Document:

<PAGE>

                                                                     EXHIBIT 4.1

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                               WARRANT AGREEMENT

                                    between

                                  VENCOR, INC.

                    (to be renamed Kindred Healthcare, Inc.)

                                      and

                      WELLS FARGO BANK OF MINNESOTA, N.A.

                                as Warrant Agent

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

                          Dated as of April 20, 2001

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<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                            Page
<S>              <C>                                                                                         <C>
Section 1.       Definitions...............................................................................   1
Section 2.       Form of Warrant; Execution; Registration..................................................   3
     2.1         Form of Warrant; Execution of Warrants....................................................   3
     2.2         Registration..............................................................................   3
     2.3         Countersignature of Warrants..............................................................   3
Section 3.       Transfer and Exchange of Warrants.........................................................   4
Section 4.       Term of Warrants; Exercise of Warrants; Compliance with Government Regulation.............   4
     4.1         Term of Warrants..........................................................................   4
     4.2         Exercise of Warrants......................................................................   5
     4.3         Compliance with Government Regulations; Qualification under Securities Laws...............   6
Section 5.       Payment of Taxes..........................................................................   6
Section 6.       Mutilated or Missing Warrant Certificates.................................................   6
Section 7.       Reservation of Warrant Shares.............................................................   7
Section 8.       Listings; Quotation.......................................................................   7
Section 9.       Adjustment of Exercise Price; Number of Warrant Shares into Which
                 Warrants are Exercisable..................................................................   7
     9.1         Mechanical Adjustments....................................................................   8
                 (a)      Adjustment for Change in Capital Stock...........................................   8
                 (b)      Adjustment for Rights Issue......................................................   8
                 (c)      Adjustment for Other Distributions...............................................   9
                 (d)      Adjustment for Common Stock and Convertible Securities Issue.....................   9
                 (e)      Current Market Price; Price Per Share............................................  10
                 (f)      When De Minimis Adjustment May Be Deferred.......................................  11
                 (g)      Adjustment in Exercise Price.....................................................  11
                 (h)      When No Adjustment is Required...................................................  11
                 (i)      Capitalization, Reclassification or Consolidation................................  12
                 (j)      Shares of Common Stock...........................................................  12
                 (k)      Expiration of Rights, etc........................................................  13
</TABLE>

                                       i
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<TABLE>
<S>              <C>                                                                                         <C>
     9.2         Notice of Adjustment......................................................................  13
     9.3         Preservation of Purchase Rights upon Merger or Consolidation..............................  13
     9.4         Statement on Warrants.....................................................................  14
Section 10.      Fractional Interests......................................................................  14
Section 11.      No Rights as Stockholders.................................................................  14
Section 12.      Payments in U.S.  Currency................................................................  14
Section 13.      Merger or Consolidation or Change of Name of Warrant Agent................................  14
Section 14.      Appointment of Warrant Agent..............................................................  15
     14.1        Correctness of Statements.................................................................  15
     14.2        Breach of Covenants.......................................................................  15
     14.3        Performance of Duties.....................................................................  15
     14.4        Reliance on Counsel.......................................................................  15
     14.5        Proof of Actions Taken....................................................................  15
     14.6        Compensation and Indemnification..........................................................  15
     14.7        Legal Proceedings.........................................................................  16
     14.8        Other Transactions in Securities of Company...............................................  16
     14.9        Liability of Warrant Agent................................................................  16
     14.10       Reliance on Documents.....................................................................  16
     14.11       Validity of Agreement.....................................................................  16
     14.12       Instructions from Company.................................................................  17
Section 15.      Change of Warrant Agent...................................................................  17
Section 16.      Notices...................................................................................  17
Section 17.      Cancellation of Warrants..................................................................  18
Section 18.      Supplements and Amendments................................................................  18
Section 19.      Successors................................................................................  19
Section 20.      Applicable Law............................................................................  19
Section 21.      Benefits of this Agreement................................................................  19
Section 22.      Counterparts..............................................................................  19
Section 23.      Captions..................................................................................  19
</TABLE>

                                       ii
<PAGE>

     WARRANT AGREEMENT, dated as of April 20, 2001, between Vencor, Inc. (to be
renamed Kindred Healthcare, Inc.), a Delaware corporation (the "Company"), and
                                                                -------
Wells Fargo Bank Minnesota, National Association, as Warrant Agent (together
with any successors and assigns, the "Warrant Agent").
                                      -------------

                              W I T N E S S E T H:

     WHEREAS, the Company and certain affiliates of the Company were Debtors and
Debtors-in-Possession in the jointly administered cases (the "Chapter 11 Cases")
                                                              ----------------
filed under title 11 of the U.S. Code, as amended from time to time ("the

Bankruptcy Code") in the United States Bankruptcy Court for the District of
---------------
Delaware (the "Bankruptcy Court"), entitled "In re Vencor, Inc., et al., Debtors
               ----------------
and Debtors in Possession," Chapter 11 Case Nos. 99-3199 through 99-3327;

     WHEREAS, in connection with and as part of the transactions to be
consummated pursuant to the confirmation of a Plan of Reorganization (as
amended, modified or supplemented from time to time) of the Company and its
affiliated debtors in the Chapter 11 Cases (the "Plan"), the Company has agreed
                                                 ----
to issue two series of Warrants (the "Series A Warrants" and the "Series B
                                      -----------------           --------
Warrants" and, collectively, the "Warrants"), with the Series A Warrants
--------                          --------
exercisable for the purchase of an aggregate of 2,000,000 shares of Common Stock
(as defined herein) of the Company and the Series B Warrants exercisable for the
purchase of an aggregate of 5,000,000 shares of Common Stock of the Company;

     WHEREAS, by Order signed by the Bankruptcy Court on March 16, 2001 and
entered on the docket of the Bankruptcy Court on March 19, 2001, the Bankruptcy
Court confirmed the Plan;

     WHEREAS, the Plan contemplates that the Company will enter into certain
agreements, including, without limitation, this Warrant Agreement;

     WHEREAS, the Company desires to issue the Warrants, each of which entitles
the holder thereof to purchase one share of its Common Stock (each of said
shares of Common Stock deliverable upon exercise of the Warrants, a "Warrant
                                                                     -------
Share"); and
-----

     WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, division, transfer, exchange and exercise of Warrants.

     NOW, THEREFORE, in consideration of the foregoing, to implement the terms
of the Plan, and for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company and
the registered owners of the Warrants (the "Holders") and any security into
                                            -------
which they may be exchanged, the Company and the Warrant Agent hereby agree as
follows:

Section 1.    Definitions.  The following terms, as used herein, have the
              -----------
following meanings (all terms defined in the singular to have the correlative
meanings when used in the plural and vice versa):
<PAGE>

     "Agreement" means this Warrant Agreement, as the same may be amended,\\
      ---------
modified or supplemented from time to time.\\

     "Assets" has the meaning ascribed to such term in Section 9.1(c) hereof.
      ------

     "Business Day" means a day other than (a) a Saturday or Sunday, (b) any day
      ------------
on which banking institutions located in the City of New York, New York or
Minneapolis, Minnesota are required or authorized by law or by local
proclamation to close, or (c) any day on which the New York Stock Exchange is
closed.

     "Commercially Reasonable Efforts", when used with respect to any obligation
      -------------------------------
to be performed or term or provision to be observed hereunder, means such
efforts as a reasonably prudent Person seeking the benefits of such performance
or action would make, use, apply or exercise to preserve, protect or advance its
rights or interests, provided that such efforts do not require such Person to
                     --------
incur a material financial cost or a substantial risk of material liability
unless such cost or liability (i) would customarily be incurred in the course of
performance or observance of the relevant obligation, term or provision, (ii) is
caused by or results from the wrongful act or negligence of the Person whose
performance or observance is required hereunder, or (iii) is not excessive or
unreasonable in view of the rights or interests to be preserved, protected or
advanced.  Such efforts may include, without limitation, the expenditure of such
funds and retention by such Person of such accountants, attorneys or other
experts or advisors as may be necessary or appropriate to effect the relevant
action; the undertaking of any special audit or internal investigation that may
be necessary or appropriate to effect the relevant action; and the commencement,
termination or settlement of any action, suit or proceeding involving such
Person to the extent necessary or appropriate to effect the relevant action.

     "Common Stock" means the common stock, par value $0.25 per share, of the
      ------------
Company after the Effective Date (defined in the Plan as "New Common Stock").

     "Convertible Securities" has the meaning ascribed to such term in Section
      ----------------------
9.1(d) hereof.

     "Effective Date" has the meaning ascribed to such term in the Plan.
      --------------

     "Exercise Period" has the meaning ascribed to such term in Section 4.1
      ---------------
hereof.

     "Exercise Price" means, collectively, (i) $30.00 per Warrant Share for the
      --------------
Series A Warrants (the "Series A Exercise Price") and (ii) $33.33 per Warrant
                        -----------------------
Share for the Series B Warrants (the "Series B Exercise Price"), in each case as
                                      -----------------------
adjusted pursuant to Section 9 hereof.

     "Holder" has the meaning ascribed to such term in the preamble hereto.
      ------

     "NASD" has the meaning ascribed to such term in Section 4.2 hereof.
      ----

     "Person" means a natural person, a corporation, a partnership, a trust, a
      ------
joint venture, any regulatory authority or any other entity or organization.

     "Plan" has the meaning ascribed to such term in the preamble hereto.
      ----

                                       2
<PAGE>

     "Price Per Share" has the meaning ascribed to such term in Section
      ---------------
9.l(e)(ii) hereof.

     "Rights" has the meaning ascribed to such term in Section 9.l(b) hereof.
      ------

     "SEC" means the U.S. Securities and Exchange Commission, or any successor
      ---
governmental agency or authority thereto.

     "Series A Warrants" has the meaning ascribed to such term in the preamble
      -----------------
hereto.

     "Series B Warrants" has the meaning ascribed to such term in the preamble
      -----------------
hereto.

     "Subsidiary" has the meaning ascribed to such term in Section 9.1(c)
      ----------
hereof.

     "Transfer Agent" has the meaning ascribed to such term in Section 7 hereof.
      --------------

     "Warrant" has the meaning ascribed to such term in the preamble hereto.
      -------

     "Warrant Certificate" has the meaning ascribed to such term in Section 2.1
      -------------------
hereof

     "Warrant Register" has the meaning ascribed to such term in Section 2.2
      ----------------
hereof.

     "Warrant Share" has the meaning ascribed to such term in the preamble
      -------------
hereto.

Section 2.    Form of Warrant; Execution; Registration.
              ----------------------------------------

2.1    Form of Warrant; Execution of Warrants.  The certificates evidencing the
       --------------------------------------
Series A Warrants and the Series B Warrants (collectively, the "Warrant
                                                                -------
Certificates") shall be in registered form only and shall be issued initally in
------------
the form of a single, global Warrant Certificate for the Series A Warrants and a
single global Warrant Certificate for the Series B Warrants, substantially in
the form set forth as Exhibit A and Exhibit B hereto, respectively, and in each
case (i) bearing the legend set forth in Exhibit C hereto, (ii) registered in
the name of The Depository Trust Company (the "DTC") or its nominee and (iii)
deposited with the Warrant Agent as custodian for the Holder.  Transfers of
beneficial interests in, and exercises of, Warrants evidenced by a global
Warrant Certificate may only be made in accordance with the rules and
regulations of the DTC.  Beneficial interests in Warrants evidenced by a global
Warrant Certificate may be exchanged upon request, in whole or in part, (a) in
respect of Series A Warrants, for a definitive Warrant Certificate substantially
in the form of Exhibit A hereto and (b) in respect of Series B Warrants, for a
definitive Warrant Certificate substantially in the form of Exhibit B hereto, in
each case registered in the name of the holder.  The Warrant Certificates shall
be signed on behalf of the Company by its Chairman of the Board, Chief Executive
Officer, Chief Financial Officer or one of its Vice Presidents.  The signature
of any such officer on the Warrant Certificates may be manual or by facsimile.
Any Warrant Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Warrant Certificate, shall be a
proper officer of the Company to sign such Warrant Certificate.  Each Warrant
Certificate shall be dated the date it is countersigned by the Warrant Agent
pursuant to Section 2.3 hereof.

                                       3
<PAGE>

2.2    Registration.  The Warrant Certificates shall be numbered and shall be
       ------------
registered on the books of the Company maintained at the principal office of the
Warrant Agent initially in Minneapolis, Minnesota (or such other place in the
continental United States as the Warrant Agent shall from time to time notify
the Company and the Holders in writing) (the "Warrant Register") as they are
                                              ----------------
issued.  The Company and the Warrant Agent shall be entitled to treat the
registered owner of any Warrant as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person.

2.3    Countersignature of Warrants.  The Warrant Certificates shall be manually
       ----------------------------
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned.  Warrant Certificates may be countersigned, however, by the
Warrant Agent and may be delivered by the Warrant Agent notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery.  The Warrant Agent shall, upon written
instructions of the Chairman of the Board, the Chief Executive Officer, Chief
Financial Officer or any Vice President of the Company, countersign, issue and
deliver Warrant Certificates entitling the Holders thereof to purchase not more
than an aggregate of 7,000,000 Warrant Shares (subject to adjustment pursuant to
Section 9 hereof) and shall countersign, issue and deliver Warrant Certificates
as otherwise provided in this Agreement.

Section 3.    Transfer and Exchange of Warrants.  Subject to the terms hereof,
              ---------------------------------
the Warrant Agent shall initially countersign, register in the Warrant Register
and deliver Warrants hereunder in accordance with the written instructions of
the Company.  Subject to the terms hereof and the receipt of such documentation
as the Warrant Agent may reasonably require, the Warrant Agent shall thereafter
from time to time register the transfer of any outstanding Warrants upon the
Warrant Register upon surrender of the Warrant Certificate or Certificates
evidencing such Warrants duly endorsed or accompanied (if so required by it) by
a written instrument or instruments of transfer in form reasonably satisfactory
to the Warrant Agent, duly executed by the registered Holder or Holders thereof
or by the duly appointed legal representative thereof or by a duly authorized
attorney.  Subject to the terms of this Agreement, each Warrant Certificate may
be exchanged for another Warrant Certificate or Certificates entitling the
Holder thereof to purchase a like aggregate number of Warrant Shares, at the
same exercise price and having the same term, as the surrendered Warrant
Certificate or Certificates then entitles such Holder to purchase.  Any Holder
desiring to exchange a Warrant Certificate or Certificates shall make such
request in writing delivered to the Warrant Agent, and shall surrender, duly
endorsed or accompanied (if so required by the Warrant Agent) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Warrant Agent, the Warrant Certificate or Certificates to be so exchanged.  Upon
registration of transfer, the Company shall issue and the Warrant Agent shall
countersign and deliver by certified mail a new Warrant Certificate or
Certificates to the persons entitled thereto.  Upon any partial transfer, a new
Warrant Certificate of like tenor and representing in the aggregate the number
of Warrants which were not so transferred, shall be issued to, and in the name
of, the Holder.

