Document:

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                                                                   EXHIBIT 10.11

                            MARINER HEALTH CARE, INC.
                            2002 STOCK INCENTIVE PLAN

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                            MARINER HEALTH CARE, INC.
                            2002 STOCK INCENTIVE PLAN

                                TABLE OF CONTENTS

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SECTION 1  DEFINITIONS............................................................................................1

   1.1     DEFINITIONS............................................................................................1

SECTION 2  THE STOCK INCENTIVE PLAN...............................................................................5

   2.1     PURPOSE OF THE PLAN....................................................................................5
   2.2     STOCK SUBJECT TO THE PLAN..............................................................................5
   2.3     ADMINISTRATION OF THE PLAN.............................................................................6
   2.4     ELIGIBILITY AND LIMITS.................................................................................6

SECTION 3  TERMS OF STOCK INCENTIVES..............................................................................6

   3.1     TERMS AND CONDITIONS OF ALL STOCK INCENTIVES...........................................................6
   3.2     TERMS AND CONDITIONS OF OPTIONS........................................................................7
           (a)    Option Price....................................................................................8
           (b)    Option Term.....................................................................................8
           (c)    Payment.........................................................................................8
           (d)    Conditions to the Exercise of an Option.........................................................9
           (e)    Termination of Incentive Stock Option...........................................................9
           (f)    Special Provisions for Certain Substitute Options...............................................9
   3.3     TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS......................................................9
           (a)    Settlement.....................................................................................10
           (b)    Conditions to Exercise.........................................................................10
   3.4     TERMS AND CONDITIONS OF STOCK AWARDS..................................................................10
   3.5     TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS....................................................10
           (a)    Payment........................................................................................10
           (b)    Conditions to Payment..........................................................................10
   3.6     TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS.......................................................11
           (a)    Payment........................................................................................11
           (b)    Conditions to Payment..........................................................................11
   3.7     TERMS AND CONDITIONS OF PHANTOM SHARES................................................................11
           (a)    Payment........................................................................................11
           (b)    Conditions to Payment..........................................................................11
   3.8     TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT....................................................11

SECTION 4  RESTRICTIONS ON STOCK.................................................................................12

   4.1     ESCROW OF SHARES......................................................................................12
   4.2     RESTRICTIONS ON TRANSFER..............................................................................12

SECTION 5  GENERAL PROVISIONS....................................................................................12

   5.1     WITHHOLDING...........................................................................................12
   5.2     CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION........................................................13
   5.3     CASH AWARDS...........................................................................................14
   5.4     COMPLIANCE WITH CODE..................................................................................14
   5.5     RIGHT TO TERMINATE EMPLOYMENT.........................................................................14
   5.6     NON-ALIENATION OF BENEFITS............................................................................14
   5.7     RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS..................................................14
   5.8     LISTING AND LEGAL COMPLIANCE..........................................................................15
   5.9     TERMINATION AND AMENDMENT OF THE PLAN.................................................................15
   5.10    STOCKHOLDER APPROVAL..................................................................................15
   5.11    CHOICE OF LAW.........................................................................................15
   5.12    EFFECTIVE DATE OF PLAN................................................................................16
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                            MARINER HEALTH CARE, INC.
                            2002 STOCK INCENTIVE PLAN

                             SECTION I. DEFINITIONS

         1.1      Definitions. Whenever used herein, the masculine pronoun will
be deemed to include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the following capitalized
words and phrases are used herein with the meaning thereafter ascribed:

                  (a)      "Affiliate" means:

                           (1)      Any Subsidiary or Parent,

                           (2)      An entity that directly or through one or
                  more intermediaries controls, is controlled by, or is under
                  common control with the Company, as determined by the Company,
                  or

                           (3)      Any entity in which the Company has such a
                  significant interest that the Company determines it should be
                  deemed an "Affiliate," as determined in the sole discretion of
                  the Company.

                  (b)      "Board of Directors" means the board of directors of
         the Company.

                  (c)      "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (d)      "Committee" means the committee appointed by the
         Board of Directors to administer the Plan. The Board of Directors shall
         consider the advisability of whether the members of the Committee shall
         consist solely of at least two members of the Board of Directors who
         are both "outside directors" as defined in Treas. Reg. ss. 1.162-27(e)
         as promulgated by the Internal Revenue Service and "non-employee
         directors" as defined in Rule 16b-3(b)(3) as promulgated under the
         Exchange Act. If the Committee has not been appointed, the Board of
         Directors in its entirety shall constitute the Committee.

                  (e)      "Company" means Mariner Health Care, Inc., a Delaware
         corporation.

                  (f)      "Disability" has the same meaning as provided in the
         long-term disability plan or policy maintained or, if applicable, most
         recently maintained, by the Company or, if applicable, any Affiliate of
         the Company for the Participant. If no long-term disability plan or
         policy was ever maintained on behalf of the Participant or, if the
         determination of Disability relates to an Incentive Stock Option,
         Disability means that condition described in Code Section 22(e)(3), as
         amended from time to time. In the event of a dispute, the determination
         of Disability will be made by the Committee and will be supported by
         advice of a physician competent in the area to which such Disability
         relates.

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                  (g)      "Dividend Equivalent Rights" means certain rights to
         receive cash payments as described in Section 3.5.

                  (h)      "Exchange Act" means the Securities Exchange Act of
         1934, as amended from time to time.

                  (i)      "Fair Market Value" with regard to a date means:

                           (1)      the price at which Stock shall have been
                  sold on that date or the last trading date prior to that date
                  as reported by the national securities exchange selected by
                  the Committee on which the shares of Stock are then actively
                  traded or, if applicable, as reported by the NASDAQ Stock
                  Market.

                           (2)      if such market information is not published
                  on a regular basis, the price of Stock in the over-the-counter
                  market on that date or the last business day prior to that
                  date as reported by the NASDAQ Stock Market or, if not so
                  reported, by a generally accepted reporting service.

                           (3)      if Stock is not publicly traded, as
                  determined in good faith by the Committee with due
                  consideration being given to (i) the most recent independent
                  appraisal of the Company, if such appraisal is not more than
                  twelve months old and (ii) the valuation methodology used in
                  any such appraisal.

         For purposes of Paragraphs (1), (2), or (3) above, the Committee may
         use the closing price as of the applicable date, the average of the
         high and low prices as of the applicable date or for a period certain
         ending on such date, the price determined at the time the transaction
         is processed, the tender offer price for shares of Stock, or any other
         method which the Committee determines is reasonably indicative of the
         fair market value.

