<PAGE>

                                                                    EXHIBIT 10.3

                     IN THE UNITED STATES BANKRUPTCY COURT
                         FOR THE DISTRICT OF DELAWARE

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In re
<S>                                                     <C>  <C>
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                                                        )    Case Nos.  00-215 (MFW)
Mariner Health Group, Inc., et al.,                     )    through   00-301 (MFW)
                                                        )
                                                        )    Chapter 11
                                                        )
          Debtors and Debtors in Possession             )    Jointly Administered
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 FINAL ORDER (i) AUTHORIZING POSTPETITION FINANCING PURSUANT TO 11 U.S.C. (S)
364,  (ii) GRANTING SENIOR LIENS AND SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIM
STATUS PURSUANT TO 11 U.S.C. (S)(S) 105, 364, 503(b) and 507, (iii) AUTHORIZING
USE OF CASH COLLATERAL PURSUANT TO 11 U.S.C. (S) 363, and (iv) GRANTING ADEQUATE
              PROTECTION PURSUANT TO 11 U.S.C. (S)(S) 363 AND 364

          Upon the motion of the above-captioned debtors and debtors-in-
possession, Mariner Health Group, Inc., et al. (jointly and severally, the
"Debtors")/1/ dated January 18, 2000 (the "Motion") for entry of an order,
pursuant to (S)(S) 105, 363, 364(c) and (d), 503(b) and 507 of the United States
Bankruptcy Code, 11 U.S.C. (S) 101 et seq. (the "Bankruptcy Code")/2/, and Rules
2002, 4001(b), (c) and (d) and 9014 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules"):

          (i) authorizing the Debtors to obtain postpetition financing in the
form of loans and other financial accommodations, including the issuance of
letters of credit, pursuant to that certain Debtor-in-Possession Credit
Agreement substantially in the form annexed to the Motion (the "DIP Credit
Agreement") by and among Mariner Health Group, Inc., a Delaware corporation
("MHG"), as debtor and debtor-in-possession, and each of MHG's subsidiaries
listed
-----------------------
/1/   The Debtors are listed on Schedule A attached hereto.
/2/   All section and rule references are to the Bankruptcy Code and Bankruptcy
      Rules, respectively, unless otherwise indicated.
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on Exhibit A hereto; the Lenders listed on the signature pages thereto (each
individually referred to herein as a "DIP Lender" and collectively as "DIP
Lenders"); First Union National Bank ("First Union"), as Syndication Agent; PNC
Capital Markets, Inc. and First Union Securities, Inc., as Co-Arrangers; and PNC
Bank, National Association ("PNC"), as Collateral Agent and Administrative
Agent, and as an issuing bank for Letters of Credit thereunder, (First Union and
PNC collectively, the "DIP Agents"), and in an aggregate principal amount not to
exceed $50 million, in two tranches of $40 million and $10 million, respectively
(the "DIP Financing");

          (ii) authorizing the Debtors to grant, as of the Petition Date (as
defined below), to the DIP Agents, for the benefit of the DIP Lenders, pursuant
to the DIP Credit Agreement and the security agreement, mortgages and other
security documents in the form annexed to the DIP Credit Agreement (the "DIP
Security Documents"; the DIP Credit Agreement, the DIP Security Documents, and
all other agreements, instruments and documents executed and delivered in
connection therewith, collectively, the "DIP Financing Documents")/3/: (A)
pursuant to (S) 364(c)(2), first priority, valid, perfected and non-voidable
Security Interests in and Liens upon (as those capitalized terms are defined in
the DIP Security Documents) all unencumbered assets of the estates of each of
the Debtors, including (without limitation) all such real, personal or mixed
property of each of the Debtors at any time existing or arising, wherever
located, all such cash contained in any account to the extent owned by or
maintained for the benefit of any of the Debtors, all such capital stock held by
any of the Debtors, the proceeds of all such causes of action existing as of the
Petition Date, all such real property the title to which is held by any of the
Debtors, or the right to possession of which is held by any of the Debtors
pursuant to a leasehold interest, and all proceeds and products thereof (but
excluding causes of action of the Debtors' estates under (S)(S) 544, 545, 547,
548 and 550), (B)
----------------------------
/3/   Capitalized terms used herein and not otherwise defined have the meaning
assigned to such terms in the DIP Financing Documents.

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pursuant to (S) 364(d), first priority, valid, perfected and non-voidable
Security Interests in and Liens upon all assets of each of the Debtors which, as
of the Petition Date, were subject to the senior liens of the Prepetition Agents
for the benefit of the Prepetition Secured Parties (as each term is defined in
the Motion), and (C) pursuant to (S) 364(c)(3), valid, perfected and non-
voidable Security Interests in and Liens upon all other assets of the Debtors
subject and subordinate only to the valid, duly perfected and non-voidable Liens
in existence as of the Petition Date (the "Petition Date Liens"), the Permitted
Adequate Protection Liens (as defined in the DIP Credit Agreement) and senior
Liens arising as permitted under Section 7.02 of the DIP Credit Agreement (the
"Post-Petition Prior Liens", and with the Petition Date Liens and the Permitted
Adequate Protection Liens, the "Prior Liens") (the collateral described in
clauses (A), (B) and (C) of this subparagraph (ii), which also shall include all
accounts receivable as of the Petition Date and thereafter arising including all
amounts at any time owing by a Governmental Authority, being collectively
referred to as the "DIP Collateral"), all of the DIP Collateral to secure the
loans, advances and all Obligations at any time owing or to be performed by the
Debtors pursuant to the DIP Credit Agreement and the other DIP Financing
Documents, and subject only to the Carve-Out (as defined below);

          (iii)  pursuant to (S) 364(c)(1), granting superpriority
administrative claim status for such Obligations, subject only to the Carve-Out;