     No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient

                                       4
<PAGE>

to cover any stamp tax or other tax or other governmental charge that is imposed
in connection with any such exchange or registration of transfer pursuant to
Section 5 hereof.

     By accepting the initial delivery, transfer or exchange of Warrants, each
Holder shall be deemed to agree to the terms of this Agreement as it may be in
effect from time to time, including any amendments or supplements duly adopted
in accordance with Section 18 hereof.

Section 4.    Term of Warrants; Exercise of Warrants; Compliance with Government
              ------------------------------------------------------------------
Regulation.
----------

4.1    Term of Warrants.  Subject to the terms of this Agreement, each Holder
       ----------------
shall have the right, until the expiration of the applicable Exercise Period for
the Warrants held, to receive from the Company the number of Warrant Shares
which the Holder may at the time be entitled to receive upon exercise of such
Warrants and payment of the Exercise Price then in effect for such Warrant
Shares, and the Warrant Shares issued to a Holder upon exercise of its Warrants
shall be duly authorized, validly issued, fully paid and nonassessable.  Each
Warrant not exercised prior to the expiration of its Exercise Period shall
become void, and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of the expiration of such Exercise Period.  The
Exercise Period for the Warrants shall begin at 9:00 a.m., New York City time,
on the date of their issuance, and end at 5:00 p.m, New York City time, on April
20, 2006 (five years after the Effective Date).

4.2    Exercise of Warrants.  During the Exercise Period, each Holder may,
       --------------------
subject to this Agreement, exercise from time to time some or all of the
Warrants evidenced by its Warrant Certificate(s) by (i) surrendering to the
Company at the principal office of the Warrant Agent such Warrant Certificate(s)
with the form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered security exchange or the National Association of
Securities Dealers, Inc. (the "NASD"), or, to the extent held in "street" name,
                               ----
Holder shall comply with applicable law, and (ii) paying to the Warrant Agent
for the account of the Company the aggregate Exercise Price for the number of
Warrant Shares in respect of which such Warrants are exercised.  Warrants shall
be deemed exercised on the date such Warrant Certificate(s) are surrendered to
the Warrant Agent and tender of payment of the aggregate Exercise Price is
received by the Warrant Agent.  Payment of the aggregate Exercise Price shall be
made in cash by wire transfer of immediately available funds to the Warrant
Agent for the account of the Company.

     Upon the exercise of any Warrants in accordance with this Agreement, the
Company shall issue and cause to be delivered promptly, to or upon the written
order of the Holder and in the name of the Holder, a certificate or certificates
for the number of full Warrant Shares issuable upon exercise of such Warrants,
and shall take such other actions as are reasonably necessary to complete the
exercise of such Warrants (including, without limitation, payment of any cash
with respect to fractional interests required under Section 10 hereof).  The
Warrant Agent shall have no responsibility or liability for such issuance or the
determination of the number of Warrant Shares issuable upon such exercise.  The
certificate or certificates representing such Warrant Shares shall have been
issued and the Holder shall be deemed to have become a holder of record of such
Warrant Shares as of the date such Warrants are exercised in accordance with the
terms

                                       5
<PAGE>

hereunder. Each Warrant Share, when issued upon exercise of the Warrants, shall
be duly authorized, validly issued, fully paid and non-assessable and shall be
delivered free and clear of all claims, liens, charges, security interests or
encumbrances of any kind, including without limitation any preemptive or similar
rights.

     In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised, the Holder thereof shall be entitled to receive a new
Warrant Certificate or Certificates as specified by such Holder evidencing the
remaining Warrants, and the Warrant Agent is hereby irrevocably authorized by
the Company to countersign, issue and deliver the required new Warrant
Certificate or Certificates evidencing such remaining Warrants pursuant to the
provisions of this Section 4.2 hereof and of Section 3 hereof.  The Company,
whenever required by the Warrant Agent, will supply the Warrant Agent with
Warrant Certificates duly executed on behalf to the Company for such purpose.

     Upon delivery of the Warrant Shares issuable upon exercise in accordance
herewith and of any required new Warrant Certificates, the Company shall direct
the Warrant Agent by written order to cancel the Warrant Certificates
surrendered upon exercise.  Such canceled Warrant Certificates shall then be
disposed of by the Warrant Agent in a manner permitted by applicable law and
satisfactory to the Company in accordance with its written instructions to the
Warrant Agent.  The Warrant Agent shall inform promptly the Company with respect
to Warrants exercised and concurrently pay to the Company all amounts received
by the Warrant Agent upon exercise of such Warrants.

     The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the Holders during normal
business hours at its office.  The Company shall supply the Warrant Agent from
time to time with such numbers of copies of this Agreement as the Warrant Agent
may reasonably request.

4.3    Compliance with Government Regulations; Qualification under Securities
       ----------------------------------------------------------------------
Laws.  The Company is issuing the Warrants based upon the belief that the
----
issuance and the exercise of the Warrants, and the issuance of the Warrant
Shares upon exercise of the Warrants, are exempt from registration under the
Federal securities laws pursuant to Section 1145 of the Bankruptcy Code.  The
Company covenants that if, following a due demand to exercise Warrants, any
Warrant Shares required to be reserved for purposes of exercise of such Warrants
require, under any federal or state law, registration with or approval of any
governmental authority before such shares may be issued upon exercise, and the
Holder requesting the exercise of a Warrant provides an opinion of counsel
acceptable to the Company to the effect that the exercise of the Warrant
requires registration, then the Company will, unless the Company has received an
opinion of counsel to the effect that such registration is not then required by
such laws, use its Commercially Reasonable Efforts to cause such shares to be so
registered or approved, as the case may be; provided that in no event shall such
                                            --------
Warrant Shares be issued, and the exercise of all such Warrants shall be
suspended, for the period from the date of such due demand for exercise until
such registration or approval is in effect; provided, further, that the Exercise
                                            --------  -------
Period for such Warrants (but only such Warrants) shall be extended one day for
each day (or portion thereof) that any such suspension is in effect.  The
Company shall promptly notify the Warrant Agent of any such suspension, and the
Warrant Agent shall have no duty, responsibility or liability in respect of any
Warrant Shares issued or delivered prior to its receipt of such notice.

                                       6
<PAGE>

The Company shall promptly notify the Warrant Agent of the termination of any
such suspension, and such notice shall set forth the number of days that the
Exercise Period with respect to such Warrants shall be extended as a result of
such suspension.

Section 5.    Payment of Taxes.  The Company will pay all documentary stamp and
              ----------------
other like taxes, if any, attributable to the initial issuance and delivery of
the Warrants and the initial issuance and delivery of the Warrant Shares upon
the exercise of Warrants, provided, that the Company shall not be required to
                          --------
pay any tax or taxes which may be payable in respect of any transfer of the
Warrants, and the Warrant Agent shall not register any such transfer or issue or
deliver any Warrant Certificate(s) unless or until the persons requesting the
registration or issuance shall have paid to the Warrant Agent for the account of
the Company the amount of such tax (which the Warrant Agent shall then apply to
the payment of such tax), if any, or shall have established to the reasonable
satisfaction of the Company that such tax, if any, has been paid.

Section 6.    Mutilated or Missing Warrant Certificates.  In the event that any
              -----------------------------------------
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall issue, and at the direction of the Company by written order the Warrant
Agent shall countersign and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate or in lieu of and substitution
for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate
of like tenor and representing all equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company and the Warrant Agent
of such loss, theft or destruction of such Warrant Certificate and an indemnity
or bond, if requested by the Company or the Warrant Agent, also reasonably
satisfactory to them.  An applicant for such a substitute Warrant Certificate
shall also comply with such other reasonable procedures as the Company or the
Warrant Agent may reasonably require.

Section 7.    Reservation of Warrant Shares.  There have been reserved, and the
              -----------------------------
Company shall at all times keep reserved, free from preemptive rights, out of
its authorized Common Stock a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by the
outstanding Warrants.  The transfer agent for the Common Stock and every
subsequent or other transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants (each, a "Transfer Agent") will be
                                                     --------------
and are hereby irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose.  The Company
will keep a copy of this Agreement on file with each Transfer Agent.  The
Warrant Agent is hereby irrevocably authorized to requisition from time to time
from the Company or a Transfer Agent, as the case may be, the certificates for
Warrant Shares required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement.  The Company will supply its
Transfer Agent with duly executed stock certificates for such purposes and will
promptly provide or otherwise make available any cash which may be payable as
provided in Section 10 hereof.  The Company will furnish to its Transfer Agent a
copy of all notices of adjustments and certificates related thereto, transmitted
to each Holder pursuant to Section 9.2 hereof.  The Company will give the
Warrant Agent prompt notice of any change in any Transfer Agent or any change of
address of any Transfer Agent.

     Before taking any action which would cause an adjustment pursuant to
Section 9 reducing the Exercise Price, the Company will take any and all
corporate action which may be

                                       7
<PAGE>

necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares (free of preemptive rights and free from all taxes,
liens, charges and security interests with respect to the issuance thereof) at
the Exercise Price as so adjusted.

Section 8     Listings; Quotation.  The Company shall use its Commercially
              -------------------
Reasonable Efforts (including requests for waivers) to have each series of the
Warrants listed on a national securities exchange or included for quotation in
the Nasdaq National Market or the Nasdaq Small Cap Market, and shall use its
Commercially Reasonable Efforts to maintain such listing or inclusion. In the
event the Warrants do not qualify for such listing or inclusion, the Company
will use its Commercially Reasonable Efforts (including requests for waivers) to
achieve such qualification and to effect such inclusion or listing whenever the
Warrants qualify therefor, and prior to such time, shall use Commercially
Reasonable Efforts to cause some other customary trading market to admit the
Warrants for trading.

Section 9     Adjustment of Exercise Price; Number of Warrant Shares into Which
              -----------------------------------------------------------------
Warrants are Exercisable. The number and kind of securities purchasable upon the
------------------------
exercise of each Warrant, and the Exercise Price, shall be subject to adjustment
from time to time upon the happening of certain events, as hereinafter
described. The Warrant Agent shall be fully protected in relying on the
certificate described in Section 9.2 below regarding the adjustment and on any
adjustment therein contained, and shall not be obligated or responsible for
calculating any adjustment, nor shall it be deemed to have knowledge of such an
adjustment unless and until it shall have received such certificate.

9.1 Mechanical Adjustments. The number of Warrant Shares purchasable upon the
    ----------------------
exercise of each Warrant and the Exercise Price shall be subject to adjustment
as follows:

(a)  Adjustment for Change in Capital Stock.  Subject to paragraphs (f) and (h)
     --------------------------------------
     below, in the event the Company (i) pays a dividend on all its outstanding
     shares of Common Stock in shares of Common Stock, or makes a distribution
     of shares of Common Stock on all its outstanding shares of Common Stock;
     (ii) makes a distribution on all its outstanding shares of Common Stock in
     shares of its capital stock other than Common Stock; (iii) subdivides its
     outstanding shares of Common Stock into a greater number of shares of
     Common Stock; (iv) combines its outstanding shares of Common Stock into a
     smaller number of shares of Common Stock; or (v) issues, by
     reclassification of its shares of Common Stock, other securities of the
     Company (including any such reclassification in connection with a
     consolidation or merger in which the Company is the surviving entity), then
     the number of Warrant Shares purchasable upon exercise of each Warrant
     immediately prior thereto shall be adjusted so that the Holder of each
     Warrant shall be entitled to receive upon the exercise of the Warrant the
     kind and number of Warrant Shares or other securities of the Company which
     such Holder would have owned or have been entitled to receive upon the
     happening of any of the events described above had such Warrant been
     exercised in full immediately prior to the happening of such event or any
     record date with respect thereto.  If a Holder is entitled to receive
     shares of two or more classes of capital stock of the Company pursuant to
     the foregoing upon exercise of Warrants, the allocation of the adjusted
     Exercise Price between such classes of capital stock shall be determined
     reasonably and in good faith by the Board of Directors of the Company.
     After such allocation, the exercise privilege and the Exercise Price with
     respect to each class of capital stock shall thereafter be subject to
     adjustment on terms substantially identical to those applicable to

                                       8
<PAGE>

     Common Stock in this Section 9. An adjustment made pursuant to this
     paragraph (a) shall become effective immediately after the record date for
     such event or, if none, immediately after the effective date of such event.
     Such adjustment shall be made successively whenever such an event occurs.

(b)  Adjustment for Rights Issue.  Subject to paragraphs (f), (h) and (k) below,
     ---------------------------
     in case the Company shall issue rights, options or warrants (collectively,
     "Rights") to all holders of its outstanding Common Stock entitling them to
      ------
     subscribe for or purchase shares of Common Stock at a Price Per Share (as
     defined in paragraph (e) below) which is lower at the record date mentioned
     below than the Current Market Price (as defined in paragraph (e) below) per
     share of Common Stock on such record date, then the number of Warrant
     Shares thereafter purchasable upon the exercise of each Warrant shall be
     determined (subject to readjustment pursuant to Section 9.1(k) below) by
     multiplying the number of Warrant Shares theretofore purchasable upon
     exercise of each Warrant by a fraction, the numerator of which shall be the
     number of shares of Common Stock outstanding on the date of issuance of
     such Rights plus the additional Number of Shares (as defined in paragraph
     (e) below) of Common Stock offered for subscription or purchase in
     connection with such Rights and the denominator of which shall be the
     number of shares of Common Stock outstanding on the date of issuance of
     such Rights plus the number of shares of Common Stock which the aggregate
     Proceeds (as defined in paragraph (e) below) received or receivable by the
     Company upon exercise of such Rights would purchase at the Current Market
     Price per share of Common Stock at such record date.  Such adjustment shall
     be made whenever Rights are actually issued, and shall become effective on
     the date of distribution retroactive to the record date for the
     determination of stockholders entitled to receive such Rights.