                  (j)      "Incentive Stock Option" means an incentive stock
         option within the meaning of Section 422 of the Internal Revenue Code.

                  (k)      "Option" means a Non-Qualified Stock Option or an
         Incentive Stock Option.

                  (l)      "Over 10% Owner" means an individual who at the time
         an Incentive Stock Option is granted owns Stock possessing more than
         10% of the total combined voting power of the Company or one of its
         Subsidiaries, determined by applying the attribution rules of Code
         Section 424(d).

                  (m)      "Non-Qualified Stock Option" means a stock option
         that is not an Incentive Stock Option.

                  (n)      "Parent" means any corporation (other than the
         Company) in an unbroken chain of corporations ending with the Company
         if, with respect to Incentive Stock

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         Options, at the time of the granting of the Option, each of the
         corporations other than the Company owns stock possessing 50% or more
         of the total combined voting power of all classes of stock in one of
         the other corporations in such chain. A Parent shall include any entity
         other than a corporation to the extent permissible under Section 424(f)
         or regulations and rulings thereunder.

                  (o)      "Participant" means an individual who receives a
         Stock Incentive hereunder.

                  (p)      "Performance Goals" means the measurable performance
         objectives, if any, established by the Committee for a Performance
         Period that are to be achieved with respect to a Stock Incentive
         granted to a Participant under the Plan. Performance Goals may be
         described in terms of Company-wide objectives or in terms of objectives
         that are related to performance of the division, Affiliate, department
         or function within the Company or an Affiliate in which the Participant
         receiving the Stock Incentive is employed or on which the Participant's
         efforts have the most influence. The achievement of the Performance
         Goals established by the Committee for any Performance Period will be
         determined without regard to the effect on such Performance Goals of
         any acquisition or disposition by the Company of a trade or business,
         or of substantially all of the assets of a trade or business, during
         the Performance Period and without regard to any change in accounting
         standards by the Financial Accounting Standards Board or any successor
         entity. The Performance Goals established by the Committee for any
         Performance Period under the Plan will consist of one or more of the
         following:

                           (i)      earnings per share and/or growth in earnings
                  per share, excluding the effect of extraordinary or
                  nonrecurring items;

                           (ii)     operating cash flow and/or growth in
                  operating cash flow;

                           (iii)    cash available;

                           (iv)     net income and/or growth in net, excluding
                  the effect of extraordinary or nonrecurring items;

                           (v)      revenue and/or growth in revenue;

                           (vi)     operating income;

                           (vii)    total shareholder return (measured as the
                  total of the appreciation of and dividends declared on the
                  Common Stock;

                           (viii)   return on invested capital; (viii) return on
                  shareholder equity;

                           (ix)     census;

                           (x)      payer mix;

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                           (xi)     cost reduction goals;

                           (xii)    return on assets in relation to target
                                    objectives;

                           (xiii)   EBITDAR or EBITDA;

                           (xiv)    economic value added;

                           (xv)     market share;

                           (xvi)    the attainment by a share of Common Stock
                                    of a specified Fair Market Value for a
                                    specified period of time; (xvii) return on
                                    common book equity; and

                           (xvii)   any combination of the foregoing.

         If the Committee determines that, as a result of a change in the
         business, operations, corporate structure or capital structure of the
         Company, or the manner in which the Company conducts its business, or
         any other events or circumstances, the Performance Goals are no longer
         suitable, the Committee may in its discretion modify such Performance
         Goals or the related minimum acceptable level of achievement, in whole
         or in part, with respect to a period as the Committee deems appropriate
         and equitable, except where such action would result in the loss of the
         otherwise available exemption of the Stock Incentive under Section
         162(m) of the Code. In such case, the Committee will not make any
         modification of the Performance Goals or minimum acceptable level of
         achievement.

                  (q)      "Performance Period" means, with respect to a Stock
         Incentive, a period of time within which the Performance Goals relating
         to such Stock Incentive are to be measured. The Performance Period will
         be established by the Committee at the time the Stock Incentive is
         granted.

                  (r)      "Performance Unit Award" refers to a performance unit
         award as described in Section 3.6.

                  (s)      "Phantom Shares" refers to the rights described in
         Section 3.7.

                  (t)      "Plan" means the Mariner Health Care, Inc., 2002
         Stock Incentive Plan.

                  (u)      "Stock" means the Company's Common Stock.

                  (v)      "Stock Appreciation Right" means a stock appreciation
         right described in Section 3.3.

                  (w)      "Stock Award" means a stock award described in
         Section 3.4.

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                  (x)      "Stock Incentive Agreement" means an agreement
         between the Company and a Participant or other documentation evidencing
         an award of a Stock Incentive.

                  (y)      "Stock Incentive Program" means a written program
         established by the Committee, pursuant to which Stock Incentives are
         awarded under the Plan under uniform terms, conditions and restrictions
         set forth in such written program.

                  (z)      "Stock Incentives" means, collectively, Dividend
         Equivalent Rights, Incentive Stock Options, Non-Qualified Stock
         Options, Phantom Shares, Stock Appreciation Rights and Stock Awards and
         Performance Unit Awards.

                  (aa)     "Subsidiary" means any corporation (other than the
         Company) in an unbroken chain of corporations beginning with the
         Company if, at the time of the granting of the Option, each of the
         corporations other than the last corporation in the unbroken chain owns
         stock possessing 50% or more of the total combined voting power of all
         classes of stock in one of the other corporations in the chain. A
         "Subsidiary" shall include any entity other than a corporation to the
         extent permissible under Section 424(f) or regulations or rulings
         thereunder.

                  (bb)     "Termination of Employment" means the termination of
         the employee-employer relationship between a Participant and the
         Company and its Affiliates, regardless of whether severance or similar
         payments are made to the Participant for any reason, including, but not
         by way of limitation, a termination by resignation, discharge, death,
         Disability or retirement. The Committee will, in its absolute
         discretion, determine the effect of all matters and questions relating
         to a Termination of Employment, including, but not by way of
         limitation, the question of whether a leave of absence constitutes a
         Termination of Employment.

                       SECTION 2 THE STOCK INCENTIVE PLAN

         2.1      Purpose of the Plan. The Plan is intended to (a) provide
incentive to employees of the Company and its Affiliates to stimulate their
efforts toward the continued success of the Company and to operate and manage
the business in a manner that will provide for the long-term growth and
profitability of the Company; (b) encourage stock ownership by employees by
providing them with a means to acquire a proprietary interest in the Company,
acquire shares of Stock, or to receive compensation which is based upon
appreciation in the value of Stock; and (c) provide a means of obtaining,
rewarding and retaining personnel.