          (iv) pursuant to (S) 363(c), authorizing the Debtors to use Cash
Collateral (as defined in the Motion) of the Prepetition Agents and the
Prepetition Secured Parties;

          (v) pursuant to (S)(S) 361, 363(e) and 364(d), providing adequate
protection to the Prepetition Agents and the Prepetition Secured Parties with
respect to any diminution in the value of Prepetition Agents' or the Prepetition
Secured Parties' interests in the collateral granted under the Prepetition
Credit Agreement (as defined in the Motion) (the "Prepetition

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Collateral") resulting from (A) the priming Liens and Security Interests to be
granted herein pursuant to (S) 364(d) to the DIP Agents for the benefit of the
DIP Lenders to secure the Obligations, (B) the Debtors' use of Cash Collateral,
(C) the use, sale or lease of the Prepetition Collateral (other than Cash
Collateral) and (D) the imposition of the automatic stay pursuant to (S) 362(a);
and

          (vi) scheduling a final hearing (the "Final Hearing") to consider
entry of this order (the "Final Order") authorizing the above-matters in full;
and such Motion also requesting that this Court hold an immediate emergency
hearing (the "Emergency Hearing") on the Motion to consider entry of an interim
order (the "Interim Order") pursuant to Rule 4001(b) and (c) authorizing the
Debtors to use Cash Collateral of the Prepetition Agents and the Prepetition
Secured Parties and borrow from the DIP Lenders an amount not to exceed $15
million  under the DIP Credit Agreement for a period of no more than  twenty-
five days  until the Final Hearing, upon the terms and conditions set forth in
the DIP Credit Agreement and the other DIP Financing Documents, pending the
Final Hearing; and it further appearing, based upon the record presented to this
Court, that:

          a. The ability of the Debtors to continue in business so that they can
attempt to confirm a plan of reorganization under the Bankruptcy Code depends
entirely upon obtaining the relief requested in the Motion and the Debtors will
suffer immediate and irreparable injury if such relief is not granted; and

          b. Notice of the Motion and Final Hearing has been given to (i) the
United States Trustee, (ii) the twenty largest unsecured creditors of the
Debtors, (iii) the Prepetition Agents for the Prepetition Secured Parties, (iv)
the United States Department of Justice, (v) the Secretary of Health and Human
Services and all fiscal intermediaries; (vi) all state Medicaid

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agencies with which the Debtors deal; (vii) all landlords of the Debtors; (viii)
holders of Petition Date Liens; (ix) the DIP Lenders and DIP Agents; (x) the
official committee of unsecured creditors appointed in these Chapter 11 Cases
(the "Committee") and (xi) any party who filed a request for notices in the
Chapter 11 Cases pursuant to Bankruptcy Rule 2002 prior to the date set forth in
the Interim Order for service of notice of the Final Hearing; and

          c. Notice of the Final Hearing was published one time, at least one
week prior to the date of the Final Hearing, in the following newspapers: The
Wall Street Journal (national edition), USA Today or The New York Times
(national edition), The Boston Globe, The Houston Chronicle or The Dallas
Morning News, The Miami Herald, The Tennessean and The Washington Post (Maryland
regional edition).

          NOW, THEREFORE, upon the entire record of the Final Hearing held
before this Court with respect to the Motion on February 16, 2000, and upon the
presentations of counsel made at the Final Hearing, and upon the record of the
Emergency Hearing held before this Court with respect to the Motion on January
18, 2000, and this Court having found good and sufficient cause therefor, it is
hereby FOUND that:

          A. On January 18, 2000 (the "Petition Date"), the Debtors filed
voluntary chapter 11 petitions under the Bankruptcy Code. Each chapter 11
petition filed by a Debtor commencing its Chapter 11 Case and the DIP Financing
Documents were duly authorized by all requisite actions of the board of
directors, shareholders, general and limited partners, or managing members, as
applicable, of such Debtor, in accordance with applicable law and the
Organizational Documents of such Debtor. No trustee or examiner has been
appointed as of the date of this Order. Pursuant to (S)(S) 1107(a) and 1108, the
Debtors are authorized to operate their business as debtors-in-possession.

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          B. This Court has jurisdiction over these Chapter 11 Cases and the
Motion pursuant to 28 U.S.C. (S)(S) 157 and 1334. Consideration of the Motion
constitutes a core proceeding as defined in 28 U.S.C. (S) 157(b)(2).

          C. The Debtors do not have sufficient funds to meet expenses necessary
for the operation of their business and have requested that they be authorized
to use Cash Collateral and that the DIP Agents and the DIP Lenders extend loans
and other financial accommodations to the Debtors pursuant to the terms and
conditions set forth in the DIP Financing Documents.

          D. The Debtors are unable to obtain the financing necessary for the
operation of their business either (i) on an unsecured basis under (S)
503(b)(1), (ii) pursuant to (S)(S) 364(a) or 364(b), (iii) solely on a junior
secured basis under (S) 364(c)(3), or (iv) on any other terms or conditions more
favorable to the Debtors than the terms and conditions set forth in the DIP
Financing Documents.

          E. In an effort to identify the parties with a potential interest in
the pre-petition accounts receivables or inventory of the Debtors, counsel for
the DIP Lenders conducted a search against each of the Debtors to identify all
such parties. Counsel to the DIP Lenders conducted extensive searches of state
UCC filings and conducted extensive on-line searches of state UCC filings using
Lexis and/or Westlaw in all jurisdictions where a Debtor maintains property or a
chief executive office is located. The Debtors' corporate counsel is satisfied
that the search was conducted in all appropriate jurisdictions and in all
appropriate offices in those jurisdictions. Because there are approximately 86
entities that are Debtors in these cases, and because the Debtors also use
numerous trade names and operate numerous health care facilities located
throughout the country, it is impractical to rely on searches alone. Therefore,
this is a proper case for the use of alternative notice procedures. In
particular, publication of notice as set

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forth in this Order is required in order to ensure that all prospective parties
have adequate notice of the Final Hearing.

