Document:

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                                                                    EXHIBIT 10.2

                                                                [EXECUTION COPY]

                               CREDIT AGREEMENT
                        PROVIDING FOR THE ISSUANCE OF
                  $300,000,000 SENIOR SECURED NOTES DUE 2008

                                 dated as of

                                April 20, 2001

                                     among

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

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

                                      and

                           THE LENDERS PARTY HERETO,

                                      and

                  MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                 as Collateral Agent and Administrative Agent
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                               TABLE OF CONTENTS

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                                                    ARTICLE 1
                                                   Definitions
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Section 1.01.  Defined Terms.............................................................................     2
Section 1.02.  Accounting Terms and Determinations.......................................................    33
Section 1.03.  Definitions From Disclosure Statement.....................................................    33
Section 1.04.  Other Definitional Provisions.............................................................    33

                                                    ARTICLE 2
                                                    The Notes

Section 2.01.  Issuance of Notes.........................................................................    34
Section 2.02.  Interest Rate; Default Rate...............................................................    34
Section 2.03.  Method of Electing Interest Periods.......................................................    35
Section 2.04.  Administrative Agent and Collateral Agent Fee.............................................    36
Section 2.05.  Final Maturity of Notes...................................................................    36
Section 2.06.  Mandatory Prepayments of Notes............................................................    36
Section 2.07.  Optional Prepayments......................................................................    41
Section 2.08.  General Provision as to Payments..........................................................    41
Section 2.09.  Computation of Interest and Fees..........................................................    42
Section 2.10.  Release of Security Interest in Assets Being Sold.........................................    43
Section 2.11.  Forgiveness of Principal..................................................................    43

                                                    ARTICLE 3
                                                   Conditions

Section 3.01.  Effectiveness of this Agreement; Closing..................................................    44

                                                    ARTICLE 4
                                         Representations and Warranties

Section 4.01.  Corporate Existence and Power.............................................................    47
Section 4.02.  Corporate And Governmental Authorization; No Contravention................................    47
Section 4.03.  Binding Effect............................................................................    48
Section 4.04.  Security Interest.........................................................................    48
Section 4.05.  Financial Information.....................................................................    48
Section 4.06.  Litigation................................................................................    48
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Section 4.07.  Compliance with Erisa....................................................................        49
Section 4.08.  Taxes....................................................................................        49
Section 4.09.  Compliance with Laws.....................................................................        49
Section 4.10.  No Regulatory Restrictions on Borrowing..................................................        49
Section 4.11.  Environmental Matters....................................................................        49
Section 4.12.  Full Disclosure..........................................................................        50
Section 4.13.  Information as to Equity Interest and Instruments........................................        50
Section 4.14.  Representations in Other Financing Documents.............................................        51
Section 4.15.  Margin Stock.............................................................................        51
Section 4.16.  Properties...............................................................................        51
Section 4.17.  Existing Indebtedness....................................................................        51

                                                    ARTICLE 5
                                              Affirmative Covenants

Section 5.01.  Information..............................................................................        52
Section 5.02.  Maintenance Of Property..................................................................        56
Section 5.03.  Insurance................................................................................        56
Section 5.04.  Compliance with Law, Etc.................................................................        56
Section 5.05.  Maintenance of Existence, Rights, Etc....................................................        57
Section 5.06.  Environmental Matters....................................................................        57
Section 5.07.  Designation of Unrestricted Subsidiaries.................................................        57
Section 5.08.  Guarantees by Future Restricted Subsidiaries.............................................        59
Section 5.09.  Future Assets to Be Added to Collateral..................................................        60
Section 5.10   Casualty Events..........................................................................        61
Section 5.11   Ranking..................................................................................        61
Section 5.12   Post-closing.............................................................................        61

                                                    ARTICLE 6
                                               Financial Covenants

Section 6.01.  Fixed Charge Coverage Ratio (EBITDAR)....................................................        63
Section 6.02.  Total Leverage Ratio.....................................................................        63
Section 6.03.  Minimum Consolidated Net Worth...........................................................        64
Section 6.04.  Capital Expenditures.....................................................................        64

                                                    ARTICLE 7
                                                Negative Covenants

Section 7.01.  Limitation on Debt.......................................................................        64
Section 7.02.  Negative Pledge..........................................................................        66
Section 7.03.  Consolidations, Mergers and Asset Sales..................................................        68
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Section 7.04.   Limitations on Transactions with Affiliates....................................................   69
Section 7.05.   Limitation on Restrictions Affecting Subsidiaries..............................................   71
Section 7.06.   Limitation on Sale or Issuance of Equity Interests of Restricted Subsidiaries..................   72
Section 7.07.   Restricted Payments............................................................................   72
Section 7.08.   Limitations on Acquisitions and Investments....................................................   74
Section 7.09.   No Change of Fiscal Periods....................................................................   75
Section 7.10.   Limitation on Business.........................................................................   75
Section 7.11.   Limitation on Sale and Leaseback Transactions..................................................   76
Section 7.12.   No Modification of Certain Documents Without Consent...........................................   76
Section 7.13.   Limitation on Cash Not Held in Collateral Accounts or Concentration Accounts...................   77
Section 7.14.   Anti-layering..................................................................................   77
Section 7.15.   Payments for Consents..........................................................................   77

                                                       ARTICLE 8
                                                        Defaults

Section 8.01.   Events of Default..............................................................................   77
Section 8.02.   Notice of Default..............................................................................   81
Section 8.03.   Enforcement Notice.............................................................................   81

                                                       ARTICLE 9
                                                       The Agent

Section 9.01.   Appointment and  Authorization.................................................................   82
Section 9.02.   Agents and Affiliates..........................................................................   82
Section 9.03.   Actions by Agents..............................................................................   82
Section 9.04.   Consultation with Experts......................................................................   83
Section 9.05.   Liability of Agents............................................................................   83
Section 9.06.   Indemnification................................................................................   83
Section 9.07.   Credit Decision................................................................................   83
Section 9.08.   Successor Agents...............................................................................   84
Section 9.09.   Collateral Agent...............................................................................   84

                                                       ARTICLE 10
                                                Changes in Circumstances

Section 10.01.  Increased Cost and Reduced Return..............................................................   85
Section 10.02.  Taxes..........................................................................................   86
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                                                            ARTICLE 11
                                                           Subordination
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Section 11.01.  Agreement to Subordinate...................................................................................     88
Section 11.02.  Liquidation, Dissolution, Bankruptcy.......................................................................     88
Section 11.03.  Default on Senior Obligations..............................................................................     89
Section 11.04.  When Distribution Must Be Paid Over........................................................................     90
Section 11.05.  Subrogation................................................................................................     90
Section 11.06.  Relative Rights; Subordination Not to Prevent Events of Default or Limit Right to Accelerate...............     90
Section 11.07.  Subordination May Not Be Impaired By Issuer................................................................     90
Section 11.08.  Rights of Administrative Agent.............................................................................     90
Section 11.09.  Distributions and Notices to, and Notices and Consents By,representatives of Holders of Senior Obligations.     91
Section 11.l0.  Administrative Agent Entitled to Rely......................................................................     91
Section 11.11.  Administrative Agent to Effectuate Subordination...........................................................     91
Section 11.12.  Administrative Agent Not Fiduciary for Holders of Senior Obligations.......................................     91
Section 11.13.  Legend on Notes............................................................................................     9l
Section 11.14.  Reliance by Holders of Senior Obligations on Subordination Provisions; No Waiver...........................     92

                                                            ARTICLE 12
                                                          Miscellaneous

Section 12.01.  Notices.................................................................................................        93
Section 12.02.  No Waiver...............................................................................................        93
Section 12.03.  Expenses; Indemnification...............................................................................        93
Section 12.04.  Sharing of Set-offs.....................................................................................        95
Section 12.05.  Amendments and Waivers..................................................................................        96
Section 12.06.  Successors and Assigns..................................................................................        97
Section 12.07.  Margin Stock............................................................................................       100
Section 12.08.  Governing Law; Submission to Jurisdiction...............................................................       100
Section 12.09.  Counterparts; Integration...............................................................................       100
Section 12.10.  Waiver of Jury Trial....................................................................................       101
Section 12.11.  Confidentiality.........................................................................................       101
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                                   SCHEDULES

Initial Lender Schedule

Schedule  1  - Restricted Subsidiaries, Insurance Subsidiaries, Excluded
               Partnerships (as of the Closing Date)

Schedule  2  - Existing Affiliate Agreements

Schedule  3  - Owned Property

Schedule  4  - Initial Master Lease Properties; Other Leased Property; Third
               Party Leases

Schedule  5  - Management Contracts

Schedule  6  - Permitted Investments

Schedule  7  - Local Real Estate Counsel

Schedule  8  - Litigation

Schedule  9  - Existing Debt (as of the Closing Date)

Schedule 10  - Debt not held in Concentration Accounts or Pledged

Schedule 11  - Post-Closing Deliveries
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                                   EXHIBITS

Exhibit A   -  Form of Senior Secured Note

Exhibit B   -  Form of Security Agreement

Exhibit C   -  Form of Subsidiary Guaranty Agreement

Exhibit D   -  Form of Vencor Guaranty Agreement

Exhibit E   -  Form of Intercreditor Agreement

Exhibit F-l -  Form of Opinion of the General Counsel of Vencor and the Issuer

Exhibit F-2 -  Form of Opinion of the Vice President of Corporate Legal Affairs
               of Vencor and the Issuer

Exhibit G   -  Form of Opinion of Cleary, Gottlieb, Steen & Hamilton, Special
               Counsel for Vencor and the Issuer

Exhibit H   -  Form of Opinion of Morris, Nichols, Arsht & Tunnell, Special
               Counsel for Vencor and the Issuer

Exhibit I   -  Form of Opinion of Local Real Estate Counsel

Exhibit J   -  Form of Subordination Provisions

Exhibit K   -  Form of Assignment Agreement

                                      vi
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                               CREDIT AGREEMENT

     This CREDIT AGREEMENT is dated as of April 20, 200l and entered into by and
among VENCOR OPERATING, INC. (to be renamed Kindred Healthcare Operating, Inc.),
a Delaware corporation (the "Issuer"), and VENCOR, INC. (to be renamed Kindred
Healthcare, Inc.), a Delaware corporation ("Vencor"); THE LENDERS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and
collectively as "Lenders"); and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
collateral agent and administrative agent for the Lenders.

                                   RECITALS

     WHEREAS, Vencor and the Issuer previously entered into a $1,000,000,000
Credit Agreement dated as of April 29, 1998 (as amended, the "Pre-Petition
Senior Credit Agreement") with a group of banks and other financial
institutions, in connection with which Bank of America N.A. (previously named
Nationsbank N.A.) acts as administrative agent and Morgan Guaranty Trust Company
of New York acts as documentation agent and collateral agent, such Agreement
providing for the making of loans to and the issuance of letters of credit for
the account of the Issuer and the guarantee of the Issuer's obligations by
Vencor and certain of Vencor's other subsidiaries;

     WHEREAS, on September 13, 1999, Vencor, the Issuer and certain of Vencor's
other subsidiaries (collectively, the "Debtors") filed with the Court (such term
and other capitalized terms used in these recitals without definition having the
meanings set forth in Sections 1.01 through 1.04 of this Agreement) voluntary
petitions for relief under the Bankruptcy Code, such proceedings being jointly
administered under Case Nos. 99-03199 (MFW) through 99-03327 (MFW) (the "Chapter
11 Cases");

     WHEREAS, the Debtors have proposed a Plan of Reorganization that provides,
inter alia, for the holders of the Senior Debt Claims (i.e., claims arising
under the Pre-Petition Senior Credit Agreement) to receive in the aggregate, in
partial satisfaction of the Senior Debt Claims, senior secured notes of the
Issuer with a stated principal amount of $300,000,000, all as set forth in the
Plan of Reorganization; and

     WHEREAS, the Plan of Reorganization contemplates that such indebtedness
will be issued pursuant to and governed by a credit agreement and related
documentation:

     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

                                       1
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                                   ARTICLE 1
                                  Definitions

     Section 1.01. Defined Terms. The following terms, as used herein, have the
following meanings:

     "Acquisition" means (i) any Investment by the Issuer or any of its
Restricted Subsidiaries in a Person whereby such Person becomes a Restricted
Subsidiary of the Issuer or whereby such Person is merged with and into the
Issuer or a Restricted Subsidiary or (ii) an acquisition by the Issuer or any of
its Restricted Subsidiaries of the property and assets of any Person that
constitutes substantially all of the assets of such Person, or any division,
line of business, Healthcare Facility or other business unit of such Person;
when used in relation to Vencor, "Acquisition" has a comparable meaning except
that references to the Issuer shall be read as Vencor and Vencor may, unless
otherwise prohibited hereunder, make Acquisitions involving any Vencor
Unrestricted Subsidiary.

     "Account Control Agreement" has the meaning set forth in Section 1 of the
Security Agreement.

     "Actual Purchase Price" has the meaning set forth in Section 2.06(b)(iii).

     "Adjusted Consolidated Net Income" means, for any period, Consolidated Net
Income for such period, adjusted to exclude therefrom, without duplication, (i)
gains or losses from Asset Sales net of related tax effects and (ii) any net
income (or loss) of any Person (other than a Restricted Subsidiary) in which the
Issuer or any Restricted Subsidiary has an ownership interest, except that such
Person's net income shall not be excluded if (and to the extent that) such
Person pays dividends or distributions in cash to the Issuer or any of its
Restricted Subsidiaries during such period.

     "Administrative Agent" means Morgan, in its capacity as administrative
agent for the Lenders under the Financing Documents, and its successors in such
capacity.

     "Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent,
duly completed by such Lender and submitted to the Administrative Agent (with a
copy to the Issuer).

     "Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling, controlled by or under common control with the Issuer.
As used in this definition, the term "control" means possession, directly or
indirectly, of the power to

                                       2
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vote 10% or more of any class of voting securities of a Person or to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise. The fact that
Ventas and Vencor may have many stockholders in common will not be deemed to
constitute "common control" for purposes of this definition unless stockholders
possessing, directly or indirectly, the power to vote more than 10% of Vencor's
outstanding common stock and more than 10% of Ventas' outstanding common stock
attempt to influence Vencor's management or policies in a manner which is, or
could reasonably be expected to be, favorable to any Ventas Company.
Notwithstanding anything to the contrary in this definition, no individual shall
be deemed an Affiliate of any Person solely by reason of his or her being an
employee, officer or director of such Person.

     "Agents" means the Collateral Agent and the Administrative Agent.

     "Agreement" means this Credit Agreement dated as of April 20, 2001, as it
may hereafter be amended, supplemented or otherwise modified from time to time.

     "Annualized Basis" means that, when a provision hereof provides that
Consolidated EBITDAR, Consolidated Interest Expense, Consolidated Rental Expense
or Consolidated EBITDA is to be calculated as of a date (the "relevant date")
prior to the end of the fourth full Fiscal Quarter following the Closing Date
for a period of four consecutive Fiscal Quarters ending on the relevant date,
(i) Consolidated EBITDAR, Consolidated Interest Expense, Consolidated Rental
Expense or Consolidated EBITDA, as the case may be, shall be calculated for the
period from the end of the month in which the Closing Date occurs to the
relevant date (a "short period") and (ii) the amount so calculated shall be
multiplied by a fraction of which the numerator is 12 and the denominator is the
number of whole calendar months in such short period.

     "Applicable Laws" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all applicable orders, rules and decrees of courts and
arbitrators.

     "Asset Sale" means any sale, lease or other transfer (including any such
transaction effected by way of merger or consolidation) of any asset by the
Issuer or any Restricted Subsidiary, including without limitation any sale-
leaseback transaction, whether or not involving a capital lease, but excluding
(i) any sale of inventory, cash, cash equivalents and other cash management
investments and obsolete, unused or unnecessary equipment, in each case in the
ordinary course of business, (ii) any transfer of assets by the Issuer to any
Restricted Subsidiary or by any Restricted Subsidiary to the Issuer or another
Restricted Subsidiary, (iii) any transfer of assets or related series of
transfers of assets involving cash proceeds of less than $350,000 and (iv) with
respect to a lease of any property (including any Master Lease Property),

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surrender to or repossession by the lessor of such property, or the termination
of the lease relating to such property by the lessor; provided that, in the case
of any event referred to in clause (iv), any cash proceeds received by the
Issuer and its Restricted Subsidiaries in excess of $350,000 in connection with
such event shall be deposited in a Collateral Account and applied as set forth
in Section 2.06(a).

     "Assignee" has the meaning set forth in Section 12.06(c).

     "Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit K annexed hereto.

     "Atria" means Atria Communities, Inc., a Delaware corporation, and its
successors.

     "Atria Shares" means all shares of common stock of Atria owned directly or
indirectly by the Issuer or any Restricted Subsidiary.

     "Attributable Debt" means, in respect of a Sale and Leaseback Transaction
the present value, discounted at the interest rate implicit in the Sale and
Leaseback Transaction, of the total obligations of the lessee for rental
payments during the remaining term of the lease in the Sale and Leaseback
Transaction.

     "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.

     "BHC Shares" means all shares of common and preferred stock of Behavioral
Healthcare Corporation, a Delaware Corporation, owned directly or indirectly by
the Issuer or any Restricted Subsidiary.

     "Board of Directors" of a Person means the board or directors or comparable
governing body of such Person, or any committee thereof duly authorized to act
on its behalf.

     "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized by law to close.

     "Capital Lease" means a lease that would be capitalized on a balance sheet
of the lessee prepared in accordance with GAAP. "Capital Lease Obligation" means
the rental obligation under any Capital Lease.

     "Casualty Event" means (i) any Condemnation Event with respect to any
property owned by or leased to the Issuer or any Restricted Subsidiary or (ii)
any

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damage to, or destruction of, any property owned by or leased to the Issuer or
any Restricted Subsidiary.

     "Casualty Proceeds" means (i) with respect to any Condemnation Event, all
awards or payments received by the Issuer, any Restricted Subsidiary or the
Collateral Agent by reason of such Condemnation Event, including all amounts
received with respect to any transfer in lieu or anticipation of such
Condemnation Event or in settlement of any proceeding relating to such
Condemnation Event and (ii) with respect to any other Casualty Event, all
insurance proceeds or payments (excluding payments with respect to business
interruption) which the Issuer, any Restricted Subsidiary or the Collateral
Agent receives by reason of such other Casualty Event, less, in either case,
unreimbursed expenses or losses related to the Casualty Event, including any
payment with respect to taxes actually paid or to become payable by the Issuer
and its Restricted Subsidiaries (as reasonably estimated by a Financial Officer)
in respect of such Casualty Event.

     "Chapter 11 Cases" has the meaning set forth in the Whereas clauses.

     "Closing" means the closing hereunder on the Closing Date.

     "Closing Date" means the date on which the Administrative Agent shall have
received the documents specified in or pursuant to Section 3.01 and the other
conditions specified in Section 3.01 shall have been satisfied or waived.

     "Collateral" means all property, real and personal, tangible and
intangible, with respect to which Liens are created or purportedly created
pursuant to the Collateral Documents.

     "Collateral Accounts" has the meaning set forth in Section 1 of the
Security Agreement.

     "Collateral Agent" means Morgan, in its capacity as collateral agent for
the holders of the Secured Obligations under the Financing Documents, and its
successors in such capacity.

     "Collateral Documents" means the Security Agreement, the Security Agreement
Supplements, the Mortgages, any Account Control Agreement and all other
supplemental or additional security agreements, mortgages or similar instruments
(other than any UCC financing statements) delivered pursuant hereto or thereto.

     "Concentration Accounts" has the meaning set forth in Section 6(a) of the
Security Agreement.

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<PAGE>

     "Condemnation Event" means any condemnation or other taking or temporary or
permanent requisition of any property, any interest therein or right appurtenant
thereto, or any change of grade affecting any property, as the result of the
exercise of any right of condemnation or eminent domain. A transfer to a
governmental authority in lieu or anticipation of condemnation shall be deemed
to be a Condemnation Event.

     "Consolidated Capital Expenditures" means, for any period, the gross
additions to property, plant and equipment and other capital expenditures of the
Issuer and its Restricted Subsidiaries for such period, as the same are or would
be reflected in a consolidated statement of cash flows of the Issuer and its
Restricted Subsidiaries for such period; provided that the amount paid by the
Issuer or any Restricted Subsidiary for any Acquisition and any amount of
Reinvestable Proceeds applied pursuant to clauses (A)(3) or (A)(4) of Section
2.06(a) shall not be included in the calculation of the amount of Consolidated
Capital Expenditures.

     "Consolidated Debt for Borrowed Money" means at any date the sum, without
duplication, of (x) the aggregate amount of Debt of the types described in
clauses (i), (ii) and (iv) of the definition of "Debt" which is Debt of the
Issuer and its Restricted Subsidiaries, (y) the aggregate amount of Debt of the
type described in clause (vi) of the definition of "Debt" which is non-
contingent Debt of the Issuer and its Restricted Subsidiaries and (z) the
aggregate amount of Guarantees by the Issuer and its Restricted Subsidiaries
with respect to Debt of others of the types described in clauses (i), (ii) and
(iv) of the definition of Debt and non-contingent Debt of others of the type
described in clause (vi) of the definition of Debt, all determined on a
consolidated basis as of such date after excluding accrued interest for the then
current period not yet due and payable.

     "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent deducted in determining Adjusted
Consolidated Net Income for such period, the sum of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation, amortization and other
similar non-cash charges.

     "Consolidated EBITDAR" means, for any period, Consolidated EBITDA for such
period plus, to the extent deducted in determining Consolidated EBITDA for such
period, the sum of (i) Consolidated Rental Expense and (ii) non-cash
compensation expense and minus (iii) any cash paid during such period in respect
of non-cash compensation expense accrued during any prior period; provided that
(x) Consolidated EBITDAR shall be calculated so as to exclude the effect of any
income or expense that (A) is classified as extraordinary, (B) is reported
separately as an unusual or non-recurring item, (C) is attributable to
discontinued operations or (D) represents the effect of an accounting change on
prior periods, in each case in

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accordance with GAAP, and (y) if any Restricted Subsidiary of the Issuer is
subject to a limitation (other than pursuant to the terms of the Financing
Documents or the Exit Facility Financing Documents) in any period binding on
such Restricted Subsidiary which limits such Restricted Subsidiary's ability to
pay dividends or make other distributions or pay any Debt owed to the Issuer or
any other Restricted Subsidiary, or to make loans or advances to the Issuer or
any other Restricted Subsidiary or to create incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues to secure the obligations
of the Issuer or any other Restricted Subsidiary under any Financing Document,
Consolidated EBITDAR for such period shall be adjusted to exclude any portion
thereof that is attributable to such Restricted Subsidiary and that, as a result
of such limitation, it would be prohibited from paying, directly or indirectly,
to the Issuer or any other Restricted Subsidiary at the end of such period.

     "Consolidated Interest Expense" means, for any period, the interest expense
of the Issuer and its Restricted Subsidiaries, determined on a consolidated
basis for such period; provided that Consolidated Interest Expense shall not (i)
include interest capitalized in accordance with GAAP or (ii) be reduced by any
interest income.

     "Consolidated Net Income" means, for any period, the net income of the
Issuer and its Restricted Subsidiaries, determined on a consolidated basis for
such period.

     "Consolidated Net Worth" means, at any date, the consolidated stockholders'
equity of the Issuer and its Restricted Subsidiaries determined as of such date.

     "Consolidated Rental Expense" means, for any period, the total rental
expense for operating leases of the Issuer and its Restricted Subsidiaries,
determined on a consolidated basis for such period; provided that Consolidated
Rental Expense shall not be reduced by any rental income.

     "Consolidated Subsidiary" means, as to any Person at any date, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date. Unless otherwise specified, "Consolidated
Subsidiary" means a Consolidated Subsidiary of the Issuer.

     "Cornerstone" means Cornerstone Insurance Company, a Cayman Islands
corporation.

     "Court" means the United States Bankruptcy Court for the District of
Delaware.

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     "Credit Parties" means the Issuer and the Guarantors, collectively.

     "Custodian" means Wells Fargo Bank Minnesota, N.A., which shall hold any
Note issued to in on the Effective Date as custodian on behalf of holders of
Senior Debt Claims in accordance with and subject to the terms of the Plan of
Reorganization until such holders become Lenders pursuant to Section 12.06.

     "Debt" of any Person means, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services, (iv) all
obligations of such Person as lessee under Capital Leases, (v) all obligations
of such Person to purchase securities which arise out of or in connection with
the sale of the same or substantially similar securities, (vi) all obligations
of such Person (whether contingent or non-contingent) to reimburse any Lender or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance or similar instrument, (vii) all obligations secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person, and (viii) all Guarantees by such Person of obligations of another
Person (each such Guarantee to constitute Debt in an amount equal to the maximum
amount of such other Person's obligations Guaranteed thereby); provided that
neither (a) trade accounts payable nor (b) amounts owed to patients or residents
arising in the ordinary course of business nor (c) obligations arising in
respect of insurance policies or performance or surety bonds which are not
themselves Guarantees of Debt (nor drafts, acceptances or similar instruments
evidencing the same nor obligations in respect of letters of credit supporting
the payment of the same) nor (d) guarantees of any obligation of the Issuer or a
Restricted Subsidiary pursuant to an operating lease shall constitute Debt.

     "Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.

     "Default Rate" means on any day the rate of interest that would be payable
on the Loans on such day pursuant to Section 2.02(b).

     "Designated Equity Proceeds" has the meaning specified in Section 2.06(b).

     "DIP Facility" means the Debtor-In-Possession Credit Agreement dated as of
September 13, 1999, as amended through the Closing Date, among certain of the
Credit Parties and the lenders and agents named therein.

     "Disclosure Statement" means the Vencor Companies' Fourth Amended
Disclosure Statement dated December 14, 2000 filed with the Court.

                                       8
<PAGE>

     "Disclosure Statement Hearing" means the hearing held by the Court on
December 14, 2000 at which the Disclosure Statement was approved.

     "Disqualified Equity Interests" means Equity Interests that by their terms
or upon the happening of any event are (a) required to be redeemed or redeemable
at the option of the holder prior to the Stated Maturity Date for consideration
other than Qualified Equity Interests or (b) convertible at the option of the
holder into Disqualified Equity Interests or exchangeable for Debt.

     "dollars" or "$" means United States dollars or such other coin or currency
as shall be legal tender for the payment of public or private debt in the United
States.

     "Eastern Time" means local time in the Eastern time zone of the United
States.

     "EBITDA" means, when used with respect to any Healthcare Facility for any
period, the net income attributable to the operations of such Healthcare
Facility during such period, plus, to the extent deducted in determining such
net income, the sum of (i) interest expense, (ii) income tax expense and (iii)
depreciation, amortization and other similar non-cash charges.

     "EBITDAR" means, when used with respect to any Healthcare Facility for any
period, the net income attributable to the operations of such Healthcare
Facility during such period, plus, to the extent deducted in determining such
net income, the sum of (i) interest expense, (ii) income tax expense, (iii)
rental expense and (iv) depreciation, amortization and other similar non-cash
charges; provided that EBITDAR shall be calculated so as to exclude the effect
of any income or expense that (A) is classified as extraordinary, (B) is
reported separately as an unusual or non-recurring item, (C) is attributable to
discontinued operations or (D) represents the effect of an accounting change on
prior periods, in each case in accordance with GAAP, as such amounts relate to
such Healthcare Facility for such period.

     "Eligible Assignee" means any Person which is either (i) (a) a commercial
bank organized under the laws of the United States or any state thereof having
unimpaired capital and surplus of not less than $500,000,000; (b) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof having unimpaired capital and surplus of not less than
$500,000,000; (c) a commercial bank organized under the laws of any other
country or a political subdivision thereof having unimpaired capital and surplus
of not less than $500,000,000; provided that (x) such bank is acting through a
branch or agency located in the United States or (y) such bank is organized
under the laws of a country that is a member of the Organization for Economic
Cooperation and Development or a political subdivision of such country; or (d)
an "accredited investor" (as defined in

                                       9
<PAGE>

Regulation D under the Securities Act) which extends credit as one of its
businesses including, but not limited to, insurance companies, mutual funds and
lease financing companies and having unimpaired capital and surplus of not less
than $100,000,000; or (ii) a Lender or an Affiliate of a Lender; provided that
no Vencor Company, no Ventas Company and no Affiliate of any of them shall be an
Eligible Assignee; and provided further that Eligible Assignee shall mean and
include any other Person designated as such pursuant to the prior written
consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed).

     "Encumbrance Letter" means Vencor's letter dated the date hereof addressed
to Morgan, as Collateral Agent and Exit Facility Collateral Agent, and First
American Title Insurance Company.

     "Enforceable Judgment" means a judgment or order of a court or arbitral or
regulatory authority as to which the period, if any, during which the
enforcement of such judgment or order is stayed shall have expired. A judgment
or order which is under appeal or as to which the time in which to perfect an
appeal has not expired shall not be deemed an Enforceable Judgment so long as
enforcement thereof is effectively stayed pending the outcome of such appeal or
the expiration of such period, as the case may be.

    "Enforcement Notice" means a notice delivered by the Administrative Agent to
the Collateral Agent pursuant to Section 8.03 directing the Collateral Agent to
exercise one or more specific rights or remedies under the Collateral Documents.

    "Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to the
environment or to the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.

    "Environmental Liabilities" means any and all liabilities of or relating to
the Issuer or any of the Guarantors (including any entity which is, in whole or
in part, a predecessor of the Issuer or any of the Guarantors), whether vested
or unvested, contingent or fixed, actual or potential, known or unknown, which
arise under or relate to matters covered by Environmental Laws.

                                      10
<PAGE>

     "Equity Interest" means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof or
(v) any warrant, option or other right to acquire any Equity Interest described
in the foregoing clauses (i), (ii), (iii) and (iv).

     "Equity Issuance" means any issuance or sale by Vencor of any Equity
Interest in Vencor other than (i) Equity Interests issued to or otherwise
acquired by directors, officers and employees of Vencor or any of its
Subsidiaries pursuant to stock option, restricted stock and similar compensation
plans approved by the Board of Directors of Vencor or (ii) Equity Interests
issued as contemplated by the Plan of Reorganization (including without
limitation common stock of Vencor issued upon the exercise of New Warrants).

     "Equity Receipt Date" has the meaning set forth in Section 2.06(b).

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.

     "ERISA Group" means the Vencor Companies and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Vencor Company, are treated as a
single employer under Section 414 of the Internal Revenue Code.

     "Escrow Agreement" means the Escrow Agreement dated as of the date hereof
among the Issuer, Vencor, the Collateral Agent and First American Title
Insurance Company, as escrow agent, as in effect on the date hereof.

     "Euro-Dollar Business Day" means any Business Day on which commercial banks
are open for international business (including dealings in dollar deposits) in
London.

     "Euro-Dollar Margin" means a per annum rate equal to 4.50%.

     "Event of Default" means any event defined as an "Event of Default" in
Section 8.01.

     "Excluded Partnership" means each of the general and limited partnerships
and each of the limited liability companies identified on Schedule 1 hereto as
an Excluded Partnership; provided that any such partnership or limited liability
company shall cease to be an Excluded Partnership at such time as (i) the grant
of a security interest in the partnership interests or limited liability company
interests thereof and a

                                      11
<PAGE>

guaranty of the Obligations by such entity shall no longer constitute a material
violation of a valid and enforceable restriction in favor of a third party or
(ii) the required consents to such grant and such guaranty shall have been
obtained.

     "Excluded PIP Repayments" means any optional repayment of the principal of
the PIP Claim that are (a) directly funded with the Net Cash Proceeds of an
Asset Sale or Equity Issuance or a payment out of the original amount deposited
and held in escrow under the Tax Refund Escrow Agreement or (b) made at a time
when the aggregate cash balances of the Issuer and its Restricted Subsidiaries
as of the last Business Day of the most recently ended month exceed $100,000,000
(as reflected in the Issuer's consolidated balance sheet as at the end of such
month and consistent with the Issuer's historical cash management practices).

     "Executive Officer" means any "executive officer" (within the meaning of
Rule 3b-7 under the Securities Exchange Act) of the Issuer.

     "Existing Affiliate Agreements" means the agreements listed in Schedule 2
hereto.

     "Exit Facility" means the $120,000,000 Credit Agreement dated as of the
date hereof among Vencor, the Issuer and the financial institutions party
thereto, under which Morgan (or its successors or assigns in such capacity) acts
as administrative agent and collateral agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time, together with
all replacements, refinancings, refundings and renewals thereof from time to
time; provided that (i) the principal amount of the Exit Facility shall not at
any time exceed $120,000,000 less any amounts up to an aggregate of $45,000,000
by which the commitments under the Exit Facility have been permanently reduced;
provided further that the principal amount of the Exit Facility as refinanced,
refunded or renewed may be increased to the aggregate amount of the commitments
under the Exit Facility immediately prior to such refinancing, refunding or
renewal, regardless of the amount outstanding under the Exit Facility at such
time and (ii) there shall at any time be only a single credit facility to which
the Issuer is a party which constitutes the "Exit Facility".

     "Exit Facility Agent" means at any time the Person acting as the
administrative agent under the Exit Facility then in effect.

     "Exit Facility Collateral Account" means a collateral account maintained by
the Exit Facility Collateral Agent pursuant to the Exit Facility.

     "Exit Facility Collateral Agent" means at any time the Person acting as the
collateral agent under the Exit Facility then in effect.

                                      12
<PAGE>

     "Exit Facility Financing Documents" means, collectively, the "Financing
Documents" as such term is defined in the Exit Facility, in each case, as the
same may be amended, restated, supplemented or otherwise modified from time to
time, together with all replacements thereof.

     "Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest l/l00th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.

     "Fee Mortgages" means fee mortgages substantially in the form of Exhibit G
to the Security Agreement relating to (i) the Owned Properties and (ii) any
other real property owned in fee by the Issuer or any Guarantor which is
required to be so encumbered to secure the Obligations pursuant to Section 5.09.

     "Financial Accommodations" means arrangements for the extension of credit
or other financial accommodation to the Issuer or one or more of the Guarantors,
including committed or uncommitted lines of credit for advances or other
financial accommodation, letters of credit, performance and surety bonds and the
like, committed or uncommitted agreements for the purchase of accounts
receivable or other financial assets, with or without recourse or repurchase
obligation, forward and future contracts for purchase of bullion or foreign
currencies and other similar arrangements and interest rate swaps and other
similar arrangements, but excluding (i) trade accounts payable arising in the
ordinary course of business and (ii) Debt under this Agreement.

     "Financial Officer" means the principal financial officer, principal
accounting officer or treasurer of the Issuer.

     "Financing Documents" means this Agreement (including the Schedules and
Exhibits hereto), the Notes, the Guaranty Agreements and the Collateral
Documents.

     "Fiscal Quarter" means a fiscal quarter of the Issuer or of Vencor, as the
context may require.

                                      13
<PAGE>

    "Fiscal Year" means a fiscal year of the Issuer or of Vencor, as the context
may require.

    "Fixed Charge Coverage Ratio (EBITDA)" means, on any date (the "transaction
date"), the ratio of (x) Consolidated EBlTDA for the four consecutive Fiscal
Quarters ended immediately prior to the transaction date (the "reference
period") to (y) Consolidated Interest Expense for the reference period; provided
that, at any transaction date prior to the end of the fourth full Fiscal Quarter
following the Closing Date, the foregoing amounts shall be determined as of the
end of the then most recently ended Fiscal Quarter on an Annualized Basis. In
making the foregoing calculation,

          (a) pro forma effect will be given to any Debt incurred during or
    after the reference period to the extent the Debt is outstanding or is to be
    incurred on the transaction date as if the Debt had been incurred on the
    first day of the reference period;

          (b) pro forma calculations of interest on Debt bearing a floating
    interest rate will be made as if the rate in effect on the transaction date
    (taking into account any Interest Rate Agreement applicable to the Debt if
    the Interest Rate Agreement has a remaining term of at least 12 months) had
    been the applicable rate for the entire reference period;

          (c) Consolidated Interest Expense related to any Debt no longer
    outstanding or to be repaid or redeemed on the transaction date, except for
    Consolidated Interest Expense accrued during the reference period under the
    Exit Facility to the extent of the commitment thereunder in effect on the
    transaction date, will be excluded;

          (d) pro forma effect will be given to

               (i) the creation, designation or redesignation of Restricted and
         Unrestricted Subsidiaries,

               (ii) the acquisition or disposition of companies, divisions or
         lines of businesses by the Issuer and its Restricted Subsidiaries,
         including any acquisition or disposition of a company, division or line
         of business since the beginning of the reference period by a Person
         that became a Restricted Subsidiary after the beginning of the
         reference period, and

               (iii) the discontinuation of any discontinued operations,

                                      14
<PAGE>

         that have occurred since the beginning of the reference period as if
         such events had occurred, and, in the case of any disposition, the
         proceeds thereof applied, on the first day of the reference period. To
         the extent that pro forma effect is to be given to an acquisition or
         disposition of a company, division or line of business, the pro forma
         calculation will be based upon the most recent four full fiscal
         quarters for which the relevant financial information is available.

         "Forgiveness Amount", as of any date prior to the Interest Commencement
Date then in effect upon which:

               (a) the principal amount of the Loans is being repaid in full
         (the "Final Prepayment Date"), whether at the option of the Issuer,
         mandatorily or upon acceleration, means a portion of the then
         outstanding principal amount of the Loans determined as follows: (i)
         determine the aggregate amount of interest that would have accrued on
         the principal amount of the Loans outstanding from time to time during
         the period beginning on the Closing Date and ending on the Final
         Prepayment Date, at the rate of interest determined pursuant to clause
         (a) of the definition of Number of Deferral Days; and (ii) subtract
         from $15,900,000 the sum of (A) the amount determined pursuant to
         clause (i) and (B) the aggregate Forgiveness Amounts, if any,
         determined for any preceding Partial Prepayment Dates, which resulting
         amount shall be the Forgiveness Amount; and

               (b) the principal amount of the Loans is being repaid in part (a
"Partial Prepayment Date"), whether at the option of the Issuer, mandatorily or
upon acceleration, means a portion of the then outstanding principal amount of
the Loans determined as follows: (i) determine the aggregate amount of interest
that would have accrued to such Partial Prepayment Date and would accrue from
such Partial Payment Date to the Interest Commencement Date (as re-set pursuant
to the proviso in the definition of Number of Deferral Days on account of such
partial prepayment) on the principal amount of the Loans outstanding from time
to time during the period beginning on the Closing Date through the Interest
Commencement Date (taking into account the principal amount of the Loans
proposed be repaid on such Partial Prepayment Date (the "Proposed Prepayment")
and the aggregate Forgiveness Amounts, if any, determined for any preceding
Partial Prepayment Dates, but otherwise assuming for this purpose no further
prepayments or forgiveness of principal prior to such Interest Commencement
Date), at the rate of interest determined pursuant to clause (a) of the
definition of Number of Deferral Days; (ii) add (A) the amount determined
pursuant to clause (i) and (B) the aggregate Forgiveness Amounts, if any,
determined for any preceding Partial Prepayment Dates; (iii) if the amount
determined pursuant to clause (ii) is equal to or greater than $15,900,000, the
applicable Forgiveness Amount shall

                                      15
<PAGE>

be zero; and (iv) if the amount determined pursuant to clause (ii) is less than
$15,900,000, then the applicable Forgiveness Amount shall be such amount which,
when subtracted from the principal amount of the Loans that would be outstanding
after giving effect to the Proposed Prepayment, would result in a pro forma
calculation pursuant to clauses (i) and (ii) in which the pro forma Forgiveness
Amount is zero pursuant to clause (iii).

     "Free Cash Flow" means, for any period, the sum (without duplication) of
(i) Consolidated EBITDA for such period minus (ii) Consolidated Capital
Expenditures for such period minus (iii) the cash consideration paid to make any
Acquisition during such period (excluding cash paid by the application of
Reinvestable Proceeds pursuant to clause (A)(4) of Section 2.06(a) or by the
application of amounts transferred to the Issuer pursuant to Section 2.06(b))
minus (iv) cash interest payable by the Issuer and its Restricted Subsidiaries
with respect to such period minus (v) the amount of cash income taxes payable by
the Issuer and its Restricted Subsidiaries with respect to such period and minus
(vi) the aggregate principal amount of Debt repaid by the Issuer and its
Restricted Subsidiaries during such period, excluding (1) repayments of loans
under the Exit Facility to the extent the commitments thereunder would permit
the amount repaid to be reborrowed and (2) Excluded PIP Repayments; provided
that the deduction for Consolidated Capital Expenditures for the first, second
and third Fiscal Quarters of a Fiscal Year will be the greater of (x) one-
quarter, one-half and three-quarters, as the case may be, of the actual budgeted
amount of Consolidated Capital Expenditure for such Fiscal Year (such budgeted
amount not to exceed the amount set forth in Section 6.04 opposite such Fiscal
Year) and (x) the actual Consolidated Capital Expenditures for such Fiscal
Quarter.

     "GAAP" means at any time generally accepted accounting principles as then
in effect in the United States, applied on a basis consistent (except for
changes concurred in by the Issuer's independent public accountants) with the
Most Recent Audited Financial Statements.

     "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.

     "Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

     "Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and,

                                      16
<PAGE>

without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise), (ii) to reimburse a bank for
drawings under a letter of credit for the purpose of paying such Debt or (iii)
entered into for the purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder against loss in respect
thereof (in whole or in part); provided that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee", when used as a verb, has a corresponding
meaning.

     "Guarantors" means Vencor and the Subsidiary Guarantors.

     "Guaranty Agreements" means the Vencor Guaranty Agreement and the
Subsidiary Guaranty Agreements.

     "Hazardous Substances" means any toxic, radioactive, corrosive or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, whether or not regulated under Environmental
Laws.

     "Healthcare Facility" means (i) a hospital, outpatient clinic, nursing
center, assisted or independent living community, long-term care facility or any
other facility that is used or useful in the provision of healthcare or
custodial care services, (ii) any healthcare business affiliated or associated
with a Healthcare Facility (as defined in clause (i)) or (iii) any business
related or ancillary to the provision of healthcare services or the operation of
a Healthcare Facility (as defined in clause (i)) including, but not limited to,
contract therapy services, as well as hospice and home care services.

     "Indemnitee" has the meaning set forth in Section 12.03(b).

     "Initial Lender Schedule" means the Initial Lender Schedule attached
hereto.

     "Initial Master Lease Properties" means the Healthcare Facilities
identified as the "Initial Master Lease Properties" on Schedule 4 hereto.

     "Insurance Subsidiary" means any insurance company that becomes a
Subsidiary of the Issuer on or after the Closing Date.

                                      17
<PAGE>

     "Intercreditor Agreement" means a Subordination and Intercreditor Agreement
among the Issuer, Vencor, the Collateral Agent and the Exit Facility Collateral
Agent, substantially in the form of Exhibit E hereto.

     "Interest Commencement Date" means the earlier of (a) the date that is the
Number of Deferral Days after the Closing Date and (b) the date, if ever, upon
which an Event of Default described in Section 8.01(n) involving the Issuer or
Vencor occurs.

     "Interest Period" means with respect to each Loan, a period commencing on
the date specified in the applicable Notice of Interest Rate Election and ending
one, two, three or six months thereafter, as the Issuer may elect in the
applicable notice; provided that:

          (a) any Interest Period that would otherwise end on a day that is not
     a Euro-Dollar Business Day shall be extended to the next succeeding Euro-
     Dollar Business Day unless such day falls in another calendar month, in
     which case such Interest Period shall end on the next preceding Euro-Dollar
     Business Day;

          (b) any Interest Period that begins on the last Euro-Dollar Business
     Day of a calendar month (or on a day for which there is no numerically
     corresponding day in the calendar month at the end of such Interest Period)
     shall, subject to clause (c) of this proviso, end on the last Euro-Dollar
     Business Day of a calendar month; and

          (c) any Interest Period that would otherwise end after the Stated
     Maturity Date shall end on the Stated Maturity Date.

     "Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement, to or under which the Issuer or
any of its Restricted Subsidiaries is a party or a beneficiary on the date
hereof or becomes a party or a beneficiary hereafter.

     "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.

     "Investment" means, with respect to any Person (the "Investor"), any
investment by the Investor in any other Person, whether by means of share
purchase, capital contribution, loan, advance, purchase of Debt, payment in
respect of a Guarantee of Debt, time deposit or otherwise.

                                      18
<PAGE>

    "Issuer" has the meaning set forth in the introduction to this Agreement.

    "Kingfish Transaction" means the proposed sale by Vencor and certain of its
Subsidiaries of the Kingfish Properties (as defined in the motion for entry of
an order filed by Vencor and certain of its Subsidiaries with the Court on
November 10, 1999 (the "Kingfish Motion"), as the same may be amended from time
to time so long as the motion as so amended shall not reflect any change from
the Kingfish Motion that, in the reasonable judgment of the Required Lenders, is
adverse in any material respect to the Issuer or any Guarantor or to the
Lenders) (i) in accordance with the order of the Court approving such sale or
(ii) at any time on or after the Effective Date, substantially in accordance
with the memorandum describing such sale delivered to the Administrative Agent
on or prior to the date hereof.

    "Leasehold Mortgages" means leasehold mortgages, substantially in the form
of Exhibit F to the Security Agreement, relating to (i) the Initial Master Lease
Properties and the Other Leased Properties and (ii) leases of any other real
properties leased by the Issuer or any Guarantor which are required to be so
encumbered to secure the Obligations pursuant to Section 5.09.

    "Lender" means initially the Custodian and, thereafter, each holder of
Senior Debt Claims and each Assignee which becomes a "Lender" for purposes
hereof pursuant to Section 12.06, and their respective successors.

    "Lender Parties" means the Lenders and the Agents.

    "Lending Office" means, as to each Lender, its office located at its address
set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Lending Office) or such other office as such
Lender may hereafter designate as its Lending Office by notice to the Issuer and
the Administrative Agent.

    "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset or any
other arrangement (other than a right of set-off, recoupment, counterclaim or
similar right) the economic effect of which is to give a creditor preferential
access to such asset to satisfy its claim. For purposes of this Agreement, the
Issuer and any Guarantor shall be deemed to own subject to a Lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement or other title retention agreement relating to such
asset or any Capital Lease.

    "Lien Grantor" means the Issuer or a Guarantor that grants a Lien on any of
its property pursuant to the Collateral Documents.

                                      19
<PAGE>

    "Loans" means the aggregate principal amount of the indebtedness of the
Issuer evidenced by the Notes.

    "Management Contracts" means the management contracts pursuant to which the
Issuer and the Guarantors manage Healthcare Facilities as set forth in Schedule
5 hereto.

    "Margin Stock" has the meaning set forth in Regulation U.

    "Master Lease Agreements" means the Amended Ventas Leases and any lease
agreements pursuant to which one or more Master Lease Leased Properties (as
defined in the Amended Ventas Leases) are leased, whether under an Amended
Ventas Lease or other leases pursuant to the terms of such Amended Ventas
Leases, in each case, as amended from time to time after the Closing Date in
accordance with the terms thereof.

    "Master Lease Property" means (i) the Initial Master Lease Properties and
(ii) any properties added after the Closing Date to the properties leased under
a Master Lease Agreement.