         2.2      Stock Subject to the Plan. Subject to adjustment in accordance
with Section 5.2, 1,980,000 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance upon exercise or payment pursuant to
Stock Incentives. The shares of Stock attributable to the nonvested, unpaid,
unexercised, unconverted or otherwise unsettled portion of any Stock Incentive
that is forfeited or cancelled or expires or terminates for any reason without
becoming vested, paid, exercised, converted or otherwise settled in full will
again be available for purposes of the Plan.

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         2.3      Administration of the Plan. The Plan is administered by the
Committee. The Committee has full authority in its discretion to determine the
employees of the Company or its Affiliates to whom Stock Incentives will be
granted and the terms and provisions of Stock Incentives, subject to the Plan.
Subject to the provisions of the Plan, the Committee has full and conclusive
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
respective Stock Incentive Agreements and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Committee's determinations under the Plan need not be uniform and may be made by
it selectively among persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly situated). The
Committee's decisions are final and binding on all Participants.

         2.4      Eligibility and Limits. Stock Incentives may be granted only
to employees of the Company, or any Affiliate of the Company; provided, however,
that an Incentive Stock Option may only be granted to an employee of the Company
or any Subsidiary. In the case of Incentive Stock Options, the aggregate Fair
Market Value (determined as at the date an Incentive Stock Option is granted) of
stock with respect to which stock options intended to meet the requirements of
Code Section 422 become exercisable for the first time by an individual during
any calendar year under all plans of the Company and its Subsidiaries may not
exceed $100,000; provided further, that if the limitation is exceeded, the
Incentive Stock Option(s) which cause the limitation to be exceeded will be
treated as Non-Qualified Stock Option(s).

                       SECTION 3 TERMS OF STOCK INCENTIVES

         3.1      Terms and Conditions of All Stock Incentives.

                  (a)      The number of shares of Stock as to which a Stock
         Incentive may be granted will be determined by the Committee in its
         sole discretion, subject to the provisions of Section 2.2 as to the
         total number of shares available for grants under the Plan and subject
         to the limits on Options and Stock Appreciation Rights in the following
         sentence. On such date as required by Section 162(m) of the Code and
         the regulations thereunder for compensation to be treated as qualified
         performance based compensation, the maximum number of shares of Stock
         with respect to which Options or Stock Appreciation Rights may be
         granted during any one year period to any employee may not exceed
         439,560. If, after grant, an Option is cancelled, the cancelled Option
         shall continue to be counted against the maximum number of shares for
         which options may be granted to an employee as described in this
         Section 3.1. If, after grant, the exercise price of an Option is
         reduced or the base amount on which a Stock Appreciation Right is
         calculated is reduced, the transaction shall be treated as the
         cancellation of the Option or the Stock Appreciation Right, as
         applicable, and the grant of a new Option or Stock Appreciation Right,
         as applicable. If an Option or Stock Appreciation Right is deemed to be
         cancelled as described in the preceding sentence, the Option or Stock
         Appreciation Right that is deemed to be canceled and the Option or
         Stock Appreciation Right that is deemed to be granted shall both be
         counted against the maximum number of shares for

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         which Options or Stock Appreciation Rights may be granted to an
         employee as described in this Section 3.1.

                  (b)      Each Stock Incentive will either be evidenced by a
         Stock Incentive Agreement in such form and containing such terms,
         conditions and restrictions as the Committee may determine to be
         appropriate, including without limitation, Performance Goals that must
         be achieved as a condition to vesting or payment of the Stock
         Incentive, or be made subject to the terms of a Stock Incentive
         Program, containing such terms, conditions and restrictions as the
         Committee may determine to be appropriate, including without
         limitation, Performance Goals that must be achieved as a condition to
         vesting or payment of the Stock Incentive. Each Stock Incentive
         Agreement or Stock Incentive Program is subject to the terms of the
         Plan and any provisions contained in the Stock Incentive Agreement or
         Stock Incentive Program that are inconsistent with the Plan are null
         and void.

                  (c)      The date a Stock Incentive is granted will be the
         date on which the Committee has approved the terms and conditions of
         the Stock Incentive and has determined the recipient of the Stock
         Incentive and the number of shares covered by the Stock Incentive, and
         has taken all such other actions necessary to complete the grant of the
         Stock Incentive.

                  (d)      Any Stock Incentive may be granted in connection with
         all or any portion of a previously or contemporaneously granted Stock
         Incentive. Exercise or vesting of a Stock Incentive granted in
         connection with another Stock Incentive may result in a pro rata
         surrender or cancellation of any related Stock Incentive, as specified
         in the applicable Stock Incentive Agreement or Stock Incentive Program.

                  (e)      Stock Incentives are not transferable or assignable
         except by will or by the laws of descent and distribution and are
         exercisable, during the Participant's lifetime, only by the
         Participant; or in the event of the Disability of the Participant, by
         the legal representative of the Participant; or in the event of death
         of the Participant, by the legal representative of the Participant's
         estate or if no legal representative has been appointed, by the
         successor in interest determined under the Participant's will;
         provided, however, that the Committee may waive any of the provisions
         of this Section or provide otherwise as to any Stock Incentives other
         than Incentive Stock Options.

         3.2      Terms and Conditions of Options. Each Option granted under the
Plan must be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee will determine whether the Option is to be an Incentive
Stock Option described in Code Section 422 or a Non-Qualified Stock Option, and
the Option must be clearly identified as to its status as an Incentive Stock
Option or a Non-Qualified Stock Option. Incentive Stock Options may only be
granted to employees of the Company or any Subsidiary. At the time any Incentive
Stock Option granted under the Plan is exercised, the Company will be entitled
to legend the certificates representing the shares of Stock purchased pursuant
to the Option to clearly identify them as representing the shares purchased upon
the exercise of an Incentive Stock Option. An

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Incentive Stock Option may only be granted within ten (10) years from the
earlier of the date the Plan is adopted or approved by the Company's
stockholders.

                  (a)      Option Price. Subject to adjustment in accordance
         with Section 5.2 and the other provisions of this Section 3.2, the
         exercise price (the "Exercise Price") per share of Stock purchasable
         under any Option must be as set forth in the applicable Stock Incentive
         Agreement, but in no event may it be less than the Fair Market Value on
         the date the Option is granted; provided, however, that within the
         first ninety (90) days following the consummation of the Plan of
         Reorganization of the Company, options may be granted with an Exercise
         Price equal to the reorganization price of the Company's common stock
         determined in connection with the Plan of Reorganization, even if such
         price is less than Fair Market Value. . With respect to each grant of
         an Incentive Stock Option to a Participant who is an Over 10% Owner,
         the Exercise Price may not be less than 110% of the Fair Market Value
         on the date the Option is granted.

