of any professionals retained by such indenture trustees, assuming an Effective
Date of August 31, 2001, will be approximately $220,000.

H. Securities to be Issued Under the Plan of Reorganization

1. New Senior Notes

Reorganized Genesis will issue $247,605,000 of New Senior Notes as part of the
Plan. The New Senior Notes will bear interest at LIBOR plus 5.0%. The New Senior
Notes will mature 6 months after the term note portion of the exit financing,
which is expected to be 6 years after the Effective Date. The New Senior Notes
will amortize 1% each year and will be secured by a second lien on the property,
plant, and equipment of the Debtors, subject to the liens granted to the lenders
providing exit financing. The New Senior Notes will be governed by an Indenture,
a copy of which is part of the Plan Supplement. The Indenture will include
covenants that are standard for public debt. Reorganized Genesis may prepay all
or a portion of the New Senior Notes at any time without penalty. The New Senior
Notes will be guarantied by the subsidiaries of Reorganized Genesis. See section
VIII.C, below, for a discussion of the exit financing. The Debtors used the
following methodology to allocate the New Senior Notes between the holders of
the Genesis Senior Lender Claims and the holders of the Multicare Senior Lender
Claims. After consultation with their respective advisors and with prospective
exit financing lenders, the Debtors determined that the overall debt capacity of
the combined companies should not exceed $624,000,000. The Debtors allocated
this debt capacity pro rata, based on the respective adjusted year 2001 EBITDA
projections for the Genesis Debtors and the Multicare Debtors, to determine an
overall debt capacity of $440,000,000 for the Genesis Debtors and $184,000,000
for the Multicare Debtors. The Genesis Debtors then deducted their aggregate
miscellaneous secured claims (Class G1) and the amount of exit financing needed
to pay their administrative expenses from their overall debt capacity
allocation. After those calculations, the Genesis Debtors would have a remaining
debt capacity of $99,923,000. The Multicare Debtors performed a similar
calculation, resulting in a remaining debt capacity of $147,682,000. These
amounts were used to allocate the New Senior Notes.

2. New Convertible Preferred Stock

On the Effective Date, Reorganized Genesis will issue convertible preferred
stock with a liquidation preference of $42,600,000. The New Convertible
Preferred Stock will accrue dividends at the annual rate of 6%, payable by
Reorganized Genesis in additional shares of New Convertible Preferred Stock. The
New Convertible Preferred Stock is convertible at any time, at the option of the
holders, into shares of New Common Stock. Reorganized Genesis will have the
right to convert all the shares of New Convertible Preferred Stock to shares of
New Common Stock at any time after the first anniversary of the Effective Date
when the average trading price for a share of New Common Stock over the
immediately preceding 30 calendar days is $26.43 or more. In either case, the
conversion rate will be $20.33 of liquidation preference for each share of New
Common Stock. Reorganized Genesis will have the right to redeem the New
Convertible Preferred Stock at any time by giving 30 days notice to the holders.
The holders may convert their shares prior to the expiration of that 30-day
period. The New Convertible Preferred Stock is also subject to mandatory
redemption on the 9th anniversary of the Effective Date. It will also be subject
to mandatory redemption from the actual cash received by Reorganized Genesis
from the following: (i) the sale of certain real and personal property, as
identified in the Plan Supplement; (ii) the exercise of the New Warrants; (iii)
any settlement with the federal government in connection with certain
administrative appeals identified in the Plan Supplement; and (iv) the
settlement or other resolution of the claims of the Genesis Debtors against the
AGE Institute and its related entities.

3. New Common Stock

On the Effective Date, Reorganized Genesis will issue 41,000,000 shares of its
New Common Stock, par value $0.01. The shares will be issued to the holders of
claims in Classes G2, G4, G5, M2, and M4. The following table shows the
allocation among these classes.

Shares of New % of New Common
Class Common Stock Stock
------------------------------------------------- ------------------- ------------------

G2 (Genesis Senior Lender Claims) 30,577,814 74.58%
G4 (Genesis General Unsecured Claims) 273,422 0.67%
G5 (Genesis Senior Subordinated Claims) 1,322,990 3.22%
Subtotal 32,174,226 78.47%

M2 (Multicare Senior Lender Claims) 8,751,980 21.35%
M4 (Multicare General Unsecured Claims) 73,794 0.18%
---------------------------------------
Subtotal 8,825,774 21.53%
----------------------------------------
Total 41,000,000 100.00%

The New Common Stock will vote as a single class for the election of directors
and on other matters that require shareholder approval and will be subject to
dilution for the issuance of additional shares of New Common Stock, including in
connection with the exercise of the New Warrants, and the issuance of restricted
shares of New Common Stock and options under the New Management Incentive Plan
for key employees. The Management Incentive Plan is described in section VIII.F,
below. The Plan of Reorganization will provide for authorization of sufficient
shares of New Common Stock to accomplish the purposes described hereunder.

4. New Warrants

On the Effective Date, Reorganized Genesis will issue warrants to purchase
2,394,618 shares of New Common Stock. This represents approximately 5.84% of the
New Common Stock issued on the Effective Date, before dilution for stock
issuances or the exercise of options under the New Management Incentive Plan for
key employees described in section VIII.F, below. The New Warrants will expire
on the first anniversary of the Effective Date and will have an exercise price
of $20.33 per share of New Common Stock.

5. New Multicare Common Stock

On the Effective Date, Multicare will issue shares of its new common stock to
the holders of claims in Classes M2 and M4. This stock will not be distributed.
Instead, it will be exchanged for New Senior Notes, New Convertible Preferred
Stock, and New Common Stock in accordance with the Plan and the terms of the
Plan of Merger.

I. Deemed Consolidation of Certain Debtors for Purposes of the Plan

For purposes of distributions to Classes G2, G4, and G5, the Genesis Debtors
will be considered to be a single legal entity. Similarly, for purposes of
distributions to Classes M2 and M4, the Multicare Debtors will be considered to
be a single legal entity (although separate from the Genesis Debtors). This
"deemed" consolidation has three major effects. First, it eliminates
intercompany claims from the treatment scheme. Second, it eliminates guaranties
of the obligations of one Genesis Debtor by another Genesis Debtor and one
Multicare Debtor by another Multicare Debtor. Finally, each claim filed in
Classes G2, G4, and G5 against any of the Genesis Debtors will be considered to
be a single claim against the consolidated Genesis Debtors and each claim filed
in Classes M2, M4, and M5 against any of the Multicare Debtors will be
considered to be a single claim against the consolidated Multicare Debtors.

The deemed consolidation will not affect the legal and organizational structure
of the Reorganized Debtors, the modification or reinstatement of claims in
Classes G1 and M1, guaranties or the grants of collateral in connection with any
financing entered into, or New Senior Notes issued, on the Effective Date or
pursuant to any contract or lease that is assumed under the Plan, or
distributions out of any insurance policies or proceeds of policies. The
foregoing deemed consolidation of the Genesis Debtors will result in the deemed
elimination of multiple and duplicative claims, joint and several liability
claims and guaranties, and the payment of allowed claims against each of the
Genesis Debtors from a common fund. The deemed consolidation of the Multicare
Debtors will have the same effect in their respective chapter 11 cases.

Subject to the proviso contained at the end of this section, the Genesis Debtors
and the Multicare Debtors believe that the foregoing deemed consolidation of
their respective estates is warranted in light of the criteria established by
the courts in ruling on the propriety of substantive consolidation in other
cases. The two critical factors considered in assessing the entitlement to
substantive consolidation are (i) whether creditors dealt with the Genesis
Debtors or the Multicare Debtors as a single economic unit and did not rely on
their separate identity in extending credit or (ii) whether the affairs of the
Genesis Debtors or the Multicare Debtors are so entangled that consolidation
will benefit all creditors. With respect to the first factor, creditors who make
loans on the basis of the financial status of a separate entity expect to be
able to look to the assets of their particular borrower for satisfaction of that
loan. The second factor involves whether there has been a commingling of the
assets and business functions and considers whether all creditors will benefit
because untangling is either impossible or so costly as to consume the assets.
The following is a discussion of these factors as they relate to the Genesis
Debtors and the Multicare Debtors.

1. Genesis Debtors

There is an ample factual basis for the deemed consolidation of the Genesis
Debtors. First, the holders of the Genesis Senior Lender Claims dealt with
substantially all the Genesis Debtors as a single economic unit and did not rely
on their separate identity in extending credit. Specifically, almost all the
Genesis Debtors are obligors under the credit agreement governing the Genesis
Senior Lender Claims. In addition, almost all the Genesis Debtors granted first
priority security interests in substantially all their assets and junior
security interests in certain properties already subject to liens to secure the
Genesis Senior Lender Claims. This course of dealing and the expectations of the
holders of the Genesis Senior Lender Claims together justify consolidation.

Second, the affairs of the Genesis Debtors are entangled to the extent that
consolidation will benefit all creditors. The Genesis Debtors consist of Genesis
and 152 of its direct and indirect subsidiaries. Genesis's integrated healthcare
networks provide inpatient, pharmacy, medical supply, and other healthcare
services through eldercare centers, long-term care pharmacies, medical supply
distribution centers serving over 1,000 eldercare centers, and community-based
pharmacies in over 40 states. There is little correlation between the names of
the centers and the names of the legal entities that technically own such
facilities. This fact alone will make it very difficult for creditors to
ascertain which Genesis Debtors they have a claim against. In fact, due to the
organization of their books and records, the Genesis Debtors filed with the
Bankruptcy Court their statement of financial affairs, schedules of assets and
liabilities, and schedules of executory contracts and unexpired leases on a
partially consolidated basis.

Third, the books and records of the Genesis Debtors reflect a large amount of
intercompany claims reflecting, among other things, advances from Genesis to
fund and build its operations, upstreamed funds from the other Genesis Debtors
to enable Genesis to make payments to creditors, the allocation of corporate
overhead, and the transfer of other property from one Genesis Debtor to another.
In view of the complexity of such transactions and the adjustments that have
been made over time, it would be difficult to reconcile intercompany claims
without embarking on an enormous effort that would diminish the return for all
creditors.

Finally, for the most part, the business units of the Genesis Debtors operate as
integrated units, without all the formalities of separate corporate entities. As
such the Genesis Debtors participate in a unified cash management system (which
includes non-Debtor subsidiaries) which would make it extremely difficult to
confirm a plan of reorganization for individual Genesis Debtors.

In view of the foregoing, the Genesis Debtors believe that creditors would not
be prejudiced to any significant degree by the deemed consolidation proposed in
the Plan of Reorganization, which is consistent with creditors' having dealt
with the Genesis Debtors as a single economic entity, and further believe that
such deemed consolidation would best utilize the Genesis Debtors' assets and
potential of all of the Genesis Debtors to pay to the creditors of each entity
the distributions proposed in the Plan of Reorganization.

2. Multicare Debtors

There is an ample factual basis for the deemed consolidation of the Multicare
Debtors. First, the Multicare Debtors all share a single manager - Genesis -
which, as a general matter, operates each of the Multicare Debtors under the
"Genesis" trade name.

Second, holders of the Multicare Senior Lender Claims dealt with substantially
all the Multicare Debtors as a single economic unit and did not rely on their
separate identity in extending credit. Specifically, almost all the Multicare
Debtors are obligors under the credit agreement governing the Multicare Senior
Lender Claims. In addition, almost all the Multicare Debtors granted first
priority security interests in substantially all their assets and junior
security interests in certain properties already subject to liens to secure the
Multicare Senior Lender Claims. This course of dealing and the expectations of
the holders of the Multicare Senior Lender Claims together justify
consolidation.

Third, the affairs of the Multicare Debtors are entangled to the extent that
consolidation will benefit all creditors. The Multicare Debtors operate as a
single enterprise, and have a single line of business -- the operation of
assisted living and skilled nursing care facilities. There is not always a
correlation between the names of the centers and the names of the legal entities
that technically own such facilities. This fact alone will make it very
difficult for some creditors to ascertain which Multicare Debtors they have a
claim against. In fact, due to the organization of their books and records, the
Multicare Debtors filed with the Bankruptcy Court their statement of financial
affairs, schedules of assets and liabilities, and schedules of executory
contracts and unexpired leases on a partially consolidated basis.

Fourth, the books and records of the Multicare Debtors reflect a large amount of
intercompany claims reflecting, among other things, advances from Multicare to
fund and build its operations, upstreamed funds from the other Multicare Debtors
to enable Multicare to make payments to creditors, the allocation of corporate
overhead, and the transfer of other property from one Multicare Debtor to
another. In view of the complexity of such transactions and the adjustments that
have been made over time, it would be difficult to reconcile intercompany claims
without embarking on an enormous effort that would diminish the return for all
creditors.

Finally, for the most part, the Multicare Debtors operate as a single integrated
unit, without all the formalities of separate corporate entities. As such the
Multicare Debtors participate in a unified cash management system (which
includes non-Debtor subsidiaries) which would make it extremely difficult to
confirm a plan of reorganization for individual Multicare Debtors.

In view of the foregoing, the Multicare Debtors believe that creditors would not
be prejudiced to any significant degree by the deemed consolidation proposed in
the Plan of Reorganization, which is consistent with creditors' having dealt
with the Multicare Debtors as a single economic entity, and further believe that
such deemed consolidation would best utilize the Multicare Debtors' assets and
potential of all of the Multicare Debtors to pay to the creditors of each entity
the distributions proposed in the Plan of Reorganization.

3. Proviso

In the event the Plan of Reorganization is not confirmed, any and all statements
made section II.I, above and any and all evidence presented with respect to the
appropriateness of the substantive consolidation of (i) each of the Genesis
Debtors into a single legal entity for purposes of distributions under the Plan
and (ii) each of the Multicare Debtors into a single legal entity for purposes
of distributions under the Plan, shall be deemed withdrawn by the Debtors and
shall not constitute admissions with respect to the appropriateness of
substantive consolidation of such entities.

J. Securities Law Matters

Holders of the allowed claims in Classes G2, G4, G5, M2, and M4 will receive
Plan Securities pursuant to the Plan of Reorganization. Section 1145 of the
Bankruptcy Code provides certain exemptions from the securities registration
requirements of federal and state securities laws with respect to the
distribution of securities under a plan of reorganization.

1. Issuance and Resale of New Securities Under the Plan of
Reorganization

Section 1145 of the Bankruptcy Code provides that the securities registration
requirements of federal and state securities laws do not apply to the offer or
sale of stock, warrants, or other securities by a debtor if (i) the offer or
sale occurs under a plan of reorganization, (ii) the recipients of securities
hold a claim against, an interest in, or claim for administrative expense
against the debtor, and (iii) the securities are issued in exchange for a claim
against or interest in a debtor or are issued principally in such exchange and
partly for cash and property. In reliance upon this exemption, the issuance of
the New Senior Notes, the New Convertible Preferred Stock, the New Common Stock,
and the New Warrants on the Effective Date as provided in the Plan of
Reorganization generally will be exempt from the registration requirements of
the Securities Act. Accordingly, such securities may be resold without
registration under the Securities Act or other federal securities laws pursuant
to an exemption provided by section 4(1) of the Securities Act, unless the
holder is an "underwriter" (see discussion below) with respect to such
securities, as that term is defined in the Bankruptcy Code. In addition, such
securities generally may be resold without registration under state securities
or "blue sky" laws pursuant to various exemptions provided by the respective
laws of the several states. However, recipients of securities issued under the
Plan of Reorganization are advised to consult with their own legal advisors as
to the availability of any such exemption from registration under state law in
any given instance and as to any applicable requirements or conditions to such
availability.

Section 1145(b)(1) of the Bankruptcy Code defines "underwriter" for purposes of
the Securities Act as one who, except with respect to "ordinary trading
transactions" of an entity that is not an "issuer," (A) purchases a claim
against, interest in, or claim for an administrative expense, with a view to
distribution of any security to be received in exchange for the claim or
interest, or (B) offers to sell securities issued under a plan to the holders of
such securities, or (C) offers to buy securities issued under a plan from the
holders of such securities, if the offer to buy is made with a view to
distribution of such securities and under an agreement made in connection with
the plan, the consummation of the plan, or the offer or sale of securities under
the plan, or (D) is an issuer of the securities within the meaning of section
2(11) of the Securities Act.

The term "issuer" is defined in section 2(4) of the Securities Act; however, the
reference contained in section 1145(b)(1)(D) of the Bankruptcy Code to section
2(11) of the Securities Act purports to include as statutory underwriters all
persons who, directly or indirectly, through one or more intermediaries,
control, are controlled by, or are under common control with, an issuer of
securities. "Control" (as defined in Rule 405 under the Securities Act) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise. Accordingly, an
officer or director of a reorganized debtor or its successor under a plan of
reorganization may be deemed to be a "control person" of such debtor or
successor, particularly if the management position or directorship is coupled
with ownership of a significant percentage of the reorganized debtor's or its
successor's voting securities. Moreover, the legislative history of section 1145
of the Bankruptcy Code suggests that a creditor who owns ten percent (10%) or
more of the securities of a reorganized debtor may be presumed to be a "control
person."

To the extent that persons deemed to be "underwriters" receive Plan Securities
pursuant to the Plan, resales by such persons would not be exempted by section
1145 of the Bankruptcy Code from registration under the Securities Act or other
applicable law. Entities deemed to be statutory underwriters for purposes of
section 1145 of the Bankruptcy Code may, however, be able, at a future time and
under certain conditions described below, to sell securities without
registration pursuant to the resale provisions of Rule 144 and Rule 144A under
the Securities Act.

Under certain circumstances, holders of Plan Securities deemed to be
"underwriters" may be entitled to resell their securities pursuant to the
limited safe harbor resale provisions of Rule 144. Generally, Rule 144 provides
that if certain conditions are met (e.g., the availability of current public
information with respect to the issuer, volume limitations, and notice and
manner of sale requirements), specified persons who resell "restricted
securities" or who resell securities which are not restricted but who are
"affiliates" of the issuer of the securities sought to be resold, will not be
deemed to be "underwriters" as defined in section 2(11) of the Securities Act.

Pursuant to the Plan, certificates evidencing Plan Securities received by a
holder of ten percent (10%) or more of the outstanding New Common Stock will
bear a legend substantially in the form below in the event the Debtors
reasonably believe such holder is an underwriter:

The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state or other jurisdiction
and may not be sold, offered for sale, or otherwise
transferred unless registered or qualified under said act and
applicable state securities laws or unless the company
receives an opinion of counsel reasonably satisfactory to it
that such registration or qualification is not required.

Any person or entity that would receive legended securities as provided above
may instead receive certificates evidencing Plan Securities without such legend
if, prior to the Effective Date, such person or entity delivers to Reorganized
Genesis (i) an opinion of counsel reasonably satisfactory to Reorganized Genesis
to the effect that the Plan Securities to be received by such person or entity
are not subject to the restrictions applicable to "underwriters" under section
1145 of the Bankruptcy Code and may be sold without registration under the
Securities Act and (ii) a certification that such person or entity is not an
"underwriter" within the meaning of section 1145 of the Bankruptcy Code.

Any holder of a certificate evidencing Plan Securities bearing such legend may
present such certificate to the transfer agent for the shares of Reorganized
Genesis for exchange for one or more new certificates not bearing such legend or
for transfer to a new holder without such legend at such time as (a) such shares
are sold pursuant to an effective registration statement under the Securities
Act or (b) such holder delivers to Reorganized Genesis an opinion of counsel
reasonably satisfactory to Reorganized Genesis to the effect that such shares
are no longer subject to the restrictions applicable to "underwriters" under
section 1145 of the Bankruptcy Code and may be sold without registration under
the Securities Act or to the effect that such transfer is exempt from
registration under the Securities Act, in which event the certificate issued to
the transferee shall not bear such legend, unless otherwise specified in such
opinion.

Whether or not any particular person would be deemed to be an "underwriter" of
Plan Securities to be issued pursuant to the Plan, or an "affiliate" of
Reorganized Genesis, would depend upon various facts and circumstances
applicable to that person. Accordingly, the Debtors express no view as to
whether any such person would be such an "underwriter" or an "affiliate."

In view of the complex, subjective nature of the question of
whether a particular person may be an underwriter or an affiliate of Reorganized
Genesis, the Debtors make no representations concerning the right of any person
to trade in Plan Securities. Accordingly, the Debtors recommend that potential
recipients of Plan Securities consult their own counsel concerning whether they
may freely trade such securities.

2. Listing

Reorganized Genesis will use reasonable commercial efforts to continue to be a
reporting company under the Securities Exchange Act of 1934 and will continue to
file periodic and current reports as required by that statute. Reorganized
Genesis will also list the New Common Stock on a nationally recognized market or
exchange or a qualifying interdealer quotation system. Listing criteria
initially may not be satisfied.

3. Secondary Stock Offering

Reorganized Genesis will undertake a secondary stock offering for up to 30% of
the shares of New Common Stock received by holders of Genesis Senior Lender
Claims and Multicare Senior Lender Claims. Reorganized Genesis will retain an
underwriter and holders of the New Common Stock may enter into underwriter
agreements with such entity. The secondary stock offering will take place as
soon as reasonably practical after the Effective Date, but no sooner than the
time when Reorganized Genesis has filed financial reports with the Securities
and Exchange Commission for two full financial quarters after the Effective
Date.

4. Registration Rights

The Plan of Reorganization provides for the execution of a registration rights
agreement, under which Reorganized Genesis will have the obligation to register
the Plan Securities. A copy of the registration rights agreement will be part of
the Plan Supplement.

K. Settlement and Compromise

The Plan incorporates two significant settlements under Bankruptcy Rule 9019.
The settlement with the federal government is being submitted for approval to
the Bankruptcy Court. Approval for the settlement between the Genesis Debtors
and the Multicare Debtors will be sought at the time of the hearing on
confirmation of the Plan. On the Effective Date, the settlement between the
Genesis Debtors and the Multicare Debtors will be binding on the Debtors and all
holders of claims or interests in these chapter 11 cases. Entry of the order
confirming the Plan will constitute a finding that this compromise and
settlement is in the best interests of the Genesis Debtors and the Multicare
Debtors, are fair, equitable, and reasonable, and are made in good faith in
accordance with Bankruptcy Rule 9019.

1. Settlement with the Federal Government

The Genesis Debtors have entered into a settlement agreement to resolve four
pending civil qui tam suits filed by private citizens under the federal False
Claims Act, 31 U.S.C. 3729 et seq. Each action will be dismissed and a release
executed, consistent with the settlement agreement, for a total payment of
$2,095,000, plus statutory attorney fees in the amount of approximately $80,000.
The Genesis Debtors dispute the allegations asserted in these actions, and the
agreement contains no admission of liability. The settlement agreement will
resolve all claims against the Debtors in connection with these suits.

The parties to the settlement agreement are Genesis and certain affiliates, the
private citizens who brought the suits, the Department of Justice, and the
Office of Inspector General for the Department of Health and Human Services. The
Department of Justice will provide a release of all administrative and civil
monetary claims under the False Claims Act, Civil Monetary Penalties Law,
Program Fraud Civil Remedies, common law theories of payment by mistake, unjust
enrichment, breach of contract, and fraud for the covered conduct in the
agreement. The Office of Inspector General will provide a release of its
permissive exclusion remedies for the covered conduct in the agreement.

The Debtors are in negotiation with the Health Care Financing Administration
over claims asserted by that agency, as well as claims asserted by Genesis and
Multicare regarding reimbursement issues. The parties are working towards a
global negotiation of the pending claims.

2. Settlement Between the Genesis Debtors and the Multicare Debtors

Genesis has managed the Multicare Debtors pursuant to certain management
services agreements since 1997. Those agreements were negotiated with the
majority owners of Multicare at that time. As of the date the Multicare Debtors
commenced their chapter 11 cases, approximately $36 million in deferred fees
under these management services agreement and approximately $57 million on
account of pharmacy, rehabilitation, and other ancillary services provided by
Genesis to the Multicare Debtors remained outstanding.

In May 2000, the Multicare Debtors retained Beverly Anderson as their
independent restructuring officer and as a director. Shortly thereafter, the
Multicare Debtors retained Ernst & Young and E&Y Capital Advisers to assist Ms.
Anderson in undertaking an investigation and evaluation of all the relationships
between the Genesis Debtors and the Multicare Debtors, including the management
services agreements. The Multicare Debtors, with the assistance of their legal
and financial advisors, also evaluated potential claims that they may have
against the Genesis Debtors. The Genesis Debtors engaged in a similar evaluation
with respect to claims they held against the Multicare Debtors and claims held
by the Multicare Debtors against the Genesis Debtors. These evaluations were not
completed before the December 19, 2000 bar date, and the Multicare Debtors and
the Genesis Debtors therefore agreed to extend the bar date to give them
additional time to complete their analyses. Pursuant to a series of stipulations
and orders, the bar date for the Multicare Debtors to assert claims against the
Genesis Debtors, and for the Genesis Debtors to assert claims against the
Multicare Debtors, presently is June 30, 2001.

After consideration of the merits of the claims between the Multicare Debtors
and the Genesis Debtors, and after a series of settlement discussions and
negotiations between the parties, the Genesis Debtors and the Multicare Debtors
have determined to enter into a Settlement and Release Agreement, a copy of
which will be part of the Plan Supplement. Pursuant to the Genesis/Multicare
Settlement, the Genesis Debtors and the Multicare Debtors shall set off their
claims against one another and waive and release any and all claims against one
another that they may have as of the date of the Settlement Agreement in excess
of such setoff. Under the Settlement Agreement, the Genesis Debtors also will
acknowledge and agree that they will not seek to recover from the Multicare
Debtors any deferred or unpaid management fees that might accrue or have accrued
under the Management Agreement on and after the Commencement Date. The Debtors
believe that the Genesis/Multicare Settlement represents a fair and equitable
settlement of the claims between the parties and satisfies the standards for
approval of settlements under Bankruptcy Rule 9019 and applicable law. As set
forth above, the Debtors will seek approval of the Genesis/Multicare Settlement
in connection with confirmation of the Plan.

L. Reservation of "Cram Down" Rights

The Bankruptcy Code permits the Bankruptcy Court to confirm a chapter 11 plan of
reorganization over the dissent of any class of claims or equity interests as
long as the standards in section 1129(b) are met. This power to confirm a plan
over dissenting classes -- often referred to as "cram down" -- is an important
part of the reorganization process. It assures that no single group (or multiple
groups) of claims or interests can block a restructuring that otherwise meets
the requirements of the Bankruptcy Code and is in the interests of the other
constituents in the case.

The Genesis Debtors and the Multicare Debtors each reserve the right to seek
confirmation of the Plan, notwithstanding the rejection of the Plan by any class
entitled to vote. In the event a class votes to reject the Plan, the Debtors
will request the Bankruptcy Court to rule that the Plan meets the requirements
specified in section 1129(b) of the Bankruptcy Code with respect to such class.
The Debtors will also seek such a ruling with respect to each class that is
deemed to reject the Plan.

III.

Voting Procedures And Requirements

Detailed voting instructions are provided with the ballot accompanying this
Disclosure Statement. The following classes are the only ones entitled to vote
to accept or reject the Plan.

Class Description
--------------- ---------------------------------------
G1-13 Brakeley Park Center
G1-14 North Cape Center
G1-15 Oak Hill Center
G1-16 Rittenhouse Pine Center
G1-17 Synthetic Lease Claims
G2 Genesis Senior Lender Claims
G4 Genesis General Unsecured Claims
G5 Genesis Senior Subordinated Note Claims
M1-7 Point Pleasant
M2 Multicare Senior Lender Claims
M4 Multicare General Unsecured Claims

If your claim is not in one of these classes, you are not entitled to vote and
you will not receive a ballot with this Disclosure Statement. If your claim is
in one of these classes, you should read your ballot and follow the listed
instructions carefully. Please use only the ballot that accompanies this
Disclosure Statement.

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

Ballot information number: 8xx.xxx.xxxx

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

A. Vote Required for Acceptance by a Class

Under the Bankruptcy Code, acceptance of a plan of reorganization by a class of
claims is determined by calculating the number and the amount of claims voting
to accept, based on the actual total claims voting. Acceptance requires an
affirmative vote of a majority of the total claims voting and two-thirds in
amount of the total claims voting.

B. Classes Not Entitled to Vote

Under the Bankruptcy Code, creditors are not entitled to vote if their
contractual rights are unimpaired by the Plan or if they will receive no
property under the Plan. Based on this standard, for example, the holders of
claims in Classes G3 and M3 and certain miscellaneous secured claims are not
being affected by the Plan. In addition, the holders of claims in Classes G7,
M5, and M7 and holders of equity interests in Classes G8, G9, G10, G11, and M8
are not receiving any property and are therefore deemed to reject the Plan. For
a summary of the classes entitled to vote, see the charts in section II.C,
above.

C. Voting

In order for your vote to be counted, your vote must be received by the voting
agent at the following address before the voting deadline of __:__ _.m., Eastern
time, on __________, 2001:

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

Voting Agent:
[address]

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

If the instructions on your ballot require you to return the ballot to your
bank, broker, or other nominee, or to their agent, you must deliver your ballot
to them in sufficient time for them to process it and return it to the voting
agent before the voting deadline. If a ballot is damaged or lost, you may
contact the Debtors' voting agent at the number set forth above. Any ballot that
is executed and returned but which does not indicate an acceptance or rejection
of the Plan of Reorganization will not be counted.

IV.

Financial Information, Projections, And Valuation Analyses

A. Introduction

This section provides summary information concerning the recent financial
performance of the Genesis Debtors and the Multicare Debtors. They also provide
a summary of five year projections and financial statements for each group of
Debtors. Finally, the following discusses an estimate of a going concern
valuation for the Genesis Debtors and the Multicare Debtors, based on
information available at the time of the preparation of this Disclosure
Statement. For purposes of these valuations, the Genesis Debtors and an
independent Restructuring Officer for the Multicare Debtors renegotiated the
terms of the management and service agreements between the Debtors to reflect
current market conditions. The effects of those changes have been included in
the projections and valuations described below.

The financial projections assume that the Plan will be confirmed and consummated
in accordance with its terms and that there will be no material change in the
legislation or negotiation that will have an unexpected impact on the Debtors'
operations. The Projections assume an Effective Date of September 30, 2001, with
allowed claims treated in accordance with those provided for in the Plan.
Expenses incurred as a result of the reorganization cases are assumed to be paid
upon confirmation of the Plan of Reorganization. If the Debtors do not emerge
from chapter 11 by September 30, 2001, additional bankruptcy expenses will be
incurred until such time as a plan of reorganization is confirmed. These
expenses could significantly impact the Debtors' results of operations and cash
flows. The financial projections of both Genesis and Multicare were prepared
individually and on an unlevered basis. Pursuant to the Plan, the Debtors are to
be merged, and accordingly, the impact of the new Plan Securities is reflected
on a pro forma consolidated basis.