    "Material Adverse Effect" means a material adverse effect on (i) the
business, condition (financial or otherwise), results of operations, performance
or properties of (A) prior to the Closing Date, Vencor and its Subsidiaries and
(B) on and after the Closing Date, the Issuer and its Restricted Subsidiaries,
in each case, taken as a whole, since September 30, 2000, (ii) the validity,
binding effect or enforceability of any Financing Document, (iii) the validity,
perfection or priority of the Liens on any material part of the Collateral
created or purportedly created under the Collateral Documents or (iv) the
ability of the Issuer or Vencor, or the ability of the Restricted Subsidiaries
taken as a whole, to perform their respective obligations under any Financing
Document; provided that a Material Adverse Effect shall not be deemed to have
occurred solely on account of (a) any events, occurrences and circumstances set
forth in the Disclosure Statement, (b) the commencement or continuation of the
Chapter 11 Cases and (c) the termination of the lease of one or more Healthcare
Facilities under a Master Lease Agreement, or the surrender or repossession of
one or more Healthcare Facilities leased thereunder, prior to the scheduled
termination thereof (the Fiscal Quarter in which such termination, surrender or
repossession occurs, the "Current Fiscal Quarter"), unless the EBITDAR
attributable to all Healthcare Facilities then being terminated, surrendered or
repossessed (other than in respect of any voluntary termination of a lease of a
Healthcare Facility at a time when no Event of Default (as defined in the Master
Lease Agreement) exists thereunder or is reasonably likely to occur or any
termination of a lease of a Healthcare Facility pursuant to a purchase option
exercised in accordance with the terms thereof), and the EBITDAR attributable to
all Healthcare

                                      20
<PAGE>

Facilities with respect to which such a termination, surrender or repossession
occurred during the Current Fiscal Quarter and the most recently ended period of
four consecutive Fiscal Quarters exceed, in the aggregate, 5% of Consolidated
EBITDAR during such period of four consecutive Fiscal Quarters (the foregoing
amounts to be calculated in accordance with Section 8.01(h)).

     "Material Debt" means Debt (other than Debt arising under this Agreement)
of the Issuer or one or more of the Guarantors, arising in one or more related
or unrelated transactions, in an aggregate outstanding amount (excluding accrued
interest) of $5,000,000 or more.

     "Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $1,000,000.

     "Material Real Property" means (i) any real property with a fair market
value exceeding, in the case of real property relating to a Healthcare Facility
that is a hospital, $6,000,000, or in the case of any other real property,
$3,000,000, in either case, which is acquired by the Issuer or a Guarantor after
the Closing Date and not sold to a Person (other than the Issuer or a Guarantor)
within 90 days after such acquisition or (ii) any real property leased to the
Issuer or a Guarantor for the first time after the Closing Date if the projected
EBITDA (as reasonably estimated by a Financial Officer) for the Healthcare
Facility to which such lease relates for the twelve months following the date on
which a leasehold report is delivered to the Administrative Agent pursuant to
Section 5.09(c) is equal to or exceeds $l,000,000 with respect to any leased
Healthcare Facility that is a hospital and $500,000 with respect to any other
leased Healthcare Facility.

     "Medicaid" means the medical assistance program established by Title XIX of
the Social Security Act (42 U.S.C. (S)(S) 1396 et seq.) and any statutes
succeeding thereto.

     "Medicaid Regulations" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting Medicaid, (ii) all applicable provisions of all federal rules,
regulations, manuals and orders all of Governmental Authorities promulgated
pursuant to or in connection with the statutes described in clause (i) above and
all federal administrative, reimbursement and other guidelines of all
Governmental Authorities having the force of law promulgated pursuant to or in
connection with the statutes described in clause (i) above, (iii) all state
statutes and plans for medical assistance enacted in connection with the
statutes and provisions described in clauses (i) and (ii) above, and (iv) all
applicable provisions of all rules, regulations, manuals and orders of all
Governmental Authorities promulgated pursuant to or in connection with the
statutes described in clause (iii) above and all state administrative,
reimbursement and other guidelines of

                                      21
<PAGE>

all Governmental Authorities having the force of law promulgated pursuant to or
in connection with the statutes described in clause (iii) above, in each case as
may be amended or supplemented.

     "Medicare" means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. (S)(S) 1995 et
seq.) and any statutes succeeding thereto.

     "Medicare Regulations" means, collectively, all federal statutes (whether
set forth in Title XVIII of the Social Security Act or elsewhere) affecting
Medicare, together with all applicable provisions of all rules, regulations,
manuals and orders and administrative, reimbursement and other guidelines having
the force of law of all Governmental Authorities (including without limitation,
Health and Human Services ("HHS"), Health Care Finance Administration, the
Office of the Inspector General for HHS, or any Person succeeding to the
functions of any of the foregoing) promulgated pursuant to or in connection with
any of the foregoing having the force of law, as each may be amended or
supplemented.

     "Minority-Owned Affiliate" means any Person (other than a Restricted
Subsidiary) in which (i) the Issuer and its Restricted Subsidiaries own 10% or
more of any class of capital stock or other Equity Interests or (ii) the Issuer
or any Restricted Subsidiary is a general partner.

     "Moody's" means Moody's Investors Service, Inc.

     "Morgan" means Morgan Guaranty Trust Company of New York and its successors
and assigns.

     "Mortgages" means the Leasehold Mortgages and Fee Mortgages, collectively.

     "Most Recent Audited Financial Statements" means (i) at any time before
audited consolidated financial statements of the Issuer and its Restricted
Subsidiaries have been delivered pursuant to Section 5.01(a), the audited
consolidated financial statements of Vencor and its Consolidated Subsidiaries as
of December 31, 2000 and (ii) at any time after audited consolidated financial
statements of the Issuer and its Restricted Subsidiaries have been delivered
pursuant to Section 5.01 (a), the most recent audited consolidated financial
statements of the Issuer and its Restricted Subsidiaries so delivered.

     "Most Recent Financial Statements" means (i) at any time before
consolidated financial statements of the Issuer and its Restricted Subsidiaries
(whether audited or unaudited) have been delivered pursuant to Section 5.01(a)
or

                                      22
<PAGE>

Section 5.01(b), the audited consolidated financial statements of Vencor and its
Consolidated Subsidiaries as of December 31, 2000, and upon delivery pursuant to
Section 5.01(a), the consolidated financial statements of Vencor and its
Consolidated Subsidiaries as of March 31, 2001 and (ii) at any time after
consolidated financial statements of the Issuer and its Restricted Subsidiaries
have been delivered pursuant to Section 5.01(a) or Section 5.01(b), the most
recent consolidated financial statements of the Issuer and its Restricted
Subsidiaries so delivered.

     "Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.

     "Net Cash Proceeds" means, with respect to any Asset Sale (other than the
Kingfish Transaction) or Equity Issuance, an amount equal to the cash proceeds
received by the Issuer and its Restricted Subsidiaries in respect of such Asset
Sale or by Vencor in respect of such Equity Issuance (including any cash
proceeds received as income or other cash proceeds of any noncash proceeds of
such Asset Sale), less:

     (i)  any expenses reasonably incurred by the Issuer and its Restricted
Subsidiaries in respect of such Asset Sale or by Vencor in respect of such
Equity Issuance (including reasonable attorneys' fees and expenses); and

     (ii) in the case of any Asset Sale, (x) the amount of any Debt secured by a
Lien on any asset disposed of in such Asset Sale and discharged from the
proceeds thereof and (y) any payment with respect to taxes actually paid or to
become payable by the Issuer and its Restricted Subsidiaries (as reasonably
estimated by a Financial Officer) in respect of such Asset Sale.

     "Non-Recourse Debt" means Debt as to which (i) neither the Issuer nor any
Restricted Subsidiary provides any Guarantee and as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Issuer or any Restricted Subsidiary and (ii) no default thereunder
would, as such, constitute a default under any Debt of the Issuer or any
Restricted Subsidiary.

     "Note" means a senior secured promissory note of the Issuer payable to a
Lender pursuant to the terms of this Agreement and substantially in the form of
Exhibit A hereto. "Notes" means any or all of such promissory notes, as the
context may require.

     "Notice of Interest Rate Election" has the meaning set forth in Section
2.03.

                                      23
<PAGE>

     "Number of Deferral Days" means a number of days determined as follows: (a)
determine the rate of interest that would be applicable to the Loans in
accordance with Section 2.02(a) (but for the proviso in the first paragraph of
such Section) for an initial Interest Period of six months beginning on the
Closing Date; (b) calculate the amount of interest that would accrue per day on
the initial principal amount of the Loans beginning with the Closing Date at the
rate of interest determined pursuant to clause (a); and (c) divide $15,900,000
by the amount of interest per day determined pursuant to clause (b), rounding
the quotient to the next highest whole number, which number shall be the Number
of Deferral Days, provided that if the principal amount of the Loans is repaid
in part (other than after an Event of Default described in Section 8.01(n)
involving the Issuer or Vencor has occurred), whether at the option of the
Issuer, mandatorily or upon acceleration, on a date prior to the Interest
Commencement Date then in effect (it being understood that successive repayments
of the principal of the Loans will result in successive re-determinations of the
Number of Deferral Days and re-settings of the Interest Commencement Date),
whether at the option of the Issuer, mandatorily or upon acceleration, the
Number of Deferral Days shall be re-determined using the amount of interest that
would accrue after such date on the reduced principal amount of the Loans so
that the Number of Deferral Days reflects an aggregate amount of interest that
would have accrued after the Closing Date equal to $15,900,000, provided further
that no re-set Interest Commencement Date may be later than the Stated Maturity
Date.

     "Obligations" means all obligations of every nature of the Issuer or any
Guarantor under the Financing Documents, including, without limitation, any
liability of the Issuer on any claim, whether or not the right to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated, fixed or
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any bankruptcy, insolvency, reorganization or other similar
proceeding. Without limiting the generality of the foregoing, the Obligations of
the Issuer and a Guarantor under the Financing Documents include (a) the
obligation to pay principal, interest, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by the Issuer or such
Guarantor under any Financing Document and (b) the obligation to reimburse any
amount in respect of any of the foregoing that any Agent or any Lender, in its
sole discretion, may elect to pay or advance on behalf of the Issuer or such
Guarantor in accordance with the terms of any Financing Document.

     "Organizational Documents" means (i) with respect to any corporation, its
certificate or articles of incorporation, by-laws and other constitutional
documents, including the certificate of designation for any series of its
preferred stock, (ii) with respect to any limited liability company, its
articles of organization and operating agreement, or other comparable documents
however named, and (iii) with respect to any partnership, its partnership
agreement.

                                      24
<PAGE>

     "Other Leased Properties" means the Healthcare Facilities identified as the
"Other Leased Properties" on Schedule 4 hereto.

     "Owned Properties" means each of the Healthcare Facilities identified as
the "Owned Properties" on Schedule 3 hereto.

     "Parent" means, with respect to any Lender, any Person controlling such
Lender.

     "Participant" has the meaning set forth in Section 12.06(b).

     "Payment Blockage Period" has the meaning set forth in Section 11.03(b).

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

     "Permitted Encumbrances" means, with respect to any property (including any
leasehold interest) owned by the Issuer or any Restricted Subsidiary:

     (a)  Liens for taxes, assessments or other governmental charges not yet due
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the Issuer
or such Restricted Subsidiary in accordance with GAAP;

     (b)  carriers', warehousemen's, mechanics', materialmens, repairmens' or
other like Liens arising by operation of law in the ordinary course of business
so long as (A) the underlying obligations are not overdue for a period of more
than 60 days or (B) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Issuer or such Restricted Subsidiary in
accordance with GAAP;

     (c)  Liens arising in the ordinary course of business and consistent with
past practice in connection with deposits with trade creditors, landlords,
bonding companies and other similar deposits;

     (d)  Liens arising in the ordinary course of business in connection with
the Issuer's cash management system; provided that the aggregate principal
amount of Debt secured by this clause (d) shall not at any time exceed
$10,000,000;

     (e)  judgment liens, and Liens securing appeal bonds or letters of credit
issued in support of or in lieu of appeal bonds, so long as no Event of Default
then exists under Section 8.01(k);

                                      25
<PAGE>

     (f)  other Liens or title defects in respect of real property (including
matters which an accurate survey might disclose and exceptions to title set
forth in title insurance with respect to the Mortgages) which (A) do not secure
Debt and (B) do not materially detract from the value of such property or
materially impair the use thereof by the Issuer or such Restricted Subsidiary in
the operation of its business; and

     (g)  other Liens and other title defects listed on the schedule to the
Encumbrance Letter; provided that such Liens and title defects are paid,
discharged, removed or reserved against in accordance with the provisions of,
and within the time periods (if any) specified in, the Encumbrance Letter.

     "Permitted Intercompany Debt" means Debt of the Issuer or any Restricted
Subsidiary owed to the Issuer or any Wholly Owned Restricted Subsidiary so long
as such Debt continues to be owed to the Issuer or any Wholly Owned Restricted
Subsidiary; provided that such Debt is either evidenced by a promissory note
(which note shall be subordinated to the Obligations in a manner reasonably
satisfactory to the Collateral Agent) or maintained in the form of open account
balances in which, in either case, the Collateral Agent has a perfected security
interest under the Security Agreement at all times until such security interest
is released pursuant to Section 18 thereof.

     "Permitted Investment" means:

     (a) Investments existing on the Closing Date and set forth in Schedule 6
hereto;

     (b) Temporary Cash Investments;

     (c) any Investment in a then-existing Restricted Subsidiary;

     (d) payroll, travel and other advances to directors, officers and
employees, in each case in the ordinary course of business, not in excess of
$1,000,000 outstanding at any time; provided that taxes payable in connection
with the issuance of Equity Interests of Vencor in the ordinary course of
business to such directors, officers and employees shall be excluded from the
calculation of the amount of Investments outstanding under this clause (d) so
long as such taxes are not owing for more than 30 days;

     (e) working capital loans to, and other Investments in, Minority-Owned
Affiliates and any other Investment in any Person engaged in any business
related to or ancillary to the provision of healthcare services or the operation
of a Healthcare Facility (as defined in clause (i) of the definition of
"Healthcare Facility"), so long as the aggregate amount of all Investments made
after the Closing Date pursuant to this

                                      26
<PAGE>

clause (e) outstanding at any time during each of the periods referred to below
shall not exceed the amount set forth opposite such period:

--------------------------------------------------------------------------------
                      Period                                         Amount
--------------------------------------------------------------------------------
Closing Date to but excluding first anniversary thereof:         $1,000,000
--------------------------------------------------------------------------------
First anniversary of Closing Date to but excluding second        $2,000,000
anniversary thereof:
--------------------------------------------------------------------------------
Second anniversary of Closing Date to but excluding third        $3,000,000
anniversary thereof:
--------------------------------------------------------------------------------
Third anniversary of Closing Date to but excluding fourth        $4,000,000
anniversary thereof:
--------------------------------------------------------------------------------
Thereafter:                                                      $5,000,000
--------------------------------------------------------------------------------

     (f) Investments received as non-cash consideration in an Asset Sale made
pursuant to and in compliance with Section 7.03(d).

     "Permitted Liens" means Liens permitted to exist under Section 7.02.

     "Permitted Taxes" means all taxes, however denominated, including any
interest, additions to tax or penalties that may become payable in respect
thereof, imposed by any federal, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income taxes
(including, but not limited to, United States federal income taxes and state
income taxes), payroll and employee withholding taxes, unemployment insurance,
social security, severance, sales and use taxes, excise taxes, customs,
environmental, license, franchise taxes, gross receipts taxes, occupation taxes,
real and personal property taxes, capital taxes, stamp taxes, transfer taxes, ad
valorem taxes, withholding taxes, workers' compensation, estimated, alternative
or add-on minimum taxes, and other obligations of the same or of a similar
nature, whenever arising.

     "Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

     "Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for

                                      27
<PAGE>

employees of any member of the ERISA Group or (ii) has at any time within the
preceding five years been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.

    "Plan of Reorganization" means the Fourth Amended Joint Plan of
Reorganization attached as Exhibit A to the Disclosure Statement (together with
the Plan Supplement), as amended through and including the Confirmation Date.

    "Plan Supplement" means the Fourth Amended Plan Supplement relating to the
Plan of Reorganization filed with the Court on December 29, 2000.

    "Proposed Purchase Price" has the meaning set forth in Section 2.06(b)(i).

    "Qualification" means, with respect to any report of independent public
accountants covering financial statements, a qualification to such report (such
as a "subject to" or "except for" statement therein) (i) resulting from a
limitation on the scope of examination of such financial statements or the
underlying data, (ii) as to the capability of the Person whose financial
statements are being examined to continue operations as a going concern or (iii)
which could be eliminated by changes in financial statements or notes thereto
covered by such report (such as, by the creation of or increase in a reserve or
a decrease in the carrying value of assets); provided that neither of the
following shall constitute a Qualification: (a) a consistency exception relating
to a change in accounting principles with which the independent public
accountants for the Person whose financial statements are being examined have
concurred or (b) a qualification relating to the outcome or disposition of any
uncertainty, including but not limited to threatened litigation, pending
litigation being contested in good faith, pending or threatened claims or other
contingencies, the impact of which litigation, claims, contingencies or
uncertainties cannot be determined with sufficient certainty to permit
quantification in such financial statements.

    "Qualified Equity Interests" means all Equity Interests of a Person other
than Disqualified Equity Interests.

    "Quarterly Measurement Date" means the last day of a Fiscal Quarter.

    "Register" has the meaning set forth in Section 12.06(e).

    "Regulated Activity" means any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substance.

                                      28
<PAGE>

     "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Reinvestable Proceeds" has the meaning set forth in Section 2.06(a).

     "Related Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed by the same investment advisor as such Lender or by an affiliate of
such investment advisor.

     "Required Lenders" means at any time Lenders holding in excess of 50% in
aggregate principal amount of the Loans then outstanding.

     "Restricted Investment" means any Investment or Acquisition other than an
Investment or Acquisition made pursuant to Section 7.08(a).

     "Restricted Payment" means (i) any dividend or other distribution on any
Equity Interests of the Issuer or any Restricted Subsidiary (except dividends
payable solely in Equity Interests of the same class) and (ii) any payment on
account of the purchase, redemption, retirement or acquisition of any Equity
Interests of the Issuer or any Restricted Subsidiary.

     "Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary; the initial Restricted Subsidiaries as of the Closing
Date are identified on Schedule 1 hereto.

     "S&P" means Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

     "Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement whereby such Person enters into a lease of property previously
transferred by such Person to the lessor.

     "Satisfactory Plan of Reorganization" means the Plan of Reorganization as
approved in connection with the Disclosure Statement Hearing, without giving
effect to any subsequent amendments thereof.

     "SEC" means the United States Securities and Exchange Commission.

     "Secured Obligations" has the meaning set forth in Section 1 of the
Security Agreement.

                                      29
<PAGE>

    "Securities Act" means the Securities Act of 1933, as amended from time to
time.

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

    "Security Agreement" means a Second Priority Security Agreement among the
Issuer, Vencor, the Restricted Subsidiaries and the Collateral Agent,
substantially in the form of Exhibit B hereto, as amended from time to time.

    "Security Agreement Supplement" means a Second Priority Security Agreement
Supplement, substantially in the form of Exhibit A to the Security Agreement,
whereby the Issuer or a Guarantor grants (or confirms its grant of) a security
interest in additional Collateral to the Collateral Agent and, if the grantor of
such security interest is a Subsidiary that is not already a party to the
Security Agreement, such Subsidiary becomes a party thereto.

     "Security Interests" has the meaning set forth in Section 1 of the Security
Agreement.

     "Senior Agents" means, collectively, the "Agents" as such term is defined
in the Exit Facility.

     "Senior Lenders" means the "Lenders", the "Swingline Bank", the "LC Issuing
Banks" and the "Interest Hedge Counterparties" as such terms are defined in the
Exit Facility.

    "Senior Obligations" means all obligations (whether in existence on the
Closing Date or arising afterwards, absolute or contingent, direct or indirect)
of the Issuer and each Guarantor for or in respect of principal (when due, upon
acceleration, upon redemption, upon mandatory repayment or repurchase pursuant
to a mandatory offer to purchase, or otherwise), premium, interest, penalties,
fees, indemnification, reimbursement and other amounts payable and liabilities
under the Exit Facility, the other Exit Facility Financing Documents and the
"Designated Interest Rate Agreements" (as defined in the Exit Facility),
including all interest accrued or accruing after the commencement of any
bankruptcy, insolvency or reorganization or similar case or proceeding at the
contract rate (including, without limitation, any contract rate applicable upon
default) specified in the relevant documentation, whether or not the claim for
such interest is allowed as a claim in such case or proceeding.

     "Shell Subsidiary" means Stamford Health Associates, L.P., a Connecticut
limited partnership.

                                      30
<PAGE>

    "Stated Maturity Date" means the seventh anniversary of the Closing Date or,
if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar
Business Day.

    "Subordinated Debt" means any Debt of the Issuer or any Guarantor which is
subordinated in right of payment to the Notes, the Subsidiary Guaranty or the
Vencor Guaranty, as applicable, pursuant to a written agreement to that effect.

    "Subsidiary" means, as to any Person, (i) any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person or (ii)
any limited liability company or partnership that, in accordance with GAAP, is a
Consolidated Subsidiary of such Person. Unless otherwise specified, "Subsidiary"
means a Subsidiary of the Issuer.

    "Subsidiary Guarantor" means a current or future Restricted Subsidiary that
(i) guarantees the obligations of the Issuer under the Financing Documents
pursuant to the Subsidiary Guaranty Agreement and (ii) grants a security
interest in its assets to the Collateral Agent under the Security Agreement to
secure its Subsidiary Guaranty.

    "Subsidiary Guaranty" means a guaranty by a Subsidiary Guarantor that the
Issuer will perform its obligations under the Financing Documents, such guaranty
to be set forth in the Subsidiary Guaranty Agreement.

    "Subsidiary Guaranty Agreement" means an instrument, substantially in the
form of Exhibit C hereto, setting forth the Subsidiary Guaranties of one or more
Subsidiary Guarantors.

    "Tax Allocation Agreement" means the Tax Allocation Agreement between Vencor
and Ventas entered into in connection with the reorganization of such entities
in 1998, as amended pursuant to the terms of the Tax Refund Escrow Agreement.

    "Tax Refund Escrow Agreement" means the Tax Refund Escrow Agreement among
certain Vencor Companies and certain Ventas Companies substantially in the form
of Exhibit 5 to the Plan Supplement that provides for the escrow and use of
certain tax refunds.

    "Temporary Cash Investment" means any investment in (i) securities issued,
or directly and fully guaranteed or insured, by the United States or any agency
or instrumentality thereof; provided that the full faith and credit of the
United States is pledged in support thereof, (ii) time deposit accounts,
bankers' acceptances, certificates of deposit and money market deposits maturing
within 180 days of the

                                      31
<PAGE>

date of acquisition thereof issued by any office located in the United States of
a bank or trust company which is organized or licensed under the laws of the
United States or any State thereof and which bank or trust company has capital,
surplus and undivided profits aggregating more than $1,000,000,000 and has
outstanding debt which is rated "P-l" (or higher) by Moody's or "A-l" (or
higher) by S&P or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with an office located in the United States of a bank or
trust company meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 180 days after the date of acquisition,
issued by a corporation (other than any Ventas Company, any Vencor Company or
any Affiliate) organized under the laws of the United States or any State
thereof with a rating, at the date of acquisition, of "P-l" (or higher) by
Moody's or "A-l" (or higher) by S&P, (v) securities with maturities of 6 months
or less from the date of acquisition issued or fully and unconditionally
guaranteed by any State, commonwealth or territory of the United States, or by a
political subdivision or taxing authority thereof, and rated at least "P-l" (or
higher) by Moody's or "A-l" (or higher) by S&P and (vi) money market funds which
invest substantially all of their assets in securities described in the
preceding clauses (i) through (v).

     "Third Party Leases" means the leases by the Issuer or a Guarantor listed
and identified as "Third Party Leases" in Schedule 4 hereto.

     "UCC" has the meaning set forth in Section 1 of the Security Agreement.

     "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title I of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

     "United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.

     "Unrestricted Subsidiary" means any Subsidiary of the Issuer that at the
time of determination has previously been designated, and continues to be, an
Unrestricted Subsidiary in accordance with Section 5.07.

     "Vencor" has the meaning set forth in the introduction to this Agreement.

                                      32
<PAGE>

     "Vencor Company" means Vencor or any Subsidiary of Vencor.

     "Vencor Guaranty" means the guaranty by Vencor that the Issuer will perform
its obligations under the Financing Documents, such guaranty to be set forth in
the Vencor Guaranty Agreement.

     "Vencor Guaranty Agreement" means an instrument, substantially in the form
of Exhibit D hereto, setting forth the Vencor Guaranty.

     "Vencor Unrestricted Subsidiary" means any Subsidiary of Vencor other than
the Issuer and any of the Issuer's Subsidiaries.

     "Ventas" means Ventas, Inc., a Delaware corporation.

     "Ventas Company" means Ventas or any Subsidiary of Ventas.

     "Wholly Owned" means, with respect to any Restricted Subsidiary, a
Restricted Subsidiary all of the outstanding capital stock of which (other than
any director's qualifying shares) is owned by the Issuer and one or more Wholly
Owned Restricted Subsidiaries (or a combination thereof).

     Section 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Issuer notifies the Administrative Agent that the Issuer
wishes to amend any provision hereof to eliminate the effect of any change in
GAAP on the operation of such provision (or if the Administrative Agent notifies
the Issuer that the Required Lenders wish to amend any provision hereof for such
purpose), then such provision shall be applied on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such provision is amended in a manner satisfactory
to the Issuer and the Required Lenders.

     Section 1.03. Definitions from Disclosure Statement. Capitalized terms used
herein that are not defined herein but are defined in the Disclosure Statement
(including the Plan of Reorganization) have the meanings given in the Disclosure
Statement.

     Section 1.04. Other Definitional Provisions. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" are to Articles, Sections,
Schedules or Exhibits of or to this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1.01 may, unless the context
otherwise requires, be used in the singular or plural depending on the
reference. "Include", "includes"

                                      33
<PAGE>

and "including" are deemed to be followed by "without limitation" whether or not
they are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing, facsimile and other
means of reproducing words on paper. References to any agreement or contract are
to such agreement or contract as amended, modified or supplemented from time to
time (whether before, on or after the Closing Date) in accordance with the terms
hereof and thereof. "Hereto", "herein" and "hereof' refer to this Agreement as
amended from time to time.

                                   ARTICLE 2
                                   The Notes

     Section 2.01. Issuance of Notes. As contemplated by the Plan of
Reorganization, on the Effective Date and subject to the occurrence of the
Closing, the Issuer will issue $300,000,000 aggregate principal amount of the
Notes, and each Lender will receive a single Note payable for the account of its
Lending Office in a principal amount equal to the amount set forth opposite its
name on the Initial Lender Schedule; provided that any Note issued to the
Custodian on the Effective Date shall be held by the Custodian on behalf of
holders of Senior Debt Claims in accordance with and subject to the terms of the
Plan of Reorganization until such holders become Lenders pursuant to Section
12.06. Upon receipt of each Lender's Note pursuant to Section 3.01(b), the
Administrative Agent shall forward such Note to such Lender. Each Lender shall
record the date and amount of each payment of principal made by the Issuer with
respect thereto, and may, in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to the then outstanding
principal amount of the Loans evidenced by such Note; provided that neither the
failure of any Lender to make any such recordation or endorsement nor any error
therein shall affect the obligations of the Issuer or the Guarantors under any
Financing Document. Each Lender is hereby irrevocably authorized by the Issuer
and the Guarantors so to endorse its Note and to attach to and make a part of
such Note a continuation of any such schedule as and when required. Each Note
shall evidence indebtedness of the Issuer owed to the relevant Lender on the
terms and conditions set forth herein and therein.

     Section 2.02. Interest Rate; Default Rate.

     (a)  Each Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the Euro-Dollar Margin plus the London Interbank
Offered Rate applicable to such Interest Period; provided that no such interest
shall

                                      34
<PAGE>

accrue on the Notes until, and the initial Interest Period applicable thereto
shall commence on, the Interest Commencement Date. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, three months after the first day thereof.

    The "London Interbank Offered Rate" applicable to any Interest Period means
the rate per annum (rounded upwards, if necessary, to the nearest l/l00 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in dollars at approximately 11:00 A.M. (London time)
two Euro-Dollar Business Days before the first day of such Interest Period for a
term comparable to such Interest Period; provided that, if more than one rate is
specified on such Telerate Page, the applicable rate shall be the arithmetic
mean of all such rates. If for any reason no such rate is available on such
Telerate Page, the applicable London Interbank Offered Rate shall be determined
in accordance with the preceding sentence on the basis of the comparable rate or
rates appearing on Reuters Screen LIBO Page.

    (b) (i) Upon the occurrence of an Event of Default of the type referred to
in Section 8.01(a), 8.01(b) or 8.01(n) or (ii) after the continuance for seven
consecutive days of any other Event of Default, then for so long as such Event
of Default shall be continuing and not waived, each Loan shall bear interest on
the outstanding principal amount thereof, payable on demand, for each day until
such Event of Default has been cured, at a rate per annum equal to the sum of
2.5% plus the Euro-Dollar Margin plus (A) for the remainder of the Interest
Period in which the Event of Default occurred, the higher of the London
Interbank Offered Rate applicable to such Interest Period and the London
Interbank Offered Rate that would be applicable for an Interest Period of one
month beginning on such day and (B) thereafter, the London Interbank Offered
Rate that would be applicable for an Interest Period of one month.

    Section 2.03. Method of Electing Interest Periods. (a) The Issuer shall
elect the initial Interest Period to be applicable to all the Loans commencing
on the Interest Commencement Date and thereafter shall elect additional Interest
Periods effective on the last day of the then current Interest Period; provided
that if the Interest Commencement Date is the date described in clause (b) of
the definition thereof, the Issuer shall be deemed to have delivered a Notice of
Interest Rate Election electing an initial Interest Period of one month for the
Interest Period commencing on the Interest Commencement Date. Each such election
shall be made by delivering a notice (a) "Notice of Interest Rate Election") to
the Administrative Agent not later than Noon (Eastern Time) on the third Euro-
Dollar Business Day before the election selected in such notice is to be
effective.

    (b) Each Notice of Interest Rate Election shall specify:

                                      35
<PAGE>

          (i)  the date upon which such election is to be effective; and

          (ii) the duration of such initial or additional Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.

     (c)  Upon receipt of a Notice of Interest Rate Election from the Issuer
pursuant to Section 2.03(a), the Administrative Agent shall promptly notify each
Lender of the contents thereof and such notice shall not thereafter be revocable
by the Issuer. If the Issuer fails to deliver a timely Notice of Interest Rate
Election to the Administrative Agent or if any Notice of Interest Rate Election
does not specify an Interest Period, then the Issuer shall be deemed to have
selected an Interest Period of one month.

     Section 2.04. Administrative Agent and Collateral Agent Fee. The Issuer
shall pay to the Administrative Agent a monthly fee as set forth in the fee
letter dated February 28, 200l among the Issuer, Vencor, the Administrative
Agent and J.P. Morgan Securities Inc., payable in advance on the Closing Date
(for the remainder of the month in which such date falls) and on the last
Business Day of each month thereafter (for the next succeeding month).

     Section 2.05. Final Maturity of Notes. The outstanding principal amount of
the Loans shall be due and payable (together with interest accrued thereon) on
the Stated Maturity Date.

     Section 2.06. Mandatory Prepayments of Notes.

     (a)  Asset Sales; Casualty Proceeds. If on or after the Closing Date the
Issuer or any Restricted Subsidiary receives any Net Cash Proceeds of any Asset
Sale (other than the Kingfish Transaction) or any Casualty Proceeds
(collectively, "Reinvestable Proceeds"), the Issuer shall (i) promptly provide
notice thereof to the Administrative Agent, which notice shall specify the
amount of Reinvestable Proceeds received and the date on, and the asset or event
in respect of, which such Reinvestable Proceeds were received and (ii) within
two Business Days of the receipt thereof deposit or cause to be deposited such
Revinvestable Proceeds in a Collateral Account, where they shall be held until
such Reinvestable Proceeds are applied as provided herein, provided that if and
to the extent that such Reinvestable Proceeds are required to be deposited with
the Exit Facility Collateral Agent, the Issuer shall not be required to deposit
such Reinvestable Proceeds with the Collateral Agent but they shall remain
otherwise subject to this Section 2.06(a). Reinvestable Proceeds (and any income
from investment thereof) shall be subject to the following provisions.

                                      36
<PAGE>

          (A)  During the one-year period beginning with the date on which the
     Issuer received such Reinvestable Proceeds, such Reinvestable Proceeds will
     be released by the Collateral Agent (or may be released by the Exit
     Facility Collateral Agent) from time to time, at the Issuer's request, (1)
     to repay principal of the PIP Claim and any interest accrued with respect
     thereto through the date of repayment, (2) if such Reinvestable Proceeds
     have been or concurrently are being made the basis of a permanent reduction
     in the amount of the commitments under the Exit Facility, (3) to restore,
     repair, replace or rebuild the asset in respect of which Casualty Proceeds
     were received (or to reimburse the Issuer or any Restricted Subsidiary for
     any such amounts paid by it), (4) to fund the Issuer's or a Restricted
     Subsidiary's payment of the purchase price of an Acquisition of a
     Healthcare Facility or real property, equipment or other assets used or to
     be used in, or in connection with, the operation of a Healthcare Facility
     owned or operated, or proposed to be developed for operation, by the Issuer
     or a Restricted Subsidiary (including any Healthcare Facility already owned
     by the Issuer or a Restricted Subsidiary) or (5) subject to Section 11.03,
     to prepay Loans, provided that the Issuer may not request the release of
     any Reinvestable Proceeds if an Event of Default shall have occurred and be
     continuing.

          (B)  If on the first anniversary of the date any Reinvestable Proceeds
     were deposited in a Collateral Account (or deposited in a collateral
     account pursuant to the Exit Facility) any portion of such Reinvestable
     Proceeds have not been released for application pursuant to subclause (A),
     subject to Section 11.03, such remaining amount shall (subject to
     subsection (d) below) be applied within two Business Days thereafter to
     prepay Loans; provided that the amount required to be so prepaid may be
     reduced by amounts that the Issuer certifies are concurrently being made
     the basis for a permanent reduction in the amount of commitments under the
     Exit Facility. In determining how long any particular Reinvestable Proceeds
     have been held in a Collateral Account, deposits and releases shall be
     accounted for on a first-in, first-out basis.

          (C)  Any Reinvestable Proceeds held by the Collateral Agent or the
     Exit Facility Collateral Agent may also be released from time to time, at
     the Issuer's request (such request to certify that no Default then exists),
     for concurrent application to repay loans then outstanding under the Exit
     Facility (each such release, a "Temporary Withdrawal"); provided that (1)
     immediately after giving effect to such repayment, the amount available to
     be drawn under the Exit Facility (taking into account the borrowing base
     then in effect) is at least equal to the aggregate amount of such Temporary
     Withdrawal and any other Temporary Withdrawals then outstanding and (2) at
     the end of the one-year period applicable to such Reinvestable Proceeds
     (or, if earlier, any date upon which an Event of Default occurs), the
     Issuer shall be

                                      37
<PAGE>

     unconditionally obligated to re-deposit with the Collateral Agent or the
     Exit Facility Agent, as the case may be (for immediate application as
     provided in subclause (B)), an amount equal to (i) the amount of such
     Temporary Withdrawal less (ii) any amounts deemed applied against such re-
     deposit obligation pursuant to the following provisions of this subclause
     (C). During such one-year period, the Issuer may by notice to the
     Collateral Agent and the Exit Facility Agent (which notice shall certify
     that no Default then exists) identify any purpose for which it would
     otherwise have been entitled to request a release of such Reinvestable
     Proceeds and designate the amount that it would otherwise have been able to
     withdraw to be deemed applied against such re-deposit obligation. During
     such one-year period, the Issuer will not make any borrowing of loans or
     swingline loans, or request the issuance of any letter of credit, under the
     Exit Facility, unless, after giving effect thereto, the amount available to
     be drawn under the Exit Facility (taking into account the borrowing base
     then in effect) would be at least equal to the aggregate amount, determined
     as of such day, of all re-deposit obligations that the Issuer has with
     respect to Reinvestable Proceeds withdrawn pursuant to this subclause (C).

     (b)  Equity Issuances. If on any date (an "Equity Receipt Date") on or
after the Closing Date Vencor receives any Net Cash Proceeds from any Equity
Issuance, Vencor shall promptly provide notice thereof to the Administrative
Agent, which notice shall specify the amount of the Net Cash Proceeds received
with respect thereto, the amount equal to 75% of such Net Cash Proceeds (the
"Designated Equity Proceeds") and the date on which such Designated Equity
Proceeds were received. Such Designated Equity Proceeds shall be applied as
follows:

          (i)  Vencor may during the six-month period following any Equity
     Receipt Date deliver to the Administrative Agent one or more definitive
     executed agreements for an Acquisition by Vencor or any of its Subsidiaries
     of one or more Healthcare Facilities, together in each instance with a
     certificate describing in reasonable detail the purchase price of such
     Acquisition (a "Proposed Purchase Price") and identifying the related pool
     of Designated Equity Proceeds proposed to be used to fund such Proposed
     Purchase Price.

          (ii) Within three Business Days after the end of such six-month
     period, an amount equal to the lesser of (A) 66 2/3% of the original amount
     of such Designated Equity Proceeds and (B) the original amount of such
     Designated Equity Proceeds less the aggregate Proposed Purchase Prices
     certified with respect thereto pursuant to clause (i) less any amount of
     such Designated Equity Proceeds that have been or concurrently are being
     (1) used to repay principal of the PIP Claim and any interest accrued with
     respect thereto through the date of repayment or (2) made the basis for a
     permanent reduction in the amount of the commitments under the Exit
     Facility, shall be

                                      38
<PAGE>

    transferred from Vencor to the Issuer as an equity contribution and, subject
    to Section 11.03, the Issuer shall (subject to subsection (d) below) prepay
    an aggregate principal amount of Loans equal to such amount.

          (iii) No later than the first anniversary of such Equity Receipt Date
     Vencor shall deliver a certificate to the Administrative Agent specifying
     the actual amounts paid during such one-year period as the purchase price
     of any such Acquisition certified with respect thereto pursuant to clause
     (i) (an "Actual Purchase Price"), and within three Business Days thereafter
     an amount equal to (A) 66 2/3% of the original amount of such Designated
     Equity Proceeds less (B) the sum of (1) the aggregate Actual Purchase
     Prices, (2) without double counting, any amount of such Designated Equity
     Proceeds that have been or concurrently are being (x) used to repay
     principal of the PIP Claim and any interest accrued with respect thereto
     through the date of repayment or (y) made the basis for a permanent
     reduction in the amount of the commitments under the Exit Facility and (3)
     any amount applied to repayment of the Loans pursuant to clause (ii), shall
     be transferred from Vencor to the Issuer as an equity contribution and,
     subject to Section 11.03, the Issuer shall (subject to subsection (d)
     below) prepay an aggregate principal amount of Loans equal to such amount.

          (iv)  In addition, Vencor may during the one-year period following
     such Equity Receipt Date deliver to the Administrative Agent one or more
     definitive executed agreements, in addition to any agreements delivered
     pursuant to clause (i), for an Acquisition by Vencor or any of its
     Subsidiaries of one or more Healthcare Facilities, together in each
     instance with a certificate describing in reasonable detail the Proposed
     Purchase Price and identifying the related pool of Designated Equity
     Proceeds proposed to be used to fund such Proposed Purchase Price.

          (v)   Within three Business Days after the end of such one-year
     period, an amount equal to (A) the original amount of such Designated
     Equity Proceeds less (B) the sum of (1) the aggregate Proposed Purchase
     Prices certified with respect thereto pursuant to clause (i) (to the extent
     the Actual Purchase Price has not been determined with respect thereto) or
     clause (iv), (2) the aggregate related Actual Purchase Prices determined
     pursuant to clause (iii), (3) without double counting, any amount of such
     Designated Equity Proceeds that have been or concurrently are being (x)
     used to repay principal of the PIP Claim and any interest accrued with
     respect thereto through the date of repayment or (y) made the basis for a
     permanent reduction in the amount of the commitments under the Exit
     Facility and (4) any amount applied to repayment of the Loans pursuant to
     clause (ii) or (iii), shall be transferred from Vencor to the Issuer as an
     equity contribution and, subject to Section 11.03,

                                      39
<PAGE>

     the Issuer shall (subject to subsection (d) below) prepay an aggregate
     principal amount of Loans equal to such amount.

          (vi)  No later than the date eighteen months after such Equity Receipt
     Date Vencor shall deliver a certificate to the Administrative Agent
     specifying the Actual Purchase Price paid during such eighteen-month period
     of any Acquisition described pursuant to clause (iv), and within three
     Business Days thereafter an amount equal to (A) the original amount of such
     Designated Equity Proceeds less (B) the sum of (1) the aggregate related
     Actual Purchase Prices determined pursuant to this clause (vi) and clause
     (iii), (2) without double counting, any amount of such Designated Equity
     Proceeds that have been or concurrently are being (x) used to repay
     principal of the PIP Claim and any interest accrued with respect thereto
     through the date of repayment or (y) made the basis for a permanent
     reduction in the amount of the commitments under the Exit Facility and (3)
     any amount applied to repayment of the Loans pursuant to clause (ii), (iii)
     or (v), shall be transferred from Vencor to the Issuer as an equity
     contribution and, subject to Section 11.03, the Issuer shall (subject to
     subsection (d) below) prepay an aggregate principal amount of Loans equal
     to such amount.

     (c)  Tax Refunds. If on or after the Closing Date Vencor receives a cash
payment out of the original amount deposited and held in escrow under the Tax
Refund Escrow Agreement, Vencor shall promptly provide notice thereof to the
Administrative Agent, which notice shall specify the amount of the payment
received and the date (the "Tax Receipt Date") on which such payment was
received and the intended application thereof. Such cash payments shall be
applied as follows:

            (i)   During the two Business Day period after the Tax Receipt Date,
     Vencor may apply such payment (or a portion thereof) to pay a tax liability
     of the nature intended to be paid from funds held in escrow under the Tax
     Refund Escrow Account.

            (ii)  If on the third Business Day after the Tax Receipt Date, any
     portion of such payment shall not have been applied pursuant to clause (i),
     such remaining amount shall be transferred from Vencor to the Issuer as an
     equity contribution and, subject to Section 11.03, shall be applied by the
     Issuer (subject to clause (d) below) to prepay an aggregate principal
     amount of Loans equal to such remaining amount; provided that the amount
     required to be so prepaid may be reduced by amounts that are concurrently
     being made the basis for a permanent reduction in the amount of commitments
     under the Exit Facility or will be used promptly to repay principal of the
     PIP Claim and any interest accrued with respect thereto through the day of
     repayment.

                                      40
<PAGE>

     (d)  Timing of Prepayment. Notwithstanding the foregoing, if the aggregate
principal amount of the Loans required to be prepaid on any date pursuant to
this Section 2.06 is less than $l,000,000, such prepayment shall be deferred
without penalty until the aggregate principal amount of the Loans required to be
prepaid pursuant to this Section 2.06 (including such deferred amounts) is not
less than $1,000,000.

     (e)  Notice of Prepayments. The Issuer shall give the Administrative Agent
notice of any prepayment being made pursuant to this Section 2.06 no later than
Noon (Eastern Time) on the date of prepayment, specifying the date and amount of
such prepayment and describing in reasonable detail the event or events which
require such prepayment and calculation of the amount thereof. Promptly upon
receipt of any such notice, the Administrative Agent shall notify each Lender of
the contents thereof and such Lender's share of such prepayment.

     (f)  Interest. Each prepayment of principal of the Loans under this Section
2.06 shall be made together with interest accrued on the amount prepaid to the
date of payment.

     Section 2.07. Optional Prepayments.

     (a)  Notice to Administrative Agent. The Issuer may, upon giving a
prepayment notice to the Administrative Agent at least three Euro-Dollar
Business Days before the date of prepayment, prepay the Loans on the Business
Day specified therein in whole or in part in the amount specified therein (which
if in part must be $l,000,000 or any larger multiple of $100,000).

     (b)  Notice to Lenders. Upon receiving a notice pursuant to this Section
2.07, the Administrative Agent shall promptly notify each Lender of the contents
thereof and of such Lender's share of such prepayment and such notice shall not
thereafter be revocable by the Issuer.

     (c)  Payment of Accrued Interest. Each prepayment of principal of the Loans
under this Section 2.07 shall be made together with interest accrued on the
amount prepaid to the date of payment.

     Section 2.08. General Provision as to Payments.

     (a)  The Issuer shall make each payment of principal of, and interest on,
the Loans and each payment of fees hereunder not later than 1:00 P.M. (Eastern
Time) on the date when due, in Federal or other funds immediately available in
New York, New York, to the Administrative Agent at its address for payments
specified in or pursuant to Section 12.01. Upon receiving a payment for the
account of the Lenders, the Administrative Agent will promptly distribute to
each such Lender its ratable share of

                                      41
<PAGE>

such payment. Whenever any payment of principal of, or interest on, the Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.

     (b)  Unless the Administrative Agent shall have received notice from the
Issuer before the date on which any payment is due to any of the Lenders
hereunder that the Issuer will not make such payment in full, the Administrative
Agent may assume that the Issuer has made such payment in full to the
Administrative Agent on such date and, in reliance upon such assumption, the
Administrative Agent may (but shall not be obligated to) cause to be distributed
to each Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent that the Issuer shall not have so made such
payment, each such Lender shall repay to the Administrative Agent forthwith on
demand any such amount distributed to such Lender together with interest
thereon, for each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the Administrative Agent, at
the Federal Funds Rate.

     (c)  If the Issuer makes any payment of principal with respect to any Loan
on any day other than the last day of an Interest Period applicable thereto, or
the last day of an applicable period fixed pursuant to Section 2.02(b), or if
the Issuer fails to prepay any Loan after notice has been given to any Lender in
accordance with the provisions of Section 2.06(e) or 2.07(b), the Issuer shall
reimburse each Lender for any resulting loss or expense incurred by it,
including any loss incurred in obtaining, liquidating or employing deposits from
third parties, subject to and in accordance with the following procedure. Each
Lender wishing to demand compensation pursuant to this Section 2.08(c) shall,
within seven Business Days after the relevant payment or failure to prepay,
notify the Administrative Agent that it demands such compensation and deliver to
the Administrative Agent a certificate as to the amount of compensation which
such Lender is entitled to receive pursuant to the first sentence of this
Section, showing the calculation thereof in reasonable detail. Such certificate
shall be conclusive in the absence of manifest error. Promptly after the end of
such period of seven Business Days, the Administrative Agent shall notify the
Issuer of all demands for such compensation received by it during such period
and deliver to the Issuer copies of the supporting certificates received by it
from Lenders. Within 15 days thereafter, the Issuer shall pay to the
Administrative Agent the aggregate amount properly demanded by Lenders pursuant
to this Section and upon receipt thereof, the Administrative Agent shall
distribute such amount to the Lenders entitled thereto.

     Section 2.09. Computation of Interest and Fees.

                                      42
<PAGE>

     (a)  Interest hereunder shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day but
excluding the last day).

     (b)  The Administrative Agent shall determine each interest rate applicable
hereunder. The Administrative Agent shall give prompt notice to the Issuer and
the Lenders of each interest rate so determined, and its determination thereof
shall be conclusive in the absence of manifest error.

     Section 2.10. Release of Security Interest in Assets Being Sold. The
Administrative Agent shall from time to time instruct the Collateral Agent to
release specific assets (but not all or substantially all the Collateral) from
the Security Interests pursuant to Section 18 of the Security Agreement if:

          (i)   the Administrative Agent shall have received a written request
     for such release signed by any Executive Officer or a Financial Officer
     stating that (x) the assets to be released are being sold or otherwise
     transferred and (y) the sale or transfer thereof does not violate Section
     7.03(d) hereof;

          (ii)  arrangements satisfactory to the Administrative Agent have been
     made so that such release will become effective no earlier than the closing
     of such sale or transfer;

          (iii) in the case of an Asset Sale, arrangements satisfactory to the
     Administrative Agent have been made to deposit an amount equal to the Net
     Cash Proceeds payable at the closing of such Asset Sale, if any, in a
     Collateral Account and apply it in accordance with Section 2.06(a); and

          (iv)  no Default or Enforcement Notice is in effect when such
     instructions are given.