(c)  Adjustment for Other Distributions. Subject to paragraphs (f) and (h)
     ----------------------------------
     below, in case the Company shall distribute to all holders of shares of its
     outstanding Common Stock (x) evidences of indebtedness or assets (excluding
     cash dividends or distributions payable out of the consolidated earnings or
     surplus legally available for such dividends or distributions and dividends
     or distributions referred to in paragraphs (a) or (b) above) of the Company
     or any corporation or other legal entity a majority of the voting equity or
     equity interests of which are owned, directly or indirectly, by the Company
     (a "Subsidiary"), or (y) shares of capital stock of a Subsidiary (such
         ----------
     evidences of indebtedness, assets and securities as set forth in clauses
     (x) and (y) above, collectively, "Assets"), then in each case the number of
                                       ------
     Warrant Shares thereafter purchasable upon the exercise of each Warrant
     shall be determined by multiplying the number of Warrant Shares theretofore
     purchasable upon the exercise of each Warrant by a fraction, the numerator
     of which shall be the Current Market Price per share of Common Stock on the
     date of such distribution and the denominator of which shall be such
     Current Market Price per share of Common Stock less the fair value as of
     such record date as determined reasonably and in good faith by the Board of
     Directors of the Company of the portion of the Assets applicable to one
     share of Common Stock.  Such adjustment shall be made whenever any such
     distribution is made, and shall become effective on the date of
     distribution retroactive to the record date for the determination of
     stockholders entitled to receive such distribution.

(d)  Adjustment for Common Stock and Convertible Securities Issue.  Subject to
     ------------------------------------------------------------
     paragraphs (f) and (h) below, in case the Company shall issue shares of its
     Common Stock, or securities convertible into, or exchangeable or
     exercisable for Common Stock or Rights to

                                       9
<PAGE>

     subscribe for or purchase such securities (collectively, "Convertible
                                                               -----------
     Securities") (excluding the issuance of (i) Common Stock or Convertible
     ----------
     Securities issued in any of the transactions described in paragraphs (a),
     (b) or (c) above or (ii) Warrant Shares issued upon the exercise of the
     Warrants), at a Price Per Share of Common Stock, in the case of the
     issuance of Common Stock, or at a Price Per Share of Common Stock initially
     deliverable upon conversion, exercise or exchange of such Convertible
     Securities, in each case, together with any other consideration received by
     the Company in connection with such issuance, below the Current Market
     Price per share of Common Stock on the date the Company fixed the offering,
     conversion or exercise or exchange price of such additional shares, then
     the number of Warrant Shares thereafter purchasable upon the exercise of
     each Warrant shall be determined by multiplying the number of Warrant
     Shares theretofore purchasable upon exercise of each Warrant by a fraction,
     the numerator of which shall be the total number of shares of Common Stock
     outstanding on such date plus the additional Number of Shares (as defined
     below) offered for subscription or purchase and the denominator of which
     shall be the number of shares of Common Stock outstanding on such date plus
     the additional Number of Shares which the aggregate Proceeds (as defined
     below) of the total amount of Convertible Securities so offered would
     purchase at the Current Market Price per share of Common Stock at such
     record date. In case the Company shall issue and sell Convertible
     Securities for a consideration consisting, in whole or in part, of property
     other than cash or its equivalent, then in determining the "Price Per
     Share" of Common Stock and the "consideration received by the Company" for
     purposes of this paragraph (d), the Board of Directors of the Company shall
     reasonably and in good faith determine the fair value of such property. The
     determination of whether any adjustment is required under this paragraph
     (d), by reason of the sale and issuance of any Convertible Securities and
     the amount of such adjustment, if any, shall be made at such time and not
     at the subsequent time of issuance of shares of Common Stock upon the
     exercise, conversion or exchange of Convertible Securities.

(e)  Current Market Price; Price Per Share.  (i) For the purpose of any
     -------------------------------------
     computation under this Section 9.1, the "Current Market Price" per share of
                                              --------------------
     Common Stock at any date shall be the volume weighted daily average prices
     for the 20 consecutive trading days preceding the date of such computation.
     The closing price for each day shall be (x) if the Common Stock shall be
     then listed or admitted to trading on the New York Stock Exchange, the
     closing price on the NYSE - Consolidated Tape (or any successor composite
     tape reporting transactions on the New York Stock Exchange) or (y) if such
     a composite tape shall not be in use or shall not report transactions in
     the Common Stock, or if the Common Stock shall be listed on a stock
     exchange other than the New York Stock Exchange, the last reported sales
     price regular way or, in case no such reported sale takes place on such
     day, the average of the closing bid and asked prices regular way for such
     day, in each case on the principal national securities exchange on which
     the shares of Common Stock are listed or admitted to trading (which shall
     be the national securities exchange on which the greatest number of shares
     of the Common Stock have been traded during such 20 consecutive trading
     days) or (z) if the Common Stock is not listed or admitted to trading, the
     average of the closing bid and asked prices of the Common Stock in the
     over-the-counter market as reported by the Nasdaq National Market or any
     comparable system or, if the Common Stock is not included for quotation in
     the Nasdaq National Market or a comparable system, the average of the
     closing bid and asked prices as furnished by two members of the NASD
     selected reasonably and in good faith from time to time by the Board of
     Directors of the Company for that purpose.  In the absence of one or more
     such quotations, the Current Market Price per share of

                                       10
<PAGE>

     the Common Stock shall be determined reasonably and in good faith by the
     Board of Directors of the Company.

          (ii) For purposes of this Section 9.1, "Price Per Share" shall be
                                                  ---------------
     defined and determined according to the following formula:

        P  =   R/N

        Where

        P  =   Price Per Share;

        R  =   the "Proceeds" received or receivable by the Company which (x) in
               the case of shares of Common Stock is the total amount received
               or receivable by the Company in consideration for the issuance
               and sale of such shares; (y) in the case of Rights or Convertible
               Securities with respect to shares of Common Stock, is the total
               amount received or receivable by the Company in consideration for
               the issuance and sale of Rights or such Convertible Securities,
               plus the minimum aggregate amount of additional consideration,
               other than the surrender of such Convertible Securities, payable
               to the Company upon exercise, conversion or exchange thereof; and
               (z) in the case of Rights to subscribe for or purchase such
               Convertible Securities, is the total amount received or
               receivable by the Company in consideration for the issuance and
               sale of such Rights plus the minimum aggregate amount of
               additional consideration, other than the surrender of such
               Convertible Securities, payable upon the exercise of the Right
               and the conversion or exchange or exercise of such Convertible
               Securities; provided that in each case the proceeds received or
               receivable by the Company shall be the net cash proceeds after
               deducting therefrom any compensation paid or discount allowed in
               the sale, underwriting or purchase thereof by underwriters or
               dealers or other performing similar services;

        N  =   the "Number of Shares," which (x) in the case of Common Stock is
               the number of shares issued; and (y) in the case of Rights or
               Convertible Securities with respect to shares of Common Stock, is
               the maximum number of shares of Common Stock initially issuable
               upon exercise, conversion or exchange thereof.

(f)  When De Minimis Adjustment May Be Deferred.  No adjustment in the number of
     ------------------------------------------
     Warrant Shares purchasable hereunder shall be required unless such
     adjustment would require an increase or decrease of at least three percent
     (3%) in the number of Warrant Shares purchasable upon the exercise of each
     Warrant, provided that any adjustments which by reason of this paragraph
              --------
     (f) are not required to be made shall be carried forward and taken into
     account in any subsequent adjustment.  All calculations shall be made to
     the nearest one-hundredth of a Warrant Share and the nearest cent.

                                       11
<PAGE>

(g)  Adjustment in Exercise Price.  Whenever the number of Warrant Shares
     ----------------------------
     purchasable upon the exercise of each Warrant is adjusted as herein
     provided, the Exercise Price payable upon exercise of each Warrant
     immediately prior to such adjustment shall be adjusted by multiplying such
     Exercise Price by a fraction, the numerator of which shall be the number of
     Warrant Shares purchasable upon the exercise of each Warrant immediately
     prior to such adjustment and the denominator of which shall be the number
     of Warrant Shares purchasable immediately thereafter.

(h)  When No Adjustment is Required.  No adjustment in the number of Warrant
     ------------------------------
     Shares purchasable upon the exercise of each Warrant or in the Exercise
     Price need be made under this Section 9.1 in connection with: (i) the
     issuance of Common Stock, options, rights, Warrants or other securities
     pursuant to the Plan; (ii) shares of Common Stock, options, rights,
     warrants or other securities issued by the Company or its subsidiaries for
     the benefit of employees or directors pursuant to any formal employee stock
     plan or other employee benefit plan arrangement duly authorized by the
     Board; (iii) any issuance of shares of Common Stock or Convertible
     Securities pursuant to an underwritten public offering for a price per
     share of Common Stock in the case of an issuance of shares of Common Stock,
     or for a price per share of Common Stock initially deliverable upon
     conversion or exchange of such securities, that is equal to or greater than
     95% of the Current Market Price per share of Common Stock on the date the
     Company fixed the offering, conversion or exchange price of such additional
     shares of Common Stock; (iv) sales of Common Stock pursuant to a plan
     adopted by the Company for reinvestment of dividends or interest; (v)
     shares of Common Stock issued to shareholders of any corporation that is
     acquired by, merged into or made a part or subsidiary of the Company in an
     arm's-length transaction; or (vi) a change in the par value of the shares
     of Common Stock.  Additionally, no adjustment need be made if the Company
     issues or distributes to each Holder of Warrants the shares, rights,
     options, warrants, evidences of indebtedness, assets or other securities
     referred to in those paragraphs which each Holder of Warrants would have
     been entitled to receive had the Warrants been exercised for the number of
     Warrant Shares for which Warrants are then exercisable prior to the
     happening of such event or the record date with respect thereto.

(i)  Capitalization, Reclassification or Consolidation.  If any capital
     -------------------------------------------------
     reorganization of the Company, or any reclassification of the Common Stock,
     or any consolidation of the Company with or merger of the Company with or
     into any other Person, or any sale, lease or other transfer of all or
     substantially all of the assets of the Company to any other Person, shall
     be effected in such a way that the holders of the Common Stock shall be
     entitled to receive stock, other securities, cash or other assets (whether
     such stock, other securities, cash or other assets are issued or
     distributed by the Company or another Person) with respect to or in
     exchange for the Common Stock, then, upon exercise of each Warrant, the
     Holder shall have the right to receive the kind and amount of stock, other
     securities, cash or other assets receivable upon such reorganization,
     reclassification, consolidation, merger or sale, lease or other transfer,
     by a holder of the number of Warrant Shares that such Holder would have
     been entitled to receive upon exercise of such Warrant had such Warrant
     been exercised immediately before such reorganization, reclassification,
     consolidation, merger or sale, lease or other transfer, subject to
     adjustments (as determined in good faith by the Board of Directors of the
     Company).  Adjustments for events subsequent to the effective date of such
     a reorganization, reclassification, consolidation, merger, sale or transfer
     of assets shall be as nearly equivalent as may be practicable to the
     adjustments provided for in this Agreement.  In any such event, effective

                                       12
<PAGE>

     provisions shall be made in the certificate or articles of incorporation of
     the resulting or surviving corporation, in any contract of sale, merger,
     conveyance, lease, transfer or otherwise so that the provisions set forth
     herein for the protection of rights of the Holders shall thereafter
     continue to be applicable; and any such resulting or surviving corporation
     shall expressly assume the obligation to deliver, upon exercise, such
     shares of stock, other securities, cash and property.  The provisions of
     Section 9 shall similarly apply to successive consolidations, mergers,
     sales, leases or transfers.

(j)  Shares of Common Stock.  For all purposes of this Agreement, the term
     ----------------------
     "shares of Common Stock" shall mean (i) the class of stock designated as
     the Common Stock of the Company at the date of this Agreement, or (ii) any
     other class of stock resulting from successive reclassifications of such
     shares consisting solely of changes in par value, or from par value to no
     par value, or from no par value to par value.  In the event that at any
     time, as a result of an adjustment made pursuant to this Section 9.1, the
     Holders shall become entitled to purchase any securities of the Company
     other than shares of Common Stock, thereafter the number of such other
     shares so purchasable upon exercise of each Warrant and the Exercise Price
     of such shares shall be subject to adjustment from time to time in a manner
     and on terms substantially identical to the provisions with respect to the
     Warrant Shares contained in paragraphs (a) through (h) above, and the
     provisions of this Agreement with respect to the Warrant Shares shall apply
     on like terms to any such other securities.

(k)  Expiration of Rights, etc.  Upon the expiration of any Rights in respect of
     --------------------------
     which an adjustment has been made pursuant to Section 9.1(b), if any
     thereof shall not have been exercised, the Exercise Price and the number of
     Warrant Shares purchasable upon the exercise of each outstanding Warrant
     shall be readjusted so that (i) any calculation previously made on the
     basis of the additional number of shares of Common Stock offered for
     subscription or purchase in connection with such Rights shall instead be
     made on the basis of the additional number of shares of Common Stock
     actually subscribed to or actually purchased in connection with such Rights
     and (ii) any calculation previously made on the basis of the aggregate
     offering price of the total number of shares issuable upon exercise of such
     Rights shall instead be made on the basis of the aggregate offering price
     of the total number of shares actually issued upon exercise of such Rights;
     provided that if, as a result of such readjustment, the net adjustment to
     --------
     the number of Warrant Shares purchasable, upon the exercise of each Warrant
     as a result of the issuance and exercise of such Rights shall be
     sufficiently small as to qualify for de minimis deferral pursuant to
                                          -- -------
     Section 9.1(f), then the Exercise Price and the number of Warrant Shares
     purchasable upon the exercise of each Warrant shall be as if no Rights had
     ever been issued and the provisions of Section 9.1(f) shall otherwise
     prevail.

9.2  Notice of Adjustment.  Whenever the number of Warrant Shares purchasable
     --------------------
upon the exercise of each Warrant or the Exercise Price of Warrant Shares is
adjusted, as herein provided, the Company shall cause the Warrant Agent promptly
to mail to each Holder notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of a firm of independent public
accountants (who may be the regular accountants employed by the Company) setting
forth the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth in
reasonable detail the computations by which such adjustment was made. The
Warrant Agent shall be entitled to rely on such certificate and

                                       13
<PAGE>

shall be under no duty or responsibility with respect to any such certificate,
except to exhibit the same, from time to time, to any Holder requesting an
inspection thereof during reasonable business hours. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holder to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Warrant Shares or other stock or property purchasable upon
exercise of Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment.