It is important to note that the projections and estimates of values described
below may differ from actual performance and are highly dependent on significant
assumptions concerning the future operations of these businesses. These
assumptions include reimbursement levels under the Medicare and state Medicaid
programs, professional liability insurance costs, growth of certain lines of
business, labor, and other operating costs, inflation, and the level of
investment required for capital expenditures and working capital. Please refer
to section IX, below, for a discussion of many of the factors that could have a
material effect on the information provided in this section.

The estimates of value are not intended to reflect the values that may be
attainable in public or private markets. They also are not intended to be
appraisals or reflect the value that may be realized if assets are sold.

B. The Genesis Debtors

1. Operating Performance

For a recent description of the operating performance of the Genesis Debtors and
the Multicare Debtors on a consolidated basis, see the Form 10-K for the fiscal
year ended September 30, 2000, which was filed by Genesis with the Securities
and Exchange Commission on February 21, 2001, and the Form 10-Q for the period
ended March 31, 2001, which was filed by Genesis on May 17, 2001. The following
is a consolidating balance sheet and income statement indicating the relative
contribution of Genesis and Multicare, individually, to the consolidated totals
for the same periods.

Balance Sheet for the Year Ended December 31, 2000 ($000)

Genesis Multicare Eliminations Consolidated
--------------- --------------- --------------- ---------------

Cash and equivalents $ 3,312 $ 19,636 $ - $ 22,948
Restricted investments in marketable securities 27,899 - - 27,899
Accounts receivable, net 396,473 101,953 (51,812) 446,614
Other current assets 102,931 16,929 - 119,860
-------------- -------------- -------------- --------------
Current Assets 530,615 138,518 (51,812) 617,321
Property and equipment, net 543,901 563,445 - 1,107,346
Goodwill and other intangibles, net 897,500 337,806 - 1,235,306
Other long-term assets 207,401 61,924 (101,399) 167,926
-------------- -------------- -------------- --------------
Total Assets $ 2,179,417 $ 1,101,693 $ (153,211) $ 3,127,899
============== ============== ============== ==============
Current installments of long-term debt $ 133,000 $ - $ - $ 133,000
Other current liabilities 127,440 69,694 (17,054) 180,080
-------------- -------------- -------------- --------------
Current Liabilities 260,440 69,694 (17,054) 313,080

Liabilities subject to compromise 1,665,921 875,111 (94,359) 2,446,673
Deferred income taxes - 54,082 - 54,082
Other long term liabilities 51,113 14,141 (3,140) 62,114

Minority interest 6,052 - 50,007 56,059
Redeemable preferred stock (subject to compromise) 442,820 - - 442,820
Shareholders' equity (deficit) (246,929) 88,665 (88,665) (246,929)
-------------- -------------- -------------- --------------
Total Liabilities and shareholders'
deficit $ 2,179,417 $ 1,101,693 $ (153,211) $ 3,127,899
============== ============== ============== ==============

Income Statement for the Year Ended September 30, 2000 ($000)

Genesis Multicare Eliminations Consolidated
--------------- -------------- ---------------- ---------------

Pharmacy and medical supply services $ 993,215 $ - $ (40,865) $ 952,350
Inpatient services 688,073 632,078 - 1,320,151
Other revenues 243,126 13,501 (95,270) 161,357
------------- ---------- ------------ -----------
Revenues, net 1,924,414 645,579 (136,135) 2,433,858

Operating expenses
Operating expenses 1,740,701 592,865 (136,135) 2,197,431
Debt restructuring, reorganization and
other charges 250,999 186,503 - 437,502
Loss on sale of eldercare centers - 7,922 - 7,922
Multicare joint venture restructuring charge 420,000 - - 420,000
------------- ---------- ------------ -----------
EBITDAR (487,286) (141,711) - (628,997)
Lease expense 25,159 12,965 - 38,124
------------- ---------- ------------ -----------
EBITDA (512,445) (154,676) - (667,121)
Depreciation and amortization 78,897 38,064 - 116,961
Interest expense (Note A) 145,627 57,943 - 203,570
------------- ---------- ------------ -----------
Pretax loss before income tax (benefit), minority
interest, equity in net income (loss) of
unconsolidated affiliates and cumulative
effect of accounting change $ (736,969) $(250,683) $ - $ (987,652)
============= ========== ============ ===========

Note A - Genesis and Multicare contractual interest expense for the period
presented was $155,345 and $76,154, respectively.

Balance Sheet as of March 31, 2001 ($000)

Genesis Multicare Eliminations Consolidated
--------------- --------------- --------------- ---------------

Cash and equivalents $ - $ 23,867 $ - $ 23,867
Restricted investments in marketable securities 34,493 - - 34,493
Accounts receivable, net 390,086 99,221 (50,912) 438,395
Other current assets 118,747 15,046 - 133,793
------------- ---------- ------------ -----------
Current Assets 543,326 138,134 (50,912) 630,548

Property and equipment, net 542,938 539,093 - 1,082,031
Goodwill and other intangibles, net 884,055 332,489 - 1,216,544
Other long-term assets 194,883 59,485 (99,689) 154,679
------------- ---------- ------------ -----------
Total Assets $ 2,165,202 $1,069,201 $ (150,601) $ 3,083,802
============= ========== ============ ===========
Current installments of long-term debt $ 165,000 $ - $ - $ 165,000
Other current liabilities 145,879 59,684 (14,396) 191,167
------------- ---------- ------------ -----------
Current Liabilities 310,879 59,684 (14,396) 356,167

Liabilities subject to compromise 1,657,661 855,372 (92,909) 2,420,124
Deferred income taxes - 54,082 - 54,082
Other long term liabilities 50,335 22,567 (9,508) 63,394
Minority interest 5,652 - 43,708 49,360
Redeemable preferred stock (subject to
compromise) 455,735 - - 455,735

Shareholders' equity (deficit) (315,060) 77,496 (77,496) (315,060)
------------- ---------- ------------ -----------
Total Liabilities and shareholders'
deficit $ 2,165,202 $1,069,201 $ (150,601) $ 3,083,802
============= ========== ============ ===========

Income Statement for the Six Months Ended March 31, 2001 ($000)

Genesis Multicare Eliminations Consolidated
--------------- --------------- --------------- ---------------

Pharmacy and medical supply services $ 529,543 $ - $ (18,368) $ 511,175
Inpatient services 354,084 313,890 - 667,974
Other revenues 129,443 5,384 (54,875) 79,952
------------- ---------- ------------ -----------
Revenues, net 1,013,070 319,274 (73,243) 1,259,101
Operating expenses
Operating expenses 922,881 295,015 (73,243) 1,144,653
Debt restructuring, reorganization and
other charges 20,305 7,901 - 28,206
(Gain)/loss on sale of eldercare center (1,770) 2,310 - 540
------------- ---------- ------------ -----------
EBITDAR 71,654 14,048 - 85,702
Lease expense 12,301 6,200 - 18,501
------------- ---------- ------------ -----------
EBITDA 59,353 7,848 - 67,201
Depreciation and amortization 36,466 16,921 - 53,387
Interest expense (Note A) 63,469 2,298 - 65,767
------------- ---------- ------------ -----------
Pretax loss before income tax (benefit), minority
interest and equity in net income (loss) of
unconsolidated affiliates $ (40,582) $ (11,371) $ - $ (51,953)
============= ========== ============ ===========

Note A - Genesis and Multicare contractual interest expense for the period
presented was $41,798 and $19,954, respectively.

2. Five Year Projections

General Operating Assumptions. Genesis will continue to operate its healthcare
service businesses through its five lines of business: ElderCare, NeighborCare
Pharmacies, Rehabilitation Services, Other Services, and Management Services &
Overhead. ElderCare operates long-term care nursing facilities, NeighborCare is
Genesis's institutional pharmacy business and medical supply business, and
Rehabilitation Services is the rehabilitation therapy business. Other Services
includes hospitality services, group purchasing services, diagnostic services,
consulting services, and physician services. Management Services & Overhead
includes third party management contracts and administrative costs.

The operation of Genesis's business will not change materially from that
described in Genesis's Form 10-K as of and for the year ended September 30,
2000. The financial projections generally assume inflationary rate increases and
relatively stable occupancy and pharmacy beds served. The financial projections
do not assume that Genesis acquires additional nursing facilities or new
institutional pharmacies.

Fiscal year 2001 reflects the Genesis Business Plan developed through a detailed
bottom-up budgeting approach. Fiscal years 2002-2006 have been projected using
fiscal year 2001 as a basis and adjusted for anticipated changes in government
reimbursement, patient mix, occupancy rates, and industry trends. The following
represents the highlights of the financial projections:

o No growth assumed from acquisitions

o Revenue CAGR 2001-2006 of 5.6%

o EBITDA CAGR 2001-2006 of 4.5%

o EBITDA Margin % at 7.7% in 2001, increasing to 8.0% in 2002
and declining to 7.5% in 2006

o Capital expenditures at $40 million in 2001 and growing at a
CAGR from 2001 to 2006 of 4.5%

Projections. The following table presents summary projected financial
information for Genesis:

Fiscal Years ($ in 000's)
------------ ------------- ------------- ------------- ------------ -------------
2001 2002 2003 2004 2005 2006
------------ ------------- ------------- ------------- ------------ -------------

Revenue $2,039,000 2,126,000 2,229,000 2,349,000 2,476,000 2,610,000
EBITDA 158,000 170,000 174,000 182,000 190,000 197,000
EBITDA % 7.7% 8.0% 7.8% 7.7% 7.7% 7.5%

Capital Expenditures 40,000 42,000 44,000 46,000 48,000 50,000

More detailed information on the financial projections is included in the Plan
Supplement.

3. Going Concern Valuation

UBS Warburg has acted as financial advisor for the Genesis Debtors in their
chapter 11 cases. In connection with UBS Warburg's engagement, Genesis requested
that UBS Warburg analyze the enterprise value of Genesis. The valuation analyses
did not address other aspects of the proposed restructuring or any related
transaction. The valuation analyses were prepared for the information of the
Board of Directors of Genesis in connection with its consideration of the Plan
of Reorganization and for the purpose of determining the value available to
distribute to creditors pursuant the Plan and the relative recoveries to
creditors thereunder. These analyses do not constitute a recommendation to any
holder of claims against Genesis as to how to vote on the Plan. UBS Warburg's
estimate of a range of enterprise value does not constitute an opinion as to the
fairness from a financial point of view of the consideration to be received
under the Plan or of the terms and provisions of the Plan.

In arriving at its views on valuation, UBS Warburg reviewed the Plan and certain
related documents, as well as publicly available business and financial
information relating to Genesis. UBS Warburg also reviewed other information
relating to Genesis, including the 2001 to 2006 financial projections (the
"Genesis Projections") (which are included in the Plan Supplement), which
Genesis provided to or discussed with UBSW, and met with the management of
Genesis to discuss the business and prospects of Genesis. A summary of the
Genesis Projections are included above. UBS Warburg also considered financial
data of Genesis and compared that data with similar data for other publicly held
companies in businesses similar to Genesis and considered, to the extent
publicly available, the financial terms of restructurings and other similar
transactions that have recently been effected. UBS Warburg also considered other
information, financial studies, analyses and investigations, and financial,
economic, and market criteria that it deemed relevant.

The analysis of comparable companies involved identifying a group of publicly
traded companies comparable, in whole or in part, to Genesis and then
calculating ratios of the enterprise values and equity values (based on publicly
traded stock prices) for such companies to certain operating and financing data
estimates for such companies (i.e., EBITDAR and EBITDA). The ranges of ratios
indicated by such analysis were then applied to corresponding operating and
financial data and estimates for Genesis based on the Genesis Projections to
derive an implied enterprise value. UBS Warburg also conducted a discounted cash
flow analysis applied on the unlevered free cash flows that Genesis would
generate assuming the Genesis Projections were realized. Based on discussions
with management, UBS Warburg then applied a range of perpetual growth rates and
discount rates based upon the weighted average cost of capital ("WACC") for
Genesis after the restructuring. Genesis's WACC was determined by analyzing the
WACC of comparable companies and applying the comparable companies' unlevered
betas to Genesis's reorganized capital structure.

In connection with its review, UBS Warburg did not assume any responsibility for
independent verification of any of the information that was provided to, or
otherwise reviewed by, it and relied on that information being complete and
accurate in all material respects. With respect to financial forecasts, UBS
Warburg was advised, and assumed, that the Genesis Projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of Genesis's management as to the future financial performance of
Genesis after giving effect to the proposed restructuring. No representation or
warranty, express or implied, can be or is made by UBS Warburg as to the
accuracy or achievability of any such valuations, estimates, and/or forecasts,
and UBS Warburg expressly disclaims any and all liability relating to or
resulting from the use of this material. In addition, UBS Warburg assumed that
the restructuring would be completed in accordance with the terms of the Plan
without any amendments, modifications, or waivers and also assumed that in the
course of obtaining the necessary judicial, regulatory, and third party consents
for the proposed restructuring and related transactions, there will be no
delays, modifications, or restrictions imposed that will have a material,
adverse effect on the contemplated benefits of the proposed restructuring to
Genesis. UBS Warburg was not requested to, and did not, make an independent
evaluation or appraisal of the individual assets or liabilities, contingent or
otherwise, of Genesis, and was not furnished with any such evaluations or
appraisals. UBS Warburg's valuation analyses were based on information available
to, and financial, economic, market, and other conditions as they existed and
could be evaluated by, UBS Warburg on April 6, 2001. Actual results may vary
from such estimates, valuation, or forecasts and such variations may be
material.

The preparation of valuation analyses is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to particular facts and
circumstances, many of which are beyond the control of Genesis and UBS Warburg.
The valuation range indicated by UBS Warburg's analyses is not necessarily
indicative of the prices at which the common stock or other securities of
Genesis may be bought or sold or predictive of future financial results or
values, which may be significantly more or less favorable than those indicated
by the analyses. Accordingly, UBS Warburg's analyses and estimates are
inherently subject to substantial uncertainty.

UBS Warburg has advised Genesis that, based upon and subject to the foregoing,
as of April 6, 2001, their analyses indicated that the enterprise value of
Genesis would be between $1.0 billion and $1.25 billion.

C. The Multicare Debtors

1. Operating Performance

For a recent description of the operating performance of the Multicare Debtors,
see the Form 10-K for the fiscal year ended September 30, 2000, which was filed
by The Multicare Companies, Inc. (the wholly-owned subsidiary of Multicare) with
the Securities and Exchange Commission on February 21, 2001, and the Form 10-Q
for the period ended March 31, 2001, which was filed on May 17, 2001.

2. Five Year Projections

General Operating Assumptions. The Multicare only projections are exclusive of
capital structure (100% equity) and fresh-start accounting is not applied. The
projections assume no taxes are paid and no interest is either paid or accrued.
These assumptions are made since a capital structure is not relevant in
determining a total enterprise value for Multicare and the post-bankruptcy
capital structure is relevant to feasibility and other issues as applied against
only the pro forma consolidated Genesis and Multicare. Accordingly, these issues
are discussed in the consolidated assumption section of the Disclosure
Statement.

Multicare will continue to operate in its primary line of business of ElderCare
which operates nursing facilities.

The operations of Multicare's business will not change materially from that
described in Multicare's Form 10-K as of and for the year ended September 30,
2000. The financial projections generally assume inflationary rate increases and
relatively stable occupancy. The financial projections do not assume that
Multicare will acquire additional nursing facilities. Fiscal year 2001 reflects
the Multicare Business Plan developed through a detailed bottom-up budgeting
approach. Fiscal years 2002-2006 have been projected using fiscal year 2001 as a
basis and adjusted for anticipated changes in government reimbursement, patient
mix, occupancy rates and industry trends. The following represents the
highlights of the financial projections:

o No growth assumed from acquisitions

o Revenue CAGR 2001-2006 of 3.3%

o EBITDA CAGR 2001-2006 of 4.4%

o EBITDA Margin % at 8.7% in 2001, increasing to 9.2% in 2003,
and remaining constant through 2006

o Capital expenditures at $10 million in 2001 and growing at a
CAGR from 2001 to 2006 of 4.2%

Projections. The following table presents summary projected financial
information for Multicare:

Revenue $641,800 670,100 690,500 711,500 733,100 755,300
EBITDA 56,000 59,400 63,300 65,200 67,300 69,500
EBITDA % 8.7% 8.9% 9.2% 9.2% 9.2% 9.2%

Capital Expenditures 10,000 10,400 10,800 11,200 11,700 12,200

More detailed information on the financial projections is included in the Plan
Supplement.

3. Going Concern Valuation

Credit Suisse First Boston Corporation ("CSFB") has acted as financial advisor
for the Multicare Debtors in their chapter 11 cases. In connection with CSFB's
engagement, Multicare requested that CSFB analyze the enterprise value of
Multicare. The valuation analyses did not address other aspects of the proposed
restructuring or any related transaction. The valuation analyses were prepared
for the information of the Board of Directors of Multicare in connection with
its consideration of the Plan of Reorganization and for the purpose of
determining the value available to distribute to creditors pursuant the Plan and
the relative recoveries to creditors thereunder. These analyses do not
constitute a recommendation to any holder of claims against Multicare as to how
to vote on the Plan. CSFB's estimate of a range of enterprise value does not
constitute an opinion as to the fairness from a financial point of view of the
consideration to be received under the Plan or of the terms and provisions of
the Plan.

In arriving at its views on valuation, CSFB reviewed the Plan and certain
related documents, as well as publicly available business and financial
information relating to Multicare. CSFB also reviewed other information relating
to Multicare, including the 2001 to 2006 financial projections (the "Multicare
Projections") (which are included in the Plan Supplement), which Multicare
provided to or discussed with CSFB, and met with the management of Multicare to
discuss the business and prospects of Multicare. A summary of the Multicare
Projections is included above. CSFB also considered financial data of Multicare
and compared that data with similar data for other publicly held companies in
businesses similar to Multicare and considered, to the extent publicly
available, the financial terms of restructurings and other similar transactions
that have recently been effected. CSFB also considered other information,
financial studies, analyses and investigations, and financial, economic, and
market criteria that it deemed relevant.

The analysis of comparable companies involved identifying a group of publicly
traded companies comparable, in whole or in part, to Multicare and then
calculating ratios of the enterprise values and equity values (based on publicly
traded stock prices) for such companies to certain operating and financing data
estimates for such companies (i.e., EBITDAR and EBITDA). The ranges of ratios
indicated by such analysis were then applied to corresponding operating and
financial data and estimates for Multicare based on the Multicare Projections to
derive an implied enterprise value. CSFB also conducted a discounted cash flow
analysis applied on the unlevered free cash flows that Multicare would generate
assuming the Multicare Projections were realized. Based on discussions with
management, CSFB then applied a range of perpetual growth rates and discount
rates based upon the weighted average cost of capital ("WACC") for Multicare
after the restructuring. Multicare's WACC was determined by analyzing the WACC
of comparable companies and applying the comparable companies' unlevered betas
to Multicare's reorganized capital structure.

In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information that was provided to, or
otherwise reviewed by, it and relied on that information being complete and
accurate in all material respects. With respect to financial forecasts, CSFB was
advised, and assumed, that the Multicare Projections were reasonably prepared on
bases reflecting the best currently available estimates and judgments of
Multicare's management as to the future financial performance of Multicare after
giving effect to the proposed restructuring. In addition, CSFB assumed that the
restructuring would be completed in accordance with the terms of the Plan
without any amendments, modifications, or waivers and also assumed that in the
course of obtaining the necessary judicial, regulatory, and third party consents
for the proposed restructuring and related transactions, there will be no
delays, modifications, or restrictions imposed that will have a material,
adverse effect on the contemplated benefits of the proposed restructuring to
Multicare. CSFB was not requested to, and did not, make an independent
evaluation or appraisal of the individual assets or liabilities, contingent or
otherwise, of Multicare, and was not furnished with any such evaluations or
appraisals. CSFB's valuation analyses were based on information available to,
and financial, economic, market, and other conditions as they existed and could
be evaluated by, CSFB on March 19, 2001.

The preparation of valuation analyses is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to particular facts and
circumstances, many of which are beyond the control of Multicare and CSFB. The
valuation range indicated by CSFB's analyses is not necessarily indicative of
the prices at which the common stock or other securities of Multicare may be
bought or sold or predictive of future financial results or values, which may be
significantly more or less favorable than those indicated by the analyses.
Accordingly, CSFB's analyses and estimates are inherently subject to substantial
uncertainty.

CSFB has advised Multicare that, based upon and subject to the foregoing, as of
March 20, 2001, their analyses indicated that the enterprise value of Multicare
would be between $350 million and $400 million.

D. Reorganized Genesis (Merger of Genesis and Multicare)

1. Operating Performance

Genesis currently reports its financial results on a consolidated basis with
Multicare. The most recent results can be found in the Form 10-K for the fiscal
year ended September 30, 2000, which was filed with the Securities and Exchange
Commission on February 21, 2001, and the Form 10-Q for the fiscal quarter ended
March 31, 2001, which was filed on May 17, 2001.

2. Five Year Projections

The following table presents summary projected financial information for the
combined companies of Genesis and Multicare:

Fiscal Years ($ in 000's)
---------------------------------------------------------------------------------
2001 2002 2003 2004 2005 2006
------------ ------------- ------------- ------------- ------------ -------------

Revenue $2,545,443 2,660,686 2,783,726 2,924,518 3,073,072 3,229,942
EBITDA 214,457 229,743 238,163 247,495 257,094 266,917
EBITDA % 8.4% 8.6% 8.6% 8.5% 8.4% 8.3%

Capital Expenditures 50,000 52,400 54,800 57,200 59,700 62,200

More detailed information on the financial projections is included in the Plan
Supplement.

Business Description and Reasons for Chapter 11

A. The Debtors' Businesses

The Genesis Debtors and the Multicare Debtors are leading providers of
healthcare and support services to the elderly. They operate inpatient
facilities in five regional areas of the United States and a national pharmacy
and medical supply business. The Genesis Debtors also provide an extensive range
of rehabilitation therapy services, including speech pathology and physical and
occupational therapy, through six certified rehabilitation agencies. Other
related healthcare services provided by the Genesis Debtors include management
of elder care centers, group purchasing and shared services programs, portable
x-ray, diagnostic, home healthcare, physician, adult day care, staffing,
transportation, and consulting services.

1. Relationship Between the Genesis Debtors and the Multicare Debtors

Prior to October 1997, The Multicare Companies, Inc. was publicly-owned and not
affiliated with the Genesis Debtors. Genesis, The Cypress Group, L.L.C., TPG
Partners II, L.P., and Nazem, Inc. formed Genesis ElderCare Corp. for the
purpose of acquiring The Multicare Companies, Inc. Through a tender offer and
merger transaction, Genesis ElderCare Corp. (a Multicare Debtor) acquired 100%
of the outstanding stock of The Multicare Companies, Inc. Genesis owns 43.6% of
the common stock of Genesis ElderCare Corp. Genesis ElderCare Network Services,
Inc., one of the Genesis Debtors, manages Genesis ElderCare Corp. pursuant to a
management services agreement, dated as of October 7, 1997.

At the time the management services agreement and other agreements were entered
into, Multicare was controlled by parties unrelated to Genesis or the Genesis
Debtors. The terms of these agreements were the product of arm's-length
negotiations between Genesis and the parties controlling Multicare and the
agreements were approved by Multicare's independent board of directors. In
addition, the terms were disclosed at the time of the issuance of Multicare's
senior subordinated notes (Class M5).

Services provided by Genesis to Multicare under the management services and
other agreements between the parties include operational oversight and
management of Multicare's inpatient facilities, rehabilitation, pharmacy,
medical supply, and other operational services, as well as accounting, financial
services, and corporate administrative services. (In addition to the management
services agreement, Genesis (through Genesis ElderCare Rehabilitation Services,
Inc., a Genesis Debtor) is the predominant provider of inpatient and outpatient
rehabilitation services for Multicare's facilities, and Genesis also is
currently the predominant provider of institutional pharmacy services for
Multicare's facilities.) In accordance with the understandings between Genesis
and Multicare's independent board, the prices under the ancillary agreements
were adjusted each year to reflect changes in the marketplace and the market
median rate charged by Genesis for similar goods and services provided to other
parties.

In November 1999, as part of an overall restructuring of the financial
obligations of Genesis and Multicare, Genesis became the effective controlling
shareholder of Multicare. At that time, the independent members of the board of
directors of Multicare resigned. At no time since that change in control were
any changes made to the management services and other agreements that were
beneficial to Genesis. Within seven months after the change in control, both
Genesis and Multicare filed these chapter 11 cases.

Multicare's board of directors now consists of two members of Genesis's board of
directors, one Genesis officer, and one independent director and officer
unaffiliated with Genesis (the "Independent Director"). Each of Multicare's
officers (other than the Independent Director) is also an officer of or
affiliated with Genesis. As Multicare has no corporate infrastructure and relies
upon Genesis to provide operational oversight and accounting, financial and
corporate administrative services, the Independent Director was hired in May
2000 to review and evaluate Multicare's relationships with Genesis.

To assist the Independent Officer in performing its duties, Multicare retained
Ernst & Young and E&Y Capital Advisers (together, "E&Y") to conduct a
comprehensive review and analysis of the related party transactions between
Genesis and Multicare. In this regard, E&Y reviewed the following broad lines of
contractual and/or business relationships between Genesis and Multicare: (a)
Genesis's management of Multicare; (b) Genesis's provision of rehabilitation
services to Multicare; (c) Genesis's provision of hospitality services to
Multicare; and (d) Genesis's provision of pharmacy services to Multicare. More
specifically, E&Y evaluated, among other matters, (i) whether the rehabilitation
therapy rates being charged by Genesis were the same or better than those
Genesis charged to third parties, (ii) the expected costs and required
management structure if Multicare were to provide these services directly, (iii)
the costs, benefits, and structure of the hospitality services (such as food,
dietary, housekeeping, linen, and laundry services) being provided by Genesis to
Multicare, (iv) the cost and structure of the management services agreement, and
(v) the cost and structure of the pharmacy services being provided by Genesis to
Multicare.

The Independent Director, utilizing the findings and recommendations of E&Y,
thereafter engaged in negotiations with Genesis management regarding the terms
of the related party relationships to reflect current market conditions.
Ultimately, Multicare and Genesis agreed to modifications of the related party
business and contractual relationships that resulted in an annualized cost
savings to the Multicare Debtors of approximately $12 million. The effects of
these changes have been included in the budgets, projections, and valuations
described in section IV, above. Thus, the effects have been included in the
materials needed for valuation of the separate estates of the Genesis Debtors
and the Multicare Debtors. However, the effects of the changes have not been
reflected in Multicare's historical financial statements and new contracts have
not actually been entered into due to the proposed merger of Genesis and
Multicare.

2. Pharmacy and Medical Supply Services (Genesis Debtors)

The Genesis Debtors provide pharmacy and medical supply services through their
NeighborCare pharmacy subsidiaries. Included in pharmacy and medical supply
service revenues are institutional pharmacy revenues, which include the
provision of prescription and nonprescription pharmaceuticals, infusion therapy,
medical supplies, and equipment provided to eldercare centers operated by the
Genesis Debtors, as well as to independent healthcare providers by contract. The
pharmacy services provided in these settings are tailored to meet the needs of
the institutional customer. These services include highly specialized packaging
and dispensing systems, computerized medical records processing, and 24-hour
emergency services. NeighborCare provides institutional pharmacy products and
services to the elderly, chronically ill, and disabled in long-term care and
alternate sites settings, including skilled nursing facilities, assisted living
facilities, residential and independent living communities, and the home. The
Genesis Debtors also provide pharmacy consulting services to assure proper and
effective drug therapy. The Genesis Debtors provided these services through
institutional pharmacies (one is jointly-owned) and medical supply distribution
centers located in their various market areas. In addition, the Genesis Debtors
operated community-based pharmacies which are located in or near medical
centers, hospitals, and physician office complexes. The community-based
pharmacies provide prescription and over-the-counter medications and certain
medical supplies as well as personal service and consultation by licensed
professional pharmacists. Approximately 91% of the sales attributable to all
pharmacy operations in the twelve months ended September 30, 2000 were generated
through external contracts with independent healthcare providers, with the
balance attributable to centers owned or leased by the Genesis Debtors,
including centers jointly owned with the Multicare Debtors.

3. Inpatient Services (Genesis Debtors and Multicare Debtors)

The Genesis Debtors own, lease, or manage eldercare centers, standalone assisted
living facilities, and transitional care units located in 15 states. These
include eldercare centers owned or leased by the Multicare Debtors. The skilled
nursing centers of the Genesis Debtors and the Multicare Debtors offer three
levels of care for their customers: skilled, intermediate, and personal. Skilled
care provides 24-hour per day professional services of a registered nurse;
intermediate care provides less intensive nursing care; and personal care
provides for the needs of customers requiring minimal supervision and
assistance. Each eldercare center is supervised by a licensed healthcare
administrator and engages the services of a Medical Director to supervise the
delivery of healthcare services to residents and a Director of Nursing to
supervise the nursing staff. The Genesis Debtors maintain a corporate quality
assurance program to monitor regulatory compliance and to enhance the standard
of care provided in each center.

The Genesis Debtors have established and actively market programs for elderly
and other customers who require subacute levels of medical care. These programs
include ventilator care, intravenous therapy, postsurgical recovery, respiratory
management, orthopedic or neurological rehabilitation, terminal care, and
various forms of coma, pain, and wound management. Private insurance companies
and other third party payors, including certain state Medicaid programs, have
recognized that treating customers requiring subacute medical care in centers
such as those operated by the Genesis Debtors and the Multicare Debtors is a
cost-effective alternative to treatment in an acute care hospital. The Genesis
Debtors and the Multicare Debtors provide such care at rates that they believe
are substantially below the rates typically charged by acute care hospitals for
comparable services.

4. Other Services (Genesis Debtors and Multicare Debtors)

Rehabilitation Therapy. The Genesis Debtors provide an extensive range of
rehabilitation therapy services, including speech pathology, physical therapy,
and occupational therapy, through six certified rehabilitation agencies in all
five of their regional market concentrations. These services are provided by
approximately 3,200 licensed rehabilitation therapists and assistants employed
or contracted by Genesis to substantially all of the eldercare centers it
operates, as well as by contract to healthcare facilities operated by others.