     Section 2.11. Forgiveness of Principal. (a) In the event that the principal
amount of the Loans are being repaid in full on a date prior to the Interest
Commencement Date then in effect (other than after an Event of Default described
in Section 8.01(n) involving the Issuer or Vencor has occurred), whether at the
option of the Issuer, mandatorily or upon acceleration, a portion of such
outstanding principal amount equal to the applicable Forgiveness Amount shall
not be repaid in cash by the Issuer and instead, effective automatically with
the repayment of the remaining portion of the outstanding principal amount of
the Loans, such principal amount of the Loans shall be forgiven by the Lenders.

     (b)  In the event that the principal amount of the Loans are being repaid
in part on a date prior to the Interest Commencement Date then in effect (other
than after an Event of Default described in Section 8.01(n) involving the Issuer
or Vencor has

                                      43
<PAGE>

occurred), whether at the option of the Issuer, mandatorily or upon
acceleration, a portion of the remaining principal amount of the Loans equal to
the applicable Forgiveness Amount, if any, shall, effective automatically with
the making of the related Proposed Prepayment (as defined under "Forgiveness
Amount"), be forgiven by the Lenders.

                                   ARTICLE 3

                                  Conditions

     Section 3.01. Effectiveness of this Agreement; Closing. This Agreement will
become effective, and the Closing will occur, when (i) the Administrative Agent
shall have received the following documents, each dated the Closing Date unless
otherwise indicated, and (ii) the other conditions specified below shall have
been satisfied:

     (a)  with respect to each party listed on the signature pages hereof,
either a counterpart of this Agreement signed by such party or facsimile or
other written confirmation satisfactory to the Administrative Agent that such
party has signed a counterpart hereof;

     (b)  a duly executed Note complying with the provisions of Section 2.01
payable to each Lender;

     (c)  a counterpart of the Subsidiary Guaranty Agreement signed by each
Restricted Subsidiary;

     (d)  a counterpart of the Vencor Guaranty Agreement signed by Vencor;

     (e)  a counterpart of the Security Agreement, signed by Vencor, the Issuer
and each Restricted Subsidiary, together with (to the extent not already held by
Morgan in its capacity as collateral agent under the Pre-Petition Senior Credit
Agreement and DIP Facility) certificates evidencing all the certificated Equity
Interests listed in Schedule 1 hereto (other than Equity Interests held in
Vencor, Cornerstone or any Excluded Partnership) and signed stock powers or
other appropriate instruments of transfer relating thereto;

     (f)  a counterpart of the Intercreditor Agreement signed by each of the
parties thereto;

     (g)  a signed counterpart of a Fee Mortgage with respect to each Owned
Property in proper form for recording in the relevant jurisdictions, together
with evidence reasonably satisfactory to the Collateral Agent that such Fee
Mortgages will be recorded on or promptly after the Closing Date, and any
related intangibles,

                                      44
<PAGE>

mortgage recording (if any) or similar taxes will be paid in connection with
such recording;

     (h)  a signed counterpart of a Leasehold Mortgage with respect to the lease
of each of the Initial Master Lease Properties and each of the Other Leased
Properties, together with evidence satisfactory to the Collateral Agent that
such Leasehold Mortgages will be recorded on or promptly after the Closing Date
or as otherwise agreed by the Collateral Agent pursuant to the Escrow Agreement,
and any related intangibles, mortgage recording (if any) or similar taxes will
be paid in connection with such recording;

     (i)  receipt by the Collateral Agent of lender's title insurance policies
in an aggregate amount equal to $120 million with respect to the Mortgages, such
policies to be in form and substance reasonably satisfactory to the Collateral
Agent;

     (j)  all signed UCC financing statements reasonably requested by the
Collateral Agent to perfect its security interests in the Collateral and
evidence satisfactory to the Collateral Agent that such UCC financing statements
will be filed on or promptly after the Closing Date or as otherwise agreed by
the Collateral Agent pursuant to the Escrow Agreement, and any related filing
fees or similar charges or taxes will be paid in connection with such filing;

     (k)  a counterpart of each Master Lease Agreement signed by each of the
parties thereto, together with evidence satisfactory to the Collateral Agent
that appropriate memoranda of lease will be recorded on or promptly after the
Closing Date with respect to each of the Initial Master Lease Properties, as
required to protect the rights of the Issuer as lessee thereof against third
parties; the Master Lease Agreements as so executed shall be consistent in all
material respects with the form thereof marked as an exhibit in connection with
the confirmation hearing before the Court on March 1, 200l;

     (l)  the Confirmation Order, as entered on the Court's docket on March 19,
2001, shall not have been amended or modified in any way that, in the reasonable
judgment of the Required Lenders, materially adversely affects their interests
or rights or the business or financial prospects of the Issuer and its
Restricted Subsidiaries and no appeal of the Confirmation Order shall have been
taken or, if any appeal has been taken, no stay of the Confirmation Order
pending appeal shall be in effect; the Confirmation Order shall not provide that
the Court's retention of jurisdiction thereunder governs the enforcement of the
Financing Documents or any of the rights or remedies of the Lenders or the
Agents related thereto, other than in any respect consented to by the Required
Lenders;

     (m)  the Effective Date of the Plan of Reorganization shall have occurred,
and all conditions precedent thereto (including termination of the commitments
under the

                                      45
<PAGE>

DIP Facility and payment in full of all amounts owing by Vencor or any of its
Subsidiaries thereunder) shall have been satisfied as set forth in the Plan of
Reorganization (or, with the prior consent of the Required Lenders, waived);

     (n) all fees and expenses (including but not limited to reasonable fees and
expenses of counsel) required to be paid to the Administrative Agent on or
before the Closing Date shall have been paid;

     (o) opinions of (i)(A) the General Counsel of Vencor and the Issuer,
substantially in the form of Exhibit F-l hereto and (B) the Vice President of
Corporate Legal Affairs of Vencor and the Issuer, substantially in the form of
Exhibit F-2 hereto, (ii) Cleary, Gottlieb, Steen & Hamilton, special counsel for
Vencor and the Issuer, substantially in the form of Exhibit G hereto, (iii)
Morris, Nichols, Arsht & Tunnell, special Delaware counsel for Vencor and the
Issuer, substantially in the form of Exhibit H hereto and (iv) each local real
estate counsel listed on Schedule 7 hereto, substantially in the form of Exhibit
I hereto;

     (p) all necessary governmental and third party consents and approvals
necessary in connection with the effectiveness of the Plan of Reorganization and
the transactions contemplated by the Financing Documents shall have been
obtained (without the imposition of any conditions that would reasonably be
expected to have a Material Adverse Effect) and shall remain in effect, and all
requisite governmental filings necessary in connection therewith have been made
and all applicable waiting periods shall have expired without in either case any
action being taken by any competent authority, except in any case or in all
cases in the aggregate such that the failure to have been obtained or made would
not reasonably be expected to have a Material Adverse Effect;

     (q) no event or condition which has had or is reasonably likely to have a
Material Adverse Effect shall have occurred;

     (r) there shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect:

     (s) copies of personal property Lien and tax and judgment Lien searches
received by the Issuer prior to the Closing Date with respect to personal, real
and mixed properties of the Issuer and the Guarantors, which shall not reveal
the existence of any Liens on such properties other than (i) Permitted Liens or
(ii) Liens as to which the Administrative Agent has received evidence
satisfactory that the obligations secured by such Liens have been fully and
finally discharged on or prior to the Closing Date;

                                      46
<PAGE>

     (t) all other documents that the Administrative Agent may reasonably
request relating to the existence of the Credit Parties, the corporate or other
authority for and the validity of the Financing Documents, the creation and
perfection of the Liens contemplated by the Collateral Documents and any other
matters relevant thereto, all in form and substance satisfactory to the
Administrative Agent.

Promptly after the Closing occurs, the Administrative Agent shall notify the
Issuer and the Lenders thereof, and such notice shall be conclusive and binding
on all parties hereto.

                                   ARTICLE 4
                        Representations and Warranties

     Each of the Issuer and Vencor represents and warrants to the Lender Parties
that:

     Section 4.01. Corporate Existence and Power. The Issuer and each Guarantor
(a) is a corporation, limited liability company or partnership duly incorporated
or organized and validly existing under the laws of its jurisdiction of
incorporation or organization, (b) is in good standing under the laws of its
jurisdiction of incorporation or organization and (c) has all corporate or other
powers and all material Governmental Approvals (including without limitation
those required by Medicaid Regulations and Medicare Regulations) required to
carry on its business as now conducted and as proposed to be conducted, except
for such Governmental Approvals the failure of which to have in the aggregate
could not be reasonably expected to have a Material Adverse Effect; provided
that clause (b) shall not apply to either Recovery Inns of America, Inc. or J.B.
Thomas Hospital, Inc. prior to July 31, 2001. The Issuer and each Guarantor is
in compliance with its Organizational Documents.

     Section 4.02. Corporate and Governmental Authorization; No Contravention.
The execution and delivery by the Issuer and each Guarantor of the Financing
Documents to which it is a party, its performance of its obligations thereunder
and, with respect to the Issuer, the issuance of the Notes are within its
corporate or other powers, have been duly authorized by all necessary corporate
or other action, require no action by or in respect of, or filing with, any
governmental body, agency or official (other than the Confirmation Order and
except such as shall have been made at or before the time required by the
Financing Documents and shall be in full force and effect on and after the date
when made to the extent required by the Financing Documents) and do not
contravene, or constitute a default under, any Applicable Laws or any provision
of its Organizational Documents, or of any agreement or other instrument binding
upon it or result in or require the imposition of

                                      47
<PAGE>

any Lien (other than the Liens created by the Collateral Documents and Liens
securing amounts owing under the Exit Facility) on any of its assets.

     Section 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Issuer and Vencor, and the other Financing Documents,
when executed and delivered as contemplated by this Agreement, will constitute
valid and binding obligations of each Credit Party that is a party thereto, in
each case enforceable in accordance with its terms, except as limited by general
principles of equity and by bankruptcy, insolvency, fraudulent conveyance or
other similar laws affecting creditor's rights generally.

     Section 4.04. Security Interests. On the Closing Date, the Collateral
Documents will create valid Security Interests in the Collateral to the extent
set forth therein. At all times after the Closing, the Collateral Documents will
create valid and, when financing statements are filed in the offices specified
in the Perfection Certificates delivered pursuant to the Security Agreement,
perfected Security Interests in the Collateral from time to time covered or
purportedly covered thereby to the extent that a security interest in such
Collateral may be perfected by filing under the UCC. Such Security Interests
will be prior to all other Liens (except Permitted Liens) on such Collateral
until the applicable Security Interest is released pursuant to Section 18 of the
Security Agreement.

     Section 4.05. Financial Information.

     (a) The consolidated balance sheet of Vencor and its Consolidated
Subsidiaries as of December 31, 2000 and the related consolidated statements of
operations, cash flows and shareholders' equity for the Fiscal Year then ended,
reported on by PricewaterhouseCoopers LLP, fairly present in all material
respects, in conformity with GAAP, the consolidated financial position of Vencor
and its Consolidated Subsidiaries as of such date and their consolidated results
of operations and cash flows for such Fiscal Year.

     (b) Since December 31, 2000, no event has occurred and no condition has
come into existence which has had, or is reasonably likely to have, a Material
Adverse Effect.

     Section 4.06. Litigation. Except as disclosed in Schedule 8 hereto, there
is no action, suit or proceeding pending against, or to the knowledge of the
Issuer or Vencor threatened against or affecting, the Issuer or any Guarantor
before any court or arbitrator or any governmental body, agency or official (i)
in which there is a reasonable possibility of an adverse decision that could
reasonably be expected to have a Material Adverse Effect or (ii) which in any
manner questions the validity of any Financing Document.

                                      48
<PAGE>

     Section 4.07. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or made any amendment
to any Plan, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii) incurred any liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.

     Section 4.08. Taxes. The Issuer and the Guarantors have filed all United
States Federal income tax returns that are required to be filed by them (or have
filed appropriate extensions for filing such tax returns) and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by any
of them, except such taxes, if any, as are being contested in good faith and as
to which reserves have been provided. The charges, accruals and reserves on the
books of the Issuer and the Guarantors in respect of taxes or other similar
governmental charges are in the aggregate, in the opinion of Vencor, adequate.

     Section 4.09. Compliance with Laws. The Issuer and the Guarantors are in
compliance in all material respects with all Applicable Laws (including without
limitation Medicaid Regulations and Medicare Regulations), other than such laws,
rules or regulations (i) the validity or applicability of which the Issuer or
the relevant Guarantor is contesting in good faith or (ii) the failure to comply
with which could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.

     Section 4.10. No Regulatory Restrictions on Borrowing. Neither the Issuer
nor any Guarantor is (i) an "investment company", within the meaning of the
Investment Company Act of 1940, as amended, (ii) a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended or (iii) otherwise subject to any regulatory scheme which restricts
its ability to incur Debt hereunder.

     Section 4.11. Environmental Matters.

     (a)  From time to time before the Closing, Vencor has reviewed the effect
of Environmental Laws on the business, operations and properties of the Issuer
and the Guarantors, in the course of which reviews it identified and evaluated
associated liabilities and costs.  On the basis of such reviews, Vencor has
reasonably concluded

                                      49
<PAGE>

that the foregoing associated liabilities and costs are unlikely to have a
Material Adverse Effect.

     (b) Except to the extent that the Environmental Liabilities of the Issuer
and the Guarantors that relate to or could result from the matters referred to
in this Section 4.1l(b) would not exceed $l,000,000 for any one occurrence, no
material notice, notification, demand, request for information, citation,
summons, complaint or order with respect to Hazardous Substances or any
violation of Environmental Laws is in existence or, to the knowledge of Vencor,
proposed, threatened or anticipated with respect to or in connection with the
operation of any properties to be owned, leased or operated after the Closing
Date by the Issuer or any Guarantor.

     Section 4.12. Full Disclosure. The information (other than projections)
heretofore furnished in writing by the Issuer or any Guarantor to any Agent or
any Lender, taken as a whole, for purposes of or in connection with this
Agreement or any transaction contemplated hereby did not at the time furnished,
and all such information hereafter furnished in writing by the Issuer or any
Guarantor to any Agent or Lender, taken as a whole, will not at the time
furnished, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were or will be made, not misleading. Although
any projections (and the underlying assumptions) by necessity involve
uncertainties and approximations, Vencor believes that the projections set forth
in its presentation dated January 10, 2001 are reasonable (and the significant
assumptions upon which they are based are stated in summary form therein), and
such projections provide reasonable estimations of the future performance of the
Issuer and its Restricted Subsidiaries, subject, as stated above, to the
uncertainties and approximations inherent in any projections. Vencor has
disclosed to the Lenders in writing (including by way of filings with the Court)
any and all facts which are known to it and which have had or could reasonably
be expected to have a Material Adverse Effect.

     Section 4.13. Information as to Equity Interest and Instruments. Schedule 1
hereto sets forth a correct and complete list, as of the close of business on
the Closing Date, of each Subsidiary of Vencor, its outstanding Equity
Interests, the owner thereof and the percentage thereof owned by such owner. As
of the close of business on the Closing Date, neither Vencor nor any of its
Subsidiaries owns any interest in any Subsidiary which is neither the Issuer nor
a Restricted Subsidiary (other than Cornerstone, the Excluded Partnerships and
the Shell Subsidiary). Except as set forth on Schedule 10 hereto, no Debt
(including Permitted Intercompany Debt) owed to any Lien Grantor is evidenced by
an instrument (as such term is defined in the UCC) that is not held in a
Concentration Account or pledged to the Collateral Agent as part of the
Collateral.

                                      50
<PAGE>

     Section 4.14. Representations in Other Financing Documents. The
representations of each Guarantor in Section 2 of its Guaranty Agreement and the
representations of each Lien Grantor in Section 2 of the Security Agreement and
Section 5 of each Security Agreement Supplement (if any) signed by it are true.

     Section 4.15. Margin Stock. (a) The Issuer does not, as of the date hereof,
expect that the Issuer or any Guarantor will acquire any Margin Stock in the
future. Even if they do, Margin Stock will not at any time represent more than
25% of the value (as determined by any reasonable method) of the assets subject
to any provision of the Financing Documents that restricts the right or ability
of the Issuer or any Guarantor to sell, pledge or otherwise dispose of Margin
Stock owned by them or requires a prepayment of Notes upon the exercise of any
such right.

     (b) No Notes constitute "buying" or "carrying" any Margin Stock within the
respective meanings of each of the quoted terms under Regulation U or for any
purpose which violates the provisions of any regulation of the Board of
Governors of the Federal Reserve System.

     Section 4.16. Properties. (a) The Issuer and each Guarantor has good title
to, or valid leasehold interests in, all real and personal property material to
its business (including all its property subject to the Mortgages), except for
Permitted Liens and minor defects that in the aggregate could not reasonably be
expected to have a Material Adverse Effect.

     (b) The Issuer and each Guarantor owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Issuer and the Guarantors
does not infringe upon the rights of any other Person, except for infringements
that, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.

     (c) As of the Closing Date, neither the Issuer nor any Guarantor has
received notice of, of has knowledge of, any pending or contemplated
condemnation proceeding affecting any property subject to a Mortgage or any sale
or disposition thereof in lieu of condemnation. No property subject to a Fee
Mortgage nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such property or interest therein,
other than Permitted Liens.

     Section 4.17. Existing Indebtedness. As of the Closing Date, the Issuer and
the Guarantors will have no Debt outstanding other than (i) this Agreement, (ii)
the Exit Facility, (iii) the PIP Claim in an aggregate principal amount not
exceeding $58,457,242 as of March 31, 2001, (iv) the Government Settlement, (v)
other Debt arising under the Plan of Reorganization, (vi) Debt set forth on
Schedule 9 hereto and (vii) other Debt in an aggregate principal amount not
exceeding $1,000,000.

                                      51
<PAGE>

                                   ARTICLE 5
                             Affirmative Covenants

     Each of the Issuer and Vencor agrees that, so long as any amounts remain
outstanding under the Notes or any Obligation remains unpaid:

     Section 5.01. Information. The Issuer will deliver the following
information to the Administrative Agent (with copies thereof for each Lender if
requested by the Administrative Agent) and, promptly upon receipt thereof, the
Administrative Agent will deliver a copy thereof to each Lender:

     (a) as soon as available and in any event within 90 days after the end of
each Fiscal Year in the case of Vencor and its Consolidated Subsidiaries and
within 105 days after the end of each Fiscal Year (beginning with Fiscal Year
2001) in the case of the Issuer and the Restricted Subsidiaries, an audited
consolidated and an unaudited consolidating balance sheet of (i) the Issuer and
its Restricted Subsidiaries and (ii) Vencor and its Consolidated Subsidiaries,
in each case, as of the end of such Fiscal Year, and the related audited
consolidated and unaudited consolidating statements of operations, cash flows
and changes in stockholders' equity for such Fiscal Year, setting forth in each
case in comparative form the figures for the previous Fiscal Year (to the extent
available), all such consolidated financial statements reported on in a manner
acceptable to the SEC by independent public accountants of nationally recognized
standing, which report (x) shall state that such financial statements present
fairly, in all material respects, the consolidated financial position of the
Issuer and its Restricted Subsidiaries or Vencor and its Consolidated
Subsidiaries, as the case may be, as of the date of such financial statements
and their consolidated results of operations and cash flows for the period
covered by such financial statements in conformity with GAAP and (y) shall not
contain any Qualification;

     (b) as soon as available and in any event within 45 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year in the case of
Vencor and its Consolidated Subsidiaries and within 60 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year in the case of the
Issuer and its Restricted Subsidiaries, (i) an unaudited condensed consolidated
and an unaudited condensed consolidating balance sheet of (A) the Issuer and its
Restricted Subsidiaries and (B) Vencor and its Consolidated Subsidiaries, in
each case together with the related condensed consolidated and consolidating
statements of operations for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter and of cash flows for the
portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting
forth in each case in comparative form the unaudited consolidated and
consolidating statements of operations and cash flows (to the extent available)
for the corresponding Fiscal Quarter and the corresponding portion of the
previous Fiscal Year, all prepared in accordance with Rule 10-01 of Regulation
S-X of the General

                                      52
<PAGE>

Rules and Regulations under the Securities Act of 1933, or any successor rule
that sets forth the manner in which interim financial statements shall be
prepared, and (ii) a certificate (subject to normal year-end adjustments) of a
Financial Officer and of a principal financial officer of Vencor, as applicable,
as to the fairness of presentation and consistency of such financial statements;
provided that Vencor and the Issuer may mark any financial statements delivered
during the 120-day period following the Closing Date as "Subject to Change" and,
if Vencor or the Issuer elects to do so, Vencor or the Issuer, as the case may
be, shall deliver final versions of such financial statements to the
Administrative Agent as soon as they are available;

     (c) simultaneously with the delivery of each set of financial statements
referred to in Sections 5.01(a) and 5.01(b), a certificate of a Financial
Officer (i) setting forth in reasonable detail such calculations as are required
to establish whether the Issuer was in compliance with the requirements of
Article 6 on the date of such financial statements, (ii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action that the Issuer is taking or
proposes to take with respect thereto, (iii) stating whether, since the date of
the Most Recent Audited Financial Statements, an event has occurred or condition
arisen which has had a Material Adverse Effect which is not reflected in the
financial statements delivered simultaneously therewith and, if so, the nature
of such Material Adverse Effect, and (iv) stating whether, since the date of the
Most Recent Audited Financial Statements, there has been a change in the GAAP
applied in preparing the financial statements then being delivered from those
applied in preparing the Most Recent Audited Financial Statements which is
material to the financial statements then being delivered;

     (d) simultaneously with the delivery of each set of annual financial
statements referred to in Section 5.01(a), a letter from the firm of independent
public accountants that reported on such statements stating (i) whether anything
has come to their attention in the course of their normal audit procedures to
cause them to believe that any Default existed on the date of such financial
statements and (ii) whether in their opinion the calculations of compliance with
the requirements of Article 6 set forth in the Financial Officer's certificate
delivered simultaneously therewith pursuant to Section 5.01(c), to the extent
derived from data contained in the accounting records of the Issuer and its
Restricted Subsidiaries, have been determined in accordance with the relevant
provisions of this Agreement;

     (e) within five Business Days after any Executive Officer or Financial
Officer obtains knowledge of any Default, if such Default is then continuing, a
certificate of a Financial Officer setting forth the details thereof and the
action that the Issuer or Vencor is taking or proposes to take with respect
thereto;

     (f) within five Business Days after any Executive Officer or Financial
Officer obtains knowledge that a notice of default has been delivered under any

                                      53
<PAGE>

Master Lease Agreement, Third Party Lease or Management Contract and such
default could reasonably be expected to result in an Event of Default or
Material Adverse Effect and if such default is then continuing, a certificate of
an Executive Officer or Financial Officer setting forth the details thereof and
the action that the Issuer or Guarantor is taking or proposes to take with
respect thereto;

     (g) within five Business Days after any Executive Officer or Financial
Officer obtains knowledge that (i) a Facility Default (as defined in the
applicable Master Lease Agreement) has occurred or (ii) notice of termination
has been delivered, or has grounds to believe that a notice of termination is
reasonably likely to be delivered, to the Issuer or any Restricted Subsidiary by
any counterparty to any lease or management contract to which the Issuer or a
Restricted Subsidiary is a party, a certificate of an Executive Officer or
Financial Officer setting forth the details thereof and the action that the
Issuer or Guarantor is taking or proposes to take with respect thereto;

     (h) promptly after the mailing thereof to Vencor's shareholders generally,
copies of all financial statements, reports and proxy statements so mailed;

     (i) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and annual, quarterly or current reports that Vencor shall have
filed with the SEC;

     (j) promptly after any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of a Financial Officer setting

                                      54
<PAGE>

forth details as to such occurrence and the action, if any, which the Issuer or
the applicable member of the ERISA Group is required or proposes to take;

     (k) as soon as reasonably practicable after any Executive Officer obtains
knowledge of the commencement of an action, suit or proceeding against the
Issuer or any Guarantor before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could have a Material Adverse Effect or which in any manner
questions the validity of any Financing Document, a certificate of a Financial
Officer setting forth the nature of such action, suit or proceeding and such
additional information as may be reasonably requested by any Lender through the
Administrative Agent;

     (l) promptly upon Vencor's receipt from its independent public accountants
of any management letter which indicates a material weakness in the reporting
practices of the Issuer or any Guarantor, a description of such material
weakness and any action being taken with respect thereto;

     (m) promptly upon their becoming available, copies of all press releases
and other statements made available generally by the Issuer or any Guarantor to
the public concerning material developments in its business;

     (n) within 15 days after the commencement of each Fiscal Year, (i) cash
flow, balance sheet and income statement forecasts in reasonable detail for the
Issuer and its Restricted Subsidiaries prepared on a monthly basis for each
Fiscal Year through the Stated Maturity Date and, promptly when available, any
material revisions of such forecast and (ii) the Issuer's business and financial
plans for such Fiscal Year, setting forth the assumptions used in preparing such
plans and, promptly when available, any material revisions of such plans;

     (o) promptly upon any Person becoming or ceasing to be a Restricted
Subsidiary or Insurance Subsidiary of the Issuer, an update to Schedule 1 hereto
setting forth the information described in Section 4.13 with respect to each
Restricted Subsidiary and Insurance Subsidiary of the Issuer (it being
understood that nothing in this Section 5.01(o) shall be deemed to permit or
authorize the creation, dissolution, liquidation or acquisition of a Restricted
Subsidiary or Insurance Subsidiary of the Issuer not otherwise permitted under
this Agreement);

     (p) promptly upon request of the Administrative Agent (which request may be
made on no more than one occasion in any calendar month), a report in reasonable
detail showing the amount of Temporary Cash Investments of the Issuer and its
Restricted Subsidiaries, the banks or financial institutions at which such
Temporary Cash Investments are maintained, the then yield on such Temporary Cash
Investments and such other information relating to Temporary Cash Investments of
the Issuer and its Restricted Subsidiaries as the Administrative Agent may
reasonably request; and

                                      55
<PAGE>

     (q)  from time to time such additional information regarding the financial
position, results of operations or business of the Issuer or any Guarantor as
any Lender may reasonably request in writing through the Administrative Agent.

Information required to be delivered pursuant to Sections 5.01(a), 5.01(b),
5.01(h), 5.01(i) and 5.01(m) shall be deemed to have been delivered on the date
on which the Issuer provides notice to the Lenders that such information has
been posted on Vencor's website on the Internet at the website address listed on
the signature pages hereof, at sec.gov/edaux/searches.htm or at another website
identified in such notice and accessible by the Lenders without charge; provided
that (i) such notice may be included in a certificate delivered pursuant to
Section 5.01(c) and (ii) Vencor shall deliver paper copies of the information
referred to in Sections 5.01(a), 5.01(b), 5.01(h), 5.01(i) and 5.01(m) to any
Lender that requests such delivery.

     Section 5.02. Maintenance of Property. The Issuer and each Guarantor will
keep all property useful and necessary in its business in good working order and
condition, ordinary wear and tear and casualty excepted.

     Section 5.03. Insurance.

     (a)  The Issuer and each Guarantor will maintain insurance with responsible
companies in such amounts and against such risks as is usually carried by owners
of similar businesses and properties in the same general areas in which it
operates.

     (b)  If the Issuer or any Guarantor fails to maintain any insurance policy
required to be maintained under this Section 5.03, the Collateral Agent shall
have the right to maintain such policy or obtain a comparable policy, and in
either case pay the premiums therefor. If the Collateral Agent maintains or
obtains any such policy and pays the premiums therefor, the Issuer will
reimburse the Collateral Agent upon demand for its expenses in connection
therewith, including interest thereon for each day at a rate per annum equal to
the Default Rate.

     Section 5.04. Compliance with Law, Etc. The Issuer and each Guarantor will
comply in all material respects with all Applicable Laws (including Medicare
Regulations, Medicaid Regulations, Environmental Laws and ERISA and the rules
and regulations thereunder and with the Corporate Integrity Agreement), except
where (i) the necessity of compliance therewith is contested in good faith by
appropriate measures or proceedings, in which case adequate and reasonable
reserves will be established in accordance with GAAP and notice of each such
contest (other than contests in the ordinary course of business) shall be given
to the Administrative Agent, or (ii) failures to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.

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<PAGE>

     Section 5.05. Maintenance of Existence, Rights, Etc. The Issuer and each
Guarantor will preserve, renew and keep in full force and effect its existence
and its rights, privileges, licenses and franchises necessary or desirable in
the normal conduct of business; provided that nothing in this Section shall
prohibit (a) any merger or consolidation permitted by Section 7.03, (b) the
termination of the existence of any Subsidiary if (i) the Issuer determines that
such termination is in its best interest and (ii) such termination is not
adverse in any material respect to the Lenders, (c) the loss of any rights,
privileges, licenses and franchises if the loss thereof, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect or (d) the Issuer
or any Guarantor from changing its name to the name set forth below the name of
the Issuer or such Guarantor on the Perfection Certificate delivered pursuant to
the Security Agreement, so long as the Issuer and such Guarantor comply with the
requirements of Section 5 of the Security Agreement in connection with such name
change.

     Section 5.06. Environmental Matters. (a) From time to time after the
Closing, Vencor will review the effect of Environmental Laws on the business,
operations and properties of the Issuer and the Guarantors, in the course of
which reviews it will identify and evaluate associated liabilities and costs.
If, on the basis of such reviews, Vencor reasonably concludes that the foregoing
associated liabilities and costs are likely to have a Material Adverse Effect,
Vencor shall promptly deliver a certificate to the Administrative Agent setting
forth its conclusion and the action that Vencor proposes to take with respect
thereto.

     (b)  Unless the Environmental Liabilities of the Issuer and the Guarantors
that relate to or could result from the matters referred to in this Section
5.06(b) would not exceed $1,000,000 for any one occurrence, Vencor shall
promptly notify the Administrative Agent of any material notice, notification,
demand, request for information, citation, summons, complaint or order (any such
communication, an "Environmental Notice") with respect to Hazardous Substances
or any violation of Environmental Laws that is then in existence or, to the
knowledge of Vencor, proposed, threatened or anticipated with respect to or in
connection with the operation of any properties to be owned, leased or operated
after the Closing Date by the Issuer or any Guarantor, which notice shall set
forth a copy of such Environmental Notice, if applicable, and such additional
information as may be reasonably requested by the Administrative Agent with
respect thereto.

     Section 5.07. Designation of Unrestricted Subsidiaries. (a) The Board of
Directors of the Issuer may designate any Subsidiary, including a newly acquired
or created Subsidiary, to be an Unrestricted Subsidiary if the sum of the total
assets of such Subsidiary (or, if any such Subsidiary itself has Subsidiaries,
the consolidated total assets of such Subsidiary and its Consolidated
Subsidiaries) and every other Unrestricted Subsidiary, in each case determined
as of the date of the Most Recent Financial Statements, does not exceed 5% of
the consolidated total assets of the Issuer

                                      57
<PAGE>

and its Consolidated Subsidiaries and the designation would not cause a Default;
provided that:

          (i)    Such Subsidiary does not own any capital stock of the Issuer or
     any Restricted Subsidiary or hold any Debt of, or any Lien on any property
     of, the Issuer or any Restricted Subsidiary.

          (ii)   At the time of designation, the designation would be permitted
     under Section 7.08.

          (iii)  To the extent the Debt of the Subsidiary is not Non-Recourse
     Debt, any Guarantee or other credit support thereof by the Issuer or any
     Restricted Subsidiary is permitted under Sections 7.01 and 7.08.

          (iv)   The Subsidiary is not party to any transaction or arrangement
     with the Issuer or any Restricted Subsidiary that would not be permitted
     under Section 7.04.

          (v)    Neither the Issuer nor any Restricted Subsidiary has any
     obligation to subscribe for additional Equity Interests of the Subsidiary
     or to maintain or preserve its financial condition or cause it to achieve
     specified levels of operating results except to the extent permitted by
     Sections 7.01 and 7.08.

Once so designated the Subsidiary will remain an Unrestricted Subsidiary,
subject to paragraph (b).

     (b)  (i)  If as of the date of the Most Recent Financial Statements, the
conditions specified in paragraph (a) are not satisfied, the Board of Directors
of the Issuer shall immediately designate one or more Unrestricted Subsidiaries
as Restricted Subsidiaries to the extent required to ensure that the conditions
specified in paragraph (a) would have been satisfied as of the date of the Most
Recent Financial Statements, subject to the consequences set forth in paragraph
(d).

               (ii) The Board of Directors of the Issuer may designate an
     Unrestricted Subsidiary to be a Restricted Subsidiary if the designation
     would not cause a Default.

     (c)  Upon a Restricted Subsidiary becoming an Unrestricted Subsidiary,

               (i)  all existing Investments of the Issuer and the Restricted
     Subsidiaries therein (valued at the Issuer's proportional share of the fair
     market value of its assets less liabilities) will be deemed made at that
     time;

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<PAGE>

          (ii)   all existing capital stock or Debt of the Issuer or a
     Restricted Subsidiary held by it will be deemed incurred at that time, and
     all Liens on property of the Issuer or a Restricted Subsidiary held by it
     will be deemed incurred at that time;

          (iii)  all existing transactions between it and the Issuer or any
     Restricted Subsidiary will be deemed entered into at that time;

          (iv)   it is released at that time from the Subsidiary Guaranty
     Agreement, if it is a party thereto; and

          (v)    it will cease to be subject to the provisions of this Agreement
     as a Restricted Subsidiary.

     (d) Upon an Unrestricted Subsidiary becoming a Restricted Subsidiary,

          (i)    all of its Debt will be deemed incurred at that time for
     purposes of Section 7.01, but will not be considered the sale or issuance
     of Equity Interests for purposes of Sections 7.03(d) or 7.06;

          (ii)   Investments therein previously charged under Section 7.08 will
     be credited thereunder;

          (iii)  it must issue a Guarantee of the Notes pursuant to Section 5.08
     and execute a Security Agreement Supplement pursuant to Section 5.09; and

          (iv)   it will thenceforward be subject to the provisions of this
     Agreement as a Restricted Subsidiary.

     (e) Any designation by the Board of Directors of the Issuer of a Subsidiary
of the Issuer as a Restricted Subsidiary or Unrestricted Subsidiary will be
evidenced to the Administrative Agent by promptly filing with the Administrative
Agent a copy of the board resolution giving effect to the designation and a
certificate of an Executive Officer certifying that the designation complied
with the foregoing provisions.

     Section 5.08. Guarantees by Future Restricted Subsidiaries. Within five
Business Days after any Person becomes a Restricted Subsidiary, the Issuer shall
(i) cause such Restricted Subsidiary to guarantee the Issuer's obligations
hereunder pursuant to a Subsidiary Guaranty Agreement and (ii) deliver to the
Agents such legal opinions and other documents as the Agents may reasonably
request relating to the existence of such Restricted Subsidiary, the corporate
or other authority for and validity of its Subsidiary Guaranty Agreement and any
other matters relevant thereto, all in form and substance satisfactory to the
Agents.

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<PAGE>

     SECTION 5.09. Future Assets to Be Added to Collateral.

     (a)  Within 5 Business Days after any Person becomes or is deemed to have
become a Restricted Subsidiary, an Insurance Subsidiary or an insurance
subsidiary of Vencor or ceases to be an Excluded Partnership after the date
hereof, the Issuer or Vencor shall cause all Equity Interests in such Person
owned by the Issuer or the Guarantors to be pledged under the Security
Agreement; provided that, if regulatory consent is required to permit any such
pledge of Equity Interests in an insurance subsidiary, (i) such pledge shall not
be required unless such regulatory consent is reasonably obtainable and (ii) if
such regulatory consent is reasonably obtainable, the Issuer or Vencor shall
exercise all reasonable efforts to obtain it and shall not be required to pledge
such Equity Interests until it is obtained.

     (b)  If at any time after the Closing Date the Issuer or a Guarantor
acquires a Material Real Property that is not included in the Collateral, the
Issuer shall, within two Business Days after it or such Guarantor acquires such
Material Real Property, provide notice thereof to the Administrative Agent and,
within 30 days after it or such Guarantor acquires such Material Real Property,
cause such Material Real Property to be added to the Collateral by delivering to
the Collateral Agent a Fee Mortgage with respect thereto and the appropriate UCC
form for the related fixture filing, all in form and substance reasonably
satisfactory to the Administrative Agent.

     (c)  Within 30 days after the commencement of each Fiscal Year, the Issuer
shall deliver a leasehold report to the Administrative Agent setting forth a
list of each Material Real Property leased by it or any Guarantor under a lease
with respect to which its or such Guarantor's leasehold interest is not included
in the Collateral. The Administrative Agent may (and if it is requested to do so
by the Required Lenders shall) request the Issuer to cause any such leasehold
interest not subject to a negative pledge to be added to the Collateral by
delivering to the Collateral Agent a Leasehold Mortgage with respect thereto and
the appropriate UCC form for the related fixture filing, all in form and
substance reasonably satisfactory to the Administrative Agent. The Issuer shall,
and shall cause each Guarantor to, attempt in good faith to cause any such lease
of a Material Real Property to (i) not contain a negative pledge (subject to
prevailing market conditions) and (ii) contain provisions for the benefit of a
leasehold mortgagee comparable to those contained in the Master Lease Agreements
and to obtain a non-disturbance agreement with respect to such lease on
customary terms.

     (d)  Within 5 Business Days after any Person becomes a Restricted
Subsidiary or ceases to be an Excluded Partnership (provided that such Person
remains a Subsidiary), the Issuer will (i) cause such Person to sign and deliver
a Subsidiary Guaranty Agreement and Security Agreement Supplement granting a
Lien or Liens on substantially all the personal property included in its assets
(with the exceptions set forth in the first proviso at the end of Section 3 of
the Security Agreement and such other exceptions as the Agents shall have
approved in writing) to

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<PAGE>

the Collateral Agent to secure its Secured Obligations and (ii) cause such
Person to comply with the provisions thereof and of the Security Agreement and
Subsidiary Guaranty Agreement.

     (e)  Whenever any asset is added to the Collateral pursuant to this Section
5.09, the Issuer shall deliver to the Administrative Agent and Collateral Agent
such legal opinions and other documents as the Administrative Agent or
Collateral Agent may reasonably request relating to the existence of the
relevant Lien Grantor, the corporate or other authority for and validity of the
Collateral Documents applicable thereto, the creation and perfection (or due
recordation) of the Lien purportedly created thereby and any other matters
relevant thereto (including the insurance), all in form and substance
satisfactory to the Administrative Agent and Collateral Agent.

     Section 5.10. Casualty Events.

     (a)  All Casualty Proceeds received by the Collateral Agent, the Issuer or
any of its Restricted Subsidiaries shall be applied as set forth in Section
2.06(a).

     (b)  If any Condemnation Event occurs with respect to property owned or
leased by the Issuer or any of its Restricted Subsidiaries, or if any
negotiation or proceeding is commenced which might result in such a Condemnation
Event, or if any such Condemnation Event is proposed or threatened, the Issuer
or such Restricted Subsidiary (i) will, promptly after receiving notice or
obtaining knowledge thereof, do all things deemed necessary or appropriate by it
to preserve its interest in such property and promptly make claim for awards
payable with respect thereto and diligently pursue to conclusion such claim and
any suit, action or other proceeding necessary or appropriate to obtain payment
thereof and (ii) will not settle any such claim, negotiation or proceeding
without the consent of the Collateral Agent if an Enforcement Notice is in
effect.

     Section 5.11. Ranking. The Issuer and Vencor shall, and shall procure that
each other Guarantor shall, procure that its respective payment obligations
under the Notes or the Guaranty Agreements (as applicable) do and will at all
times rank at least pari passi in right and priority of payment with all of its
other present and future Debt, other than the Senior Obligations.

     Section 5.12. Post-Closing. (a)  No later than 15 days after the Closing
Date, the Issuer shall deliver a schedule to the Administrative Agent setting
forth the correct address of each real property that was owned by the Issuer or
any Guarantor as of the Closing Date.

     (b) (i) The Issuer agrees to deliver to the Collateral Agent as soon as
practicable but in no event later than 45 days after the Closing Date,
replacement stock certificates evidencing Equity Interests in each entity
referred to in paragraph 1

                                      61
<PAGE>

of Schedule 11, together with stock powers executed in blank or other
appropriate instruments of pledge relating thereto.

          (ii)   The Issuer agrees to deliver to the Collateral Agent as soon as
     practicable but in no event later than 60 days after the Closing Date,
     stock certificates evidencing Equity Interests in each entity referred to
     in paragraph 2 of Schedule 11, together with stock powers executed in blank
     or other appropriate instruments of pledge relating thereto.

          (iii)  Notwithstanding the foregoing provisions of this clause (b), if
     despite the Issuer's best efforts, the Issuer fails to deliver any of the
     foregoing items to the Collateral Agent within the time periods specified
     above, the Collateral Agent may (but shall not be obligated to) consent to
     additional time periods for such delivery.

     (c)  If at any time the granting of a pledge or other security interest
over the Equity Interests in Cornerstone is not prohibited by Cayman Islands
law, Vencor shall ensure that a pledge or such other security interest over such
Equity Interests is granted to the Collateral Agent for the benefit of the
Lenders and that stock certificates evidencing such Equity Interests are
promptly delivered to the Collateral Agent together with signed stock powers or
other appropriate instruments of transfer relating thereto. Prior to such time,
Vencor shall ensure that no Lien over such Equity Interests is granted to any
Person.

     (d)  Vencor shall (i) ensure that the Liens and title defects listed on the
schedule to the Encumbrance Letter are paid, discharged or removed in accordance
with the provisions of, and within the time periods (if any) specified in, the
Encumbrance Letter and (ii) comply with the other provisions of the Encumbrance
Letter.

     (e)  As soon as practicable but in no event later than 60 days after the
Closing Date, the Issuer shall cause the Shell Subsidiary to be liquidated or
dissolved and shall, in connection with the foregoing, cause all personal, real
and mixed property, if any, of such Shell Subsidiary to be transferred to a
Restricted Subsidiary.

                                   ARTICLE 6
                              FINANCIAL COVENANTS

    The Issuer agrees that, so long as any amounts remain outstanding under the
Notes or any Obligation remains unpaid:

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<PAGE>

     SECTION 6.01. Fixed Charge Coverage Ratio (EBITDAR). (a) At each Quarterly
Measurement Date on or after June 30, 2001, the ratio of (i) Consolidated
EBITDAR for the four consecutive Fiscal Quarters then ended to (ii) the sum of
Consolidated Interest Expense plus Consolidated Rental Expense plus the
aggregate principal amount of Debt of the Issuer and its Restricted Subsidiaries
scheduled to be amortized, in each case for the same four Fiscal Quarters, will
not be less than 1.0l:1; provided that (x) at any Quarterly Measurement Date
prior to the end of the fourth full Fiscal Quarter after the Closing Date, the
foregoing amounts shall be calculated as of the end of the then most recently
ended Fiscal Quarter on an Annualized Basis, (y) any amounts payable by the
Issuer and its Restricted Subsidiaries pursuant to Section 6.12(a)(l)(i) and
(ii) of the Plan of Reorganization in respect of the Government Settlement
during any relevant calculation period shall be excluded from the calculation of
the foregoing amounts for such period and (z) the principal amount of loans
payable under the Exit Facility on the date of final maturity thereof shall be
excluded from the calculation of the foregoing amounts for the period during
which such date occurs.

     (b)  For purposes of calculating the foregoing ratio, if any corporation or
other entity shall have been acquired by the Issuer or any Restricted Subsidiary
during the period for which Consolidated EBITDAR is to be calculated and if such
corporation or other entity becomes a Restricted Subsidiary during such period,
Consolidated EBITDAR shall be calculated as if such corporation or other entity
had been acquired at the beginning of such period, to the extent that the
relevant financial information with respect to it for the portion of such period
prior to such acquisition can be determined with reasonable accuracy.

     SECTION 6.02. Total Leverage Ratio. (a) On or after June 30, 2001, the
ratio of (x) Consolidated Debt for Borrowed Money to (y) Consolidated EBITDA for
the four consecutive Fiscal Quarters then most recently ended will not exceed
3.95:l; provided that for dates prior to the end of the fourth full Fiscal
Quarter after the Closing Date, Consolidated EBITDA shall be determined as of
the end of the then most recently ended Fiscal Quarter on an Annualized Basis;
provided further that any amounts payable by the Issuer and its Restricted
Subsidiaries pursuant to Section 6.12(a)(l)(i) and (ii) of the Plan of
Reorganization in respect of the Government Settlement during any relevant
calculation period shall be excluded from the calculation of the foregoing
amounts for such period.

     (b)  For purposes of calculating the foregoing ratio, if any corporation or
other entity shall have been acquired by the Issuer or any Restricted Subsidiary
during the period for which Consolidated EBITDA is to be calculated and if such
corporation or other entity becomes a Restricted Subsidiary during such period,
Consolidated EBITDA shall be calculated as if such corporation or other entity
had been acquired at the beginning of such period, to the extent that the
relevant financial information with

                                      63
<PAGE>

respect to it for the portion of such period prior to such acquisition can be
determined with reasonable accuracy.

     SECTION 6.03. Minimum Consolidated Net Worth. Consolidated Net Worth will
not be less than the Minimum Compliance Level. The "Minimum Compliance Level"
means, at each Quarterly Measurement Date (the "date of determination"), an
amount equal to the sum of (i) 100% of the Consolidated Net Worth as of the
Closing Date minus (ii) $50,000,000 plus (iii) for each full Fiscal Quarter
ending after the Closing Date and on or prior to the date of determination for
which Consolidated Net Income is a positive number, an amount equal to 50% of
such positive number.

     SECTION 6.04. Capital Expenditures. Consolidated Capital Expenditures will
not, for any Fiscal Year listed below, exceed the amount indicated for such
Fiscal Year:

     Fiscal Year                          Amount
     -----------                          ------
        2001                           $75,000,000
        2002                           $75,000,000
        2003                           $80,000,000
        2004                           $80,000,000
        2005                           $85,000,000
        2006                           $85,000,000
        2007                           $90,000,000
        2008                           $90,000,000

                                   ARTICLE 7
                              Negative Covenants

     Each of the Issuer and Vencor agrees that, so long as any amounts remain
outstanding under the Notes or any Obligation remains unpaid:

     SECTION 7.01. Limitation on Debt. (a) The Issuer shall not, and shall not
permit any Restricted Subsidiary to, incur or be liable with respect to (i) any
Debt of a type described in clause (i), (ii) or (iv) of the definition of "Debt"
in Section 1.01 or (ii) any Guarantee of any such Debt described in clause (i)
above; provided that the Issuer and its Restricted Subsidiaries may incur such
Debt if, on the date of the incurrence, after giving effect to the incurrence
and the receipt and application of the proceeds thereof, the Fixed Charge
Coverage Ratio (EBITDA) is not less than 3.5:1.

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<PAGE>

     (b) Notwithstanding the foregoing, the Issuer and its Restricted
Subsidiaries may incur and be liable for each and all of the following:

          (i)    Debt outstanding under the Financing Documents;

          (ii)   Debt under or in respect of the Exit Facility in an aggregate
    principal amount not to exceed $120,000,000 less any amounts up to an
    aggregate not to exceed $45,000,000 by which the commitments under the Exit
    Facility have been permanently reduced;

          (iii)  Debt outstanding on the Closing Date, including the Government
     Settlement and any other obligations arising under the Plan of
     Reorganization;

          (iv)   Capital Lease Obligations; provided that the aggregate
    outstanding principal amount of Debt permitted by this clause (iv) and by
    clause (v) shall not at any time exceed $25,000,000;

          (v)    Debt incurred or assumed after the Closing Date for the purpose
    of financing all or any part of the cost of acquiring or constructing an
    asset of the Issuer or a Restricted Subsidiary; provided that (A) such Debt
    is secured by a Lien on such asset that is permitted by Section 7.02(g) and
    (B) the aggregate outstanding principal amount of all Debt permitted by
    clause (iv) and this clause (v) shall not at any time exceed $25,000,000;

          (vi)   Debt of any Person that becomes a Restricted Subsidiary after
    the Closing Date in connection with an Acquisition; provided that such Debt
    was outstanding before such Person became a Restricted Subsidiary and was
    not incurred in contemplation thereof;

          (vii)  Debt incurred after the Closing Date and Guarantees of Debt
    entered into after the Closing Date; provided that (A) the Debt so incurred
    or Guaranteed is incurred in exchange for or to repay, prepay, repurchase,
    redeem, defease, retire or refinance ("refinance") any outstanding Debt of
    the Issuer or any Restricted Subsidiary otherwise permitted by this Section
    and (B) the principal amount of the Debt so incurred or Guaranteed shall not
    exceed the unpaid principal amount of the Debt so exchanged or refinanced;
    provided that in connection with any refinancing of the Exit Facility, the
    principal amount of the Debt incurred or to be incurred pursuant to such
    refinancing may be in an amount equal to the aggregate amount of the
    commitments under the Exit Facility immediately prior to such refinancing;

          (viii) Permitted Intercompany Debt;

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<PAGE>

          (ix)   Debt consisting of trade obligations arising in the ordinary
     course of business after the Closing Date;

          (x)    Debt under Interest Rate Agreements of the Issuer or any
     Restricted Subsidiary relating to Debt permitted to be incurred and
     outstanding under this Section and entered into in the ordinary course of
     business for the purpose of limiting interest rate risks and not for
     speculation; and

          (xi)   Debt owed in respect of any overdrafts and related liabilities
     arising from treasury, depository and cash management services or in
     connection with any automated clearing house transfers of funds.