9.3  Preservation of Purchase Rights upon Merger or Consolidation. The Company
     ------------------------------------------------------------
shall not merge or consolidate with or into any other entity unless the
successor entity (in the event the Company is not the successor entity) shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Agent in its sole judgment and executed and delivered
to the Warrant Agent, the due and punctual performance and observance of the
covenants and conditions of this Agreement to be performed and observed by the
Company. The provisions of this Section 9.3 shall similarly apply to successive
consolidations or mergers. The Warrant Agent shall be under a good faith duty
and responsibility to determine the correctness of any provisions contained in
any such agreement relating to the kind or amount of shares of stock or other
securities or property receivable upon exercise of Warrants or with respect to
the method employed and provided therein for any adjustments and shall be
entitled to rely upon the provisions contained in any such agreement. In the
event of any conflict between this Section 9.3 and Section 9.1(i), Section
9.1(i) shall prevail.

9.4  Statement on Warrants.  Irrespective of any adjustments in the Exercise
     ---------------------
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrant Certificates theretofore or thereafter issued may continue to
express the same Exercise Price and number and kind of Warrant Shares as are
stated in the Warrant Certificates initially issuable pursuant to this
Agreement.

Section 10.   Fractional Interests.  Neither the Company nor the Warrant Agent
              --------------------
shall be required to issue fractional Warrant Shares on the exercise of
Warrants.  If more than one Warrant shall be exercised at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrants so
exercised.  If any fraction of a Warrant Share would, except for the provisions
of this Section 10, be issuable on the exercise of any Warrant, then the Company
shall pay an amount in cash equal to the Current Market Price for one Warrant
Share on the date the Warrant Certificate is presented for exercise (determined
in accordance with Section 9.1(e) hereof), multiplied by such fraction.

Section 11.   No Rights as Stockholders.  Nothing contained in this Agreement or
              -------------------------
in any of the Warrants shall be construed as conferring upon the Holders or
their transferees the right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.

Section 12.   Payments in U.S.  Currency.  All payments required to be made
              --------------------------
hereunder shall be made in lawful money of the United States of America.

                                       14
<PAGE>

Section 13.   Merger or Consolidation or Change of Name of Warrant Agent.  Any
              ----------------------------------------------------------
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporation trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without, other than prompt written notice to the Company
with respect thereto, the execution or filing of any paper or any further act on
the part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Warrant Agent under the provisions of
Section 15 hereof.  In case any of the Warrant Certificates shall have been
countersigned but not delivered at the time such successor to the Warrant Agent
shall succeed to the agency created by this Agreement, any such successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrant Certificates so countersigned; and in case at that time any
of the Warrant Certificates shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrant Certificates either in the name
of the predecessor Warrant Agent or in its name; and in all such cases such
Warrant Certificates shall be fully valid and effective as provided therein and
in this Agreement.

     In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall be
fully valid and effective as provided therein and in this Agreement.

Section 14.   Appointment of Warrant Agent.  The Company hereby appoints the
              ----------------------------
Warrant Agent to act as agent for the Company hereunder and in accordance with
the terms and conditions hereof, and the Warrant Agent hereby accepts such
appointment and undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions.

14.1   Correctness of Statements.  The statements contained herein and in the
       -------------------------
Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except statements that describe the Warrant Agent or action taken by it.

14.2   Breach of Covenants.  The Warrant Agent shall not be responsible for any
       -------------------
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the Company.

14.3   Performance of Duties.  The Warrant Agent may execute and exercise any of
       ---------------------
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its duly appointed attorneys or agents.

14.4   Reliance on Counsel.  Before the Warrant Agent acts or refrains from
       -------------------
acting, the Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant Agent
shall incur no liability or responsibility to the

                                       15
<PAGE>

Company or to any Holder in respect to any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the written opinion or the
written advice of such counsel.

14.5   Proof of Actions Taken.  Whenever in the performance of its duties under
       ----------------------
this Agreement the Warrant Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed conclusively to
have been proved and established by a certificate signed by any of the Chairman
of the Board, Chief Executive Officer, Chief Financial Officer or one of the
Vice Presidents of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

14.6   Compensation and Indemnification.  The Company agrees to pay the Warrant
       --------------------------------
Agent reasonable compensation for all services rendered by the Warrant Agent in
the performance of its duties under this Agreement, to reimburse the Warrant
Agent for all reasonable expenses, taxes and governmental charges and other
charges incurred by the Warrant Agent in the performance of its duties under
this Agreement (including but not limited to the reasonable fees and expenses of
a single legal counsel), and to indemnify the Warrant Agent and its officers,
agents and directors for and to hold each harmless from and against any and all
losses and liabilities, including judgments, costs and reasonable counsel
fees, for anything done or omitted by the Warrant Agent or any of its agents in
the performance of its duties under this Agreement, except as a result of the
Warrant Agent's gross negligence or willful misconduct as determined in a final
judgment of a court of competent jurisdiction and authority.  The Company's
obligations under this Section 14.6 and any claim arising hereunder shall
survive the resignation or removal of the Warrant Agent and the termination or
discharge of the Company's obligations under this Agreement.

14.7   Legal Proceedings.  The Warrant Agent shall be under no obligation to
       -----------------
institute any action, suit or legal proceeding or to take any other action
likely to involve material expense unless the Company or any one or more Holders
shall furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses which may be incurred or any liabilities which may arise (but
only to the extent such costs and expenses or liabilities would be covered by
the preceding Section 14.6), but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity.  All rights of action of
any Holder under this Agreement or under any of the Warrants may be enforced by
the Warrant Agent, and any action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders, as their respective
rights or interests may appear.

14.8   Other Transactions in Securities of Company.  Subject to the provisions
       -------------------------------------------
of applicable law, the Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
any other securities of the Company or have a pecuniary interest in any
transaction in which the Company may be interested or contract with or lend
money to the Company or otherwise act as fully and freely as

                                       16
<PAGE>

though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.

14.9   Liability of Warrant Agent.  The Warrant Agent shall act hereunder solely
       --------------------------
as agent, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.

14.10    Reliance on Documents.  The Warrant Agent will not incur any liability
         ---------------------
or responsibility to the Company or to any Holder for any action taken in
reliance on any notice, resolution, waiver, consent order, certificate, or other
paper, document or instrument reasonably believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.

14.11    Validity of Agreement.  The Warrant Agent shall not be under any
         ---------------------
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or for
any of the statements of fact or recitals contained in this Agreement or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereof) or any Warrant; nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other securities) to be
issued pursuant to this Agreement or any Warrant, or as to whether any Warrant
Shares (or other securities) will, when issued, be validly issued, fully paid
and nonassessable, or as to the Exercise Price or the number or amount of
Warrant Shares or other securities or any assets or other property issuable upon
exercise of any Warrant.

14.12    Instructions from Company.  The Warrant Agent is hereby authorized and
         -------------------------
directed to accept instructions with respect to the performance of its duties
hereunder from any person believed in good faith by the Warrant Agent to be the
Chairman of the Board, Chief Executive Officer, the Chief Financial Officer or
one of the Vice Presidents of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or officers or any delay in acting while
waiting for these instructions.

Section 15.   Change of Warrant Agent.  The Warrant Agent may resign and be
              -----------------------
discharged from its duties under this Agreement by giving to the Company thirty
(30) days' prior written notice.  The Warrant Agent may be removed by like
notice to the Warrant Agent and the Holders from the Company, such notice to
specify the date when removal shall become effective.  If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, then
the Company shall appoint a successor to the Warrant Agent.  If the Company
shall fail to make such appointment within a period of thirty (30) days after
such removal or written notification of such resignation or incapacity by the
resigning or incapacitated Warrant Agent, then any Holder may, at the Company's
expense, apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent.  Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank or trust company, in good
standing, incorporated under the laws of the United States of America or any
state thereof and having at the time of its appointment as Warrant Agent a
combined capital and surplus of at least $100,000,000.  After appointment and
acceptance of such appointment in writing, the successor

                                       17
<PAGE>

Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent any property at the time held by it hereunder, and
shall execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Failure to file any notice provided for in this
Section 15, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor Warrant Agent, as the case may be. In the event of such
resignation or removal, the successor Warrant Agent shall promptly mail to each
Holder written notice of such removal or resignation and the name and address of
such successor Warrant Agent.

Section 16.   Notices.  Any notice pursuant to this Agreement by the Company or
              -------
by any Holder to the Warrant Agent, shall be in writing and shall be delivered
in person or sent by registered or certified mail and shall be deemed given upon
receipt at its offices at:

     If by mail:

     Wells Fargo Bank Minnesota, N.A.
     Sixth and Marquette
     MAC N9303-120
     Minneapolis, MN  55479
     Attention:  Corporate Trust Services

     If in person:

     Wells Fargo Bank Minnesota, N.A.
     Corporate Trust Services
     608 Second Avenue South
     12th Floor - Northstar East Bldg.
     Minneapolis, MN  55402

Any notice pursuant to this Agreement by the Warrant Agent or by any Holder to
the Company, shall be in writing and shall be delivered in person or sent by
registered or certified mail and shall be deemed given upon receipt at its
offices at Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), 680 South
Fourth Street, Louisville, Kentucky 40202, Attn: General Counsel and Chief
Financial Officer.  Each party hereto may from time to time change the address
to which its notices are to be delivered or mailed hereunder by notice to the
other party.

     Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders shall be in writing and shall be mailed first class,
postage prepaid, or otherwise delivered, to such Holders at their respective
addresses in the Warrant Register.  The initial address of each Holder shall be
as provided by the Company to the Warrant Agent.  Any Holder may change its
address by notice to the Company and the Warrant Agent given in accordance with
this Section 16.

Section 17.   Cancellation of Warrants.  In the event the Company shall purchase
              ------------------------
or otherwise acquire any Warrants, the same shall thereupon be delivered to the
Warrant Agent and

                                       18
<PAGE>

be cancelled by it and retired. The Warrant Agent shall cancel any Warrant
Certificate surrendered for exchange, substitution, transfer or exercise in
whole or in part.

Section 18.   Supplements and Amendments.  The Company and the Warrant Agent may
              --------------------------
from time to time supplement or amend this Agreement, the Warrants and the
Warrant Certificates without approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to comply with
the requirements of any national securities exchange or the Nasdaq National
Market or the Nasdaq Small Cap Market, or to make any other provisions in regard
to matters or questions arising hereunder which the Company and the Warrant
Agent may deem necessary or desirable and which shall not be inconsistent with
the provisions of the Warrants and this Agreement.  Any other supplement or
amendment to this Agreement may be made with the approval of the Holders of a
majority of outstanding Warrants of each series of Warrants, voting separately
as two classes.  Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Warrant Agent
under this Agreement will be effective against the Warrant Agent without the
execution of such supplement or amendment by the Warrant Agent.

Section 19.   Successors.  All the covenants and provisions of this Agreement by
              ----------
or for the benefit of the Company or the Warrant Agent shall bind and inure
solely to the benefit of the Company or the Warrant Agent and their respective
successors hereunder.

Section 20.   Applicable Law.  This Agreement and each Warrant issued hereunder
              --------------
shall be governed by and construed in accordance with the laws of the state of
New York without giving effect to the principles of conflict of laws thereof.

Section 21.   Benefits of this Agreement.  Nothing in this Agreement shall be
              --------------------------
construed to give to any Person other than the Company, the Warrant Agent and
the Holders any legal or equitable right, remedy or claim under this Agreement;
rather, this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent, their respective successors, and the Holders.

Section 22.   Counterparts.  This Agreement may be executed in any number of
              ------------
counterparts, each of which shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.

Section 23.   Captions.  The captions of the Sections and subsections of this
              --------
Agreement, have been inserted for convenience only and shall have no substantive
effect.

                                       19
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.

                              VENCOR, INC.

                              (to be renamed Kindred Healthcare, Inc.)

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

                              WELLS FARGO BANK MINNESOTA, N.A.

                              as Warrant Agent

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

                                       20
<PAGE>

                                         EXHIBIT A
                                         TO WARRANT AGREEMENT

     No.  _______________                            _____________ Warrants

                          Series A Warrant Certificate

                             CUSIP No. 494580-11-1

                                  VENCOR, INC.
                    (to be renamed Kindred Healthcare, Inc.)

     This Warrant Certificate certifies that _____________________ or registered
assigns, is the registered holder of Series A Warrants (the "Warrants") expiring
at 5:00 p.m., New York City time, on April 20, 2006 (five years after the
Effective Date of the Plan (as defined in the Warrant Agreement referred to on
the reverse side hereof)) (the "Expiration Date"), to purchase Common Stock,
$0.25 par value per share (the "Common Stock"), of VENCOR, INC. (to be renamed
Kindred Healthcare, Inc.), a Delaware corporation (the "Company"). The Warrants
may be exercised at any time from 9:00 a.m., New York City time, on April 21,
2001 to 5:00 p.m., New York City time, on the Expiration Date. Each Warrant
entitles the holder upon exercise to receive from the Company, if exercised
before 5:00 p.m., New York City time, on the Expiration Date, one fully paid and
nonassessable share of Common Stock (a "Warrant Share") at the Series A Exercise
Price (as defined in the Warrant Agreement referred to on the reverse side
hereof), payable in lawful money of the United States of America, upon surrender
of this Warrant Certificate and payment of the Series A Exercise Price at the
office or agency of the Warrant Agent, subject to the conditions set forth
herein and in the Warrant Agreement. The Series A Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events as set forth in the Warrant Agreement.

     WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON APRIL
20, 2006 (FIVE YEARS FROM THE EFFECTIVE DATE) SHALL BECOME VOID.

     Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

     This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.

                                      A-1
<PAGE>

     IN WITNESS WHEREOF, VENCOR, INC. (to be renamed Kindred Healthcare, Inc.)
has caused this Warrant Certificate to be duly executed.

                                    VENCOR, INC.

                                    (to be renamed Kindred Healthcare, Inc.)

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

Dated:
       -----------------------------

Countersigned:

WELLS FARGO BANK MINNESOTA,
   NATIONAL ASSOCIATION,
as Warrant Agent

By:
   ----------------------------
      Authorized Signatory

                                      A-2
<PAGE>

                         [Form of Warrant Certificate]

                                   (Reverse)

     The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder upon exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of April 20,
2001 (the "Warrant Agreement"), duly executed and delivered by the Company to
Wells Fargo Bank Minnesota, National Association, as Warrant Agent (the "Warrant
Agent"), which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Warrant Agent. By accepting initial delivery, transfer or exchange of
this Warrant Certificate, the duly registered holder shall be deemed to have
agreed to the terms of the Warrant Agreement as it may be in effect from time to
time, including any amendments or supplements duly adopted in accordance
therewith.

     The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with payment
of the aggregate Series A Exercise Price in the manner described below at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or its assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.