                  (b)      Option Term. Any Incentive Stock Option granted to a
         Participant who is not an Over 10% Owner is not exercisable after the
         expiration of ten (10) years after the date the Option is granted. Any
         Incentive Stock Option granted to an Over 10% Owner is not exercisable
         after the expiration of five (5) years after the date the Option is
         granted. The term of any Non-Qualified Stock Option must be as
         specified in the applicable Stock Incentive Agreement.

                  (c)      Payment. Payment for all shares of Stock purchased
         pursuant to exercise of an Option will be made in any form or manner
         authorized by the Committee in the Stock Incentive Agreement or by
         amendment thereto, including, but not limited to, cash or, if the Stock
         Incentive Agreement provides:

                           (i)      by delivery to the Company of a number of
                  shares of Stock which have been owned by the holder for at
                  least six (6) months prior to the date of exercise having an
                  aggregate Fair Market Value of not less than the product of
                  the Exercise Price multiplied by the number of shares the
                  Participant intends to purchase upon exercise of the Option on
                  the date of delivery;

                           (ii)     in a cashless exercise through a broker; or

                           (iii)    by having a number of shares of Stock
                  withheld, the Fair Market Value of which as of the date of
                  exercise is sufficient to satisfy the Exercise Price.

         In its discretion, the Committee also may authorize (at the time an
         Option is granted or thereafter) Company financing to assist the
         Participant as to payment of the Exercise Price on such terms as may be
         offered by the Committee in its discretion. Payment must be made at the
         time that the Option or any part thereof is exercised, and no shares
         may be issued or delivered upon exercise of an option until full
         payment has been made by the Participant. The holder of an Option, as
         such, has none of the rights of a stockholder.

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                  (d)      Conditions to the Exercise of an Option. Each Option
         granted under the Plan is exercisable by the Participant or any other
         designated person, at such time or times, or upon the occurrence of
         such event or events, and in such amounts, as the Committee specifies
         in the Stock Incentive Agreement; provided, however, that subsequent to
         the grant of an Option, the Committee, at any time before complete
         termination of such Option, may accelerate the time or times at which
         such Option may be exercised in whole or in part, including, without
         limitation, upon a change in control as defined in the Stock Incentive
         Agreement and may permit the Participant or any other designated person
         to exercise the Option, or any portion thereof, for all or part of the
         remaining Option term, notwithstanding any provision of the Stock
         Incentive Agreement to the contrary.

                  (e)      Termination of Incentive Stock Option. With respect
         to an Incentive Stock Option, in the event of Termination of Employment
         of a Participant, the Option or portion thereof held by the Participant
         which is unexercised will expire, terminate, and become unexercisable
         no later than the expiration of three (3) months after the date of
         Termination of Employment; provided, however, that in the case of a
         holder whose Termination of Employment is due to death or Disability,
         one (1) year will be substituted for such three (3) month period;
         provided, further that such time limits may be exceeded by the
         Committee under the terms of the grant, in which case, the Incentive
         Stock Option will be a Non-Qualified Option if it is exercised after
         the time limits that would otherwise apply. For purposes of this
         Subsection (e), Termination of Employment of the Participant will not
         be deemed to have occurred if the Participant is employed by another
         corporation (or a parent or subsidiary corporation of such other
         corporation) which has assumed the Incentive Stock Option of the
         Participant in a transaction to which Code Section 424(a) is
         applicable.

                  (f)      Special Provisions for Certain Substitute Options.
         Notwithstanding anything to the contrary in this Section 3.2, any
         Option issued in substitution for an option previously issued by
         another entity, which substitution occurs in connection with a
         transaction to which Code Section 424(a) is applicable, may provide for
         an exercise price computed in accordance with such Code Section and the
         regulations thereunder and may contain such other terms and conditions
         as the Committee may prescribe to cause such substitute Option to
         contain as nearly as possible the same terms and conditions (including
         the applicable vesting and termination provisions) as those contained
         in the previously issued option being replaced thereby.

         3.3      Terms and Conditions of Stock Appreciation Rights. Each Stock
Appreciation Right granted under the Plan must be evidenced by a Stock Incentive
Agreement. A Stock Appreciation Right entitles the Participant to receive the
excess of (1) the Fair Market Value of a specified or determinable number of
shares of the Stock at the time of payment or exercise over (2) a specified or
determinable price which, in the case of a Stock Appreciation Right granted in
connection with an Option, may not be less than the Exercise Price for that
number of shares subject to that Option. A Stock Appreciation Right granted in
connection with a Stock Incentive may only be exercised to the extent that the
related Stock Incentive has not been exercised, paid or otherwise settled.

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                  (a)      Settlement. Upon settlement of a Stock Appreciation
         Right, the Company must pay to the Participant the appreciation in cash
         or shares of Stock (valued at the aggregate Fair Market Value on the
         date of payment or exercise) as provided in the Stock Incentive
         Agreement or, in the absence of such provision, as the Committee may
         determine.

                  (b)      Conditions to Exercise. Each Stock Appreciation Right
         granted under the Plan is exercisable or payable at such time or times,
         or upon the occurrence of such event or events, and in such amounts, as
         the Committee specifies in the Stock Incentive Agreement; provided,
         however, that subsequent to the grant of a Stock Appreciation Right,
         the Committee, at any time before complete termination of such Stock
         Appreciation Right, may accelerate the time or times at which such
         Stock Appreciation Right may be exercised or paid in whole or in part.

         3.4      Terms and Conditions of Stock Awards. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, will be as the Committee determines, and the certificate for such shares
will bear evidence of any restrictions or conditions. Subsequent to the date of
the grant of the Stock Award, the Committee has the power to permit, in its
discretion, an acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares awarded to a Participant.
The Committee may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the shares of Stock awarded
determined at the date of grant in exchange for the grant of a Stock Award or
may grant a Stock Award without the requirement of a cash payment.

         3.5      Terms and Conditions of Dividend Equivalent Rights. A Dividend
Equivalent Right entitles the Participant to receive payments from the Company
in an amount determined by reference to any cash dividends paid on a specified
number of shares of Stock to Company stockholders of record during the period
such rights are effective. The Committee may impose such restrictions and
conditions on any Dividend Equivalent Right as the Committee in its discretion
shall determine, including the date any such right shall terminate and may
reserve the right to terminate, amend or suspend any such right at any time.