     (c) Vencor may:

          (i)    Guarantee the obligations of the Issuer under the Exit
     Facility;

          (ii)   Guarantee the obligations of the Issuer under this Agreement as
     set forth in the Vencor Guaranty;

          (iii)  Guarantee the obligations of the Issuer or any Restricted
     Subsidiary under any real property lease to which the Issuer or such
     Restricted Subsidiary is a party;

          (iv)   Guarantee Debt incurred by any Vencor Unrestricted Subsidiary;
     and

          (v)    incur or be liable with respect to any other Debt;

provided that in the case of any Guarantee or Debt described in clauses (iv) and
(v), Vencor may not give such Guarantee or incur such Debt unless its
obligations thereunder are expressly subordinated to the Vencor Guaranty
pursuant to subordination provisions in substantially the form of Exhibit J. The
ability of any Vencor Unrestricted Subsidiary to incur Debt is not limited by
this Agreement.

     Section 7.02. Negative Pledge. The Issuer shall not, and shall not permit
any Restricted Subsidiary to, create, assume or suffer to exist any Lien
securing any Debt on any asset now owned or hereafter acquired by it (or any
income therefrom or any right to receive income therefrom), except:

     (a)  Liens created pursuant to the Collateral Documents;

     (b)  Liens securing Senior Obligations;

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<PAGE>

     (c)  Liens existing on the Closing Date securing Debt described in clause
(iii) of Section 7.01(b);

     (d)  any Lien existing on any asset prior to the acquisition thereof by the
Issuer or a Restricted Subsidiary; provided that such Lien was not created in
contemplation of such event and does not extend to any other property of the
Issuer or any Restricted Subsidiary;

     (e)  any Lien existing on any asset of any Person at the time such Person
becomes a Restricted Subsidiary or merges into the Issuer or any of its
Restricted Subsidiaries in connection with an Acquisition; provided that such
Lien was not created in contemplation of such event and does not extend to any
other property of the Issuer or any Restricted Subsidiary;

     (f)  Liens upon the assets of the Issuer and its Restricted Subsidiaries
subject to Capital Lease Obligations to the extent permitted by Section
7.0l(b)(iv); provided that (i) such Liens only serve to secure the payment of
Debt arising under such Capital Lease Obligation, (ii) the Lien encumbering the
asset giving rise to the Capital Lease Obligation does not encumber any other
asset of the Issuer or any Restricted Subsidiary and (iii) the aggregate
outstanding principal amount of all Debt secured pursuant to this clause (f) and
clause (g) shall not exceed $25,000,000;

     (g)  any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or constructing
such asset, provided that (i) such Lien attaches to such asset concurrently with
or within 180 days after the acquisition or completion of construction thereof
and attaches to no asset other than such asset so financed and (ii) the
aggregate outstanding principal amount of all Debt secured pursuant to clause
(f) and this clause (g) shall not exceed $25,000,000;

     (h)  Liens securing Debt of the Issuer or a Restricted Subsidiary to the
Issuer or a Wholly Owned Restricted Subsidiary;

     (i)  any Lien arising out of the refinancing (as defined in Section
7.0l(b)(vii)) of any Debt secured by any Lien permitted by this Section,
provided that the principal amount of such Debt is not increased (except as set
forth in the second proviso to Section 7.0l(b)(vii)) and such refinanced Debt is
not secured by any additional assets;

     (j)  Permitted Encumbrances;

     (k)  Liens on deposit account balances and Temporary Cash Investments in an
amount not exceeding $2,000,000 securing Interest Rate Agreements; and

                                      67
<PAGE>

     (l)  Liens created in favor of the Collateral Agent (for the benefit of
Lenders) pursuant to the Collateral Documents or in favor of the Exit Facility
Collateral Agent (for the benefit of holders of Senior Obligations).

     Section 7.03. Consolidations, Mergers and Asset Sales.

     (a)  The Issuer shall not, Vencor shall not, and the Issuer shall not
permit any Restricted Subsidiary to, consolidate or merge with or into, or sell,
lease or otherwise dispose of all or substantially all of its assets to any
other Person, except that:

          (i)   Vencor may merge with any Person (other than the Issuer or a
     Restricted Subsidiary) if Vencor is the surviving corporation and,
     immediately after such merger (and giving effect thereto), no Default shall
     have occurred and be continuing;

          (ii)  the Issuer may merge with any Person (other than Vencor) if the
     Issuer is the surviving corporation and, immediately after such merger (and
     giving effect thereto), no Default shall have occurred and be continuing;
     and

         (iii)  any Restricted Subsidiary may merge or consolidate with or into,
     and the Issuer or any Restricted Subsidiary may transfer all or
     substantially all of its assets to, any Person if, immediately after such
     transaction (and giving effect thereto), no Default shall have occurred and
     be continuing and (A) the surviving corporation or transferee is the Issuer
     or a Restricted Subsidiary, (B) in the case of a Restricted Subsidiary,
     such merger, consolidation or transfer of all or substantially all assets
     is in conjunction with a disposition by the Issuer and its Restricted
     Subsidiaries of their entire investment in such Subsidiary and such
     disposition is not prohibited by any provision of the Financing Documents
     (other than this subsection (a)); provided that the foregoing shall not
     prohibit any transaction permitted by Section 7.03(d), (C) the Required
     Lenders shall have consented to such transaction or (D) immediately after
     such transaction is consummated, the aggregate book value of all assets
     disposed of in transactions permitted by this clause (D) during the period
     of 365 days then ended (whether disposed of directly or by means of a
     merger, consolidation or transfer of Equity Interests) would not exceed 5%
     of Consolidated Net Worth as shown on the Most Recent Financial Statements.

For purposes of Section 7.03(a)(iii)(D), the book value of the assets disposed
of in each transaction shall be the book value of such assets on the books of
the relevant Subsidiary immediately before such disposition.

     (b)  If the Issuer and its Restricted Subsidiaries dispose of their entire
investment in any Restricted Subsidiary as permitted by subsection (a) above,
the Administrative Agent shall at the Issuer's request instruct the Collateral
Agent,

                                      68
<PAGE>

concurrently with or at any time after such disposition, to release all security
interests in Equity Interests in such Subsidiary granted by the Issuer and its
Restricted Subsidiaries to the Collateral Agent. In addition, (i) such
Restricted Subsidiary's Subsidiary Guaranty shall be automatically released and
it shall cease to be a party to the Security Agreement, in each case
concurrently with such disposition, and (ii) the Administrative Agent shall at
the Issuer's request instruct the Collateral Agent, concurrently with or at any
time after such disposition, to release all security interests granted by such
Subsidiary to secure its Subsidiary Guaranty and return to such Subsidiary any
of its assets held by the Collateral Agent under the Collateral Documents.

     (c)  Notwithstanding the foregoing, clause (a) of this Section 7.03 shall
not apply to any sale or other disposition of Atria Shares or BHC Shares, and
any such transaction shall be excluded from calculations under Section
7.03(a)(iii)(D).

     (d)  The Issuer shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Sale, unless:

          (i)   the consideration received from such Asset Sale shall be in an
     amount at least equal to the fair market value thereof (as determined in
     good faith by the Issuer (which determination, if the sale price exceeds
     $5,000,000, shall be evidenced by a resolution of the Issuer's Board of
     Directors) as at the time of such Asset Sale); and

          (ii)   at least 80% of the consideration received shall be in the form
    of cash received at closing (for purposes of this clause only, the
    assumption by the purchaser of Debt or other obligations of the Issuer or a
    Restricted Subsidiary relating to the assets subject to such Asset Sale
    pursuant to a customary novation agreement and the release of the Issuer or
    the Restricted Subsidiary (as the case may be) of its obligations relating
    to such Debt or other obligations, and instruments or securities received
    from the purchaser that are promptly, but in any event within 30 days of the
    closing, converted by the Issuer to cash, to the extent of the cash actually
    so received, shall be considered cash received at closing); and

         (iii)   the Net Cash Proceeds received at such closing shall be
    deposited in a Collateral Account and applied as set forth in Section
    2.06(a);

provided that the Kingfish Transaction shall not be subject to the foregoing
provisions.

    Section 7.04. Limitations on Transactions with Affiliates. The Issuer shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
pay any funds to or for the account of, make any Investment in, lease, sell,
transfer or

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otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate; provided that the foregoing shall not prohibit:

          (i)    the Issuer or any Restricted Subsidiary from performing its
    obligations under the Existing Affiliate Agreements;

          (ii)   the Issuer or any Restricted Subsidiary from making any
    Investment in Minority-Owned Affiliates permitted by Section 7.08;

          (iii)  the Issuer or any Restricted Subsidiary from making sales or
    leases to or purchases or leases from any Affiliate and, in connection
    therewith, extending credit or making payments, or from making payments for
    services rendered by any Affiliate, if such sales, leases or purchases are
    made or such services are rendered in the ordinary course of business and on
    terms and conditions at least as favorable to the Issuer or such Restricted
    Subsidiary as the terms and conditions which would apply in a similar
    transaction with a Person not an Affiliate;

          (iv)   the Issuer or any Restricted Subsidiary from making payments to
    Vencor in amounts as shall be necessary to permit Vencor to pay costs and
    expenses incurred by it in the ordinary course in connection with
    maintaining its status as a public company (including, without limitation,
    transfer agent fees, registration fees, stock exchange fees, costs for
    shareholder communications and other similar costs and expenses) or on
    account of intercompany allocation matters; provided that (w) Vencor shall
    have received an invoice requiring payment of such cost or expense and shall
    have forwarded a copy thereof to the Issuer, (x) Vencor shall pay such cost
    or expense within 15 days of receipt of amounts from the Issuer or any
    Restricted Subsidiary pursuant to this clause, (y) in the case of any
    payment on account of intercompany allocation matters, such payment is
    allocated between the Issuer and its Restricted Subsidiaries and the other
    Vencor Companies on a basis that reflects the actual use to the extent
    practicable and, to the extent such allocation is not practicable, on a
    basis reasonably related to actual use and (z) the aggregate amount of
    payments made pursuant to this clause (iv) during each of the periods
    referred to below shall not exceed the amount set forth opposite such
    period:

-----------------------------------------------------------------------
               Period                             Amount
-----------------------------------------------------------------------
    Closing Date to but excluding              $ 2,000,000
    first anniversary thereof:
-----------------------------------------------------------------------
    Each 12-month period thereafter:           $   750,000
-----------------------------------------------------------------------

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<PAGE>

          (v)    the Issuer or any Restricted Subsidiary from making payments of
     principal, interest and premium on any of its Debt held by an Affiliate if
     the terms of such Debt are substantially as favorable to the Issuer or such
     Restricted Subsidiary as the terms which could have been obtained at the
     time of the creation of such Debt from a lender which was not an Affiliate;

          (vi)   to the extent permitted by Section 7.08, the Issuer or any
     Restricted Subsidiary from participating in, or effecting any transaction
     in connection with, any joint enterprise or other joint arrangement with
     any Affiliate if the Issuer or such Restricted Subsidiary participates in
     the ordinary course of its business and on a basis no less advantageous
     than the basis on which such Affiliate participates;

          (vii)  the Issuer or any Restricted Subsidiary from maintaining,
     entering into or adopting any executive or employee incentive or
     compensation plan, contract or other arrangement (including any loans or
     extensions of credit in connection therewith to the extent permitted by
     Section 7.08), or any arrangement to terminate any of the foregoing, if
     such plan, contract, or arrangement has been or is approved either (x) at
     any time by the shareholders of Vencor in accordance with such voting
     requirements as may be applicable or (y) at any time by the board of
     directors of Vencor (or a duly constituted committee of such board) at a
     meeting at which a quorum of disinterested directors is present;

          (viii) to the extent permitted by Section 7.08, the Issuer or any
     Restricted Subsidiary from making any loan, guarantee or other
     accommodation in accordance with Vencor's policies and practices concerning
     employee relocation in the ordinary course of its business; or

          (ix)   any Restricted Payments permitted by Section 7.07.

     Section 7.05. Limitation on Restrictions Affecting Subsidiaries. The Issuer
shall not, and shall not permit any Restricted Subsidiary to, enter into, or
suffer to exist, any agreement (other than the Financing Documents and the Exit
Facility Financing Documents and, in the case of clause (c), the Master Lease
Agreements) which prohibits or limits the ability of any Restricted Subsidiary
to (a) pay dividends or make any other distributions or pay any Debt owed to the
Issuer or any other Restricted Subsidiary; (b) make loans or advances to the
Issuer or any other Restricted Subsidiary or (c) create, incur, assume or suffer
to exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, to secure the obligations of the Issuer and the
Guarantors under the Financing Documents and the Exit Facility Financing
Documents; provided that the foregoing shall not prohibit any such prohibition
or limitation contained in:

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<PAGE>

          (i)    any document relating to Debt secured by a Lien permitted by
     Section 7.02, insofar as the provisions thereof limit grants of junior
     liens on the assets securing such Debt;

          (ii)   any operating lease or capital lease, insofar as the provisions
     thereof limit grants of a security interest in, or other assignments of,
     the related leasehold interest to any other Person; and

          (iii)  if a Person becomes a Restricted Subsidiary after the date
     hereof, any agreement that is binding on such Person and was not entered
     into in contemplation of its becoming a Restricted Subsidiary, insofar as
     such agreement limits such Person's ability to take any action described in
     clause (a), (b) or (c) of this Section, provided that either:

                 (A) such limitation is terminated within 60 days after such
          Person becomes a Restricted Subsidiary; or

                 (B) not more than 5% of Consolidated EBITDAR for any period of
          four consecutive Fiscal Quarters is attributable, in the aggregate, to
          Persons that become Restricted Subsidiaries after the date hereof and
          remain subject to such limitations more than 60 days after becoming
          Restricted Subsidiaries.

     Section 7.06. Limitation on Sale or Issuance of Equity Interests of
Restricted Subsidiaries. The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, sell or issue any Equity
Interests of a Restricted Subsidiary unless:

     (a)  the sale or issuance is to the Issuer or a Wholly Owned Restricted
Subsidiary; or

     (b)  (i) if, after giving effect to the sale or issuance, the Restricted
Subsidiary would no longer be a Restricted Subsidiary, all remaining Investments
of the Issuer and the Restricted Subsidiaries in such former Restricted
Subsidiary (valued at an amount equal to the Issuer's remaining proportional
share of the fair market value of such former Restricted Subsidiary's assets
less liabilities), if deemed made at that time, would be permitted under Section
7.08 and (ii) the Issuer complies with Section 7.03(d) with respect to the sale
or issuance.

     Section 7.07. Restricted Payments. (a) The Issuer shall not, and shall not
permit any Restricted Subsidiary to, declare or make any Restricted Payment on
or after the Closing Date, except that:

          (i)    any Restricted Subsidiary may declare and make Restricted
    Payments to the Issuer or any Wholly Owned Restricted Subsidiary;

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<PAGE>

          (ii)   the Issuer may declare or make Restricted Payments to Vencor
for the purchase, redemption or other acquisition or retirement for value of
Equity Interests of Vencor held by (A) officers, directors or employees or
former officers, directors or employees (or their estates or beneficiaries under
their estates), upon death, disability, retirement, severance or termination of
employment or (B) Ventas, to the extent required to satisfy the requirements of
Article XII of Vencor's Amended and Restated Certificate of Incorporation;
provided that the aggregate amount paid to Vencor pursuant to this clause (ii)
does not exceed an aggregate amount of $500,000;

          (iii)  the Issuer may declare or make Restricted Payments to Vencor of
required amounts notified to Vencor in writing from time to time by the
insurance regulatory authorities in the Cayman Islands; provided that Vencor
shall (x) promptly upon receipt of any such notice, forward a copy thereof to
the Administrative Agent and (y) invest all Restricted Payments received
pursuant to this clause in Cornerstone promptly upon receipt;

          (iv)   the Issuer may declare or make Restricted Payments to Vencor of
amounts necessary for any payment of Permitted Taxes related to the business or
assets of the Issuer and its Restricted Subsidiaries including, without
limitation, (A) any income Permitted Tax liability allocated to the Issuer and
Restricted Subsidiaries under Internal Revenue Code Sections 1502 and 1552 and
Treasury Regulations promulgated thereunder, and any equivalent provisions
allocating tax liability to them as members of a consolidated or combined tax
group for state or local tax purposes, (B) any joint and several liability for
taxes asserted against the Issuer and Restricted Subsidiaries by a Permitted
Taxing authority under Treasury Regulations Section 1.1502-6 or any equivalent
provisions of state or local tax law or (C) any liability for Permitted Taxes or
other amounts under the provisions of the Tax Refund Escrow Agreement or the Tax
Allocation Agreement; and

          (v)    the Issuer may declare or make Restricted Payments in cash to
Vencor if at the time of, and after giving effect to, the Restricted Payment:

                    (A)  the Issuer could incur at least $1.00 of additional
          Debt pursuant to Section 7.01(a); and

                    (B)  the aggregate amount expended for all Restricted
          Payments made pursuant to clause (ii) and this clause (v) on or after
          the Closing Date would not exceed 25% of the aggregate Free Cash Flow
          calculated on a cumulative basis during the period, taken as one
          accounting period, beginning on the first day of the first full Fiscal
          Quarter following the Closing Date and ending on the last day of the

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<PAGE>

          Issuer's most recently completed Fiscal Quarter for which financial
          statements have been provided pursuant to this Agreement;

    provided that Restricted Payments may be declared and made pursuant to
clauses (ii), (iii), (iv) or (v) only if at the time of, and after giving effect
to, the Restricted Payment, no Default shall have occurred and be continuing.

          (b)  Vencor shall not, directly or indirectly, use the proceeds of any
Restricted Payment to (i) declare or pay any dividend or other distribution on
any Equity Securities of Vencor (except dividends payable solely in Equity
Securities of the same class) or (ii) purchase, redeem, retire or otherwise
acquire any Equity Securities of Vencor except as permitted by Section
7.07(a)(ii).

          Section 7.08. Limitations on Acquisitions and Investments. (a) The
Issuer shall not, and shall not permit any Restricted Subsidiary to, make any
Acquisitions or make, acquire or hold any other Investments, except:

               (i)   Permitted Investments;

               (ii)  Acquisitions involving Healthcare Facilities the sole
          consideration for which consists of Qualified Equity Interests of
          Vencor;

               (iii) up to $7.7 million in connection with the Kingfish
          Transaction; and

               (iv)  Investments or Acquisitions funded with any Net Cash
          Proceeds of an Asset Sale or an Equity Issuance or any Casualty
          Proceeds pursuant to Section 2.06; provided that in the case of an
          Equity Issuance, such amounts have been transferred by Vencor to the
          Issuer as an equity contribution.

          (b)  Notwithstanding the foregoing, the Issuer and its Restricted
Subsidiaries may make Restricted Investments involving Healthcare Facilities and
assets incidental thereto if, at the time of, and after giving effect to, each
such Restricted Investment:

               (i)   no Default shall have occurred and be continuing; and

               (ii)  the aggregate amount of such Restricted Investment and all
          other Restricted Investments made in reliance on this clause (net of,
          with respect to a Restricted Investment in any particular Person made
          pursuant to this clause, the after-tax cash return thereon received
          after the Closing Date as a result of any sale for cash, repayment,
          redemption, liquidating distribution or other cash realization (not
          included in Consolidated Net Income), but not to exceed the amount of
          such Restricted Investment in such Person made after the Closing Date
          in reliance on this clause) plus the aggregate principal amount of
          related Debt incurred pursuant to Section 7.01(b)(vi) and still
          outstanding (including

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<PAGE>

          any refinance thereof pursuant to Section 7.0l(b)(vii)) (such Debt,
          "Investment Related Debt") does not exceed $30,000,000;

             provided that if the aggregate amount of Restricted Investments
made by the Issuer and its Restricted Subsidiaries in reliance on this clause
plus the aggregate principal amount of Investment Related Debt at any time is
equal to $30,000,000 or if such threshold would be exceeded by the making of any
proposed Restricted Investment, then the Issuer and its Restricted Subsidiaries
may make additional Restricted Investments involving Healthcare Facilities and
assets incidental thereto if (x) the Issuer or the Restricted Subsidiary, as the
case may be, notifies the Administrative Agent that it proposes to make a
Restricted Investment pursuant to this proviso, which notice shall specify the
amount of such Restricted Investment and the date on which such Restricted
Investment is proposed to be made and (y) at the time of, and after giving
effect to, each such additional Restricted Investment:

                    (1)  no Default shall have occurred and be continuing; and

                    (2)  the aggregate amount of such additional Restricted
               Investment and all other Restricted Investments made in reliance
               on this proviso plus the aggregate principal amount of Investment
               Related Debt does not exceed the lesser of (x) the amount of
               additional Debt that the Issuer could then incur pursuant to
               Section 7.01(a) and (y) $20,000,000.

     Section 7.09. No Change of Fiscal Periods. Neither the Issuer nor Vencor
shall change the date on which any of its Fiscal Years or Fiscal Quarters ends,
unless the Required Lenders shall have consented to such change (which consent
may be conditioned on the amendment of any covenant herein that would be
affected by such change to eliminate the effect thereof).

     Section 7.10. Limitation on Business.

     (a)  Vencor will at all times own 100% of the outstanding Equity Interests
of the Issuer and will not engage in any activities other than owning such
Equity Interests and Equity Interests in Cornerstone and other Subsidiaries that
own, operate or manage Healthcare Facilities, and financing activities and other
activities reasonably related to such ownership.

     (b)  Vencor shall not permit any of its Subsidiaries (other than the
Excluded Partnerships and Cornerstone) to engage in any business, other than the
business of owning, operating or managing Healthcare Facilities and any business
reasonably incidental thereto.

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<PAGE>

     (c) The Issuer shall not, and shall not permit any Restricted Subsidiary
to, engage in any business, other than the business of owning, operating or
managing Healthcare Facilities, any of the businesses in which the Issuer and
its Restricted Subsidiaries are engaged on the Closing Date and any business
reasonably incidental thereto.

     Section 7.11. Limitation on Sale and Leaseback Transactions. The Issuer
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale and Leaseback Transaction with respect to any property or asset unless:

          (1) the Issuer or the Restricted Subsidiary would be entitled to

               (A) incur Debt in an amount equal to the Attributable Debt with
          respect to such Sale and Leaseback Transaction pursuant to Section
          7.01(a), and

               (B) create a Lien on such property or asset securing such
          Attributable Debt pursuant to Section 7.02,

       in which case, the corresponding Debt and Lien will be deemed incurred
       pursuant to those provisions, and

          (2) the Issuer complies with Section 7.03(d) in respect of such
     transaction.

     Section 7.12. No Modification of Certain Documents Without Consent. (a) The
Issuer shall not, Vencor shall not, and the Issuer shall not permit any
Restricted Subsidiary to, consent to or solicit any amendment or supplement to,
or any waiver or other modification of, any Existing Affiliate Agreement if the
effect thereof would be to materially increase the amount, or materially
accelerate the date of payment, of any obligation of the Issuer or any Guarantor
thereunder.

     (b) The Issuer shall not, Vencor shall not, and the Issuer shall not permit
any Restricted Subsidiary to, consent to or solicit any amendment or supplement
to, or any waiver or other modification of any Third Party Lease or Management
Contract, the Tax Refund Escrow Agreement or the Tax Allocation Agreement, if
the effect thereof could reasonably be expected to be adverse in any material
respect to the Issuer and the Guarantors, taken as a whole, or to the Lenders.

     (c) The Issuer shall not, Vencor shall not, and the Issuer shall not permit
any Restricted Subsidiary to, consent to or solicit any amendment or supplement
to, or any waiver or other modification of any Master Lease Agreement if the
effect thereof could adversely affect the ability of the Issuer and the
Guarantors to repay the Obligations as and when due.

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<PAGE>

     Section 7.13. Limitation on Cash Not Held in Collateral Accounts or
Concentration Accounts. The Issuer will not permit the aggregate amount of all
collected funds and Temporary Cash Investments held by the Issuer and its
Restricted Subsidiaries in accounts, other than the Collateral Accounts, the
Exit Facility Collateral Account and the Concentration Accounts, to exceed
$2,000,000 at the close of business on any two consecutive Business Days. On the
Closing Date, all cash and Temporary Cash Investments of Vencor and its
Subsidiaries held on the Closing Date will be held in the Issuer or a Restricted
Subsidiary, other than (a) amounts held in Unrestricted Subsidiaries that,
consistent with Vencor's historical cash management practices, have been held in
Unrestricted Subsidiaries, (b) up to $l,000,000 held in Vencor and (iii)
deposits with trade creditors, landlords, bonding companies and similar deposits
in the ordinary course of business consistent with past practice.

     Section 7.14. Anti-Layering. The Issuer and Vencor shall not, and shall not
permit any Subsidiary Guarantor to, incur any Debt that is subordinate in right
of payment to Senior Obligations of the Issuer, Vencor or the Subsidiary
Guarantors, unless such Debt is pari passu with, or subordinated in right of
payment to, the Notes or the Guarantee under the relevant Guaranty Agreement.
This does not apply to distinctions between categories of Debt that exist by
reason of any Liens or Guarantees securing or in favor of some but not all of
such Debt.

     Section 7.15. Payments for Consents. The Issuer and Vencor shall not, and
shall not permit any of their Subsidiaries or Affiliates to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Lender for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Agreement
or the other Financing Documents unless such consideration is offered to be paid
or agreed to be paid to all Lenders that consent, waive or agree to amend such
term or provision within the time period set forth in the solicitation documents
relating to the consent, waiver or amendment.

                                   ARTICLE 8
                                   Defaults

     Section 8.01. Events of Default. If one or more of the following events
(each, an "Event of Default") shall have occurred and be continuing:

     (a) (i) any principal of any Note shall not be paid within three Business
Days after the due date thereof, or (ii) any interest thereon shall not be paid
within five Business Days after the due date thereof, or (iii) any fee or other
amount payable hereunder to or for the account of any Agent or any Lender shall
not be paid on the due date thereof and any such fee or other amount shall
remain unpaid for 5 Business

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<PAGE>

Days after written notice thereof has been given to the Issuer by the
Administrative Agent, in each case, whether or not the payment is prohibited
under Section 11; or

     (b) the Issuer shall fail to observe or perform any covenant contained in
Article 6; or

     (c) the Issuer or Vencor shall fail to observe or perform any covenant
contained in Section 5.01(e), Section 5.01(f) or Article 7; or

     (d) the Issuer or any Guarantor shall fail to observe or perform any of its
covenants or agreements contained in the Financing Documents (other than those
covered by clause (a), (b) or (c) above) for 30 days after written notice
thereof has been given to the Issuer by the Administrative Agent at the request
of any Lender; provided that: (i) if such failure relates primarily to the
operation of, or to the use, maintenance, protection, preservation or status of
property used directly in the operation of, a particular Healthcare Facility
that is a Master Lease Property and there is a representation, covenant or
agreement dealing with substantially the same subject matter in the applicable
Master Lease Agreement, such failure shall not constitute an Event of Default
pursuant to this clause (d) and instead shall be governed solely by Sections
8.01(h) and 8.01(l) below; and (ii) if such failure relates primarily to the
operation of, or to the use, maintenance, protection, preservation or status of
property used directly in the operation of, one or more Healthcare Facilities
that are subject to one or more Third Party Leases and it would not be an Event
of Default under Section 8.01(i) if at such time all such Third Party Leases
were terminated (or the surrender or repossession of the property leased
thereunder were required), such failure shall not constitute an Event of Default
pursuant to this Section 8.01(d); or

     (e) any representation, warranty, certification or statement made by the
Issuer or any Guarantor in any Financing Document or in any certificate,
financial statement or other document delivered pursuant thereto shall prove to
have been incorrect in any material respect when made; or

     (f) the Issuer or any Guarantor shall fail to make one or more payments in
respect of Material Debt when due or within any period of grace applicable to
such payments; or

     (g) any event or condition shall occur that (i) results in the acceleration
of the maturity of any Financial Accommodation or (ii) enables the holder or
holders of such Financial Accommodation or any Person acting on behalf of such
holder or holders to accelerate the maturity thereof, and such event or
condition has not been waived or cured and the aggregate amount that would be
payable by the Issuer and the Guarantors upon the acceleration of all Financial
Accommodations referred to in clauses (i) and (ii) above equals or exceeds
$5,000,000; provided that it shall not be an Event of Default under this clause
(g) if such event or condition is an event of default under the instrument
evidencing such Financial Accommodation and arises

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<PAGE>

with respect to an Event of Default (as defined in the applicable Master Lease
Agreement) and no other event of default shall have then occurred and be
continuing under such instrument; or

     (h) the termination of the lease of one or more Healthcare Facilities under
a Master Lease Agreement, or the surrender or repossession of one or more
Healthcare Facilities leased thereunder, prior to the scheduled termination
thereof; provided that (i) this subsection (h) shall not apply to (A) any
voluntary termination of a lease of a Healthcare Facility at a time when no
Event of Default (as defined in the Master Lease Agreement) exists thereunder or
is reasonably likely to occur or (B) any termination of a lease of a Healthcare
Facility pursuant to a purchase option exercised in accordance with the terms
thereof and (ii) no Event of Default shall exist under this subsection (h) at
any time, unless the EBITDAR attributable to all Healthcare Facilities covered
by this subsection (h) then being terminated, surrendered or repossessed (the
Fiscal Quarter in which such termination, surrender or repossession occurs, the
"Current Fiscal Quarter"), and the EBITDAR attributable to all Healthcare
Facilities with respect to which such a termination, surrender or repossession
covered by this subsection (h) occurred during the Current Fiscal Quarter and
the most recently ended period of four consecutive Fiscal Quarters exceed, in
the aggregate, 5% of Consolidated EBITDAR during such four consecutive Fiscal
Quarter period (the EBITDAR attributable to each such Healthcare Facility and
the Consolidated EBITDAR to be calculated, in each case, for the most recently
ended period of four consecutive Fiscal Quarters for which the necessary
information is available, in each case annualized if such fiscal information is
not available for a full four Fiscal Quarters following the Closing Date); or

     (i) one or more events or conditions shall occur that result in, or enable
the counter-party thereunder to require, (i) the termination of one or more
Third Party Leases, or the surrender or repossession of the property leased
thereunder, prior to the scheduled termination thereof or (ii) the termination
of one or more Management Contracts prior to the scheduled termination thereof;
provided that (x) this subsection (i) shall not apply to any voluntary
termination of a Third Party Lease or Management Contract by the Issuer or a
Guarantor at a time when no default by it thereunder exists or is reasonably
likely to occur and (y) no Event of Default shall exist under this subsection
(i) at any time, unless the EBITDA attributable to all Healthcare Facilities
then subject to a termination, surrender or repossession covered by this
subsection (i) and the EBITDA attributable to all Healthcare Facilities with
respect to which such a termination, surrender or repossession occurred during
the preceding 12 months exceed, in the aggregate, 12% of Consolidated EBITDA
(the EBITDA attributable to each such Healthcare Facility to be calculated for
the most recent 12 months of full operation thereof for which the necessary
financial information is available and Consolidated EBITDA to be calculated for
the most recently ended period of four consecutive Fiscal Quarters for which the
necessary financial information is available, in each case annualized if such
financial information is not available for a full 12 months or a full four
Fiscal Quarters, as the case may be); or

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<PAGE>

     (j) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $l,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $1,000,000; or

     (k) one or more Enforceable Judgments for the payment of money aggregating
in excess of $20,000,000 shall be rendered against the Issuer or one or more of
the Guarantors and shall not have been satisfied; or

     (l) any Lien created by any of the Collateral Documents shall at any time
fail to constitute a valid and perfected Lien on all of the Collateral purported
to be subject to such Lien, subject to no prior or equal Lien (other than Liens
securing amounts owing under the Exit Facility and other Permitted Liens), or
the Issuer or any Guarantor shall so assert in writing; provided that it shall
not be an Event of Default under this clause (l) if the Liens in question are
not valid or not perfected, or are subject to such other Liens, only in respect
of Collateral used directly in the operation of one or more particular
Healthcare Facilities (i) that are Master Lease Properties and the number of
such Facilities does not exceed 15 or (ii) that are subject to one or more Third
Party Leases and it would not be an Event of Default under 8.01(i) if at such
time all such Third Party Leases were terminated (or the surrender or
repossession of the property leased thereunder were required); or

     (m) any provision of any Guaranty Agreement shall cease to be in full force
and effect (except as permitted by Section 7.03(b)) or any Guarantor, or any
Person acting on behalf of any Guarantor, shall so assert in writing; or

     (n) other than the Chapter 11 Cases:

           (i) the Issuer or any Guarantor shall commence a voluntary case or
     other proceeding seeking liquidation, reorganization or other relief with
     respect to itself or its debts under any bankruptcy, insolvency or other
     similar law now or hereafter in effect or seeking the appointment of a
     trustee, receiver, liquidator, custodian or other similar official of it or
     any substantial part of its property, or shall consent to any such relief
     or to the appointment of or taking possession by any such official in an
     involuntary case or other

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     proceeding commenced against it, or shall make a general assignment for the
     benefit of creditors, or shall fail generally to pay its debts as they
     become due, or shall take any corporate action to authorize any of the
     foregoing; or

          (ii) an involuntary case or other proceeding shall be commenced
     against the Issuer or any Guarantor seeking liquidation, reorganization or
     other relief with respect to it or its debts under any bankruptcy,
     insolvency or other similar law now or hereafter in effect or seeking the
     appointment of a trustee, receiver, liquidator, custodian or other similar
     official of it or any substantial part of its property, and such
     involuntary case or other proceeding shall remain undismissed and unstayed
     for a period of 60 days; or an order for relief shall be entered against it
     under the Federal bankruptcy laws as now or hereafter in effect; or

     (o) any Person or group of Persons (within the meaning of Section 13 or 14
of the Securities Exchange Act) (other than any Person which acquires shares of
common stock of Vencor on the Closing Date pursuant the Plan of Reorganization
(an "Excluded Person") or any group of Persons of which Excluded Persons have
majority interest) shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 promulgated by the SEC under said Act) of more than 50% of the
outstanding shares of common stock of Vencor,

then, and in every such event the Administrative Agent or the Required Lenders
may by notice to the Issuer declare the principal of the Notes and all other
amounts in respect of the Obligations (in each case together with accrued
interest thereon) to be, and they shall become due and payable upon the earlier
to occur of (x) the 5/th/ day after notice thereof has been given to the Exit
Facility Agent and (y) the date on which all Senior Obligations have been
accelerated, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Issuer. If any event specified above in
Section 8.01(n) occurs, then without notice to the Issuer or any other act by
any Agent or any Lender, the principal of the Notes and all other amounts in
respect of the Obligations (in each case together with accrued interest thereon)
shall become immediately due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Issuer. The
Administrative Agent will promptly notify the Exit Facility Agent of any
declaration of acceleration of the Notes.

     Section 8.02. Notice of Default. The Administrative Agent shall give notice
to the Issuer under Section 8.01 promptly upon being requested to do so by the
Required Lenders and shall thereupon notify all the Lenders thereof.

     Section 8.03. Enforcement Notice. Subject to the Intercreditor Agreement,
if the Administrative Agent is (i) instructed to do so by the Required Lenders
at any time after the Notes become immediately due and payable pursuant to
Section 8.01(n), or (ii) instructed to do so by the Required Lenders at any time
after the

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principal and other amounts outstanding under the Notes have been declared due
and payable pursuant to Section 8.01, the Administrative Agent shall deliver to
the Collateral Agent an Enforcement Notice directing the Collateral Agent to
exercise one or more specific remedies under the Collateral Documents or any
other right or remedy available at law or in equity. Concurrently with the
delivery of any such Enforcement Notice to the Collateral Agent, the principal
of the Notes and other amounts in respect of the Obligations not theretofore
declared due and payable shall automatically become immediately due and payable.

                                   ARTICLE 9
                                   The Agent

     Section 9.01. Appointment and Authorization.

     (a) Each Lender irrevocably appoints the Administrative Agent to act as its
agent in connection herewith and authorizes the Administrative Agent to take
such action as agent on such Lender's behalf and to exercise such powers under
the Financing Documents as are delegated to the Administrative Agent by the
terms thereof, together with all such powers as are reasonably incidental
thereto.

     (b) Each of the Lenders and the Administrative Agent (i) authorizes the
Collateral Agent to execute the Collateral Documents and the Intercreditor
Agreement as agent on their behalf, (ii) irrevocably appoints and authorizes the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Collateral Documents and the Intercreditor Agreement as are
delegated to the Collateral Agent by the terms thereof, together with all such
powers as are reasonably incidental thereto and (iii) agrees to be bound by the
terms and provisions of the Collateral Documents and the Intercreditor Agreement
relating to the Administrative Agent and such Lender.

     Section 9.02. Agents and Affiliates. Morgan shall have the same rights and
powers under the Financing Documents as any other Lender and may exercise or
refrain from exercising the same as though it were not one of the Agents. Morgan
and its affiliates may accept deposits from, lend money to, and generally engage
in any kind of business with the Issuer or any of the Guarantors or their
Affiliates as if it were not one of the Agents.

     Section 9.03. Actions by Agents. The obligations of each of the Agents
under the Financing Documents are only those expressly set forth therein with
respect to it. Without limiting the generality of the foregoing, none of the
Agents shall be required to take any action with respect to any Default, except
as expressly provided in Article 8 hereof and in the Collateral Documents.

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     Section 9.04. Consultation with Experts. Each of the Agents may consult
with legal counsel (who may be counsel for the Issuer or any Guarantor),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.

     Section 9.05. Liability of Agents. None of the Agents or their respective
affiliates or their respective directors, officers, agents or employees shall be
liable for any action taken or not taken by it in connection with the Financing
Documents (i) with the consent or at the request of the Required Lenders or (ii)
in the absence of its own gross negligence or willful misconduct. None of the
Agents or their respective affiliates or their respective directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with any Financing Document; (ii) the performance or observance of
any of the covenants or agreements of the Issuer or any Guarantor under any
Financing Document; (iii) the satisfaction of any condition specified in Section
3.01 except, in the case of the Administrative Agent, receipt of items required
to be delivered to it; (iv) the validity, effectiveness or genuineness of any
Financing Document or any other instrument or writing furnished in connection
therewith; or (v) the existence, genuineness or value of any of the Collateral
or the validity, perfection, recordation, priority or enforceability of any Lien
on any of the Collateral. None of the Agents shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile copy or similar writing) believed by
it to be genuine or to be signed by the proper party or parties.

     Section 9.06. Indemnification. The Lenders shall, ratably in accordance
with the aggregate outstanding principal amount of their Loans, indemnify each
Agent, their respective affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Issuer and the
Guarantors) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitee's gross negligence or willful misconduct) that such
indemnitee may suffer or incur in connection with the Financing Documents or any
action taken or omitted by such indemnitees thereunder.

     Section 9.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance on the Agents or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agents or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.

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     Section 9.08. Successor Agents. (a) Any Agent may resign at any time (a
"Retiring Agent") by giving notice thereof to the Lenders, the other Agents and
the Issuer. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor for the Retiring Agent (a "Successor Agent"). If no
Successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the Retiring Agent gives
notice of resignation, then the Retiring Agent may, on behalf of the Lenders,
appoint a Successor Agent, which shall be a Lender or any other commercial bank
organized or licensed under the laws of the United States or any State thereof
and having a combined capital and surplus of at least $500,000,000; provided
that for so long as Morgan is the Exit Facility Agent, Morgan shall have the
absolute right to resign as Administrative Agent upon 30 days notice, and such
resignation shall become effective, regardless of whether a Successor Agent has
been appointed and shall have no obligation to appoint a Successor Agent. Upon
the acceptance of its appointment as a Successor Agent, such Successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the Retiring Agent, and the Retiring Agent shall be discharged from its duties
and obligations hereunder; provided that if Morgan resigns as Administrative
Agent pursuant to the proviso in the previous sentence, then Morgan shall be
discharged from its duties and obligations hereunder immediately upon the expiry
of the 30 day period referred to in such proviso. After any Retiring Agent
resigns as an Agent hereunder, the provisions of this Article 9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
one of the Agents.

     (b) Without prejudice to its rights under paragraph (a), Morgan may resign
as an Agent at any time and may appoint any other subsidiary of J.P. Morgan
Chase & Co. to such role by giving written notice thereof to each of the Lenders
and the Issuer. Upon such appointment, such subsidiary shall thereupon succeed
to and become vested with all the rights and duties of Morgan in such capacity
and Morgan shall be discharged from its duties and obligations in such capacity
hereunder. After Morgan resigns as Agent under this paragraph (b), the
provisions of this Article 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was one of the Agents.

     Section 9.09. Collateral Agent.

     (a) As to any matters not expressly provided for in the Collateral
Documents (including the timing and methods of realization upon the Collateral),
the Collateral Agent shall, subject to the Intercreditor Agreement, act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion; provided that the Collateral Agent shall not be obligated to take
any action if the Collateral Agent believes that such action is or may be
contrary to any applicable law or might cause the Collateral Agent to incur any
loss or liability for which it has not been indemnified to its satisfaction.

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     (b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of any Lien on any of the Collateral, whether
impaired by operation of law or by reasons of any action or omission to act on
its part under the Collateral Documents. The Collateral Agent shall have no duty
to ascertain or inquire as to the performance or observance of any of the terms
of the Collateral Documents by the Issuer or any of the Guarantors.

                                  ARTICLE 10
                           Changes in Circumstances

     SectioN 10.01. Increased Cost and Reduced Return.

     (a) If, on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender Party (other than the
Agents) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency, shall impose, modify
or deem applicable any reserve, special deposit, insurance assessment or similar
requirement (including any such requirement imposed by the Board of Governors of
the Federal Reserve System) against assets of, deposits with or for the account
of, or credit extended by, any Lender Party (other than the Agents) or shall
impose on any Lender Party (other than the Agents) or the London interbank
market any other condition affecting its Loans, and the result of any of the
foregoing is to increase the cost to such Lender Party of making or maintaining
its Loans or to reduce the amount of any sum received or receivable by such
Lender Party under this Agreement or under its Loans with respect thereto, by an
amount deemed by such Lender Party to be material, then, within 15 days after
demand by such Lender Party (with a copy to the Administrative Agent), the
Issuer shall pay to such Lender Party such additional amount or amounts as will
compensate such Lender Party for such increased cost or reduction; provided that
the Issuer shall not be liable to any Lender Party in respect of any such
increased cost or reduction with respect to any period of time more than three
months before the Issuer receives the notice required by the first sentence of
Section 10.01(c) or more than six months before the Issuer receives the relevant
certificate referred to in the second sentence of Section 10.01(c).

     (b) If any Lender Party (other than the Agents) shall have determined that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change in any such law, rule or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, central

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bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Lender Party (or its Parent) as a consequence of such Lender Party's
obligations hereunder to a level below that which such Lender Party (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Lender Party to be material, then from time to time,
within 15 days after demand by such Lender Party (with a copy to the
Administrative Agent), the Issuer shall pay to such Lender Party such additional
amount or amounts as will compensate it for such reduction; provided that the
Issuer shall not be liable to any Lender Party in respect of any such reduction
with respect to any period of time more than three months prior to the date of
the notice required by the first sentence of Section 10.01(c).

     (c)  Each Lender Party (other than the Agents) will promptly notify the
Issuer and the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle it to compensation pursuant
to this Section and will designate a different Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender Party, be otherwise disadvantageous
to it. A certificate of any such Lender Party claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder, showing the calculation thereof in reasonable detail, shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender Party may use any reasonable averaging and attribution methods.

     Section 10.02. Taxes.

     (a)  Any and all payments by the Issuer and the Guarantors to or for the
account of any Lender Party under any Financing Document shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender Party, taxes imposed on its net
income, and franchise or similar taxes imposed on it, by (i) the jurisdiction
under the laws of which it is organized or any political subdivision thereof and
(ii) in the case of each Lender, the jurisdiction of its Lending Office or any
political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Issuer or any Guarantor shall be required by law
to deduct any Taxes from or in respect of any sum payable under any Financing
Document to any Lender Party, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 10.02) such Lender
Party receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Issuer or the relevant Guarantor shall make such

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deductions, (iii) the Issuer or the relevant Guarantor shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law, and (iv) the Issuer or the relevant Guarantor shall furnish
to the Administrative Agent, at its address specified in or pursuant to Section
12.01, the original or a certified copy of a receipt evidencing payment thereof.

     (b)  In addition, the Issuer agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, or charges or similar
levies which arise from any payment made hereunder or under any other Financing
Document or from the execution or delivery of, or otherwise with respect to, any
Financing Document (hereinafter referred to as "Other Taxes").

     (c)  The Issuer agrees to indemnify each Lender Party for the full amount
of Taxes or Other Taxes (including any Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this Section 10.02) paid by such
Lender Party and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within 15 days from the date such Lender Party makes demand therefor.

     (d)  Each Lender Party organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender Party listed on the signature pages hereof
and on or prior to the date on which it becomes a Lender Party in the case of
each other Lender Party, and from time to time thereafter if requested in
writing by the Issuer (but only so long as such Lender Party remains lawfully
able to do so), shall provide the Issuer and the Administrative Agent with (i)
Internal Revenue Service form W-8BEN, or any successor form prescribed by the
Internal Revenue Service, certifying that such Lender Party is entitled to
benefits under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest under the Financing
Documents or (ii) an Internal Revenue Service form W-8ECI, or any successor form
prescribed by the Internal Revenue Service, certifying that the income
receivable by it pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States. If the form provided by a
Lender Party at the time such Lender Party first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be excluded from "Taxes" as defined in
Section 10.02(a).

     (e)  For any period with respect to which a Lender Party has failed to
provide the Issuer and the Administrative Agent with the appropriate form
pursuant to Section 10.02(d) (unless such failure is due to a change in treaty,
law or regulation occurring subsequent to the date on which a form originally
was required to be provided), such Lender Party shall not be entitled to
indemnification under Section 10.02(a) with respect to Taxes imposed by the
United States; provided that should a Lender Party, which is otherwise exempt
from or subject to a reduced rate of withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder,

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the Issuer or the relevant Guarantor shall take such steps as such Lender Party
shall reasonably request to assist such Lender Party to recover such Taxes.

     (f)  If the Issuer or any Guarantor is required to pay additional amounts
to or for the account of any Lender Party pursuant to this Section 10.02, then
such Lender Party will change the jurisdiction of its Lending Office so as to
eliminate or reduce any such additional payment which may thereafter accrue if
such change, in the sole judgment of such Lender Party, is not otherwise
disadvantageous to such Lender Party.

     (g)  Without prejudice to the survival of any other agreement of the Issuer
or Vencor hereunder, the agreements and obligations of the Issuer and the
Guarantors contained in this Section 10.02 (as set forth herein and incorporated
by reference in the Guaranty Agreements) shall survive the payment in full of
the principal of and interest on the Notes.