     Payment of the aggregate Series A Exercise Price must be made in cash by
wire transfer to the Warrant Agent for the account of the Company.

     The Warrant Agreement provides that upon the occurrence of certain events
the number of shares of Common Stock or type of stock issuable upon the exercise
of each Warrant, and the Series A Exercise Price of each Warrant, may, subject
to certain conditions, be adjusted.  No fractions of a share of Common Stock
will be issued upon the exercise of any Warrant, but the Company shall pay the
cash value thereof determined as provided in the Warrant Agreement.

     Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

     Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant

                                      A-3
<PAGE>

Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.

     The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.  Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.

                                      A-4
<PAGE>

                                 PURCHASE FORM
                                 -------------

     The undersigned hereby irrevocably elects to exercise ___ Warrant(s)
represented by this Warrant Certificate, according to the terms and conditions
hereof and hereby makes payment of $________ in payment of the aggregate Series
A Exercise Price thereof.  If the number of Warrants exercised shall not be all
of the Warrants represented by this Warrant Certificate, then a new Warrant
Certificate for the balance remaining shall be issued in the name of the
undersigned or its assignee as indicated on the Assignment Form.

Dated:
      ----------------------------------

                     INSTRUCTIONS FOR REGISTRATION OF STOCK
                     --------------------------------------

Name:
     --------------------------------------------------------------------------
                  (please typewrite or print in block letters)
Address:
        -----------------------------------------------------------------------

     Signature:
               ----------------------------------------------------------------
               Note:  The signature must conform in all respects to name of
               holder as specified on the face of this Warrant Certificate

     Signature Guaranteed:

                                      A-5
<PAGE>

                                ASSIGNMENT FORM
                                ---------------

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

Name:
      -------------------------------------------------------------------
                  (please typewrite or print in block letters)

Address:
        ------------------------------------------------------------------

its right, title and interest in ___ Warrants represented by this Warrant
Certificate and does hereby irrevocably constitute and appoint _________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.

Dated:
      ------------------------------

                                                 Signature:
                                                           --------------------
----------------------------------------------            Note: The signature
Social Security or other identifying number of                  must conform in
holder                                                          all respects to
                                                                name of holder
                                                                as specified on
                                                                the face of this
                                                                Warrant
                                                                Certificate

Signature Guaranteed:

                                      A-6
<PAGE>

                                         EXHIBIT B
                                         TO WARRANT AGREEMENT

     No.  _______________                    _____________ Warrants

                          Series B Warrant Certificate

                               CUSIP 494580-12-9

                                  VENCOR, INC.

                    (to be renamed Kindred Healthcare, Inc.)

     This Warrant Certificate certifies that _____________________ or registered
assigns, is the registered holder of Series B Warrants (the "Warrants") expiring
at 5:00 p.m., New York City time, on April 20, 2006 (five years after the
Effective Date of the Plan (as defined in the Warrant Agreement referred to on
the reverse side hereof)) (the "Expiration Date"), to purchase Common Stock,
$0.25 par value per share (the "Common Stock"), of VENCOR, INC. (to be renamed
Kindred Healthcare, Inc.), a Delaware corporation (the "Company").  The Warrants
may be exercised at any time from 9:00 a.m., New York City time, on April 21,
2001 to 5:00 p.m., New York City time, on the Expiration Date.  Each Warrant
entitles the holder upon exercise to receive from the Company, if exercised
before 5:00 p.m., New York City time, on the Expiration Date, one fully paid and
nonassessable share of Common Stock (a "Warrant Share") at the Series B Exercise
Price (as defined in the Warrant Agreement referred to on the reverse side
hereof), payable in lawful money of the United States of America, upon surrender
of this Warrant Certificate and payment of the Series B Exercise Price at the
office or agency of the Warrant  Agent, subject to the conditions set forth
herein and in the Warrant Agreement.  The Series B Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events as set forth in the Warrant Agreement.

     WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON APRIL
20, 2006 (FIVE YEARS FROM THE EFFECTIVE DATE) SHALL BECOME VOID.

     Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

     This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.

                                      B-1
<PAGE>

     IN WITNESS WHEREOF, VENCOR, INC. (to be renamed Kindred Healthcare, Inc.)
has caused this Warrant Certificate to be duly executed.

                                    VENCOR, INC.

                                    (to be renamed Kindred Healthcare, Inc.)

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

Dated:
       -----------------------------

Countersigned:

WELLS FARGO BANK MINNESOTA,
    NATIONAL ASSOCIATION
as Warrant Agent

By:
   ----------------------------
      Authorized Signatory

                                      B-2
<PAGE>

                         [Form of Warrant Certificate]

                                   (Reverse)

     The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder upon exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of April 20,
2001 (the "Warrant Agreement"), duly executed and delivered by the Company to
Wells Fargo Bank Minnesota, National Association, as Warrant Agent (the "Warrant
Agent"), which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Warrant Agent. By accepting initial delivery, transfer or exchange of
this Warrant Certificate, the duly registered holder shall be deemed to have
agreed to the terms of the Warrant Agreement as it may be in effect from time to
time, including any amendments or supplements duly adopted in accordance
therewith.

     The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with payment
of the aggregate Series B Exercise Price in the manner described below at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or its assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.

     Payment of the aggregate Series B Exercise Price must be made in cash by
wire transfer to the Warrant Agent for the account of the Company.

     The Warrant Agreement provides that upon the occurrence of certain events
the number of shares of Common Stock or type of stock issuable upon the exercise
of each Warrant, and the Series B Exercise Price of each Warrant, may, subject
to certain conditions, be adjusted.  No fractions of a share of Common Stock
will be issued upon the exercise of any Warrant, but the Company shall pay the
cash value thereof determined as provided in the Warrant Agreement.

     Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

     Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant

                                      B-3
<PAGE>

Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.

     The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.  Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.

                                      B-4
<PAGE>

                                 PURCHASE FORM
                                 -------------

     The undersigned hereby irrevocably elects to exercise ___ Warrant(s)
represented by this Warrant Certificate, according to the terms and conditions
hereof and hereby makes payment of $________ in payment of the aggregate Series
B Exercise Price thereof.  If the number of Warrants exercised shall not be all
of the Warrants represented by this Warrant Certificate, then a new Warrant
Certificate for the balance remaining shall be issued in the name of the
undersigned or its assignee as indicated on the Assignment Form.

Dated:
      ----------------------------------

                     INSTRUCTIONS FOR REGISTRATION OF STOCK
                     --------------------------------------

Name:
     -------------------------------------------------------------------------
                  (please typewrite or print in block letters)
Address:
        ----------------------------------------------------------------------

     Signature:
               ---------------------------------------------------------------
            Note:  The signature must conform in all respects to name of holder
            as specified on the face of this Warrant Certificate

     Signature Guaranteed:

                                      B-5
<PAGE>

                                ASSIGNMENT FORM
                                ---------------

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

Name:
     -------------------------------------------------------------------------
                  (please typewrite or print in block letters)
Address:
        ----------------------------------------------------------------------

its right, title and interest in ___ Warrants represented by this Warrant
Certificate and does hereby irrevocably constitute and appoint _________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.

Dated:
      ------------------------------

                                                 Signature:
                                                           --------------------
----------------------------------------------            Note: The signature
Social Security or other identifying number of                  must conform in
holder                                                          all respects to
                                                                name of holder
                                                                as specified on
                                                                the face of this
                                                                Warrant
                                                                Certificate

Signature Guaranteed:

                                      B-6
<PAGE>

                                         EXHIBIT C
                                         TO WARRANT AGREEMENT

UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR EXERCISE, AND ANY
WARRANT CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
WARRANT SHARES ISSUED UPON THE EXERCISE HEREOF ARE REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE, EXERCISE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                                      C-1<PAGE>

                                                                     Exhibit 4.2

                         REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April
                                               ---------
20, 2001, by and among Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), a
Delaware corporation (the "Company") and the Persons identified on Schedule 1
                           -------
hereto (the "Initial Holders").
             ---------------

                                    RECITALS

A.    Pursuant to the Company's Fourth Amended and Restated Plan of
Reorganization dated as of December 14, 2000 (the "Plan"), upon satisfaction of
certain conditions, the Company will issue New Common Stock and/or New Warrants
(both as defined in the Plan) to the Initial Holders in the amounts set forth on
Schedule 1 hereto.

B.    In order to induce the Initial Holders to agree to the Plan, the Company
has agreed to grant certain securities registration rights to the Initial
Holders as set forth herein.
                                   AGREEMENTS

          In consideration of the premises and the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.  Definitions and General Interpretive Principles.  In addition to the defined
    -----------------------------------------------
terms set forth in the Plan that are not otherwise defined herein (which shall
have the same meanings herein as in the Plan) and to the capitalized terms
defined elsewhere in this Agreement, the following capitalized terms shall have
the following meanings when used in this Agreement:

          "Adverse Disclosure" means public disclosure of material non-public
           ------------------
information, which disclosure in the good faith judgment of the chief executive
officer or chief financial officer of the Company (i) would be required to be
made in any registration statement filed with the Commission by the Company so
that such registration statement would not be materially misleading; (ii) would
not be required to be made at such time but for the filing of such registration
statement; and (iii) the Company has a bona fide business purpose for avoiding.

          "Allocation Percentage" has the meaning set forth in Section 3(e).
           ---------------------

          "Commission" means the U.S. Securities and Exchange Commission and any
           ----------
agency succeeding to its functions.

          "Demand Registration" has the meaning set forth in Section 3(a).
           -------------------

          "Demand Suspension" has the meaning set forth in Section 3(c).
           -----------------

          "Expiration Time" means the earlier of (i) April 20, 2003 (the second
           ---------------
anniversary of the Effective Date); provided, however, that the rights and
                                    --------  -------
obligations relating to Piggyback Registrations contained in Section 4 and
Demand Registrations solely as they relate to a Ventas Stockholder Distribution
contained in Section 3 (and the provisions of this Agreement
<PAGE>

specifically related thereto) shall continue until April 20, 2005 (the fourth
anniversary of the Effective Date) and (ii) the first time at which there are no
Holders.

          "Holder" means an Initial Holder or a successor, assignee or
           ------
transferee of an Initial Holder as contemplated by Section 13 hereof, in each
case for so long as such Initial Holder, successor, assignee or transferee holds
Registrable Securities.

          "Included Registrable Securities" has the meaning set forth in Section
           -------------------------------
          4(a).

          "Indemnified Party" has the meaning set forth in Section 8(c).
           -----------------

          "Indemnifying Party" has the meaning set forth in Section 8(c).
           ------------------

          "Loss" has the meaning set forth in Section 8(a).
           ----

          "NASD" means the National Association of Securities Dealers, Inc.
           ----

          "New Warrant Stock" means any New Common Stock or other security of
           -----------------
the Company or any successor entity issued or issuable upon exercise of any New
Warrant.

          "Participant" has the meaning set forth in Section 8(a).
           -----------

          "Person" means a natural person, a partnership, a corporation, a
           ------
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.

          "Piggyback Registration" has the meaning set forth in Section 4(a).
           ----------------------

          "Registrable Securities" means (i) the New Common Stock, (ii) the New
           ----------------------
Warrants and (iii) the New Warrant Stock issuable upon exercise of the New
Warrants, in each case including any securities of the Company or any successor
entity that may be issued or distributed in respect thereof by way of stock
dividend, stock split or other distribution, consolidation, reclassification or
any similar transaction; provided, however, that the foregoing securities shall
                         --------  -------
cease to be "Registrable Securities" to the extent that (i) a registration
statement with respect to the sale of such securities has been declared
effective under the Securities Act and such securities have been disposed of
pursuant to such registration statement, (ii) such securities have been disposed
of pursuant to and in accordance with Rule 144 (or any similar provision then in
force) under the Securities Act or (iii) such securities may be disposed of
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act.  For purposes of this Agreement, any reference to a percentage
(or a majority in number) of Registrable Securities shall mean that percentage
of Registrable Securities, collectively, computed on the assumption that all
such New Warrants were exercised.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the Commission promulgated thereunder.

                                       2
<PAGE>

          "Securities Exchange Act" means the Securities Exchange Act of 1934,
           -----------------------
as amended, and the rules and regulations of the Commission promulgated
thereunder.

          "Shelf Period" has the meaning set forth in Section 2(b).
           ------------

          "Shelf Registration" means a registration effected pursuant to Section
           ------------------
          2.

          "Shelf Registration Statement" means a registration statement of the
           ----------------------------
Company filed with the Commission on Form S-1 or, if available, Form S-3 (or any
successors thereto) for an offering to be made on a continuous or delayed basis
pursuant to Rule 415 under the Securities Act (or any similar rule that may be
adopted by the Commission) covering all of the Registrable Securities requested
to be included by the Initial Holders.

          "Shelf Suspension" has the meaning set forth in Section 2(c).
           ----------------

          "Underwritten Offering" means an offering registered under the
           ---------------------
Securities Act in which securities of the Company are sold to an underwriter on
a firm commitment basis for reoffering to the public.

          "Ventas" means Ventas Realty, Limited Partnership and/or one or more
           ------
trusts established for the benefit of the stockholders of Ventas, Inc. (the

"Trust").  For purposes of requesting a Demand Registration pursuant to Section
------
3 hereof, either Ventas Realty, Limited Partnership or the Trust (but not both)
shall be deemed an Initial Holder.

          "Ventas Stockholder Distribution" means a pro rata distribution by
           -------------------------------
Ventas, Inc. of Registrable Securities held by Ventas, Inc. solely to its
beneficial owners.

          Whenever used in this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, any noun or pronoun shall be
deemed to include the plural as well as the singular and to cover all genders.
The name assigned this Agreement and the section captions used herein are for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect hereof.  Unless otherwise specified, the terms "hereof,"
"herein," "hereunder" and similar terms refer to this Agreement as a whole, and
references herein to Sections refer to Sections of this Agreement.

2.  Shelf Registration
    ------------------
(a)  Filing.  Subject to Section 2(c), as soon as practicable after the
     ------
Effective Date, but in no event later than 120 days following the Effective
Date, the Company shall file with the Commission a Shelf Registration Statement
relating to the offer and sale of Registrable Securities by the Holders thereof
from time to time in accordance with (i) the reasonable and customary methods of
distribution elected by such Holders (including one or more Underwritten
Offerings) and (ii) in order to permit a Ventas Stockholder Distribution, in
each case as set forth in such Shelf Registration Statement, and shall use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act as soon as practicable thereafter.