                  (a)      Payment. Payment in respect of a Dividend Equivalent
         Right may be made by the Company in cash or shares of Stock (valued at
         Fair Market Value as of the date payment is owed) as provided in the
         Stock Incentive Agreement or Stock Incentive Program, or, in the
         absence of such provision, as the Committee may determine.

                  (b)      Conditions to Payment. Each Dividend Equivalent Right
         granted under the Plan is payable at such time or times, or upon the
         occurrence of such event or events, and in such amounts, as the
         Committee specifies in the applicable Stock Incentive Agreement or
         Stock Incentive Program; provided, however, that subsequent to the
         grant of a Dividend Equivalent Right, the Committee, at any time before
         complete termination of such Dividend Equivalent Right, may accelerate
         the time or times at which such Dividend Equivalent Right may be paid
         in whole or in part.

                                       10
<PAGE>

         3.6      Terms and Conditions of Performance Unit Awards. A Performance
Unit Award shall entitle the Participant to receive, at a specified future date,
payment of an amount equal to all or a portion of the value of a specified or
determinable number of units (stated in terms of a designated or determinable
dollar amount per unit) granted by the Committee. At the time of the grant, the
Committee must determine the base value of each unit, the number of units
subject to a Performance Unit Award, and the Performance Goals applicable to the
determination of the ultimate payment value of the Performance Unit Award. The
Committee may provide for an alternate base value for each unit under certain
specified conditions.

                  (a)      Payment. Payment in respect of Performance Unit
         Awards may be made by the Company in cash or shares of Stock (valued at
         Fair Market Value as of the date payment is owed) as provided in the
         applicable Stock Incentive Agreement or Stock Incentive Program or, in
         the absence of such provision, as the Committee may determine.

                  (b)      Conditions to Payment. Each Performance Unit Award
         granted under the Plan shall be payable at such time or times, or upon
         the occurrence of such event or events, and in such amounts, as the
         Committee shall specify in the applicable Stock Incentive Agreement or
         Stock Incentive Program; provided, however, that subsequent to the
         grant of a Performance Unit Award, the Committee, at any time before
         complete termination of such Performance Unit Award, may accelerate the
         time or times at which such Performance Unit Award may be paid in whole
         or in part.

         3.7      Terms and Conditions of Phantom Shares. Phantom Shares shall
entitle the Participant to receive, at a specified future date, payment of an
amount equal to all or a portion of the Fair Market Value of a specified number
of shares of Stock at the end of a specified period. At the time of the grant,
the Committee will determine the factors which will govern the portion of the
phantom shares so payable, including, at the discretion of the Committee, any
performance criteria that must be satisfied as a condition to payment. Phantom
Share awards containing performance criteria may be designated as performance
share awards.

                  (a)      Payment. Payment in respect of Phantom Shares may be
         made by the Company in cash or shares of Stock (valued at Fair Market
         Value as of the date payment is owed) as provided in the applicable
         Stock Incentive Agreement or Stock Incentive Program, or, in the
         absence of such provision, as the Committee may determine.

                  (b)      Conditions to Payment. Each Phantom Share granted
         under the Plan is payable at such time or times, or upon the occurrence
         of such event or events, and in such amounts, as the Committee specify
         in the applicable Stock Incentive Agreement or Stock Incentive Program;
         provided, however, that subsequent to the grant of a Phantom Share, the
         Committee, at any time before complete termination of such Phantom
         Share, may accelerate the time or times at which such Phantom Share may
         be paid in whole or in part.

         3.8      Treatment of Awards Upon Termination of Employment. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who has experienced a Termination of Employment may be cancelled,
accelerated, paid or continued, as provided in

                                       11
<PAGE>

the applicable Stock Incentive Agreement or Stock Incentive Program, or, in the
absence of such provision, as the Committee may determine. The portion of any
award exercisable in the event of continuation or the amount of any payment due
under a continued award may be adjusted by the Committee to reflect the
Participant's period of service from the date of grant through the date of the
Participant's Termination of Employment or such other factors as the Committee
determines are relevant to its decision to continue the award.

                         SECTION 4 RESTRICTIONS ON STOCK

         4.1      Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan will be issued in the Participant's name, but, if
the applicable Stock Incentive Agreement or Stock Incentive Program so provides,
the shares of Stock will be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian must appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant is entitled to all rights, except as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, applicable to shares of
Stock not so held. Any dividends declared on shares of Stock held by the
Custodian must provide in the applicable Stock Incentive Agreement or Stock
Incentive Program, to be paid directly to the Participant or, in the
alternative, be retained by the Custodian or by the Company until the expiration
of the term specified in the applicable Stock Incentive Agreement or Stock
Incentive Program and shall then be delivered, together with any proceeds, with
the shares of Stock to the Participant or to the Company, as applicable.

         4.2      Restrictions on Transfer. The Participant does not have the
right to make or permit to exist any disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement or Stock Incentive Program. Any disposition of the shares of
Stock issued under the Plan by the Participant not made in accordance with the
Plan or the applicable Stock Incentive Agreement or Stock Incentive Program will
be void. The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program, and the shares so transferred
will continue to be bound by the Plan and the applicable Stock Incentive
Agreement or Stock Incentive Program.

                          SECTION 5 GENERAL PROVISIONS

         5.1      Withholding. The Company must deduct from all cash
distributions under the Plan any taxes required to be withheld by federal, state
or local government. Whenever the Company proposes or is required to issue or
transfer shares of Stock under the Plan or upon the vesting of any Stock Award,
the Company has the right to require the recipient to remit to the

                                       12
<PAGE>

Company an amount sufficient to satisfy any federal, state and local tax
withholding requirements prior to the delivery of any certificate or
certificates for such shares or the vesting of such Stock Award. A Participant
may pay the withholding obligation in cash, or, if the applicable Stock
Incentive Agreement or Stock Incentive Program provides, a Participant may elect
to have the number of shares of Stock he is to receive reduced by, or with
respect to a Stock Award, tender back to the Company, the smallest number of
whole shares of Stock which, when multiplied by the Fair Market Value of the
shares of Stock determined as of the Tax Date (defined below), is sufficient to
satisfy federal, state and local, if any, withholding obligation arising from
exercise or payment of a Stock Incentive (a "Withholding Election"). A
Participant may make a Withholding Election only if both of the following
conditions are met:

                  (a)      The Withholding Election must be made on or prior to
         the date on which the amount of tax required to be withheld is
         determined (the "Tax Date") by executing and delivering to the Company
         a properly completed notice of Withholding Election as prescribed by
         the Committee; and

                  (b)      Any Withholding Election made will be irrevocable
         except on six months advance written notice delivered to the Company;
         however, the Committee may in its sole discretion disapprove and give
         no effect to the Withholding Election.