                                  ARTICLE 11

                                 Subordination

     Section 11.01.  Agreement to Subordinate. The Debt evidenced by the Notes,
together with all interest, fees, indemnities, rescission claims and other
Obligations hereunder and under the Financing Documents, is subordinated in
right of payment, to the extent and in the manner provided in this Agreement, to
the prior payment of all Senior Obligations. The subordination provisions are
for the benefit of and enforceable by the holders of Senior Obligations from
time to time.

     Section 11.02.  Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Issuer to creditors upon a total or partial
liquidation or a total or partial dissolution of the Issuer or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Issuer or its property:

     (a)  holders of Senior Obligations are entitled to receive payment in full
in cash of all Senior Obligations, including all interest accrued or accruing on
Senior Obligations after the commencement of any bankruptcy, insolvency or
reorganization or similar case or proceeding at the contract rate (including,
without limitation, any contract rate applicable upon default) specified in the
relevant documentation, whether or not the claim for the interest is allowed as
a claim in the case or proceeding with respect to the Senior Obligations before
the Lenders will be entitled to receive any payment of principal of or interest
on the Notes. As used herein, "payment in full" or "paid in full" shall mean,
with respect to the Senior Obligations, the indefeasible payment in full in cash
or cash equivalents of 100% of the principal, interest, fees, expenses and other
amounts due or to become due to the Senior Agents and the Senior Lenders under
the Exit Facility and the other Exit Facility Financing Documents in the manner
provided under the terms of such

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documents or in such other manner which the Exit Facility Agent, at the
direction of the Senior Lenders, shall have consented in writing; and

     (b)  until the Senior Obligations are paid in full, any payment or
distribution to which Lenders would be entitled but for these subordination
provisions shall instead be made to holders of Senior Obligations as their
interests may appear.

     Section 11.03.  Default on Senior Obligations. (a) The Issuer shall not pay
the principal of or interest on the Notes, or any other Obligation hereunder and
under the Financing Documents, and shall not repay, repurchase, redeem or
otherwise retire any Notes (collectively hereinafter referred to as "pay the
Notes") if at the time any Senior Obligations have not been paid when due,
whether at maturity, upon redemption or mandatory repurchase, acceleration, or
otherwise, and the default has not been cured or waived.

     (b)  During the continuance of any default (other than a default of the
type specified in clause (a)) with respect to any Senior Obligations pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except any notice that may be required to effect acceleration) or upon the
expiration of a grace period, the Issuer may not pay the Notes for a period (a
"Payment Blockage Period"):

          (i)  commencing upon the receipt by the Issuer and the
     Administrative Agent (if it is not the same person as the Exit Facility
     Agent) of written notice of default from the Exit Facility Agent specifying
     an election to effect a Payment Blockage Period (a "Blockage Notice") and

          (ii) ending 179 days thereafter (or earlier if the Payment Blockage
     Period is terminated (A) by written notice to the Administrative Agent (if
     it is not the same person as the Exit Facility Agent) and the Issuer from
     the Exit Facility Agent, (B) by repayment in full of such Senior
     Obligations or (C) because the default giving rise to the Blockage Notice
     has been cured or waived pursuant to a writing satisfactory to the Exit
     Facility Agent).

     Subject to clause (a) and the preceding paragraph, unless the holders of
such Senior Obligations have accelerated the maturity of such Senior
Obligations, the Issuer may resume payments on the Notes after the Payment
Blockage Period.

     (c)  Not more than one Blockage Notice may be given in any consecutive 360-
day period, irrespective of the number of defaults with respect to Senior
Obligations during such period. No default which existed or was continuing on
the date of the commencement of any Payment Blockage Period with respect to the
Senior Obligations whose holders initiated the Payment Blockage Period may be
made the basis of the commencement of a subsequent Payment Blockage Period by
the holders of such Senior Obligations, whether or not within a period of 360

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consecutive days, unless the default has been cured or waived for a period of
not less than 90 consecutive days.

     Section 11.04.  When Distribution Must Be Paid Over. If a payment or other
distribution is made to Lenders that because of these subordination provisions
should not have been made to them, the Lenders that receive the distribution
shall hold it in trust for holders of Senior Obligations and pay it over to them
as their interests may appear.

     Section 11.05.  Subrogation. A distribution made under these subordination
provisions to holders of Senior Obligations which otherwise would have been made
to Lenders is not, as between the Issuer and Lenders, a payment by the Issuer on
Senior Obligations. After all Senior Obligations are paid in full and until the
Notes are paid in full, Lenders will be subrogated to the rights of holders of
Senior Obligations to receive payments in respect of Senior Obligations, which,
to the extent received by Lenders, do not constitute, as between the Issuer and
the Lenders, payments by the Issuer on the Notes.

     Section 11.06.  Relative Rights; Subordination Not to Prevent Events of
Default or Limit Right to Accelerate. Subject to the Intercreditor Agreement,
these subordination provisions define the relative rights of Lenders and holders
of Senior Obligations and do not impair, as between the Issuer and Lenders, the
obligation of the Issuer, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms. The failure to make
a payment pursuant to the Notes by reason of these subordination provisions does
not prevent the occurrence of a Default, nor do these subordination provisions
have any effect on the right of the Lenders or the Administrative Agent to
accelerate the maturity of the Notes upon an Event of Default or prevent the
Administrative Agent or any Lender from exercising its available remedies upon a
Default, subject to the Intercreditor Agreement and the rights of holders of
Senior Obligations to receive distributions otherwise payable to Lenders.

     Section 11.07.  Subordination May Not Be Impaired by Issuer. No right of
any holder of Senior Obligations to enforce the subordination of the Notes will
be impaired by any act or failure to act by the Issuer or by its failure to
comply with this Agreement.

     Section 11.08.  Rights Of Administrative Agent. (a) The Administrative
Agent may continue to make payments on the Notes and will not be charged with
knowledge of the existence of facts that would prohibit the making of any such
payments unless, not less than two Business Days prior to the date of such
payment, the Administrative Agent receives notice satisfactory to it from the
Issuer or the Exit Facility Agent that payments may not be made under this
Article; provided that a Blockage Notice shall be deemed to be effective as
against the Lenders immediately upon the Administrative Agent receiving such
notice under Section 11.03(b).

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     (b)  The Administrative Agent in its individual or any other capacity may
hold Senior Obligations with the same rights, including rights under this
Article, it would have if it were not Administrative Agent. Nothing in this
Article applies to claims of, or payments to, the Administrative Agent under or
pursuant to Section 12.03.

     Section 11.09.  Distributions and Notices to, and Notices and Consents by,
Representatives of Holders of Senior Obligations. Whenever a distribution is to
be made or a notice given to holders of Senior Obligations, the distribution may
be made and the notice given to the Exit Facility Agent. Notices or consents
under this Agreement from holders of the Senior Obligations may be given only by
the Exit Facility Agent.

     Section 11.10.  Administrative Agent Entitled to Rely. For the purpose of
ascertaining the outstanding amount of Senior Obligations, the holders thereof,
and all other information relevant to making any payment or distribution to
holders of Senior Obligations pursuant to this Article, the Administrative Agent
and the Lenders are entitled to rely upon an order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
Section 11.02 are pending, a certificate of the liquidating trustee or other
Person making a payment or distribution to the Administrative Agent or to the
Lenders, or information provided by the Exit Facility Agent. The Administrative
Agent may defer any payment or distribution pending receipt of evidence or
instructions satisfactory to it or a judicial determination regarding the rights
of parties to receive the payment or distribution.

     Section 11.11.  Administrative Agent to Effectuate Subordination. Each
Lender by accepting a Note authorizes and directs the Administrative Agent on
behalf of the Lender to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Lenders and the holders
of Senior Obligations as provided in this Article and appoints the
Administrative Agent as attorney-in-fact for any and all such purposes,
including for the purpose of filing a claim in any proceedings of the nature
referred to in Section 11.02.

     Section 11.12.  Administrative Agent Not Fiduciary for Holders of Senior
Obligations. The Administrative Agent will not be deemed to owe any fiduciary
duty to the holders of Senior Obligations and will not be liable to any such
holders if it mistakenly pays over or distribute to Lenders, or to the Issuer or
any other Person, any money or assets to which holders of Senior Obligations are
entitled by virtue of this Article.

     Section 11.13.  Legend on Notes. Until such time as all outstanding Senior
Obligations are indefeasibly paid in full in cash, each of the Notes and any
other promissory note or similar document evidencing the Loans, shall bear upon
its face a legend as follows:

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         "THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE
         MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN CREDIT AGREEMENT
         REFERRED TO BELOW IN ACCORDANCE WITH THE TERMS THEREOF, AND THE RIGHTS
         AND REMEDIES OF THE HOLDER OF THIS NOTE ARE SUBJECT TO THE TERMS AND
         CONDITIONS OF THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT
         DATED AS OF APRIL 20,200l BY AND AMONG THE ISSUER, VENCOR, THE
         COLLATERAL AGENT AND THE EXIT FACILITY COLLATERAL AGENT, AS AMENDED,
         RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME (THE
         "INTERCREDITOR AGREEMENT")."

     Section 11.14.  Reliance by Holders of Senior Obligations on Subordination
Provisions; No Waiver. (a) Each Lender by accepting a Note acknowledges and
agrees that these subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of Senior Obligations, whether
created or acquired before or after the issuance of the Notes, to acquire or to
hold such Senior Obligations, and each holder of Senior Obligations will be
deemed conclusively to have relied on these subordination provisions in
acquiring and holding such Senior Obligations.

     (b)  The holders of Senior Obligations may, at any time and from time to
time, without the consent of or notice to the Administrative Agent or the
Lenders, without incurring any liability or responsibility to the Lenders, and
without impairing the rights of holders of Senior Obligations under these
subordination provisions, do any of the following:

          (i)    change the manner, place or terms of payment or extend the time
     of payment of, or renew or alter, Senior Obligations or any instrument
     evidencing the same or any agreement under which Senior Obligations is
     outstanding or secured;

          (ii)   sell, exchange, release or otherwise deal with any property
     pledged, mortgaged or otherwise securing Senior Obligations;

          (iii)  release any Person liable in any manner for the payment of
     Senior Obligations; or

          (iv)   exercise or refrain from exercising any rights against the
     Issuer and any other Person.

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                                  ARTICLE 12

                                 Miscellaneous

     Section 12.01.  Notices. Unless otherwise specified herein, all notices,
requests and other communications to any party under any Financing Document
shall be in writing (including bank wire, facsimile copy or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof (or, in the case of any Lender, in its Administrative
Questionnaire) or such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agents and the Issuer;
provided that if the Issuer or the Administrative Agent gives any notice
changing its address or facsimilie number, a copy of such notice shall be given
by the Issuer or the Administrative Agent, as the case may be, to the Exit
Facility Agent. Each such notice, request or other communication shall be
effective (i) if given by facsimile transmission, when transmitted to the
facsimile number specified in or pursuant to this Section 12.01 and confirmation
of receipt is received, (ii) if given by mail, ten days after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid, or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section 12.01, provided that notices and
requests to the Administrative Agent under Articles 2, 8, 10 or 11 shall not be
effective until received.

     Section 12.02.  No Waiver. No failure or delay by the Lender Parties, or
any of them, in exercising any right, power or privilege under any Financing
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies provided in the
Financing Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.

     Section 12.03.  Expenses; Indemnification.

     (a)  The Issuer shall pay on demand all the actual and reasonable costs,
fees and expenses of(i) the Agents in connection with the negotiation,
preparation, execution and administration of the Financing Documents and any
consents, amendments, waivers or other modifications thereto, or any Default or
alleged Default hereunder; (ii) furnishing all opinions by counsel for the
Issuer and the Guarantors (including any opinions reasonably requested by the
Administrative Agent or Required Lenders as to any legal matters arising
hereunder) and of the Issuer's and the Guarantors' performance of and compliance
with all agreements and conditions on its part to be performed or complied with
under this Agreement and the other Financing Documents, including with respect
to confirming compliance with environmental, insurance and solvency
requirements; (iii) counsel to the Agents (including the reasonable fees and
expenses of O'Melveny & Myers LLP and Davis Polk & Wardwell, special counsel to
the Agents) in connection with the negotiation,

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preparation, execution and administration of the Financing Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by the Issuer or any Guarantor, provided that it
is acknowledged that the Agents have retained O'Melveny & Myers LLP principally
in respect of Bankruptcy Code matters and that after the Closing Date, in the
absence of an Event of Default, there will be only one principal counsel (as
opposed to any local counsel or similar specialized retention) retained by the
Agents, (iv) creating and perfecting Liens in favor of the Collateral Agent on
behalf of Lenders pursuant to any Collateral Document, including filing and
recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums, and reasonable fees, expenses and disbursements of
counsel providing any opinions that any Agent or Required Lenders may reasonably
request in respect of the Collateral Documents or the Liens created pursuant
thereto; (v) Policano & Manzo in connection with the negotiation, preparation
and execution of the Financing Documents and for a period of six months after
the Closing Date in connection with the administration thereof; (vi) the Agents
in connection with the custody or preservation of any of the Collateral; and
(vii) if any Event of Default occurs, any Lender Party, including actual and
reasonable costs, fees and expenses of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom, including the negotiation of any restructuring or "workout"
of the Issuer's obligations under the Financing Documents.

     (b)  In addition to the payment of expenses pursuant to Section 12.03(a),
whether or not the transactions contemplated hereby shall be consummated, the
Issuer agrees to defend (subject to Indemnitee's selection of counsel),
indemnify, pay and hold harmless Agents and Lenders, and the officers,
directors, employees, agents and affiliates of the Agents and Lenders
(collectively called the "Indemnitees"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided, that the Issuer
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise from
the gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction.

     As used herein, "Indemnified Liabilities" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including environmental claims),
costs (including the costs of any investigation, study, sampling, testing,
abatement, clean-up, removal, remediation or other response action necessary to
remove, remediate, clean up or abate any hazardous materials activity), expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws,

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<PAGE>

statues, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and environmental laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of(i) this Agreement or the other Financing Documents or the
transactions contemplated hereby or thereby, including any enforcement of any of
the Financing Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Guaranty
Agreements), or (ii) any environmental claim or any hazardous materials activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of the Issuer and the
Guarantors.

     To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this Section 12.03(b) may be unenforceable in whole or in
part because they are violative of any law or public policy, the Issuer shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them. Without prejudice to the survival of any
other agreement of the Issuer or the Guarantors hereunder, the agreements and
obligations of the Issuer and the Guarantors contained in this Section 12.03 (as
set forth herein and incorporated by reference in the Guaranty Agreements) shall
survive the payment in full of the principal of and interest on the Notes.

     Section 12.04.  Sharing of Set-offs.

     (a)  Each Lender agrees that if it shall, by exercising any right of set-
off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest then due (or overdue) with respect to
the Notes held by it which is greater than the proportion received by any other
Lender in respect of the aggregate amount of principal and interest then due (or
overdue) with respect to the Notes held by such other Lender, the Lender
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Lenders, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Lenders shall be
shared by the Lenders pro rata.

     (b)  Nothing in this Section 12.04 shall impair the right of any Lender to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Issuer or
the relevant Guarantor other than its indebtedness in respect of the Notes.

     (c)  The Issuer agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of set-
off or counterclaim and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor of the Issuer in the
amount of such participation.

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<PAGE>

     Section 12.05.  Amendments and Waivers.

     (a)  Neither this Agreement nor any other Financing Document, nor any terms
hereof or thereof, may be amended, supplemented or modified except in accordance
with the provisions of this Section 12.05.

     (b)  Except as set forth in the succeeding subsections of this Section, the
Required Lenders (or the Administrative Agent with their written consent) may
from time to time (i) enter into written amendments, supplements or
modifications of any Financing Document (which shall not be effective unless
signed by the Issuer if a party thereto and each Guarantor party thereto) for
the purpose of adding any provisions to such Financing Document or changing in
any manner the rights of the parties hereunder or thereunder or (ii) waive, on
such terms and conditions as the Required Lenders (or the Administrative Agent
with their written consent) may specify in such instrument, any of the
requirements of any Financing Document (including any waiver of any of the
conditions precedent set forth in Section 3.01 (except that the acceptance of a
Note by any Lender on the Closing Date shall be deemed to constitute a waiver of
such conditions precedent by such Lender)) or any Default or Event of Default
and its consequences (any such amendment, supplement, modification or waiver, a
"Specified Change"); provided that

          (1)  without the written consent of the then Agents, no Specified
     Change shall amend, modify or waive any provision of Article 9 or any other
     provision of this Agreement governing the rights or obligations of the
     Agents; and

          (2)  without the written consent of all the Lenders, no Specified
     Change shall reduce the percentage specified in the definition of "Required
     Lenders".

     (c)  Without the written consent of the all Lenders, no Specified Change
shall take any action which has the effect of releasing all or substantially all
of the Collateral, releasing Vencor from its obligations under the Vencor
Guaranty Agreement or releasing all or substantially all of the Restricted
Subsidiaries from their obligations under the Subsidiary Guaranty Agreement,
except in each case as expressly provided in this Agreement or any Collateral
Document.

     (d)  Without the written consent of all the Lenders, no Specified Change
shall (i) consent to the assignment or transfer by Vencor or the Issuer of any
of its rights and obligations under the Financing Documents, (ii) include, as
indebtedness under this Agreement, any indebtedness of the Issuer or the
Guarantors other than the Issuer's indebtedness under the Loans or (iii) change
the priority claim status of the Obligations.

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<PAGE>

     (e)  Without the written consent of each Lender directly affected thereby,
no Specified Change shall reduce the amount or extend the scheduled date of
maturity of any Loan, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or amend, modify
or waive any provision of this subsection (f).

     (f)  Without the consent of the Exit Facility Agent, no Specified Change
may effect any change that adversely affects the rights of any holder of Senior
Obligations then outstanding under Section 11.

     (g)  Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Lenders, the Agents, all future holders of the Notes, the Issuer and the
Guarantors.

     Section 12.06.  Successors and Assigns.

     (a)  The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that neither the Issuer nor Vencor may assign or otherwise transfer any
of its rights under this Agreement without the prior written consent of all the
Lenders. Any attempted assignment or transfer in contravention of the foregoing
shall be null and void.

     (b)  Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all of its
Loans. If any Lender grants a participating interest to a Participant, whether
or not upon notice to the Issuer and the Agents, such Lender shall remain
responsible for the performance of its obligations hereunder, and the Issuer and
the Agents shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Financing
Documents. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Issuer and the
Guarantors or any other party under the Financing Documents, including the right
to approve any amendment, modification or waiver of any provision of the
Financing Documents; provided that such participation agreement may provide that
(i) such Lender will not agree to any modification, amendment or waiver of this
Agreement described in Section 10.02(f) without the consent of the Participant
and (ii) such Lender will agree to vote the Participant's participating interest
with respect to any matter requiring a vote of all Lenders under the Security
Agreement as the Participant may direct. The Issuer and Vencor each agrees that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article 10 with respect to its participating
interest. An assignment or other transfer which is not permitted by Section
12.06(c) or 12.06(d) shall be given effect for purposes of this Agreement only
to the extent of a participating interest granted in accordance with this
subsection (b).

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     (c)  Any Lender may at any time on or after the Closing Date assign to one
or more (x) Eligible Assignees or (y) affiliates or Related Funds of such
transferor Lender (each such Eligible Assignee, affiliate or Related Fund being
an "Assignee") all, or a ratable portion of all, of its rights and obligations
under the Financing Documents and the Loans, and such Assignee shall assume such
rights and obligations, with notice to the Issuer and the Administrative Agent;
provided that:

             (i)    any assignment of only a ratable portion of the transferor
     Lender's rights and obligations shall not be less than $5,000,000;

             (ii)   such assignment may be made to an Assignee that is already a
     Lender, or made by a Lender to one of its Related Funds, without regard to
     the foregoing minimum assignment amount;

             (iii)  except in the case of an assignment made pursuant to clause
     (ii), the Administrative Agent shall give its prior written consent to such
     assignment (which consent shall not be unreasonably withheld);

             (iv)   the parties to each such assignment shall execute and
     deliver to the Administrative Agent an Assignment Agreement for its
     acceptance and recording in the Register at least two Business Days prior
     to the proposed effective date of such assignment; and

             (v)    the Assignee under each such assignment (unless it is
     already a Lender) shall deliver to the Administrative Agent a completed
     Administrative Questionnaire.

     When (A) such an Assignment Agreement (together with an Administrative
Questionnaire, if required) has been delivered to the Administrative Agent, (B)
such assignment has been recorded in the Register, and (C) such Assignee has
paid to such transferor Lender an amount equal to the purchase price agreed
between them, such Assignee shall be a Lender party to this Agreement and shall
have all the rights and obligations of a Lender with outstanding Notes as set
forth in such instrument of assignment, and the transferor Lender shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), (x) the Administrative Agent
shall notify the Collateral Agent thereof and (y) the transferor Lender, the
Administrative Agent and the Issuer shall make appropriate arrangements so that,
if required, a new Note complying with the provisions of Section 2.01 is issued
to the Assignee. In connection with any such assignment, the transferor Lender
shall pay to the Administrative Agent an administrative fee for processing such
assignment in the amount of $3,500. If the Assignee is organized under the laws
of a jurisdiction outside the United States, it shall deliver to the Issuer and
the Administrative Agent certification as to exemption from deduction or
withholding of United States federal income taxes in accordance with Section
10.02.

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Anything contained herein to the contrary notwithstanding, the Administrative
Agent shall not be required to accept and record assignments hereunder on more
than one day during each week, and each assigning Lender shall coordinate each
assignment with the Administrative Agent so that the proposed effective date of
such assignment shall be the same date as the effective date of each other
assignment during the relevant week by each other assigning Lender.

     Notwithstanding the foregoing provisions of this clause (c), if at any time
on or after the Closing Date, any holder of a Senior Debt Claim properly
completes and returns to the Custodian in accordance with Section 6.04 of the
Plan of Reorganization a Letter of Transmittal, together with debt instruments
(to the extent such exist) representing their Old Debt Securities and an
executed counterpart to this Agreement, the Custodian shall promptly (i) provide
notice to the Issuer and the Administrative Agent, which notice shall specify
the name of such holder and the principal amount of the Note to be issued to
such holder and (ii) forward the executed counterpart to the Administrative
Agent. Such holder shall, upon making the deliveries referred to in the previous
sentence, become a Lender party to this Agreement and shall have all the rights
and obligations of a Lender with outstanding Notes in a principal amount set
forth in the notice referred to in the previous sentence. The Administrative
Agent shall notify the Collateral Agent of any holder becoming a Lender pursuant
to this paragraph and the Administrative Agent, the Issuer and the Custodian
shall make arrangements so that, if required, a new Note complying with the
provisions of Section 2.01 is issued to such holder. Upon the issuance of a Note
to a holder of Senior Debt Claims pursuant to this paragraph, the principal
amount of the Note held by the Custodian shall be reduced by an amount equal to
the principal amount of the Note issued to such holder. If any such holder of
Senior Debt Claims is organized under the laws of a jurisdiction outside the
United States, it shall deliver to the Issuer and the Administrative Agent
certification as to exemption from deduction or withholding of United States
federal income taxes in accordance with Section 10.02. Promptly upon any holder
of Senior Debt Claims becoming a Lender, such holder shall deliver to the
Administrative Agent a completed Administrative Questionnaire.

     (d) Any Lender may at any time assign all or any portion of its Notes as
security to a Federal Reserve Bank. No such assignment or pledge shall release
the transferor Lender from its obligations hereunder.

     (e) The Administrative Agent (acting, for this purpose only, as agent for
the Issuer) shall maintain at its address at which notices are to be given to it
pursuant hereto a copy of each Assignment Agreement delivered to it pursuant to
subsection (c) of this Section 12.06 and a register for the recordation of the
names and addresses of the Lenders and the principal amounts of their respective
Notes outstanding from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and the Issuer,
the Guarantors, the Agents and the Lenders may treat each Person whose name is
recorded in the Register as a Lender for all

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<PAGE>

purposes of this Agreement. The Register shall be available for inspection by
the Issuer or any Lender Party at any reasonable time and from time to time upon
reasonable prior notice.

     (f) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under Section 10.01 or 10.02
than such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Issuer's prior written
consent or by reason of the provisions of Section 10.01 or 10.02 requiring such
Lender to designate a different Lending Office under certain circumstances or at
a time when the circumstances giving rise to such greater payment did not exist.

     Section 12.07.  Margin Stock. Each of the Lenders represents to the Agents
and each of the other Lenders that it in good faith is not relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.

     Section 12.08.  Governing Law; Submission to Jurisdiction. THIS AGREEMENT,
THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES. SUBJECT TO THE JURISDICTION OF THE COURT, THE ISSUER AND
VENCOR EACH HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO ANY OF THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY. THE ISSUER AND VENCOR EACH IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, 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.

     Section 12.09.  Counterparts; Integration. This Agreement and any amendment
to this Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto were
upon the same instrument. This Agreement (together with the other Financing
Documents) constitutes the entire agreement and understanding among the parties
hereto and

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<PAGE>

supersedes any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof.

     Section 12.10.  Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.10.

     Section 12.11.  Confidentiality. Each Lender Party agrees to keep any non-
public information delivered or made available by Ventas, the Issuer or any
Guarantor to it confidential and to use such information only for the purpose of
evaluating, approving, structuring and administering the Notes; provided that
nothing herein shall prevent any Lender Party from disclosing such information
(i) to Persons employed or retained by such Lender Party who are engaged or
expected to be engaged in evaluating, approving, structuring or administering
the Notes, (ii) to any other Person if reasonably incidental to the
administration of the Notes, (iii) to any other Lender Party, (iv) pursuant to
any subpoena or express direction of any court or other authorized government
agency or as otherwise required by law, (v) upon the request or demand of any
authorized bank regulatory agency, bank examiner or comparable authority, (vi)
which has theretofore been publicly disclosed or is otherwise available to such
Lender Party on a non-confidential basis from a source that is not, to its
knowledge, subject to a confidentiality agreement with Ventas, the Issuer or any
Guarantor, (vii) in connection with any litigation to which any Lender Party or
its subsidiaries or Parent may be a party, (viii) to the extent necessary in
connection with the exercise of any remedy hereunder, (ix) to such Lender
Party's affiliates, legal counsel and independent auditors; (x) to any actual or
proposed Participant or Assignee that has signed a written agreement containing
provisions substantially similar to this Section 12.11 or (xi) any other Person
approved by the Issuer in writing. Any Lender Party that discloses confidential
information to other Persons as contemplated by clause (i), (ii) or (ix) of the
foregoing proviso shall inform such other Persons of the confidential nature of
such information and shall instruct them to keep such information confidential
(except for disclosures permitted by the foregoing proviso). Before any Lender
Party discloses confidential information pursuant to clause (iv) or (vii) of the
foregoing proviso, such Lender Party shall, to the extent permitted by law, use
its best efforts to advise the Issuer, Vencor or Ventas of such proposed
disclosure so that the Issuer, Vencor or Ventas may, in its discretion, seek

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an appropriate protective order. If and to the extent requested to do so by the
Issuer, the Administrative Agent may deliver copies of information supplied to
it pursuant to Section 5.01 to any Person referred to in clause (x) or (xi) of
the foregoing proviso. Anything herein to the contrary notwithstanding, no
Lender Party shall have any liability with respect to disclosure of confidential
information by electronic transmission, including, without limitation,
facsimile, e-mail and internet communication, as long as such Lender Party
exercises reasonable care in effecting such transmission.

                 [Remainder of page intentionally left blank]

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

                     BY:  Vencor Operating, Inc.
                          (to be renamed Kindred Healthcare Operating,
                          Inc.)

                          By:  /s/ Richard A. Lechleiter
                               --------------------------------------
                          Name:    Richard A. Lechleiter
                          Title:   Vice President-Finance,
                                   Corporate Controller & Treasurer

                     BY:  Vencor, Inc.
                          (to be renamed Kindred Healthcare, Inc.)

                          By:  /s/ Richard A. Lechleiter
                               --------------------------------------
                          Name:    Richard A. Lechleiter
                          Title:   Vice President-Finance,
                                   Corporate Controller & Treasurer

                     Notice Address for the Issuer and Vencor:

                                Vencor, Inc.
                                (to be renamed Kindred Healthcare, Inc.)
                                680 South Fourth Street
                                Louisville, KY 40202
                     Attention: General Counsel
                     Facsimile: 502-596-4075
                     Internet:  www.vencor.com, and after Vencor, Inc.'s
                                name change to Kindred Healthcare, Inc.,
                                www.kindredhealthcare.com

                     with a copy to:
                     Address:   Vencor, Inc.
                                (to be renamed Kindred Healthcare, Inc.)
                                680 South Fourth Street
                                Louisville, KY 40202
                     Attention: Assistant Treasurer
                     Facsimile: 502-596-4170

                                      S-1
<PAGE>

                     with a copy to:
                     Address:     Cleary, Gottlieb, Steen & Hamilton
                                  One Liberty Plaza
                                  New York, NY 10006-1470
                     Attention:   Thomas J. Moloney
                     Facsimile:   212-225-3999

                                      S-2
<PAGE>

AGENTS AND LENDERS:

                     MORGAN GUARANTY TRUST COMPANY OF
                     NEW YORK, as Collateral Agent and Administrative
                     Agent

                     By:  /s/ Renee Toft
                          --------------------------------------
                     Name:    Renee Toft
                     Title:   Vice President

                     For Wire Transfers:
                     ABA: 021000238
                     For credit to Loan Unit 8
                     Account No.: 99999090
                     Ref.: Vencor, Inc.

                     Notices Relating to
                     Operations, etc.:
                          J.P. Morgan Services
                          500 Stanton Christiana Road
                          Newark, Delaware 19713
                          Attention: Kira Hindsley
                          Telephone: (302) 634-4264
                          Facsimile: (302) 634-4300

                     All Other Communications:
                          Morgan Guaranty Trust Company of New York
                          60 Wall Street
                          New York, New York 10260
                          Attention: Houston Stebbins
                          Telephone: (212) 648-7875
                          Facsimile: (212) 648-5005

                          and

                          J.P. Morgan Services
                          500 Stanton Christiana Road
                          Newark, Delaware 19713
                          Attention: Sandra Doherty and Linda Palmer
                          Telephone: (302) 634-3316
                          Facsimile: (302) 634-4300

                                      S-3
<PAGE>

                          WELLS FARGO BANK MINNESOTA, N.A., as
                          Custodian

                           By:  /s/ Cory Branden
                               -----------------------------
                           Name:    Cory Branden
                           Title:   Corporate Trust Officer

                                      S-4
<PAGE>

                            INITIAL LENDER SCHEDULE

        ------------------------------------------------------------------------
                         Lender                                    Amount
        ------------------------------------------------------------------------
          Wells Fargo Bank Minnesota, N.A., as Custodian        $300,000,000
        ------------------------------------------------------------------------
<PAGE>

                                                                      SCHEDULE 1

                VENCOR, INC. AND ALL CONSOLIDATED SUBSIDIARIES
                ----------------------------------------------
                             (alphabetical order)

      I.  CORPORATIONS AND L.L.C.S
      ----------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

No.   Name                              State of        Holder of Stock/Ownership          Outstanding       Percentage  Status/(1)/
                                        Organization    Interest                           Equity Interest   Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                               <C>             <C>                                <C>               <C>         <C>
1.    Advanced Infusion Systems, Inc.   CA              Medisave Pharmacies, Inc.          1,000 shares      100              RS
                                                                                           of common
                                                                                           stock, no par
                                                                                           value per share

2.    American X-Rays, Inc.             LA              Medisave Pharmacies, Inc.          2,000 shares      100              RS
                                                                                           of common
                                                                                           stock, no par
                                                                                           value per share

3.    Caribbean Behavioral Health       NV              Interamericana Health Care Group   1,000 shares      100              RS
      Systems, Inc.                                                                        of common
                                                                                           stock, par
                                                                                           value $1.00
                                                                                           per share

4.    C.P.C. of Louisiana, Inc.         LA              Transitional Hospitals            100 shares of      100              RS
                                                        Corporation (NV)                  common stock,
                                                                                          no par value
                                                                                          per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[New York #878492 v8]

(1): EP = Excluded Partnership
     RS = Restricted Subsidiary
     SS = Shell Subsidiary

                                       1
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

No.   Name                         State of        Holder of Stock/Ownership                Outstanding      Percentage  Status/(1)/
                                   Organization    Interest                                 Equity Interest  Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                          <C>             <C>                                      <C>              <C>         <C>
5.    Community Behavioral
      Health System, Inc.          LA              CPC Managed Care Health Services, Inc.   1,000 shares     100                RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

6.    Community Psychiatric
      Centers of Arkansas, Inc.    AR              Transitional Hospitals Corporation (NV)  1,000 shares     100                RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share
7.    Community Psychiatric
      Centers of California        CA              Transitional Hospitals Corporation (NV)  1,518 shares     100                RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $10.00
                                                                                            per share

8.    Community Psychiatric
      Centers of Florida, Inc.     FL              Transitional Hospitals Corporation (NV)  7,500 shares     100                RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

9.    Community Psychiatric
      Centers of Idaho, Inc.       ID              Transitional Hospitals Corporation (NV)  5,000 shares     100                RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $10.00
                                                                                            per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[New York #878492 v8]

(1): EP = Excluded Partnership
     RS = Restricted Subsidiary
     SS = Shell Subsidiary

                                       2
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
No.   Name                           State of       Holder of Stock/Ownership                Outstanding      Percentage  Status/1/
                                     Organization   Interest                                 Equity Interest  Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                             <C>            <C>                                      <C>              <C>         <C>
10.  Community Psychiatric
     Centers of Indiana, Inc.        IN             Transitional Hospitals Corporation (NV)  1,000 shares     100             RS
                                                                                             stock, par
                                                                                             value $1.00
                                                                                             per share
11.  Community Psychiatric
     Centers of Kansas, Inc.         KS             Transitional Hospitals Corporation (NV)  1,000 shares     100             RS
                                                                                             of common
                                                                                             stock, par
                                                                                             value $1.00
                                                                                             per share
12.  Community Psychiatric
     Centers of Mississippi, Inc.    MS             Transitional Hospitals Corporation (NV)  1,000 shares     100             RS
                                                                                             of common
                                                                                             stock, par
                                                                                             value $1.00
                                                                                             per share

13.  Community Psychiatric
     Centers of Missouri, Inc.       MO             Transitional Hospitals Corporation (NV)  5,000 shares     100             RS
                                                                                             of common
                                                                                             stock, par
                                                                                             value $10.00
                                                                                             per share

14.  Community Psychiatric
     Centers of North Carolina, Inc. NC             Transitional Hospitals Corporation (NV)  1,000 shares     100             RS
                                                                                             of common
                                                                                             stock, par
                                                                                             value $1.00
                                                                                             per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[New York #878492 v8]

(1): EP = Excluded Partnership
     RS = Restricted Subsidiary
     SS = Shell Subsidiary

                                       3
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                               Outstanding
No.   Name                                State of       Holder of Stock/Ownership Interest    Equity         Percentage Status/(1)/
                                          Organization                                         Interest        Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                                 <C>            <C>                                   <C>            <C>        <C>
15.   Community Psychiatric Centers of    OK             Transitional Hospitals Corporation    1,000 shares   100               RS
        Oklahoma, Inc.                                     (NV)                                of common
                                                                                               stock, par
                                                                                               value $1.00
                                                                                               per share

16.   Community Psychiatric Centers of    UT             Transitional Hospitals Corporation    1,000 shares   100               RS
        Utah, Inc.                                         (NV)                                of common
                                                                                               stock, par
                                                                                               value $1.00
                                                                                               per share

17.   Community Psychiatric Centers       CA             Community Psychiatric Centers of      2,500 shares   100               RS
        Properties Incorporated                            California                          of common
                                                                                               stock, par
                                                                                               value $10.00
                                                                                               per share

18.   Community Psychiatric Centers       OK             Transitional Hospitals Corporation    1,000 shares   100               RS
        Properties of Oklahoma, Inc.                       (NV)                                of common
                                                                                               stock, par
                                                                                               value $1.00
                                                                                               per share

19.   Community Psychiatric Centers       TX             Transitional Hospitals Corporation    1,000 shares   100               RS
        Properties of Texas, Inc.                          (NV)                                of common
                                                                                               stock, par
                                                                                               value $1.00
                                                                                               per share
====================================================================================================================================
</TABLE>

  [New York #878492 v8]

  (1):  EP=Excluded Partnership
        RS=Restricted Subsidiary
        SS=Shell Subsidiary

                                       4
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                            Outstanding
No.   Name                               State of       Holder of Stock/Ownership Interest  Equity           Percentage  Status/(1)/
                                         Organization                                       Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                                <C>            <C>                                 <C>              <C>         <C>
20.   Community Psychiatric Centers      UT             Transitional Hospitals Corporation  1,000 shares     100             RS
        Properties of Utah, Inc.                          (NV)                              of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

21.   Cornerstone Insurance Company      CI             Vencor, Inc.                        1,000,000        100         Cornerstone
                                                                                            shares of
                                                                                            common stock,
                                                                                            par value
                                                                                            $1.00 per
                                                                                            share

22.   Courtland Gardens Health Center,   CT             PersonaCare of Connecticut, Inc.    1,000 shares     100             RS
        Inc.                                                                                of common
                                                                                            stock, no
                                                                                            par value
                                                                                            per share

23.   CPC Investment Corp.               CA             Community Psychiatric Centers       5,000 shares     100             RS
                                                          Properties Incorporated           of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

24.   CPC Managed Care Health Services,  DE             Transitional Hospitals Corporation  1,000 shares     100            RS
        Inc.                                              (NV)                              of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share
====================================================================================================================================
</TABLE>

  [New York #878492 v8]

  (1):  EP=Excluded Partnership
        RS=Restricted Subsidiary
        SS=Shell Subsidiary

                                       5
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                            Outstanding
No.   Name                               State of       Holder of Stock/Ownership Interest  Equity           Percentage  Status/(1)/
                                         Organization                                       Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                                <C>            <C>                                 <C>              <C>         <C>
25.   CPC of Georgia, Inc.               GA             Transitional Hospitals              500 shares of    100             RS
                                                          Corporation (NV)                  common stock,
                                                                                            par value
                                                                                            $1.00 per share

26.     CPC Properties of Arkansas,      AR             Transitional Hospitals              1,000 shares     100             RS
          Inc.                                            Corporation (NV)                  of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

27.     CPC Properties of Illinois,      IL             Community Psychiatric Centers       1,000 shares     100             RS
          Inc.                                            Properties Incorporated           of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

28.     CPC Properties of Indiana,       IN             Transitional Hospitals              1,000 shares     100             RS
          Inc.                                            Corporation (NV)                  of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

29.     CPC Properties of Kansas,        KS             Transitional Hospitals              1,000 shares     100             RS
          Inc.                                            Corporation (NV)                  of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share
====================================================================================================================================
</TABLE>

  [New York #878492 v8]

  (1):  EP=Excluded Partnership
        RS=Restricted Subsidiary
        SS=Shell Subsidiary

                                       6
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                               Outstanding
No.  Name                                 State of     Holder of Stock/Ownership Interest      Equity       Percentage   Status/(1)/
                                          Organization                                         Interest     Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                    <C>          <C>                                      <C>           <C>       <C>
30.  CPC Properties of Louisiana, Inc.      LA           Transitional Hospitals Corporation (NV)  1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share

31.  CPC Properties of Mississippi, Inc.    MS           Transitional Hospitals Corporation (NV)  1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share

32.  CPC Properties of Missouri, Inc.       MO           Community Psychiatric Centers Properties 1,500 shares  100             RS
                                                               Incorporated                       of common
                                                                                                  stock, par
                                                                                                  value $10.00
                                                                                                  per share

33.  CPC Properties of North Carolina, Inc. NC           Transitional Hospitals Corporation (NV)  1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share

34.  First Rehab, Inc.                      DE           Medisave Pharmacies, Inc.                1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1): EP=Excluded Partnership
     RS=Restricted Subsidiary
     SS=Shell Subsidiary

                                       7
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                  Outstanding
No.  Name                                   State of     Holder of Stock/Ownership Interest       Equity      Percentage Status/(1)/
                                            Organization                                          Interest    Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                    <C>          <C>                                      <C>           <C>        <C>
35.  Florida Hospital Properties, Inc.      FL           Transitional Hospitals Corporation (NV)  7,500 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share

36.  Health Care Holdings, Inc.             DE           Vencare Rehab Services, Inc.             1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $.001
                                                                                                  per share

37.  Health Care Technology, Inc.           DE           Health Care Holdings, Inc.               1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $.001
                                                                                                  per share

38.  Helian ASC of Northridge, Inc.         CA           Helian Health Group, Inc.                100,000 shares100             RS
                                                                                                  of common
                                                                                                  stock, no par
                                                                                                  value per share

39.  Helian Health Group, Inc.              DE           Vencare Rehab Services, Inc.             1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $.01 per
                                                                                                  share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1): EP=Excluded Partnership
     RS=Restricted Subsidiary
     SS=Shell Subsidiary

                                       8
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                 Outstanding
No.  Name                                   State of     Holder of Stock/Ownership Interest      Equity       Percentage Status/(1)/
                                            Organization                                         Interest     Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                    <C>          <C>                                      <C>           <C>        <C>
40.  Helian Recovery Corporation            CA           Helian Health Group, Inc.                100 shares of 100             RS
                                                                                                  common stock,
                                                                                                  no par value
                                                                                                  per share

41.  Homestead Health Center, Inc.          CT           PersonaCare of Connecticut, Inc.         1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, no par
                                                                                                  value per share

42.  Horizon Healthcare Services, Inc.      GA           Vencare Rehab Services, Inc.             1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $10.00
                                                                                                  per share

43.  Interamericana Health Care Group       NV           Transitional Hospitals Corporation (NV)  1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share

44.  J. B. Thomas Hospital, Inc.            MA           Transitional Hospitals Corporation (DE)  1,000 shares  100             RS
                                                                                                  of common
                                                                                                  stock, par
                                                                                                  value $1.00
                                                                                                  per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1): EP=Excluded Partnership
     RS=Restricted Subsidiary
     SS=Shell Subsidiary

                                       9
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                          Outstanding
No.  Name                                   State of                                      Equity             Percentage
                                            Oragnization  Holder of Stock/Ownership       Interest           Interest    Status/(1)/
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>                             <C>                <C>
45.   Lafayette Health Care Center, Inc.     GA           PersonaCare, Inc.               1,000 shares       100                  RS
                                                                                          of common
                                                                                          stock, no par
                                                                                          value per share

46.   MedAssure, L.L.C.                      KY           Vencare, Inc.                   N/A                50                   EP

47.   MedEquities, Inc.                      CA           Helian ASC of Northridge, Inc.  10,000 shares      100                  RS
                                                                                          of common
                                                                                          stock, no par
                                                                                          value per share

48.   Medisave of Tennessee, Inc.            DE           Medisave Pharmacies, Inc.       1,000 shares       100                  RS
                                                                                          of common
                                                                                          stock, no par
                                                                                          value per share

49.   Medisave Pharmacies, Inc.              DE           Vencor Operating, Inc.          10 shares of       100                  RS
                                                                                          common stock,
                                                                                          par value
                                                                                          $100.00 per
                                                                                          share
====================================================================================================================================
</TABLE>

[New York#878492v8]

(1):  EP=Excluded Partnership
      RS=Restricted Subsidiary
      SS=Shell Subsidiary

                                       10
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                          Outstanding
No.  Name                                   State of                                      Equity           Percentage
                                            Oragnization  Holder of Stock/Ownership       Interest         Interest      Status/(1)/
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>                             <C>              <C>           <C>

50.   Old Orchard Hospital, Inc.            IL            Transitional Hospitals          100 shares of    100                  RS
                                                           Corporation  (NV)              common stock,
                                                                                          par value
                                                                                          $10.00 per
                                                                                          share

51.   Palo Alto Surgecenter Corporation     CA            Helian Health Group, Inc.       100 shares of    100                  RS
                                                                                          common stock,
                                                                                          no par value
                                                                                          per share

52.   Peachtree-Parkwood Hospital, Inc.     GA            CPC of Georgia, Inc.            200 shares of    100                  RS
                                                                                          common stock,
                                                                                          par value
                                                                                          $1.00 per share

53.   PersonaCare, Inc.                     DE            Vencare Rehab Services, Inc.    995 shares of    100                  RS
                                                                                          common stock,
                                                                                          par value $.01
                                                                                          per share

54.   PersonaCare Living Center of          DE            PersonaCare, Inc.               1,000 shares     100                  RS
       Clearwater, Inc.                                                                   of common
                                                                                          stock, par
                                                                                          value $.001
                                                                                          per share
====================================================================================================================================
</TABLE>

[New York#878492v8]

(1):  EP=Excluded Partnership
      RS=Restricted Subsidiary
      SS=Shell Subsidiary

                                       11
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                          Outstanding
No.  Name                                   State of                                      Equity             Percentage
                                            Oragnization  Holder of Stock/Ownership       Interest           Interest    Status/(1)/
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>                             <C>                <C>         <C>
55.   PersonaCare of Bradenton, Inc.        DE            PersonaCare, Inc.               1,000 shares       100                RS
                                                                                          of common
                                                                                          stock, par
                                                                                          value $.001
                                                                                          per share

56.   PersonaCare of Clearwater, Inc.       DE            PersonaCare, Inc.               1,000 shares       100                RS
                                                                                          of common
                                                                                          stock, par
                                                                                          value $.001
                                                                                          per share

57.   PersonaCare of Connecticut, Inc.      CT            PersonaCare, Inc.               1,000 shares       100                RS
                                                                                          of common
                                                                                          stock, no par
                                                                                          value per share

58.   PersonaCare of Georgia, Inc.          DE            PersonaCare, Inc.               1,000 shares       100                RS
                                                                                          of common
                                                                                          stock, par
                                                                                          value $.001
                                                                                          per share

59.   PersonaCare of Huntsville, Inc.       DE            PersonaCare, Inc.               1,000 shares       100                RS
                                                                                          of common
                                                                                          stock, par
                                                                                          value $.001
                                                                                          per share
====================================================================================================================================
</TABLE>

[New York#878492v8]

(1):  EP=Excluded Partnership
      RS=Restricted Subsidiary
      SS=Shell Subsidiary

                                       12
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Outstanding
No.  Name                                  State of        Holder of Stock/            Equity                Percentage  Status/(1)/
                                           Organization    Ownership Interest          Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                   <C>             <C>                         <C>                   <C>         <C>
60.  PersonaCare of Little Rock, Inc.      DE              PersonaCare, Inc.           100 shares of         100             RS
                                                                                       common stock,
                                                                                       par value
                                                                                       $.001 per share

61.  PersonaCare of Ohio, Inc.             DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

62.  PersonaCare of Owensboro, Inc.        DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

63.  PersonaCare of Pennsylvania, Inc.     DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

64.  PersonaCare of Pompano East, Inc.     DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1): EP= Excluded Partnership
     RS= Restricted Subsidiary
     SS= Shell Subsidiary

                                       13
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Outstanding
No.  Name                                  State of        Holder of Stock/            Equity                Percentage  Status/(1)/
                                           Organization    Ownership Interest          Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                   <C>             <C>                         <C>                   <C>         <C>
65.  PersonaCare of Pompano West, Inc.     DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

66.  PersonaCare of Reading, Inc.          DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

67.  PersonaCare of San Antonio, Inc.      DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

68.  PersonaCare of San Pedro, Inc.        DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

69.  PersonaCare of Shreveport, Inc.       DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1): EP= Excluded Partnership
     RS= Restricted Subsidiary
     SS= Shell Subsidiary

                                       14
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Outstanding
No.  Name                                  State of        Holder of Stock/            Equity                Percentage  Status/(1)/
                                           Organization    Ownership Interest          Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>                                   <C>             <C>                         <C>                   <C>         <C>

70.  PersonaCare of St. Petersburg, Inc.   DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

71.  PersonaCare of Warner Robins, Inc.    DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

72.  PersonaCare of Wisconsin, Inc.        DE              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.001
                                                                                       per share

73.  PersonaCare Properties, Inc.          GA              PersonaCare, Inc.           1,000 shares          100             RS
                                                                                       of common
                                                                                       stock, par
                                                                                       value $.01 per
                                                                                       share

74.  ProData Systems, Inc.                 AL              Vencor Home Care and        333.33 shares         100             RS
                                                            Hospice Indiana            of common
                                                            Partnership                stock, par
                                                                                       value $1.00
                                                                                       per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1): EP= Excluded Partnership
     RS= Restricted Subsidiary
     SS= Shell Subsidiary

                                       15
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                           Outstanding
No.  Name                             State of     Holder of Stock/Ownership Interest      Equity           Percentage  Status/(1)/
                                      Organization                                         Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>                                    <C>               <C>         <C>
75.  Recovery Inns of America, Inc.   CA           Helian Recovery Corporation             2,500 shares     100                RS
                                                                                           of common
                                                                                           stock, no par
                                                                                           value per share

76.  Respiratory Care Services, Inc.  DE           Vencare Rehab Services, Inc.            1,000 shares     100                RS
                                                                                           of common
                                                                                           stock, par
                                                                                           value $.01 per
                                                                                           share

77.  Stamford Health Facilities, Inc. CT           PersonaCare of Connecticut, Inc.        1,000 shares     100                RS
                                                                                           of common
                                                                                           stock, no par
                                                                                           value per share

78.  THC - Chicago, Inc.              IL           Transitional Hospitals Corporation (DE) 1,000 shares     100                RS
                                                                                           of common
                                                                                           stock, par
                                                                                           value $1.00
                                                                                           per share

79.  THC - Hollywood, Inc.            FL           Transitional Hospitals Corporation (DE) 1,000 shares     100                RS
                                                                                           of common
                                                                                           stock, par
                                                                                           value $1.00
                                                                                           per share
====================================================================================================================================
</TABLE>

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       16
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                           Outstanding
No.  Name                             State of     Holder of Stock/Ownership Interest      Equity           Percentage  Status/(1)/
                                      Organization                                         Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>                                    <C>               <C>         <C>
80.  THC - Houston, Inc.              TX           Transitional Hospitals Corporation (DE) 1,000 shares     100              RS
                                                                                           of common
                                                                                           stock, par
                                                                                           value $1.00
                                                                                           per share

81.  THC - Minneapolis, Inc.          MN           Transitional Hospitals Corporation (DE)  1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

82.  THC - North Shore, Inc.          IL           THC - Chicago, Inc.                      1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

83.  THC - Orange County, Inc.        CA           Transitional Hospitals Corporation (DE)  1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

84.  THC - San Diego, Inc.            CA           Transitional Hospitals Corporation (DE)  1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share
====================================================================================================================================
</TABLE>

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       17
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                           Outstanding
No.  Name                             State of     Holder of Stock/Ownership Interest      Equity           Percentage  Status/(1)/
                                      Organization                                         Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>                                    <C>               <C>         <C>
85.  THC - Seattle, Inc.              WA           Transitional Hospitals Corporation (DE)  1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $1.00
                                                                                            per share

86.  TheraTx Health Services, Inc.    DE           Vencare Rehab Services, Inc.             1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $.001
                                                                                            per share

87.  TheraTx Healthcare Management,
     Inc.                             DE           Vencare Rehab Services, Inc.             1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $.001
                                                                                            per share

88.  TheraTx Management Services,
     Inc.                             CA           Vencare Rehab Services, Inc.             10,000 shares   100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $0.01
                                                                                            per share

89.  TheraTx Medical Supplies, Inc.   DE           Vencare Rehab Services, Inc.             1,000 shares    100              RS
                                                                                            of common
                                                                                            stock, par
                                                                                            value $.001
                                                                                            per share
====================================================================================================================================
</TABLE>

(1)  EP= Excluded Partnership
     RS= Restricted Subsidiary
     SS= Shell Subsidiary

                                       18
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
No.             Name                                                     State of        Holder of Stock/Ownership Interest
                                                                         Organization
------------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                                                     <C>             <C>
90.             TheraTx Rehabilitation Services, Inc.                    DE              TheraTx Health Services, Inc.