          F. The DIP Lenders have agreed to provide the DIP Financing on the
terms and conditions set forth in the DIP Financing Documents provided that the
Court enters an order satisfactory to the DIP Agents and the DIP Lenders
approving the DIP Financing Documents and granting such claims and priorities to
or for the benefit of the DIP Agents and the DIP Lenders as are set forth
herein, in the DIP Credit Agreement and in the other DIP Financing Documents
with respect to all Obligations.

          G. The Debtors will benefit from the loans and other financial
accommodations to be provided by the DIP Agents and the DIP Lenders under the
DIP Financing Documents. The loans and other financial accommodations provided
under the DIP Financing Documents are necessary to fund the business of the
Debtors and will contribute to payment of the actual and necessary costs and
expenses of preserving their estates.

          H. The Debtors have agreed both that they are indebted to the
Prepetition Agents and the Prepetition Secured Parties under the Prepetition
Credit Agreement (as defined in the Motion) and shall not raise any defense,
counterclaim or offset of any kind with respect to such indebtedness (the
"Prepetition Obligations"), and have further agreed that as of the Petition
Date, the Debtors were liable to the Prepetition Agents and the Prepetition
Secured Parties in the aggregate unpaid principal amount plus letter of credit
exposure outstanding of approximately $434.4 million, plus accrued interest,
fees and other charges thereunder.

          I. The Debtors have further agreed that they will not challenge (a)
the validity, perfection, enforceability and non-voidability of the Liens and
Security Interests granted by the Debtors to Prepetition Agents, for the benefit
of the Prepetition Secured Parties, in the Prepetition Collateral pursuant to
the Prepetition Credit Agreement and (b) that all or

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substantially all of the Debtors' cash on hand and proceeds of Prepetition
Collateral received after the Petition Date constitute the Cash Collateral of
the Prepetition Agents and Prepetition Secured Parties.

          J. The Prepetition Agents and Prepetition Secured Parties are
entitled, pursuant to (S)(S) 361, 363(e) and 364(c) and (d), to adequate
protection of their interests in the Prepetition Collateral in order to protect
the Prepetition Agents and the Prepetition Secured Parties from any diminution
in the value of the Prepetition Collateral resulting from (i) the Debtors' use
of Cash Collateral, (ii) the priming Liens and Security Interests granted to the
DIP Agents for the benefit of the DIP Lenders pursuant to this Order, the DIP
Credit Agreement and the other DIP Financing Documents, (iii) the Debtors' use,
sale or lease of the Prepetition Collateral other than Cash Collateral, and (iv)
the imposition of the automatic stay.

          K. The Debtors do not have sufficient available sources of working
capital from the Prepetition Secured Parties' Cash Collateral or other financing
to carry on the operation of their business as without the DIP Financing. The
ability of the Debtors to provide patient care, maintain business relationships
with their vendors and suppliers, purchase new inventory, pay necessary
employees and otherwise finance their operations is essential to the Debtors'
continued viability. In addition, the Debtors' critical need for financing is
immediate. In the absence of access to Cash Collateral and the DIP Financing,
the continued operation of the Debtors' business would not be possible, a
precipitate liquidation would ensue, and immediate and irreparable harm to the
Debtors' patients, the Debtors' unsecured creditors, and the Debtors' estates
would occur.

          L. The ability of the Debtors to continue in business so they can
attempt to reorganize under the Bankruptcy Code depends on obtaining the relief
sought in the Motion.

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<PAGE>

          M. Based on the record presented to this Court by the Debtors at the
Emergency and Final Hearings, the terms of the DIP Financing are fair and
reasonable, reflect the Debtors' exercise of prudent business judgment
consistent with their fiduciary duties, and, when the initial Loans were funded,
were supported by reasonably equivalent value and fair consideration.

          N. Based on the record before the Court, the financing arrangements
contemplated by the DIP Credit Agreement and the other DIP Financing Documents
are the product of an arm's length negotiation and are entered into by the DIP
Agents and the DIP Lenders in good faith, as the term "good faith" is used in
(S) 364(e).

          O. The Final Hearing was held pursuant to Rule 4001(b)(2) and (c)(2),
and notice of the Motion has been given pursuant to (S)(S) 102(l), 363(c) and
364(c) and (d), and Rules 2002 and 4001(b) and (c), to the parties set forth
above.

          Based upon the foregoing findings and conclusions, and upon the record
made before this Court, and good and sufficient cause appearing therefor,

          IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:

          1. The Motion is granted and the Debtors are hereby authorized and
directed to execute and deliver the DIP Financing Documents, subject to the
terms and conditions hereinafter set forth.

          2. Debtors are authorized to: (a) obtain loans and request the
issuance of letters of credit pursuant to the terms of the DIP Financing
Documents; and (b) use Cash Collateral in the operation of the Debtors'
business, in each case in a manner consistent with this Order, the DIP Credit
Agreement (including, without limitation, the prohibitions set forth in section
5.06 thereof), the other DIP Financing Documents and the Cash Budget.

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<PAGE>

          3. The Debtors are hereby authorized and directed to (a) execute and
deliver the DIP Financing Documents and all other documents necessary or
desirable to implement the DIP Financing (through one or more officers
designated by them) including, without limitation, waivers and (after notice to
counsel for the Committee) modifications and amendments to the DIP Financing
Documents with respect thereto which are not material in the judgment of the
Debtors and the DIP Lenders, (b) grant the Security Interests and Liens
contemplated hereby and thereby, (c) effect all transactions and take any
actions provided for in or contemplated by the DIP Financing Documents or in
good faith deemed necessary to effectuate the terms and conditions of the DIP
Financing Documents and this Order, including, without limitation, the payment
of any and all fees, costs, charges, commissions and expenses, including
reasonable counsel fees, payable under the DIP Financing Documents or this
Order, and (d) comply with all provisions of the DIP Financing Documents,
including, without limitation, the payment and satisfaction in full of all
Obligations when due in accordance with the terms of the DIP Financing
Documents.