Management Services. The Genesis Debtors provided management services to 190
eldercare centers (including those owned or leased by the Multicare Debtors)
pursuant to management agreements that provide generally for the day-to-day
responsibility for the operation and management of the centers. In turn, the
Genesis Debtors receive management fees, depending on the agreement, computed as
either an overall fixed fee, a fixed fee per customer, a percentage of net
revenues of the center plus an incentive fee, or a percentage of gross revenues
of the center with some incentive clauses. The various management agreements,
including option periods, are scheduled to terminate between 2001 and 2015. The
Genesis Debtors have arranged for the extension of various mortgage and other
loans to certain facilities under management contract. The Multicare Debtors
also provided management services to eldercare centers pursuant to similar
management agreements in return for management fees specified in the relevant
agreement.

Group Purchasing. The Genesis Debtors jointly own and operate The Tidewater
Healthcare Shared Services Group, Inc. ("Tidewater"), one of the largest group
purchasing companies in the MidAtlantic region. Tidewater provides purchasing
and shared service programs specially designed to meet the needs of eldercare
centers and other long-term care facilities. Tidewater's services are contracted
to approximately 3,100 members with over 308,000 beds in 45 states and the
District of Columbia.

Other Services. The Genesis Debtors employ or have consulting arrangements with
approximately 81 physicians, physician assistants, and nurse practitioners who
are primarily involved in designing and administering clinical programs and
directing patient care. The Genesis Debtors also provide an array of other
specialty medical services in certain parts of their eldercare network,
including portable x-ray and other diagnostic services, home healthcare
services, adult day care services, consulting services, respiratory health
services and hospitality services such as dietary, housekeeping, laundry, plant
operations, and facilities management services.

5. Revenue Sources

The Genesis Debtors and the Multicare Debtors receive revenues from Medicare,
Medicaid, private insurance, self-pay residents, other third party payors, and
long term care facilities which utilize their specialty medical services. The
health care industry is experiencing the effects of the federal and state
governments' trend toward cost containment, as government and other third party
payors seek to impose lower reimbursement and utilization rates and negotiate
reduced payment schedules with providers. These cost containment measures,
combined with the increasing influence of managed care payors and competition
for patients, generally have resulted in reduced rates of reimbursement for
services provided by the Genesis Debtors and the Multicare Debtors.

The sources and amounts of the patient revenues for the Genesis Debtors and the
Multicare Debtors are determined by a number of factors, including licensed bed
capacity and occupancy rates of the nursing centers, the mix of patients, and
the rates of reimbursement among payors. Changes in the case mix of the patients
as well as payor mix among private pay, Medicare, and Medicaid significantly
affect the profitability of the Genesis Debtors and the Multicare Debtors.

Additional detail on the operations and business segments of the Genesis Debtors
and the Multicare Debtors can be found in Genesis's annual report on Form 10-K
for the fiscal year ended September 30, 2000 and quarterly report on Form 10-Q
for the fiscal quarter ended March 31, 2001, and in Multicare's annual report on
Form 10-K for the fiscal year ended September 30, 2000, and its quarterly report
on Form 10-Q for the fiscal quarter ended March 31, 2001.

6. Personnel

At December 31, 2000, the Debtors employed over 46,000 people, including
approximately 33,000 full-time and 13,000 part-time employees. Approximately 19%
of these employees are physicians, nurses, and professional staff. Approximately
13,000 of these employees are employed by the Multicare Debtors.

Including Multicare, the Debtors currently have 81 facilities that are covered
by, or are negotiating, collective bargaining agreements. The agreements expire
at various dates from 2001 through 2005 and cover approximately 5,100 employees.
The Debtors believe that their relationship with their employees is generally
good.

The Debtors and the industry continue to experience significant shortages in
qualified professional clinical staff. They compete with other healthcare
providers and with nonhealthcare providers for both professional and
nonprofessional employees. As the demand for these services continually exceeds
the supply of available and qualified staff, the Debtors and their competitors
have been forced to offer more attractive wage and benefit packages to these
professionals and to utilize outside contractors for these services at premium
rates. Furthermore, the competitive arena for this shrinking labor market has
created high turnover among clinical professional staff as many seek to take
advantage of the supply of available positions, each offering new and more
attractive wage and benefit packages. In addition to the wage pressures inherent
in this environment, the cost of training new employees amid the high turnover
rates has caused added pressure on the Debtors' operating margins. While the
Debtors have been able to retain the services of an adequate number of qualified
personnel to staff their facilities appropriately and maintain their standards
of quality care, there can be no assurance that continued shortages will not in
the future affect their ability to attract and maintain an adequate staff of
qualified healthcare personnel. A lack of qualified personnel at a facility
could result in significant increases in labor costs at such facility or
otherwise adversely affect operations at such facility. Any of these
developments could adversely affect the Debtors' operating results or business
strategy.

B. Events Leading to the Commencement of the Chapter 11 Cases

The Genesis Debtors and the Multicare Debtors believe that their financial
difficulties are attributable to a number of factors. First, the federal
government has made fundamental changes to the reimbursement for medical
services provided to eligible individuals. The changes have had a significantly
negative impact on the healthcare industry as a whole and on the Debtors' cash
flows. Second, the federal reimbursement changes have exacerbated a
long-standing problem of less than fair reimbursement by the states for medical
services provided to indigent persons. Third, numerous other factors have
adversely affected the Debtors' cash flows, including increased labor costs,
increased professional liability costs and insurance, and increased interest
rates. Finally, as a result of declining governmental reimbursement rates and in
the face of rising inflationary costs, the Debtors were too highly leveraged to
service their indebtedness.

1. Medicare Reimbursement

The Health Insurance for Aged and Disabled Act (Title XVIII of the Social
Security Act), known as "Medicare," has made available to nearly every American
65 years of age and older a broad program of health insurance designed to help
the nation's elderly meet hospital and other health care costs. Health insurance
coverage has been extended to certain persons under age 65 qualifying as
disabled and those having end-stage renal disease. Medicare includes three
related health insurance programs: (i) hospital insurance ("Part A"); (ii)
supplementary medical insurance ("Part B"); and (iii) a managed care option for
beneficiaries who are entitled to Part A and enrolled in Part B
("Medicare+Choice" or "Medicare Part C"). The Medicare program is currently
administered by fiscal intermediaries (for Part A and some Part B services) and
carriers (for Part B) under the direction of the Health Care Financing
Administration ("HCFA") of the Department of Health and Human Services ("HHS").

Pursuant to the Balanced Budget Act of 1997 and regulations promulgated by HHS,
reimbursement under the Medicare program has changed from a cost-based
retrospective reimbursement system to what is known as a prospective-payment
system ("PPS") for Medicare Part A services. The changes also resulted in the
adoption of fee screen schedules which limit and "cap" reimbursement for
Medicare Part B therapy services. The reimbursement rates under PPS were not
published until May 12, 1998, less than two months prior to the implementation
of PPS, and were significantly lower than anticipated within the industry.

The magnitude of the reduction in rates took the industry by surprise. During
the mid-1990's, HCFA funded the development of the Multi-State Nursing Home
Care-Mix and Quality Demonstration. The purpose of that project was to design,
implement, and evaluate Medicare nursing home prospective payment and quality
monitoring system across several states. A number of facilities participated in
the demonstration and helped to perfect the case mix classification system
(RUG-III) developed to capture resource use of nursing home patients. Under the
demonstration project, most nontherapy ancillary costs were passed through and
Medicare Part B expenditures incurred during the beneficiary's inpatient (Part
A) stay were not considered. The industry was led to believe that HCFA would
adjust its payment "grouper" to compensate for these variable costs. That did
not happen. First, the expected adjustments for nontherapy ancillary costs were
not made. Second, the Medicare Part B expenditures during inpatient stays were
undercalculated. Third, adjustments were made that reduced the aggregate base
year to the 1995 spending level. Fourth, the market basket used by HCFA to trend
forward the 1995 expenditures to 1998 was defective. Fifth, the RUG-III case-mix
classification system, as implemented, was insensitive to patients requiring
multiple services, e.g., rehabilitation and extensive medical care.

Since Medicare patients account for a substantial portion of the Debtors'
revenues, this change has materially and adversely affected the financial
condition of both the Genesis Debtors and the Multicare Debtors. Among other
effects, and despite efforts to reduce costs and otherwise adjust operations,
the Debtors' revenues fell short of the levels needed to service the debt under
their respective debt instruments.

In November of 1999, Congress passed the Medicare Balanced Budget Refinement Act
(the "Refinement Act"), which repealed the cap on Medicare Part B services and
provided for modest increases in the per diem rates paid to skilled nursing
facilities for their sickest patients. In spite of the Refinement Act, the
substantial reduction in reimbursement under the Medicare system has materially
impaired many of the lines of business of the Genesis Debtors and the Multicare
Debtors. Long-term care facilities now receive significantly less compensation
for any given level of care. In many cases, reimbursement does not cover even
the direct cost of care, let alone overhead and capital costs. The Genesis
Debtors' eldercare centers began implementation of PPS on October 1, 1998, and
the majority of the Multicare Debtors' eldercare centers began implementation of
PPS on January 1, 1999.

On December 15, 2000, Congress passed the Benefit Improvement and Protection Act
of 2000 which, among other provisions, increases the nursing component of
Federal PPS rates by approximately 16.7% for the period April 1, 2001 through
September 30, 2002. The legislation will also change the 20% add-on to 3 of the
14 rehabilitation RUG categories to a 6.7% add-on to all 14 rehabilitation RUG
categories beginning April 1, 2001. The Part B consolidated billing provision of
BBRA will be repealed except for Medicare Part B therapy services and the
moratorium on the $1,500 therapy caps will be extended through calendar year
2002.

The implementation of PPS has been identified as a significant factor affecting
the commencement of chapter 11 cases by five other national nursing home chains
(Vencor, Sun Healthcare Group, Inc., Integrated Health Services, Inc., Mariner
Post-Acute Network, Inc., and Mariner Health Group, Inc.), and the bankruptcy of
numerous smaller nursing home companies.

2. Medicaid Reimbursement

Medicaid (Title XIX of the Social Security Act) is a federal-state cooperative
program in which the federal government supplements funds provided by the
participating states for medical assistance to "medically indigent" persons. The
programs are administered by the applicable state welfare or social service
agencies. Although Medicaid programs vary from state to state, traditionally
they have provided for the payment of certain expenses, up to established
limits, at rates determined in accordance with each state's regulations. Most
states pay prospective rates and have some form of acuity adjustment.

Although the amount of reimbursement varies significantly from state to state,
in general, Medicaid payments are lower than the costs associated with treating
those patients. Moreover, the Balanced Budget Act of 1997 repealed the "Boren
Amendment" federal payment standard for Medicaid payments to nursing facilities
effective October 1, 1997. The Boren Amendment required that Medicaid payments
to certain health care providers be reasonable and adequate in order to cover
the costs of efficiently and economically operated healthcare facilities.

This imbalance between Medicaid rates and the costs of providing Medicaid
patient care has been a chronic problem which, until the implementation of PPS,
was partially offset by Medicare reimbursement rates. With the unanticipated and
excessive reductions in Medicare reimbursement under PPS, the Genesis Debtors
and the Multicare Debtors no longer had the ability to subsidize the treatment
of their Medicaid patients while meeting their debt service obligations.

3. Debt Burden

The most significant portion of the growth of the Genesis Debtors and the
Multicare Debtors has been through acquisitions. Those acquisitions were
financed through the sale of stock and the incurrence of a significant amount of
senior and junior debt obligations. The amount of debt (leverage) incurred was
based on revenue projections. Revenue projections were driven, for the most
part, by expected reimbursement from the Medicare and Medicaid programs. The
negative impact from the implementation of PPS changed the level of debt of the
Debtors from "moderate" to "far too high."

Following the completion of the Multicare acquisition, the Genesis Debtors'
obligations under their senior lender credit facility and Genesis's senior
subordinated notes alone aggregated in excess of $1.5 billion. Similarly, the
senior lender credit facility for the Multicare Debtors and Multicare's senior
subordinated notes aggregated over $700 million. Despite substantial reductions
in corporate overhead and operational changes, the Genesis Debtors and the
Multicare Debtors simply were unable to repay such indebtedness in accordance
with its terms.

C. Prepetition Negotiations

In 1999, the Debtors developed a restructuring strategy based on an infusion of
additional equity, an increase in availability under existing bank credit lines,
and the sale of certain assets. These restructuring efforts are described in
detail in the most recent Form 10-K filed by Genesis. In early 2000, it became
apparent that the Debtors would not be able to sell sufficient assets to meet
the repayment obligations under their existing debt obligations. At that time
they began discussions with the holders of their senior lender claims. Those
lenders agreed to forbear from exercising remedies due to certain types of
default through May 19, 2000, which was further extended through June 30, 2000.
In addition, Genesis and The Multicare Companies, Inc. began discussions with
certain holders of their respective public senior subordinated notes. Genesis
and Multicare continued discussions with these creditor groups until it became
apparent that the businesses would require additional liquidity. In addition,
certain creditors threatened to commence involuntary bankruptcy cases against
Genesis and Multicare. During this process, Genesis and Multicare determined to
commence voluntary cases under chapter 11 of the Bankruptcy Code, which, except
for Healthcare Resources Corp., ultimately occurred on June 22, 2000.

D. Pending Litigation and Other Proceedings

1. The Genesis and Vitalink Actions Against HCR Manor Care

On May 7, 1999, Genesis and Vitalink Pharmacy Services (d/b/a NeighborCare(R)),
a subsidiary of Genesis, filed multiple lawsuits requesting injunctive relief
and compensatory damages against HCR Manor Care, Inc. ("HCR Manor Care"), two of
its subsidiaries, and two of its principals. The lawsuits arise from HCR Manor
Care's threatened termination of long-term pharmacy services contracts effective
June 1, 1999. Vitalink filed a complaint against HCR Manor Care and two of its
subsidiaries in Baltimore City, Maryland circuit court (the "Maryland State
Court Action"). Genesis filed a complaint against HCR Manor Care, a subsidiary,
and two of its principals in federal district court in Delaware including, among
other counts, securities fraud (the "Delaware Federal Action"). Vitalink has
also instituted an arbitration action before the American Arbitration
Association (the "Arbitration"). In these actions, Vitalink is seeking a
declaration that it has a right to provide pharmacy, infusion therapy, and
related services to all of HCR Manor Care's facilities and a declaration that
HCR Manor Care's threatened termination of the long-term pharmacy service
contracts was unlawful. Genesis, certain of its subsidiaries, and Vitalink also
seek over $100,000,000 in compensatory damages and enforcement of a 10-year
noncompetition clause.

Genesis acquired Vitalink from HCR Manor Care in August 1998. In 1991, Vitalink
and HCR Manor Care had entered into long-term master pharmacy, infusion therapy,
and related agreements which gave Vitalink the right to provide pharmacy
services to all facilities owned or licensed by HCR Manor Care and its
affiliates. In 1998, the terms of the pharmacy service agreements were extended
to September 2004. Under the master service agreements, Genesis and Vitalink
receive revenues at the rate of approximately $107,000,000 per year.

By agreement dated May 13, 1999, the parties agreed to consolidate the Maryland
State Court Action relating to the master service agreements with the
Arbitration matter. Accordingly, on May 25, 1999, the Maryland State Court
Action was dismissed voluntarily. Until such time as a final decision is
rendered in such Arbitration, the parties have agreed to maintain the master
service agreements in full force and effect.

HCR Manor Care and its subsidiaries have asserted counterclaims in the
Arbitration seeking damages for Vitalink's alleged overbilling for products and
services provided to HCR Manor Care, a declaration that HCR Manor Care had the
right to terminate the master service agreements, and a declaration that
Vitalink does not have the right to provide pharmacy, infusion therapy, and
related services to facilities owned by HCR prior to its merger with HCR Manor
Care. According to an expert report submitted by HCR Manor Care on May 8, 2000,
HCR Manor Care is seeking $17,800,000 in compensatory damages for alleged
overbilling by Vitalink between September 1, 1998 and March 31, 2000.

On January 14, 2000, HCR Manor Care moved to dismiss Vitalink's claims in the
Arbitration that it has a right to provide pharmacy and related services to the
HCR Manor Care facilities not previously under the control of HCR Manor Care. On
May 17, 2000, the Arbitrator ordered the dismissal of Vitalink's claims seeking
a declaratory judgment and injunctive relief for denial of Vitalink's right to
service the additional HCR Manor Care facilities, but sustained Vitalink's claim
seeking compensatory damages against HCR Manor Care for denial of that right.

Trial in the Arbitration was originally scheduled to begin on June 12, 2000. On
May 23, 2000, however, the Arbitrator postponed the trial indefinitely due to
Vitalink's potential bankruptcy filing. In connection with this stay, the
parties agreed that HCR Manor Care may pay NeighborCare 90% of the face amount
of all invoices for pharmaceutical and infusion therapy goods and services that
NeighborCare renders to respondents under the Master Service Agreements. After
Genesis and its affiliates, including Vitalink, commenced their chapter 11 cases
on June 22, 2000, the Arbitration was automatically stayed pursuant to section
362(a) of the Bankruptcy Code.

On August 1, 2000, HCR Manor Care moved to lift the automatic stay and compel
arbitration. On September 5, 2000, the Bankruptcy Court denied that motion, with
leave to refile its request in 90 days. On December 8, 2000, HCR Manor Care
filed a similar motion for relief from the stay. The Genesis Debtors opposed the
motion and filed their own motion to assume the contracts between the parties.
On February 6, 2000, the Bankruptcy Court ruled in favor of Manor Care's renewed
motion and deferred consideration of the motion to assume until completion of
the Arbitration. As a result, the parties are proceeding forward in the
Arbitration. The trial in the Arbitration is now scheduled to commence during
the week of July 30, 2001.

HCR Manor Care has not filed proofs of claim in these chapter 11 cases.
Accordingly, its claims for overcharges under the contracts will not be a claim
against the Genesis Debtors unless they successfully assume those agreements.

2. The Vitalink Action Against Omnicare and Heartland

On July 26, 1999, NeighborCare, through its Maryland counsel, filed an
additional complaint against Omnicare, Inc. ("Omnicare") and Heartland
Healthcare Services (a joint venture between Omnicare and HCR Manor Care)
seeking injunctive relief and compensatory and punitive damages. The complaint
includes counts for tortious interference with Vitalink's contractual rights
under its exclusive long-term service contracts with HCR Manor Care. On November
12, 1999, in response to a motion filed by the defendants, that action was
stayed pending a decision in the Arbitration.

3. The HCR Manor Care Action Against Genesis in Delaware

On August 27, 1999, Manor Care Inc., a wholly owned subsidiary of HCR Manor Care
Inc., filed a lawsuit against Genesis in federal district court in Delaware
based upon Section 11 and Section 12 of the Securities Act of 1933, as amended.
Manor Care Inc. alleges that in connection with the sale of the Genesis Series G
Cumulative Convertible Preferred Stock as part of the purchase price to acquire
Vitalink, Genesis failed to disclose or made misrepresentations related to the
effects of the conversion to PPS on Genesis's earnings, the restructuring of
Genesis's ElderCare Joint Venture, the impact of the operations of Genesis's
Multicare affiliate on Genesis's earnings, the status of Genesis's labor
relations, Genesis's ability to declare dividends on the Series G Preferred
Stock, the value of the conversion right attached to the Series G Preferred
Stock, and information relating to the ratio of combined fixed charges and
preference dividends to earnings. Manor Care, Inc. seeks, among other things,
compensatory damages and rescission of the purchase of the Series G Preferred
Stock.

On November 23, 1999, Genesis moved to dismiss this action on the ground, among
others, that Manor Care Inc.'s complaint failed to plead fraud with
particularity. On September 29, 2000, the court granted that motion in part and
denied it in part. Specifically, the court dismissed all of defendants'
allegations except those concerning the company's labor relations and the ratio
of combined fixed charges and preference dividends to earnings.

On January 18, 2000, Genesis moved to consolidate this action with the Delaware
Federal Action. That motion has been fully submitted and is awaiting decision.
As a result of the commencement of Genesis's chapter 11 cases, this action is
also automatically stayed pursuant to section 362(a) of the Bankruptcy Code.
However, as noted above, HCR Manor Care has not filed a proof of claim in these
chapter 11 cases. Therefore, it will not be entitled to any affirmative relief
against the Genesis Debtors based on these claims.

4. The HCR Manor Care Action Against Genesis in Ohio

On December 22, 1999, HCR Manor Care filed a lawsuit against Genesis and others
in the United States District Court for the Northern District of Ohio. HCR Manor
Care alleges, among other things, that the Series H Senior Convertible
Participating Cumulative Preferred Stock and Series I Senior Convertible
Exchangeable Participating Cumulative Preferred Stock were issued in violation
of the terms of the Series G Preferred Stock and the Rights Agreement dated as
of April 26, 1998 between Genesis and HCR Manor Care. HCR Manor Care seeks,
among other things, damages and rescission or cancellation of the Series H and
Series I Preferred Stock. On February 29, 2000, Genesis moved to dismiss this
action on the ground, among others, that HCR Manor Care's complaint failed to
state a cause of action. This motion has been fully submitted, including
supplemental briefing by both parties, and is awaiting decision. As a result of
the commencement of Genesis's chapter 11 cases, this action is also
automatically stayed pursuant to section 362(a) of the Bankruptcy Code. However,
as noted above, HCR Manor Care has not filed a proof of claim in these chapter
11 cases. Therefore, it will not be entitled to any affirmative relief against
the Genesis Debtors based on these claims.

5. Age Institute

On November 27, 2000, Genesis, along with several other Genesis Debtors, filed
an adversary proceeding in their chapter 11 cases against four related nursing
home owners affiliated with AGE Holdings, Inc. to collect unpaid receivables,
among other things. For more details, see the litigation description in the Form
10-K for the fiscal year ended September 30, 2000.

6. Qui Tam Suits

Currently pending against Genesis or its affiliates, divisions, or subsidiaries,
are five private citizen suits filed under the federal False Claims Act, 31
U.S.C. ss. 3729 et seq. Genesis has reached an agreement to resolve four of the
pending suits. For a description of that settlement, see section II.K, above.
The remaining private citizen suit, styled U.S. ex rel Scherfel v. Genesis
Health Ventures et al (D.N.J.), is the subject of a proof of claim in the
Genesis reorganization case.

In the Scherfel suit, the plaintiff alleges that a pharmacy owned by
NeighborCare, Inc., failed to process Medicaid credits for returned medications.
The allegations are vaguely alleged for other jurisdictions. While the action
was under seal in United States District Court, Genesis fully cooperated with
the Department of Justice's evaluation of the allegations. On or about March,
2001, the Department of Justice declined to intervene in the suit and prosecute
the allegations. The plaintiff filed a proof of claim in the bankruptcy
proceeding initially for approximately $650 million and more recently has
submitted an amended claim in the amount of approximately $325 million. The
Debtors believe that the allegations have no merit and intend to object to the
proof of claim and defend the suit. Any claims ultimately allowed in connection
with this suit will be treated as part of Class G4 (Genesis General Unsecured
Claims).

7. Personal Injury and Employment Law Litigation

Prior to the Commencement Date, the Debtors and/or persons or entities which the
Debtors indemnify, were defendants in approximately 275 prepetition lawsuits
alleging personal injury, employment disputes, and similar allegations, and/or
potential lawsuits where a statutory notice of intent to sue was timely served.
These lawsuits allege a variety of personal injury allegations arising from
patient care, automobile accidents, and other personal injury incidents, as well
as employment discrimination, wrongful termination, and related employment law
claims. The lawsuits are pending in state and federal courts nationwide. The
majority of the claims asserted in the personal injury lawsuits are covered by
insurance. Until June 1, 2000, the Debtors' various insurance policies on
personal injury claims contained neither a self-insured retention nor a
deductible. After June 1, 2000, the relevant insurance policies contained a
self-insured retention of $500,000 per claim, subject to a $5 million aggregate,
except in the state of Florida where the relevant insurance policies contained a
self-insured retention of $2.5 million per claim, subject to a $9 million
aggregate. Certain claims asserted in the personal injury lawsuits, such as
claims for punitive damages, may be uninsured or uninsurable in certain states.
With respect to employment law claims, the Debtors purchased an insurance policy
in 1999 with a $500,000 self-insured retention per claim. The Debtors vigorously
dispute the allegations contained in the personal injury and employment
lawsuits. The Bankruptcy Court recently orally approved, subject to further
documentation and the signing of a Bankruptcy Court order, a procedure which
subjects these same lawsuits to mandatory alternative dispute resolution
procedures, as described in section VI.J, below.

8. Multicare Litigation

The Multicare Debtors are not party to any significant litigation, other than
litigation arising from the ordinary course of their businesses.

9. Ordinary Course Litigation

The Debtors are parties to various other legal actions and administrative
proceedings and are subject to various claims arising in the ordinary course of
business.

VI.

Significant Events During the Reorganization Cases

A. Filing and First Day Orders

On June 22, 2000, the Genesis Debtors (other than Healthcare Resources Corp.)
and the Multicare Debtors filed their petitions under chapter 11 of the
Bankruptcy Code. On June 23, 2000, the Bankruptcy Court entered certain orders
designed to minimize the disruption of the Debtors' business operations and to
facilitate their reorganization.

o Case Administration Orders. These orders (i) authorized
separate joint administration of the Genesis Debtors' chapter
11 cases and Multicare Debtors' chapter 11 cases, (ii)
established interim compensation procedures for
professionals, (iii) granted an extension of the time to file
the Debtors' schedules and statements, and (iv) authorized
the mailing of initial notices and all other mailings
directly to parties in interest and the filing of a list of
creditors without claim amounts in lieu of a matrix.

o Payments on Account of Certain Prepetition Claims. The
Bankruptcy Court authorized the payment of prepetition (i)
wages, compensation, and employee benefits, (ii) sales and
use taxes, (iii) claims of common carriers and warehousemen,
(iv) claims of critical trade vendors, and (v) refunds to
patients.

o Business Operations. The Bankruptcy Court authorized the
Genesis Debtors and the Multicare Debtors to (i) comply with
certain license and regulatory agency fee requirements, (ii)
continue customer service programs, (iii) continue
prepetition premium obligations under workers' compensation
insurance and all other insurance policies, and bonds
relating thereto, (iv) maintain existing bank accounts and
business forms, (v) continue their existing cash management
system, (vi) employ certain investment guidelines, (vii)
provide adequate assurance to utility companies including the
payment of certain prepetition claims, (viii) grant
administrative expense status to undisputed obligations
arising from the postpetition delivery of goods ordered in
the prepetition period and make payment of such claims in the
ordinary course of business, and (ix) maintain patient trust
accounts.

o Other Stipulations. The Bankruptcy Court authorized a
stipulation between one of the Genesis Debtors and Cardinal
Distribution which provided for a long-term commitment by
Cardinal Distribution to continue to ship inventory on credit
terms in exchange for the payment over time of certain
secured prepetition amounts owed to that company. That
stipulation has been amended to provide additional
postpetition credit to the Genesis Debtors. The Bankruptcy
Court also authorized separate stipulations between the
Genesis Debtors and certain agencies of the federal
government and between the Multicare Debtors and those
entities. These stipulations provided adequate protection to
the federal government in the form of payment over time of
certain prepetition overpayments alleged to have been made
under the Medicare program. The stipulation with the Genesis
Debtors was amended to reduce the amounts to be paid and
provide the federal government with an administrative expense
claim to the extent of additional amounts discovered.

o Bankruptcy Matters. The Bankruptcy Court authorized the
Genesis Debtors and the Multicare Debtors to (i) establish
notice procedures and (ii) obtain interim postpetition
financing under debtor in possession credit agreements on a
superpriority basis for $250 million (for the Genesis
Debtors) and $50 million (for the Multicare Debtors), pending
further interim and final hearings.

On July 31, 2000, Healthcare Resources Corp. ("HRC"), one of the Genesis
Debtors, filed a petition under chapter 11 of the Bankruptcy Code. On August 1,
2000, the Bankruptcy Court entered orders in HRC's reorganization case
substantially similar to the orders entered on June 23, 2000 for the other
Genesis Debtors. HRC is a party to the Genesis debtor in possession credit
facility.

B. Appointment of the Creditors' Committee

On July 12, 2000, the United States Trustee for the District of Delaware,
pursuant to its authority under section 1102 of the Bankruptcy Code, appointed a
statutory committee of unsecured creditors in the Genesis reorganization cases
and a separate committee in the Multicare reorganization cases.

1. Genesis Creditors' Committee

The Genesis creditors' committee currently consists of the following six
members:
American General Investment Management, L.P.
2929 Allen Parkway
Houston, Texas 77019

Abbot Laboratories
625 Cleveland Avenue
Columbus, Ohio 43215

GMS Group, LLC
c/o LeBouf, Lamb, Greene & MacRae
125 West 55th Street
New York, New York 10019

Service Employees International Union, AFL-CIO
c/o Cohen, Weiss and Simon, LLP
3030 W. 42nd Street
25th Floor
New York, New York 10036

State Street Bank and Trust Company
2 Avenue de Lafayette
6th Floor
Boston, Massachusetts 02111

The Bank of New York
101 Barclay Street
Floor 21W
New York, New York 10286

The Genesis creditors' committee has retained Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, and Pachulski Stang Ziehl
Young & Jones PC, 919 N. Market Street, 16th Floor, P.O. Box 8075, Wilmington,
Delaware 19899-8705, as its attorneys, and Houlihan Lokey Howard & Zukin, 2
First National Plaza, 20 South Clark Street, 21st Floor, Chicago, Illinois
60603-1881, as its financial advisors. The Genesis creditors' committee has
actively participated in all aspects of the Genesis reorganization cases.

2. Multicare Creditors' Committee

The Multicare creditors' committee currently consists of the following three
members:

Mackay-Shields Financial Corp.
9 West 57th Street
New York, NY 10019

The Chase Manhattan Bank, as Indenture Trustee
450 West 33rd Street, 15th Floor
New York, NY

Gulf South Medical Supply, Inc.
4345 Southpoint Blvd
Jacksonville, FL 3216

The Multicare creditors' committee has retained Kasowitz, Benson, Torres &
Friedman LLP, 1301 Avenue of the Americas, New York, New York 10019, and Saul,
Ewing, Remick & Saul LLP, 222 Delaware Avenue, Suite 1200, P.O. Box 1266,
Wilmington, Delaware 19899-1266, as its attorneys, and Chanin Capital Partners,
11100 Santa Monica Blvd, Suite 830, Los Angeles, California 90025, as its
financial advisors. The Multicare creditors' committee has actively participated
in all aspects of the Multicare reorganization cases.