                                       3
<PAGE>

(b)  Continued Effectiveness.  Subject to Section 2(c), the Company shall use
     -----------------------
its reasonable best efforts to keep the Shelf Registration Statement
continuously effective in order to permit any prospectus that forms a part
thereof to be usable by Holders until the Expiration Time (such period
being the "Shelf Period"), provided that the Shelf Period shall be subject
           ------------    --------
to extension in accordance with Section 6(c).

(c)  Delay in Filing; Suspension of Registration.  If the filing, initial
     -------------------------------------------
effectiveness or continued effectiveness of the Shelf Registration Statement at
any time would require the Company to make an Adverse Disclosure or would
require the inclusion in such Shelf Registration Statement of audited financial
statements that are unavailable to the Company for reasons beyond its reasonable
control, the Company may, upon giving prompt written notice (but in any event
within five (5) days of determination) of such action to the Holders, delay the
filing or initial effectiveness of, or suspend use of, the Shelf Registration
Statement for the shortest period of time determined in good faith by the
Company to be necessary for such purpose (a "Shelf Suspension"); provided,
                                             ----------------    --------
however, that the Company shall not be permitted to exercise a Shelf Suspensio
-------
(i) more than three times during any twenty-four (24) month period, (ii) for a
period exceeding ninety (90) days on any one occasion, or (iii) for an aggregate
period exceeding one hundred twenty (120) days in any twelve (12) month period.
In the event of a Shelf Suspension, the Holders agree to suspend, immediately
upon their receipt of the notice referred to above, any sale or offer to sell
the Registrable Securities, and the use of the prospectus related to the Shelf
Registration in connection with any such sale or offer to sell Registrable
Securities, and agree not to disclose to any other Person the fact that the
Company has exercised a Shelf Suspension or any related facts. The Company shall
promptly (but in any event within five (5) days) notify the Holders upon the
termination of any Shelf Suspension.

(d)  Underwritten Offering.  If the Holders holding not less than a majority of
     ---------------------
the Registrable Securities included in the Shelf Registration Statement so elect
by written request to the Company, such Holders may conduct an offering in the
form of an Underwritten Offering and the Company, if necessary, shall amend or
supplement the Shelf Registration Statement for such purpose. The Holders
holding a majority of the Registrable Securities included in such Underwritten
Offering shall, after consulting with the Company, have the right to select the
managing underwriter or underwriters for the offering, subject to the right of
the Company to approve such managing underwriter or underwriters (which approval
shall not be unreasonably withheld) and to select one co-managing underwriter
reasonably acceptable to such Holders.

(e)  Effect on Demand Registration Obligation.  The provisions of Section 3 of
     ----------------------------------------
this Agreement shall not apply at any time that the Company maintains the
effectiveness of a Shelf Registration Statement and is otherwise complying with
its obligations under this Section 2 with respect to all Registrable Securities.

3.  Demand Registrations.
    --------------------
(a)  Demand by Holders.
     -----------------

(i)  Subject to Section 2(e), each Initial Holder may make a written request to
the Company for registration of all or any part of the Registrable Securities
held by such requesting Holder; provided that the estimated market value of the
                                --------
Registrable Securities to

                                       4
<PAGE>

be so registered is at least $10 million in the aggregate or not less than 5% of
the Registrable Securities; and provided further that Ventas shall be entitled
                                -------- -------
to request a Demand Registration with respect to a Ventas Stockholder
Distribution without regard to the dollar or percentage limits set forth above.
Any such requested registration shall hereinafter be referred to as a "Demand
                                                                       ------
Registration."  Each request for a Demand Registration shall specify the
------------
aggregate amount of Registrable Securities to be registered and the intended
methods of disposition thereof.

        (ii)   Within ten (10) days following receipt of any request for a
Demand Registration, the Company shall deliver written notice of such request to
all other Holders of Registrable Securities. Thereafter, subject to Section
3(e), the Company shall include in such Demand Registration any additional
Registrable Securities which the Holder or Holders thereof have requested in
writing be included in such Demand Registration, provided that all requests
                                                 --------
therefor have been received by the Company within ten (10) days of the Company's
having given the applicable notice to such Holder or Holders. All such requests
shall specify the aggregate amount of Registrable Securities to be registered
and the intended method or methods of distribution of the same. The Company also
may elect to include in such registration additional securities of the Company
to be registered thereunder, including securities to be sold for the Company's
own account or for the account of Persons who are not Holders.

        (iii)  As promptly as practicable following receipt of a request for a
Demand Registration, but in no event later than the later of (x) 180 days
following the Effective Date and (y) 60 days following receipt by the Company of
such request, the Company shall, subject to the terms hereof and applicable law,
use its reasonable best efforts to file a registration statement relating to
such Demand Registration and shall use its reasonable best efforts to cause such
registration statement to be declared effective under the Securities Act as soon
as practicable thereafter and to keep such registration statement effective for
not less than ninety (90) days (or such shorter period during which a prospectus
is required to be delivered under the Securities Act).

(b)  Limitation on Demand Registrations; Effective Registration.  In no event
     ----------------------------------------------------------
shall the Company be required to effect more than one Demand Registration
requested by any Initial Holder. In addition, the Company shall not be required
to file a registration statement for a Demand Registration (i) at any time
during the 120-day period following the effective date of another such
registration statement (other than a registration statement relating solely to a
Ventas Stockholder Distribution), or (ii) during the period commencing on the
seventh day prior to the effective date of an offering by the Company that is
registered under the Securities Act and ending on the ninetieth day after such
offering is completed, provided that, solely with respect to a Ventas
                       --------
Stockholder Distribution, Ventas shall have been afforded the opportunity to
participate in such offering in accordance with the provisions of Section 4
hereof. A registration will not count as a Demand Registration hereunder until
the related registration statement becomes effective and has remained effective
for the period of time specified in Section 3(a)(iii).

(c)  Suspension of Registration.  If the filing, initial effectiveness or
     --------------------------
continued use of a registration statement in respect of a Demand Registration at
any time would require the Company to make an Adverse Disclosure or would
require the inclusion in such registration statement of audited financial
statements that are unavailable to the Company for reasons beyond

                                       5
<PAGE>

the Company's reasonable control, the Company may, upon giving prompt written
notice (but in any event within five (5) days of determination) of such action
to the Holders holding Registrable Securities included or proposed to be
included in such Demand Registration, delay the filing or initial effectiveness
of, or suspend use of, such registration statement for the shortest period of
time determined in good faith by the Company to be necessary for such purpose
a "Demand Suspension"); provided, however, that the Company shall not be
   -----------------    --------  -------
permitted to exercise a Demand Suspension (i) more than three times during any
twenty-four (24) month period, (ii) for a period exceeding ninety (90) days on
any one occasion, or (iii) for an aggregate period exceeding one hundred twenty
(120) days in any twelve (12) month period. In the event of a Demand Suspension,
the Holders agree to suspend, immediately upon their receipt of the notice
referred to above, any sale or offer to sell the Registrable Securities, and the
use of the prospectus related to the Demand Registration in connection with any
such sale or offer to sell Registrable Securities, and agree not to disclose to
any other Person the fact that the Company has exercised a Demand Suspension or
any related facts. The Company shall promptly (but in any event within five (5)
days) notify the Holders holding Registrable Securities affected by any Demand
Suspension upon the termination of such Demand Suspension.

(d)  Underwritten Offering.  If the Holders holding not less than a majority of
     ---------------------
the Registrable Securities included in any offering pursuant to a Demand
Registration so elect by written request to the Company, such offering shall be
in the form of an Underwritten Offering. Holders holding a majority of the
Registrable Securities included in such Underwritten Offering shall, after
consulting with the Company, have the right to select the managing underwriter
or underwriters for the offering, subject to the right of the Company to approve
such managing underwriter or underwriters (which approval shall not be
unreasonably withheld) and to select one co-managing underwriter reasonably
acceptable to such Holders.

(e)  Priority of Securities Registered Pursuant to Demand Registrations.  If the
     ------------------------------------------------------------------
managing underwriter or underwriters of a proposed offering of Registrable
Securities included in a Demand Registration inform the Holders of such
Registrable Securities and the Company in writing that, in its or their opinion,
the number of securities requested to be included in such Demand Registration
(including securities of the Company for its own account or for the account of
other Persons which are not Holders) exceeds the number which can be sold in
such offering without being likely to have an adverse effect on the price,
timing or distribution of the securities offered or the market for the
securities offered, the Company will include in such registration all of the
Registrable Securities sought to be registered therein by the Holders and only
such lesser number of other securities requested to be included for the account
of the Company or for the account of other Persons which are not Holders as
shall not, in the opinion of the managing underwriter or underwriters, be likely
to have such an effect. In the event that, despite the reduction of the number
of securities to be offered for the account of the Company or for the account of
Persons which are not Holders in such registration pursuant to the immediately
preceding sentence, the number of Registrable Securities to be included in such
registration exceeds the number which, in the opinion of the managing
underwriter or underwriters, can be sold without having the adverse effect
referred to above, the number of Registrable Securities that can be included
without having such an adverse effect shall be allocated pro rata among the
                                                         --- ----
Holders which have requested participation in the Demand Registration (based,
for each such Holder, on the percentage derived by dividing (i) the number of
Registrable Securities which such Holder has requested to include in such Demand
Registration by (ii) the aggregate number

                                       6
<PAGE>

of Registrable Securities which all such Holders have requested to
include (such Holder's "Allocation Percentage")).  Notwithstanding the
                        ---------------------
foregoing, if more than 50% of the Registrable Securities of a Holder
requested to be registered pursuant to a Demand Registration under this
Section 3 are excluded from such Demand Registration, then the Holder
having such securities excluded (an "Excluded Holder") shall have the right
                                     ---------------
to withdraw all, or any number, of their Registrable Securities from inclusion
in such Demand Registration no later than 20 days prior to its effectiveness. If
less than 80% of the aggregate Registrable Securities requested to be included
in such Demand Registration by an Initial Holder are actually included therein,
such registration will not count as a Demand Registration of such Initial Holder
for purposes of this Section 3. Notwithstanding the foregoing, no Registrable
Securities to be distributed pursuant to a Ventas Stockholder Distribution shall
be excluded from a Demand Registration by virtue of this Section 3(e).

          (f)  Registration Statement Form.  Registrations under this Section 3
               ---------------------------
shall be on such appropriate registration form of the Commission (i) as shall be
selected by the Company and as shall be reasonably acceptable to the Holders
holding a majority of Registrable Securities requesting participation in the
Demand Registration and (ii) as shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
specified in the applicable Holders' requests for such registration.

          4.   Piggyback Registrations.
               -----------------------

          (a)  Participation.

          (i)  If the Company at any time proposes to file a registration
statement with respect to any offering of equity securities for its own account
or for the account of any holders of its securities (other than (A) a
registration under Section 2 hereof, (B) a registration on Form S-4 or S-8 or
any successor form to such forms or (C) a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities (other than information as to the
selling stockholders and their intended method or methods of disposition)),
then, as soon as practicable (but in no event less than fifteen (15) days prior
to the proposed date of filing such registration statement with the Commission),
the Company shall give written notice of such proposed filing to all Holders of
Registrable Securities and such notice shall offer the Holders the opportunity
to register such number of Registrable Securities as each such Holder may
request in writing (a "Piggyback Registration"). Subject to Section 4(b), the
Company shall include in such registration statement all such Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the Company's notice has been given
("Included Registrable Securities").  If at any time after giving written
 ---------------------------------
notice of its intention to register any equity securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may, at its election,
give written notice of such determination to each Holder holding Included
Registrable Securities and, (x) in the case of a determination not to register,
shall be relieved of its obligation to register any Included Registrable
Securities in connection with such registration, and (y) in the case of a
determination

                                       7
<PAGE>

to delay registering, shall be permitted to delay registering any Included
Registrable Securities for the same period as the delay in registering such
other equity securities.

        (ii) If the offering pursuant to a Piggyback Registration is to be an
Underwritten Offering, then each Holder making a request for its Registrable
Securities to be included therein must, and the Company shall use its reasonable
best efforts to make such arrangements with the underwriters so that each such
Holder may, participate in such Underwritten Offering on the same terms as other
Persons selling securities in such Underwritten Offering. If the offering
pursuant to such registration is to be on any other basis, then each Holder
making a request for a Piggyback Registration pursuant to this Section 4(a) must
participate in such offering on such basis. Notwithstanding any provision in
this Agreement to the contrary, any Holder participating through a Piggyback
Registration shall have no right to change the intended method or methods of
disposition otherwise applicable, other than to include provisions reasonably
necessary to effect a Ventas Stockholder Distribution.

       (b) Priority of Piggyback Registration.  If the managing underwriter
           ----------------------------------
or underwriters of any proposed offering of securities included in a Piggyback
Registration informs the Holders holding Included Registrable Securities in
writing that, in its or their opinion, the total number of securities which such
Holders and any other Persons intend to include in such offering exceeds the
number which can be sold in such offering without being likely to have an
adverse effect on the price, timing or distribution of the securities offered or
the market for the securities offered, then the securities to be included in
such registration shall be allocated as follows:

(i)   first, 100% of the securities that the Company or any Person exercising a
      -----
      contractual right to demand registration has proposed to sell shall be
      included therein;

(ii)  second, and only if all the securities referenced in clause (i) have been
      ------
      included, the number of Included Registrable Securities that, in the
      opinion of such underwriter or underwriters, can be sold without having
      such adverse effect shall be included therein, with such number to be
      allocated pro rata among the Holders of Included Registrable Securities
                --- ----
      (based, for each such Holder, on such Holder's Allocation Percentage);
      provided, however, that if as a result of the provisions of this Section
      --------  -------
      4(b), any Holder shall not be entitled to include at least 50% of such
      Holder's Included Registrable Securities, such Holder may withdraw such
      Holder's request to include all, or any number of such Registrable
      Securities in such registration statement no later than 20 days prior to
      its effectiveness; and

(iii) third, and only if all of the Registrable Securities referenced in
      -----
      clauses (i) and (ii) have been included, any other equity securities
      eligible for inclusion in such registration which, in the opinion of such
      underwriters, can be sold without having such adverse effect shall be
      included therein.