          4. The Obligations shall be entitled to the following protections,
Security Interests, Liens and priorities in favor of the DIP Agents and the DIP
Lenders, to secure full and complete compliance with, and timely payment of, all
Obligations at any time owing or to be performed by the Debtors pursuant to the
DIP Credit Agreement and the other DIP Financing Documents, subject only to the
Carve-Out (as defined below):

          (a) pursuant to (S) 364(c)(2), first priority, valid, perfected and
non-voidable Security Interests in and Liens upon all unencumbered assets of the
estates of each of the Debtors as of the Petition Date, including (without
limitation) all such real, personal or mixed property of each of the Debtors at
any time existing or arising, wherever located, all such cash contained in any
account to the extent owned by or maintained for the benefit of the Debtors, all
such capital

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stock held by any of the Debtors, the proceeds of all such causes of action
existing as of the Petition Date, all such real property the title to which is
held by any of the Debtors, or the right to possession of which is held by any
of the Debtors pursuant to a leasehold interest, and all proceeds and products
thereof (but excluding causes of action of the Debtors' estates under (S)(S)
544, 545, 547, 548 and 550);

          (b) pursuant to (S) 364(d), valid, perfected and non-voidable Security
Interests in and Liens, as of the Petition Date, upon all Prepetition Collateral
(including all accounts receivable as of the Petition Date and all amounts at
any time owing by a Governmental Authority) to the extent that such Prepetition
Collateral was subject to senior liens, as of the Petition Date, in favor of the
Prepetition Agents and the Prepetition Secured Parties, having priority over and
senior to the Security Interests and Liens of the Prepetition Agents and the
Prepetition Secured Parties; and

          (c) pursuant to (S) 364(c)(3), valid, perfected and non-voidable
Security Interests in and Liens, as of the Petition Date, upon all other assets
(including all Prepetition Collateral and all accounts receivable as of the
Petition Date and thereafter arising including all amounts at any time owing by
a Governmental Authority to the extent not covered by (b) above)  of each of the
Debtors, subject and subordinate only to the Prior Liens (but senior to any
Liens in favor of the Prepetition Agents and the Prepetition Secured Parties).

          (d) In addition, in order to further assure full and complete
compliance with, and timely payment of, all Obligations at any time owing or to
be performed by the Debtors pursuant to the DIP Credit Agreement or the other
DIP Financing Documents, the DIP Agents and the DIP Lenders are hereby granted
(subject to the Carve-Out), pursuant to (S) 364(c)(1), superpriority
administrative claim status for such Obligations.  All Obligations owing to the
DIP Agents and the DIP Lenders under the DIP Credit Agreement and the other DIP
Financing

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Documents (including, but not limited to, the obligation to pay principal,
interest, professional fees, costs, charges, commissions and expenses) shall be
paid as provided in the DIP Credit Agreement and the other DIP Financing
Documents when due, without defense, offset, reduction or counterclaim, and
shall constitute allowed claims to the full extent thereof against the Debtors
arising under (S) 364(c)(1), with priority for such claims over any and all
administrative expenses (other than the Carve-Out) of the kind specified or
ordered pursuant to any provision of the Bankruptcy Code, including, but not
limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b) and
(to the maximum extent permitted by law) 726 provided that, the superpriority
                                             --------
administrative claim status of the Obligations, Liens and Security Interests
securing the same shall be subject only to: (i) unpaid professional fees and
expenses incurred (x) prior to the date of the delivery of a notice from the
Administrative Agent or Required Lenders to the Debtors of the occurrence of an
Event of Default and specifying that the limitation on professional fees and
expenses referred to in the following clause (ii) is in effect (such notice
being the "Carve-Out Notice") or (y) after the earlier of (1) such time as no
Event of Default shall be continuing and (2) such time as such Carve-Out Notice
shall be rescinded by the Administrative Agent at the direction of Required
Lenders in their sole discretion, to the extent such fees and expenses described
in this clause (i) are allowed by the Court in the Chapter 11 Cases (including
on an interim basis and subject to final allowance), (ii) from and after the
date of the delivery of a Carve-Out Notice, professional fees and expenses
allowed by the Court in the Chapter 11 Cases in an aggregate amount (determined
without regard to fees and expenses incurred prior to the date of the delivery
of such Carve-Out Notice and which are at any time allowed by the Court either
on an interim basis (subject to final allowance) or final basis) not to exceed
$2,000,000 (for any period commencing at the time a Carve-Out Notice shall have
been so delivered and ending at the earlier of (1) such subsequent time as no
Event of Default shall be

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continuing and (2) such time as such Carve-Out Notice shall be rescinded by the
Administrative Agent at the direction of Required Lenders in their sole
discretion), and (iii) fees payable to the Clerk of the Court and to the United
States Trustee pursuant to 28 U.S.C. (S)1930(a)(6) ((i) through (iii)
collectively, being referred to herein as the "Carve-Out"); provided, however,
                                                            --------
that in no event shall there be paid from proceeds of the DIP Financing,
obligations of the issuer in respect of Letters of Credit, Cash Collateral or
any portion of the Carve-Out any fees and expenses incurred in investigating,
objecting to, challenging in any matter, or raising any defenses to (1) the
validity, perfection, priority or enforceability of the Obligations owing to the
DIP Lenders or DIP Agents, or the Security Interests and Liens in favor of the
DIP Lenders or DIP Agents securing such Obligations, or to assert any claims or
causes of action against the DIP Lenders or DIP Agents in their capacity as
lenders or agents under the DIP Financing, or (2) the Security Interests, Liens
or Prepetition Obligations of the Prepetition Agents or the Prepetition Secured
Parties, although, subject to the Carve-Out, the professionals for the Committee
may be paid (to the extent allowed by the Court) fees and expenses incurred in
analyzing such Liens or claims described in (2) above in an amount not to exceed
$25,000. Subject to the Carve-Out, such claims of the DIP Agents and DIP Lenders
shall at all times be senior, in this and any subsequent case under the
Bankruptcy Code, to the rights of the Debtors, any trustee or examiner and any
unsecured claims of any creditor or other entity. No cost or expense of
administration or any claims in this case, including to the maximum extent
permitted by law those resulting from or incurred after any conversion of this
case pursuant to (S) 1112, shall (except to the extent of the Carve-Out) rank
prior to, or on parity with, the claims of the DIP Agents and DIP Lenders
arising hereunder, under the DIP Credit Agreement or under the other DIP
Financing Documents.