91.             TheraTx Staffing, Inc.                                   IL              Vencare Rehab Services, Inc.

92.             Transitional Hospitals Corporation                       NV              Vencor Operating, Inc.

93.             Transitional Hospitals Corporation                       DE              Transitional Hospitals Corporation (NV)

94.             Transitional Hospitals Corporation of Indiana, Inc.      IN              Transitional Hospitals Corporation (DE)

====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
====================================================================================================================================
Outstanding
Equity                Percentage         Status/(1)/
Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>               <C>
1,000 shares          100                RS
of common
stock, par
value $.001
per share

1,000 shares          100                RS
of common
stock, no par
value per share

100 shares of         100                RS
common stock,
par value
$1.00 per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share  .

1,000 shares          100                RS
of common
stock, par
value $1.00
per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       19
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
No.             Name                                                     State of        Holder of Stock/Ownership Interest
                                                                         Organization
------------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                                                     <C>             <C>
95.             Transitional Hospitals Corporation of Louisiana, Inc.    LA              Transitional Hospitals Corporation (DE)

96.             Transitional Hospitals Corporation of Michigan, Inc.     MI              Transitional Hospitals Corporation (NV)

97.             Transitional Hospitals Corporation of New Mexico, Inc.   NM              Transitional Hospitals Corporation (DE)

98.             Transitional Hospitals Corporation of Nevada, Inc.       NV              Transitional Hospitals Corporation (DE)

99.             Transitional Hospitals Corporation of Tampa, Inc.        FL              Transitional Hospitals Corporation (DE)

====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
====================================================================================================================================
Outstanding
Equity                Percentage         Status/(1)/
Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>               <C>
1,000 shares          100                RS
of common
stock, par
value $1.00
per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       20
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
No.             Name                                                     State of        Holder of Stock/Ownership Interest
                                                                         Organization
------------------------------------------------------------------------------------------------------------------------------------

<S>             <C>                                                     <C>             <C>
100.            Transitional Hospitals Corporation of Texas, Inc.        TX              Transitional Hospitals Corporation (DE)

101.            Transitional Hospitals Corporation of Wisconsin, Inc.    WI              Transitional Hospitals Corporation (DE)

102.            Tucker Nursing Center, Inc.                              GA              PersonaCare, Inc.

103.            Tunstall Enterprises, Inc.                               GA              Horizon Healthcare Services, Inc.

104.            VC - OIA, Inc.                                           AZ              Helian Health Group, Inc.

====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
====================================================================================================================================
Outstanding
Equity                Percentage         Status/(1)/
Interest              Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>               <C>
1,000 shares          100                RS
of common
stock, par
value $1.00
per share

1,000 shares          100                RS
of common
stock, par
value $1.00
per share

500 shares of         100                RS
common stock,
par value
$1.00 per share

100 shares of         100                RS
common stock,
par value
$1.00 per share

1,000 shares          100                RS
of common
stock, no par
value per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       21
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Outstanding
No.    Name                             State of         Holder of Stock/Ownership Interest    Equity        Percentage  Status/(1)/
                                        Organization                                           Interest      Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                              <C>              <C>                                   <C>           <C>         <C>
105.   VC - TOHC, Inc.                  AZ               Helian Health Group, Inc.             1,000 shares  100           RS
                                                                                               of common
                                                                                               stock, par
                                                                                               value $.01
                                                                                               per share

106.   VC - WM, Inc.                    FL               Vencare Rehab Services, Inc.          700 shares    100           RS
                                                                                               of common
                                                                                               stock, par
                                                                                               value $.01
                                                                                               per share

107.   Vencare, Inc.                    DE               Vencor Operating, Inc.                100 shares    100           RS
                                                                                               of common
                                                                                               stock, par
                                                                                               value $.25
                                                                                               per share

108.   Vencare Rehab Services, Inc./1/  DE               Vencor Operating, Inc.                1,000 shares  100           RS
                                                                                               of common
                                                                                               stock, par
                                                                                               value $.001
                                                                                               per share

109.   Vencor, Inc.                     DE               N/A                                   N/A           N/A           Parent
                                                                                                                           Guarantor
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

________________________

/1/       Formerly TheraTX, Inc.
[New York #878492 v8]

(1): EP=Excluded Partnership
     RS=Restricted Subsidiary
     SS=Shell Subsidiary

                                       22
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Outstanding
No.    Name                             State of         Holder of Stock/Ownership Interest  Equity          Percentage  Status/(1)/
                                        Organization                                         Interest        Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                              <C>              <C>                                 <C>             <C>           <C>

110.   Vencor Facility Services, Inc.   DE               Vencor Operating, Inc.              100 shares of   100             RS
                                                                                             common stock
                                                                                             par value $.25
                                                                                             per share

111.   Vencor Holdings, L.L.C.          DE               Vencor Operating, Inc.                              100             RS

112.   Vencor Home Care Services, Inc.  DE               Vencor Operating, Inc.              100 shares of   100             RS
                                                                                             common stock,
                                                                                             par value $.25
                                                                                             per share

113.   Vencor Hospice, Inc.             KY               Vencare, Inc.                       60 shares of    100             RS
                                                                                             common stock,
                                                                                             par value $.25
                                                                                             per share

114.   Vencor Hospitals East, L.L.C.    DE               Vencor Operating, Inc.              N/A             100             RS

115.   Vencor Hospitals West, L.L.C.    DE               Vencor Operating, Inc.              N/A             100             RS

116.   Vencor Insurance Holdings, Inc.  DE               Vencor Operating, Inc.              100 shares of   100             RS
                                                                                             common stock,
                                                                                             par value $.25
                                                                                             Per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[New York #878492 v8]

(1): EP = Excluded Partnership
     RS = Restricted Subsidiary
     SS = Shell Subsidiary

                                       23
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Outstanding
No.    Name                                      State of       Holder of Stock/Ownership    Equity          Percentage  Status/(1)/
                                                 Organization   Interest                     Interest        Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                                       <C>            <C>                          <C>             <C>         <C>
117.   Vencor Investment Company                 DE             Vencor Operating, Inc.       100 shares of   100         RS
                                                                                             common stock,
                                                                                             par value $.25
                                                                                             per share

118.   Vencor Nevada, L.L.C.                     DE             Vencor Operating, Inc.       N/A             100         RS

119.   Vencor Nursing Centers Central, L.L.C.    DE             Vencor Nursing Centers       N/A             100         RS
                                                                Limited Partnership

120.   Vencor Nursing Centers East, L.L.C.       DE             Vencor Operating, Inc.       N/A             100         RS

121.   Vencor Nursing Centers North, L.L.C.      DE             Vencor Operating, Inc.       N/A             100         RS

122.   Vencor Nursing Centers South, L.L.C.      DE             Vencor Operating, Inc.       N/A             100         RS

123.   Vencor Nursing Centers West, L.L.C.       DE             Vencor Operating, Inc.       N/A             100         RS

124.   Vencor Operating, Inc.                    DE             Vencor, Inc.                 100 shares of   100         Issuer/
                                                                                             common stock,               Borrower
                                                                                             par value $.25
                                                                                             per share

125.   Vencor Pediatric Care, Inc.               DE             Vencor Operating, Inc.       100 shares of   100         RS
                                                                                             common stock,
                                                                                             par value $.25
                                                                                             per share
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[New York #878492 v8]

(1):  EP = Excluded Partnership
      RS = Restricted Subsidiary
      SS = Shell Subsidiary

                                       24
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                           Outstanding
                                         State of                                          Equity           Percentage
No.    Name                              Organization  Holder of Stock/Ownership Interest  Interest         Interest    Status/(1)/
------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                               <C>           <C>                                 <C>              <C>         <C>
126.   Vencor Provider Network, Inc.     DE            Vencor Insurance Holdings, Inc.     100 shares of    100                RS
                                                                                           common stock,
                                                                                           par value $.25
                                                                                           per share

127.   Ventech Systems, Inc.             DE            Vencor Operating, Inc.              100 shares of    100                RS
                                                                                           common stock,
                                                                                           par value $.25
                                                                                           per share
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       25
<PAGE>

       II.  PARTNERSHIPS
       -----------------

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                           Outstanding
No.    Name                              State of      Holder of Stock/Ownership Interest  Equity           Percentage  Status/(1)/
                                         Organization                                      Interest         Interest
------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                               <C>           <C>                                 <C>              <C>         <C>
128.   California Respiratory Care       CA            Advanced Infusion Systems, Inc.     N/A              51(GP)            EP
         Partnership

129.   Foothill Nursing Company          CA            Vencor Operating, Inc.              N/A              50(GP)            EP
         Partnership

130.   Northridge Surgery Center         CA            MedEquities, Inc.                   N/A              43(GP)            EP
       Development, Ltd.

131.   Northridge Surgery Center, Ltd.   CA            Northridge Surgery Center           N/A              38(GP)            EP
                                                        Development, Ltd.

                                                       Helian Health Group, Inc.           N/A              13.5(LP)

                                                       Helian ASC of Northridge, Inc.      N/A              13(GP),
                                                                                                            6(LP)

132.   Pharmaceutical Infusion Therapy   CA            Advanced Infusion Systems, Inc.     N/A              50.99(GP)         EP

133.   Recovery Inn of Menlo Park, L.P.  CA            Recovery Inns of America, Inc.      N/A              12(LP)            EP
                                                                                                            58(GP),
                                                       Helian Recovery Corporation         N/A              27.6(LP)

134.   Stamford Health Associates, L.P.  CT            Stamford Health Facilities, Inc.    N/A              1(GP)             SS

                                                       PersonaCare, Inc.                   N/A              99(LP)

135.   Vencor Home Care and Hospice      IN            Vencor Home Care Services, Inc.     N/A              50(GP)            RS
         Indiana Partnership
                                                       Vencor Hospice, Inc.                N/A              50(GP)
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       26
<PAGE>

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                           Outstanding
No.    Name                              State of      Holder of Stock/Ownership Interest  Equity           Percentage  Status/(1)/
                                         Organization                                      Interest         Interest
-----------------------------------------------------------------------------------------------------------------------------------
<S>    <C>                               <C>           <C>                                 <C>              <C>         <C>
136.   Vencor Hospitals Limited          DE            Vencor Nursing Centers Limited      N/A              1(GP)             RS
         Partnership                                     Partnership

                                                       Vencor Operating, Inc.              N/A              1(GP),
                                                                                           N/A              98(LP)

137.   Vencor Nursing Centers Central    DE            Vencor Nursing Centers Limited      N/A              1(GP)             RS
         Limited Partnership                             Partnership

                                                       Vencor Operating, Inc.              N/A              1(GP),
                                                                                                            98(LP)

138.   Vencor Nursing Centers Limited    DE            Vencor Hospitals Limited            N/A              1(GP)             RS
         Partnership                                     Partnership

                                                       Vencor Operating, Inc.              N/A              1(GP),
                                                                                                            98(LP)

139.   Visiting Nurse Advanced Infusion  CA            Advanced Infusion Systems, Inc.     N/A              50.01(GP)         EP
         Systems - Anaheim

140.   Visiting Nurse Advanced Infusion  CA            Advanced Infusion Systems, Inc.     N/A              51.01(GP)         EP
         Systems - Colton

141.       Visiting Nurse Advanced       CA            Advanced Infusion Systems, Inc.     N/A              51.01(GP)         EP
             Infusion Systems -
             Newbury Park
====================================================================================================================================
</TABLE>

[New York #878492 v8]

(1):  EP= Excluded Partnership
      RS= Restricted Subsidiary
      SS= Shell Subsidiary

                                       27
<PAGE>

                                                                      SCHEDULE 2

                         EXISTING AFFILIATE AGREEMENTS
                         -----------------------------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
        FACILITY                           AGREEMENT                        RELEVANT AFFILIATE
---------------------------------------------------------------------------------------------------------
<S>                       <C>                                          <C>
          926             Management Agreement dated as of February         Hillhaven-MSC Partnership
Nineteenth Avenue HCC     29, 1988, by and between Hillhaven, Inc.
2043 - 19/th/ Avenue      (whose obligations have been assumed by
San Francisco, CA         Vencor Nursing Centers West, LLC), and
                          Hillhaven-MSC Partnership, a California
                          general partnership
---------------------------------------------------------------------------------------------------------
          949             Management Agreement dated as of 1985, by         Ledgewood Healthcare
Ledgewood Rehab. & Nsg.   and between The Hillhaven Corporation             Corporation
87 Herrick Street         (whose obligations have been assumed by
Beverly, MA               Vencor Nursing Centers East, LLC), and
                          Ledgewood Health Care Corporation, a
                          Massachusetts corporation
---------------------------------------------------------------------------------------------------------
          983             Long Term Care Facility Management                Fox Hill Village Partnership
Clark House Nrsg. Ctr.    Agreement dated as of July 1, 1990, by and
30 Longwood Drive         between First Healthcare Corporation
Westwood, MA              (whose obligations have been assumed by
                          Vencor Nursing Centers East, LLC), and Fox
                          Hill Village Partnership, a Massachusetts
                          general partnership
---------------------------------------------------------------------------------------------------------
          995             Agreement to Provide Management Services          Starr Farm Partnership
Starr Farm Nursing        to a Health Care Facility dated as of
 Center                   December 30, 1986, by and between First
98 Starr Farm Road        Healthcare Corporation (whose obligations
Burlington, VT            have been assumed by Vencor Nursing
                          Centers East, LLC), and Starr Farm
                          Partnership, a Vermont general partnership
---------------------------------------------------------------------------------------------------------
       Corporate          Shareholders and Registration Rights              Atria Communities, Inc.
                          Agreement dated as of September 15, 1998
                          among Atria Communities, Inc., Kapson
                          Senior Quarters Corp., Vencor, Inc.,
                          Vencor Holdings, LLC and the management
                          shareholders party thereto
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       1
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------
<S>                       <C>                                               <C>
       Corporate          Sale and Purchase Agreement dated February        HealthEssentials Solutions,
                          25, 1999 between NPPA of America, Inc.,           Inc.
                          HealthEssentials Solutions, Inc.; Harris
                          W. Miers, Jr., Gregory P. Guidroz, Lana S.
                          Ralston, Robert B. Teague and Vencor
                          Operating, Inc. (continuing registration
                          and preemptive rights)
---------------------------------------------------------------------------------------------------------
       Corporate          $500,000 Promissory Note made by                  HealthEssentials Solutions,
                          HealthEssentials Solutions, Inc. in favor         Inc.
                          of Vencor Operating, Inc.
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                                                           SCHEDULE 3

                                              OWNED PROPERTIES
                                              ----------------

State/
------
Facility #: Facility Name:                      County, City, State Location:      Facility Type:    Index #:
----------- --------------                      -----------------------------      --------------    --------
<S>         <C>                                 <C>                                <C>               <C>
CA#212      Woodside Nursing Center             San Luis Obispo, San Luis          Nursing center    DIP#1
                                                Obispo, CA

CA#4-608/   Vencor Hospital - Sacramento        Sacramento, Folsom, CA             Hospital          DIP#2
 4-609

CA#4-695    Vencor Hospital - Los Angeles       Los Angeles, Los Angeles, CA       Hospital          DIP#3

FL#610      Boca Raton Rehabilitation Center    Palm Beach, Boca Raton, FL         Nursing center    DIP#4

TX#4-610    Vencor Hospital - Dallas            Dallas, Dallas, TX                 Hospital          DIP#5

TX#4-649    Vencor Hospital - Arlington         Tarrant, Arlington, TX             Hospital          DIP#6

WA#160      First Health Care Center            King, Seattle, WA                  Nursing center    DIP#7

WA#4-643    Vencor Hospital - Seattle           King, Seattle, WA                  Hospital          DIP#8

WI#4-663    Vencor Hospital - Milwaukee         Milwaukee, Greenfield, WI          Hospital          DIP#9

FL#115      Rehab Center of the Palm Beaches    Palm Beach, Palm Beach, FL         Nursing center    FP#1

ID#217      Caldwell Care Center                Canyon, Caldwell, Idaho            Nursing center    FP#2

KY#699      Headquarters Building               Jefferson, Louisville, KY          Headquarters      FP#3

KY#699      OK Storage Building                 Jefferson, Louisville, KY          Storage facility  FP#4
</TABLE>
<PAGE>

                                                                      SCHEDULE 4

  INITIAL MASTER LEASE PROPERTIES; OTHER LEASED PROPERTY; THIRD PARTY LEASES
  --------------------------------------------------------------------------

<TABLE>
<CAPTION>

INITIAL MASTER LEASE #1:

State/
------
Facility #: Facility Name:                                County, City, State Location:     Facility Type:     Index #:
----------- -------------                                 -----------------------------     --------------     --------
<S>         <C>                                           <C>                                <C>               <C>
AZ#436      Valley Healthcare & Rehab Center              Pima, Tuscon, AZ                   Nursing center    ML#1-1
AZ#742      Sonoran Rehab & Care Center                   Maricopa, Phoenix, AZ              Nursing center    ML#1-2
AZ#4-656    Vencor Hospital - Phoenix                     Maricopa, Phoenix, AZ              Hospital          ML#1-3
CA#150      Nob Hill Healthcare Center                    San Francisco, San Francisco, CA   Nursing center    ML#1-4
CA#167      Canyonwood Nursing & Rehab Center             Shasta, Redding, CA                Nursing center    ML#1-5
CA#335      Lawton Healthcare Center                      San Francisco, San Francisco, CA   Nursing center    ML#1-6
CA#525      La Veta Healthcare Center                     Orange, Orange, CA                 Nursing center    ML#1-7
CA#738      Bay View Nursing & Rehab Center               Alameda, Alameda, CA               Nursing center    ML#1-8
CA#4-622    Vencor Hospital - San Leandro                 Alameda, San Leandro, CA           Hospital          ML#1-9
CA#4-642    Vencor Hospital - Orange County               Orange, Westminster, CA            Hospital          ML#1-10
CA#4-648    Vencor Hospital - San Diego                   San Diego, San Diego, CA           Hospital          ML#1-11
CA#4-693    Recovery Inn of Menlo Park                    San Mateo, Menlo Park, CA          Hospital          ML#1-12
CO#745      Aurora Care Center                            Arapahoe, Aurora, CO               Nursing center    ML#1-13
CT#562      Andrew House Healthcare                       Hartford, New Britain, CT          Nursing center    ML#1-14
CT#567      Nutmeg Pavilion                               New London, New London, CT         Nursing center    ML#1-15
FL#117      East Manor Medical Care Center                Sarasota, Sarasota, FL             Nursing center    ML#1-16
FL#4-602    Vencor Hospital - Coral Gables                Dade, Coral Gables, FL             Hospital          ML#1-17
FL#4-652    Vencor Hospital - North Florida               Clay, Green Cove Springs, FL       Hospital          ML#1-18
GA#660      Savannah Specialty Care Center                Chatham, Savannah, GA              Nursing center    ML#1-19
ID#218      Cascade Care Center                           Canyon, Caldwell, ID               Nursing center    ML#1-20
</TABLE>
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
ID#221      Lewiston Rehab & Care Center                  Ney Perce, Lewiston, ID            Nursing center    ML#1-21
ID#409      Mountain Valley Care and Rehab                Shoshone, Kellogg, ID              Nursing center    ML#1-22
IL#4-637    Vencor Hospital - Chicago North               Cook, Chicago, IL                  Hospital          ML#1-23
IL#4-690    Vencor Hospital - Northlake                   Cook, Northlake, IL                Hospital          ML#1-24
IN#112      Royal Oaks Healthcare & Rehab Center          Vigo, Terre Haute, IN              Nursing center    ML#1-25
IN#113      Southwood Health & Rehab Center               Vigo, Terre Haute, IN              Nursing center    ML#1-26
IN#286      Columbia Healthcare Facility                  Vanderburgh, Evansville, IN        Nursing center    ML#1-27
IN#406      Muncie Health Care & Rehab                    Delaware, Muncie, IN               Nursing center    ML#1-28
IN#779      Westview Nursing & Rehab Center               Lawrence, Bedford, IN              Nursing center    ML#1-29
IN#4-620    Vencor Hospital - LaGrange                    LaGrange, LaGrange, IN             Hospital          ML#1-30
IN#4-638    Vencor Hospital - Indianapolis                Marion, Indianapolis, IN           Hospital          ML#1-31
KY#280      Winchester Center for Health/Rehab            Clark, Winchester, KY              Nursing center    ML#1-32
KY#783      Lexington Centre for Health & Rehab           Fayette, Lexington, KY             Nursing center    ML#1-33
KY#784      North Centre for Health & Rehab               Jefferson, Louisville, KY          Nursing center    ML#1-34
KY#4-633    Vencor Hospital - Louisville                  Jefferson, Louisville, KY          Hospital          ML#1-35
ME#550      Norway Rehabilitation & Living Center         Oxford, Norway, ME                 Nursing center    ML#1-36
ME#552      Shore Village Rehab & Nursing Center          Knox, Rockland, ME                 Nursing center    ML#1-37
ME#555      Brentwood Rehab & Nursing Center              Penobscot, Yarmouth, ME            Nursing center    ML#1-38
ME#558      Fieldcrest Manor Nursing Home                 Lincoln, Waldoboro, ME             Nursing center    ML#1-39
MA#327      Laurel Ridge Rehab & Nursing Center           W. Roxbury, Jamaica Plain, MA      Nursing center    ML#1-40
MA#501      Blue Hills Alzheimers Care Center             Stoughton, Stoughton, MA           Nursing center    ML#1-41
MA#507      Country Manor Rehab & Nursing Center          Essex, Newburyport, MA             Nursing center    ML#1-42
MA#516      Hammersmith House Nursing & Care Center       Essex, Saugus, MA                  Nursing center    ML#1-43
MA#518      Timberlyn Heights Nursing & Alzheimers        Bershire, Great Barrington, MA     Nursing center    ML#1-44
            Center
MA#527      Briarwood Health Care Nursing Center          Norfolk, Needham, MA               Nursing center    ML#1-45
</TABLE>

                                       2
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
MA#528      Westridge Healthcare Center                   Middlesex, Marlborough, MA         Nursing center    ML#1-46
MA#529      Bolton Manor Nursing Home                     Middlesex, Marlborough, MA         Nursing center    ML#1-47
MA#537      Quincy Rehab & Nursing Center                 Norfolk, Quincy, MA                Nursing center    ML#1-48
MA#538      West Roxbury Manor                            Suffolk, West Roxbury, MA          Nursing center    ML#1-49
MA#573      Eagle Pond Rehab & Living Center              Barnstable, S. Dennis, MA          Nursing center    ML#1-50
MA#581      Blueberry Hill Healthcare                     Essex, Beverly, MA                 Nursing center    ML#1-51
MA#582      Colony House Nursing & Rehab Center           Plymouth, Abington, MA             Nursing center    ML#1-52
MA#588      Walden Rehab & Nursing Center                 Middlesex, Concord, MA             Nursing center    ML#1-53
MA#985/     Harrington House Nursing & Rehab Center       Norfolk, Walpole, MA               Nursing center    ML#1-54
  198
MN#4-659    Vencor Hospital - Minneapolis                 Hennepin, Golden Valley, MN        Hospital          ML#1-55
MO#4-680    Vencor Hospital - St. Louis                   St. Louis, St. Louis, MO           Hospital          ML#1-56
MT#416      Park Place Health Care Center                 Cascade, Great Falls, MT           Nursing center    ML#1-57
MT#433      Parkview Acres Care & Rehab Center            Beaverhead, Dillon, MT             Nursing center    ML#1-58
NV#640      Las Vegas Healthcare & Rehab Center           Clark, Las Vegas, NV               Nursing center    ML#1-59
NH#591      Dover Rehab & Living Center                   Strafford, Dover, NH               Nursing center    ML#1-60
NH#593      Hanover Terrace Healthcare                    Hanover, Hanover, NH               Nursing center    ML#1-61
NC#137      Sunnybrook Alzheimers & Healthcare Spec.      Wake, Raleigh, NC                  Nursing center    ML#1-62
NC#138      Blue Ridge Rehab & Healthcare Center          Buncombe, Asheville, NC            Nursing center    ML#1-63
NC#188      Cypress Pointe Rehab & Healthcare Center      New Hanover, Wilmington, NC        Nursing center    ML#1-64
NC#190      Winston-Salem Rehab & Healthcare Center       Forsyth, Winston-Salem, NC         Nursing center    ML#1-65
NC#191      Silas Creek Manor                             Forsyth, Winston-Salem, NC         Nursing center    ML#1-66
NC#704      Guardian Care of Roanoke Rapids               Halifax, Roanoke Rapids, NC        Nursing center    ML#1-67
NC#707      Rehab & Nursing Center of Monroe              Union, Monroe, NC                  Nursing center    ML#1-68
NC#724      Rehab & Health Center of Gastonia             Gaston, Gastonia, NC               Nursing center    ML#1-69
NC#806      Chapel Hill Rehab & Healthcare Center         Orange, Chapel Hill, NC            Nursing center    ML#1-70
OH#560      Franklin Woods Health Care Center             Franklin, Columbus, OH             Nursing center    ML#1-71
</TABLE>

                                       3
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
OH#572      Winchester Place Nursing & Rehab Center       Franklin, Canal Winchester, OH     Nursing center    ML#1-72
OH#577      Minerva Park Nursing & Rehab Center           Franklin, Columbus, OH             Nursing center    ML#1-73
OH#635      Coshocton Health & Rehab Center               Coshocton, Coshocton, OH           Nursing center    ML#1-74
OH#868      Lebanon Country Manor                         Warren, Lebanon, OH                Nursing center    ML#1-75
OK#4-618    Vencor Hospital - Oklahoma City               Oklahoma, Oklahoma City, OK        Hospital          ML#1-76
OR#452      Sunnyside Care Center                         Marion, Salem, OR                  Nursing center    ML#1-77
PA#4-619    Vencor Hospital - Pittsburgh                  Allegheny, Oakdale, PA             Hospital          ML#1-78
TN#132      Madison Healthcare & Rehab Center             Davidson, Madison, TN              Nursing center    ML#1-79
TN#884      Masters Health Care Center                    Putnam, Algood, TN                 Nursing center    ML#1-80
TN#4-628    Vencor Hospital - Chattanooga                 Hamilton, Chattanooga, TN          Hospital          ML#1-81
UT#140      Wasatch Care Center                           Weber, Ogden, UT                   Nursing center    ML#1-82
UT#247      St. George Care and Rehab Center              Washington, St. George, UT         Nursing center    ML#1-83
UT#655      Federal Heights Rehab & Nursing Center        Salt Lake, Salt Lake City, UT      Nursing center    ML#1-84
VA#825      Nansemond Pointe Rehab & Healthcare Center    Suffolk, Suffolk, VA               Nursing center    ML#1-85
VA#829      River Pointe Rehab & Healthcare Center        Princess Anne, Virginia Beach, VA  Nursing center    ML#1-86
WA#114      Arden Rehabilitation & Healthcare Center      King, Seattle, WA                  Nursing center    ML#1-87
WA#127      Northwest Continuum Care Center               Cowlitz, Longview, WA              Nursing center    ML#1-88
WA#165      Rainier Vista Care Center                     Pierce, Puyallup, WA               Nursing center    ML#1-89
WA#180      Vencor of Vancouver Healthcare & Rehab        Clark, Vancouver, WA               Nursing center    ML#1-90
WA#185      Heritage Health & Rehab Center                Clark, Vancouver, WA               Nursing center    ML#1-91
WA#462      Queen Anne Healthcare                         King, Seattle, WA                  Nursing center    ML#1-92
WI#767      Colony Oaks Care Center                       Outagamie, Appleton, WI            Nursing center    ML#1-93
WI#769      North Ridge Medical & Rehab Center            Manitowoc, Manitowoc, WI           Nursing center    ML#1-94
WI#772      Family Heritage Medical & Rehab Center        Wood, Wisconsin Rapids, WI         Nursing center    ML#1-95
WI#775      Sheridan Medical Complex                      Kenosha, Kenosha, WI               Nursing center    ML#1-96
</TABLE>

                                       4
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
WI#776      Woodstock Health & Rehab Center               Kenosha, Kenosha, WI               Nursing center    ML#1-97
WY#441      Mountain Towers Healthcare & Rehab            Laramie, Cheyenne, WY              Nursing center    ML#1-98
WY#482      Wind River Healthcare & Rehab Center          Fremont, Riverton, WY              Nursing center    ML#1-99
WY#483      Sage View Care Center                         Sweetwater, Rock Springs, WY       Nursing center    ML#1-100
</TABLE>

INITIAL MASTER LEASE #2:

<TABLE>
<CAPTION>
State/
----------
Facility #: Facility Name:                                County, City, State Location:      Facility Type:    Index #:
----------  --------------                                -----------------------------      --------------    --------
<S>         <C>                                           <C>                                <C>               <C>
AL#804      Rehab & Healthcare Center of Birmingham       Jefferson, Birmingham, AL          Nursing center    ML#2-1
AZ#743      Desert Life Rehab & Care Center               Pima, Tuscon, AZ                   Nursing center    ML#2-2
CA#320      Magnolia Gardens Care Center                  San Mateo, Burlingame, CA          Nursing center    ML#2-3
CA#420      Maywood Acres Healthcare Center               Ventura, Oxnard, CA                Nursing center    ML#2-4
CA#4-607    Vencor Hospital - Ontario                     San Bernadino, Ontario, CA         Hospital          ML#2-5
CO#744      Cherry Hills Health Care Center               Arapahoe, Englewood, CO            Nursing center    ML#2-6
CT#565      Hamilton Rehab Center                         New London, Norwich, CT            Nursing center    ML#2-7
CT#1226     Homestead Health Center                       Fairfield, Stamford, CT            Nursing center    ML#2-8
FL#125      Titusville Rehab & Nursing Center             Brevard, Titusville, FL            Nursing center    ML#2-9
FL#245      Bay Pointe Nursing Pavilion                   Pinellas, St. Petersburg, FL       Nursing center    ML#2-10
FL#836      Rehab & Health Center of Tampa                Hillsborough, Tampa, FL            Nursing center    ML#2-11
FL#837      Rehab & Health Center of Cape Coral           Lee, Cape Coral, FL                Nursing center    ML#2-12
FL#1217     Casa Mora Rehab & Ext. Care                   Manatee, Bradenton, FL             Nursing center    ML#2-13
FL#4-611    Vencor Hospital - St. Petersburg              Pinellas, St. Petersburg, FL       Hospital          ML#2-14
FL#4-674    Vencor Hospital - Central Tampa               Hillsborough, Tampa, FL            Hospital          ML#2-15
GA#1228     Lafayette Nursing & Rehab Center              Fayette, Fayetteville, Ga          Nursing center    ML#2-16
ID#216      Hillcrest Rehab/Care Center                   Ada, Boise, ID                     Nursing center    ML#2-17
ID#222      Nampa Care Center                             Boise, Nampa, ID                   Nursing center    ML#2-18
</TABLE>

                                       5

<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
ID#223      Weiser Rehabilitation & Care                  Washington, Weiser, ID             Nursing center    ML#2-19
IL#4-615    Vencor Hospital - Sycamore                    De Kalb, Sycamore, IL              Hospital          ML#2-20
IN#111      Rolling Hills Health Care Center              Floyd, New Albany, IN              Nursing center    ML#2-21
IN#294      Windsor Estates Health & Rehab Center         Howard, Kokomo, IN                 Nursing center    ML#2-22
IN#407      Parkwood Health Care Center                   Boone, Lebanon, IN                 Nursing center    ML#2-23
IN#780      Columbus Health & Rehab Center                Bartholomew, Columbus, IN          Nursing center    ML#2-24
KY#278      Oakview Nursing & Rehab Center                Marshall, Calvert City, KY         Nursing center    ML#2-25
KY#282      Maple Manor Healthcare Center                 Jefferson, Greenville, KY          Nursing center    ML#2-26
ME#545      Eastside Rehab and Living Center              Penobscot, Bangor, ME              Nursing center    ML#2-27
ME#549      Kennebunk Nursing Center                      York, Kennebunk, ME                Nursing center    ML#2-28
MA#508      Crawford Skilled Nursing & Rehab Center       Bristol, Fall River, MA            Nursing center    ML#2-29
MA#513      Hallmark Nursing & Rehab Center               Bristol, New Bedford, MA           Nursing center    ML#2-30
MA#532      Hillcrest Nursing Home                        Worcester, Fitchburg, MA           Nursing center    ML#2-31
MA#534      Country Gardens Sk. Nursing & Rehab           Essex, Swansea, MA                 Nursing center    ML#2-32
MA#584      Franklin Sk. Nursing & Rehab Center           Franklin, Franlin, MA              Nursing center    ML#2-33
MI#4-677    Vencor Hospital - Metro Detroit               Wayne, Detroit, MI                 Hospital          ML#2-34
MO#4-612    Vencor Hospital - Kansas City                 Jackson, Kansas City, MO           Hospital          ML#2-35
NV#641      Torrey Pines Care Center                      Clark, Las Vegas, NV               Nursing center    ML#2-36
NH#592      Greenbrier Terrace Healthcare                 Hillsborough, Nashua, NH           Nursing center    ML#2-37
NC#136      LaSalle Healthcare Center                     Durham, Durham, NC                 Nursing center    ML#2-38
NC#706      Guardian Care of Henderson                    Vance, Henderson, NC               Nursing center    ML#2-39
NC#711      Guardian Care of Kinston                      Lenoir, Kinston, NC                Nursing center    ML#2-40
NC#726      Guardian Care of Elizabeth City               Pasquotank, Elizabeth City, NC     Nursing center    ML#2-41
OH#578      West Lafayette Rehab & Nursing Center         Coshocton, West Lafayette, OH      Nursing center    ML#2-42
OH#634      Cambridge Health & Rehab Center               Guernsey, Cambridge, OH            Nursing center    ML#2-43
RI#1-224    Health Havens Nursing & Rehab Center          Providence, East Providence, RI    Nursing center    ML#2-44
</TABLE>

                                       6
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
TN#822      Primacy Healthcare & Rehab Center             Shelby, Memphis, TN                Nursing center    ML#2-45
TX#4-653    Vencor Hospital - Ft. Worth Southwest         Tarrant, Ft. Worth, TX             Hospital          ML#2-46
TX#4-654    Vencor Hospital - Houston Northwest           Harris, Houston, TX                Hospital          ML#2-47
TX#4-668    Vencor Hospital - Ft. Worth West              Tarrant, Ft. Worth, TX             Hospital          ML#2-48
UT#690      Wasatch Valley Rehabilitation                 Salt Lake, Salt Lake City, UT      Nursing center    ML#2-49
VA#826      Harbour Pointe Medical & Rehab Center         Suffolk, Suffolk, VA               Nursing center    ML#2-50
VA#842      Bay Pointe Medical & Rehab Centre             Princess Anne, Virginia Beach, VA  Nursing center    ML#2-51
WA#168      Lakewood Healthcare Center                    Pierce, Lakewood, WA               Nursing center    ML#2-52
WI#289      San Luis Medical & Rehab Center               Brown, Green Bay, WI               Nursing center    ML#2-53
WI#766      Colonial Manor Medical & Rehab Center         Marathon, Wausau, WI               Nursing center    ML#2-54
</TABLE>

INITIAL MASTER LEASE #3:
<TABLE>
<CAPTION>
State/
------
Facility #: Facility Name:                                County, City, State Location:      Facility Type:    Index #:
----------- --------------                                -----------------------------      --------------    --------
<S>         <C>                                           <C>                                <C>               <C>
AL#824      Rehab & Healthcare Center of Mobile           Mobile, Mobile, AL                 Nursing center    ML#3-1
AZ#851      Villa Campana Health Center                   Pima, Tuscon, AZ                   Nursing center    ML#3-2
CA#210      Californian Care Center                       Kern, Bakersfield, CA              Nursing center    ML#3-3
CA#411      Alta Vista Healthcare Center                  Riverside, Riverside, CA           Nursing center    ML#3-4
CA#4-644    THC - Orange County                           Orange, Brea, CA                   Hospital          ML#3-5
CO#873      Brighton Care Center                          Adams, Brighton, CO                Nursing center    ML#3-6
CT#563      Camelot Nursing & Rehab Center                New London, New London, CT         Nursing center    ML#3-7
CT#568      Parkway Pavilion Healthcare                   Hartford, Enfield, CT              Nursing center    ML#3-8
FL#124      Healthcare & Rehab Center of Sanford          Seminole, Sanford, FL              Nursing center    ML#3-9
FL#372      Carrollwood Care Center                       Hillsborough, Tampa, FL            Nursing center    ML#3-10
FL#922/     Windsor Woods Convalescent Center             Pasco, Hudson, FL                  Nursing center    ML#3-11
   181
</TABLE>

                                       7
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
FL#4-676    Vencor Hospital - Hollywood                   Broward, Hollywood, FL             Hospital          ML#3-12

FL#1220     Highland Pines Rehab Center                   Pinellas, Clearwater, FL           Nursing center    ML#3-13

GA#155      Savannah Rehab & Nursing Center               Chatham, Savannah, GA              Nursing center    ML#3-14

GA#645      Specialty Care of Marietta                    Cobb, Marietta, GA                 Nursing center    ML#3-15

ID#219      Emmett Rehabilitation & Healthcare            Gem, Emmett, ID                    Nursing center    ML#3-16

IN#269      Meadowvale Health & Rehab Center              Wells, Bluffton, IN                Nursing center    ML#3-17

IN#694      Wedgewood Healthcare Center                   Clark, Clarksville, IN             Nursing center    ML#3-18

KY#279      Cedars of Lebanon Nursing Center              Marion, Lebanon, KY                Nursing center    ML#3-19

KY#281      Riverside Manor Healthcare                    McLean, Calhoun, KY                Nursing center    ML#3-20

KY#782      Danville Centre for Health & Rehab            Boyle, Danville, KY                Nursing center    ML#3-21

ME#544      Augusta Rehabilitation Center                 Kennebec, Augusta, ME              Nursing center    ML#3-22

ME#547      Brewer Rehabilitation & Living Center         Penobscot, Brewer, ME              Nursing center    ML#3-23

ME#554      Westgate Manor                                Penobscot, Bangor, ME              Nursing center    ML#3-24

MA#506      Presentation Nursing & Rehab Center           Suffolk, Brighton, MA              Nursing center    ML#3-25

MA#514      Sachem Nursing & Rehab Center                 Plymouth, East Bridgewater, MA     Nursing center    ML#3-26

MA#539      Newton & Wellesley Alzheimer Center           Norfolk, Wellesley, MA             Nursing center    ML#3-27

MA#587      River Terrace                                 Worcester, Lancaster, MA           Nursing center    ML#3-28

MA#4-673    Vencor Hospital - Boston Northshore           Essex, Peabody, MA                 Hospital          ML#3-29

MA#4-688    Vencor Hospital - Boston                      Suffolk, Boston, MA                Hospital          ML#3-30

MI#4-675    Vencor Hospital - Detroit                     Wayne, Lincoln, MI                 Hospital          ML#3-31

NV#4-647    THC - Las Vegas Hospital                      Clark, Las Vegas, NV               Nursing center    ML#3-32

NC#116      Pettigrew Rehab & Healthcare Center           Durham, Durham, NC                 Nursing center    ML#3-33

NC#143      Raleigh Rehab & Healthcare Center             Wake, Raleigh, NC                  Nursing center    ML#3-34

NC#307      Lincoln Nursing Center                        Lincoln, Lincoln, NC               Nursing center    ML#3-35

NC#713      Guardian Care of Zebulon                      Wake, Zebulon, NC                  Nursing center    ML#3-36

NC#4-662    Vencor Hospital - Greensboro                  Guilford, Greensboro, NC           Hospital          ML#3-37
</TABLE>

                                       8
<PAGE>

<TABLE>
<S>         <C>                                           <C>                                <C>               <C>
OR#453      Medford Rehab & Healthcare Center             Jackson, Medford, OR               Nursing center    ML#3-38

PA#1-237    Wyomissing Nursing & Rehab Center             Berks, Reading, PA                 Nursing center    ML#3-39

TN#182      Cordova Rehab & Nursing Center                Shelby, Cordova, TN                Nursing center    ML#3-40

TX#4-635    Vencor Hospital - San Antonio                 Bexar, San Antonio, TX             Hospital          ML#3-41

TX#4-660    Vencor Hospital - Mansfield                   Tarrant, Mansfield, TX             Hospital          ML#3-42

UT#230      Crosslands Rehab & Health Care Center         Salt Lake, Salt Lake City, UT      Nursing center    ML#3-43

WA#461      Edmonds Rehab & Healthcare Center             Snohomish, Edmonds, WA             Nursing center    ML#3-44

WI#770      Vallhaven Care Center                         Winnebago, Neenah, WI              Nursing center    ML#3-45

WI#773      Mt. Carmel Medical & Rehab Center             Racine, Burlington, WI             Nursing center    ML#3-46

WI#774      Mt. Carmel Medical & Rehab Center             Milwaukee, Milwaukee, WI           Nursing center    ML#3-47
</TABLE>

INITIAL MASTER LEASE #4:

<TABLE>
<CAPTION>
State/
----------
Facility#:    Facility Name:                                County, City, State Location:      Facility Type:    Index #:
----------    --------------                                -----------------------------      --------------    --------
<S>           <C>                                           <C>                                <C>               <C>
AL#791        Rehab & Healthcare Center of Huntsville       Madison, Huntsville, AL            Nursing center    ML#4-1

AZ#853        Kachina Point Health Care & Rehab             Yavapai, Sedona, AZ                Nursing center    ML#4-2

AZ#4-658      Vencor Hospital - Tuscon                      Pima, Tuscon, AZ                   Hospital          ML#4-3

CA#350        Valley Gardens Health Care & Rehab            San Joaquin, Stockton, CA          Nursing center    ML#4-4

CA#982/       Village Square Nursing & Rehab Center         San Diego, San Marcos, CA          Nursing center    ML#4-5
 148

CO#859        Castle Garden Care Center                     Adams, Northglenn, CO              Nursing center    ML#4-6

CO#4-665      Vencor Hospital - Denver                      Denver, Denver, CO                 Hospital          ML#4-7

CT#566        Windsor Rehab & Healthcare Center             Hartford, Windsor, CT              Nursing center    ML#4-8

CT#1221       Courtland Gardens Health Center, Inc.         Fairfield, Stamford, CT            Nursing center    ML#4-9

FL#268        Colonial Oaks Rehab Center - Ft. Meyers       Lee, Ft. Meyers, FL                Nursing center    ML#4-10

FL#637        Evergreen Woods Health & Rehab                Hernando, Springhill, FL           Nursing center    ML#4-11

FL#1218       North Broward Rehab and Nursing Center        Broward, Pompano Beach, FL         Nursing center    ML#4-12
</TABLE>

                                       9
<PAGE>

<TABLE>
<S>           <C>                                           <C>                                <C>               <C>
FL#1232       Pompano Rehab/Nursing Center                  Broward, Pompano Beach, FL         Nursing center    ML#4-13

FL#1233       Abbey Rehab & Nursing Center                  Pinellas, St. Petersburg, FL       Nursing center    ML#4-14

FL#4-645/     Vencor Hospital - Ft. Lauderdale              Broward, Ft. Lauderdale, FL        Hospital          ML#4-15
 46

GA#1238       Tucker Nursing Center                         De Kalb, Tucker, GA                Nursing center    ML#4-16

ID#225        Moscow Care Center                            Latah, Moscow, ID                  Nursing center    ML#4-17

IL#4-671      Vencor Hospital - Lake Shore                  Cook, Chicago, IL                  Hospital          ML#4-18

IN#131        Vencor Corydon Nursing Care Center            Harrison, Corydon, IN              Nursing center    ML#4-19

IN#209        Valley View Health Care Center                Elkhart, Elkhart, IN               Nursing center    ML#4-20

IN#213        Wildwood Healthcare Center                    Marion, Indianapolis, IN           Nursing center    ML#4-21