                                       8
<PAGE>

5.  Black-out Periods
    -----------------

          (a) Black-out Periods for Holders.  In the event of (i) a registration
              -----------------------------
by the Company involving the offering and sale by the Company of its equity
securities or securities convertible into or exchangeable for its equity
securities or (ii) an Underwritten Offering involving the offering and sale by
Holders of Registrable Securities, the Holders agree, if requested by the
Company (or, in the case of any Underwritten Offering, by the managing
underwriter or underwriters) and provided that the Company has complied with its
obligations under Section 4, not to effect any public sale or distribution
(including any sale pursuant to Rule 144 under the Securities Act) of any
securities of the Company (except, in each case, as part of the applicable
registration, if permitted, and provided that, solely with respect to a Ventas
Stockholder Distribution, Ventas shall have been afforded the opportunity to
participate in such offering in accordance with the provisions of Section 4
hereof) which securities are the same as or similar to those being registered in
connection with such registration, or which are convertible into or exchangeable
or exercisable for such securities, during the period beginning seven (7) days
before and ending 90 days (or such lesser period as may be permitted by the
Company or such managing underwriters) after, the effective date of the
registration statement filed in connection with such registration, to the extent
such Holders are timely notified in writing by the Company or the managing
underwriter or underwriters.

          (b) Black-out Periods for the Company.  In the event of a registration
              ---------------------------------
of Registrable Securities pursuant to Section 2 or Section 3 hereof, the Company
agrees, if requested by the Holders holding a majority of the Registrable
Securities to be sold pursuant to such registration (or, in the case of an
Underwritten Offering, by the managing underwriter or underwriters in such
Underwritten Offering), not to effect any public sale or distribution of any
securities of the Company which are the same as or similar to those being
registered, or which are convertible into or exchangeable or exercisable for
such securities, during the period beginning seven (7) days before, and ending
90 days (or such lesser period as may be permitted by such Holders or such
underwriter or underwriters) after, the effective date of the registration
statement filed in connection with such registration (or, in the case of an
Underwritten Offering under the Shelf Registration, the date of the closing
under the underwriting agreement in connection therewith), to the extent the
Company is timely notified in writing by such Holders or such underwriter or
underwriters.  Notwithstanding the foregoing, the Company may effect a public
sale or distribution of securities of the type described above and during the
periods described above if the same (A) is made pursuant to a registration on
Form S-4 or S-8 or any successor form to such forms or (B) in connection with a
direct or indirect acquisition, merger or other business combination by the
Company of or with another Person.

6.  Registration Procedures.
    -----------------------

          (a) In connection with the Company's registration obligations pursuant
to this Agreement, the Company shall, subject to the limitations set forth
herein, use its reasonable best efforts to effect any such registration so as to
permit the sale of the applicable Registrable Securities in accordance with the
intended method or methods of distribution thereof as expeditiously as
reasonably practicable and, in any event, in conformity with any required time
period set forth herein, and in connection therewith the Company shall:

              (i)    before filing a registration statement or prospectus with
the Commission, or any amendments or supplements thereto, furnish to the
underwriter or

                                       9
<PAGE>

underwriters, if any, and to the Holders holding Registrable Securities included
in such registration statement, copies of all documents prepared to be filed, w
hich documents shall be subject to the reasonable review and comment of such
Holders, such underwriters, if any, and their respective counsel;

              (ii)   prepare and file with the Commission a registration
statement relating to the registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities;

             (iii)   prepare and file with the Commission such amendments or
supplements to the applicable registration statement or prospectus used in
connection therewith as may be (A) reasonably requested by any participating
Holder (to the extent such request relates to information relating to such
Holder), (B) necessary to keep such registration effective for the period of
time required by this Agreement or (C) necessary to comply with the applicable
provisions of Rules 424 and 430A under the Securities Act;

             (iv)    notify the selling Holders and the managing underwriter or
underwriters, if any, as soon as reasonably practicable after notice thereof is
received by the Company (A) when the applicable registration statement or any
amendment thereto has been filed or becomes effective and when the applicable
prospectus or any amendment or supplement thereto has been filed, (B) of any
written comments by the Commission or any request by the Commission for
amendments or supplements to such registration statement or prospectus or for
additional information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or any order
preventing or suspending the use of any preliminary or final prospectus or the
initiation or threat of any proceedings for such purposes and (D) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for offering or sale in any
jurisdiction or the initiation or threat of any proceeding for such purpose;

             (v)     promptly notify each selling Holder and the managing
underwriter or underwriters, if any, when the Company becomes aware of the
occurrence of any event as a result of which the applicable registration
statement or prospectus (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein (in the case of the prospectus and any preliminary prospectus, in light
of the circumstances under which they were made) not misleading or, if for any
other reason it shall be necessary to amend or supplement such registration
statement or prospectus in order to comply with the Securities Act and, in
either case as promptly as reasonably practicable thereafter, prepare and file
with the Commission a post-effective amendment or supplement to such
registration statement or prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of Registrable Securities, the prospectus shall not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading;

             (vi)    make every reasonable effort to prevent or obtain at the
earliest possible moment the withdrawal of any stop order with respect to the
applicable registration statement or other order suspending the use of any
preliminary or final prospectus;

                                       10
<PAGE>

             (vii)   promptly incorporate in a prospectus supplement or post-
effective amendment to the applicable registration statement such information as
the managing underwriter or underwriters, if any, or the Holders holding a
majority of the Registrable Securities being sold agree should be included
therein (or, in the case of a Ventas Stockholder Distribution, by Ventas)
relating to the plan of distribution with respect to such Registrable
Securities, the amount of Registrable Securities being distributed and the
purchase price being paid therefor; and make all required filings of such
prospectus supplement or post-effective amendment as soon as reasonably
practicable after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;

             (viii)  furnish to each selling Holder and each managing
underwriter, if any, without charge, as many conformed copies as such Holder or
managing underwriter may reasonably request of the applicable registration
statement, including all documents incorporated by reference therein or exhibits
to such registration statement;

             (ix)    deliver to each selling Holder and each managing
underwriter, if any, without charge, as many copies of the applicable prospectus
(including each preliminary prospectus) as such Holder or managing underwriter
may reasonably request (it being understood that the Company consents to the use
of the prospectus by each of the selling Holders and the underwriter or
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the prospectus);

             (x)     on or prior to the date on which the applicable
registration statement is declared effective, use its reasonable best efforts to
register or qualify such Registrable Securities for offer and sale under the
securities or "Blue Sky" laws of each state and other jurisdiction of the United
States, as any such selling Holder or underwriter, if any, or their respective
counsel reasonably and timely requests in writing, and do any and all other acts
or things reasonably necessary or advisable to keep such registration or
qualification in effect so as to permit the commencement and continuance of
sales and dealings in such jurisdictions for as long as may be necessary to
complete the distribution of the Registrable Securities covered by the
registration statement; provided that the Company shall not be required (A) to
                        --------
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) to take any action which would subject it to taxation or general
service of process in any such jurisdiction where it is not then so subject or
(C) make any change in its charter or by-laws that the board of directors of the
Company determines in good faith to be contrary to the best interests of the
Company and its stockholders;

             (xi)    cooperate with the selling Holders and the managing
underwriter, underwriters or agent, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends;

             (xii)   not later than the effective date of the applicable
registration statement, provide a CUSIP number for all Registrable Securities
included in such registration statement and provide the applicable transfer
agent with printed certificates for the Registrable Securities, which
certificates shall be in a form eligible for deposit with The Depository Trust
Company;

                                       11
<PAGE>

             (xiii)  obtain for delivery to the underwriter or underwriters, if
any, with copies to the Holders included in such registration, an opinion or
opinions from counsel for the Company dated the effective date of the
registration statement or, in the event of an Underwritten Offering, the date of
the closing under the underwriting agreement, in customary form, scope and
substance;

             (xiv)   in the case of an Underwritten Offering, obtain for
delivery to the Company and the underwriter or underwriters, if any, with copies
(subject to the reasonable consent of the certified public accountants referred
to below, determined in accordance with market practice) to the Holders included
in such registration, a comfort letter from the Company's independent certified
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and as the managing underwriter or
underwriters reasonably request, dated the date of execution of the underwriting
agreement and brought down to the closing under the underwriting agreement;

             (xv)    reasonably cooperate with each selling Holder of
Registrable Securities and each underwriter or agent, if any, participating in
the disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD;

             (xvi)   use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders such information (financial or otherwise) as may be
required thereunder;

             (xvii)  provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the applicable registration
statement from and after a date not later than the effective date of such
registration statement;

             (xviii) cause all Registrable Securities covered by the applicable
registration statement to be listed on each securities exchange on which any of
the Company's securities of such class are then listed or quoted and on each
inter-dealer quotation system on which any of the Company's securities of such
class are then quoted; and

             (xix)   make available upon reasonable notice at reasonable times
and for reasonable periods for inspection by each Initial Holder and a
representative appointed by the Holders holding a majority of the Registrable
Securities covered by the applicable registration statement, by any managing
underwriter or underwriters participating in any disposition to be effected
pursuant to such registration statement and by any attorney, accountant or other
agent retained by such Holders or any such managing underwriter, all pertinent
financial and other records, pertinent corporate documents and properties of the
Company as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause all of the Company's officers, directors and
employees and the independent public accountants who have certified its
financial statements to make themselves available upon reasonable notice at
reasonable times and for reasonable periods to discuss the business of the
Company and to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement as shall be reasonably necessary to enable them to exercise their due
diligence responsibility (subject to the entry by each party referred to

                                       12
<PAGE>

in this clause (xix) into a customary confidentiality agreement in a form
reasonably acceptable to the Company).

          (b) The Company may require each selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding itself, the Registrable Securities held by it, the distribution of
such Holder's Registrable Securities and such other information relating to such
Holder and its ownership of the applicable Registrable Securities as the Company
may from time to time reasonably request, including without limitation
information required under Item 507 of Regulation S-K and other information
necessary to effect a registration with respect to a Ventas Stockholder
Distribution.  Each Holder agrees to furnish such information to the Company and
to cooperate with the Company as necessary to enable the Company to comply with
the provisions of this Agreement.  The Company shall have the right to exclude
any Holder that does not comply with the preceding sentence from the applicable
registration.

          (c) Each Holder agrees by acquisition of its Registrable Securities
that, upon receipt of any notice from the Company of the occurrence of any event
of the kind described in Section 6(a)(v), such Holder shall discontinue
disposition of its Registrable Securities pursuant to such registration
statement until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6(a)(v) and of any additional or
supplemental filings that are incorporated by reference in the prospectus, or
until such Holder is advised in writing by the Company that the use of the
prospectus may be resumed, and has received copies and, if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the prospectus covering such Registrable Securities which are current at the
time of the receipt of such notice.  In the case of the Shelf Registration
Statement, in the event the Company shall give any such notice, the Shelf Period
shall be extended by the number of days in the period from and including the
date of the giving of such notice in accordance with Section 16 and pursuant to
this Section 6(c) to but not including the date when each Holder of Registrable
Securities covered by the Shelf Registration Statement shall have received
copies of the supplemented or amended prospectus contemplated by Section
6(a)(v), and the restrictions of this Section 6(c) shall no longer be
applicable.

7.  Registration Expenses.  The Company shall pay all expenses incident to its
    ---------------------
performance or compliance with its obligations under this Agreement, including
without limitation: (i) all registration and filing fees, and any other fees and
expenses associated with filings required to be made with the Commission or the
NASD, (ii) all fees and expenses of compliance with federal and state securities
or "Blue Sky" laws, (iii) all of its printing, duplicating, word processing,
messenger, telephone, facsimile and delivery expenses (including expenses of
printing certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and of printing prospectuses), (iv)
all fees and disbursements of counsel for the Company and of all independent
certified public accountants of the Company, (v) Securities Act liability
insurance or similar insurance if the Company so desires, (vi) all fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange or the quotation of the Registrable Securities on any
inter-dealer quotation system, (vii) the reasonable fees and expenses of one
counsel for all Holders (selected by the Holders of a majority of the
Registrable Securities included in a registration) in an amount not to exceed

                                       13
<PAGE>

$50,000 and (viii) all road show costs and expenses not paid for by the
underwriters.  In addition, the Company shall pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any audit and
the fees and expenses of any Person, including special experts, retained by the
Company.  The Company shall not be required to pay (w) any other costs or
expenses in the course of the transactions contemplated hereby, (x) any expenses
incurred by the Holders (except as provided in clauses (i), (ii) and (vii) of
the preceding sentence), (y) any underwriting discounts or commissions or
transfer taxes attributable to the sale of Registrable Securities or (z) any
fees and expenses of counsel to the underwriters.

8.  Indemnification.
    ---------------

          (a) Indemnification by the Company.  The Company agrees to indemnify
              ------------------------------
and hold harmless, to the fullest extent permitted by law, each Holder selling
Registrable Securities and its respective officers, directors, partners and
employees and each Person who controls (within the meaning of the Securities Act
or the Securities Exchange Act) such selling Holder (each, a "Participant") from
                                                              -----------
and against any and all losses, claims, damages, judgments, liabilities and
expenses (including reasonable costs of investigation and legal expenses) caused
by, arising out of or based upon (i) any untrue or alleged untrue statement of a
material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act (including any
final, preliminary or summary prospectus contained therein or any amendment
thereof or supplement thereto or any documents incorporated by reference
therein) or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a prospectus or preliminary prospectus, in light of the
circumstances under which they were made) not misleading (each, a "Loss" and
                                                                   ----
collectively "Losses"); provided, however, that the Company shall not be liable
              ------    --------  -------
to any Participant in any such case to the extent that any such Loss is caused
by written information furnished to the Company by such Holder expressly for use
in the preparation thereof , or if such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in an amendment or
supplement to such prospectus which has been made available to the Holders and
the relevant Holder fails to deliver such prospectus as so amended or
supplemented, if such delivery is required under applicable law or the
applicable rules of any securities exchange, prior to or concurrently with the
sales of the Registrable Securities to the Person asserting such Loss.  This
indemnity shall be in addition to any liability the Company may otherwise have.

          (b) Indemnification by the Holders.  Each selling Holder agrees
              ------------------------------
(severally and not jointly) to indemnify and hold harmless, to the fullest
extent permitted by law, the Company, its directors, officers and employees and
each Person who controls the Company (within the meaning of the Securities Act
and the Securities Exchange Act) from and against any and all Losses to the
extent, but only to the extent, that any such Loss is caused by, arises out of
or is based upon any information furnished in writing by such selling Holder to
the Company specifically for inclusion in any registration statement under which
such Registrable Securities were registered under the Securities Act (including
any final, preliminary or summary prospectus contained therein or any amendment
thereof or supplement thereto or any documents incorporated by reference
therein) and was not corrected in a subsequent writing prior to or concurrently
with the sale of the Registrable Securities to the Person asserting such Loss.