                                       13
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          5. Other than the Liens and Security Interests granted pursuant to or
referred to in this Order, and under the terms of the DIP Credit Agreement and
the other DIP Financing Documents, no Liens or Security Interests shall attach
to any property of the Debtors' estates in this or any subsequent case under the
Bankruptcy Code unless either (a) the Liens or Security Interests are Permitted
Adequate Protection Liens or are otherwise permitted under Section 7.02 of the
DIP Credit Agreement, (b) the DIP Agents and DIP Lenders give their express
written consent, or (c) if the DIP Financing has been terminated and all
Obligations have been paid in full and the Commitments terminated, provided,
                                                                   --------
that in the case of clause (c), notwithstanding such termination and payment, no
----
Liens or Security Interests shall be granted under (S) 364(d) on any property
constituting Prepetition Collateral or that is subject to any Replacement Liens
(as defined below).

          6. The Debtors shall not incur Debt not permitted by the DIP Credit
Agreement or the other DIP Financing Documents unless (a) the DIP Agents and DIP
Lenders consent in writing thereto, or (b) the proceeds thereof are used first
to satisfy in full all Obligations owing to the DIP Agents or the DIP Lenders
under the DIP Credit Agreement or the other DIP Financing Documents in
accordance with the terms thereof and the Commitments are terminated.

          7. Except as set forth in the last sentence of this paragraph, no cost
or expense, including, but not limited to, any cost or expense of administration
of the Debtors' Chapter 11 Cases or any future proceeding that may develop out
of such cases, including liquidation in chapter 7 or other case under the
Bankruptcy Code, or cost or expense incurred in connection with the
preservation, protection or enhancement of, or liquidation of the DIP Collateral
or the Prepetition Collateral, but excluding the Carve-Out, shall be charged
against the DIP Collateral pursuant to (S) 506(c) or otherwise without the prior
written consent of the DIP

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Agents and DIP Lenders or the Prepetition Agents and Prepetition Secured
Parties, and no such consent shall be implied from any action, inaction or
acquiescence by the DIP Agents, DIP Lenders, Prepetition Agents or Prepetition
Secured Parties. Publication notice given as set forth in this Order is
sufficient to bind third parties not otherwise served with the Motion or this
Order to the provisions of this paragraph 7. Notwithstanding the foregoing
provisions of this paragraph 7, each of MCI WorldCom, Inc. and its affiliates
and Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi,
Inc. and their affiliates reserves its right, if any, to assert a claim pursuant
to (S)506(c) against the DIP Collateral and the Prepetition Collateral, and the
Debtors, the DIP Lenders, the DIP Agents, the Prepetition Agents and the
Prepetition Secured Parties reserve their rights and defenses with respect to
any such claim.

          8. In addition to the protections afforded the Prepetition Agents and
the Prepetition Secured Parties elsewhere in this Order and in the DIP Credit
Agreement, the Prepetition Agents and Prepetition Secured Parties are granted
further adequate protection of their interests in the Prepetition Collateral as
hereinafter set forth. As further adequate protection to the Prepetition Agents
and Prepetition Secured Parties for any diminution in the value of their
respective interests in the Prepetition Collateral resulting from (a) the
Debtors' granting of priming Liens on and Security Interests in the Prepetition
Collateral, pursuant to (S) 364(d), in favor of the DIP Agents and DIP Lenders,
(b) the Debtors' use of Cash Collateral pursuant to (S) 363(c), (c) the use,
sale or lease of the Prepetition Collateral (other than Cash Collateral)
pursuant to (S) 363, and (d) the imposition of the automatic stay pursuant to
(S) 362(a):

          (i) the Prepetition Agents and the Prepetition Secured Parties are
granted (effective as of the Petition Date and without the necessity of the
execution by the Debtors of mortgages, security agreements, pledge agreements,
financing statements or otherwise), valid, perfected and non-voidable
replacement Security Interests in and Liens upon (the "Replacement

                                       15
<PAGE>

Liens") all property of each of the Debtors including, without limitation, all
real, personal and mixed property of the Debtors (including leasehold interests
and capital stock) at any time existing or arising, wherever located, and all
proceeds and products thereof (but excluding causes of action of the Debtors'
estates under (S)(S) 544, 545, 547, 548 and 550 and any assets (if any)
specifically excluded from the Security Interests and Liens granted to the DIP
Agents and the DIP Lenders pursuant to the terms of the DIP Security Documents),
subject only to (x) the Carve-Out, (y) the Liens and Security Interests granted
pursuant to this Order and the DIP Financing Documents to the DIP Agents and DIP
Lenders to secure the Obligations, and (z) the Prior Liens; and

          (ii) Prepetition Agents and Prepetition Secured Parties are granted
superpriority claims with priority over any and all administrative expenses of
the kind specified or ordered pursuant to any provision of the Bankruptcy Code,
including, but not limited to, (S)(S) 105, 326, 328, 330, 331, 503(b), 506(c),
507(a), 507(b) and (to the maximum extent permitted by law) 726, subject only to
(x) the superpriority claims granted to DIP Agents and DIP Lenders in respect of
the Obligations pursuant to the Interim Order and (y) the Carve-Out.