C. DIP Credit Agreements

1. Genesis Debtors

On July 18, 2000, the Bankruptcy Court entered a final order (1) authorizing the
Genesis Debtors to (a) obtain postpetition financing and (b) utilize cash
collateral and (2) granting adequate protection to certain prepetition secured
parties. In particular, the Bankruptcy Court approved that certain Revolving
Credit and Guaranty Agreement, dated as of June 22, 2000, among Genesis, as
borrower, the other Genesis Debtors, as guarantors, Mellon Bank, N.A., as agent,
and the lender parties thereto. This agreement provided for maximum borrowings
of $250 million and terminates on December 21, 2001. The obligations of the
Genesis Debtors under this agreement are secured by substantially all the assets
of the Genesis Debtors, subject to certain existing mortgages and inventory
liens. The liens granted to the postpetition lenders are senior to the liens
securing the Genesis Senior Lender Claims. As of the date hereof, the Debtors
have drawn approximately $180,000,000 under their debtor in possession credit
facility. The borrowings under this facility have been used to make payments to
the holders of the Genesis Senior Lender Claims, to issue letters of credit, to
make payments to Cardinal Distribution, and to make other miscellaneous
payments. See section II.E.2, above for a description of those claims and the
payments made. The Genesis Debtors amended certain covenants under their debtor
in possession credit facility as of February 14, 2001, to bring those covenants
into line with current performance and projections.

2. Multicare Debtors

On July 18, 2000, the Bankruptcy Court entered a final order (1) authorizing the
Multicare Debtors to (a) obtain postpetition financing and (b) utilize cash
collateral and (2) granting adequate protection to certain prepetition secured
parties. In particular, the Bankruptcy Court approved that certain Revolving
Credit and Guaranty Agreement, dated as of June 22, 2000, among Multicare, as
borrower, the other Multicare Debtors, as guarantors, Mellon Bank, N.A., as
agent, and the lender parties thereto. This agreement provided for maximum
borrowings of $50 million and terminates on December 21, 2001. The obligations
of the Multicare Debtors under this agreement are secured by substantially all
the assets of the Multicare Debtors, subject to certain existing mortgages and
inventory liens. The liens granted to the postpetition lenders are senior to the
liens securing the Multicare Senior Lender Claims. As of the date hereof, the
Debtors have not drawn any funds under this debtor in possession credit
facility, although letters of credit for approximately $2 million issued under
the facility are outstanding. The Multicare Debtors amended certain covenants
under their debtor in possession credit facility as of February 14, 2001, to
bring those covenants into line with current performance and projections.

D. Cash Collateral Protection

1. Genesis Debtors

At the commencement of these chapter 11 cases, a number of third-party lenders,
including the holders of the Genesis Senior Lender Claims, had an interest in
the Genesis Debtors' receivables or other cash collateral. In order to provide
for the continued use of such cash collateral, the Genesis Debtors agreed to
provide certain protections to those third-party lenders. For the holders of the
Genesis Senior Lender Claims, the protections consisted of the following:

o a superpriority administrative claim against the Genesis
Debtors, immediately junior to the claims of the lenders
under the debtor in possession credit facility

o liens on substantially all the property of the Genesis
Debtors immediately junior to the claims of the lenders under
the debtor in possession credit facility and existing third
party liens

o payment of an amount equal to interest on the Genesis Senior
Lender Claims at the contractual nondefault rate

o reimbursement for the reasonable fees and disbursements of
counsel and consultants to the holders of the Genesis Senior
Lender Claims and payment of certain administrative fees

In addition, the Bankruptcy Court entered a generic order protecting all other
third party lenders for the use of cash collateral that they had an interest in
by providing a postpetition interest in certain accounts and inventory. Since
entry of that order, the Genesis Debtors have agreed to provide more specific
adequate protection to certain third party lenders, based on the extent to which
the claims of such lenders are secured. For Classes G1-5, G1-6, and G1-7, the
Genesis Debtors agreed to pay amounts equal to postpetition interest at
contractual nondefault rates and to pay real estate taxes and insurance on the
underlying real property collateral. For Class G1-8, the Genesis Debtors agreed
to pay amounts equal to postpetition interest at contractual nondefault rates
and to maintain insurance on the underlying real property collateral. Finally,
for Class G1-12, the Genesis Debtors agreed to pay postpetition real estate
taxes and maintain insurance on the underlying real property collateral.

2. Multicare Debtors

As of the Commencement Date, the Multicare Debtors also required the continued
use of cash collateral of certain third parties holding security interests in
specified accounts receivable, inventory, or other rights to payments, or cash
proceeds thereof. The Multicare Debtors therefore requested and received
authority from the Bankruptcy Court to use cash collateral as is necessary to
continue the Multicare Debtors' business operations. The protections granted to
the holders of the Multicare Senior Lender Claims in return for permitting the
Multicare Debtors' continued use of cash collateral consisted of the following:

o a superpriority administrative claim against the Multicare
Debtors, immediately junior to the claims of the lenders
under the debtor in possession credit facility

o liens on substantially all the property of the Multicare
Debtors immediately junior to the claims of the lenders under
the debtor in possession credit facility and existing third
party liens

o reimbursement for the reasonable fees and disbursements of
counsel and consultants to the holders of the Multicare
Senior Lender Claims and payment of certain administrative
fees

To date, the Multicare Debtors have not been required to provide more specific
adequate protection to any third party lenders (except for Class M1-4), although
the Multicare Debtors presently are engaged in discussions with a number of such
lenders regarding more specific adequate protection. For Class M1-4, the
Multicare Debtors agreed to bring current their prepetition and postpetition
obligations on the underlying loan and to remain current on a go-forward basis.

E. Key Employee and Executive Retention Programs

The Genesis Debtors have established two separate retention programs for key
employees. The first program covers all key employees, other than the top four
executives of Genesis and was approved by the Bankruptcy Court on September 5,
2000. The second program covers the top four executives of Genesis and was
approved by the Bankruptcy Court on February 23, 2001. Both retention programs
are designed to encourage key employees to remain with the Debtors by providing
them with additional incentives, including cash payments. Inasmuch as the
Multicare Debtors do not have any management employees, no retention programs
have been implemented for those Debtors (although the Multicare Debtors did
request and receive authority from the Bankruptcy Court to reimburse Genesis for
retention bonuses made by it to administrators and directors of nursing at those
of Multicare's facilities managed by Genesis).

1. First Retention Program

Pursuant to the first retention program, a maximum aggregate of $11.5 million in
retention bonus payments are available for all qualifying key employees. The
retention payments, paid out over a course of four payments beginning September
30, 2000 and ending on May 31, 2001, are available to middle managers, senior
officers, directors, or officers (other than the top four executives of Genesis)
who were employed by the Genesis Debtors on or before April 1, 2000, and
continue to be employed on the date of payment. As part of this program, the
Genesis Debtors also assumed 24 employment agreements of certain key employees.

2. Second Retention Program

The second retention program, which was not submitted to the Bankruptcy Court
until several months after the initial program was implemented, is designed to
retain the top four executives through the restructuring process and beyond. The
program does not include any guarantied retention payments. Instead, it provides
for incentive or restructuring payments to be made on the Effective Date. The
aggregate amount of such payments will be approximately $2.1 million if the
Effective Date is August 31, 2001. Such amounts increase or decrease if the
Effective Date is earlier or later than that date. An earlier Effective Date
results in an increase of 5% (up to a maximum increase of 15%) for each month. A
later Effective Date results in a decrease of 7.5% (up to a maximum decrease of
15%) for each month.

The program also provides severance protection in an amount equal to two times
the base salary of the executive. This protection is in place of existing
severance arrangements in the prepetition employment agreements for those
individuals. In exchange for such protection, each executive will agree to a
two-year noncompete arrangement.

Finally, the program provides for the assumption of certain deferred
compensation arrangements and the forgiveness of certain loans that three of the
executives incurred in order to comply with a prepetition requirement by the
Board of Directors that they purchase shares of the stock of Genesis. The
forgiveness will occur on the earlier of the first anniversary of the Effective
Date or the termination of the employment of the executive. The forgiveness
includes an agreement to pay any taxes due from the executives due to such
forgiveness. The aggregate amount of such loans is approximately $2.5 million.

F. Claims Process and Bar Date

1. Schedules and Statements

On October 19, 2000, the Genesis Debtors filed with the Bankruptcy Court their
statement of financial affairs, schedules of assets and liabilities, schedules
of executory contracts and unexpired leases, and schedule of equity security
holders. The Genesis Debtors' schedules and statements were filed on a partially
consolidated basis.

On October 19, 2000, the Multicare Debtors filed with the Bankruptcy Court their
statement of financial affairs, schedules of assets and liabilities, schedules
of executory contracts and unexpired leases, and schedule of equity security
holders. The Multicare Debtors' schedules and statements were filed on a
partially consolidated basis.

2. Bar Date

By separate orders dated November 6, 2000, the Bankruptcy Court fixed December
19, 2000, at 4:00 p.m. (Eastern Time) as the date and time by which proofs of
claim were required to be filed in the Genesis and Multicare reorganization
cases, except that governmental entities have until June 25, 2001, at 4:00 p.m.
(Eastern Time) to file proofs of claim against the Genesis Debtors and the
Multicare Debtors. In accordance with the orders fixing the bar date, on or
about November 6, 2000, notices informing creditors of the last date to timely
file proofs of claims, and a "customized" proof of claim form, reflecting the
nature, amount, and status of each creditor's claim as reflected in the
schedules of assets and liabilities, were mailed to all creditors listed on the
schedules of assets and liabilities. In addition, consistent with that order,
the Debtors caused to be published in the national editions of the Wall Street
Journal, New York Times, and USA Today a notice of the last date to timely file
proofs of claim.

G. ElderTrust Transactions

In November 2000, the Genesis Debtors and the Multicare Debtors reached
agreements to restructure their relationship with ElderTrust, a Maryland
healthcare real estate investment trust, and certain of its affiliates
(collectively, "ElderTrust"). On January 4, 2001, the Bankruptcy Court approved
those agreements. The following transactions were consummated on January 31,
2001. The agreements with ElderTrust cover leases and mortgages for 33
properties operated by the Genesis Debtors and the Multicare Debtors, either
directly or through joint ventures. Under its agreement with ElderTrust, Genesis
has (1) assumed its leases with ElderTrust, subject to certain modifications,
including a reduction in annual lease expenses of $745,000, (2) extended the
maturity and reduced the principal balances for three assisted living properties
by $8,500,000 through the satisfaction of an ElderTrust obligation of like
amount, and (3) acquired a building currently leased from ElderTrust, which is
located on the campus of a Genesis skilled nursing facility, for $1,250,000.

Pursuant to its agreement with ElderTrust, the Multicare Debtors sold three
owned assisted living properties that were mortgaged to ElderTrust in exchange
for a release of principal amounts owed totaling $19,500,000. ElderTrust has
leased the properties back to the Multicare Debtors under a new ten-year lease
with annual rents of $791,561.

H. CareFirst Transactions

On January 4, 2001, the Bankruptcy Court approved the Genesis Debtors'
settlement agreement with CareFirst of Maryland, Inc., a health insurance
corporation, and its affiliates (collectively, "CareFirst"). This agreement
settles certain disputes among the Genesis Debtors and CareFirst, and provides a
basis from which the Genesis Debtors are able to maintain their integral
business relationship with CareFirst and its 2.9 million members. More
specifically, the agreement authorizes the Genesis Debtors to (1) assume certain
contracts with CareFirst, including (a) home care provider contracts under which
the Debtors receive payments in exchange for arranging for or providing certain
home care services to CareFirst, and (b) preferred provider agreements which
formalize the Genesis Debtors' status as the preferred healthcare provider to
CareFirst, (2) continue to hold as deposit without any impact resulting from the
Genesis reorganization cases, the aggregate $4 million in service deposits
previously provided by CareFirst, and provide the terms under which such service
deposits will be allocated, (3) pay $4,673,398 to CareFirst as settlement for
amounts owed under that certain Transition Agreement between certain of the
Genesis Debtors and CareFirst, dated October 20, 1999, and (4) enter into new
business agreements with CareFirst. These agreements were consummated on January
19, 2001.

I. Swap Settlement

Genesis and Citibank, N.A. ("Citibank") are parties to certain interest rate
hedging agreements ("swap agreements"). Certain of those agreements allowed
Genesis to fulfill its obligation under its prepetition credit agreement to
hedge against a portion of the risk of the floating rate of interest in such
facility. The obligations of Genesis under swap agreements that met certain
requirements are entitled to share in the collateral securing the Genesis Senior
Lender Claims. On March 24, 2000, Citibank terminated all its swap agreements
with Genesis. Based on the underlying documents and information obtained from
other financial institutions engaged in interest rate hedging agreements,
Citibank asserted a claim against Genesis of approximately $28.5 million to
unwind the swap agreement. Citibank also asserted that such claims constituted
Genesis Senior Lender Claims. After negotiations between the parties, they
agreed to treat approximately 61% of the claim as a Genesis Senior Lender Claim
and the balance as a Genesis General Unsecured Claim in Class G4. The Bankruptcy
Court approved this settlement on May 11, 2001.

J. Alternative Dispute Resolution Procedures

The Genesis Debtors and the Multicare Debtors identified approximately 375
prepetition claims (not including claims in which a lawsuit has yet to be
commenced or a statutory pre-suit demand has yet to be served) (the "Pending
Actions") against the Debtors based on personal injury, employment litigation,
and similar claims by various entities (the "Claimants"). Certain Pending
Actions related or relate to claims against persons or entities for whom the
Debtors retain ultimate liability, including non-Debtor defendants in Pending
Actions who are current or former employees, officers, and directors of the
Debtors, and any person or entity indemnified by any of the Debtors or listed as
additional insureds under the Debtors' liability policies (collectively, the
"Indemnitees").

By motions dated March 19, 2001, the Genesis Debtors and the Multicare Debtors
respectively sought Bankruptcy Court approval of the implementation of
alternative dispute resolution procedures (the "ADR Procedures") to assist in
expediting the resolution of the Pending Actions. The ADR Procedures sought to
be implemented by the Genesis Debtors and the Multicare Debtors would be
governed by substantially similar "ADR Term Sheets." Pursuant to the ADR Term
Sheets, as revised by the Bankruptcy Court, the ADR Procedures will shortly be
implemented as follows:

o The Debtors compiled lists of all the Pending Actions of
which the Debtors were aware (the "Preliminary ADR Claims
Lists"). The Debtors will serve upon the Claimant (or such
Claimant's counsel, if known) in each Pending Action a
Bankruptcy Court approved notice (the "ADR Notice")
indicating that such Claimant's Pending Action shall be
deemed an "ADR Claim" and shall be subject to the ADR
Procedures.

o Additional Pending Actions, which will be omitted from the
Preliminary ADR Claims Lists, will be added to the ADR
Procedures by serving upon such Claimants (i) the appropriate
ADR Order; (ii) the appropriate ADR Term Sheet; (iii) an ADR
Notice; and (iv) an Opt-Out Stipulation (as defined below)
(the "Additional ADR Claims"). If the holder of an Additional
ADR Claim does not timely object to inclusion in the ADR
Procedures, or if the Bankruptcy Court overrules such
objection, such holder's Additional ADR Claim will become
subject to the ADR Procedures.

o The proposed ADR orders provide for an injunction, which
would enjoin until one year from the date the Bankruptcy
Court enters orders approving the ADR Procedures, holders of
ADR and Additional ADR Claims from, among other things,
commencing or continuing any action or proceeding in any
manner or any place to collect or otherwise enforce such
claims against the Debtors or their property other than
through the ADR Procedures (the "ADR Injunction"). In
addition, the ADR Injunction would enjoin proceedings against
any Indemnitee and any direct action against a third party
payor (which includes insurance companies).

o The ADR Procedures establish a four stage process for the
orderly and efficient resolution of the ADR and Additional
ADR Claims. The first stage would be a formal
demand/counteroffer stage, where limited discovery would be
available to the parties. The second stage would be
mediation. The third stage would be binding arbitration for
those Claimants who have previously consented to such
arbitration and whose ADR and Additional ADR Claims are not
resolved through the first two stages of the ADR Procedures.
The fourth stage, which shall commence only after all
mediations have been completed, would be relief from the
automatic stay for those Claimants whose ADR and Additional
ADR Claims are not settled or submitted to binding
arbitration.

o At any time, a Claimant has the option to opt out of the ADR
Procedures by entering into a stipulation with the Debtors
(the "Opt-Out Stipulation"), which requires the Claimant to
(i) waive any and all claims for punitive damages, attorney's
fees, and any similar enhanced remedies; (ii) dismiss, with
prejudice, any and all claims against any Indemnitee; (iii)
agree not to name any Indemnitee as a defendant in the
Pending Action; and (iv) agree to limit his or her recovery,
if any, solely to available insurance proceeds and waive any
and all rights to seek recovery from the assets of the
Debtors or their estates. Relief from the automatic stay
granted pursuant to an Opt-Out Stipulation shall commence no
earlier than four (4) months after the entry of an order
approving the ADR Procedures.

K. Settlement with the Multicare Debtors

As described in section II.K, above, the Genesis Debtors and the Multicare
Debtors have entered into a settlement of the claims between them. The Debtors
intend to seek approval of that settlement at the hearing on confirmation of the
Plan.

L. Appointment of Fee Auditor

On April 26, 2001, the Bankruptcy Court ordered the
appointment of the legal auditing firm Stuart, Maue, Mitchell & James, Ltd. as
the fee auditor in the reorganization cases to act as a special consultant to
the Bankruptcy Court for professional fee review and analysis.

M. Motion for Appointment of Trustee in the Multicare Reorganization Cases

On May 14, 2001, the statutory committee of unsecured
creditors in the Multicare reorganization cases filed a motion seeking, in the
alternative, (i) the appointment of a trustee to re-negotiate the management
service and other agreements between Genesis and Multicare, evaluate and
prosecute alleged claims of Multicare against Genesis, and propose a competing
plan of reorganization for Multicare or (ii) to force Multicare to bid out its
agreements with Genesis.

Multicare and Genesis believe that the motion was filed
because the unsecured creditors' committee in the Multicare cases has been
unable to reach agreement on treatment under the Plan. They believe that the
motion is devoid of any merit and is a thinly-veiled attempt to extract more
value from senior classes than is warranted by the circumstances.

Multicare and Genesis intend vigorously to oppose the motion.
Any allegations in the motion as to misconduct or conflict of interest are
unjustified. Genesis has controlled Multicare only since November 1999 - only
seven months before the commencement of these chapter 11 cases. Following that
time, no material changes were made to the relationships and other agreements
between Genesis and Multicare that were beneficial to Genesis. Since the
commencement Date, the Multicare Debtors' relationships with the Genesis Debtors
have been reviewed and evaluated by Multicare' independent restructuring
officer, as advised by Multicare's legal and financial advisors, and the terms
of such relationships have been renegotiated. See the discussion in section
V.A.1, above.

As of the date hereof, the parties are engaged in discovery in
preparation for a hearing on this motion.

VII.

Governance of the Reorganized Debtors

A. Board of Directors of Reorganized Genesis

The initial Board of Directors of Reorganized Genesis will consist of 7 members,
whose names and qualifications will be disclosed no later than the hearing to
confirm the Plan of Reorganization. Six members will be selected by the holders
of the Genesis Senior Lender Claims and the Multicare Senior Lender Claims. The
Chief Executive Officer of Reorganized Genesis will be a director and Chairman
of the Board. Each member of the initial Board of Directors will serve on the
Board of Directors in accordance with Reorganized Genesis's Amended Certificate
of Incorporation and Bylaws, as the same may be amended from time to time.

B. Senior Management of Reorganized Genesis

As of the Effective Date, Reorganized Genesis will enter into long term
employment agreements with its top four senior executives. In general, the
contracts provide for three year employment terms which are automatically
renewed unless either Reorganized Genesis or the employee provide advance
notice. Reorganized Genesis will also adopt a new long term Management Incentive
Plan under which [describe]. The following table summarizes the base salary and
stock and option grants for the top four executives of Reorganized Genesis.

Name Title Base Salary Stock Options
Grants

Michael R. Walker Chief Executive Officer and
Chairman of the Board
Richard R. Howard Vice Chairman
David C. Barr Vice Chairman
George V. Hager, Jr. Executive Vice President and
Chief Financial Officer

Copies of the new employment agreements and the New Management Incentive Plan
will be part of the Plan Supplement. These executives named above are also
entitled to certain rights under an executive retention plan approved by the
Bankruptcy Court. That plan is described in section VI.E, above.

The Plan of Reorganization will be deemed a solicitation of the holders of New
Common Stock for approval of the New Management Incentive Plan. The Debtors
believe that the order confirming the Plan of Reorganization should constitute
such approval of the New Management Incentive Plan for purposes of sections 422
and 162(m) of the Internal Revenue Code. There can be no assurance, however,
that the Internal Revenue Service will agree with such position.

VIII.

Other Aspects of the Plan of Reorganization

A. Analysis of the Proposed Merger of Genesis and Multicare

At the present time, Genesis manages the Multicare Debtors pursuant to a
management contract that was negotiated with the independent majority
shareholders of Multicare in 1997 which is comprehensive and encompasses all
management and administrative functions. For the reasons described in the
followings sections, both the Genesis Debtors and the Multicare Debtors have
concluded that a merger will result in the best outcome for the creditors who
will receive distributions under the Plan of Reorganization for the following
reasons:

At the present time, Genesis and Multicare employ a management structure which
serves the combined assets of both companies. Significant efficiencies are
realized through the maintenance of a single infrastructure, particularly in an
environment where qualified managerial personnel are difficult to recruit and
retain. The creation and execution of a common operating strategy implemented
using common practices enhances revenues for both companies in the most
efficient manner. For instance, Genesis and Multicare are marketed using a
common "ElderCare" branding strategy which promotes better name recognition,
increasing referrals, and enhances the options for referral sources and
third-party payers in geographically concentrated markets. Likewise, the
companies are able to leverage off of common resources, such as discharge
planning functions and care coordinators and the ElderCare telephone line, to
increase the admissions for both companies' centers. The utilization of common
systems and a single uniform set of policies and procedures improves internal
controls and compliance to standards which result in greater operating cost
efficiencies. The merger of Genesis and Multicare creates incentive for
additional investment of time and resources to enhance the companies' abilities
to realize efficiencies and capitalize on revenue opportunities across the wider
group of operating entities.

Together, Genesis and Multicare enjoy considerable purchasing power, which is
utilized to achieve favorable pricing for nearly all goods and services needed
for the operation of their businesses. Additionally, the size and clout of the
combined organization provides access to certain goods and services which are
more difficult to obtain, for various reasons. For instance, both Genesis and
Multicare are able to contract for adequate professional liability insurance,
which due to the recent exit of insurers, has become significantly more
difficult to obtain.

Similarly, the availability of debt and equity capital, which has become scarce
for the long-term care industry and is essential to the long-term viability and
success of each company, is greatly enhanced through the merger of the two
companies. Capital markets favor larger and more diverse companies. For
instance, the proposed exit financing is possible due, in part, to the size of
the combined credit facility, which promotes greater liquidity and the more
diversified business operation financed, which mitigates credit risk. Access to
capital is important for three reasons. First, the long term care industry is
real estate based and accordingly, capital intensive. Eldercare centers require
regular maintenance in order to remain competitive and meet regulatory
standards. Second, capital is necessary in order for either company to realize
new business opportunities or to provide necessary working capital for internal
growth. Finally, changes in the regulatory landscape, whether state or federal,
can result in a significant cash drain, which may be temporary or more
permanent, which effects can be mitigated through stronger liquidity. The larger
capital base and greater float for the new equity securities than either company
would have or enjoy individually enhances the market value for both Genesis and
Multicare.

While today Genesis and Multicare realize certain savings and efficiencies from
contracting with common accounting professionals for financial auditing and
consulting services, the merger of Genesis and Multicare into a single corporate
entity will eliminate the duplicative costs associated with preparing separate
audits and filing separate financial statements and other documents as required
by the federal securities laws.

In summary, the security the creditors are entitled to receive under the
proposed scenario incorporates the value of the combined Multicare and Genesis
estates. It is the position of both Debtors that through the preservation of the
common infrastructure, purchasing power, access to capital, and opportunities
for administrative cost reductions, value is created which exceeds the value
that each company would be able to realize independently.

B. Mechanics of the Merger

The merger will be implemented through the Plan of Merger, a copy of which is
part of the Plan Supplement. A subsidiary of Genesis will create a new
subsidiary to effectuate the merger ("Multicare Acquisition Corporation").
Genesis, Multicare Acquisition Corporation, and Multicare will be parties to the
Plan of Merger. Authorization for the merger will be pursuant to the Plan of
Reorganization and the approval of the shareholders of Multicare Acquisition
Corporation and the deemed shareholders of Reorganized Multicare. As part of the
merger process, Multicare Acquisition Corporation will be merged into Multicare.
Note that the shareholders of Multicare will consist of the holders of the
Multicare Senior Lender Claims and the Multicare General Unsecured Claims, in
accordance with the distribution provisions of the Plan. The Plan of Merger will
provide for the exchange of the stock of Reorganized Multicare received by (i)
the holders of the Multicare Senior Lender Claims for New Senior Notes, New
Convertible Preferred Stock, and New Common Stock, and (ii) the holders of the
Multicare General Unsecured Claims for New Common Stock.

C. Exit Facility -- Condition Precedent to Effective Date

The Effective Date cannot occur unless the Debtors arrange for sufficient
financing to pay the administrative expenses of their respective chapter 11
cases (an "Exit Facility") and all the conditions precedent to the initial
extensions of credit thereunder shall be satisfied. The Genesis Debtors estimate
that their administrative expenses will total approximately $225 million,
including repayment of their debtor in possession financing. The Multicare
Debtors estimate their administrative expenses at approximately $10 million. The
Debtors expect to arrange for a revolving line of credit for working capital
purposes with availability of up to $150 million. In addition, to fund the
administrative expenses of the reorganization cases, the Debtors expect to issue
senior secured debt of approximately $235 million, repayable at the end of 6
years. The Exit Facility will permit the New Senior Notes to be outstanding. It
is anticipated that the obligations under the Exit Facility will be guarantied
by all the Debtors and will be secured by all their assets.

Several lending institutions have expressed an interest in providing an Exit
Facility in the amounts needed. In the alternative, it may be desirable for
Reorganized Genesis to raise funds in the public debt markets. The exact form
and terms of the Exit Facility selected by the Debtors will be finalized as the
Debtors prepare for confirmation of the Plan.

D. Distributions Under the Plan of Reorganization

One of the key concepts under the Bankruptcy Code is that only claims and equity
interests that are "allowed" may receive distributions under a chapter 11 plan.
This term is used throughout the Plan of Reorganization and the descriptions
below. In general, an "allowed" claim or "allowed" equity interest simply means
that the debtor agrees, or in the event of a dispute, that the Bankruptcy Court
determines, that the claim or interest, and the amount thereof, is in fact a
valid obligation of the debtor.

1. Timing and Conditions of Distributions

(a) Date of Distribution

Except as otherwise provided for in the Plan of Reorganization, distribution on
account of allowed claims will be made on or as soon as practicable after the
later of the Effective Date and the date an order allowing a disputed claim
becomes a Final Order. Disputed claims will be treated as set forth below. All
distributions to the holders of the Genesis Senior Lender Claims and the
Multicare Senior Lender Claims will be made to the individual holders of the
Genesis Senior Lender Claims and Multicare Senior Lender Claims in such
denominations and registered in the names of the holders as Mellon Bank, N.A.
shall have directed in writing.

(b) Surrender of Certain Securities Necessary for Distribution

Plans of reorganization generally require a holder of an instrument or security
of a debtor to surrender such instrument or security prior to receiving a new
instrument or security in exchange therefor under a plan of reorganization. This
rule avoids disputes regarding who is the proper recipient of instruments or
securities under a plan of reorganization.

As a condition to participating in the distribution under the Plan, a holder of
a certificated instrument or note must surrender such instrument or note prior
to the first anniversary of the Effective Date or provide the Disbursing Agent
with a satisfactory affidavit of loss and/or indemnity and bond. Failure to do
so will result in the forfeiture of such holder's right to receive any
distribution relating to such instrument or note.

Holders of Multicare Senior Subordinated Notes or the Debtors' preferred or
common equity interests shall not be required to surrender such securities
because they are not receiving a distribution under the Plan of Reorganization
on account of such securities.

No fractional shares of New Convertible Preferred Stock, New Common Stock, or
fractional New Warrants or cash in lieu thereof will be distributed. For
purposes of distribution, fractional shares of New Convertible Preferred Stock
or New Common Stock, and fractional New Warrants shall be rounded down to the
next whole number or zero, as appropriate.

(d) Final Distribution of New Common Stock and New Warrants

Upon the resolution or determination of all disputed claims, the Disbursing
Agent shall distribute to all holders of allowed claims entitled to receive New
Common Stock and New Warrants the amount of such securities that such holders
would have received if the resolution of all disputed claims had been known on
the Effective Date. In the event that dividend distributions have been made with
respect to the New Common Stock, such holder shall be entitled to receive the
allocable portion of such dividends without any interest with respect thereto.

2. Certain Claims Allowed

For purposes of the Plan, claims in the following classes are allowed in the
following amounts (exclusive of postpetition interest, if applicable):

Class Description Allowed Claim
------------- --------------------------------------------- ------------------------------

G2 Genesis Senior Lender Claims $1,198,460,000
G5 Genesis Senior Subordinated Note Claims 387,425,000
M2 Multicare Senior Lender Claims 443,400,000
M5 Multicare Senior Subordinated Note Claims 257,817,000

3. Procedures for Treating Disputed Claims Under the Plan of
Reorganization

For purposes of the following discussion, the term "allowed" when it applies to
a claim means that the claim has been recognized as a valid claim against the
Debtors and is entitled to participate in the class to which such claim belongs.