                                       14
<PAGE>

The liability of any Holder under this paragraph shall in no event exceed the
amount by which proceeds received by such Holder from sales of Registrable
Securities giving rise to such obligations exceeds the amount of any Loss which
such Holder has otherwise been required to pay by reason of such untrue
statement or omission.  This indemnity shall be in addition to any liability
such Holder may otherwise have.

          (c) Indemnification Proceedings.  Any Person entitled to
              ---------------------------
indemnification hereunder (an "Indemnified Party") shall (i) give prompt written
                               -----------------
notice to the Person from whom such indemnification may be sought (the
"Indemnifying Party") of any claim with respect to which it seeks
-------------------
indemnification, provided, however, that the failure to so notify the
                 --------  -------
Indemnifying Party shall not relieve it of any obligation or liability which it
may have hereunder or otherwise except to the extent it is materially prejudiced
by such failure, and (ii) permit such Indemnifying Party to assume the defense
of such claim with counsel reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to select and
--------  -------
employ separate counsel and to participate in the defense of such claim, and the
fees and expenses of such counsel shall be at the expense of the Indemnified
Party unless (A) the Indemnifying Party has agreed in writing to pay such fees
or expenses, (B) the Indemnifying Party shall have failed to assume the defense
of such claim within a reasonable time after having received notice of such
claim from the Indemnified Party and to employ counsel reasonably satisfactory
to the Indemnified Party, (C) in the reasonable judgment of the Indemnified
Party, based upon advice of its counsel, a conflict of interest exists between
the Indemnified Party and the Indemnifying Party with respect to such claims or
(D) the Indemnified Party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other Indemnified Parties
that are different from or in addition to those available to the Indemnifying
Party (in which case, if the Indemnified Party notifies the Indemnifying Party
in writing that the Indemnified Party elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such claim on behalf of the Indemnified Party).
If such defense is assumed by the Indemnifying Party, or if such defense is not
assumed by the Indemnifying Party but the Indemnifying Party acknowledges that
the Indemnified Party is entitled to indemnification hereunder, the Indemnifying
Party shall not be subject to any liability for any settlement made without its
consent, which consent shall not be unreasonably withheld; provided, that an
                                                           --------
Indemnifying Party shall not be required to consent to any settlement involving
the imposition of equitable remedies or involving the imposition of any material
obligations on such Indemnifying Party other than financial obligations for
which such Indemnified Party will be indemnified hereunder.  If the Indemnifying
Party assumes the defense, the Indemnifying Party shall have the right to settle
such action without the consent of the Indemnified Party; provided, that the
                                                          --------
Indemnifying Party shall be required to obtain the consent of the Indemnified
Party (which consent shall not be unreasonably withheld) if the settlement
includes any admission of wrongdoing on the part of the Indemnified Party or any
equitable remedies or restriction on the Indemnified Party or its officers,
directors or employees.  No Indemnifying Party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to each Indemnified Party
of an unconditional release from all liability in respect of such claim or
litigation.  An Indemnifying Party (or, as the case may be, Indemnifying
Parties) shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time from all Indemnified Parties collectively unless

                                       15
<PAGE>

(x) the employment of more than one counsel has been authorized in writing by
such Indemnifying Party (or Indemnifying Parties) or (y) a conflict exists or
may exist (based on advice of counsel to an Indemnified Party) between such
Indemnified Party and other Indemnified Parties, in each of which cases the
Indemnifying Party (or Indemnifying Parties) shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels.  The
indemnification provided for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party or any officer, director or controlling Person of such Indemnified Party
and shall survive the transfer of Registrable Securities.

          (d) Contribution.  If for any reason the indemnification provided for
              ------------
in paragraphs (a) and (b) of this Section 8 is unavailable to an Indemnified
Party or is insufficient to hold it harmless as contemplated by paragraphs (a)
and (b) of this Section 8, then the Indemnifying Party shall contribute to the
amount paid or payable by the Indemnified Party as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other.  The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.  Notwithstanding anything in this Section 8(d) to
the contrary, no Indemnifying Party (other than the Company) shall be required
pursuant to this Section 8(d) to contribute any amount in excess of the amount
by which the net proceeds received by such Indemnifying Party from the sale of
Registrable Securities in the offering to which the Losses of the Indemnified
Parties relate exceeds the amount of any damages which such Indemnifying Party
has otherwise been required to pay by reason of such untrue statement or
omission.  The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
                                                              --- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the preceding sentences.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.  If indemnification is
available under this Section 8, the Indemnifying Parties shall indemnify each
Indemnified Party to the fullest extent provided in Sections 8(a) and 8(b)
hereof without regard to the relative fault of said Indemnifying Parties or
Indemnified Party.

          (e) Reimbursement.  In addition to, but not in duplication of, the
              -------------
foregoing, each Initial Holder shall be entitled to reimbursement from the
Company for any out-of-pocket losses actually incurred in the event, and only to
the extent, that such Holder suffers such losses as a result of such Holder's
inability to make delivery of sold securities due to the Company's breach of its
commitment to provide timely notice as required by clauses (C) and (D) of
Section 6(a)(iv).

9.  Compliance with Rule 144.  The Company shall file the reports required to be
    ------------------------
filed by it under the Securities Act and the Securities Exchange Act so long as
the Company is obligated to file such reports, and it shall take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to

                                       16
<PAGE>

time or (b) any similar rules or regulations hereafter adopted by the
Commission. Upon the written request of any Holder, the Company shall deliver to
such Holder a written statement as to whether it has complied with such
requirements.

10.  Underwriting Agreements.  If requested by the underwriters for any
     -----------------------
Underwritten Offering requested by Holders pursuant to Section 2 or Section 3,
the Company and the Holders of Registrable Securities to be included therein
shall enter into an underwriting agreement with such underwriters, such
agreement to be reasonably satisfactory in substance and form to the Company,
the Holders holding a majority of the Registrable Securities to be included in
such Underwritten Offering and the underwriters, and to contain such terms and
conditions as are generally prevailing in agreements of that type, including,
without limitation, such representations and warranties to, and covenants with,
the underwriters with respect to the business of the Company and its
subsidiaries and the registration statement, prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
securities similar to the Registrable Securities, and indemnities no less
favorable to the recipient thereof than those provided in Section 8.  The
Holders holding any Registrable Securities to be included in any Underwritten
Offering pursuant to Section 4 shall enter into such an underwriting agreement
at the request of the Company.  No Holder shall be required in any such
underwriting agreement to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, such Holder's Registrable
Securities, such Holder's intended method of distribution and any other
representations required by law or as the underwriters may reasonably request;
provided, however, that each Holder agrees to execute customary powers of
--------  -------
attorney, custody agreements and other forms or documents reasonably requested
by the underwriters.

11.  Term.  This Agreement shall terminate at the Expiration Time.  The
     ----
provisions of Section 8, 22 and 23 shall survive any termination.

12.  Amendments and Waivers.  The provisions of this Agreement may be amended or
     ----------------------
waived at any time only by the written agreement of the Company and the Holders
holding a majority of the Registrable Securities; provided, however, that any
                                                  --------  -------
amendment or waiver that adversely effects any Holder or group of Holders
(including without limitation any amendment or waiver to the extent it has an
adverse effect on the ability to effect a Ventas Stockholders Distribution)
shall only be binding on those Holders that have expressly agreed to such
amendment or waiver.  Any amendment or waiver on the part of any such Holders of
any provision or condition of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in writing.  Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder and the Company, except as provided in the proviso to the first
sentence of this section.  Each Holder acknowledges that by operation of this
paragraph the Holders holding a majority of the Registrable Securities, acting
in conjunction with the Company, will have the right and power to diminish or
eliminate all rights pursuant to this Agreement, except as provided in the
proviso to the first sentence of this section.

                                       17
<PAGE>

13.  Successors, Assigns and Transferees.
     -----------------------------------

          (a) The registration rights (other than demand registration rights
pursuant to Section 3 hereof; provided, however, that each Initial Holder may
                              --------  -------
transfer and assign all but not less than all of its Registrable Securities to
one entity, in which case such Initial Holder's unexercised Demand Registration
shall also be transferred and assigned) of any Holder under this Agreement with
respect to any Registrable Securities may be transferred and assigned, provided
                                                                       --------
that no such transfer or assignment shall be binding upon or obligate the
Company under this Agreement to any such transferee or assignee unless and until
(i) the Company shall have received notice of such transfer or assignment as
herein provided and a written agreement of the transferee or assignee to be
bound by the provisions of this Agreement and (ii) such transferee or assignee
holds Registrable Securities.  Any transfer or assignment of the rights and
obligations under this Agreement made other than as provided in the first
sentence of this Section 13 shall be null and void.

          (b) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, and their respective successors and permitted
assigns.

14.  Final Agreement.  This Agreement constitutes the final agreement of the
     ---------------
parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.

15.  Severability.  Whenever possible, each provision of this Agreement will be
     ------------
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

16.  Notices.  All notices, demands or other communications or documents to be
     -------
given or delivered under or by reason of the provisions of this Agreement shall
be made in writing and shall be deemed to have been received (a) when delivered
personally to the recipient; (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next business day; (c) one business day
after the date when sent to the recipient by reputable express courier service
(charges prepaid), or (d) seven business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid.  Such notices, demands and other communications shall be sent to the
parties at the addresses indicated below, or to such other address as any party
hereto may, from time to time, designate in writing delivered pursuant to the
terms of this Section 16:

          If to the Initial Holders, to the addresses set forth on Schedule 1
hereto.

          If to Holders other than the Initial Holders, to the addresses set
forth on the stock record books of the Company.

                                       18
<PAGE>

          If to the Company, to:

               Vencor, Inc. (to be renamed Kindred Healthcare, Inc.)
               680 South Forest Street
               Louisville, KY  40202
               Attention:  General Counsel and Chief Financial Officer
               Fax:  (502) 596-4715

17.  Governing Law; Service of Process; Consent to Jurisdiction.  (a)  THIS
     ----------------------------------------------------------
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE.
          (b) To the fullest extent permitted by applicable law, each party
hereto (i) agrees that any claim, action or proceeding by such party seeking any
relief whatsoever arising out of, or in connection with, this Agreement or the
transactions contemplated hereby shall be brought only in the U.S. District
Court for the Southern District of New York and in any New York State court
located in the Borough of Manhattan and not in any other State or Federal court
in the United States of America or any court in any other country, (ii) agrees
to submit to the exclusive jurisdiction of such courts located in the State of
New York for purposes of all legal proceedings arising out of, or in connection
with, this Agreement or the transactions contemplated hereby and (iii)
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.

18.  Counterparts and Facsimile Execution.  This Agreement may be executed in
     ------------------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.  This agreement may be executed by the exchange of signatures by
facsimile transmission.  Each party shall receive a duplicate original of the
counterpart copy or copies executed by it  and the Company.

19.  Securities Held by the Company or its Affiliates.  Whenever the consent or
     ------------------------------------------------
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or any of its
affiliates (as such term is defined in Rule 405 under the Securities Act, but
excluding any Holders of Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.

20.  Specific Performance.  Without limiting or waiving in any respect any
     --------------------
rights or remedies of the parties under this Agreement now or hereinafter
existing at law or in equity or by statute, each of the parties hereto shall be
entitled to seek specific performance of the obligations to be performed by the
other(s) in accordance with the provisions of this Agreement.

21.  No Inconsistent Agreements.  (a)  The Company shall not, on or after the
     --------------------------
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders pursuant to this
Agreement or otherwise conflicts with the provisions hereof.  The rights granted
to the Holders hereunder do not in any way conflict with

                                       19
<PAGE>

and are not inconsistent with the rights granted to the holders of the Company's
securities under any other agreement in effect on the date hereof.

          (b)  In the event of any inconsistency with respect to the
registration and sale of New Warrants and New Warrant Stock as provided for in
this Agreement and in the Warrant Agreement, dated as of the date hereof between
the Company and the Warrant Agent named therein, this Agreement shall govern the
rights and obligations of those Holders of Registrable Securities who are also
Holders as defined in the Warrant Agreement.

22.  Third Party Beneficiaries.  Holders of Registrable Securities and the
     -------------------------
Indemnified Parties are intended third party beneficiaries of this Agreement,
and this Agreement shall inure to the benefit of, and may be enforced by, such
Persons.  Other than as set forth in the preceding sentence, this Agreement
shall be binding upon and inure solely to the benefit of each party hereto.

23.  NASD Rule 4460.  For the period beginning on the date hereof until the date
     --------------
the New Common Stock are listed and admitted and authorized for trading on the
New York Stock Exchange, the Nasdaq Stock Market or another national securities
exchange, the Company shall comply with the requirements of NASD Rule 4460 as if
it were subject thereto, other than those (a) requiring the Company to provide
notice of certain actions or events to the NASD or (b) set forth in subsections
(b) and (k) thereof.

24.  Listing of New Common Stock.  The Company shall use its reasonable best
     ---------------------------
efforts to cause the New Common Stock, including the Registrable Securities, to
be approved for listing on the New York Stock Exchange, the Nasdaq Stock Market,
or other national securities exchange.

25.  Capacity of Trust as Signatory.  The Company and the Holders agree that (i)
     ------------------------------
this Agreement is executed and delivered by the trustee of the Trust, which
initially is The Bank of New York (the "Trustee"), not individually or
personally but solely in its capacity as the Trustee of the Trusts, in the
exercise of the powers and authority conferred and vested in it as such, (ii)
the representations, undertakings and agreements herein made on the part of each
applicable Trust are made and intended not as personal representations,
undertakings and agreements by the Trustee, but are made and intended for the
purpose of binding only each applicable Trust, (iii) nothing herein contained
shall be construed as creating any liability on the Trustee, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties who
are signatories to this Agreement and by any Person claiming by, through or
under such parties and (iv) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of each
applicable Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by each applicable Trust
under this Agreement.

                  [Remainder of page intentionally left blank.
                  --------------------------------------------

                            Signature pages follow.]

                                       20
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.

                                    VENCOR, INC. (to be renamed

                                    KINDRED HEALTHCARE, INC.)

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

      [Signature blocks of Initial Holders to appear on subsequent pages]

                                       21
<PAGE>

                                                                      SCHEDULE 1

                                INITIAL HOLDERS

Holder                                 Holding
------------------------------------   ---------------------------------------
Ventas Realty, Limited Partnership     1,498,500 shares of New Common Stock
The Ventas Stockholder Trust           0 shares of New Common Stock

[Additional Initial Holders: To include each entity owning at least 10% of the
New Common Stock and New Warrants (on a fully converted basis) issued and
outstanding immediately following the Effective Date; counterparts may be
executed within 30 days of the Effective Date.]

                                       22

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