          9. Subject to the terms and conditions of the DIP Financing Documents,
the DIP Financing and the Debtors' use of Cash Collateral shall terminate on the
Commitment Termination Date provided, that in the event the Obligations shall
                            --------  ----
have been satisfied in full in accordance with the DIP Financing Documents, such
termination shall be without prejudice to the Debtors' right to seek to use Cash
Collateral pursuant to (S) 363 (c) (2), and the Prepetition Agents' and
Prepetition Secured Parties' right to oppose such use or seek further adequate
protection in addition to that provided herein.

          10. The Security Interests and Liens in the DIP Collateral granted to
the DIP Agents for the benefit of the DIP Lenders pursuant to the DIP Financing
Documents and

                                       16
<PAGE>

approved herein are valid, enforceable and fully perfected by entry of this
Order, and neither the DIP Agents nor the DIP Lenders shall be required to file
or record financing statements, mortgages, leasehold mortgages, deeds of trust
or other documents in any jurisdiction or take any other action (including
obtaining possession) in order to validate, perfect or otherwise enforce the
Security Interests and Liens in such DIP Collateral. If the DIP Agents shall, in
their or its sole discretion, choose to file financing statements or file or
record any other documents or otherwise confirm perfection of such Security
Interests and Liens in the DIP Collateral, the DIP Agents are authorized to
effect such filings and recordations, and the automatic stay of (S) 362 is
hereby modified to allow such actions, and all such financing statements or
similar documents shall be deemed to have been filed or recorded on the date of
entry of this Order. The Debtors are hereby authorized and directed to execute
and deliver to the DIP Agents, any and all such documents as the DIP Agents may
in good faith request in order to confirm the perfection of the Liens and
Security Interests in the DIP Collateral. The DIP Agents are hereby authorized
to file this Order as evidence of their Security Interests and Liens in lieu of
a financing statement or other filing or recording, and the appropriate state
and local official may accept the same for filing or recording.

          11. The DIP Agents and DIP Lenders, having been found to be acting in
good faith, shall be entitled to the full protection of (S) 364(e) and the
claims, Liens, Security Interests and priorities created or authorized in this
Order, the DIP Credit Agreement and the other DIP Financing Documents are so
created and authorized pursuant to (S)(S) 364(c) and (d) and are entitled to the
benefits and protections of (S) 364(e).

          12. The DIP Agents and DIP Lenders are entitled to all of the rights,
benefits, privileges and remedies set forth or provided herein or in the DIP
Financing Documents, including, but not limited to, without further application
to or order of this Court, all of the

                                       17
<PAGE>

rights, benefits, privileges and remedies available to the DIP Agents or DIP
Lenders upon the occurrence and during the continuance of a Default or an Event
of Default (as defined in the DIP Credit Agreement including, without
limitation, any reversal, stay or modification of this Order without the consent
of the DIP Agents or Required Lenders, the appointment or election of an interim
or permanent trustee in this case or the conversion or dismissal of this case)
as follows:

          (i) The automatic stay of (S) 362 (to the extent applicable) is
vacated solely to permit the exercise, enjoyment and enforcement of any of such
rights, benefits, privileges and remedies including, but not limited to (a) the
termination by the DIP Agents and the DIP Lenders of all Commitments under the
DIP Credit Agreement, (b) the declaration of all Obligations to be immediately
due and payable in full, (c) termination of the Debtors' rights hereunder to use
Cash Collateral, and (d) the exercise of remedies against the DIP Collateral,
including, without limitation, charging a default rate of interest as set forth
in the DIP Financing Documents or foreclosing on such DIP Collateral under
applicable state or federal law, provided that the DIP Agents or the DIP Lenders
                                 --------
shall give the Debtors, any official committee appointed pursuant to (S) 1102,
and the United States Trustee five (5) business days' prior written notice (an
"Enforcement Notice") of any exercise of remedies against the DIP Collateral
(other than acceleration of the Loans or other Obligations, termination of the
Commitments, but including the exercise of any rights of set-off under the DIP
Credit Agreement or under any other DIP Financing Document), and shall file a
copy of the Enforcement Notice with the Court.

          (ii) Furthermore, five (5) business days after the giving of the
Enforcement Notice (a) the Debtors are precluded from using funds maintained in
any bank, whether a DIP Lender or a third party bank, and all banks are
authorized and directed to withhold payment on items presented for payment from
any account of one or more of the Debtors, (b) all banks in

                                       18
<PAGE>

which any lock-boxes, deposit accounts, concentration accounts, disbursement
accounts or other accounts of the Debtors are maintained are authorized and
directed to comply with any request of the DIP Agents to turnover all funds of
the Debtors to the DIP Agents without offset or deduction (other than ordinary
course of business deductions for returned items and/or postpetition bank
account fees), and (c) without limiting any of the DIP Agents' rights or
remedies to collect directly from any account debtor or obligor (including the
United States), all proceeds of the DIP Collateral received by the Debtors or
any successors or assigns (including any trustee appointed or elected in these
Chapter 11 Cases or any superseding Chapter 7 cases) shall be held in trust for,
and immediately turned over to, the DIP Agents for the benefit of the DIP
Lenders and the Prepetition Secured Parties.

          (iii) If any of the Debtors or any other person or entity (including
any official committee) challenges the occurrence of a Default or an Event of
Default, any such objector's remedy shall be, and hereby is, limited to
requesting a hearing before this Court on five (5) business days' written notice
to the DIP Lenders and the DIP Agents. Pending any such hearing, unless the
Court orders otherwise, the DIP Lenders and the DIP Agents shall not take the
actions that are the subject of Enforcement Notices described in the proviso to
clause (i) above and in clause (ii) above. In any such hearing, the sole issue
before the Court shall be whether a Default or an Event of Default has occurred
and (if subject to cure) has not been cured. No other issue or argument shall be
relevant to any opposition to enforcement of the DIP Lenders' rights, under
Bankruptcy Code Sections 105, 362 or otherwise.