(a) Disputed Claims

Disputed claims include those claims (i) listed by any Debtor in such Debtors'
schedules of assets and liabilities, as may be amended from time to time, as not
liquidated in amount or contingent or disputed, (ii) to which an objection or
request for estimation has been filed and not withdrawn or determined, (iii) for
which a proof of claim has been filed and with respect to which no corresponding
claim is listed in the schedules or the corresponding claim is listed as other
than contingent, disputed, or unliquidated but for which the nature or amount of
the claim as filed differs from that listed in the schedules, or (iv) asserting
tort claims.

(b) Objections to Claims

The Debtors shall be entitled to object to all claims. Any objections to claims
shall be served and filed on or before one hundred and twenty (120) days after
the Effective Date or such later date as may be fixed by the Bankruptcy Court.

If any portion of a claim is a disputed claim, no payment or distribution shall
be made on account of the claim until the disputed portion of the claim becomes
an allowed claim or is otherwise resolved. Pending the allowance or disallowance
of the disputed claims, the Debtors shall withhold from the payments and
distributions made pursuant to the Plan of Reorganization to the holders of
allowed claims the payments and distributions allocable to the disputed claims
as if the disputed claims had been allowed claims.

(d) Distributions After Allowance

Once a disputed claim becomes an allowed claim, the holder of such allowed claim
shall receive a distribution in accordance with the provisions of the Plan of
Reorganization. If the holder is entitled to a cash distribution under the Plan,
the cash distribution shall include interest, calculated at the average rate
received by the Debtors in their deposit accounts, from the Effective Date until
the date of distributions. Cash distributions shall be made as soon as
practicable after the order allowing the disputed claim becomes a Final Order.
If the holder of a disputed claims which becomes allowed after the Effective
Date is entitled to New Common Stock or New Warrants, the Disbursing Agent may
distribute to such holder the amount of shares of such securities as such holder
would have received had such holder's claim been allowed in such amount on the
Effective Date. In the event dividend distributions have been made with respect
to the New Common Stock, such holder shall be entitled to received such
previously distributed dividends without any interest with respect thereto.

To the extent that a disputed claim is disallowed, the amount of property
withheld by the Debtors on account of such claim shall be retained by the
Debtors.

E. Treatment of Executory Contracts and Unexpired Leases

1. Contracts and Leases Not Expressly Rejected are Assumed

All executory contracts and unexpired leases, except for those expressly
rejected by the Plan of Reorganization or by separate motion, are assumed
pursuant to the Plan of Reorganization. The Plan of Reorganization provides for
the Debtors to reject those executory contracts and unexpired leases
specifically designated as a contract or lease to be rejected as specified in
the Plan Supplement. Any time prior to the first Business Day prior to the
commencement of the hearing on confirmation of the Plan of Reorganization, the
Debtors may modify that list. The Debtors will provide notice to the parties
affected by any such amendment. The Debtors expressly reserve the right to
reject any contract in the event there is a dispute concerning the amount
necessary to cure defaults, notwithstanding the fact that such dispute may arise
after the confirmation of the Plan.

2. Cure of Defaults

Generally, if there has been a default (other than a default specified in
section 365(b)(2) of the Bankruptcy Code) under an executory contract or
unexpired lease, the debtor can assume the contract or lease only if the debtor
cures the default. Accordingly, a condition to the assumption of an executory
contract or unexpired lease is that any default under an executory contract or
unexpired lease that is to be assumed pursuant to the Plan of Reorganization
will be cured in a manner consistent with the Bankruptcy Code and as set forth
in the Plan of Reorganization.

3. Rejection Claims

If an entity with a claim for damages arising from the rejection of an executory
contract or unexpired lease under the Plan of Reorganization has not filed a
proof of claim for such damages, that claim shall be barred and shall not be
enforceable against the Debtors and the Reorganized Debtors unless a proof of
claim is filed with the Bankruptcy Court and served upon counsel for the Debtors
within thirty (30) days after the Confirmation Date.

F. Management Incentive Plan

Reorganized Genesis will adopt a New Management Incentive Plan, which will
provide for grants of shares of New Common Stock and options to purchase
additional shares of New Common Stock to the senior managers of Reorganized
Genesis. The grants and options will represent [__%] of the New Common Stock on
a fully diluted basis and will be divided equally between grants and options.
[describe plan]. A copy of the New Management Incentive Plan is part of the Plan
Supplement.

G. Releases

The Plan of Reorganization includes two types of releases. First, certain
affiliates of the Genesis Debtors and the Multicare Debtors, that are not
Debtors in these reorganization cases, are obligors on the Debtors' prepetition
credit agreements. As part of the Plan, the holders of the Genesis Senior Lender
Claims and the Multicare Senior Lender Claims will release those non-Debtors.
Second, management and other agents of the Debtors will receive a full release
in recognition of their contribution to the reorganization process and in order
to avoid collateral attacks against the Reorganized Debtors by filing suits
against such parties.

H. Effect of Confirmation

1. Discharge of Claims and Termination of Equity Interests

Except as otherwise provided in the Plan, confirmation of the Plan of
Reorganization will discharge all existing debts and claims and terminate all
equity interests, of any kind, nature, or description whatsoever against or in
the Debtors or any of their assets or properties. All holders of existing claims
against and equity interests in the Debtors will be enjoined from asserting
against the Reorganized Debtors, or any of their assets or properties, any other
or further claim or equity interest based upon any act or omission, transaction,
or other activity that occurred prior to the Effective Date, whether or not such
holder has filed a proof of claim or proof of equity interest. In addition, upon
the Effective Date, each holder of a claim against or equity interest in the
Debtors shall be forever precluded and enjoined from prosecuting or asserting
any discharged claim against or terminated equity interests in the Debtors or
the Reorganized Debtors.

2. Indemnification

The Plan provides for the assumption and continuation of normal corporate
indemnification provisions related to the protection of officers and directors.

3. Exculpation

The Plan of Reorganization exculpates the Debtors, the Disbursing Agent, the
statutory committees of unsecured creditors appointed in these reorganization
cases, Mellon Bank, N.A., as administrative agent under, and any lender under,
the Genesis Senior Lender Agreements, the Multicare Senior Lender Agreements,
and the Revolving Credit and Guaranty Agreements described in sections II.E.2,
II.F.2, and VI.C, above, and their respective agents for conduct relating to the
prosecution of the reorganization cases. Specifically, the Plan of
Reorganization provides that neither the Debtors, the Disbursing Agent, the
statutory committees of unsecured creditors appointed in these reorganization
cases, and their respective members, officers, directors, employees, agents, or
professionals shall have or incur any liability to any holder of any claim or
equity interest for any act or omission in connection with, or arising out of,
the reorganization cases, the confirmation of the Plan of Reorganization, the
consummation of the Plan of Reorganization, or the administration of the Plan of
Reorganization or property to be distributed under the Plan of Reorganization,
except for willful misconduct or gross negligence.

I. Preservation of Certain Avoidance Actions

The Debtors and the Reorganized Debtors are waiving all avoidance actions except
as set forth in the Plan Supplement.

J. Miscellaneous Provisions

The Plan of Reorganization contains provisions relating to the cancellation of
existing securities, corporate actions, the Disbursing Agent, delivery of
distributions, manner of payment, vesting of assets, binding effect, term of
injunctions or stays, injunction against interference with the Plan of
Reorganization, payment of statutory fees, retiree benefits, dissolution of the
statutory committees of unsecured creditors appointed in the reorganization
cases, recognition of guaranty rights, substantial consummation, compliance with
tax requirements, severablity, revocation, and amendment of the Plan of
Reorganization, governing law, and timing. For more information regarding these
items, see the Plan of Reorganization attached hereto as Exhibit A.

IX.

Certain Factors To Be Considered

A. Certain Bankruptcy Considerations

Although the Debtors believe that the Plan of Reorganization will satisfy all
requirements necessary for confirmation by the Bankruptcy Court, there can be no
assurance that the Bankruptcy Court will reach the same conclusion. Moreover,
there can be no assurance that modifications of the Plan of Reorganization will
not be required for confirmation or that such modifications would not
necessitate the resolicitation of votes. In addition, although the Debtors
believe that the Effective Date will occur soon after the Confirmation Date,
there can be no assurance as to such timing.

The Plan of Reorganization provides for no distribution to Classes G7 (Genesis
Punitive Damage Claims), M5 (Multicare Senior Subordinated Notes), M7 (Multicare
Punitive Damage Claims), and equity interests in the Debtors. The Bankruptcy
Code conclusively deems these classes to have rejected the Plan of
Reorganization. Notwithstanding the fact that these classes are deemed to have
rejected the Plan of Reorganization, the Bankruptcy Court may confirm the Plan
of Reorganization if at least one impaired class with respect to the Genesis
Debtors and one impaired class with respect to the Multicare Debtors votes to
accept the Plan of Reorganization (with such acceptance being determined without
including the vote of any "insider" in such class). Thus, for the Plan of
Reorganization to be confirmed, (i) one of the impaired subclasses in Class G1
or one of Classes G2 (Genesis Senior Lender Claims), G4 (Genesis General
Unsecured Claims), or G5 (Genesis Senior Subordinated Note Claims), and (ii) one
of the impaired subclasses in Class M1 or Classes M2 (Multicare Senior Lender
Claims) or M4 (Multicare General Unsecured Claims) must vote to accept the Plan
of Reorganization. As to each impaired class that has not accepted the Plan of
Reorganization, the Plan of Reorganization may be confirmed if the Bankruptcy
Court determines that the Plan of Reorganization "does not discriminate
unfairly" and is "fair and equitable" with respect to these classes. The Debtors
believe that the Plan of Reorganization satisfies these requirements. For more
information, see section XI.F, below.

B. Risks Relating to the Plan Securities

1. Variances from Projections

The projections included in this Disclosure Statement reflect numerous
assumptions concerning the anticipated future performance of the Debtors and
with respect to the prevailing market and economic conditions which are beyond
the control of the Debtors and which may not materialize. The projections
include assumptions concerning reimbursement rates with respect to third party
payors and patient mix, occupancy, the collectability of accounts receivable,
operating costs, and rent expense. The Debtors believe that the assumptions
underlying the projections are reasonable. However, unanticipated events and
circumstances occurring subsequent to the preparation of the projections may
affect the actual financial results of the Debtors. Therefore, the actual
results achieved throughout the periods covered by the projections necessarily
will vary from the projected results, which variations may be material and
adverse.

2. Substantial Leverage; Ability to Service Debt

The Reorganized Debtors will have substantial indebtedness. On the Effective
Date, after giving effect to the transactions contemplated by the Plan of
Reorganization, the Reorganized Debtors will have approximately $624 million in
secured indebtedness. Although this level of debt represents significantly less
leverage than many of the Debtors' competitors, significant amounts of cash
flows will be necessary to make payments of interest and repay the principal
amount of this indebtedness.

3. Significant Holders

Under the Plan of Reorganization, certain holders of allowed claims may receive
distributions of shares in Reorganized Genesis representing in excess of five
percent (5%) of the outstanding shares of New Common Stock. If holders of a
significant number of shares of Reorganized Genesis were to act as a group, such
holders may be in a position to control the outcome of actions requiring
shareholder approval, including the election of directors. Further, the
possibility that one or more of the holders of a number of shares of Reorganized
Genesis may determine to sell all or a large portion of their shares in a short
period of time may adversely affect the market price of the stock of Reorganized
Genesis.

4. Lack of Trading Market

Reorganized Genesis will use reasonable commercial efforts to cause the shares
of New Common Stock to be listed on a national securities exchange or a
qualifying interdealer quotation system as soon as practicable following the
Effective Date. There can be no assurance, however, that the New Common Stock
will be listed on such exchange or system. Accordingly, there can be no
assurance that a holder of the such securities will be able to sell such shares
in the future or as to the price at which such shares might trade.

5. Dividend Policies

Because all of the Debtors' cash flows will be used in the foreseeable future to
make payments under the exit facility that will be entered into in connection
with the emergence from chapter 11 and under certain of the Plan Securities,
Reorganized Genesis does not anticipate paying dividends on the New Common Stock
in the near future.

6. Restrictions on Transfer

Holders of Plan Securities who are deemed to be "underwriters" as defined in
section 1145(b) of the Bankruptcy Code, including holders who are deemed to be
"affiliates" or "control persons" within the meaning of the Securities Act, will
be unable freely to transfer or to sell their securities except pursuant to (a)
"ordinary trading transactions" by a holder that is not an "issuer" within the
meaning of section 1145(b), (b) an effective registration of such securities
under the Securities Act and under equivalent state securities or "blue sky"
laws, or (c) pursuant to the provisions of Rule 144 under the Securities Act or
another available exemption from registration requirements. For a more detailed
description of these matters, see section II.J, above.

C. Risks Associated with the Business

The following categories of risks associated with the Debtors' businesses are
set forth in their respective Form 10-Ks, which have been filed with the
Securities and Exchange Commission: Risk Associated with Reimbursement Process;
Reduced Revenues Resulting from Prospective Payment System; Self-Funded
Insurance; Competitive Conditions; Collectability of Certain Accounts
Receivable; Risks Related to Investigations and Legal Proceedings; Risk Of
Adverse Effect Of Future Healthcare Reform; Potential Adverse Effect of Change
in Revenue Sources; Potential Adverse Impact from Extensive Regulation; Risk of
International Operations; Foreign Exchange Risk; and Increased Labor Costs.
Please refer to those SEC filings for a further discussion on this topic.

Confirmation of the Plan of Reorganization

A. Confirmation Hearing

Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after
appropriate notice, to hold a hearing on confirmation of a plan of
reorganization. The confirmation hearing is scheduled for [__:__ _].m., Eastern
Time, before the Honorable Judith H. Wizmur, United States Bankruptcy Court for
the District of New Jersey, Mitchell H. Cohen Courthouse, Courtroom 4B, 4th and
Cooper Street, Camden, New Jersey 08101. The confirmation hearing may be
adjourned from time to time by the Debtors or the Bankruptcy Court without
further notice except for an announcement of the adjourned date made at the
confirmation hearing or any subsequent adjourned confirmation hearing.

Section 1128(b) of the Bankruptcy Code provides that any party in interest may
object to confirmation of a plan of reorganization. Any objection to
confirmation of the Plan of Reorganization must be in writing, must conform to
the Federal Rules of Bankruptcy Procedure, must set forth the name of the
objector, the nature and amount of claims or interests held or asserted by the
objector against the particular Debtor or Debtors, the basis for the objection
and the specific grounds therefor, and must be filed with the Bankruptcy Court,
with a copy to Chambers, together with proof of service thereof, and served upon
(i) Weil, Gotshal & Manges LLP, Co-Attorneys for the Genesis Debtors and Debtors
in Possession, 767 Fifth Avenue, New York, New York 10153, Attention: Michael F.
Walsh, Esq.; (ii) Richards, Layton & Finger PA, Co-Attorneys for Genesis Debtors
and Debtors in Possession, One Rodney Square P.O. Box 551, Wilmington, Delaware
19899; Attention: Mark D. Collins, Esq.; (iii) Willkie, Farr & Gallagher,
Co-Attorneys for the Multicare Debtors and Debtors in Possession, 787 Seventh
Avenue, New York, New York 10019, Attention: Marc Abrams, Esq.; (iv) Young,
Conaway, Stargatt & Taylor, Co-Attorneys for the Multicare Debtors and Debtors
in Possession, 11th floor, Wilmington Trust Company, P.O. Box 391, Wilmington
Delaware 19899-0391, Attention: James J. Patton, Esq.; (v) The United States

Trustee for the District of Delaware, Attention: Joseph McMahon, Esq., 601
Walnut Street, Suite 950 West, Philadelphia, Pennsylvania 19106; (vi) Akin,
Gump, Strauss, Hauer & Feld, L.L.P., Attorneys for the Official Committee of
Unsecured Creditors for the Genesis Debtors, 590 Madison Avenue, New York, New
York 10022, Attention: Lisa Beckerman, Esq.; (vii) Pachulski Stang Ziehl Young &
Jones PC, Attorneys for the Official Committee of Unsecured Creditors for the
Genesis Debtors, 919 N. Market Street, 16th Floor, P.O. Box 8075, Wilmington,
Delaware 19899-8705, Attention: Laura Davis Jones, Esq., (viii) Kasowitz,
Benson, Torres & Friedman LLP, Attorneys for the Official Committee of Unsecured
Creditors for the Multicare Debtors, 1301 Avenue of the Americas, New York, NY
10019, Attention: David Rosner, Esq., (ix) Saul, Ewing, Remick & Saul LLP,
Attorneys for the Official Committee of Unsecured Creditors for the Multicare
Debtors, 222 Delaware Avenue, Suite 1200, P.O. Box 1266, Wilmington, Delaware
19899-1266, Attention: Norman Pernick, Esq., and (x) Morgan, Lewis & Bockius
LLP, Attorneys for Agent for the Prepetition Senior Secured Lenders and
Postpetition Lenders, 101 Park Avenue, New York, New York 10178-0060, Attention:
Richard S. Toder, Esq.

Objections to confirmation of the Plan of Reorganization are governed by Rule
9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN OBJECTION TO
CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE
BANKRUPTCY COURT.

B. General Requirements of Section 1129

At the confirmation hearing, the Bankruptcy Court will determine whether the
following confirmation requirements specified in section 1129 of the Bankruptcy
Code have been satisfied:

1. The Plan complies with the applicable provisions of the
Bankruptcy Code.

2. The Debtors have complied with the applicable provisions of
the Bankruptcy Code.

3. The Plan has been proposed in good faith and not by any means
proscribed by law.

4. Any payment made or promised by the Debtors or by a person
issuing securities or acquiring property under the Plan for
services or for costs and expenses in, or in connection with,
the chapter 11 cases, or in connection with the Plan and
incident to the chapter 11 cases, has been disclosed to the
Bankruptcy Court, and any such payment made before the
confirmation of the Plan is reasonable or if such payment is
to be fixed after confirmation of the Plan, such payment is
subject to the approval of the Bankruptcy Court as
reasonable.

5. The Debtors have disclosed the identity and affiliations of
any individual proposed to serve, after confirmation of the
Plan, as a director, officer, or voting trustee of the
Debtors, affiliates of the Debtors participating in the Plan
with the Debtors, or a successor to the Debtors under the
Plan, and the appointment to, or continuance in, such office
of such individual is consistent with the interests of
creditors and equity holders and with public policy, and the
Debtors have disclosed the identity of any insider that will
be employed or retained by the Debtors, and the nature of any
compensation for such insider.

6. With respect to each class of claims or equity interests,
each holder of an impaired claim or impaired equity interest
either has accepted the Plan or will receive or retain under
the Plan on account of such holder's claim or equity
interest, property of a value, as of the Effective Date, that
is not less than the amount such holder would receive or
retain if the Debtors were liquidated on the Effective Date
under chapter 7 of the Bankruptcy Code. See discussion of
"Best Interests Test" below.

7. Except to the extent the Plan meets the requirements of
section 1129(b) of the Bankruptcy Code (discussed below),
each class of claims or equity interests has either accepted
the Plan or is not impaired under the Plan. Classes G7
(Genesis Punitive Damage Claims), G8 (Genesis Series G
Preferred Stock Interests), G9 (Genesis Series H Preferred
Stock Interests), G10 (Genesis Series I Preferred Stock
Interests), G11 (Genesis Common Stock Interests), M5
(Multicare Senior Subordinated Note Claims), M7 (Multicare
Punitive Damage Claims), and M8 (Multicare Common Stock
Interests) are deemed to have rejected the Plan and thus the
Plan can be confirmed only if the requirements of section
1129(b) of the Bankruptcy Code are met.

8. Except to the extent that the holder of a particular claim
has agreed to a different treatment of such claim, the Plan
provides that Administrative Expense Claims and Priority
Non-Tax Claims will be paid in full on the Effective Date and
that Priority Tax Claims will receive on account of such
claims deferred cash payments, over a period not exceeding
six (6) years after the date of assessment of such claims, of
a value, as of the Effective Date, equal to the allowed
amount of such claims.

9. At least one class of impaired claims has accepted the Plan,
determined without including any acceptance of the Plan by
any insider holding a claim in such class.

10. Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further financial reorganization
of the Debtors or any successor to the Debtors under the
Plan, unless such liquidation or reorganization is proposed
in the Plan. See discussion of "Feasibility" below.

11. The Plan provides for the continuation after the Effective
Date of payment of all retiree benefits (as defined in
section 1114 of the Bankruptcy Code), at the level
established pursuant to section 1114(e)(1)(B) or 1114(g) of
the Bankruptcy Code at any time prior to confirmation of the
Plan, for the duration of the period the Debtors have
obligated themselves to provide such benefits.

C. Best Interests Tests

As described above, the Bankruptcy Code requires that each holder of an impaired
claim or equity interest either (i) accept the Plan or (ii) receive or retain
under the Plan property of a value, as of the Effective Date, that is not less
than the value such holder would receive if the Debtors were liquidated under
chapter 7 of the Bankruptcy Code.

The first step in determining whether this step has been satisfied is to
determine the dollar amount that would be generated from the liquidation of the
Debtors' assets and properties in the context of a chapter 7 liquidation case.
The gross amount of cash that would be available for satisfaction of claims and
equity interests would be the sum consisting of the proceeds resulting from the
disposition of the unencumbered assets and properties of the Debtors, augmented
by the unencumbered cash held by the Debtors at the time of the commencement of
the liquidation case.

The next step is to reduce that gross amount by the costs and expenses of
liquidation and by such additional administrative and priority claims that might
result from the termination of the Debtors' business and the use of chapter 7
for the purposes of liquidation. Any remaining net cash would be allocated to
creditors and shareholders in strict priority in accordance with section 726 of
the Bankruptcy Code. Finally, the present value of such allocations (taking into
account the time necessary to accomplish the liquidation) are compared to the
value of the property that is proposed to be distributed under the Plan on the
Effective Date.

The Debtors' costs of liquidation under chapter 7 would include the fees payable
to a trustee in bankruptcy, as well as those fees that might be payable to
attorneys and other professionals that such a trustee might engage. Other
liquidation costs include the expenses incurred during the chapter 11 cases
allowed in the chapter 7 case, such as compensation for attorneys, financial
advisors, appraisers, accountants, and other professionals for the Debtors and
statutory committee of unsecured creditors appointed in the chapter 11 cases,
and costs and expenses of members of the statutory committee of unsecured
creditors, as well as other compensation claims. In addition, claims would arise
by reason of the breach or rejection of obligations incurred and leases and
executory contracts assumed or entered into by the Debtors during the pendency
of the chapter 11 cases.

The foregoing types of claims, costs, expenses, fees, and such other claims that
may arise in a liquidation case would be paid in full from the liquidation
proceeds before the balance of those proceeds would be made available to pay
prepetition priority and unsecured claims. The Debtors believe that in a chapter
7 case, Classes G4 (other than insured claims to the extent of such insurance),
G5, G6, G7, G8, G9, G10, G11, M4 (other than insured claims to the extent of
such insurance), M5, M6, M7, M8, and M9 would receive no distribution of
property.

After consideration of the effects that a chapter 7 liquidation would have on
the ultimate proceeds available for distribution to creditors in the chapter 11
cases, including (i) the increased costs and expenses of a liquidation under
chapter 7 arising from fees payable to a trustee in bankruptcy and professional
advisors to such trustee, (ii) additional costs associated with the rapid
transfer or cessation of operations at the facilities and the erosion in value
of assets in a chapter 7 case in the context of the expeditious liquidation
required under chapter 7 and the "forced sale" atmosphere that would prevail,
and (iii) the substantial increases in claims that would be satisfied on a
priority basis, the Debtors have determined that confirmation of the Plan will
provide each holder of an allowed claim with a recovery that is not less than
such holder would receive pursuant to liquidation of the Debtors under chapter
7.

The Debtors also believe that the value of any distributions to each class of
allowed claims in a chapter 7 case, including all secured claims, would be less
than the value of distributions under the Plan because such distributions in a
chapter 7 case would not occur for a substantial period of time. In this regard,
it is possible that distribution of the proceeds of the liquidation could be
delayed for one or more years or more after the completion of such liquidation
in order to resolve claims and prepare for distributions. In the event
litigation was necessary to resolve claims asserted in a chapter 7 case, the
delay could be prolonged and administrative expenses increased.

The Debtors' liquidation analysis is an estimate of the proceeds that may be
generated as a result of a hypothetical chapter 7 liquidation of the Debtors.
The analysis is based on a number of significant assumptions which are
described. The liquidation analysis does not purport to be a valuation of the
Debtors' assets and is not necessarily indicative of the values that may be
realized in an actual liquidation.

D. Liquidation Analyses

The liquidation analyses has been prepared in consultation with the auditors of
Genesis and Multicare. The full reports, including assumptions for each company,
are included in the Plan Supplement.

1. The Genesis Debtors

Notes Unaudited Asset Realization Liquidation Values
Ref Book Value Scenario I Scenario II Scenario I Scenario II
--------- -------------- ---------- ----------- ---------- -----------

Statement of Assets ($000)
Cash & equivalents A $806 100% 100% $806 $806
Restricted investments in marketable
securities B 31,697 0% 0% - -
Accounts receivable (net) C 404,770 39% 53% 157,860 214,528
Inventory D 65,011 0% 0% - -
Prepaid expenses and other current
assets E 45,884 21% 36% 9,636 16,518
Proceeds from the sale of operating
entities F N/A N/A 273,635 478,557
Property, plant and equipment G 537,215 N/A N/A 11,893 22,436
Notes receivable and other
investments H 38,881 48% 63% 18,663 24,495
Other long term assets I 114,222 16% 24% 18,276 27,413
Investments in unconsolidated
affiliates J 56,801 0% 0% - -
Goodwill and other intangibles K 890,888 0% 0% - -
Avoidance & contingency claims L Unknown Unknown
------------- ------- -------
Total liquidated proceeds 2,186,175 22.45% 35.90% 490,769 784,753
------------- ------- -------

Estimated Recovery
Scenario I Scenario II
------------ ---------------

CHAPTER 7 ADMINISTRATIVE CLAIMS - Section 503(b)
Trustee & Receiver fees M 14,747 23,599
Counsel for Trustee N 7,374 11,800
Other professional fees O 13,200 13,200
Estimated liquidation costs P 39,262 62,780
------------- -----------
TOTAL CHAPTER 7 ADMINISTRATIVE CLAIMS 74,583 111,379
------------- -----------
Net Estimated Recovery - Chapter 7 Admin Claims 100% 100%

Net Estimated Proceeds available for distribution $416,186 $673,374

Estimated
Balance
--------------

SECURED CLAIMS
DIP Financing Q 180,000 100% 100% 180,000 180,000
G1 miscellaneous mortgage claims R 120,385 28% 45% 33,765 54,631
G2 senior lender claims R 1,198,460 17% 37% 202,421 438,743
------------- ------------- -----------
TOTAL SECURED CLAIMS 1,498,845 416,186 673,374
------------- ------------- -----------

Net Estimated Proceeds available for distribution after Secured Claims $0 $0

ADMINISTRATIVE CLAIMS
Post petition trade creditor claims S 47,655 0% 0% - -
Accrued salaries, wages, and other
compensation T 51,753 0% 0% - -
------------- ------------- -----------
TOTAL ADMINISTRATIVE CLAIMS 99,408 - -
------------- ------------- -----------

Balance available for distribution to priority creditors $0 $0

PRIORITY CLAIMS (G3)
Accrued Salaries, wages and other
compensation U 17 0% 0% - -
Taxes U 11,508 0% 0% - -
Other claims U 2,056 0% 0% - -
------------- ------------- -----------
TOTAL PRIORITY CLAIMS 13,581 - -
------------- ------------- -----------

Balance available for distribution to unsecured creditors $0 $0

GENERAL UNSECURED CLAIMS
G4 general unsecured claims V 80,761 0% 0% - -
G5 senior subordinated note claims W 387,425 0% 0% - -
------------- ------------- -----------
TOTAL GENERAL UNSECURED CLAIMS 468,186 - -
------------- ------------- -----------

Notes to Genesis Liquidation Analysis

GENERAL ASSUMPTIONS

4 The Liquidation Analysis assumes that Genesis's captive insurance business
would be liquidated separately and accordingly, that business is excluded
from this analysis. It is assumed that this Liquidation Analysis includes
all other assets of Genesis, including investments in subsidiaries not
currently in bankruptcy. It is assumed that all operating assets would be
disposed of through sale, liquidation, and/or termination as appropriate.
5 The Liquidation Analysis uses Genesis's unaudited financial statements as
of December 31, 2000, and other figures estimated by Genesis's management.
6 Genesis operates skilled nursing and assisted living eldercare facilities
("centers"). The skilled nursing centers offer three levels of care to
their customers: skilled, intermediate, and personal. This analysis assumes
that the majority of these centers will be sold as a going-concern over the
six-month liquidation period. Genesis believes a six-month liquidation
period is sufficient to allow for an orderly transfer of operations to
acquirers. During this time, certain personnel would be retained as
necessary to support the completion of the sale and liquidation process.
7 Management has assumed that those centers generating negative earnings will
be either closed within the six month liquidation period or involuntarily
placed into receivership by various state authorities as a result of
Genesis's conversion to a chapter 7 case.
8 Genesis operates pharmacy and medical supply services that provide
prescription and nonprescription pharmaceuticals, infusion therapy, medical
supplies, and equipment to elderly, chronically ill, and disabled patients
in long-term care and alternative site settings. Genesis also operates
community-based pharmacies which are located in or near medical centers,
hospitals, and physician office complexes. This analysis assumes that
Genesis's pharmacy services will be sold as a going-concern over the
six-month liquidation period. Genesis believes a six-month liquidation
period is sufficient to allow for an orderly transfer of operations to
acquirers. During this time, certain personnel would be retained as
necessary to support the completion of the sale and liquidation process.
9 Genesis provides physical, speech, and occupational rehabilitation
services. This analysis assumes that Genesis's rehabilitation services will
be sold as a going-concern over the six-month liquidation period. Genesis
believes a six-month liquidation period is sufficient to allow for an
orderly transfer of operations to acquirers. During this time, certain
personnel would be retained as necessary to support the completion of the
sale and liquidation process.
10 Genesis provides other ancillary services including group purchasing,
hospitality services, respiratory health services, diagnostic services,
home healthcare, and other miscellaneous healthcare, management, and
consulting services. This analysis assumes that Genesis's other ancillary
services will be sold as a going-concern over the six-month liquidation
period. Genesis believes a six-month liquidation period is sufficient to
allow for an orderly transfer of operations to acquirers. During this time,
certain personnel would be retained as necessary to support the completion
of the sale and liquidation process.
11 This liquidation analysis assumes that all assets of the Genesis Debtors
will be liquidated during the six-month liquidation period. There can be no
assurances made that all assets will be completely liquidated during this
time period.
12 For purposes of this analysis, management has assumed a high and low range
of liquidation scenarios entitled Scenario I and II.