IN#290        Bremen Healthcare Center                      Marshall, Bremen, IN               Nursing center    ML#4-22

KY#277        Rosewood Health Care Center                   Warren, Bowling Green, KY          Nursing center    ML#4-23

KY#785        Hillcrest Health Care Center                  Davies, Owensboro, KY              Nursing center    ML#4-24

KY#787        Woodland Terrace Health Care Facility         Hardin, Elizabethtown, KY          Nursing center    ML#4-25

KY#864        Harrodsburg Health Care Center                Mercer, Harrodsburg, KY            Nursing center    ML#4-26

LA#4-666      Vencor Hospital - New Orleans                 Orleans Parish, New Orleans, LA    Hospital          ML#4-27

ME#546        Winship Green Nursing Center                  Sagadahoc, Bath, ME                Nursing center    ML#4-28

MA#503        Brigham Manor Nursing & Rehab Center          Suffolk, Newburyport, MA           Nursing center    ML#4-29

MA#517        Oakwood Rehab & Nursing Center                Worcester, Webster, MA             Nursing center    ML#4-30

MA#523        Star of David Nursing & Rehab/Alz. Center     Suffolk, West Roxbury, MA          Nursing center    ML#4-31

MA#526        Brittany Healthcare Center                    Middlesex, Natick, MA              Nursing center    ML#4-32

MA#542        Den-Mar Rehab & Nursing Center                Essex, Rockport, MA                Nursing center    ML#4-33

MA#583        Embassy House Sk. Nursing & Rehab             Plymouth, Brockton, MA             Nursing center    ML#4-34

MA#585        Great Barrington Rehab & Nursing Center       Berkshire, Gt. Barrington, MA      Nursing center    ML#4-35

NE#746        Homestead Health Care & Rehab Center          Lancaster, Lincoln, NE             Nursing center    ML#4-36

NM#4-664      Vencor Hospital - Albuquerque                 Bernalillo, Albuquerque, NM        Nursing center    ML#4-37
</TABLE>

                                       10
<PAGE>

<TABLE>
<S>           <C>                                           <C>                                <C>               <C>
NC#146        Rose Manor Health Care Center                 Durham, Durham, NC                 Nursing center    ML#4-38

NC#723        Guardian Care of Rocky Mount                  Nash, Rocky Mount, NC              Nursing center    ML#4-39

OH#569        Chillicothe Nursing & Rehab Center            Ross, Chillicothe, OH              Nursing center    ML#4-40

OH#570        Pickerington Nursing & Rehab Center           Fairfield, Pickerington, OH        Nursing center    ML#4-41

OH#571        Logan Health Care Center                      Hocking, Logan, OH                 Nursing center    ML#4-42

OH#802        Bridgepark Center for Rehab & Nursing         Summit, Akron, OH                  Nursing center    ML#4-43
              Services

PA#4-614      Vencor Hospital - Philadelphia                Philadelphia, Philadelphia, PA     Hospital          ML#4-44

RI#1-231      Oak Hill Nursing & Rehab Center               Providence, Pawtucket, RI          Nursing center    ML#4-45

TX#1-234      San Pedro Manor                               Bexar, San Antonio, TX             Nursing center    ML#4-46

TX#4-685      Vencor Hospital - Houston                     Harris, Houston, TX                Hospital          ML#4-47

VT#559        Birchwood Terrace                             Chittenden, Burlington, VT         Nursing center    ML#4-48

VA#4-617      Vencor Hospital - Arlington                   Arlington, Arlington, VA           Hospital          ML#4-49

WA#158        Bellingham Health Care & Rehab Svc.           Whatcom, Bellingham, WA            Nursing center    ML#4-50

WI#765        Eastview Medical & Rehab Center               Langlade, Antigo, WI               Nursing center    ML#4-51

WI#771        Kennedy Park Medical & Rehab Center           Marathon, Schofield, WI            Nursing center    ML#4-52

WY#481        South Central Wyoming Healthcare & Rehab      Carbon, Rawlins, WY                Nursing center    ML#4-53
</TABLE>

OTHER LEASED PROPERTY (6):
(against which a leasehold mortgage will be filed on the Closing Date)

<TABLE>
<CAPTION>
State/
----------
Facility#:    Facility Name:                                County, City, State Location:      Facility Type:    Index #:
----------    --------------                                -----------------------------      --------------    --------
<S>           <C>                                           <C>                                <C>               <C>
FL#4-640      Vencor Hospital Tampa                         Hillsborough, Tampa, FL            Hospital          FP#1

GA#1-236      Warner Robins Rehabilitation and Nursing      Houston, Warner Robins, GA         Nursing center    FP#2
              Center

IN#199        Vencor at Sellersburg                         Clark, Clark, IN                   Nursing center    FP#3

KY#248        Liberty Care Center                           Casey, Liberty, KY                 Nursing center    FP#4
</TABLE>

                                       11
<PAGE>

<TABLE>
<S>           <C>                                           <C>                                <C>               <C>
KY#781        Bashford East Health Care                     Jefferson, Louisville, KY          Nursing center    FP#5

NC#722        Guardian Care of Kenansville                  Duplin, Kennansville, NC           Nursing center    FP#6
</TABLE>

Third Party Leases (including all Other Leased Property):

<TABLE>
<CAPTION>
State/
----------
Facility#:    Facility Name:                                County, City, State Location:      Facility Type:    Status:
----------    --------------                                -----------------------------      --------------    -------
<S>           <C>                                           <C>                                <C>               <C>
AL#1-227      Big Spring Specialty Care Center              Madison, Huntsville, AL            Nursing center

AZ#796        Hacienda Rehabilitation and Care Center       Cochise, Sierra Vista, AZ          Nursing center

CA#205        Hacienda Care Center                          Alameda, Livermore, CA             Nursing center

CA#342        Mill Valley Healthcare Center                 Marin, Mill Valley, CA             Nursing center    Non-operational

CA#368        Santa Cruz Healthcare Center                  Santa Cruz, Santa Cruz, CA         Nursing center

CA#909        Golden Gate Health Care Center                San Francisco, San Francisco, CA   Nursing center

CA#907        Fifth Avenue Health Care Center               Marin, San Rafael, CA              Nursing center    Subleased

CA#911        Victorian Healthcare Center                   San Francisco, San Francisco, CA   Nursing center

CA#3-298      SunBridge Care Center                         Sutter, Yuba City, CA              Nursing center    Subleased

CA#3-299      SunBridge Health Care Center                  Yuba, Marysville, CA               Nursing center    Subleased

CO#849        Iliff Care Center                             Denver, Denver, CO                 Nursing center

FL#246        The Oaks at Avon                              Highlands, Avon Park, FL           Nursing center

FL#4-640      Vencor Hospital - Tampa                       Hillsborough, Tampa, FL            Hospital

GA#4-670      Vencor Hospital - Atlanta                     Clayton, Atlanta, GA               Hospital

GA#1-213      Eastview Nursing Home                         Bibb, Macon, GA                    Nursing center

GA#1-214      Elberta Health Care                           Houston, Warner Robins, GA         Nursing center

GA#1-219      PersonaCare of Clayton                        Clayton, Lake City, GA             Nursing center

GA#1-236      Warner Robins Rehabilitation and Nursing      Houston, Warner Robins, GA         Nursing center
              Center
</TABLE>

                                       12
<PAGE>

<TABLE>
<S>           <C>                                           <C>                                <C>
IL#4-667      Vencor Hospital - Chicago Central             Cook, Chicago, IL                  Hospital

IN#194        Vencor at Eagle Creek                         Marion, Indianapolis, IN           Nursing center

IN#199        Vencor at Sellersburg                         Clark, Sellersburg, IN             Nursing center

IN#204        Angel River Health and Rehabilitation         Warrick, Newburgh, IN              Nursing center

IN#224        Regency Place of Castleton                    Marion, Indianapolis, IN           Nursing center

IN#232        Regency Place of Dyer                         Lake, Dyer, IN                     Nursing center

IN#240        Regency Place of Greenwood                    Johnson, Greenwood, IN             Nursing center

IN#287        Crestview                                     Knox, Vincennes, IN                Nursing center

IN#288        Indian Creek Health and Rehabilitation        Harrison, Corydon, IN              Nursing center
              Center

IN#296        Chalet Village Health and Rehabilitation      Adams, Berne, IN                   Nursing center
              Center

IN#402        Regency Place of Fort Wayne                   Allen, Ft. Wayne, IN               Nursing center

IN#403        Regency Place of Greenfield                   Hancock, Greenfield, IN            Nursing center

IN#404        Regency Place of Lafayette                    Tippecanoe, Lafayette, IN          Nursing center

IN#405        Regency Place of South Bend                   St. Joseph, South Bend, IN         Nursing center

IN#408        Colonial Oaks Health Care Center              Grant, Marion, IN                  Nursing center

IN#4-672      Vencor Hospital - Indianapolis South          Johnson, Greenwood, IN             Hospital

IN#3-305      University Nursing Center                     Grant, Upland, IN                  Nursing center Subleased

KY#248        Liberty Care Center                           Casey, Liberty, KY                 Nursing center

KY#271        Heritage Manor Health Care Center             Graves, Mayfield, KY               Nursing center

KY#781        Bashford East Health Care                     Jefferson, Louisville, KY          Nursing center

KY#786        Riverfront Terrace Health Care Center         McCracken, Paducah, KY             Nursing center

KY#1-225      Hermitage Nursing and Rehabilitation Center   Daviess, Owensboro, KY             Nursing center

LA#1-235      Irving Place Rehabilitation and Nursing       Caddo, Shreveport, LA              Nursing center
              Center

MA#531        Nichols House Nursing Home                    Bristol, Fairhaven, MA             Nursing center

MA#540        Brook Farm Rehabilitation and Nursing Center  Suffolk, West Roxbury, MA          Nursing center
</TABLE>

                                       13
<PAGE>

<TABLE>
<S>          <C>                                             <C>                            <C>
MA#541       Westborough Health Care Center                  Worcester, Westborough, MA     Nursing center

MI#3-300     Autumnwood of McBain                            Missaukee, McBain, MI          Nursing center    Subleased

MI#3-301     Autumnwood of Deckerville                       Sanilac, Deckerville, MI       Nursing center    Subleased

MS#227       Alcorn County Care Inn                          Alcorn, Corinth, MS            Nursing center

MS#3-882     West Point Nursing Home                         Clay, West Point, MS           Nursing center    Subleased

MO#861       Blue Hills Living Center                        Jackson, Kansas City, MO       Nursing center

MO#3-263     Ozark Mountain Regional Health                  Stone, Crane, MO               Nursing center    Managed by
                                                                                                              third party

MO#3-265     Table Rock Health Care Center                   Stone, Kimberling City, MO     Nursing center    Managed by
                                                                                                              third party

MO#3-266     Table Rock Residential Center                   Stone, Kimberling City, MO     Nursing center    Managed by
                                                                                                              third party

MT#434       Livingston Health and Rehabilitation Center     Park, Livingston, MT           Nursing center

NM#3-881     Southwest Senior Care Center                    San Miguel, Las Vegas, NM      Nursing center    Subleased

NC#193       Rehabilitation and Healthcare Center of         Alamance, Graham, NC           Nursing center
             Alamance

NC#717       Guardian Care of Scotland Neck                  Halifax, Scotland Neck, NC     Nursing center

NC#718       Guardian Care of Ahoskie                        Hertford, Ahoskie, NC          Nursing center

NC#722       Guardian Care of Kenansville                    Duplin, Kenansville, NC        Nursing center

OH#237       Newark Healthcare Center                        Licking, Newark, OH            Nursing center

OH#295       Whitehouse Country Manor                        Lucas, Whitehouse, OH          Nursing center

OH#870       Community Health Care Center                    Marion, Marion, OH             Nursing center

OH#1-229     The LakeMed Nursing and Rehabilitation          Lake, Painesville, OH          Nursing center
             Center

PA#1-223     PersonaCare at Eastwood                         Northampton, Easton, PA        Nursing center

TN#171       Pine Meadows Healthcare and                     Hardeman, Bolivar, TN          Nursing center
             Rehabilitation Center
</TABLE>

                                       14
<PAGE>

<TABLE>
<S>         <C>                                             <C>                               <C>
TN#174      Camden Healthcare and Rehabilitation Center     Benton, Camden, TN                Nursing center

TN#175      Jefferson City Health and Rehabilitation        Jefferson, Jefferson City, TN     Nursing center
            Center

TN#177      Louden Healthcare Center                        Loudon, Loudon, TN                Nursing center

TN#178      Shelby Pines Rehabilitation and Healthcare      Shelby, Memphis TN                Nursing center
            Center

TN#179      Huntingdon Health and Rehabilitation Center     Carroll, Huntingdon, TN           Nursing center

TN#183      Ripley Healthcare and Rehabilitation Center     Landerdale, Ripley, TN            Nursing center

TN#184      Greystone Health Care Center                    Sullivan, Blountville, TN         Nursing center

TN#187      Maryville Healthcare and Rehabilitation         Blount, Maryville, TN             Nursing center
            Center

TN#189      Fairpark Healthcare Center                      Blount, Maryville, TN             Nursing center

TN#789      Northhaven Health Care Center                   Knox, Knoxville, TN               Nursing center

TN#877      Smith County Health Care Center                 Smith, Carthage, TN               Nursing center    Subleased

TX#4-657    Vencor Hospital - Bay Area-Houston              Harris, Pasadena, TX              Hospital

TX#4-686    Vencor Hospital - Dallas East                   Dallas, Dallas TX                 Hospital

TX#880      Four States Care Center                         Bowie, Texarkana, TX              Nursing center

TX#1-230    Normandy Terrace Northeast                      Bexar, San Antonio, TX            Nursing center

TX#3-272    The Springs                                     Cass, Hughes Springs, TX          Nursing center    Subleased

TX#3-273    Windsor Place                                   Morris, Daingerfield, TX          Nursing center    Subleased

TX#3-840    Windcrest Rehabcare                             Lubbock, Lubbock, TX              Nursing center    Subleased

TX#3-841    Lakerridge Rehab & Nsg. Center                  Lubbock, Lubbock, TX              Nursing center    Subleased

UT#419      Salt Lake Nursing and Rehabilitation Center     Salt Lake, Salt Lake City, UT     Nursing center

WI#197      Oshkosh Medical & Rehabilitation Center         Winnebago, Oshkosh, WI            Nursing center

WI#1-216    Middleton Village Nursing and                   Dane, Middleton, WI               Nursing center
            Rehabilitation Center
</TABLE>

                                       15
<PAGE>

                                                                      SCHEDULE 5

                              MANAGEMENT CONTRACTS
                              --------------------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
           FACILITY                           AGREEMENT                                 MANAGER
---------------------------------------------------------------------------------------------------------------
<C>                               <S>                                    <C>
       169                        Management Agreement dated as of       Vencor Nursing Centers East, L.L.C.
Menorah House                     January 31, 1990
9945 Central Park Blvd. N
Boca Raton, FL
---------------------------------------------------------------------------------------------------------------
       815                        Management Agreement dated as of       Vencor Nursing Centers East, L.L.C.
Lago Vista Care Center            January 31, 1990
5430 Linton Boulevard
Delray Beach, FL
---------------------------------------------------------------------------------------------------------------
       912                        Management Agreement dated as of       Vencor Operating, Inc.
The Arbors Healthcare Center      March 6, 2000
15 E. Highway 260
Camp Verde, AZ  86322
---------------------------------------------------------------------------------------------------------------
       913                        Management Agreement dated as of       Vencor Operating, Inc.
Los Arcos Health Care Center      March 6, 2000
800 W. University Avenue
Flagstaff, AZ  86001
---------------------------------------------------------------------------------------------------------------
       914                        Management Agreement dated as of       Vencor Operating, Inc.
Pueblo Norte Nursing Center       March 6, 2000
2401 E. Hunt Street
Show Low, AZ 85901
---------------------------------------------------------------------------------------------------------------
       915                        Management Agreement dated as of       Vencor Operating, Inc.
Rio Verde Health Care Center      March 6, 2000
197 S. Willard Street
Cottonwood, AZ  86326
---------------------------------------------------------------------------------------------------------------
       920                        Management Agreement dated as of       Vencor Nursing Centers East, L.L.C.
Marietta Ctr for Hlth & Rehab     July 12, 1983
117 Bartlett Street
Marietta, OH
---------------------------------------------------------------------------------------------------------------
       926                        Management Agreement dated as of       Vencor Nursing Centers West, L.L.C.
Nineteenth Avenue HCC             February 29, 1988
2043 - 19/th/ Avenue
San Francisco, CA
---------------------------------------------------------------------------------------------------------------
       930                        Management Agreement dated as of       Vencor Operating, Inc.
Peppertree Square                 March 16, 2000
1933 Pepper Tree Drive
Safford, AZ
---------------------------------------------------------------------------------------------------------------
       931                        Management Agreement dated as of       Vencor Operating, Inc.
Safford Care Center               March 16, 2000
1933 Pepper Tree Drive
Safford, AZ
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                       1
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
           FACILITY                           AGREEMENT                  MANAGER
---------------------------------------------------------------------------------------------------------
<S>                             <C>                                <C>
        932                     Management Agreement dated as of   Vencor Operating, Inc.
Village Catered Care            March 16, 2000
1400 San Antonio Avenue
Douglas, AZ
---------------------------------------------------------------------------------------------------------
        934                     Management Agreement dated as of   Vencor Operating, Inc.
Douglas Manor                   March 16, 2000
1400 San Antonio Avenue
Douglas, AZ
---------------------------------------------------------------------------------------------------------
        935                     Management Agreement dated as of   Vencor Operating, Inc.
Kendallville Manor LLC Ctr      March 6, 2000
1802 E. Dowling Street
Kendallville, IN
---------------------------------------------------------------------------------------------------------
        936                     Management Agreement dated as of   Vencor Operating, Inc.
Wellington Manor                March 6, 2000
1924 Wellesley Boulevard
Indianapolis, IN
---------------------------------------------------------------------------------------------------------
        937                     Management Agreement dated as of   Vencor Operating, Inc.
Cloverleaf of Knightsville      March 6, 2000
9325 N. Crawford Street
Knightsville, IN
---------------------------------------------------------------------------------------------------------
        949                     Management Agreement dated as of   Vencor Nursing Centers East, L.L.C.
Ledgewood Rehab. & Nsg.         1985
87 Herrick Street
Beverly, MA
---------------------------------------------------------------------------------------------------------
        950                     Management Agreement dated as of   Vencor Nursing Centers West, L.L.C.
Salemhaven Nursing Home         April 21, 1983
23 Geremonty Drive
Salem, NH
---------------------------------------------------------------------------------------------------------
        951                     Management Agreement dated as of   Vencor Operating, Inc.
Marshall Manor                  March 16, 2000
3120 North Street
Guntersville, Al
---------------------------------------------------------------------------------------------------------
        952                     Management Agreement dated as of   Vencor Operating, Inc.
Terrace Lake Village            March 16, 2000
100 Terrace Lake Drive
Guntersville, AL
---------------------------------------------------------------------------------------------------------
        953                     Management Agreement dated as of   Vencor Operating, Inc.
Ridgewood Health Care Ctr.      March 16, 2000
201 Oakhill Road
Jasper, AL
---------------------------------------------------------------------------------------------------------
        954                     Management Agreement dated as of   Vencor Operating, Inc.
Holiday Manor                   March 16, 2000
305 N. 6/th/ Avenue
Princeton, IN
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
           FACILITY                           AGREEMENT                  MANAGER
---------------------------------------------------------------------------------------------------------
<S>                             <C>                                <C>
        956                     Management Agreement dated as of   Vencor Operating, Inc.
Owensville Convalescent Ctr.    March 16, 2000
Hwy, 165 West, Box 369
Owensville, IN
---------------------------------------------------------------------------------------------------------
        957                     Management Agreement dated as of   Vencor Operating, Inc.
Willow Manor Conv. Ctr.         March 16, 2000
1321 Willow Street
Vincennes, IN.
---------------------------------------------------------------------------------------------------------
        961                     Management Agreement dated as of   Vencor Operating, Inc.
Hertigate Plaza Nsg. Center     March 6, 2000
600 W. 52/nd/ Street
Texarkana, TX
---------------------------------------------------------------------------------------------------------
        962                     Management Agreement dated as of   Vencor Operating, Inc.
Pine Grove Nursing Center       March 6, 2000
RR 8 Box 1965
Center, TX
---------------------------------------------------------------------------------------------------------
        963                     Management Agreement dated as of   Vencor Operating, Inc.
Pine Haven Care Center          March 6, 2000
4808 N. Elizabeth Street
Texarkana, TX
---------------------------------------------------------------------------------------------------------
        964                     Management Agreement dated as of   Vencor Operating, Inc.
Pleasant Manor Living Center    March 6, 2000
3650 S. Highway 35-E
Waxahachie, TX
---------------------------------------------------------------------------------------------------------
        965                     Management Agreement dated as of   Vencor Operating, Inc.
Reunion Plaza Sr. Care & Ret.   March 6, 2000
1401 Hampton Drive
Texarkana, TX  75503
---------------------------------------------------------------------------------------------------------
        966                     Management Agreement dated as of   Vencor Operating, Inc.
South Place Nursing Center      March 6, 2000
150 Gibson Road
Athens, Texas
---------------------------------------------------------------------------------------------------------
        967                     Management Agreement dated as of   Vencor Operating, Inc.
West Place Nursing Center       March 6, 2000
Hwy, 31 West Box 232
Athens, TX
---------------------------------------------------------------------------------------------------------
        968                     Management Agreement dated as of   Vencor Operating, Inc.
Colonial Pines Healthcare,      March 6, 2000
Ctr.
1203 FM 1277
San Augustine, TX
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
           FACILITY                         AGREEMENT                           MANAGER
---------------------------------------------------------------------------------------------------------
<S>                             <C>                                <C>
        978                     Management Agreement dated as of   Vencor Nursing Centers East, L.L.C.
North Shore Living Center       January 31, 1990
106 Medical Center Drive
Slidell, LA
---------------------------------------------------------------------------------------------------------
        981                     Foothill Skilled Nursing           Vencor Nursing Centers West, L.L.C.
Foothill Nsg. & Rehab Ctr.      Facility Management Agreement
401 West Ada Avenue             dated as of 1986
Glendora, CA
---------------------------------------------------------------------------------------------------------
        983                     Long Term Care Facility            Vencor Nursing Centers East, L.L.C.
Clark House Nrsg. Ctr.          Management Agreement dated as of
30 Longwood Drive               July 1, 1990
Westwood, MA
---------------------------------------------------------------------------------------------------------
        990                     Management Agreement dated as of   Vencor Nursing Centers East, L.L.C.
Jo Ellen Smith Conv. Center     January 31, 1990
4502 General Meyer Avenue
New Orleans, LA
---------------------------------------------------------------------------------------------------------
        992                     Agreement to Provide Management    Vencor Nursing Centers West, L.L.C.
Holladay Healthcare Center      Services to a Health Care
4782 South Holladay Blvd.       Facility dated as of September
Salt Lake City, UT              1, 1985
---------------------------------------------------------------------------------------------------------
        995                     Agreement to Provide Management    Vencor Nursing Centers East, L.L.C.
Starr Farm Nursing Center       Services to a Health Care
98 Starr Farm Road              Facility dated as of December
Burlington, VT                  30, 1986
---------------------------------------------------------------------------------------------------------
    See attached list           Letter Agreement with Omega        Vencor Operating, Inc.
                                Healthcare Investors, Inc. and
                                affiliates dated as of March 26,
                                2000
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       4
<PAGE>

             List of Facilities Governed by Letter Agreements with
             -----------------------------------------------------
                Omega Healthcare Investors, Inc. and Affiliates
                -----------------------------------------------

                        (The) Arbors Health Care Center
                         Los Arcos Health Care Center
                          Pueblo Norte Nursing Center
                          Rio Verde Healthcare Center
                          Cloverleaf of Knightsville
                              Kendallville Manor
                               Wellington Manor
                                Colonial Pines
                                Heritage Plaza
                           Pine Grove Nursing Center
                            Pine Haven Care Center
                         Pleasant Manor Living Center
                                 Reunion Plaza
                          South Place Nursing Center
                                  West Place
                       Willow Manor Convalescent Center
                                  Owensville
                                 Holiday Manor
                        Village Catered Care (Douglas)
                                 Douglas Manor
                          Peppertree Square (Safford)
                              Safford Care Center
                        Terrace Lake Village (Marshall)
                                Marshall Manor
                         Ridgewood Health Care Center

                                       5
<PAGE>

                                                                      SCHEDULE 6

                             PERMITTED INVESTMENTS
                             ---------------------

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
       HOLDER                                                 INVESTMENT
-----------------------------------------------------------------------------------------------------------------
<S>                                   <C>
Vencor Operating, Inc.                Promissory Notes evidencing loans made by Vencor Operating, Inc. and/or
                                      Vencor, Inc. to certain current and former officers of Vencor not
                                      exceeding $16,000,000 aggregate amount
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                $500,000 Promissory Note made by HealthEssentials Solutions, Inc. due
                                      February 25, 2001*
-----------------------------------------------------------------------------------------------------------------
First Healthcare Corporation          $3,965,000 Promissory Note made by Foothill Nursing Company Partnership
 (assigned to Vencor Operating,       due March 31, 2001 (as the same may be extended from time to time provided
 Inc.)                                that the aggregate outstanding principal amount does exceed $3,965,000)
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                7,500 shares in Ledgewood Health Care Corporation, a Massachusetts
                                      corporation
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                1,933,901 shares in Lectus Inc., a California corporation
-----------------------------------------------------------------------------------------------------------------
Vencor Holdings, L.L.C.               1,234,568 shares in Atria Communities, Inc., a Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                50,000 shares in HealthEssentials Solutions, Inc., a Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Community Psychiatric Centers         1,385,076 shares of common stock and 4,350,712 shares of Series A
 Properties, Incorporated             Preferred in Behavioral Healthcare Corporation, a Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Community Psychiatric Centers of      1,112,919 shares of common stock and 1,299,817 shares of Series A
 California                           Preferred in Behavioral Healthcare Corporation, a Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Interamericana Health Care Group      246,900 shares of common stock in Behavioral Healthcare Corporation, a
                                      Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Transitional Hospitals Corporation    3,248,405 shares of common stock in Behavioral Healthcare Corporation, a
                                      Delaware corporation
-----------------------------------------------------------------------------------------------------------------
C.P.C. of Louisiana, Inc.             6,700 shares of common stock and 838 shares of Series A Preferred in
                                      Behavioral Healthcare Corporation, a Delaware corporation
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                50% general partnership interest in Fox Hill Village Partnership, a
                                      Massachusetts general partnership
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                50% general partnership interest in Hillhaven-MSC
-----------------------------------------------------------------------------------------------------------------
</TABLE>

* Vencor is pursuing collection.

                                       1
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------------------------
<S>                                   <C>
                                      Partnership, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                50% general partnership interest in Starr Farm Partnership, a Vermont
                                      partnership
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       Approximately 46% general partnership interest in VNA/CPS Pharmaceutical
                                      Services, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Vencare, Inc.                         50% membership interest in MedAssure, L.L.C., a Kentucky limited liability
                                      company
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       51% general partnership interest in California Respiratory Care
                                      Partnership, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                50% general partnership interest in Foothill Nursing Company Partnership,
                                      a California general partnership
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       Approximately 50.99% general partnership interest in Pharmaceutical
                                      Infusion Therapy, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       50.01% general partnership interest in Visiting Nurse Advanced Infusion
                                      Systems - Anaheim, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       51.01% general partnership interest in Visiting Nurse Advanced Infusion
                                      Systems - Colton, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Advanced Infusion Systems, Inc.       51.01% general partnership interest in Visiting Nurse Advanced Infusion
                                      Systems - Newbury Park, a California general partnership
-----------------------------------------------------------------------------------------------------------------
Northridge Surgery Center             38% general partnership interest in Northridge Surgery Center, Ltd., a
 Development, Ltd.                    California limited partnership
-----------------------------------------------------------------------------------------------------------------
Helian ASC of Northridge, Inc.        13% general partnership interest in Northridge Surgery Center, Ltd., a
                                      California limited partnership
-----------------------------------------------------------------------------------------------------------------
Helian Health Group, Inc.             13.5% limited partnership interest in Northridge Surgery Center, Ltd., a
                                      California limited partnership
-----------------------------------------------------------------------------------------------------------------
Helian ASC of Northridge, Inc.        6% limited partnership interest in Northridge Surgery Center, Ltd., a
                                      California limited partnership
-----------------------------------------------------------------------------------------------------------------
MedEquities, Inc.                     43% general partnership interest in Northridge Surgery Center Development,
                                      Ltd., a California limited partnership
-----------------------------------------------------------------------------------------------------------------
Helian Recovery Corporation           58% general partnership interest in Recovery Inn of Menlo Park, L.P., a
                                      California limited partnership
-----------------------------------------------------------------------------------------------------------------
Recovery Inns of America, Inc.        12% limited partnership interest in Recovery Inn of Menlo Park, L.P., a
                                      California limited partnership
-----------------------------------------------------------------------------------------------------------------
</TABLE>

* Vencor is pursuing collection.

                                       2
<PAGE>

<TABLE>
<S>                                   <C>
-----------------------------------------------------------------------------------------------------------------
Helian Recovery Corporation           Approximately 27.6% limited partnership interest in Recovery Inn of Menlo
                                      Park, L.P., a California limited partnership
-----------------------------------------------------------------------------------------------------------------
Vencor Operating, Inc.                $87,136.65 Promissory Note made by ZirMed.com, Inc.
-----------------------------------------------------------------------------------------------------------------
</TABLE>

* Vencor is pursuing collection.

                                       3
<PAGE>

<TABLE>
<CAPTION>

                                                                      SCHEDULE 7

                                   LOCAL REAL ESTATE COUNSEL
                                   -------------------------
-----------------------------------------------------------------------------------------------
                    STATE                                          LAW FIRM
-----------------------------------------------------------------------------------------------
<S>                                             <C>
Alabama                                         Sirote & Permutt
                                                2222 Arlington Avenue
                                                Birmingham, AL 35205
-----------------------------------------------------------------------------------------------
Arizona                                         Coppersmith Gordon Schermer Owens & Nelson, PLC
                                                2633 E. Indian School Road, Suite 300
                                                Phoenix, AZ 85016-6759
-----------------------------------------------------------------------------------------------
California                                      Manatt, Phelps and Phillips, LLP
                                                11365 West Olympic Boulevard
                                                Los Angeles, CA 90064-1614
-----------------------------------------------------------------------------------------------
Colorado                                        Baker & Hostetler LLP
                                                303 East 17/th/ Avenue, Suite 1100
                                                Denver, CO 80203
-----------------------------------------------------------------------------------------------
Connecticut                                     Murtha, Cullina, Richter and Pinney
                                                185 Asylum Street
                                                Hartford, CT 06103
-----------------------------------------------------------------------------------------------
Florida                                         Boyd, Lindsey, Williams & Branch
                                                1407 Piedmont Drive East
                                                Tallahassee, FL 32312
-----------------------------------------------------------------------------------------------
Georgia                                         Arnall, Golden & Gregory LLP
                                                One Atlantic Center, 1201 West Peachtree Street
                                                Atlanta, GA 30309-3400
-----------------------------------------------------------------------------------------------
Idaho                                           Marshall Batt & Fisher, L.L.P.
                                                U.S. Bank Plaza, 5/th/ Floor
                                                101 S. Capital Blvd.
                                                Post Office Box 1308
                                                Boise, Idaho 83701
-----------------------------------------------------------------------------------------------
Illinois                                        Winston & Strawn
                                                35 W. Wacker Drive
                                                Chicago, Illinois 60601-9703
-----------------------------------------------------------------------------------------------
Indiana                                         Krieg DeVault Alexander & Capehart, LLP
                                                One Indiana Square, Suite 2800
                                                Indianapolis, IN 46204-2017
-----------------------------------------------------------------------------------------------
Kentucky                                        Frost, Brown & Todd
                                                400 West Market Street, 32/nd/ Floor
                                                Louisville, KY 40202-3363
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------
<S>                                             <C>
Louisiana                                       Kean, Miller, Hawthorne, D'Armond, McCowan &
                                                Jarman, L.L.P.
                                                22/nd/ Floor, One American Place
                                                Baton Rouge, Louisiana 70825
-----------------------------------------------------------------------------------------------
Maine                                           Verrill & Dana, LLP
                                                One Portland Square
                                                Portland, ME 04112-05860
-----------------------------------------------------------------------------------------------
Massachusetts                                   Mintz, Levin, Cohn, Ferris, Glovsky & Popeo,
                                                P.C.
                                                One Financial Center
                                                Boston, MA 02111
-----------------------------------------------------------------------------------------------
Michigan                                        Honigman Miller Schwartz & Cohn
                                                2290 First National Building
                                                Detroit, MI 48226-3583
-----------------------------------------------------------------------------------------------
Minnesota                                       Orbovich & Gartner
                                                Historic Hamm Building, Suite 417
                                                408 St. Peter Street
                                                St. Paul, Minnesota 55102
-----------------------------------------------------------------------------------------------
Missouri                                        Armstrong Teasdale LLP
                                                One Metropolitan Square, Suite 2600
                                                St. Louis, Missouri 63102-2740
-----------------------------------------------------------------------------------------------
Montana                                         Crowley, Haughey, Hanson, Toole & Dietrich
                                                490 North 31/st/ Street, Suite 500 TW2
                                                Billings, Montana 59103-2529
-----------------------------------------------------------------------------------------------
Nebraska                                        Morris & Titus
                                                121 South 13/th/ Street Suite 701, Lincoln
                                                Center, P.O. Box 81849
                                                Lincoln, Nebraska 68501-1849
-----------------------------------------------------------------------------------------------
New Hampshire                                   Gallagher, Callahan & Gartrell, PA
                                                214 North Main Street, P.O. Box 1415
                                                Concord, New Hampshire 03302-1415
-----------------------------------------------------------------------------------------------
Nevada                                          Lionel Sawyer & Collins
                                                1700 Bank of America Plaza
                                                300 South Fourth Street
                                                Las Vegas, Nevada 89101
-----------------------------------------------------------------------------------------------
New Mexico                                      Rodey, Dickason, Sloan, Akin & Robb
                                                201 Third St. NW, Suite 2200
                                                Albuquerque, NM 87102
-----------------------------------------------------------------------------------------------
North Carolina                                  Womble Carlyle Sandridge & Rice
                                                200 West Second St., Suite 1500
                                                Winston-Salem, NC 27101
-----------------------------------------------------------------------------------------------
Ohio                                            Vorys, Sater, Seymour and Pease
                                                52 East Gray Street
                                                P.O. Box 1008
                                                Columbus, Ohio 43216-1008
-----------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------
<S>                                             <C>
Oklahoma                                        McAfee & Taft
                                                211 N. Robinson
                                                Two Leadership Square, 10/th/ Floor
                                                Oklahoma City, OK 73102
-----------------------------------------------------------------------------------------------
Oregon                                          Davis Wright Tremaine LLP
                                                2300 First Interstate Tower
                                                1300 SW Fifth Avenue
                                                Portland, OR 07201
-----------------------------------------------------------------------------------------------
Pennsylvania                                    Buchanan Ingersoll, P.C.
                                                1835 Market Street, 14/th/ Fl.
                                                Philadelphia, PA 19103
-----------------------------------------------------------------------------------------------
Rhode Island                                    Hinckley Allen & Snyder
                                                1500 Fleet Center
                                                Providence, RI 02903
-----------------------------------------------------------------------------------------------
Tennessee                                       Thomason, Hendrix, Harvey, Johnson & Mitchell
                                                Twenty-Ninth Floor One Commerce Square, 40
                                                South Main
                                                Memphis, Tennessee 38103
-----------------------------------------------------------------------------------------------
Texas                                           Baker & Botts, L.L.P.
                                                98 San Jacinto Blvd.
                                                1600 San Jacinto Center
                                                Austin, TX 78701-4039
-----------------------------------------------------------------------------------------------
Utah                                            Fabian & Clendenin
                                                215 South State Street, 12/th/ Floor
                                                Salt Lake City, UT 84111-2309
-----------------------------------------------------------------------------------------------
Vermont                                         Dinse, Knapp & McAndrew, P.C.
                                                209 Battery Street
                                                PO Box 988
                                                Burlington, VT 05042-0988
-----------------------------------------------------------------------------------------------
Virginia                                        Gary W. Lonergan
                                                115 Oronoco Street
                                                Alexandria, Virginia 22314
-----------------------------------------------------------------------------------------------
Washington                                      Davis Wright Tremaine LLP
                                                2600 Century Square
                                                1501 Fourth Avenue
                                                Seattle, WA 98101-1688
-----------------------------------------------------------------------------------------------
Wisconsin                                       Ehlinger Law Office, LLC
                                                Stonewood Corporate Center
                                                W175 N11117 Stonewood Dr. #211
                                                Germantown, Wisconsin 53022
-----------------------------------------------------------------------------------------------
Wyoming                                         Rogers and Associates
                                                122 East Seventeenth Street
                                                Cheyenne, WY 82001
-----------------------------------------------------------------------------------------------
</TABLE>

                                       3
<PAGE>

                                                                      SCHEDULE 8
                                   LITIGATION
                                   ----------

               (Capitalized terms used but not otherwise defined
                  shall have the meaning ascribed thereto in
           Vencor's annual filing on Form 10-K for fiscal year 2000)

     On September 13, 1999, the Company and substantially all of its
subsidiaries filed voluntary petitions for protection under Chapter 11 of the
Bankruptcy Code. The Chapter 11 Cases have been styled In re: Vencor, Inc., et
al., Debtors and Debtors in Possession, Case Nos. 99-3199 (MFW) through 99-3327
(MFW), Chapter 11, Jointly Administered. On December 14, 2000, the Company filed
its Amended Plan with the Bankruptcy Court. On March 1, 2001, the Bankruptcy
Court approved the Company's Amended Plan and an order was entered confirming
the Amended Plan on March 16, 2001.

     On March 18, 1999, the Company served Ventas with a demand for mediation
pursuant to the Spin-off Agreement. The Company was seeking a reduction in rent
and other concessions under its Master Lease Agreements with Ventas. On March
31, 1999, the Company and Ventas entered into a standstill agreement which
provided that both companies would postpone through April 12, 1999 any claims
either may have against the other. On April 12, 1999, the Company and Ventas
entered into a second standstill which provided that neither party would pursue
any claims against the other or any other third party related to the Spin-off as
long as the Company complied with certain rent payment terms. The second
standstill was scheduled to terminate on May 5, 1999. Pursuant to a tolling
agreement, the Company and Ventas also agreed that any statutes of limitations
or other time-related constraints in a bankruptcy or other proceeding that might
be asserted by one party against the other would be extended and tolled from
April 12, 1999 until May 5, 1999 or until the termination of the second
standstill. As a result of the Company's failure to pay rent, Ventas served the
Company with notices of nonpayment under the Master Lease Agreements.
Subsequently, the Company and Ventas entered into further amendments to the
second standstill and the tolling agreement to extend the time during which no
remedies may be pursued by either party and to extend the date by which the
Company may cure its failure to pay rent.

     In connection with the Chapter 11 Cases, the Company and Ventas entered
into the Stipulation that provides for the payment by the Company of a reduced
aggregate monthly rent of approximately $15.1 million. The Stipulation has been
approved by the Bankruptcy Court. The Stipulation also continues to toll any
statutes of limitations or other time constraints in a bankruptcy proceeding for
claims that might be asserted by the Company against Ventas. The Stipulation
automatically renews for one-month periods unless either party provides a 14-day
notice of termination. The Stipulation also may be terminated prior to its
expiration upon a payment default by the Company, the consummation of a plan of
reorganization or the occurrence of certain defaults under the DIP Financing.
The Stipulation also provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off. The Stipulation will
terminate upon the effective date of the Amended Plan.
<PAGE>

     The Company believes that the Amended Plan, if consummated, will resolve
all material disputes between the Company and Ventas. The Amended Plan also
provides for comprehensive mutual releases between the Company and Ventas, other
than for obligations that the Company is assuming under the Amended Plan.

     If the Amended Plan does not become effective and the Company and Ventas
are unable to otherwise resolve their disputes or maintain an interim
resolution, the Company may seek to pursue claims against Ventas arising out of
the Spin-off and seek judicial relief barring Ventas from exercising any
remedies based on the Company's failure to pay some or all of the rent to
Ventas. The Company's failure to pay rent or otherwise comply with the
Stipulation, in the absence of judicial relief, would result in an "Event of
Default" under the Master Lease Agreements. Upon an Event of Default under the
Master Lease Agreements, assuming Ventas were to be granted relief from the
automatic stay by the Bankruptcy Court, the remedies available to Ventas
include, without limitation, terminating the Master Lease Agreements,
repossessing and reletting the leased properties and requiring the Company to
(a) remain liable for all obligations under the Master Lease Agreements,
including the difference between the rent under the Master Lease Agreements and
the rent payable as a result of reletting the leased properties or (b) pay the
net present value of the rent due for the balance of the terms of the Master
Lease Agreements. Such remedies, however, would be subject to the supervision of
the Bankruptcy Court.

     The Company's subsidiary, formerly named TheraTx, Incorporated, is
plaintiff in a declaratory judgment action entitled TheraTx, Incorporated v.
James W. Duncan, Jr., et al., No. 1:95-CV-3193, filed in the United States
District Court for the Northern District of Georgia and currently pending in the
United States Court of Appeals for the Eleventh Circuit, No. 99-11451-FF. The
defendants have asserted counterclaims against TheraTx under breach of contract,
securities fraud, negligent misrepresentation and other fraud theories for
allegedly not performing as promised under a merger agreement related to
TheraTx's purchase of a company called PersonaCare, Inc. and for allegedly
failing to inform the defendants/counterclaimants prior to the merger that
TheraTx's possible acquisition of Southern Management Services, Inc. might cause
the suspension of TheraTx's shelf registration under relevant rules of the
Securities and Exchange Commission (the "Commission"). The court granted summary
judgment for the defendants/counterclaimants and ruled that TheraTx breached the
shelf registration provision in the merger agreement, but dismissed the
defendants' remaining counterclaims. Additionally, the court ruled after trial
that defendants/counterclaimants were entitled to damages and prejudgment
interest in the amount of approximately $1.3 million and attorneys' fees and
other litigation expenses of approximately $700,000. The Company and the
defendants/counterclaimants both appealed the court's rulings. The Court of
Appeals for the Eleventh Circuit affirmed the trial court's rulings with the
exception of the damages award and certified the question of the proper
calculation of damages under Delaware law to the Delaware Supreme Court. The
Company is defending the action vigorously.

     The Company is pursuing various claims against private insurance companies
who issued Medicare supplement insurance policies to individuals who became
patients of the Company's hospitals. After the patients' Medicare benefits are
exhausted, the insurance companies become liable to pay the insureds' bills
pursuant to the terms of these policies. The Company has filed

                                       2
<PAGE>

numerous collection actions against various of these insurers to collect the
difference between what Medicare would have paid and the hospitals' usual and
customary charges. These disputes arise from differences in interpretation of
the policy provisions and federal and state laws governing such policies.
Various courts have issued various rulings on the different issues, some of
which have been adverse to the Company and most of which have been appealed. The
Company intends to continue to pursue these claims vigorously. If the Company
does not prevail on these issues, future results of operations and liquidity
would be materially adversely affected.

     A class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al., was
filed on December 24, 1997 in the United States District Court for the Western
District of Kentucky (Civil Action No. 3-97CV-8354). The class action claims
were brought by an alleged stockholder of the Company's predecessor against the
Company and Ventas and certain current and former executive officers and
directors of the Company and Ventas. The complaint alleges that the Company,
Ventas and certain current and former executive officers of the Company and
Ventas during a specified time frame violated Sections 10(b) and 20(a) of the
Exchange Act, by, among other things, issuing to the investing public a series
of false and misleading statements concerning Ventas' then current operations
and the inherent value of its common stock. The complaint further alleges that
as a result of these purported false and misleading statements concerning
Ventas' revenues and successful acquisitions, the price of the common stock was
artificially inflated. In particular, the complaint alleges that the defendants
issued false and misleading financial statements during the first, second and
third calendar quarters of 1997 which misrepresented and understated the impact
that changes in Medicare reimbursement policies would have on Ventas' core
services and profitability. The complaint further alleges that the defendants
issued a series of materially false statements concerning the purportedly
successful integration of Ventas' acquisitions and prospective earnings per
share for 1997 and 1998 which the defendants knew lacked any reasonable basis
and were not being achieved. The suit seeks damages in an amount to be proven at
trial, pre-judgment and post-judgment interest, reasonable attorneys' fees,
expert witness fees and other costs, and any extraordinary equitable and/or
injunctive relief permitted by law or equity to assure that the plaintiff has an
effective remedy. In December 1998, the defendants filed a motion to dismiss the
case. The court converted the defendants' motion to dismiss into a motion for
summary judgment and granted summary judgment as to all defendants. The
plaintiff appealed the ruling to the United States Court of Appeals for the
Sixth Circuit. On April 24, 2000, the Sixth Circuit affirmed the district
court's dismissal of the action on the grounds that the plaintiff failed to
state a claim upon which relief could be granted. On July 14, 2000, the Sixth
Circuit granted the plaintiff's petition for a rehearing en banc. The Company is
defending this action vigorously.

     A shareholder derivative suit entitled Thomas G. White on behalf of Vencor,
Inc. and Ventas, Inc. v. W. Bruce Lunsford, et al., Case No. 98CI03669, was
filed in June 1998 in the Jefferson County, Kentucky, Circuit Court. The suit
was brought on behalf of the Company and Ventas against certain current and
former executive officers and directors of the Company and Ventas. The complaint
alleges that the defendants damaged the Company and Ventas by engaging in
violations of the securities laws, engaging in insider trading, fraud and
securities fraud and damaging the reputation of the Company and Ventas. The
plaintiff asserts that such actions were taken deliberately, in bad faith and
constitute breaches of the defendants' duties of loyalty and due care. The
complaint is based on substantially similar assertions to those made in

                                       3
<PAGE>

the class action lawsuit entitled A. Carl Helwig v. Vencor, Inc., et al.,
discussed above. The suit seeks unspecified damages, interest, punitive damages,
reasonable attorneys' fees, expert witness fees and other costs, and any
extraordinary equitable and/or injunctive relief permitted by law or equity to
assure that the Company and Ventas have an effective remedy. The Company
believes that the allegations in the complaint are without merit and intends to
defend this action vigorously.

     A class action lawsuit entitled Jules Brody v. Transitional Hospitals
Corporation, et al., Case No. CV-S-97-00747-PMP, was filed on June 19, 1997 in
the United States District Court for the District of Nevada on behalf of a class
consisting of all persons who sold shares of Transitional common stock during
the period from February 26, 1997 through May 4, 1997, inclusive. The complaint
alleges that Transitional purchased shares of its common stock from members of
the investing public after it had received a written offer to acquire all of the
Transitional common stock and without making the required disclosure that such
an offer had been made. The complaint further alleges that defendants disclosed
that there were "expressions of interest" in acquiring Transitional when, in
fact, at that time, the negotiations had reached an advanced stage with actual
firm offers at substantial premiums to the trading price of Transitional's stock
having been made which were actively being considered by Transitional's Board of
Directors. The complaint asserts claims pursuant to Sections 10(b), 14(e) and
20(a) of the Exchange Act, and common law principles of negligent
misrepresentation and names as defendants Transitional as well as certain former
senior executives and directors of Transitional. The plaintiff seeks class
certification, unspecified damages, attorneys' fees and costs. In June 1998, the
court granted the Company's motion to dismiss with leave to amend the Section
10(b) claim and the state law claims for misrepresentation. The court denied the
Company's motion to dismiss the Section 14(e) and Section 20(a) claims, after
which the Company filed a motion for reconsideration. On March 23, 1999, the
court granted the Company's motion to dismiss all remaining claims and the case
was dismissed. The plaintiff has appealed this ruling to the United States Court
of Appeals for the Ninth Circuit. The Company is defending this action
vigorously.