          13. This Order shall be deemed the order of a court of competent
jurisdiction for purposes of 42 U.S.C. (S) 1395g (c) (1). In view of the filing
of these Chapter 11 Cases and the "HHS Stipulation" dated as of the Petition
Date and approved by the Court, 42

                                       19
<PAGE>

C.F.R. (S) 424.90(b) on its face does not apply. Nothing contained herein shall
limit any claims or defenses of the Debtors, DIP Agents or DIP Lenders under
applicable law as provided under the HHS Stipulation.

          14. Except as otherwise provided in this Order, pursuant to Section
552(a) of the Bankruptcy Code, all property acquired by the Debtors after the
Petition Date, including, without limitation, all DIP Collateral pledged to the
DIP Lenders pursuant to the DIP Credit Agreement, and this Order, is not and
shall not be subject to any Lien of any entity resulting from any security
agreement entered into by the Debtors prior to the Petition Date, except to the
extent that (i) such property constitutes proceeds of property of the Debtors
existing on or before the Petition Date or (ii) such entity is granted a
Permitted Adequate Protection Lien.

          15. The provisions of this Order, including the priority and validity
of all claims and Liens in favor of the DIP Lenders, and any actions taken
pursuant hereto or in reliance hereon, shall survive entry of any other order
which may be entered in this case, including any order (a) confirming any plan
of reorganization, (b) converting these cases from cases under chapter 11 to
cases under chapter 7, (c) appointing a trustee or examiner (including an
examiner with expanded powers), or (d) dismissing this case, and the terms and
provisions of this Order, as well as (to the maximum extend permitted by law)
the priorities in payment granted pursuant to this Order, the DIP Credit
Agreement and the other DIP Financing Documents shall continue in full force and
effect notwithstanding the entry of such other order, until all of the
Obligations owing to the DIP Lenders are irrevocably paid in full in accordance
with the terms of the DIP Credit Agreement and the other DIP Financing Documents
and all of the Commitments thereunder have been terminated.

          16. If any or all of the provisions of this Order are hereafter
reversed, modified, vacated or stayed by subsequent order of this Court
(including in connection with the

                                       20
<PAGE>

Final Hearing) or any other court, such reversal, stay, modification or vacatur
shall not affect the validity and enforceability of any Obligation, debt or
claim incurred or any Security Interest or Lien or the priority that is or was
incurred or granted pursuant to the DIP Credit Agreement, the other DIP
Financing Documents or this Order, and notwithstanding any stay, reversal,
modification or vacatur of this Order, any Obligations owing to the DIP Agents
or DIP Lenders arising prior to the effective date of such stay, reversal,
modification or vacatur shall be governed in all respects by the original
provisions of this Order and the DIP Financing Documents, as the case may be,
and the DIP Agents and DIP Lenders shall be entitled to all of their respective
rights, privileges and benefits hereunder and under the DIP Financing Documents
including, without limitation, the priorities, rights and remedies granted
herein and therein to or for their benefit with respect to all Obligations owing
to the DIP Agents and the DIP Lenders. Without adversely affecting or limiting
the foregoing provisions of this paragraph 16, the Committee shall have the
right to move by February 25, 2000 to modify this Order solely to the extent
that this Order authorizes the Debtors to execute the DIP Credit Agreement with
the inclusion in the DIP Credit Agreement in the definition of "Commitment
Termination Date" of the language in (iii)(y) of such definition (and such other
provisions of the DIP Credit Agreement ancillary to the foregoing), in which
event such motion shall be heard by this Court no later than March 8, 2000 at
11:30 a.m. If such motion is granted: (a) it shall be deemed an Event of Default
under (S) 8.01 (j) of the DIP Credit Agreement; and (b) the Required Lenders and
the Administrative Agent may exercise their rights and remedies as granted under
the DIP Credit Agreement and this Order, provided that such Event of Default may
not be challenged pursuant to paragraph 12(iii) of this Order or otherwise.
Nothing contained herein shall be deemed to modify any provision of the DIP
Credit Agreement or the other DIP Financing Documents. This Order shall be
deemed a Final Order as defined in the DIP Credit Agreement as to all persons
and entities and for all

                                       21
<PAGE>

purposes, except with respect to the Committee's right to make a motion on the
basis set forth in this paragraph. If the Committee makes such a motion and it
is denied or the Committee fails to make such a motion timely, this Order shall
be a Final Order as to the Committee as well.

          17. The findings contained in paragraphs H. and I shall be binding
upon all parties in interest, including but not limited to, the Debtors (and the
Debtors waive any right to challenge such findings) and any official committee
appointed in the Chapter 11 Cases unless (a) any such committee has properly
filed an adversary proceeding or contested matter challenging the validity,
enforceability, non-voidability, perfection or priority of the Prepetition
Obligations, or the Prepetition Agents' or Prepetition Secured Parties' Liens on
and Security Interests in the Prepetition Collateral, no later than the date
that is ninety (90) days after the date of appointment of the Committee, and (b)
a Final Order has been entered in favor of such committee in any such timely and
properly filed adversary proceeding or contested matter. If no such adversary
proceeding or contested matter is properly commenced as of such date, (i) the
Prepetition Obligations (less any non-voidable payments made thereon after the
Petition Date) shall constitute allowed claims for all purposes in the Chapter
11 Cases and any subsequent chapter 7 cases, and the Prepetition Agents' and
Prepetition Secured Parties' Liens on and Security Interests in the Prepetition
Collateral shall be deemed legal, valid, binding, and properly perfected, and
not subject to subordination or avoidance, and (ii) the Prepetition Obligations
and the Prepetition Agents' and Prepetition Secured Parties' Liens on and
Security Interests in the Prepetition Collateral shall not be subject to any
other or further challenge by any party in interest seeking to exercise the
rights of any Debtor's estate including, without limitation, any successor
thereto.