NOTES TO ASSET ACCOUNTS

A Cash & equivalents. The Liquidation Analysis assumes no further cash would
be generated during the chapter 7 cases for distribution, except for net
proceeds from the disposition of noncash assets. It is assumed that the
cash at the date of the actual liquidation would be equal to the cash
balance as of December 31, 2000. That cash would be fully available for
distribution to creditors.

B Restricted investments in marketable securities. This amount represents
investments in marketable securities held by Genesis's captive insurance
subsidiary which did not file for bankruptcy. Restricted investments in
marketable securities would not be available in Genesis's chapter 7
liquidation. All outstanding liabilities (potential claims) in connection
with Genesis's captive insurance subsidiary are omitted from this analysis.

C Accounts receivable. Genesis will retain ownership of the accounts
receivable for all entities. The chapter 7 trustee will bill and collect
these receivables. For purposes of this analysis, management anticipates
recovering between 39% and 53% of net accounts receivable. These
percentages are based upon a review of the detailed aging balance for the
various payors. Management has assessed the potential recoverability for
these receivables based on payor-mix and the days outstanding of these
receivables.

Below are the recovery percentages applied for the nursing centers:

Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------

Current 80% 95% 75% 90%
-------
31 - 60 65% 85% 55% 75%
-------
61 - 90 55% 80% 45% 65%
-------
91 - 120 30% 60% 25% 55%
--------
121 - 365 15% 35% 10% 30%
---------
Over 365 0% 0% 0% 0%
--------

Below are the recovery percentages applied for the pharmacy and medical supply
division:

Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------

Current 75% 90% 70% 85%
-------
31 - 60 60% 80% 50% 70%
-------
61 - 90 50% 75% 40% 60%
-------
91 - 120 25% 55% 20% 50%
--------
121 - 365 10% 30% 5% 25%
---------
Over 365 0% 0% 0% 0%
--------

Certain trade receivables are due from a related entity - Multicare - for
prepetition services rendered. It is estimated that no recovery will be made
from these receivables.

All other receivables from rehabilitation and other ancillary services represent
approximately 5% of net receivables. The cash recovery value for these other
receivables was estimated by applying the aggregate recovery percentage average
for nursing and pharmacy receivables.

The estimate herein reflects management's approximation of the recoverable value
of these receivables during the six-month liquidation period.

D Inventory. For purposes of this analysis, it is assumed that inventory will
be included in the sale of going-concern entities and is therefore not
projected.

E Prepaid expenses and other current assets. This asset account consists
primarily of miscellaneous receivables, prepaid rents, prepaid property
taxes, and prepaid insurance. Management has reviewed the individual
account balances for this account and has estimated that in aggregate
approximately $9 million and $17 million will be recovered under a
liquidation scenario.

F Proceeds from the sale of operating entities. The proceeds from the
distressed sale of going-concern operations is estimated to be in the range
of $274 million to $479 million. The entities sold include Genesis's
inpatient nursing centers, pharmacy business, rehabilitation services, and
other ancillary businesses. The values estimated for those businesses are
based upon various earnings multiples for distressed going concern
operations which management considers reasonable.

The enterprise value for these entities was determined by applying these
multiples to a normalized earnings for Genesis. The 2001 projected earnings
(EBITDA) were adjusted to reflect the following:

- current operations through January 31, 2001;
- the elimination of negative earnings for underperforming entities
likely to be closed;
- allocation of corporate overhead to the operating businesses

A range of multiple of earnings was then applied to this "normalized
EBITDA" to estimate enterprise value for these entities. The calculated
enterprise value was then further reduced by the secured debt and current
liabilities from non bankrupt subsidiaries of Genesis. It is assumed that
any secured debt and current liabilities of the nonbankrupt entities would
be paid upon sale of the business units.

G Property, plant & equipment.

i. Centers, Pharmacy, Rehabilitation, and Other Ancillary
Services: Property, plant, and equipment will be included in
the sale as a going concern.
ii. Corporate Division: Property, plant, and equipment net of
accumulated depreciation is approximately $70 million. The
liquidation recovery as a percentage of cost is assumed to be
the following: Buildings & Land (25% - 50%), Equipment (10% -
20%), and Computer Equipment (10% - 15%) and construction in
progress (10% - 21%).

H Notes receivable and other investments. This asset account is comprised of
loans made to various third parties, including managed and jointly-owned
properties. Management has reviewed the various notes receivables and
investments to determine potential recoveries under a liquidation scenario.
It is estimated that Genesis would be able to recover approximately $19
million and $24 million from these receivables and investments.

I Other long-term assets. This asset account is primarily comprised of real
estate deposits, deferred financing costs, a deferred management fee due
from Multicare, net receivables from HCFA and other third-party payors.
Management estimates that approximately $18 million and $27 million will be
recovered under a liquidation scenario.

J Investments in unconsolidated affiliates. The majority of the investments
in unconsolidated affiliates is with Multicare. Management of Genesis
assigns no recoverability for this asset.

K Goodwill and other intangibles. Goodwill and other intangibles assets are
estimated to have no liquidation recovery value.

L Avoidance & contingency claims. The Genesis Debtors may have certain rights
for avoidance actions and other contingency claims that may benefit the
estate. It is unknown at this time the total benefit that these claims may
generate for the estates if the Genesis Debtors were successful in
litigating these matters.

NOTES TO CHAPTER 7 ADMINISTRATIVE CLAIMS

M Trustee & Receiver fees. Compensation for the chapter 7 trustee will be
limited to fee guidelines in section 326 of the Bankruptcy Code.

N Counsel for Trustee. Compensation for trustee's counsel is estimated at 50%
of estimated trustee fees.

O Other professional fees. Management estimates that professional fees for
legal, financial, and other advice relating to the bankruptcy proceedings
will be $1.7 million per month for the first three months of the
liquidation process. It is anticipated that professional fees would reduce
to $1 million per month for the subsequent three months. In addition, there
was approximately $5.1 million owing in relation to fees outstanding from
the Commencement Date to December 31, 2000.

P Liquidation costs. For purposes of this analysis, liquidation costs are
estimated as 8% of total liquidated proceeds.

NOTES TO SECURED CLAIMS

Q DIP financing. The administrative claim owing in relation to DIP Financing
has been estimated as the amount outstanding as disclosed in the Debtors'
borrowing base certificate as of May 31, 2001.

R Secured Claims. Amount of liability represented herein is based on proof of
claims filed by the various claimants.

NOTES TO ADMINISTRATIVE CLAIMS

S Postpetition trade creditor claims. This amount represents the trade
creditor debt incurred during the Genesis reorganization cases payable as
an administrative claim.

T Accrued salaries, wages, and other compensation. Amount represents
salaries, wages, and other compensation incurred pre- and postpetition
subject to Bankruptcy Court order.

NOTES TO PRIORITY CLAIMS

U Priority Claims. Amount represents section 507 claims.

NOTES TO UNSECURED CLAIMS

V General unsecured - Class G4 claims. Amount represents trade creditor debt
outstanding as of the Commencement Date. Although not specifically shown,
technically, this class would also include deficiency claims from classes
G1 and G2.

W Unsecured Debt - Class G5 claims. Amount represents claims under certain
prepetition senior subordinated notes.

Best Interest Comparison

Liquidation Recovery Chapter 11
Class Low High Recovery

G1 (Misc Secured Claims) 28% 45% 100.00%
G2 (Genesis Senior Lender Claims) 17% 37% 79.17%
G3 (Priority Claims) 0% 0% 100.00%
G4 (Genesis General Unsecured Claims) 0% 0% 6.94%
G5 (Genesis Sr Subordinated Note Claims) 0% 0% 6.94%
G7 (Genesis Punitive Damage Claims) 0% 0% 0.00%

2. Multicare Debtors

Asset Realization Liquidation Values
Notes Unaudited Scenario Scenario
Ref Book Value 1 2 Scenario 1 Scenario 2
------- --------------- --------- -------- ------------- ------------

Statement of Assets ($000)
Cash and equivalents A $19,070 100% 100% $19,070 $19,070
Accounts receivable, net B 104,581 46% 63% 48,107 65,886
Prepaid expenses and other current assets C 15,876 15% 29% 2,381 4,604
Proceeds from the sale of operating
entities D N/A N/A 83,672 148,731
Property, plant and equipment, net E 559,963 0% 0% - -
Other long-term assets F 62,052 N/A N/A 5,000 10,000
Goodwill and other intangibles, net G 335,147 0% 0% - -
Avoidance & contingency claims H Unknown Unknown
-------------- ---------- ----------
Total $1,096,689 14.4% 22.6% $158,230 $248,291
============== ========== ==========

CHAPTER 7 ADMINS - Section 503(b)
Trustee & Receiver fees I 4,771 7,473
Counsel for Trustee J 2,386 3,737
Other professional fees K 8,252 8,252
Estimated liquidation costs L 12,658 19,863
---------- ----------
TOTAL CHAPTER 7 ADMIN CLAIMS 28,067 39,325
---------- ----------
Net Estimated Recovery - Chapter 7 Admin
Claims 100% 100%

Net Estimated Proceeds available for
distribution $130,163 $208,966

SECURED CLAIMS
DIP financing M - - -
M1 miscellaneous mortgage claims N 27,854 28% 44% 7,693 12,351
M2 senior lender claims N 443,400 28% 44% 122,470 196,615
-------------- ---------- ----------
TOTAL SECURED CLAIMS 471,254 130,163 208,966
-------------- ---------- ----------
Net Estimated Proceeds available for
distribution $0 $0

ADMINISTRATIVE CLAIMS
Post petition trade creditor claims O 23,755 0% 0% - -
Accrued salaries, wages, and other
compensation P 13,594 0% 0% - -
-------------- ---------- ----------
TOTAL ADMINISTRATIVE CLAIMS 37,349 - -
-------------- ---------- ----------

Balance available for distribution to priority
creditors $0 $0

PRIORITY CLAIMS (M3)
Accrued salaries, wages & other
compensation Q 50 0% 0% - -
Taxes Q 5,570 0% 0% - -
Other claims Q 405 0% 0% - -
-------------- ---------- ----------
TOTAL PRIORITY CLAIMS 6,025 - -
-------------- ---------- ----------

Balance available for distribution to general unsecured creditors $0 $0

GENERAL UNSECURED CLAIMS
M4 Other & trade creditor claims R 26,439 0% 0% - -
M5 Unsecured Debt S 257,817 0% 0% - -
-------------- ---------- ----------
TOTAL GENERAL UNSECURED CLAIMS 284,256 - -
-------------- ---------- ----------

Notes to Multicare Liquidation Analysis

GENERAL ASSUMPTIONS

1 This Liquidation Analysis was prepared in accordance with section
1129(a)(7)(A)(ii) of the Bankruptcy Code to determine that the Plan of
Reorganization is in the best interest of each holder of a Claim or
Interest.
2 The Liquidation Analysis is based upon a number of estimates and
assumptions that, although developed and considered reasonable by
Multicare's management, are inherently subject to significant economic,
business, governmental regulation, competitive uncertainties, and
contingencies beyond the control of Multicare or its management. The
Liquidation Analysis is also based upon assumptions with regard to
liquidation decisions that are subject to change. Accordingly, there can be
no assurance that the values reflected in this Liquidation Analysis would
be realized if Multicare were, in fact, to undergo such a liquidation and
actual results could vary materially and adversely from those contained
herein.
3 This analysis assumes the conversion of the current chapter 11 cases to
chapter 7 cases with the liquidation of the company's assets being
finalized over a six-month period. A chapter 7 trustee would be appointed
to administer the estates. The chapter 7 trustee is independent and would
be entitled to make all of his or her own decisions regarding the
liquidation of the estates, hiring of professionals, the pursuit of claims
or litigation, the payment of or objection to claims, and the distribution
of any ultimate dividends. The chapter 7 trustee would be compensated in
accordance with section 326 of the Bankruptcy Code.
4 It is assumed that this Liquidation Analysis includes all assets of the
parent company, including investments in subsidiaries not currently in
bankruptcy. It is assumed that all operating assets would be disposed of
through sale, liquidation, and/or termination as appropriate.
5 The Liquidation Analysis utilizes Multicare's unaudited financial
statements as of December 31, 2000, and other figures estimated by
management.
6 This analysis assumes that the majority of inpatient services assets will
be sold as a going-concern over the six-month liquidation period. Multicare
believes a six-month liquidation period is sufficient to allow for an
orderly transfer of operations to acquirers. During this time, certain
personnel would be retained as necessary to support the completion of the
sale and liquidation process.
7 Management has assumed that those centers generating negative earnings will
be either closed within the six month liquidation period or involuntarily
placed into receivership by various state authorities as a result of
Multicare's conversion to a chapter 7 case.
8 This Liquidation Analysis assumes that all assets of the Multicare Debtors
will be liquidated during the six-month liquidation period. There can be no
assurances made that all assets will be completely liquidated during this
time period.
9 For purposes of this analysis, management has assumed a high and low range
of liquidation scenarios entitled Scenario I and II.

NOTES TO ASSET ACCOUNTS

A Cash & equivalents. The Liquidation Analysis assumes no further cash would
be generated during the chapter 7 case for distribution, except for net
proceeds from the disposition of noncash assets. It is assumed that the
available cash at the date of liquidation would be equal to the cash
balance as of December 31, 2000. That cash would be fully available for
distribution to creditors.

B Accounts receivable. Multicare will retain ownership of the accounts
receivable for all entities. The trustee will bill and collect these
receivables. For purposes of this analysis, management anticipates
recovering between 46% and 63% of net accounts receivable. These
percentages are based upon a review of the detailed aging balance for the
various payors. Management has assessed the potential recoverability for
these receivables based on payor-mix and the days outstanding for these
receivables. Listed below are the recovery percentages applied:

Medicare/Medicaid Managed Care/Private
----------------- --------------------
Scenario I Scenario II Scenario I Scenario II
---------- ----------- ---------- -----------
Current 80% 95% 75% 90%
-------
31 - 60 65% 85% 55% 75%
-------
61 - 90 55% 80% 45% 65%
-------
91 - 120 30% 60% 25% 55%
--------
121 - 365 15% 35% 10% 30%
---------
Over 365 0% 0% 0% 0%
--------

The estimate herein reflects management's estimate of the recoverable value
of these trade receivables during the six-month liquidation period.

C Prepaid expenses and other current assets. This asset account is comprised
of the following assets: prepaid insurance, patient trust accounts,
miscellaneous inventory, and miscellaneous receivables. For purposes of
this analysis, management estimates that approximately $2.3 to $4.6 million
will be recoverable under a liquidation scenario.

D Proceeds from sale of going-concern operations. The proceeds from the
distressed sale of going-concern operations is estimated to be in the range
of $83 million to $148 million. The values estimated for those businesses
sold are based upon various earnings multiples for distressed going-concern
operations which management considers reasonable.

The enterprise value for these entities was determined by applying these
multiples to a normalized earnings for Multicare. The 2001 projected
earnings (EBITDA) were adjusted to reflect the following:

- current operations through January 31, 2001;
- elimination of negative earnings for underperforming entities
likely to be closed;
- potential management fee savings upon termination with Multicare's
relationship with Genesis
- loss of revenues from management contracts due to liquidation of
Multicare

A range of multiple of earnings was then applied to this "normalized
EBITDA" to estimate enterprise value for these entities. The calculated
enterprise value was then further reduced by the secured debt and current
liabilities from nonbankrupt subsidiaries of Multicare. It is assumed that
any secured debt and current liabilities of the nonbankrupt entities would
be paid upon sale of the business units.

E Property, plant & equipment. Property, plant, and equipment will be
included in the sale of centers as a going concern and therefore no value
is contained herein.

F Other long-term assets. Other long term assets are comprised of deferred
financing costs, deposits to a related company, investments in
joint-ventures and potential settlement with HCFA. Management estimates to
receive approximately $5 to $10 million from HCFA. Other long term costs
are estimated to have no liquidation recovery value.

G Goodwill and other intangibles. Goodwill and other intangibles assets are
estimated to have no liquidation recovery value.

H Avoidance & contingency claims. The Multicare Debtors may have certain
rights for avoidance actions and other contingency claims that may benefit
the estates. It is unknown at this time the total benefit that these claims
may generate for the estate if the Multicare Debtors were successful in
litigating these matters.

NOTES TO CHAPTER 7 ADMINISTRATIVE CLAIMS

I Trustee & Receiver Fees. Compensation for the chapter 7 trustee will be
limited to fee guidelines in section 326 of the Bankruptcy Code.

J Counsel for Trustee. Compensation for trustee's counsel is estimated at 50%
of estimated trustee fees.

K Professional fees. As of December 31, 2000, approximately $3.7 million in
professional fees was outstanding. Management estimates that combined
professional fees will be $1,000,000 per month for the first three months
of the liquidation process. It is anticipated that professional fees would
reduce to $500,000 per month for the subsequent three months.

L Liquidation costs. For purposes of this analysis, liquidation costs are
estimated as 8% of total liquidated proceeds.

NOTES TO SECURED CLAIMS

M DIP Financing. As of May 31, 2001, Multicare did not have an outstanding
balance on its debtor in possession lending facility.

N Secured claims. Amount of liability represented herein is based on proofs
of claims filed by the various claimants.

NOTES TO ADMINISTRATIVE CLAIMS

O Postpetition trade creditor claims. Amount represents trade creditor debt
incurred during the Multicare reorganization cases. Management has reduced
the trade payable by $23 million for intercompany debt payable to Genesis
related to certain deposits that have been made. Management does not
anticipate paying this obligation upon liquidation.

P Accrued salaries, wages and other compensation. Amount represents salaries,
wages and other compensation incurred postpetition. For purposes of this
analysis, this amount is estimated as one-half of payroll and benefits
expense for the month of December 2000.

NOTES TO PRIORITY CLAIMS

Q Priority claims. Amount represents management estimates for priority
claims.

NOTES TO GENERAL UNSECURED CLAIMS

R Other unsecured creditor claims. This balance is exclusive of a $93 million
intercompany claim filed by Genesis.

S Unsecured Debt. Amount represents claims under certain prepetition senior
subordinated notes.

Best Interest Comparison

Liquidation Recovery Chapter 11
Class Low High Recovery

M1 (Misc Secured Claims) 28% 44% 100.00%
M2 (Multicare Senior Lender Claims 28% 44% 81.68%
M3 (Priority Claims) 0% 0% 100.00%
M4 (Multicare General Unsecured Claims) 0% 0% 5.67%
M5 (Multicare Sr Sub Note Claims) 0% 0% 0.00%
M7 (Multicare Punitive Damage Claims) 0% 0% 0.00%

E. Feasibility

The Bankruptcy Code requires that a debtor demonstrate that confirmation of a
plan is not likely to be followed by liquidation or the need for further
financial reorganization. For purposes of determining whether the Plan meets
this requirement, the Debtors have analyzed their ability to meet their
obligations under the Plan. As part of this analysis, the Debtors have prepared
projections contained in section IV, above. Based upon such projections, the
Debtors believe that they will be able to make all payments required pursuant to
the Plan and, therefore, that confirmation of the Plan is not likely to be
followed by liquidation or the need for further reorganization.

F. Section 1129(b)

The Bankruptcy Court may confirm a plan of reorganization over the rejection or
deemed rejection of the plan of reorganization by a class of claims or equity
interests if the plan of reorganization "does not discriminate unfairly" and is
"fair and equitable" with respect to such class.

1. No Unfair Discrimination

This test applies to classes of claims or equity interests that are of equal
priority and are receiving different treatment under the Plan of Reorganization.
The test does not require that the treatment be the same or equivalent, but that
such treatment be "fair."

2. Fair and Equitable Test

This test applies to classes of different priority and status (e.g., secured
versus unsecured) and includes the general requirement that no class of claims
receive more than 100% of the allowed amount of the claims in such class. As to
the dissenting class, the test sets different standards, depending on the type
of claims or interests in such class:

o Secured Creditors. Each holder of an impaired secured claim
either (i) retains its liens on the property, to the extent
of the allowed amount of its secured claim and receives
deferred cash payments having a value, as of the effective
date, of at least the allowed amount of such claim, or (ii)
has the right to credit bid the amount of its claim if its
property is sold and retains its liens on the proceeds of the
sale (or if sold, on the proceeds thereof) or (iii) receives
the "indubitable equivalent" of its allowed secured claim.

o Unsecured Creditors. Either (i) each holder of an impaired
unsecured creditor receives or retains under the plan
property of a value equal to the amount of its allowed claim
or (ii) the holders of claims and interests that are junior
to the claims of the dissenting class will not receive any
property under the plan.

o Equity Interests. Either (i) each equity interest holder will
receive or retain under the plan property of a value equal to
the greater of (a) the fixed liquidation preference or
redemption price, if any, of such stock and (b) the value of
the stock, or (ii) the holders of interests that are junior
to the equity interests of the dissenting class will not
receive or retain any property under the plan of
reorganization.

The Debtors believe the Plan of Reorganization will satisfy the "fair and
equitable" requirement notwithstanding that Classes G7 (Genesis Punitive Damage
Claims), G8 (Genesis Series G Preferred Stock Interests), G9 (Genesis Series H
Preferred Stock Interests), G10 (Genesis Series I Preferred Stock Interests),
G11 (Genesis Common Stock Interests), M5 (Multicare Senior Subordinated Note
Claims), M7 (Multicare Punitive Damage Claims), and M8 (Multicare Common Stock
Interests) are deemed to reject the Plan of Reorganization because no class that
is junior to such classes will receive or retain any property on account of the
claims or equity interests in such class.

The Genesis Senior Subordinated Note Claims (Class G5) are unsecured claims that
are contractually subordinated to the Genesis Senior Lender Claims. Pursuant to
the terms of the respective indentures under which these senior subordinated
notes were issued, holders of these senior subordinated notes are not entitled
to receive a distribution unless the Genesis Senior Lender Claims are paid in
full. The Plan of Reorganization does not give effect to these subordination
provisions as to the Genesis Senior Subordinated Note Claims. The distribution
provided to the holders of the claims in Class G5 (Genesis Senior Subordinated
Note Claims) under the Plan of Reorganization represents a negotiated settlement
between the unsecured creditors' committee in the Genesis reorganization cases
on behalf of the holders of claims in Class G5 and the holders of the Genesis
Senior Lender Claims. Accordingly, the distributions to the holders of the
Genesis Senior Subordinated Note Claims shall not be subject to levy,
garnishment, attachment, or other legal process by any senior holder of
indebtedness by reason of claimed contractual subordination rights. On the
Effective Date, all holders of claims against the Genesis Debtors shall be
deemed to have waived any and all contractual subordination rights which they
may have with respect to such distribution, and the Confirmation Order shall
permanently enjoin, effective as of the Effective Date, all holders of senior
indebtedness from enforcing or attempting to enforce any such rights with
respect to the distributions under the Plan of Reorganization to the holders of
the Genesis Senior Subordinated Note Claims.

The Multicare Senior Subordinated Note Claims (Class M5) are unsecured claims
that are contractually subordinated to the Multicare Senior Lender Claims.
Pursuant to the terms of the indenture under which these senior subordinated
notes were issued, holders of these senior subordinated notes are not entitled
to receive a distribution unless the Multicare Senior Lender Claims are paid in
full. The Plan of Reorganization strictly enforces these contractual
subordination provisions in accordance with their terms and pursuant to section
510 of the Bankruptcy Code.

Because several classes of claims are not being paid in full, the existing
equity interests in the Debtors are being extinguished.

XI.

Alternatives to Confirmation and Consummation of the Plan of Reorganization

A. Liquidation Under Chapter 7

If no chapter 11 plan can be confirmed, the chapter 11 cases may be converted to
cases under chapter 7 of the Bankruptcy Code in which a trustee would be elected
or appointed to liquidate the assets of the Debtors for distribution in
accordance with the priorities established by the Bankruptcy Code. A discussion
of the effect that a chapter 7 liquidation would have on the recoveries of
holders of claims is set forth in sections X.C and X.D of this Disclosure
Statement. The Debtors believe that liquidation under chapter 7 would result in
smaller distributions being made to creditors than those provided for in the
Plan of Reorganization because of (a) the likelihood that other assets of the
Debtors would have to be sold or otherwise disposed of in a less orderly
fashion, (b) additional administrative expenses attendant to the appointment of
a trustee and the trustee's employment of attorneys and other professionals, and
(c) additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from the rejection of leases
and other executory contracts in connection with a cessation of the Debtors'
operations. In a chapter 7 liquidation, the Debtors believe that there would be
no distribution to holders of Classes G4 (other than insured claims to the
extent of such insurance) through G11 and Classes M4 (other than insured claims
to the extent of such insurance) through M9.

B. Alternative Plan of Reorganization

If the Plan of Reorganization is not confirmed, the Debtors or any other party
in interest (if the Debtors' exclusive period in which to file a plan of
reorganization has expired) could attempt to formulate a different plan of
reorganization. Such a plan might involve either a reorganization and
continuation of the Debtors' business or an orderly liquidation of the Debtors'
assets under chapter 11. The Debtors have concluded that the Plan of
Reorganization enables creditors and equity holders to realize the most value
under the circumstances. In a liquidation under chapter 11, the Debtors would
still incur the expenses associated with closing or transferring to new
operators numerous facilities. The process would be carried out in a more
orderly fashion over a greater period of time. Further, if a trustee were not
appointed, because such appointment is not required in a chapter 11 case, the
expenses for professional fees would most likely be lower than those incurred in
a chapter 7 case. Although preferable to a chapter 7 liquidation, the Debtors
believe that liquidation under chapter 11 is a much less attractive alternative
to creditors and equity holders than the Plan of Reorganization because of the
greater return provided by the Plan of Reorganization.

XII.

Certain Federal Income Tax Consequences of the Plan of Reorganization

The following discussion summarizes certain federal income tax consequences of
the implementation of the Plan to the Debtors and certain holders of claims. The
following summary does not address the federal income tax consequences to (i)
holders whose claims are entitled to reinstatement or payment in full in cash,
or are otherwise unimpaired under the Plan (e.g., holders of certain Genesis
Other Secured Claims, Genesis Priority Non-Tax Claims, Multicare Priority
Non-Tax Claims, and certain Multicare Other Secured Claims) and (ii) holders of
equity interests or claims which are extinguished without a distribution in
exchange therefor (e.g., holders of Multicare Senior Subordinated Note Claims,
Genesis Punitive Damage Claims, and Multicare Punitive Damage Claims).

The following summary is based on the Internal Revenue Code of 1986, as amended
(the "Tax Code"), Treasury Regulations promulgated thereunder, judicial
decisions, and published administrative rules and pronouncements of the Internal
Revenue Service ("IRS") as in effect on the date hereof. Changes in such rules
or new interpretations thereof may have retroactive effect and could
significantly affect the federal income tax consequences described below.

The federal income tax consequences of the Plan are complex and are subject to
significant uncertainties. The Debtors have not requested a ruling from the IRS
or an opinion of counsel with respect to any of the tax aspects of the Plan.
Thus, no assurance can be given as to the interpretation that the IRS will
adopt. In addition, this summary does not address foreign, state, or local tax
consequences of the Plan, nor does it purport to address the federal income tax
consequences of the Plan to special classes of taxpayers (such as foreign
taxpayers, broker-dealers, mutual funds, insurance companies, financial
institutions, small business investment companies, regulated investment
companies, tax-exempt organizations, and investors in pass-through entities).

This discussion assumes that the various debt and other arrangements to which
the Debtors are currently a party and any consideration issued to the Debtors
under the Plan of Reorganization will be respected for federal income tax
purposes in accordance with their form.

Accordingly, the following summary of certain federal income tax consequences is
for informational purposes only and is not a substitute for careful tax planning
and advice based upon the individual circumstances pertaining to a holder of a
claim. All holders of claims are urged to consult their own tax advisors for the
federal, state, local, and other tax consequences to them of the implementation
of the Plan.

A. Consequences to the Debtors

The Genesis Debtors, on the one hand (the "Genesis Group"), and the Multicare
Debtors, on the other hand (the "Multicare Group"), each file a separate
consolidated federal income tax return, excluding those Debtors that are treated
as partnerships for federal income tax purposes. For federal income tax
purposes, the Genesis Group has substantial consolidated net operating loss
("NOL") and capital loss carryforwards and the Multicare Group has substantial
consolidated NOL carryforwards. The amount of such loss carryforwards and the
other tax benefits of the Genesis Group and the Multicare Group may be adjusted
during the course of the preparation of the actual tax returns and remain
subject to examination by the IRS. Moreover, at or about the end of 1999, the
Genesis Group and the Multicare Group each underwent an "ownership change"
within the meaning of Section 382 of the Tax Code. As a result, a substantial
portion of the loss carryforwards of the respective groups is subject to
existing limitations. Although severely restricting the utility of such loss
carryforwards against future income, the loss carryforwards remain an available
tax benefit for purposes of the cancellation of debt ("COD") rules discussed
below.

As discussed below, the loss carryforwards of the Genesis Group and Multicare
Group and possibly certain other tax benefits (including tax basis in assets)
may be reduced or subject to additional limitations upon implementation of the
Plan.

1. Cancellation of Debt

In general, the discharge of a debt obligation by a debtor for an amount less
than the remaining balance of the debt obligation (as determined for federal
income tax purposes) gives rise to COD income which must be included in the
debtor's income, subject to certain statutory or judicial exceptions that can
apply to limit the amount of COD income in a title 11 bankruptcy case (such as
where the payment of the cancelled debt would have given rise to a tax
deduction). A statutory exception applies to corporate and certain other debtors
if the discharge is granted in a title 11 bankruptcy case or pursuant to a plan
approved by a bankruptcy court.

100

In general, for debtors in bankruptcy, no portion of the COD is includable in
income; however the debtor must still reduce certain of its tax attributes--such
as NOL carryforwards, current year NOLs, capital loss carryforwards, current
year capital losses, tax credits, and tax basis in assets--by the amount of any
COD. To the extent the amount of COD exceeds the tax attributes available for
reduction, the remaining excludable COD income is simply forgiven. It is unclear
whether the reduction in tax attributes will occur on a separate company basis,
even though the Debtors file consolidated federal income tax returns with the
other members of their respective groups. The Debtors are aware that the IRS
has, in certain cases, asserted that such reduction generally should occur on a
consolidated basis. Any reduction in tax attributes does not effectively occur
until the first day of the taxable year following the year the COD occurs. If
advantageous, a debtor could elect to reduce the basis of depreciable property
prior to any reduction in their loss carryforwards.