         5.2      Changes in Capitalization; Merger; Liquidation.

                  (a)      The number of shares of Stock reserved for the grant
         of Options, Dividend Equivalent Rights, Performance Unit Awards,
         Phantom Shares, Stock Appreciation Rights and Stock Awards; the number
         of shares of Stock reserved for issuance upon the exercise or payment,
         as applicable, of each outstanding Option, Dividend Equivalent Right,
         Phantom Share and Stock Appreciation Right and upon vesting or grant,
         as applicable, of each Stock Award; the Exercise Price of each
         outstanding Option and the specified number of shares of Stock to which
         each outstanding Dividend Equivalent Right, Phantom Share and Stock
         Appreciation Right pertains must be proportionately adjusted for any
         increase or decrease in the number of issued shares of Stock resulting
         from a subdivision or combination of shares or the payment of a stock
         dividend in shares of Stock to holders of outstanding shares of Stock
         or any other increase or decrease in the number of shares of Stock
         outstanding effected without receipt of consideration by the Company.

                  (b)      In the event of a merger, consolidation,
         reorganization, extraordinary dividend, spin-off, sale of substantially
         all of the Company's assets, other change in capital structure of the
         Company, tender offer for shares of Stock, or a change in control of
         the Company (as defined by the Committee in the applicable Stock
         Incentive Agreement) the Committee may make such adjustments with
         respect to awards and take such other action as it deems necessary or
         appropriate to reflect such merger, consolidation, reorganization or
         tender offer, including, without limitation, the substitution of new
         awards, or the adjustment of outstanding awards, the acceleration of
         awards, the removal of restrictions on outstanding awards, or the
         termination of outstanding awards in exchange for the cash value
         determined in good faith by the

                                       13
<PAGE>

         Committee of the vested and/or unvested portion of the award. Any
         adjustment pursuant to this Section 5.2 may provide, in the Committee's
         discretion, for the elimination without payment therefor of any
         fractional shares that might otherwise become subject to any Stock
         Incentive, but except as set forth in this Section may not otherwise
         diminish the then value of the Stock Incentive.

                  (c)      The existence of the Plan and the Stock Incentives
         granted pursuant to the Plan must not affect in any way the right or
         power of the Company to make or authorize any adjustment,
         reclassification, reorganization or other change in its capital or
         business structure, any merger or consolidation of the Company, any
         issue of debt or equity securities having preferences or priorities as
         to the Stock or the rights thereof, the dissolution or liquidation of
         the Company, any sale or transfer of all or any part of its business or
         assets, or any other corporate act or proceeding.

         5.3      Cash Awards. The Committee may, at any time and in its
discretion, grant to any holder of a Stock Incentive the right to receive, at
such times and in such amounts as determined by the Committee in its discretion,
a cash amount which is intended to reimburse such person for all or a portion of
the federal, state and local income taxes imposed upon such person as a
consequence of the receipt of the Stock Incentive or the exercise of rights
thereunder.

         5.4      Compliance with Code. All Incentive Stock Options to be
granted hereunder are intended to comply with Code Section 422, and all
provisions of the Plan and all Incentive Stock Options granted hereunder must be
construed in such manner as to effectuate that intent.

         5.5      Right to Terminate Employment. Nothing in the Plan or in any
Stock Incentive confers upon any Participant the right to continue as an
employee or officer of the Company or any of its Affiliates or affect the right
of the Company or any of its Affiliates to terminate the Participant's
employment or services at any time.

         5.6      Non-Alienation of Benefits. Other than as provided herein, no
benefit under the Plan may be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do
so shall be void. No such benefit may, prior to receipt by the Participant, be
in any manner liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Participant.

         5.7      Restrictions on Delivery and Sale of Shares; Legends. Each
Stock Incentive is subject to the condition that if at any time the Committee,
in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Stock Incentive upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such Stock Incentive or the
purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to such Stock Incentive may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under Stock Incentives then outstanding, the Committee may
require, as a condition of exercise of any Option or as a condition to any other
delivery of Stock pursuant to a Stock Incentive, that the

                                       14
<PAGE>

Participant or other recipient of a Stock Incentive represent, in writing, that
the shares received pursuant to the Stock Incentive are being acquired for
investment and not with a view to distribution and agree that the shares will
not be disposed of except pursuant to an effective registration statement,
unless the Company shall have received an opinion of counsel that such
disposition is exempt from such requirement under the Securities Act of 1933 and
any applicable state securities laws. The Company may include on certificates
representing shares delivered pursuant to a Stock Incentive such legends
referring to the foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate.

         5.8      Listing and Legal Compliance. The Committee may suspend the
exercise or payment of any Stock Incentive so long as it determines that
securities exchange listing or registration or qualification under any
securities laws is required in connection therewith and has not been completed
on terms acceptable to the Committee.

         5.9      Termination and Amendment of the Plan. The Board of Directors
at any time may amend or terminate the Plan without stockholder approval;
provided, however, that the Board of Directors may condition any amendment on
the approval of stockholders of the Company if such approval is necessary or
advisable with respect to tax, securities or other applicable laws. No such
termination or amendment without the consent of the holder of a Stock Incentive
may adversely affect the rights of the Participant under such Stock Incentive.

         5.10     Stockholder Approval. The Plan must be submitted to the
stockholders of the Company for their approval within twelve (12) months before
or after the adoption of the Plan by the Board of Directors of the Company. If
such approval is not obtained, any Option granted hereunder will be a
Non-Qualified Stock Option.

         5.11     Choice of Law. The laws of the State of Delaware shall govern
the Plan, to the extent not preempted by federal law, without reference to the
principles of conflict of laws.

                                       15
<PAGE>

         5.12     Effective Date of Plan. This Plan was approved by the Board of
Directors as of ________________ and will be effective as of that date.

                                            MARINER HEALTH CARE, INC.