          18. The provisions of Annex A are approved and the Debtors are
authorized and directed to comply therewith.

                                       22
<PAGE>

          19. HHS's authority to collect prepetition overpayments from the
Debtors shall be governed by this Order and the Stipulation dated January 18,
2000, between HHS and the Debtors, the terms of which are hereby incorporated by
reference. Subject to the HHS Stipulation, any federal governmental unit,
including the departments and agencies thereof, and any fiscal intermediaries
thereof, shall have no right to recoup provider reimbursement overpayments that
were made to any Debtor from any amounts due to such Debtor (or any other
Debtor) other than to recoup such overpayments that arise under the same
provider agreement or comparable applicable statutes, regulations, or
arrangements, and in the same provider cost-year as the amounts due to such
Debtor arise. This paragraph does not affect offset rights permitted by order of
the Court or by written postpetition agreement of the parties.

          20. As long as any portion of the Obligations remains unpaid, or any
DIP Financing Document remains in effect, the Debtors shall not assume without
the written consent of the Required Lenders, and no Order shall be entered
authorizing the assumption of, any provider agreements between the Debtors and
any governmental unit.

          21. This Final Order shall supersede the Interim Order and shall be
deemed effective as of the date of the Interim Order. 22. This Court retains and
reserves jurisdiction to enforce all provisions of this Final Order.

          22. This court retains and reserves jurisdiction to enforce all
provisions of this Final Order.


Dated:  February __, 2000
        Wilmington, Delaware


                                         ______________________________
                                         Mary F. Walrath
                                         United States Bankruptcy Judge

<PAGE>

                                    DEBTORS
                                    -------

Mariner Health Group, Inc.
Aid &Assistance, Inc.
Allegis Health and Living Center at Heritage Harbour, L.L.C.
Beechwood Heritage Retirement Community, Inc.
Bride Brook Nursing & Rehabilitation Center, Inc.
Compass Pharmacy Services, Inc.
Compass Pharmacy Services of Maryland, Inc.
Compass Pharmacy Services of Texas, Inc.
Cypress Nursing Facility, Inc.
IHS Rehab Partnership, Ltd.
Long Ridge Nursing & Rehabilitation Center, Inc.
Longwood Rehabilitation Center, Inc.
Mariner Health at Bonifay, Inc.
Mariner Health Care, Inc.
Mariner Health Care of Atlantic Shores, Inc.
Mariner Health Care of Deland, Inc.
Mariner Health Care of Fort Wayne, Inc.
Mariner Health Care of Greater Laurel, Inc.
Mariner Health Care of Inverness, Inc.
Mariner Health Care of Lake Worth, Inc.
Mariner Health Care of MacClenny, Inc.
Mariner Health Care of MetroWest, Inc.
Mariner Health Care of Nashville, Inc.
Mariner Health Care of North Hills, Inc.
Mariner Health Care of Orange City, Inc.
Mariner Health Care of Palm City, Inc.
Mariner Health Care of Pinellas Point, Inc.
Mariner Health Care of Port Orange, Inc.
Mariner Health Care of Southern Connecticut, Inc.
Mariner Health Care of Toledo, Inc.
Mariner Health Care of Tuskawilla, Inc.
Mariner Health Care of West Hills, Inc.
Mariner Health of Florida, Inc.
Mariner Health of Jacksonville, Inc.
Mariner Health of Maryland, Inc.
Mariner Health of Orlando, Inc.
Mariner Health of Palmetto, Inc.
Mariner Health of Seminole County, Inc.
Mariner Health of Tampa, Inc.
Mariner Health Properties IV, Ltd.
Mariner Health Properties VI, Ltd.
Mariner Health Resources, Inc.
Mariner Physician Services, Inc.


                                      A-1
<PAGE>

Mariner Practice Corporation
Mariner - Regency Health Partners, Inc.
MarinerSelect Staffing Solutions, Inc.
Mariner Supply Services, Inc.
MedRehab, Inc.
MedRehab of Indiana, Inc.
MedRehab of Louisiana, Inc.
MedRehab of Missouri, Inc.
Merrimack Valley Nursing & Rehabilitation Center, Inc.
Methuen Nursing & Rehabilitation Center, Inc.
MHC Rehab. Corp.
MHC Transportation, Inc.
Mystic Nursing & Rehabilitation Center, Inc.
National Health Strategies, Inc.
Park Terrace Nursing & Rehabilitation Center, Inc.
Pendleton Nursing & Rehabilitation Center, Inc.
Pinnacle Care Corporation
Pinnacle Care Corporation of Huntington
Pinnacle Care Corporation of Nashville
Pinnacle Care Corporation of Seneca
Pinnacle Care Corporation of Sumter
Pinnacle Care Corporation of Williams Bay
Pinnacle Care Corporation of Wilmington
Pinnacle Care Management Corporation
Pinnacle Pharmaceutical Services, Inc.
Pinnacle Rehabilitation, Inc., a Tennessee Corporation
Pinnacle Rehabilitation of Missouri, Inc.
Prism Care Centers, Inc.
Prism Health Group, Inc.
Prism Home Care Company, Inc.
Prism Home Care, Inc.
Prism Home Health Services, Inc.
Prism Hospital Ventures, Inc.
Prism Rehab Systems, Inc.
Regency Health Care Center of Seminole County, Inc.
Sassaquin Nursing & Rehabilitation Center, Inc.
Seventeenth Street Associates Limited Partnership
Tampa Medical Associates, Inc.
The Ocean Pharmacy, Inc.
Tri-State Health Care, Inc.
Windward Health Care, Inc.


                                      A-2