In the case of a partnership (or a limited liability company treated as a
partnership for federal income tax purposes), the above bankruptcy exception to
COD income applies at the partner level, rather than the partnership level, and
is determined by the financial status of the partner. Thus, a corporate partner
that is itself in bankruptcy should be able to apply the above bankruptcy
exception to its allocable share of the COD income of the partnership.

As a result of the discharge of claims pursuant to the Plan, the Debtors will
incur COD, resulting in a reduction of their respective current year NOLs, loss
carryforwards, and, possibly, the tax basis in their respective assets,
effective as of the beginning of the taxable year following the taxable year in
which the Effective Date occurs. The extent of such COD and resulting tax
attribute reduction will depend, in part, on the fair market value of the New
Common Stock, New Convertible Preferred Stock, New Senior Notes, New Warrants,
and Cash (if any) distributed and the dollar amount of claims ultimately
allowed. For purposes of calculating the financial projections of Reorganized
Genesis (see section IV, above), it has been assumed that no consolidated NOLs
or NOL carryforwards of the Genesis Group or the Multicare Group will survive
the reorganization and that any reduction in the tax basis in depreciable of
amortizable assets of the Debtors would be insignificant.

2. Limitations on Loss Carryforwards and Other Tax Benefits

Following the implementation of the Plan, any consolidated NOLs (and
carryforwards thereof) and certain other tax attributes of the corporate Debtors
allocable to the period prior to the Effective Date of the Plan will be subject
to the limitations imposed by Section 382 of the Tax Code.

Under section 382, if a corporation undergoes an "ownership change," the amount
of its pre-change losses that may be utilized to offset future taxable income
is, in general, subject to an annual limitation. Such limitation also may apply
to certain losses or deductions which are "built-in" (i.e., economically accrued
but unrecognized) as of the date of the ownership change that are subsequently
recognized. The Debtors anticipate that an ownership change of the Genesis Group
and the Multicare Group will occur upon implementation of the Plan.

101

a. General Section 382 Limitation. The amount of the annual limitation to which
a loss corporation may be subject (i) depends, in part, on whether the
corporation is in bankruptcy and the ownership change occurs pursuant to a plan
of reorganization confirmed by the bankruptcy court, and (ii) within the context
of an affiliated group of corporations that file a consolidated federal income
tax return, generally applies on a consolidated basis. As discussed below, a
corporation in bankruptcy may also be able to avoid any annual limitation.

In general, the amount of the annual limitation to which a corporation (or
consolidated group) would be subject would be equal to the product of (i) the
fair market value of the stock of the corporation (or, in the case of a
consolidated group, the common parent) immediately before the ownership change
(with certain adjustments) multiplied by (ii) the "long-term tax-exempt rate" in
effect for the month in which the ownership change occurs (5.01% for ownership
changes occurring in June 2001). For a corporation in bankruptcy and,
presumably, where, as in the case of the Genesis Group and the Multicare Group,
the common parent is in bankruptcy and undergoes the ownership change pursuant
to a confirmed plan, the stock value generally is determined immediately after
(rather than before) the ownership change, and some of the adjustments that
ordinarily would apply do not apply.

For example, the annual limitation applicable to a corporation not in bankruptcy
generally would be determined after reduction of its stock value for any capital
infusions within the two year period ending on the date of the ownership change,
whereas the stock value of Genesis and Multicare for purposes of computing the
annual limitation generally would not. However, regardless of whether the
ownership change occurs pursuant to a confirmed plan, certain "anti-duplication"
rules apply. These rules principally are intended to prevent the value of a
nonconsolidated, more than 50% owned subsidiary from being taken into account
both in the determination of such subsidiary's own annual limitation and, as a
result of being an asset of the controlling corporation, indirectly in the
determination of the annual limitation of the controlling corporation (or
group). Similar rules or principles can apply within a consolidated group in
those cases where the consolidated return regulations continue to require
separate company (or subgroup) annual limitations. As a result, the stock value
of Reorganized Genesis attributable to its ownership of Reorganized Multicare
will not be able to be taken into account in determining the annual limitation
applicable to the Genesis Group to the extent that the value of Reorganized
Multicare is taken into account in determining the annual limitation applicable
to the Multicare Group (and possibly will only be useable by Genesis if an
affirmative election is made by Multicare permitting it to do so).

Any unused limitation may be carried forward, thereby increasing the annual
limitation in the subsequent taxable year. However, if the corporation (or
consolidated group) does not continue its historic business or use a significant
portion of its assets in a new business for two years after the ownership
change, the annual limitation resulting from the ownership change is zero.

102

b. Built-In Gains and Losses. If a loss corporation (or consolidated group) has
a net unrealized built-in gain at the time of an ownership change (determined
taking into account most assets and all items of "built-in" income and
deductions), any built-in gains recognized during the following five years (up
to the amount of the original net built-in gain) generally will increase the
annual limitation in the year recognized, such that the loss corporation (or
consolidated group) would be permitted to use its pre-change losses against such
built-in gain income in addition to its regular annual allowance.

On the other hand, if the loss corporation (or consolidated group) has a net
unrealized built-in loss at the time of an ownership change, then any built-in
losses recognized during the following five years (up to the amount of the
original net built-in loss) generally will be treated as a pre-change loss and
will be subject to the annual limitation in the same fashion as a pre-change NOL
carryforward. In addition, although this net built-in loss rule generally
applies to consolidated groups on a consolidated basis, any corporation that
joins the consolidated group within the preceding five years may have to be
excluded from the group computation and tested for a net built-in loss on a
separate company basis. Accordingly, even though a consolidated group of
corporations may not have a net unrealized built-in loss on an overall group
basis, the group may have a net unrealized built-in loss if certain members of
the group are required to be excluded. Additionally, if the excluded member has
a net built-in loss when tested on a separate company basis, any subsequently
recognized built-in losses of such corporation may be subject to a more
restrictive annual limitation based on the separate value of such member.

A loss corporation's (or consolidated group's) net unrealized built-in gain or
loss generally will be deemed to be zero unless it is greater than the lesser of
(i) $10 million or (ii) 15% of the fair market value of its gross assets (with
certain adjustments) immediately before the ownership change.

It is currently unclear whether the Genesis Group or the Multicare Group will be
in a net unrealized built-in loss position and/or a net unrealized built-in gain
position as of the Effective Date.

c. Special Bankruptcy Exception. An exception to the general annual limitation
(including the described built-in gain and loss rules) applies where the
stockholders and/or qualified creditors of the debtor retain or receive (other
than for new value) at least 50% of the vote and value of the stock of the
reorganized debtor pursuant to a confirmed bankruptcy plan. Under this
exception, a debtor's pre-change losses are not limited on an annual basis, but
are required to be reduced by the amount of any interest deductions claimed
during the three taxable years preceding the date of the reorganization, and
during the part of the taxable year prior to and including the reorganization,
in respect of the debt converted into stock in the reorganization. Moreover, if
this exception applies, any further ownership change of the debtor within a
two-year period will preclude the debtor's utilization of any pre-change losses
at the time of the subsequent ownership change against future taxable income.

103

Because the creditors of the Multicare Debtors (even though partially
overlapping with those of the Genesis Debtors) will not receive 50% or more of
the stock of Reorganized Genesis in exchange for their claims against the
Multicare Debtors, this exception will not apply to the Multicare Group. It is
possible, however, that the receipt of New Common Stock by the holders of
Genesis Senior Lender Claims solely in exchange for such interests would qualify
for this exception with respect to the Genesis Group. Even if the Genesis Group
so qualifies, Genesis may, if it so desires, elect not to have the exception
apply and instead remain subject to the annual limitation and built-in gain and
loss rules described above. Such election would have to be made in the Genesis
Group's federal income tax return for the taxable year in which the
reorganization occurs.

The statute does not address whether this exception can be applied on a
consolidated basis or only on a separate company basis. Accordingly, it is
possible that only any pre-change losses attributable to Genesis itself (rather
than to the other members of the Genesis Group)--all of which would likely be
eliminated in any event due to the attribute reduction resulting from the COD
under the Plan--may be able to benefit from this exception. If the exception
were applicable only to Genesis itself, it appears that the pre-change losses
attributable to the other members of the Genesis Group would be subject to the
annual limitation rules described above determined as if Genesis had not
qualified for this exception.

3. Alternative Minimum Tax

In general, an alternative minimum tax ("AMT") is imposed on a corporation's
"alternative minimum taxable income" ("AMTI") at a 20% rate to the extent such
tax exceeds the corporation's regular federal income tax for the year. AMTI is
generally equal to regular taxable income with certain adjustments. For purposes
of computing AMTI, certain tax deductions and other beneficial allowances are
modified or eliminated. In particular, even though a corporation otherwise might
be able to offset all of its taxable income for regular tax purposes by
available NOL carryforwards, a corporation (or consolidated group) is entitled
to offset no more than 90% of its AMTI with NOLs (as recomputed for AMT
purposes).

In addition, if a corporation (or consolidated group) undergoes an "ownership
change" within the meaning of Section 382 and is in a net unrealized built-in
loss position on the date of the ownership change, the corporation's (or
group's) aggregate tax basis in its assets would be reduced for certain AMT
purposes to reflect the fair market value of such assets as of the change date.
The application of this provision is unaffected by whether the special
bankruptcy exception to the annual limitation (and built-in gain and loss) rules
of Section 382 applies.

Any AMT that the corporation pays generally will be allowed as a nonrefundable
credit against its regular federal income tax liability in future taxable years
when the corporation is no longer subject to AMT.

4. Issuance of the New Senior Notes

It is possible, although not anticipated, that the New Senior Notes will be
issued at original issue discount ("OID"). See section XII.B.11, below. Any such
OID generally would be amortizable by Genesis utilizing the constant interest
method, and deductible as interest, unless the New Senior Notes are treated as
applicable high-yield discount obligations ("AHYDO") within the meaning of
Section 163(e)(5) of the Tax Code. The New Senior Notes would be treated as
AHYDOs if, among other requirements, their yield to maturity is at least five
percentage points over the applicable federal rate in effect for the calendar
month in which such notes are issued (approximately 5.01% compounded annually
for the month of June 2001) and the notes have significant OID (in general,
where there is unamortized OID as of the end of the fifth year after issuance
that exceeds the amount of one year's interest, both actual and imputed).
If the New Senior Notes are treated as AHYDOs, a portion of the accrued discount
attributable to the "disqualified portion," if any, of the interest deduction

104

otherwise allowable as OID would be disallowed, and the balance of such
deduction would be deferred until actually paid in cash. The "disqualified
portion" of any interest deduction otherwise allowable as OID on an AHYDO is
that portion, if any, of the total OID multiplied by a fraction, the numerator
of which is equal to the "disqualified yield" (i.e., the excess of the yield to
maturity of the notes over the sum of the applicable federal rate for the
calendar month in which the notes are issued plus six percentage points) and the
denominator of which is equal to the total yield to maturity of the notes.

B. Consequences to Holders of Certain Claims

Pursuant to, and in accordance with, the Plan, holders of allowed claims in
Class G2 (Genesis Senior Lender Claims) and holders of allowed claims in Class
M2 (Multicare Senior Lender Claims) will be entitled to receive in satisfaction
of their claims Cash, New Senior Notes, New Common Stock, and New Convertible
Preferred Stock. Holders of allowed claims in Class G4 (Genesis General
Unsecured Claims), except to the extent such a claim constitutes an Insured
Claim, and holders of allowed claims in Class G5 (Genesis Senior Subordinated
Note Claims) will receive in satisfaction of their Claims New Common Stock and
New Warrants. Holders of allowed claims in Class M4 (Multicare General Unsecured
Claims), except to the extent such a claim constitutes an Insured Claim, will
receive in satisfaction of their claims New Common Stock.

The federal income tax consequences of the Plan to holders of allowed claims
against Genesis depend, in part, on whether such claims, and in the case of
Genesis Senior Lender Claims, whether the New Senior Notes, constitute
"securities" for federal income tax purposes. The term "security" is not defined
in the Tax Code or in the regulations issued thereunder and has not been clearly
defined by judicial decisions. The determination of whether a particular debt
constitutes a "security" depends on an overall evaluation of the nature of the
debt. One of the most significant factors considered in determining whether a
particular debt is a security is its original term. In general, debt obligations
issued with a weighted average maturity at issuance of five years or less (e.g.,
trade debt and revolving credit obligations) do not constitute securities,
whereas debt obligations with a weighted average maturity at issuance of ten
years or more constitute securities. For purposes of the following discussion it
has been assumed that Genesis Senior Subordinated Note Claims constitute
"securities." Each holder of a Genesis Senior Lender Claim, Genesis General
Unsecured Claim, and Genesis Senior Subordinated Note Claim is urged to consult
its tax advisor regarding the status of its claim, or any portion thereof, as a
"security."

105

The following discussion does not necessarily apply to holders who have claims
in more than one class relating to the same underlying obligation (such as where
the underlying obligation is classified as partially secured and partially
unsecured). Such holders should consult their tax advisor regarding the effect
of such dual status obligations on the federal income tax consequences of the
Plan to them.

1. Consequences to All Holders (Including Holders Whose Claims Are Against
Any of the Multicare Debtors) Who Receive Cash, New Senior Notes, New
Convertible Preferred Stock, New Common Stock, or New Warrants, Other
Than Holders of Claims Against Genesis That Constitute "Securities"

In general, holders of claims who receive Cash, New Senior Notes, New Common
Stock, New Convertible Preferred Stock, and/or New Warrants (other than holders
of claims against Genesis that constitute "securities") will recognize gain or
loss in an amount equal to the difference between (i) the "amount realized" by
the holder in satisfaction of its claim (other than any claim for accrued but
unpaid interest) and (ii) the holder's adjusted tax basis in its claim (other
than any claim for accrued but unpaid interest). For a discussion of the tax
consequences of any claims for accrued interest, see section XII.B.4, below.

For these purposes, the "amount realized" by a holder will equal the sum of the
aggregate of (i) Cash, (ii) the "issue price" of any New Senior Notes (see
section XII.B.11, below), (iii) the fair market value of any New Convertible
Preferred Stock, (iv) the fair market value of any New Common Stock, and (iv)
the fair market value of any New Warrants received by the holder (less any
portion of such distribution required to be treated as imputed interest as a
result of any such distribution being made after the Effective Date).

Due to the possibility that a holder of a Genesis General Unsecured Claim and
Multicare General Unsecured Claim may receive a distribution of New Common Stock
and/or New Warrants subsequent to the Effective Date in respect of any
subsequently disallowed disputed claims, the imputed interest provisions of the
Tax Code may apply to treat a portion of the distribution to such holders as
imputed interest. Such imputed interest may (with respect to certain holders)
accrue over time using the constant interest method, in which event the holder
may be required to include such imputed interest in income prior to the actual
distribution.

In addition, because distributions of New Common Stock and/or New Warrants to
such holders may be made after the Effective Date, any loss, and a portion of
any gain, realized by a holder in satisfaction of its claim may be deferred
until all such subsequent distributions are made. Such holders are urged to
consult their tax advisors regarding the possible application of (or ability to
elect out of) the "installment method" of reporting any gain that may be
recognized by such holder in respect of its claim.

Where gain or loss is recognized by a holder, the character of such gain or loss
as long-term or short-term capital gain or loss or as ordinary income or loss
will be determined by a number of factors, including the tax status of the
holder, whether the claim constitutes a capital asset in the hands of the holder
and how long it has been held, whether the claim was acquired at a market
discount, and whether and to what extent the holder had previously claimed a bad
debt deduction.

106

A holder's aggregate tax basis in any New Convertible Preferred Stock, New
Common Stock, and any New Warrants received will equal the fair market value of
such preferred stock, common stock, and warrants. A holder's tax basis in any
New Senior Notes received will equal the "issue price" of such notes. The
holding period for any New Convertible Preferred Stock, New Common Stock, New
Senior Notes and New Warrants generally will begin the day following the
issuance of such preferred stock, common stock, notes, or warrants.

Notwithstanding the foregoing, it is possible the IRS may attempt to treat the
receipt of New Common Stock, New Convertible Preferred Stock, New Senior Notes,
and/or New Warrants in satisfaction of claims against Multicare or any
subsidiary of Genesis as part of a non-recognition transaction. So treated, such
a holder would not be permitted to recognize any loss, but to the extent that
the holder receives New Senior Notes, New Warrants, and possibly New Convertible
Preferred Stock, such holder would still be required to recognize a portion of
its gain. In the case of a holder that does not recognize loss, the holder's tax
basis in its New Common Stock would reflect the unrecognized loss. In addition,
the holder's holding period in the New Common Stock would, in whole or in part,
include its holding period in its claim. However, Genesis believes, and the
discussion herein assumes, that the satisfaction of claims described in this
paragraph should be treated as a fully taxable transaction, in which both gain
and loss may be recognized.

For a discussion of the tax treatment of New Warrants, New Common Stock, New
Convertible Preferred Stock, and New Senior Notes, see sections XII.B.5,
XII.B.6, XII.B.7, XII.B.8, XII.B.9, XII.B.10, XII.B.11, below.

2. Consequences to Holders of Genesis Senior Subordinated Note Claims and
Genesis General Unsecured Claims That Constitute "Securities"

The receipt of New Common Stock and New Warrants in satisfaction of a Genesis
Senior Subordinated Note Claim or a Genesis General Unsecured Claim against
Genesis that constitutes a "security" will be a "recapitalization" for federal
income tax purposes. Accordingly, in general, the holder of such a claim will
not recognize loss upon such exchange, but will recognize gain (computed as
described in the preceding section), if any, to the extent of any consideration
received other than the New Common Stock and New Warrants (such as proceeds from
insurance), excluding the portion of any consideration allocable to a claim for
accrued but unpaid interest or required to be treated as imputed interest due to
the distribution of such consideration after the Effective Date. The character
and timing of such gain would also be determined in accordance with the
principles discussed in preceding section. For a discussion of the tax
consequences of any claims for accrued interest, see section XII.B.4, below.

In the case of a recapitalization, a holder's aggregate tax basis in any New
Common Stock and New Warrants received in satisfaction of its claim will equal
the holder's aggregate adjusted tax basis in its claim (including any claim for
accrued but unpaid interest) increased by any gain or interest income recognized
in respect of its claim and decreased by any consideration received other than
New Common Stock and New Warrants and any deductions claimed in respect of any
previously accrued interest. Such tax basis would be allocated between the New
Common Stock and the New Warrants based on relative fair market value. In
general, the holder's holding period for the New Common Stock and the New
Warrants received will include the holder's holding period for the claim except
to the extent that the New Common Stock and the New Warrants were issued in
respect of a claim for accrued but unpaid interest or treated as imputed
interest.

107

For a discussion of the tax treatment of New Warrants, see sections XII.B.5 and
XII.B.10, below.

3. Consequences to Holders of Genesis Senior Lender Claims That Constitute
"Securities"

The receipt of New Common Stock or New Convertible Preferred Stock, and the
receipt of New Senior Notes if such notes constitute "securities," in partial
satisfaction of a Genesis Senior Lender Claim (to the extent such claim
constitutes a "security") will be a "recapitalization" for federal income tax
purposes. Accordingly, in general, the holder of such claim will not recognize
loss upon such exchange with respect to the portion of its claim constituting a
"security," but will recognize gain (computed as described above in the case of
non-securities), if any, to the extent of any consideration received other than
stock or securities (such as the Cash and the New Senior Notes if such notes do
not constitute "securities"), excluding the portion of any consideration
allocable to a claim for accrued but unpaid interest. The character and timing
of such gain would also be determined in accordance with the principles
discussed above with respect to claims that are not securities. See section
XII.B.1, above. For a discussion of the tax consequences of any claims for
accrued interest, see section XII.B.4, below.

If the New Senior Notes do not constitute "securities," the holder's aggregate
tax basis in any New Common Stock and New Convertible Preferred Stock received
in satisfaction of the portion of its claim constituting a "security" will equal
the holder's aggregate tax basis in such portion (including any claim for
accrued but unpaid interest), increased by any gain or interest income
recognized in respect of such portion and decreased by any consideration
received other than stock or securities (such as any Cash or New Senior Notes
received) and any deductions claimed in respect of any previously accrued
interest. Such basis would be allocated between the New Common Stock and the New
Convertible Preferred Stock based on relative fair market value. In general, the
holder's holding period for any New Common Stock and the New Convertible
Preferred Stock received will include the holder's holding period for the claim,
except to the extent that the New Common Stock or New Convertible Preferred
Stock was issued in respect of a claim for accrued but unpaid interest. A
holder's tax basis in any New Senior Notes received would equal the "issue
price" of such notes, and the holding period for any New Senior Notes generally
would begin the day following the issuance of such notes.

108

If the New Senior Notes do constitute "securities," a holder will have an
aggregate tax basis in any New Common Stock, New Convertible Preferred Stock,
and New Senior Notes received in satisfaction of the portion of its claim
constituting a "security" equal to the holder's adjusted tax basis in such
portion (including any claim for accrued but unpaid interest) increased by any
gain or interest income recognized in respect of such portion and decreased by
any consideration received other than stock or securities (such as any Cash
received) and any deductions claimed in respect of any previously accrued
interest. Such tax basis would then be allocated between the New Common Stock,
New Convertible Preferred Stock, and New Senior Notes based on relative fair
market value. A holder's holding period for any New Common Stock, New
Convertible Preferred Stock, and New Senior Notes in this instance will include
that holder's holding period for the claim, except to the extent that the New
Common Stock, New Convertible Preferred Stock, or New Senior Notes were issued
in respect of a claim for accrued but unpaid interest.

4. Distributions in Discharge of Accrued Interest

Pursuant to the Plan, all distributions in respect of an allowed claim will be
allocated first to the principal amount of the claim, with any excess allocated
to the remaining portion of the claim. However, there is no assurance that such
allocation would be respected by the IRS for federal income tax purposes. In
general, to the extent that any amount received (whether stock, Cash, or other
property) by a holder of a debt is received in satisfaction of accrued interest
during its holding period, such amount will be taxable to the holder as interest
income (if not previously included in the holder's gross income). Conversely, a
holder generally recognizes a deductible loss to the extent any accrued interest
claimed was previously included in its gross income and is not paid in full.
Each holder of a claim is urged to consult its tax advisor regarding the
allocation of consideration and the deductibility of unpaid interest for tax
purposes.

5. Market Discount

A holder which purchased its claim from a prior holder at a market discount may
be subject to the market discount rules of the Tax Code. Under those rules,
assuming that the holder has made no election to amortize the market discount
into income on a current basis with respect to any market discount instrument,
any gain recognized on the exchange of its claim (subject to a de minimis rule)
generally would be characterized as ordinary income to the extent of the accrued
market discount on such claim as of the date of the exchange.

To the extent that a holder's claim constitutes a "security" and is exchanged in
a "recapitalization" for federal income tax purposes, the Treasury Department is
expected to promulgate regulations that will provide that any accrued "market
discount" not treated as ordinary income upon such exchange would carry over to
the nonrecognition property received in the exchange. If such regulations are
promulgated and applicable to the Plan (and arguably even without issuance of
regulations), any holder of a claim that is exchanged in a "recapitalization"
would carry over any accrued market discount incurred in respect of such claim,
on an allocable basis, to any New Common Stock, New Convertible Preferred Stock,
New Senior Notes (if such notes constitute "securities"), and/or New Warrants
received, such that any gain recognized by the holder upon a subsequent
disposition of such New Common Stock, New Convertible Preferred Stock, New
Senior Notes, or New Warrants would be treated as ordinary income to the extent
of any accrued market discount not previously included in income. In addition,
any accrued market discount that carries over to the New Convertible Preferred
Stock would, in turn, carryover to any New Common Stock received upon conversion
of such preferred stock, and it is possible that any accrued market discount
that carries over to the New Warrants would, in turn, carryover to any New
Common Stock received upon the exercise of such warrants.

109

6. Treatment of Distributions on New Convertible Preferred Stock and New
Common Stock

Distributions - In General. The amount of distributions, if any, by Reorganized
Genesis in respect of the New Common Stock and the New Convertible Preferred
Stock will be equal to the amount of cash and the fair market value as of the
date of distribution of any property distributed. Subject to the discussion
below regarding redemption of New Convertible Preferred Stock (see section
X.B.9, above), distributions generally will be treated for federal income tax
purposes first as a dividend to the extent of Reorganized Genesis's current and
accumulated earnings and profits (as determined for federal income tax purposes)
and then as a tax-free return of capital to the extent of the holder's tax basis
in its stock, with any excess treated as capital gain from the sale or exchange
of the stock.

The requirement to pay stated dividends with respect to the New Convertible
Preferred Stock in the form of additional shares of such stock will result in
constructive distributions, as described below.

Constructive Distributions. Under Section 305 of the Tax Code and the Treasury
Regulations promulgated thereunder, it appears that holders of New Convertible
Preferred Stock will be required to accrue -- regardless of the holder's regular
method of accounting -- the excess of the "redemption price" of the New
Convertible Preferred Stock over its issue price (generally fair market value)
over the term of the preferred stock, utilizing the constant yield method.
Because all stated dividends on the New Convertible Preferred Stock are required
to be paid annually in additional shares of such stock, the "redemption price"
of the New Convertible Preferred Stock would be equal to the sum of the
instruments stated redemption price ($20.33) and the aggregate stated dividends
provided for over the term of the instrument. The stated term of the New
Convertible Preferred Stock is nine years, but for purposes of calculating
constructive distributions the term may be regarded as being less than nine
years if an earlier date upon which a redemption may occur is the date that a
redemption is most likely to occur based upon all the facts and circumstances at
the time of issuance. Under applicable Treasury regulations, each holder will be
bound by Reorganized Genesis's determination as to the presence or absence of
such constructive distributions, unless the holder explicitly discloses in its
timely filed tax return for the taxable year in which it acquires the stock that
it is taking a contrary position.

The constructive distributions would be treated in the same manner as an
ordinary distribution (discussed above). To the extent a constructive
distribution results in a taxable dividend to the holder, the holder's aggregate
tax basis in the New Convertible Preferred Stock (including any additional
shares actually distributed in respect of the stated dividend) would be
increased by the amount of the constructive distribution. To the extent a
constructive distribution does not result in a taxable dividend to the holder,
the aggregate tax basis of the holder's New Convertible Preferred Stock will
remain unchanged but will be spread over a greater number of shares (assuming
actual payment of the stated dividend). The actual distribution of stock in
respect of a stated dividend would not be considered a further distribution for
federal income tax purposes.

110

Aside from the treatment of any excess redemption premium, the presence or
absence of an adjustment to the conversion price of the New Convertible
Preferred Stock under anti-dilution provisions may, under certain circumstances,
result in constructive distributions to the holder. Conversely, the absence of
an adjustment to the conversion price of the New Convertible Preferred Stock may
result in a constructive distribution to the holders of the New Common Stock or
the holder of the New Warrants.

Distributions to Corporate Shareholders. In general, a distribution to a
corporate shareholder which is treated as a dividend for federal income tax
purposes will qualify for the 70% dividends received deduction that is available
to corporate shareholders that own less than 20% of the voting power or value of
the outstanding stock of the distributing corporation (other than certain
preferred stock not applicable here). A corporate shareholder holding 20% or
more of the distributing corporation (other than certain preferred stock not
applicable here) may be eligible for an 80% dividends received deduction. No
assurance can be given that Reorganized Genesis will have sufficient earnings
and profits (as determined for federal income tax purposes) to cause
distributions to be eligible for a dividends received deduction. Dividend income
that is not subject to regular federal income tax as a consequence of the
dividends received deduction may be subject to the federal alternative minimum
tax.

The dividends received deduction is only available if certain holding periods
and taxable income requirements are satisfied. The length of time that a
shareholder has held stock is reduced for any period during which the
shareholder's risk of loss with respect to the stock is diminished by reason of
the existence of certain options, contracts to sell, short sales, or similar
transactions. The law is unclear whether there would also be excluded any period
during which a holder can require, pursuant to the terms of the stock itself,
the redemption of the stock, as in the case of New Convertible Preferred Stock.
Also, to the extent that a corporation incurs indebtedness that is directly
attributable to an investment in the stock on which the dividend is paid, all or
a portion of the dividends received deduction may be disallowed. In addition,
any dividend received by a corporation is also subject to the "extraordinary
distribution" provisions of the Tax Code.

7. Subsequent Sale of New Common Stock or New Convertible Preferred Stock

Any gain recognized by a holder upon a subsequent taxable disposition of New
Convertible Preferred Stock or New Common Stock (including any New Common Stock
received upon conversion) received pursuant to the Plan (or any stock or
property received for it in a later tax-free exchange) will be treated as
ordinary income to the extent of (i) any bad debt deductions (or additions to a
bad debt reserve) claimed with respect to its claim and any ordinary loss
deductions incurred upon satisfaction of its claim, less any income (other than
interest income) recognized by the holder upon satisfaction of its claim, and
(ii) with respect to a cash-basis holder, also any amounts which would have been
included in its gross income if the holder's claim had been satisfied in full
but which was not included by reason of the cash method of accounting.

In addition, a portion of any gain may be treated as ordinary income under the
"market discount" rules of the Tax Code. See section XII.B.5, above.

111

8. Conversion of New Convertible Preferred Stock

Except for cash received in lieu of a fractional share, a holder of New
Convertible Preferred Stock generally will not recognize gain or loss upon
conversion of the New Convertible Preferred Stock for New Common Stock. A holder
who receives cash in lieu of a fractional share should recognize capital gain or
loss equal to the difference between the amount of cash received and the
holder's tax basis exchanged allocable to the fractional share.

Generally, a holder's tax basis in the New Common Stock received upon conversion
of shares of New Convertible Preferred Stock will equal the tax basis of the
shares of New Convertible Preferred Stock exchanged therefor (less the portion
of the holder's basis allocable to any fractional share, as to which the holder
receives cash), and the holding period of the New Common Stock received upon
conversion will include the holding period of the shares of the New Convertible
Preferred Stock exchanged therefor.