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

                                       16<PAGE>
                                                                   EXHIBIT 10.12

                            MARINER HEALTH CARE, INC.
                    2002 OUTSIDE DIRECTORS' STOCK OPTION PLAN
<PAGE>

                            MARINER HEALTH CARE, INC.
                    2002 OUTSIDE DIRECTORS' STOCK OPTION PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                             <C>
SECTION 1  INTRODUCTION...........................................................................................1

SECTION 2  DEFINITIONS............................................................................................1

SECTION 3  ADMINISTRATION.........................................................................................3

SECTION 4  SHARES SUBJECT TO PLAN.................................................................................4

SECTION 5  OPTION AWARDS..........................................................................................4

SECTION 6  TERM OF PLAN...........................................................................................4

SECTION 7  INDEMNIFICATION OF BOARD OF DIRECTORS..................................................................4

SECTION 8  AMENDMENT AND TERMINATION OF THE PLAN..................................................................5

SECTION 9  ADJUSTMENT IN OPTION SHARES AND EXERCISE PRICE.........................................................5

SECTION 10 WITHHOLDING TAXES......................................................................................5

SECTION 11 RIGHTS AS A STOCKHOLDER................................................................................6

SECTION 12 GOVERNING LAW..........................................................................................6
</TABLE>

<PAGE>

                            MARINER HEALTH CARE, INC.
                    2002 OUTSIDE DIRECTORS' STOCK OPTION PLAN

                             SECTION 1. INTRODUCTION

         The Mariner Health Care, Inc. 2002 Outside Directors' Stock Option Plan
(the "Plan") provides the Company with the ability to grant each non-employee
director nonqualified stock options ("Options") to purchase shares ("Option
Shares") of common stock of Mariner Health Care, Inc. (the "Company").

                             SECTION 2. DEFINITIONS

         2.1      Definitions. The following words and phrases shall, when used
herein, have the meanings set forth below:

                  (a)      "Act" means the Securities Exchange Act of 1934, as
         amended.

                  (b)      "Affiliate" means

                           (1)      Any Subsidiary or Parent,

                           (2)      An entity that directly or through one or
         more intermediaries controls, is controlled by, or is under common
         control with the Company, as determined by the Company, or

                           (3)      Any entity in which the Company has such a
         significant interest that the Company determines it should be deemed an
         "Affiliate", as determined in the sole discretion of the Company.

                  (c)      "Agreement" means a stock option agreement, which is
         an agreement subject to the terms of the Plan.

                  (d)      "Board of Directors" or "Board" means the Board of
         Directors of the Company.

                  (e)      "Code" means the Internal Revenue Code of 1986, as
         amended.

                  (f)      "Company" means Mariner Health Care, Inc., a Delaware
         corporation.

                  (g)      "Common Stock" means the Company's common stock.

                  (h)      "Eligible Director" means a Director who meets the
         requirements of Section 3.3 of the Plan.

                  (i)      "Director" means a director of the Company.

<PAGE>

                  (j)      "Disability" has the same meaning as provided in the
long-term disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any Affiliate of the Company for
Director. If no long-term disability plan or policy was ever maintained on
behalf of the Director or, the determination of Disability relates to an Option,
Disability means that condition described in Code Section 22(e)(3), as amended
from time to time. In the event of a dispute, the determination of Disability
will be made by the Compensation Committee of the Board of Directors and will be
supported by advice of a physician competent in the area to which such
Disability relates.

                  (k)      "Employee" means any person who is employed by the
Company or an Affiliate for purposes of the Federal Insurance Contributions Act.

                  (l)      "Fair Market Value" with regard to a date means:

                           (1)      the price at which Common Stock shall have
         been sold on that date or the last trading date prior to that date as
         reported by the national securities exchange selected by the
         Compensation Committee of the Board of Directors on which the shares of
         Common Stock are then actively traded or, if applicable, as reported by
         the NASDAQ Stock Market.

                           (2)      if such market information is not published
         on a regular basis, the price of Common Stock in the over-the-counter
         market on that date or the last business day prior to that date as
         reported by the NASDAQ Stock Market or, if not so reported, by a
         generally accepted reporting service.

                           (3)      if Common Stock is not publicly traded, as
         determined in good faith by the Compensation Committee of the Board of
         Directors with due consideration being given to (i) the most recent
         independent appraisal of the Company, if such appraisal is not more
         than twelve months old and (ii) the valuation methodology used in any
         such appraisal.

         For purposes of Paragraphs (1), (2), or (3) above, the Compensation
         Committee of the Board of Directors may use the closing price as of the
         applicable date, the average of the high and low prices as of the
         applicable date or for a period certain ending on such date, the price
         determined at the time the transaction is processed, the tender offer
         price for shares of Common Stock, or any other method which the
         Compensation Committee of the Board of Directors determines is
         reasonably indicative of the fair market value.

                  (m)      "Option" means an option to purchase Common Stock of
the Company granted pursuant to and in accordance with the provisions of the
Plan.

                  (n)      "Optionee" means a Director who is granted an Option
pursuant to and in accordance with the provisions of the Plan.

                  (o)      "Option Shares" means Shares subject to and issued
pursuant to an exercise of an Option granted under the Plan.

                  (p)      "Parent" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if at the
time of the granting of the Option, each of the corporations other than the
Company owns stock possessing 50% of more of the total combined

                                       2
<PAGE>

voting power of all classes of stock in one of the other corporations in such
chain. A Parent shall include any entity other than a corporation to the extent
permissible under Section 424(f) or regulations and rulings thereunder.

                  (q)      "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain. A Subsidiary shall include any entity other than a
corporation to the extent permissible under Section 424(f) or regulations or
rulings thereunder.

                  (r)      "Share" means a share of Common Stock of the Company.

                            SECTION 3. ADMINISTRATION

         3.1      Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors.

         3.2      Finality. The Compensation Committee of the Board of Directors
shall have the authority in its sole discretion to interpret the Plan, to grant
Options under and in accordance with the provisions of the Plan, and to make all
other determinations and to take all other actions it deems necessary or
advisable for the implementation and administration of the Plan or Agreements
thereunder. All actions of the Compensation Committee of the Board of Directors
shall be final, conclusive and binding upon the Optionees. No member of the
Compensation Committee of the Board of Directors shall be liable for any action
taken or decision made in good faith relating to the Plan or any grant of an
Option thereunder. All Options granted pursuant to this Plan shall be evidenced
by an Agreement and shall be subject to the terms of the Plan and such
additional terms are as set forth in the Agreement.

         3.3      Eligibility. Directors who are not Employees of the Company or
an Affiliate shall be eligible to receive Options under the Plan on the terms
and subject to the restrictions hereinafter set forth.

         3.4      Exercise and Payment of Option Awards. All Options may be
exercised to the extent vested. All Options may be exercised only by written
notice to the Company. Payment for all Shares purchased pursuant to exercise of
an Option shall be made (a) in cash; (b) by delivery to the Company of a number
of Shares which have been beneficially owned by the Eligible Director for at
least six (6) months prior to the date of exercise having an aggregate Fair
Market Value of not less than the product of the exercise price multiplied by
the number of shares the Eligible Director intends to purchase upon exercise of
the Option on the date of delivery; or (c) to the extent available, in a
cashless exercise through a broker. Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an Option until full payment has been made. The
holder of an Option, as such, shall have none of the rights of a shareholder of
the Company.

         3.5      Non-Transferability. Unless otherwise permitted by the
Compensation Committee of the Board of Directors, an Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable during the Optionee's lifetime only by the

                                       3
<PAGE>

Optionee, except in the case of the Optionee's Disability, in which case an
Option shall be exercisable by the Optionee's legal representative.

                        SECTION 4. SHARES SUBJECT TO PLAN

         The aggregate number of Option Shares which may be issued under the
Plan shall at no time exceed one hundred seventy-five thousand (175,000). The
limitation established by this Section shall be subject to adjustment in
accordance with the provisions of the Plan. In the event that an Option expires
or is terminated for any reason, the Option Shares allocable to the unexercised
portion of such Option may again be subject to an Option under the Plan. In the
event that an Optionee delivers Shares as payment of the exercise price for an
Option, such Shares may be subject to Options under this Plan.

                            SECTION 5. OPTION AWARDS

         Each Option contemplated by this Section 5 shall be evidenced by an
Agreement which shall incorporate the applicable terms of the Plan. The terms of
each Agreement shall provide: (a) that the per share purchase price for each
Share subject to the Option shall be the Fair Market Value as of the date of
grant; provided, however, that within the first ninety (90) days following the
consummation of the Plan of Reorganization of the Company, Options may be
granted within an exercise price equal to the reorganization price of the
Company's common stock determined in connection with the Plan of Reorganization,
even if such price is less than Fair Market Value; and (b) that the Option shall
expire upon the earlier of the tenth (10th) anniversary following the date of
grant or, subject to the condition that an Option may not be exercised past the
expiration of its term, within one year after the date the Director ceases to
serve upon the Board of Directors for any reason.

                             SECTION 6. TERM OF PLAN

         The Plan shall be effective on the date of its approval by the Board of
Directors and shall continue to be effective until ten (10) years following the
effective date of the Plan, unless sooner terminated by the Board of Directors
pursuant to Section 10 hereof.

                SECTION 7. INDEMNIFICATION OF BOARD OF DIRECTORS

         In addition to such other rights of indemnification that the members of
the Board of Directors may have, each member of the Board of Directors shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
it may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by it in settlement thereof (provided the settlement has received
the prior approval of the Company) or paid by it in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in the action, suit or proceeding that the Board
member is liable for negligence or misconduct in the performance of its duties;
provided that promptly after institution of the action, suit or proceeding the
Board member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend such matter. Upon the delivery to the Board member
of written notice of assumption by the Company of the defense of such matter,
the Company will not be responsible to the Board member for any further fees and
disbursements relating to the defense of such matter, including fees and
disbursements of counsel.

                                       4
<PAGE>

                SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN

         The Board of Directors at any time may amend or terminate the Plan
without the approval of the shareholders of the Company; provided, however, that
the Board of Directors may condition any amendment on the approval of the
shareholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws to which the Company, this
Plan, Optionees or Eligible Directors are subject. No amendment or termination
of the Plan shall adversely affect the rights of an Optionee with regard to his
Options without his consent.

            SECTION 9. ADJUSTMENT IN OPTION SHARES AND EXERCISE PRICE

         If (i) the number of Shares shall be increased or reduced by a change
in par value, split-up, stock split, reverse stock split, reclassification,
merger, consolidation, distribution of stock dividends or similar capital
adjustments, or (ii) the Company engages in a transaction for which the
Compensation Committee of the Board of Directors determines an adjustment is
appropriate, then the Compensation Committee of the Board of Directors may make
an adjustment in the number and kind of Shares available for the granting of
Options under the Plan. In addition, the Compensation Committee of the Board of
Directors may, in its sole and absolute discretion, make an adjustment in the
number, kind and price of Shares as to which outstanding Options, or the
portions thereof then unexercised, shall be exercisable, to the end that the
Optionee's proportionate interest is maintained as before the occurrence of the
event. The adjustment in outstanding Options will be made without change in the
total price applicable to the unexercised portion of the Option and, if
necessary, with a corresponding adjustment in the exercise price per share. Any
fractional Shares resulting from such adjustments shall be eliminated. All
adjustments made by the Compensation Committee of the Board of Directors under
this Section shall be conclusive.

         In the event of a merger, consolidation or other reorganization of the
Company or tender offer for Shares, the Compensation Committee of the Board of
Directors may make such adjustments with respect to Options and take such other
action as it deems necessary or appropriate to reflect such merger,
consolidation, reorganization or tender offer, including, without limitation,
the substitution of new Options, or the adjustment of outstanding Options, the
acceleration of Options, the removal of restrictions on outstanding Options, or
the termination of outstanding Options in exchange for the cash value determined
in good faith by the Compensation Committee of the Board of Directors. Any
adjustment pursuant to this Section may provide, in the Compensation Committee's
discretion, for the elimination without payment therefor of any fractional
Shares that might otherwise become subject to any Options, but except as set
forth in this Section may not otherwise diminish the then value of the Options.

                          SECTION 10. WITHHOLDING TAXES

         To the extent required by law, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirement, if any, prior to the
delivery of any certificate or certificates for such Shares. An optionee must
pay the withholding tax in cash or by certified check or by the Company
deducting a sufficient number of Shares from the Option Shares issued to satisfy
withholding taxes, in accordance with the Agreement.

                                       5
<PAGE>

                      SECTION 11. RIGHTS AS A SHAREHOLDER

         An Optionee or a transferee of an Optionee shall have no rights as a
shareholder of the Company with respect to any Option or Option Shares until the
date of the issuance of a stock certificate to him for the Option Shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date the stock certificate is issued, except as
otherwise provided in the Plan.

                            SECTION 12. GOVERNING LAW

         The laws of the State of Delaware shall govern this Plan, to the extent
not preempted by federal law, without reference to the principles of conflict of
laws.

                                             MARINER HEALTH CARE, INC.

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

                                       6

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