9. Redemption of New Convertible Preferred Stock

The federal income tax treatment of a redemption to a holder of New Convertible
Preferred Stock will depend on the particular facts relating to such holder at
the time of the redemption. If the redemption of such stock (i) is "not
essentially equivalent to a dividend" with respect to the holder (taking into
account any ownership of common stock), (ii) is "substantially disproportionate"
with respect to the holder (defined generally as a greater than 20% reduction in
a holder's voting stock interest in a corporation), or (iii) results in a
"complete termination" of all such holder's equity interest in the corporation,
then the receipt of cash or property by such holder will be treated as an
exchange on which gain or loss will be recognized. Such exchange will be treated
as a taxable disposition in which gain or loss will be recognized. See Section
X.B.7, above. In applying these tests, certain constructive ownership rules
apply to determine stock ownership.

If none of the above tests giving rise to taxable disposition treatment is
satisfied in respect of a redemption of New Convertible Preferred Stock, the
holder will be treated as having received an ordinary distribution with respect
to such stock. The amount of such distribution generally will be equal to the
amount of cash and the fair market value of property received in the redemption,
and will be treated first as a taxable dividend to the extent of Reorganized
Genesis's current and accumulated earnings and profits, if any, and then as a
tax-free return of capital to the extent of the holder's tax basis in the stock
redeemed, with any excess treated as capital gain from the sale or exchange of
such stock. See section X.B.6, above for discussion of distributions to
corporate shareholders.

10. Ownership and Disposition of New Warrants

A holder of a New Warrant will not recognize gain or loss upon the exercise of
such warrant (except possibly in respect of any cash received in lieu of
fractional shares). A holder's tax basis in the New Common Stock received upon
exercise of a New Warrant will be equal to the sum of the holder's tax basis in
the New Warrant and the exercise price (less the sum of the portion of the
holder's tax basis allocable to any fractional share, as to which the holder
receives cash, as discussed below). The holding period of the New Common Stock
received upon exercise of a New Warrant will commence on the day following the
exercise of such warrant.

112

A holder who receives cash in lieu of a fractional share upon exercise of a New
Warrant should recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of the holder's tax basis in the New
Warrant allocable to such fractional share.

The presence of an adjustment to the exercise price of the New Warrants under
anti-dilution provisions may, under certain circumstances, result in
constructive distributions to the holder. Conversely, the absence of an
adjustment to the exercise price of the New Warrants may result in a
constructive distribution to the holders of the New Common Stock or the holders
of the New Convertible Preferred Stock.

Upon the lapse or disposition of a New Warrant, the holder generally should
recognize gain or loss equal to the difference between the amount received
(nothing in the case of a lapse) and its tax basis in the warrant. In general,
such gain or loss should be a capital gain or loss, long-term or short-term,
depending whether the requisite holding period was satisfied.

11. Interest and Original Issue Discount on the New Senior Notes

Pursuant to the Plan, interest on the New Senior Notes generally will be payable
at least annually at a rate of interest equal to the LIBOR plus 5%. Stated
interest on the New Senior Notes should be includable in income by a holder in
accordance with such holder's method of accounting.

In addition, under certain circumstances, holders of the New Senior Notes may be
required to recognize imputed interest to the extent that such New Senior Notes
are issued with OID. In general, a debt instrument is treated as having OID to
the extent its "stated redemption price at maturity" (in this case, the stated
principal amount of the New Senior Notes) exceeds its "issue price." The "issue
price" of the New Senior Notes will depend upon whether they are traded on an
"established securities market" during the sixty day period ending thirty days
after the Effective Date. Pursuant to Treasury Regulations, an "established
securities market" includes a system of general circulation (including a
computer listing disseminated to subscribing brokers, dealers, or traders) that
provides a reasonable basis to determine fair market value by disseminating
either recent price quotations or actual prices of recent sales transactions. If
the New Senior Notes are traded on an established securities market, the "issue
price" will be their fair market value. If they are not so traded, the issue
price of the New Senior Notes will be their stated principal amount.

In general, if the New Senior Notes are treated as issued with OID, each holder
will be required to accrue the OID in respect of its New Senior Notes, and
include such amount in gross income as interest, over the term of such notes
based on the constant interest method. Accordingly, each holder generally will
be required to include amounts in gross income in advance of the payment of cash
in respect of such income. A holder's tax basis in a New Senior Note will be
increased by the amount of any OID included in income and reduced by any cash
payments (other than payment of stated interest) made with respect to such New
Senior Note.

113

In addition, as discussed in section XII.A.4, above, certain debt obligations
that are issued with substantial OID and have a maturity of over five years are
treated as applicable high yield discount obligations (AHYDOs) within the
meaning of the Tax Code. With respect to such obligations, a portion of a
corporate holder's income with respect to such accrued OID may be treated as a
dividend for purposes of the dividend-received-deduction to the extent such
amount would be so treated if it had been a distribution made by the issuer with
respect to its stock (that is, to the extent the issuer has sufficient earnings
and profits such that a distribution in respect of stock would constitute a
dividend for federal income tax purposes and, presumably, subject to certain
holding period and taxable income requirements and other limitations on the
dividend-received-deduction). The AHYDO rules will have no applicability to the
New Senior Notes unless the New Senior Notes are considered to be traded on an
established securities market and are issued with sufficient OID such that there
would be unamortized OID as of the end of the fifth year after issuance in
excess of one year's interest, both actual and imputed.

12. Information Reporting and Withholding

All distributions to holders of allowed claims under the Plan are subject to any
applicable withholding (including employment tax withholding). Under federal
income tax law, interest, dividends, and other reportable payments may, under
certain circumstances, be subject to "backup withholding" at a rate of 31%.
Backup withholding generally applies if the holder (a) fails to furnish its
social security number or other taxpayer identification number ("TIN"), (b)
furnishes an incorrect TIN, (c) fails properly to report interest or dividends,
or (d) under certain circumstances, fails to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct number and
that it is not subject to backup withholding. Backup withholding is not an
additional tax but merely an advance payment, which may be refunded to the
extent it results in an overpayment of tax. Certain persons are exempt from
backup withholding, including, in certain circumstances, corporations and
financial institutions.

THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL
HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.

114

XIII.

Conclusion

The Debtors believe the Plan of Reorganization is in the best interests of all
creditors and equity holders and urges the holders of impaired claims in Class
G2 (Genesis Senior Lender Claims), Class G4 (Genesis General Unsecured Claims),
Class G5 (Genesis Senior Subordinated Note Claims), Class M2 (Multicare Senior
Lender Claims), and Class M4 (Multicare General Unsecured Claims), to vote to
accept the Plan of Reorganization and to evidence such acceptance by returning
their Ballots so that they will be received not later than [___].

Dated: June 5, 2001

Respectfully submitted,

GENESIS HEALTH SERVICES CORPORATION
GENESIS HEALTH VENTURES, INC.
ACCUMED, INC.
ASCO HEALTHCARE, INC.
ASCO HEALTHCARE OF NEW ENGLAND, INC.
BRINTON MANOR, INC.
BURLINGTON WOODS CONVALESCENT CENTER, INC.
CARECARD, INC.
CAREFLEET, INC.
CHELTENHAM LTC MANAGEMENT, INC.
COMPASS HEALTH SERVICES, INC.
CONCORD HEALTHCARE CORPORATION
CONCORD PHARMACY SERVICES, INC.
CRESTVIEW CONVALESCENT HOME, INC.
CRESTVIEW NORTH, INC.
CRYSTAL CITY NURSING CENTER, INC.
DELCO APOTHECARY, INC.
DERBY NURSING CENTER CORPORATION
DIANE MORGAN AND ASSOCIATES, INC.
DOVER HEALTHCARE ASSOCIATES, INC.
EASTERN MEDICAL SUPPLIES, INC.
EASTERN REHAB SERVICES, INC.
EIDOS, INC.
ENCARE OF MASSACHUSETTS, INC.
GENESIS ELDERCARE ADULT DAY HEALTH SERVICES, INC.
GENESIS ELDERCARE DIAGNOSTIC SERVICES, INC.
GENESIS ELDERCARE HOME CARE SERVICES, INC.
GENESIS ELDERCARE HOME HEALTH SERVICES-SOUTHERN,
INC.
GENESIS ELDERCARE HOSPITALITY SERVICES, INC.
GENESIS ELDERCARE MANAGEMENT SERVICES, INC.
GENESIS ELDERCARE NETWORK SERVICES, INC.
GENESIS ELDERCARE NATIONAL CENTERS, INC.
GENESIS ELDERCARE NETWORK SERVICES OF
MASSACHUSETTS, INC.
GENESIS ELDERCARE PHYSICIAN SERVICES, INC.
GENESIS ELDERCARE PROPERTIES, INC.
GENESIS ELDERCARE REHABILITATION MANAGEMENT
SERVICES, INC.
GENESIS ELDERCARE REHABILITATION SERVICES, INC.
GENESIS ELDERCARE STAFFING SERVICES, INC.
GENESIS ELDERCARE TRANSPORTATION SERVICES, INC.
GENESIS HEALTH VENTURES OF ARLINGTON, INC.

115

GENESIS HEALTH VENTURES OF BLOOMFIELD, INC.
GENESIS HEALTH VENTURES OF CLARKS SUMMIT, INC.
GENESIS HEALTH VENTURES OF INDIANA, INC.
GENESIS HEALTH VENTURES OF LANHAM, INC.
GENESIS HEALTH VENTURES OF MASSACHUSETTS, INC.
GENESIS HEALTH VENTURES OF NAUGATUCK, INC.
GENESIS HEALTH VENTURES OF NEW GARDEN, INC.
GENESIS HEALTH VENTURES OF POINT PLEASANT, INC.
GENESIS HEALTH VENTURES OF WAYNE, INC.
GENESIS HEALTH VENTURES OF WEST VIRGINIA, INC.
GENESIS HEALTH VENTURES OF WILKES-BARRE, INC.
GENESIS HEALTH VENTURES OF WINDSOR, INC.
GENESIS HEALTHCARE CENTERS HOLDINGS, INC.
GENESIS HOLDINGS, INC.
GENESIS IMMEDIATE MED CENTER, INC.
GENESIS PROPERTIES OF DELAWARE CORPORATION
GENESIS SELECTCARE CORP.
GERIATRIC & MEDICAL COMPANIES, INC.
GERIATRIC AND MEDICAL SERVICES, INC.
GERIATRIC AND MEDICAL INVESTMENTS CORPORATION
GERIMED CORP.
GMC LEASING CORPORATION
GMC MEDICAL CONSULTING SERVICES, INC.
GMS MANAGEMENT-TUCKER, INC.
GMS MANAGEMENT, INC.
GOVERNOR'S HOUSE NURSING HOME, INC.
HEALTHCARE RESOURCES CORP.
HEALTH CONCEPTS AND SERVICES, INC.
HEALTHOBJECTS CORPORATION
HILLTOP HEALTH CARE CENTER, INC.
HORIZON MEDICAL EQUIPMENT AND SUPPLY, INC.
INNOVATIVE HEALTH CARE MARKETING, INC.
INNOVATIVE PHARMACY SERVICES, INC.
INSTITUTIONAL HEALTH CARE SERVICES, INC.
KEYSTONE NURSING HOME, INC.
KNOLLWOOD MANOR, INC.
KNOLLWOOD NURSING HOME, INC.
LIFE SUPPORT MEDICAL EQUIPMENT, INC.
LIFE SUPPORT MEDICAL, INC.
LINCOLN NURSING HOME, INC.
MANOR MANAGEMENT CORP. OF GEORGIAN MANOR, INC.
MCKERLEY HEALTH CARE CENTERS, INC.
MEDICAL SERVICES GROUP, INC.
MERIDIAN HEALTH, INC.
MERIDIAN HEALTHCARE, INC.
METRO PHARMACEUTICALS, INC.
NATIONAL PHARMACY SERVICE, INC.
NEIGHBORCARE INFUSION SERVICES, INC.
NEIGHBORCARE-MEDISCO, INC.

116

NEIGHBORCARE OF NORTHERN CALIFORNIA, INC.
NEIGHBORCARE OF OKLAHOMA, INC.
NEIGHBORCARE OF VIRGINIA, INC.
NEIGHBORCARE OF WISCONSIN, INC.
NEIGHBORCARE PHARMACIES, INC.
NEIGHBORCARE PHARMACY SERVICES, INC.
NEIGHBORCARE-ORCA, INC.
NEIGHBORCARE-TCI, INC.
NETWORK AMBULANCE SERVICES, INC.
OAK HILL HEALTH CARE CENTER, INC.
PHARMACY EQUITIES, INC.
PHILADELPHIA AVENUE CORPORATION
PROFESSIONAL PHARMACY SERVICES, INC.
PROSPECT PARK LTC MANAGEMENT, INC.
STATE STREET ASSOCIATES, INC.
SUBURBAN MEDICAL SERVICES, INC.
THE TIDEWATER HEALTHCARE SHARED SERVICES GROUP,
INC.
THERAPY CARE, INC.
TRANSPORT SERVICES, INC.
UNITED HEALTH CARE SERVICES, INC.
VALLEY MEDICAL SERVICES, INC.
VALLEY TRANSPORT AMBULANCE SERVICE, INC.
VERSALINK, INC.
VILLAS REALTY & INVESTMENTS, INC.
WALNUT LTC MANAGEMENT, INC.
WAYSIDE NURSING HOME, INC.
WEISENFLUH AMBULANCE SERVICE, INC.
WEST PHILA. LTC MANAGEMENT, INC.
WYNCOTE HEALTHCARE CORP.
YORK LTC MANAGEMENT, INC.

BY: GENESIS HEALTH VENTURES, INC., as agent and
attorney-in-fact for each of the foregoing
entities

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

ASCO HEALTHCARE OF NEW ENGLAND, LIMITED
PARTNERSHIP

BY: ASCO HEALTHCARE OF NEW ENGLAND, INC., its
General partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

117

BREVARD MERIDIAN LIMITED PARTNERSHIP
CATONSVILLE MERIDIAN LIMITED PARTNERSHIP
EASTON MERIDIAN LIMITED PARTNERSHIP
GREENSPRING MERIDIAN LIMITED PARTNERSHIP
HAMMONDS LANE MERIDIAN LIMITED PARTNERSHIP
MERIDIAN EDGEWOOD LIMITED PARTNERSHIP
MERIDIAN PERRING LIMITED PARTNERSHIP
MERIDIAN VALLEY LIMITED PARTNERSHIP MERIDIAN
VALLEY VIEW LIMITED PARTNERSHIP
MERIDIAN/CONSTELLATION LIMITED PARTNERSHIP
MILLVILLE MERIDIAN LIMITED PARTNERSHIP

BY: MERIDIAN HEALTHCARE, INC., as General Partner
of each of the foregoing limited
partnerships

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

CARE4, L.P.

BY: INSTITUTIONAL HEALTH CARE SERVICES, INC.,
its general partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

EDELLA STREET ASSOCIATES

BY: GENESIS HEALTH VENTURES OF CLARK SUMMIT,
INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

118

GENESIS-GEORGETOWN SNF/JV, LIMITED LIABILITY
COMPANY
RESPIRATORY HEALTH SERVICES, L.L.C.

BY: GENESIS HEALTH VENTURES, INC., its Member

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

GENESIS ELDERCARE EMPLOYMENT SERVICES, LLC

BY: GENESIS ELDERCARE MANAGEMENT SERVICES,
INC., its Member

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

GENESIS HEALTH VENTURES OF WEST VIRGINIA,
LIMITED PARTNERSHIP

BY: GENESIS HEALTH VENTURES OF WEST VIRGINIA,
INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

GENESIS PROPERTIES LIMITED PARTNERSHIP

BY: GENESIS HEALTH VENTURES OF ARLINGTON,
INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

119

GENESIS PROPERTIES OF DELAWARE LTD.
PARTNERSHIP, L.P.

BY: GENESIS PROPERTIES OF DELAWARE
CORPORATION, its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

HALLMARK HEALTHCARE LIMITED PARTNERSHIP

BY: PHARMACY EQUITIES, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

MAIN STREET PHARMACY, L.L.C.

BY: PROFESSIONAL PHARMACY SERVICES, INC., its
Member

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

MCKERLEY HEALTH CARE CENTER-CONCORD LIMITED
PARTNERSHIP

BY: MCKERLEY HEALTH CARE CENTER-CONCORD,
INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

120

MCKERLEY HEALTH FACILITIES
SEMINOLE MERIDIAN LIMITED PARTNERSHIP
VOLUSIA MERIDIAN LIMITED PARTNERSHIP

BY: MERIDIAN HEALTH, INC., as General Partner of each of
the foregoing Limited Partnerships

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

NORRISTOWN NURSING AND REHABILITATION CENTER
ASSOCIATES, LIMITED PARTNERSHIP

BY: GMC-LTC MANAGEMENT, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

NORTH CAPE CONVALESCENT CENTER ASSOCIATES, L.P.
NORTHWEST TOTAL CARE CENTER ASSOCIATES, L.P.

BY: GERIATRIC AND MEDICAL SERVICES, INC., as
General Partner for each of the foregoing Limited
Partnerships

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

121

PHILADELPHIA AVENUE ASSOCIATES

BY: PHILADELPHIA AVENUE CORPORATION, its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

RIVER RIDGE PARTNERSHIP
RIVER STREET ASSOCIATES

BY: GENESIS HEALTH VENTURES OF WILKES-BARRE, INC.,
as General Partner for each of the foregoing Limited
Partnerships

STATE STREET ASSOCIATES, L.P.
BY: STATE STREET ASSOCIATES, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

122

THERAPY CARE SYSTEMS, LP

BY: GENESIS ELDERCARE REHABILITATION
SERVICES, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President,
Chief Financial Officer

COUNSEL:

- - -----------------------------------
Michael F. Walsh
Gary T. Holtzer
Weil, Gotshal & Manges LLP
Co-Attorneys for the Genesis Debtors,
as Debtors and Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000

- - -----------------------------------
Mark D. Collins
Richards, Layton & Finger P.A.
Co-Attorneys for the Genesis Debtors,
as Debtors and Debtors in Possession
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 655-6541

MULTICARE AMC, INC
ADS PALM CHELMSFORD, INC.
ADS RESERVOIR WALTHAM, INC.
MARKGLEN, INC.
ACADEMY NURSING HOME, INC.
ADS CONSULTING, INC.
ADS HINGHAM ALF, INC.
ADS HOME HEALTH, INC.
ADS VILLAGE MANOR, INC.
ANR, INC.
APPLEWOOD HEALTH RESOURCES, INC.
ASL, INC.
AUTOMATED PROFESSIONAL ACCOUNTS, INC.
BERKS NURSING HOME, INC.
BETHEL HEALTH RESOURCES, INC.
BREYUT CONVALESCENT CENTER, INC.

123

BRIGHTWOOD PROPERTY, INC.
CENTURY CARE CONSTRUCTION, INC.
CENTURY CARE MANAGEMENT, INC.
CHEATEAU VILLAGE HEALTH RESOURCES, INC.
CHG INVESTMENT CORP., INC.
CHNR - 1, INC.
COLONIAL HALL HEALTH RESOURCES, INC.
COLONIAL HOUSE HEALTH RESOURCES, INC.
CONCORD CAMPANION CARE, INC.
CONCORD HEALTHCARE SERVICES, INC.
CONCORD HEALTH GROUP, INC.
CONCORD HOME HEALTH, INC.
CONCORD REHAB, INC.
CONCORD SERVICE CORPORATION
CVNR, INC.
DAWN VIEW MANOR, INC.
DELM NURSING, INC.
ELDERCARE RESOURCES CORP.
ELMWOOD HEALTH RESOURCES, INC.
ENCARE OF MENDHAM, INC.
ENCARE OF PENNYPACK, INC.
ENR, INC.
GENESIS ELDERCARE CORP.
GLENMARK ASSOCIATES - DAWN VIEW MANOR, INC.
GLENMARK PROPERTIES, INC.
GMA - BRIGHTWOOD, INC.
GMA - MADISON, INC.
GMA - CONSTRUCTION, INC.
GMA UNIONTOWN, INC.
HEALTH RESOURCES OF ACADEMY MANOR, INC.
HEALTH RESOURCES OF BOARDMAN, INC.
HEALTH RESOURCES OF BRIDGETON, INC.
HEALTH RESOURCES OF BROOKLYN, INC.
HEALTH RESOURCES OF CEDAR GROVE, INC.
HEALTH RESOURCES OF CINNAMINSON, INC.
HEALTH RESOURCES OF COLCHESTER, INC.
HEALTH RESOURCES OF COLUMBUS, INC.
HEALTH RESOURCES OF CRANBURY, INC.
HEALTH RESOURCES OF ENGLEWOOD, INC.
HEALTH RESOURCES OF EATONTOWN, INC.
HEALTH RESOURCES OF EWING, INC.
HEALTH RESOURCES OF FARMINGTON, INC.
HEALTH RESOURCES OF GARDNER, INC.
HEALTH RESOURCES OF GLASTONBURY, INC.
HEALTH RESOURCES OF JACKSON, INC.
HEALTH RESOURCES OF KARAMENTA AND MADISON, INC.
HEALTH RESOURCES OF LAKEVIEW, INC.
HEALTH RESOURCES OF LEMONT, INC.
HEALTH RESOURCES OF LYNN, INC.

124

HEALTH RESOURCES OF MARCELLA, INC.
HEALTH RESOURCES OF MONTCLAIR, INC.
HEALTH RESOURCES OF MORRISTOWN, INC.
HEALTH RESOURCES OF NORFOLK, INC
HEALTH RESOURCES OF NORTH ANDOVER, INC.
HEALTH RESOURCES OF NORWALK, INC.
HEALTH RESOURCES OF PENNINGTON, INC.
HEALTH RESOURCES OF RIDGEWOOD, INC.
HEALTH RESOURCES OF ROCKVILLE, INC.
HEALTH RESOURCES OF SOLOMONT/BROOKLINE, INC.
HEALTH RESOURCES OF SOUTH BRUNSWICK, INC.
HEALTH RESOURCES OF TROY HILL, INC.
HEALTH RESOURCES OF VOORHEES, INC.
HEALTH RESOURCES OF WESTWOOD, INC.
HEALTHCARE REHAB SYSTEMS, INC.
HELSTAT, INC.
HMNR REALTY, INC.
HNCA, INC.
HORIZON MOBILE, INC.
HORIZON REHABILITATION, INC.
SCHUYLKILL NURSING HOMES, INC.
SCHUYLKILL PARTNERSHIP ACQUISITION CORPORATION
SCOTCHWOOD MASS. HOLDING CO., INC.
SENIOR LIVING VENTURES, INC.
SENIOR SOURCE, INC.
SNOW VALLEY HEALTH RESOURCES, INC.
SVNR, INC.
THE ADS GROUP, INC.
RIDGELAND HEALTH RESOURCES, INC.
RIVER PINES HEALTH RESOURCES, INC.
RIVERSHORES HEALTH RESOURCES, INC.
RLNR, INC.
ROPHEL CONVALESCENT CENTER, INC.
ROSE HEALTHCARE, INC.
ROSE VIEW MANOR, INC.
ROXBOROUGH NURSING HOME, INC.
RSNR, INC.
LWNR, INC.
MABRI CONVALESCENT CENTER, INC.
MARSHFIELD HEALTH RESOURCES, INC.
MHNR, INC.
MNR, INC.
MONTGOMERY NURSING HOMES, INC.
MULTICARE HOME HEALTH OF ILLINOIS, INC.
NORTHWESTERN MANAGEMENT SERVICES, INC.
NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC.
ARACADIA ASSOCIATES
PHC OPERATING CORP.
POCOHANTAS CONTINUOUS CARE CENTER, INC.

125

POMPTON CARE, INC.
PRESCOTT NURSING HOME, INC.
PROGRESSIVE REHABILITATION CENTERS, INC.
PROVIDENCE FUNDING CORPORATION
PROVIDENCE HEALTH CARE, INC.
PROVIDENCE MEDICAL, INC.
REST HAVEN NURSING HOME, INC.
HR OF CHARLESTON, INC.
HRWV HUNTINGTON, INC.
LAKEWOOD HEALTH RESOURCES, INC.
LAUREL HEALTH RESOURCES, INC.
LEHIGH NURSING HOMES, INC.
LRC HOLDING COMPANY
S.T.B. INVESTORS, LTD.
THE ASSISTED LIVING ASSOCIATES OF BERKSHIRE, INC.
THE ASSISTED LIVING ASSOCIATES OF LEHIGH, INC.
THE ASSISTED LIVING ASSOCIATES OF SANATOGA, INC.
THE ASSISTED LIVING ASSOCIATES OF WALL, INC.
THE HOUSE OF CAMPBELL, INC.
TM ACQUISITION CORP.
TRI-STATE MOBILE MEDICAL SERVICES, INC.
WILLOW MANOR NURSING HOME, INC.
WESTFORD NURSING AND RETIREMENT CENTER, INC.
RVNR, INC.
HORIZON ASSOCIATES, INC.
HEALTH RESOURCES OF WARWICK, INC.
HEALTH RESOURCES OF WALLINGFORD, INC.
HEALTH RESOURCES OF MIDDLETOWN (RI), INC.
HEALTH RESOURCES OF GROTON, INC.
HEALTH RESOURCES OF CUMBERLAND, INC.
HEALTH RESOURCES OF ARCADIA, INC.
ENCARE OF WYNCOTE, INC.
ENCARE OF QUAKERTOWN, INC.
ADS SENIOR HOUSING, INC.
ADS RECUPERATIVE CENTER, INC.
ADS HINGHAM NURSING FACILITY, INC.
ADS APPLE VALLEY, INC.
ADS/MULTICARE, INC.
GLENMARK ASSOCIATES, INC.
GMA PARTNERSHIP HOLDING COMPANY, INC.
STAFFORD CONVALESCENT CENTER, INC.
THE MULTICARE COMPANIES, INC.
NORTH MADISON, INC.

126

BY: Genesis Eldercare Corporation, as agent and attorney-in-
fact for each of the foregoing entities

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

127

CARE HAVEN ASSOCIATES LIMITED PARTNERSHIP
GLENMARK PROPERTIES I, LIMITED PARTNERSHIP
POINT PLEASANT HAVEN LIMITED PARTNERSHIP
RALEIGH MANOR LIMITED PARTNERSHIP
ROMNEY HEALTH CARE CENTER LTD. LIMITED PARTNERSHIP
SISTERVILLE HAVEN LIMITED PARTNERSHIP
TEAYS VALLEY HAVEN LIMITED PARTNERSHIP

BY: GLENMARK ASSOCIATES, INC., as General Partner of
each of the foregoing limited partnerships

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

ADS HINGHAM LIMITED PARTNERSHIP

BY: ADS HINGHAM NURSING FACILITY, INC., its General
Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

ADS RECUPERATIVE CENTER LIMITED PARTNERSHIP

BY: ADS RECUPERATIVE CENTER, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

128

WESTFORD NURSING AND RETIREMENT CENTER, LIMITED PARTNERSHIP

BY: WESTFORD NURSING AND RETIREMENT CENTER, INC., its
General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

ADS APPLE VALLEY LIMITED PARTNERSHIP

BY: ADS APPLE VALLEY, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P.

BY: ENCARE OF MENDHAM, L.L.C., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer of The Multicare
Companies, Inc. for and as the Majority
Member of Encare of Mendham, L.L.C.

MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P.

BY: BREYUT CONVALESCENT CENTER, L.L.C., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

129

MIDDLETOWN (RI) ASSOCIATE OF RHODE ISLAND, L.P.

BY: HEALTH RESOURCES OF MIDDLETOWN (RI), INC., its General
Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer

POMPTON ASSOCIATES, L.P.

BY: POMPTON CARE, L.L.C., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer of The Multicare Companies, Inc.
for and as Majority Member of Pompton
Care, L.L.C.

THE STRAUS GROUP - OLD BRIDGE, L.P.

BY: HEALTH RESOURCES OF EMERY, L.L.C., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer of The Mutlicare Companies, Inc.
for and as Majority Member of Health
Resources of Emery, L.L.C.

THE STRAUS GROUP - RIDGEWOOD, L.P.

BY: HEALTH RESOURCES OF RIDGEWOOD, L.L.C., its General
Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer of The Multicare Companies, Inc.
for and as the Majority Member of Health
Resources of Ridgewood, L.L.C.

130

WALLINGFORD ASSOCIATES OF CONNECTICUT, L.P.

BY: HEALTH RESOURCES OF WALLINGFORD, INC., its General
Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer

WARWICK ASSOCIATES OF RHODE ISLAND, L.P.

BY: HEALTH RESOURCES OF WARWICK, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer

THE STRAUS GROUP - HOPKINS HOUSE, L.P.

BY: ENCARE OF WYNCOTE, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer

THE STRAUS GROUP - QUAKERTOWN MANOR, L.P.

BY: ENCARE OF QUAKERTOWN, INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief Financial
Officer

131

CUMBERLAND ASSOCIATES OF RHODE ISLAND, L.P.

BY: HEALTH RESOURCES OF CUMBERLAND, INC., its General
Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

GROTON ASSOCIATES OF CONNECTICUT, L.P.

BY: HEALTH RESOURCES OF GROTON INC., its General Partner

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

HEALTH RESOURCES OF BRIDGETON, L.L.C.
HEALTH RESOURCES OF CINNAMINSON, L.L.C.
HEALTH RESOURCES OF CRANBURY, L.L.C.
HEALTH RESOURCES OF ENGLEWOOD, L.L.C.
HEALTH RESOURCES OF EWING, L.L.C.
HEALTH RESOURCES OF FAIRLAWN, L.L.C.
HEALTH RESOURCES OF JACKSON, L.L.C.
HEALTH RESOURCES OF WEST ORANGE, L.L.C.
ROEPHEL CONVALESCENT CENTER, L.L.C.
TOTAL REHABILITATION CENTER, L.L.C.
POMPTON CARE, L.L.C.
HEALTH RESOURCES OF LAKEVIEW, L.L.C.
HEALTH RESOURCES OF RIDGEWOOD, L.L.C.
HEALTH RESOURCES OF EMERY, L.L.C.
ENCARE OF MENDHAM. L.L.C.
BREYUT CONVALESCENT CENTER, L.L.C.

BY: THE MULTICARE COMPANIES, INC., as Member of the
foregoing Limited Liability Companies

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

132

GLENMARK LIMITED LIABILITY COMPANY I

BY: GLENMARK ASSOCIATES, INC., its Member

By:___________________________________
Name: George V. Hager, Jr.
Title: Executive Vice President, Chief
Financial Officer

133