     On April 14, 1999, a lawsuit entitled Lenox Healthcare, Inc., et al. v.
Vencor, Inc., et al., Case No. BC 208750, was filed in the Superior Court of Los
Angeles, California by Lenox Healthcare, Inc. ("Lenox") asserting various causes
of action arising out of the Company's sale and lease of several nursing centers
to Lenox in 1997. Lenox subsequently removed certain of its causes of action and
refiled these claims before the United States District Court for the Western
District of Kentucky in a case entitled Lenox Healthcare, Inc. v. Vencor, Inc.,
et al., Case No. 3:99 CV-348-H. The Company asserted counterclaims, including
RICO claims, against Lenox in the Kentucky action. The Company believes that the
allegations made by Lenox in both complaints are without merit. Lenox and its
subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code on
November 3, 1999. By virtue of both the Company's and Lenox's separate filings
for Chapter 11 protection, the two Lenox actions and the Company's counterclaims
were stayed. Subsequently, the parties entered into a settlement, which was
approved by their respective bankruptcy courts, that requires the dismissal of
the two above actions. Joint motions to dismiss have been filed by the parties
in each court.

     The Company was informed by the DOJ that the Company and Ventas are the
subjects of investigations into various Medicare reimbursement issues, including
hospital cost reporting

                                       4
<PAGE>

issues, Vencare billing practices and various quality of care issues in the
hospitals and nursing centers formerly operated by Ventas and currently operated
by the Company. These investigations include some matters for which the Company
indemnified Ventas in the Spin-off. In cases where neither the Company nor any
of its subsidiaries are defendants but Ventas is the defendant, the Company had
agreed to defend and indemnify Ventas for such claims as part of the Spin-off.
The Stipulation entered into with Ventas provides that the Company will continue
to fulfill its indemnification obligations arising from the Spin-off. The
Company has cooperated fully in the investigations.

     The DOJ has informed the Company that it has intervened in several pending
qui tam actions asserted against the Company and/or Ventas in connection with
these investigations. In addition, the DOJ has filed proofs of claims with
respect to certain alleged claims in the Chapter 11 Cases. The Company, Ventas
and the DOJ have finalized the terms of the Government Settlement which will
resolve all of the DOJ investigations including the pending qui tam actions.
The Government Settlement provides that within 30 days after the Amended Plan
becomes effective, the Government will move to dismiss with prejudice to the
United States and the relators (except for certain claims which will be
dismissed without prejudice to the United States in certain of the cases) the
pending qui tam actions as against any or all of the Company and its
subsidiaries, Ventas and any current or former officers, directors and employees
of either entity. There can be no assurance that each court before which a qui
tam action is pending will dismiss the case on the DOJ's motion.

     The following is a summary of the qui tam actions pending against the
Company and/or Ventas in which the DOJ has intervened. In connection with the
DOJ's intervention, the courts ordered these previously non-public actions to be
unsealed. Certain of the actions described below name other defendants in
addition to the Company and Ventas.

     (a) The Company, Ventas and the Company's subsidiary, American X-Rays, Inc.
("AXR"), are defendants in a civil qui tam action styled United States ex rel.
Doe v. American X-Rays Inc., et al., No. LR-C-95-332, pending in the United
States District Court for the Eastern District of Arkansas and served on AXR on
July 7, 1997. The DOJ intervened in the suit which was brought under the Federal
Civil False Claims Act and added the Company and Ventas as defendants. The
Company acquired an interest in AXR when Hillhaven was merged into the Company
in September 1995 and purchased the remaining interest in AXR in February 1996.
AXR provided portable X-ray services to nursing centers (including some of those
operated by Ventas or the Company) and other healthcare providers. The civil
suit alleges that AXR submitted false claims to the Medicare and Medicaid
programs. The suit seeks damages in an amount of not less than $1,000,000,
treble damages and civil penalties. The Company has defended this action
vigorously. The court has dismissed the action based upon the possible pending
settlement between the DOJ, the Company and Ventas. In a related criminal
investigation, the United States Attorney's Office for the Eastern District of
Arkansas ("USAO") indicted four former employees of AXR; those individuals were
convicted of various fraud related counts in January 1999. AXR had been informed
previously that it was not a target of the criminal investigation, and AXR was
not indicted. However, the Company received several grand jury subpoenas for
documents and witnesses which it moved to quash. The USAO has withdrawn the
subpoenas which rendered the motion moot.

                                       5
<PAGE>

     (b)  The Company's subsidiary, Medisave Pharmacies, Inc. ("Medisave"),
Ventas and Hillhaven (former parent company to Medisave), are the defendants in
a civil qui tam action styled United States ex rel. Danley v. Medisave
Pharmacies, Inc., et al., No. CV-N-96-00170-HDM, filed in the United States
District Court for the District of Nevada on March 15, 1996. The plaintiff
alleges that Medisave, an institutional pharmacy provider, formerly owned by
Ventas and owned by the Company since the Spin-off: (a) charged the Medicare
program for unit dose drugs when bulk drugs were administered and charged
skilled nursing facilities more for the same drugs for Medicare patients than
for non-Medicare patients; (b) improperly claimed special dispensing fees that
it was not entitled to under Medicaid; and (c) recouped unused drugs from
skilled nursing facilities and returned these drugs to its stock without
crediting Medicare or Medicaid, all in violation of the Federal Civil False
Claims Act. The complaint also alleges that Medisave had a policy of offering
kickbacks, such as free equipment, to skilled nursing centers to secure and
maintain their business. The complaint seeks treble damages, other unspecified
damages, civil penalties, attorneys' fees and other costs. The Company disputes
the allegations in the complaint. The defendants intend to defend this action
vigorously.

     (c)  Ventas and the Company's subsidiary, Vencare, Inc. ("Vencare"), among
others, are defendants in the action styled United States ex rel. Roberts v.
Vencor, Inc., et al., No. 3:97CV-349-J, filed in the United States District
Court for the Western District of Kansas on June 25, 1996 and consolidated with
the action styled United States of America ex rel. Meharg, et al. v. Vencor,
Inc., et al., No. 3:98SC-737-H, filed in the United States District Court for
the Middle District of Florida on June 4, 1998. The complaint alleges that the
defendants knowingly submitted and conspired to submit false claims and
statements to the Medicare program in connection with their purported provision
of respiratory therapy services to skilled nursing center residents. The
defendants allegedly billed Medicare for respiratory therapy services and
supplies when those services were not medically necessary, billed for services
not provided, exaggerated the time required to provide services or exaggerated
the productivity of their therapists. It is further alleged that the defendants
presented false claims and statements to the Medicare program in violation of
the Federal Civil False Claims Act, by, among other things, allegedly causing
skilled nursing centers with which they had respiratory therapy contracts, to
present false claims to Medicare for respiratory therapy services and supplies.
The complaint seeks treble damages, other unspecified damages, civil penalties,
attorneys' fees and other costs. The Company disputes the allegations in the
complaint. The defendants intend to defend this action vigorously.

     (d)  In United States ex rel. Kneepkens v. Gambro Healthcare, Inc., et al.,
No. 97-10400-GAO, filed in the United States District Court for the District of
Massachusetts on October 15, 1998, the Company's subsidiary, Transitional, and
two unrelated entities, Gambro Healthcare, Inc. and Dialysis Holdings, Inc., are
defendants in this suit alleging that they violated the Federal Civil False
Claims Act and the Medicare and Medicaid antikickback, antifraud and abuse
regulations and committed common law fraud, unjust enrichment and payment by
mistake of fact. Specifically, the complaint alleges that a predecessor to
Transitional formed a joint venture with Damon Clinical Laboratories to create
and operate a clinical testing laboratory in Georgia that was then used to
provide lab testing for dialysis patients, and that the joint venture billed at
below cost in return for referral of substantially all non-routine testing in
violation of Medicare

                                       6
<PAGE>

and Medicaid antikickback and antifraud regulations. It is further alleged that
a predecessor to Transitional and Damon Clinical Laboratories used multiple
panel testing of end stage renal disease rather than single panel testing that
allegedly resulted in the generation of additional revenues from Medicare and
that the entities allegedly added non-routine tests to tests otherwise ordered
by physicians that were not requested or medically necessary but resulted in
additional revenue from Medicare in violation of the antikickback and antifraud
regulations. Transitional has moved to dismiss the case. Transitional disputes
the allegations in the complaint and is defending the action vigorously.

     (e)  The Company and/or Ventas are defendants in the action styled United
States ex rel. Huff and Dolan v. Vencor, Inc., et al., No. 97-4358 AHM (Mcx),
filed in the United States District Court for the Central District of California
on June 13, 1997. The plaintiff alleges that the defendant violated the Federal
Civil False Claims Act by submitting false claims to the Medicare, Medicaid and
CHAMPUS programs by allegedly: (a) falsifying patient bills and submitting the
bills to the Medicare, Medicaid and CHAMPUS programs, (b) submitting bills for
intensive and critical care not actually administered to patients, (c)
falsifying patient charts in relation to the billing, (d) charging for physical
therapy services allegedly not provided and pharmacy services allegedly provided
by non-pharmacists, and (e) billing for sales calls made by nurses to
prospective patients. The complaint seeks treble damages, other unspecified
damages, civil penalties, attorneys' fees and other costs. Defendants dispute
the allegations in the complaint. The Company, on behalf of itself and Ventas,
intends to defend this action vigorously.

     (f)  Ventas is the defendant in the action styled United States ex rel.
Brzycki v. Vencor, Inc., Civ. No. 97-451-JD, filed in the United States District
Court for the District of New Hampshire on September 8, 1997. Ventas is alleged
to have knowingly violated the Federal Civil False Claims Act by submitting and
conspiring to submit false claims to the Medicare program. The complaint alleges
that Ventas: (a) fabricated diagnosis codes by ordering medically unnecessary
services, such as respiratory therapy; (b) changed referring physicians'
diagnoses in order to qualify for Medicare reimbursement; and (c) billed
Medicare for oxygen use by patients regardless of whether the oxygen was
actually administered to particular patients. The complaint further alleges that
Ventas paid illegal kickbacks to referring healthcare professionals in the form
of medical consulting service agreements as an alleged inducement to refer
patients, in violation of the Federal Civil False Claims Act, the antikickback
and antifraud regulations and the Stark provisions. It is additionally alleged
that Ventas consistently submitted Medicare claims for clinical services that
were not performed or were performed at lower actual costs. The complaint seeks
unspecified damages, civil penalties, attorneys' fees and costs. Ventas disputes
the allegations in the complaint. The Company, on behalf of Ventas, intends to
defend the action vigorously.

     (g)  United States ex rel. Lanford and Cavanaugh v. Vencor, Inc., et al.,
Civ. No. 97-CV-2845, was filed against Ventas in the United States District
Court for the Middle District of Florida, on November 24, 1997. The United
States of America intervened in this civil qui tam lawsuit on May 17, 1999. On
July 23, 1999, the United States filed its amended complaint in the lawsuit and
added the Company as a defendant. The lawsuit alleges that the Company and
Ventas knowingly submitted false claims and false statements to the Medicare and
Medicaid

                                       7
<PAGE>

programs including, but not limited to, claims for reimbursement of costs for
certain ancillary services performed in defendants' nursing centers and for
third-party nursing center operators that the United States alleges are not
properly reimbursable costs through the hospitals' cost reports. The lawsuit
involves the Company's hospitals which were owned by Ventas prior to the Spin-
off. The complaint does not specify the amount of damages sought. The Company
and Ventas dispute the allegations in the amended complaint and intend to defend
this action vigorously.

     (h)  In United States ex rel. Harris and Young v. Vencor, Inc., et al.,
filed in the Eastern District of Missouri on May 25, 1999, the defendants
include the Company, Vencare, and Ventas. The defendants allegedly submitted and
conspired to submit false claims for payment to the Medicare and CHAMPUS
programs, in violation of the Federal Civil False Claims Act.  According to the
complaint, the Company, through its subsidiary, Vencare, allegedly (a) over
billed for respiratory therapy services, (b) rendered medically unnecessary
treatment, and (c) falsified supply, clinical and equipment records. The
defendants also allegedly encouraged or instructed therapists to falsify
clinical records and over prescribe therapy services.  The complaint seeks
treble damages, other unspecified damages, civil penalties, attorneys' fees and
other costs. The Company disputes the allegations in the complaint and intends
to defend this action vigorously.  The action has been dismissed with prejudice
as to the relator and without prejudice as to the United States.

     (i)  In United States ex rel. George Mitchell, et al. v. Vencor, Inc., et
al., filed in the United States District Court for the Southern District of Ohio
on August 13, 1999, the defendants, consisting of the Company and its two
subsidiaries, Vencare and Vencor Hospice, Inc., are alleged to have violated the
Federal Civil False Claims Act by obtaining improper reimbursement from Medicare
concerning the treatment of hospice patients.  Defendants are alleged to have
obtained inflated Medicare reimbursement for admitting, treating and/or failing
to discharge in a timely manner hospice patients who were not "hospice
appropriate." The complaint further alleges that the defendants obtained
inflated reimbursement for providing medications for these hospice patients. The
complaint alleges damages in excess of $1,000,000. The Company disputes the
allegations in the complaint and intends to defend vigorously the action.

     (j)  In Gary Graham, on Behalf of the United States of America v. Vencor
Operating, Inc. et. al., filed in the United States District Court for the
Southern District of Florida on or about June 8, 1999, the defendants, including
the Company, its subsidiary, Vencor Operating, Inc., Ventas, Hillhaven and
Medisave, are alleged to have presented or caused to be presented false or
fraudulent claims for payment to the Medicare program in violation of, among
other things, the Federal Civil False Claims Act. The complaint alleges that
Medisave, a subsidiary of the Company which was transferred from Ventas to the
Company in the Spin-off, systematically up-charged for drugs and supplies
dispensed to Medicare patients. The complaint seeks unspecified damages, civil
penalties, interest, attorneys' fees and other costs. The Company disputes the
allegations in the complaint and intends to defend this action vigorously.

     (k)  In United States, et al., ex rel. Phillips-Minks, et al. v.
Transitional Corp., et al., filed in the United States District Court for
Southern District of California on July 23, 1998, the

                                       8
<PAGE>

defendants, including Transitional and Ventas, are alleged to have submitted and
conspired to submit false claims and statements to Medicare, Medicaid, and other
federal and state funded programs during a period commencing in 1993. The
conduct complained of allegedly violates the Federal Civil False Claims Act, the
California False Claims Act, the Florida False Claims Act, the Tennessee Health
Care False Claims Act, and the Illinois Whistleblower Reward and Protection Act.
The defendants allegedly submitted improper and erroneous claims to Medicare,
Medicaid and other programs, for improper or unnecessary services and services
not performed, inadequate collections efforts associated with billing and
collecting bad debts, inflated and nonexistent laboratory charges, false and
inadequate documentation of claims, splitting charges, shifting revenues and
expenses, transferring patients to hospitals that are reimbursed by Medicare at
a higher level, failing to return duplicate reimbursement payments, and
improperly allocating hospital insurance expenses. In addition, the complaint
alleges that the defendants were inconsistent in their reporting of cost report
data, paid kickbacks to increase patient referrals to hospitals, and incorrectly
reported employee compensation resulting in inflated employee 401(k)
contributions. The complaint seeks unspecified damages. The Company disputes the
allegations in the complaint and intends to defend this action vigorously.

     In connection with the Spin-off, liabilities arising from various legal
proceedings and other actions were assumed by the Company and the Company agreed
to indemnify Ventas against any losses, including any costs or expenses, it may
incur arising out of or in connection with such legal proceedings and other
actions. The indemnification provided by the Company also covers losses,
including costs and expenses, which may arise from any future claims asserted
against Ventas based on the former healthcare operations of Ventas. In
connection with its indemnification obligation, the Company has assumed the
defense of various legal proceedings and other actions. The Stipulation entered
into with Ventas provides that the Company will continue to fulfill its
indemnification obligations arising from the Spin-off.

     The Company is a party to certain legal actions and regulatory
investigations arising in the normal course of its business. The Company is
unable to predict the ultimate outcome of pending litigation and regulatory
investigations. In addition, there can be no assurance that the DOJ, HCFA or
other regulatory agencies will not initiate additional investigations related to
the Company's businesses in the future, nor can there be any assurance that the
resolution of any litigation or investigations, either individually or in the
aggregate, would not have a material adverse effect on the Company's results of
operations, liquidity or financial position. In addition, the above litigation
and investigations (as well as future litigation and investigations) are
expected to consume the time and attention of the Company's management and may
have a disruptive effect upon the Company's operations.

      *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *

     In the opinion of Vencor Operating, Inc., there is no reasonable
possibility of an adverse decision with respect to the actions disclosed on this
Schedule 8 that could reasonably be expected to have a Material Adverse Effect
or which in any manner would question the validity of any Financing Document.

                                       9
<PAGE>

                                                                      SCHEDULE 9

                             EXISTING INDEBTEDNESS
                             ---------------------

--------------------------------------------------------------------------------
        CREDITOR                 PRINCIPAL              DESCRIPTION
                                 BALANCE/1/
--------------------------------------------------------------------------------
    Middleton Village          $   1,675,938      mortgage on real/personal
                                                  property - Nursing Center
--------------------------------------------------------------------------------
 Various Landlords under       $     949,799         See attached chart
   Capitalized Leases
--------------------------------------------------------------------------------
   City of Louisville          $   4,200,000    Lien on property under a city
                                               development grant for corporate
                                                        headquarters.
--------------------------------------------------------------------------------
  Recovery Inn of Menlo        $4,228,008.88        Intercompany balance
       Park, L.P.                                      (open accounts)
--------------------------------------------------------------------------------

______________________________

/1/   All balances as of March 31, 2001.
<PAGE>

                       EXISTING INDEBTEDNESS (continued)
                       ---------------------------------

                               CAPITALIZED LEASES
                               ------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
             LIEN HOLDER                      LIEN GRANTOR          PRINCIPAL             DESCRIPTION
                                                                    AMOUNT OF
                                                                   DEBT SECURED
                                                                    BY LIEN/2/

------------------------------------------------------------------------------------------------------------
<S>                                      <C>                       <C>              <C>
          IBM Credit Corp.                    Vencor, Inc.           $208,356           IBM Rise 6000
          290 Harbor Drive                                                             Computer Servers
           P.O. Box 10399
      Stamford, CT  06904-2399
------------------------------------------------------------------------------------------------------------
     Wesleyan Retirement Center          Vencor Nursing Centers      $ 18,732          Personal Property
  d/b/a/ Colonial Oaks  Ret. Apts.        Limited Partnership
     714 S. Colonial Oaks Drive                                                       Colonial Oaks Health
         Marion, IN  46953                                                                Care Center
                                                                                      4725 South Colonial
                                                                                          Oaks Drive
                                                                                       Marion, IN  46953

------------------------------------------------------------------------------------------------------------
           Health Quest                  Vencor Nursing Centers      $115,732          Personal Property
   315 West Jefferson Boulevard           Limited Partnership
   South Bend, IN   46601-1586                                                         Regency Place of
                                                                                          Castleton
                                                                                    5226 East 82/nd/ Street
                                                                                       Indianapolis, IN
                                                                                            46250
------------------------------------------------------------------------------------------------------------
           Health Quest                  Vencor Nursing Centers      $107,346          Personal Property
   315 West Jefferson Boulevard           Limited Partnership
    South Bend, IN 46601-1586                                                          Regency Place of
                                                                                             Dyer
                                                                                       2300 Great Lakes
                                                                                            Drive
                                                                                        Dyer, IN  46311
------------------------------------------------------------------------------------------------------------
           Health Quest                  Vencor Nursing Centers      $169,106          Personal Property
   315 West Jefferson Boulevard           Limited Partnership
    South Bend, IN 46601-1586                                                          Regency Place of
                                                                                          Greenwood
                                                                                        377 Westridge
                                                                                          Boulevard
                                                                                        Greenwood, IN
------------------------------------------------------------------------------------------------------------
</TABLE>
      ______________________________

      /2/   All balances as of March 31, 2001.

                                       2
<PAGE>

<TABLE>
----------------------------------------------------------------------------------------------------------
<S>                                   <C>                         <C>           <C>
                                                                                       46142

----------------------------------------------------------------------------------------------------------
          Health Quest                Vencor Nursing Centers      $115,731        Personal Property
  315 West Jefferson Boulevard         Limited Partnership
    South Bend, IN 46601-1586                                                     Regency Place of
                                                                                     Fort Wayne
                                                                                  6006 Brandy Chase
                                                                                        Cove
                                                                                 Ft. Wayne, IN  46815

----------------------------------------------------------------------------------------------------------
          Health Quest                Vencor Nursing Centers      $169,074        Personal Property
  315 West Jefferson Boulevard         Limited Partnership
    South Bend, IN 46601-1586                                                     Regency Place of
                                                                                     Greenfield
                                                                                  200 Green Meadows
                                                                                       Drive
                                                                                Greenfield, IN  46140

-----------------------------------------------------------------------------------------------------------
          Health Quest                Vencor Nursing Centers      $115,731        Personal Property
  315 West Jefferson Boulevard         Limited Partnership
    South Bend, IN 46601-1586                                                     Regency Place of
                                                                                     Lafayette
                                                                                300 Windy Hill Drive
                                                                                Lafayette, IN  47905

----------------------------------------------------------------------------------------------------------
          Health Quest                Vencor Nursing Centers      $107,346        Personal Property
  315 West Jefferson Boulevard         Limited Partnership
    South Bend, IN 46601-1586                                                     Regency Place of
                                                                                     South Bend
                                                                                    52654 North
                                                                                   Ironwood Road
                                                                                   South Bend, IN
                                                                                       46635

----------------------------------------------------------------------------------------------------------
</TABLE>

                                       3
<PAGE>

                                                                     Schedule 10

              Debt Not Held in Concentration Accounts or Pledged
              --------------------------------------------------

1.  All of the following obligations owed to Vencor Operating, Inc. (all
    balances as of April 19, 2001)

<TABLE>
<CAPTION>
  Consolidating
     Entity        Entity Name                                                        Total Principal
     ------        -----------                                                        ---------------
  <S>              <C>                                                                <C>
       No          Hillhaven - MSC Partnership                                             392,500.00

       No          Randle Paull Associates                                               3,589,000.00

       Yes         Foothill Nursing Company Partnership                                 12,351,982.39

       Yes         Pharmaceutical Infusion Therapy Partnership                             650,000.00

       Yes         California Respiratory Care Partnership                                 527,000.00

       Yes         Visiting Nurse Advanced Infusion Systems - Anaheim                      350,000.00

       Yes         Carribean Behavioral Health Systems, Inc.                               292,858.96

    Grand Total                                                                         18,153,341.35
                                                                                        =============
</TABLE>

2. All obligations (in the aggregate not exceeding $16 million) owed to Vencor
   Operating, Inc. and/or Vencor, Inc. from certain current and former officers
   of Vencor as referenced on Schedule 6.
<PAGE>

                                                                     SCHEDULE 11

                            POST-CLOSING DELIVERIES
                            -----------------------

1.  Restricted Subsidiaries for which replacement stock certificates are to be
delivered after the Closing Date in accordance with the terms of the Credit
Agreement:

          Health Care Holdings, Inc. (to account for name change of its parent
from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab Services,
Inc.)

          Helian Health Group, Inc. (to account for name change of its parent
from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab Services,
Inc.)

          Horizon Healthcare Services, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          PersonaCare, Inc. (to account for name change of its parent from
TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab Services, Inc.)

          PersonaCare of Bradenton, Inc. (to reflect a par value of $.001 per
share)

          PersonaCare of Warner Robins, Inc. (to reflect a par value of $.001
per share)

          Respiratory Care Services, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          TheraTx Health Services, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          TheraTx Healthcare Management, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          TheraTx Management Services, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          TheraTx Medical Supplies, Inc. (to account for name change of its
parent from TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab
Services, Inc.)

          TheraTx Rehabilitation Services, Inc. (to reflect correct name of its
parent, TheraTx Health Services, Inc.)

          TheraTx Staffing, Inc. (to account for name change of its parent from
TheraTx, Inc. to Vencare Rehab Services, Inc. to Kindred Rehab Services, Inc.)

          VC-WM, Inc. (to account for name change of its parent from TheraTx,
Inc. to Vencare Rehab Services, Inc. to Kindred Rehab Services, Inc.)
<PAGE>

2.   Investment for which stock certificate is to be delivered after the Closing
Date in accordance with the terms of the Credit Agreement:

          Lectus Inc. (representing 1,933,901 shares held by Vencor Operating,
Inc. but currently certificated in the name of Ventas Investments)

                                       2

<PAGE>

                                                                       EXHIBIT A

                                     NOTE

$_______________                                              New York, New York
                                                              April __, 2001

THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER
AND TO THE EXTENT SET FORTH IN THAT CERTAIN CREDIT AGREEMENT REFERRED TO BELOW
IN ACCORDANCE WITH THE TERMS THEREOF, AND THE RIGHTS AND REMEDIES OF THE HOLDER
OF THIS NOTE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF APRIL 20, 2001 BY AND
AMONG THE ISSUER, VENCOR, THE COLLATERAL AGENT AND THE EXIT FACILITY COLLATERAL
AGENT, AS AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO
TIME (THE "INTERCREDITOR AGREEMENT").

     For value received, VENCOR OPERATING, INC. (to be renamed Kindred
Healthcare Operating, Inc.), a Delaware corporation (the "Issuer"), promises to
pay [name of Lender] or its registered assigns (the "Lender"), for the account
of its Lending Office, the principal amount of $_______, or such lesser amount
as is the outstanding principal amount of the Loan evidenced by this Note issued
by the Issuer pursuant to the Credit Agreement referred to below, on the
maturity date provided for in the Credit Agreement. The Issuer promises to pay
interest on the unpaid principal amount hereof on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of the Administrative Agent as set
forth in the Credit Agreement.

     All repayments of the principal hereof shall be recorded by the Lender and,
if the Lender so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to the
principal amount of the Loan evidenced by this Note then outstanding may be
endorsed by the Lender on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof; provided that neither the
failure of the Lender to make any such recordation or endorsement nor any error
therein shall affect the obligations of the Issuer hereunder or under any other
Financing Document.

                                      A-1
<PAGE>

     This note is one of the Notes referred to in the $300,000,000 Credit
Agreement dated as of April 20, 2001 among the Issuer, Vencor, Inc. (to be
renamed Kindred Healthcare, Inc.), the Lenders party thereto and Morgan Guaranty
Trust Company of New York, as Administrative Agent and Collateral Agent (as
amended from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.

     By its acceptance hereof, the Lender hereby acknowledges and agrees that
its rights to payment hereunder and under the Financing Documents and its rights
to exercise remedies are subject to the subordination provisions set forth in
Article XI of the Credit Agreement and to the terms and conditions set forth in
the Intercreditor Agreement.

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

                                       By:________________________________
                                          Title:

                                      A-2
<PAGE>

                                 Note (cont'd)

                        LOANS AND PAYMENTS OF PRINCIPAL

--------------------------------------------------------------------------------
                                                                   Notation
    Date                Amount of Principal Repaid                 Made By
--------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      A-3
<PAGE>

                                                                       EXHIBIT B

                                                                [EXECUTION COPY]

                       SECOND PRIORITY SECURITY AGREEMENT

                                   dated as of

                                 April 20, 2001

                                      among

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

                           THE GUARANTORS PARTY HERETO

                                       and

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                               as Collateral Agent
<PAGE>

                                TABLE OF CONTENTS

                                 --------------
<TABLE>
<CAPTION>

                                                                                           Page
                                                                                           ----
<S>                                                                                        <C>
Section 1.  Definitions................................................................       2
Section 2.  Representations and Warranties.............................................      12
Section 3.  The Security Interests.....................................................      14
Section 4.  Delivery of Certain Collateral.............................................      16
Section 5.  Further Assurances; Covenants..............................................      17
Section 6.  Concentration Accounts.....................................................      21
Section 7.  Collateral Accounts........................................................      23
Section 8.  Record Ownership of Pledged Equity Securities..............................      25
Section 9.  Right to Vote Pledged Equity Securities....................................      25
Section 10. Right to Receive Distributions on Collateral...............................      26
Section 11. General Authority..........................................................      26
Section 12. Remedies upon Enforcement Notice...........................................      27
Section 13. Fees and Expenses; Indemnification.........................................      31
Section 14. Limitation on Duty of Collateral Agent in Respect of Collateral............      32
Section 15. Application of Proceeds....................................................      32
Section 16. Concerning the Collateral Agent............................................      33
Section 17. Appointment of Co-collateral Agents........................................      37
Section 18. Termination of Security Interests; Release of Collateral; Reinstatement....      37
Section 19. Additional Subsidiary Guarantors...........................................      38
Section 20. Notices....................................................................      38
Section 21. Withdrawal of Enforcement Notice...........................................      40
Section 22. Waivers, Remedies Not Exclusive............................................      41
Section 23. Successors and Assigns.....................................................      41
Section 24. Changes in Writing.........................................................      41
Section 25. NEW YORK LAW...............................................................      41
Section 26. Severability...............................................................      42
Section 27. Intercreditor Agreement....................................................      42
Section 28. Counterparts...............................................................      42
</TABLE>

Exhibit A   --   Form of Second Priority Security Agreement Supplement

Exhibit B   --   Form of Second Priority Copyright Security Agreement

Exhibit C   --   Form of Second Priority Patent Security Agreement

Exhibit D   --   Form of Second Priority Trademark Security Agreement

                                       2
<PAGE>

Exhibit E   --   Form of Second Priority Perfection Certificate

Exhibit F   --   Form of Second Priority Leasehold Mortgage

Exhibit G   --   Form of Second Priority Fee Mortgage

Exhibit H   --   Form of Account Control Agreement

                                       3
<PAGE>

                      SECOND PRIORITY SECURITY AGREEMENT

         AGREEMENT dated as of April 20, 2001 among VENCOR OPERATING, INC. (to
be renamed Kindred Healthcare Operating, Inc.), the GUARANTORS party hereto and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Collateral Agent.

         WHEREAS, the Issuer is entering into the Credit Agreement (such term
and other capitalized terms used in these recitals without definition having the
meanings set forth in Section 1 below), pursuant to which the Issuer intends to
issue senior secured notes with a stated principal amount of $300,000,000 to the
Lenders in partial satisfaction of the claims of the Lenders arising under the
$1,000,000,000 Credit Agreement dated as of April 29, 1998 (as amended, the
"Pre-Petition Senior Credit Agreement") among the Issuer, Vencor and a group of
banks and other financial institutions, in connection with which Bank of America
N.A. (previously named Nationsbank N.A.) acted as administrative agent and
Morgan Guaranty Trust Company of New York acted as documentation agent and
collateral agent;

         WHEREAS, the Issuer is willing to secure its obligations under the
Credit Agreement and the other Financing Documents by granting Liens on its
assets to the Collateral Agent as provided in this Agreement and the other
Collateral Documents;

         WHEREAS, Vencor is guaranteeing the foregoing obligations of the Issuer
as provided in the Vencor Guaranty Agreement and is willing to secure its
guarantee thereof by granting Liens on its assets to the Collateral Agent as
provided in this Agreement and the other Collateral Documents;

         WHEREAS, the Issuer is willing to cause each of its Restricted
Subsidiaries to guarantee the foregoing obligations of the Issuer as provided in
a Subsidiary Guaranty Agreement, with each Restricted Subsidiary to secure its
guarantee thereof by granting Liens on its assets to the Collateral Agent as
provided in this Agreement and the other Collateral Documents;

         WHEREAS, the Lenders are willing to accept the notes described above in
partial settlement of their claims under the Pre-Petition Senior Credit
Agreement only if (i) the foregoing obligations of the Issuer are secured by
Liens on its assets as provided in the Collateral Documents, (ii) the foregoing
obligations of the Issuer are guaranteed by Vencor and each of the Issuer's
Restricted Subsidiaries and (iii) each such guarantee is secured by Liens on the
assets of the relevant Guarantor as provided in this Agreement and the other
Collateral Documents; and
<PAGE>

         WHEREAS, upon any foreclosure or other enforcement of the Collateral
Documents, the net proceeds of the relevant Collateral are to be received by or
paid over to the Collateral Agent and applied as provided in Section 15 of this
Agreement;

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
meanings:

         "Account Control Agreement" means an agreement among the Borrower, a
Concentration Account Bank, the Collateral Agent and the Exit Facility
Collateral Agent pursuant to which the Concentration Accounts are maintained,
such agreement to be substantially in the form of Exhibit H hereto or in any
other form agreed to by the parties thereto.

         "Accounts" means, with respect to any Lien Grantor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Lien Grantor, and
also means and includes all accounts receivable, contract rights, book debts,
notes, drafts and other obligations or indebtedness owing to such Lien Grantor
arising from the performance of services by it and/or the sale, lease or
exchange of goods or other property by it (including, without limitation, any
such obligation or indebtedness which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any applicable jurisdiction) and all of such Lien Grantor's rights in, to and
under all contracts or purchase orders for goods, services or other property,
and all of such Lien Grantor's rights to any goods, services or other property
represented by any of the foregoing and all monies due to or to become due to
such Lien Grantor under all contracts for the performance of services by it
and/or the sale, lease or exchange of goods or other property by it (whether or
not yet earned by performance on the part of such Lien Grantor), in each case
whether now existing or hereafter arising or acquired, including, without
limitation, the right to receive the proceeds of said contracts and purchase
orders and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing; provided that the term "Accounts"
shall not include such Lien Grantor's right, title and interest in and to any
Retained Collection Rights.

         "Cash Distributions" means dividends, interest and other payments and
distributions made in cash upon or with respect to the Collateral.

                                       2
<PAGE>

         "Chattel Paper" means "chattel paper" (as defined in the UCC).

         "Collateral" means all property, whether now owned or hereafter
acquired, in which a security interest or other Lien is granted or purported to
be granted to the Collateral Agent pursuant to the Collateral Documents. When
used with respect to a specific Lien Grantor, the term "Collateral" means all
such property in which such a security interest or other Lien is granted or
purported to be granted to the Collateral Agent by such Lien Grantor.

         "Collateral Accounts" means the Reduction Event Account and the
Collateral Proceeds Accounts.

         "Collateral Agent" means Morgan Guaranty Trust Company of New York, in
its capacity as Collateral Agent for the holders of the Secured Obligations
under the Collateral Documents, and its successors in such capacity.

         "Collateral Documents" means this Agreement, the Security Agreement
Supplements, the Mortgages, the Account Control Agreements, the Intellectual
Property Security Agreements and all other supplemental or additional security
agreements, mortgages or similar instruments delivered pursuant hereto or
thereto.

         "Collateral Proceeds Account" has the meaning set forth in Section
7(d).

         "Concentration Account Bank" has the meaning set forth in Section 6(a).

         "Concentration Accounts" has the meaning set forth in Section 6(a).

         "Copyright License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor has granted
to any other Person, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which a
Copyright is in existence or may come into existence, including, without
limitation, any agreement identified in Schedule 1 to a Copyright Security
Agreement.

         "Copyrights" means all the following: (i) all copyrights under the laws
of the United States or any other country (whether or not the underlying works
of authorship have been published), all registrations and recordings thereof,
all copyrightable works of authorship (whether or not published), and all
applications for copyrights under the laws of the United States or any other
country, including, without limitation, registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States, any State

                                       3
<PAGE>

thereof or any other country or any political subdivision thereof, including,
without limitation, those described in Schedule 1 to any Copyright Security
Agreement, (ii) all renewals thereof, (iii) all claims for, and rights to sue
for, past or future infringements of any of the foregoing, and (iv) all income,
royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including, without limitation, damages and payments for
past or future infringements thereof.

         "Copyright Security Agreement" means a Second Priority Copyright
Security Agreement, substantially in the form of Exhibit B hereto, executed and
delivered by a Lien Grantor in favor of the Collateral Agent, for the benefit of
the Secured Parties, as amended from time to time.

         "Credit Agreement" means the $300,000,000 Credit Agreement dated as of
April 20, 2001 among Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), the
Lenders party thereto and Morgan Guaranty Trust Company of New York, as
Administrative Agent and Collateral Agent, as amended from time to time.

         "Documents" means, with respect to any Lien Grantor, all "documents"
(as defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Lien Grantor.

         "Enforcement Notice" means a notice delivered to the Collateral Agent
by the Administrative Agent pursuant to Section 8.03 of the Credit Agreement
directing the Collateral Agent to exercise one or more specific rights or
remedies under the Collateral Documents.

         "Equipment" means, with respect to any Lien Grantor, all "equipment"
(as defined in the UCC) now owned or hereafter acquired by it, wherever located.

         "Equity Interest" means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in the foregoing clauses (i), (ii), (iii) and (iv).

         "Existing Intellectual Property" means, with respect to any Original
Lien Grantor, all Intellectual Property owned by or licensed to such Lien
Grantor as of the Closing Date.

                                       4
<PAGE>

         "Future Intellectual Property" means, with respect to any Lien Grantor
at any time after the Closing Date, any Intellectual Property owned by or
licensed to such Lien Grantor at such time, other than its Existing Intellectual
Property.

         "General Intangibles" means, with respect to any Lien Grantor, all
"general intangibles" (as defined in the UCC) now owned or hereafter acquired by
such Lien Grantor, including, without limitation, (i) all obligations or
indebtedness owing to such Lien Grantor (other than Accounts) from whatever
source arising, (ii) all Intellectual Property, goodwill, trade names, service
marks, trade secrets, permits and licenses, (iii) all rights or claims in
respect of refunds for taxes paid and (iv) all rights in respect of any pension
plan or similar arrangement maintained for employees of any member of the ERISA
Group.

         "Goods" means, with respect to any Lien Grantor, all "goods" (as
defined in the UCC) now owned or hereafter acquired by it, wherever located.

         "Instruments" means, with respect to any Lien Grantor, all
"instruments", or "letters of credit" (each as defined in the UCC) or Chattel
Paper evidencing, representing, arising from or existing in respect of, relating
to, securing or otherwise supporting the payment of, any Account or other
obligation or indebtedness owing to such Lien Grantor, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now owned or hereafter acquired by such Lien Grantor.

         "Intellectual Property" means (i) Patents, (ii) Patent Licenses, (iii)
Trademarks, (iv) Trademark Licenses, (v) Copyrights and (vi) Copyright Licenses,
and all rights in or under any of the foregoing.

         "Intellectual Property Filing" means (i) with respect to any Patent,
Patent License, Trademark or Trademark License, the filing of the applicable
Patent Security Agreement or Trademark Security Agreement with the United States
Patent and Trademark Office, together with an appropriately completed
recordation form, and (ii) with respect to any Copyright or Copyright License,
the filing of the applicable Copyright Security Agreement with the United States
Copyright Office, together with an appropriately completed recordation form, in
each case sufficient to record the Security Interest granted to the Collateral
Agent in such Intellectual Property.

         "Intellectual Property Security Agreement" means a Copyright Security
Agreement, a Patent Security Agreement or a Trademark Security Agreement.

         "Inventory" means, with respect to any Lien Grantor, all "inventory"
(as defined in the UCC), now owned or hereafter acquired by it, wherever
located.

                                       5
<PAGE>

         "Lien Grantor" means the Issuer, Vencor or any Subsidiary Guarantor and
"Lien Grantors" means all of the foregoing.

         "Liquid Investments" has the meaning set forth in Section 7(f).

         "Medicaid Receivable" means any Account with respect to which the
obligor is a state governmental authority (or agent thereof) obligated to pay,
pursuant to federal or state Medicaid program statutes or regulations, for
services rendered to eligible beneficiaries thereunder.

         "Medicare Receivable" means any Account with respect to which the
obligor is a federal governmental authority (or agent thereof) obligated to pay,
pursuant to federal Medicare program statutes or regulations, for services
rendered to eligible beneficiaries thereunder.

         "Opinion of Counsel" means a written opinion of legal counsel (who may
be counsel to a Lien Grantor or other counsel, in either case approved by the
Administrative Agent or the Required Lenders in a writing delivered to the
Collateral Agent) addressed and delivered to the Collateral Agent.

         "Original Lien Grantor" means the Issuer, Vencor or any Subsidiary
Guarantor that grants a Lien on any of its assets hereunder on the Closing Date,
and "Original Lien Grantors" means all of the foregoing.

         "Patent License" means any agreement now or hereafter in existence
granting any Lien Grantor, or pursuant to which any Lien Grantor has granted to
any other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether a
patent or application for patent on such invention may come into existence or
not, including, without limitation, any agreement identified in Schedule 1 to a
Patent Security Agreement.

         "Patents" means (i) all letters patent and design letters patent of the
United States or any other country and all applications (other than the
Provisional Application but only for so long as such Provisional Application
remains a provisional application) for letters patent and design letters patent
of the United States or any other country, including, without limitation,
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, (ii) all reissues, divisions, continuations,
continuations-in-part, revisions and extensions thereof, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing and
(iv) all

                                       6
<PAGE>

income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.

         "Patent Security Agreement" means a Second Priority Patent Security
Agreement, substantially in the form of Exhibit C hereto, executed and delivered
by a Lien Grantor in favor of the Collateral Agent, for the benefit of the
Secured Parties, as amended from time to time.

         "Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit E hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of the Collateral Agent, and duly executed by a duly authorized
officer of such Lien Grantor, provided that in the case of Perfection
Certificates required to be delivered in connection with the Closing, such
requirements may be satisfied as to all Lien Grantors through the delivery on
their behalf by the Issuer of Perfection Certificates pursuant to the Senior
Security Agreement (so long as such Perfection Certificates refer to this
Agreement and copies of such Perfection Certificates are simultaneously
delivered to the Collateral Agent), duly executed by a Financial Officer, that
sets forth in a form satisfactory to the Collateral Agent all of the information
required to be provided.

         "Permitted Liens" means (i) the Security Interests and (ii) the other
Liens on the Collateral permitted to be created or assumed or to exist pursuant
to Section 7.02 of the Credit Agreement.

         "Personal Property Collateral" means at any time, with respect to any
Lien Grantor, all its property included in the Collateral at such time, other
than its Real Property Collateral.

         "Personal Property Security Interests" means the security interests in
Personal Property Collateral granted by the Lien Grantors under the Collateral
Documents.

         "Pledged Equity Interests" means at any time all Equity Interests
included in the Collateral at such time.

         "Pledged Equity Securities" means at any time all "certificated
securities" (as such term is defined in Article 8 of the UCC) that evidence or
represent Pledged Equity Interests at such time.

         "Pledged Instruments" means at any time all Instruments included in the
Collateral at such time.

                                       7
<PAGE>

         "Pledged LLC Interest" means at any time any membership interest or
similar interest in a limited liability company that is included in the Pledged
Equity Interests at such time.

         "Pledged Partnership Interest" means at any time any partnership
interest (whether general or limited) that is included in the Pledged Equity
Interests at such time.

         "Post-Petition Interest" means any interest which accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Issuer, whether or not such interest is
allowed or allowable as a claim in any such proceeding.

         "Proceeds" means, with respect to any Lien Grantor, all proceeds of,
and all other profits, products, rents or receipts, in whatever form, arising
from the collection, sale, lease, exchange, assignment, licensing or other
disposition of, or other realization upon, its Collateral, including without
limitation all claims of such Lien Grantor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any of its Collateral, and
any condemnation or requisition payments with respect to any of its Collateral,
in each case whether now existing or hereafter arising.

         "Provisional Application" means the provisional application for a
patent entitled "A method and system for tracking medical claims which are under
review or have been denied" filed with the United States Patent and Trademark
Office on September 9, 2000 (Registration Number 42,923; Docket Number
VE075/OVE12).

         "Real Property Collateral" means at any time, with respect to any Lien
Grantor, all its real property (including leasehold interests in real property)
included in the Collateral at such time.

         "Real Property Security Interests" means the security interests in Real
Property Collateral granted by the Lien Grantors under the Mortgages and the
other Collateral Documents.

         "Reduction Event Account" has the meaning set forth in Section 7(a).

         "Retained Collection Rights" means, with respect to any Medicaid
Receivable, Medicare Receivable or VA Receivable of any Lien Grantor, the right
of such Lien Grantor to collect and receive from the obligor thereon payments in

                                       8
<PAGE>

respect of such Account in the absence of a court order requiring such obligor
to submit payments thereon directly to a Person other than such Lien Grantor.

         "Secured Obligations" means:

         (a)  with respect to the Issuer, all Obligations, including principal
of all Loans outstanding from time to time under the Credit Agreement, all
interest (including Post-Petition Interest) on such Loans, and all other amounts
now or hereafter payable by the Issuer pursuant to any Financing Document;

         (b)  with respect to Vencor, all obligations of Vencor under the Vencor
Guaranty Agreement and all amounts now or hereafter payable by Vencor under any
other Financing Document; and

         (c)  with respect to any Subsidiary Guarantor, (i) all obligations of
such Subsidiary Guarantor under its Subsidiary Guaranty Agreement and (ii) all
other obligations of such Subsidiary Guarantor under or in respect of the
Financing Documents.

         "Secured Parties" means the holders from time to time of the Secured
Obligations.

         "Secured Parties Requesting Notice" means, at any time, each Secured
Party which has, at least five Business Days prior thereto, delivered to the
Collateral Agent a written notice (a) stating that it holds one or more Secured
Obligations and wishes to receive copies of the notices referred to in Section
16(i) and (b) setting forth its address or facsimile number to which copies of
such notices should be sent.

         "Security Agreement Supplement" means a Second Priority Security
Agreement Supplement, substantially in the form of Exhibit A hereto, executed
and delivered to the Collateral Agent pursuant to Section 19 for the purpose of
adding a new Subsidiary Guarantor as a party hereto and/or adding additional
property to the Collateral.

         "Security Interests" means the Personal Property Security Interests and
the Real Property Security Interests.

         "Senior Collateral Agent" means Morgan Guaranty Trust Company of New
York, in its capacity as collateral agent under the Senior Financing Documents,
and its successors.

                                       9
<PAGE>

         "Senior Collateral Documents" means the Senior Security Agreement, the
Senior Security Agreement Supplements, the Senior Mortgages and all other
supplemental or additional security agreements (including all intellectual
property security agreements), mortgages or similar instruments delivered
pursuant thereto or pursuant to the Senior Credit Agreement.

         "Senior Credit Agreement" means the $120,000,000 Credit Agreement dated
as of the date hereof among the Issuer, Vencor, the Lenders, Swingline Bank and
LC Issuing Banks party thereto, Morgan Guaranty Trust Company of New York as
Senior Collateral Agent and administrative agent, and General Electric Capital
Corporation, as documentation agent and collateral monitoring agent, and any
refinancings, refundings or renewals thereof.

         "Senior Fee Mortgages" means fee mortgages relating to any real
properties owned in fee by the Issuer or any Guarantor in favor of the Senior
Collateral Agent.

         "Senior Financing Documents" means the Senior Credit Agreement
(including the Schedules and Exhibits thereto), the Senior Notes, the Senior
Guaranty Agreements, the Senior Collateral Documents and the Intercreditor
Agreement.

         "Senior Guaranty Agreements" means the Senior Vencor Guaranty Agreement
and the Senior Subsidiary Guaranty Agreements.

         "Senior Leasehold Mortgages" means leasehold mortgages relating to any
real properties leased by the Issuer or any Guarantor in favor of the Senior
Collateral Agent.

         "Senior Mortgages" means the Senior Leasehold Mortgages and the Senior
Fee Mortgages, collectively.

         "Senior Notes" means the senior secured notes of the Issuer issued to
the lenders party to the Senior Credit Agreement.

         "Senior Security Agreement" means the Senior Security Agreement dated
as of the date hereof among the Issuer, the Guarantors party thereto and the
Senior Collateral Agent, as amended from time to time, and any replacement or
successor agreement relating to any refinancing, refunding or renewal of the
Senior Credit Agreement.

         "Senior Security Agreement Supplement" means a Senior Security
Agreement Supplement whereby the Issuer or a Guarantor grants (or confirms its

                                      10
<PAGE>

grant of) a security interest in additional collateral to the Senior Collateral
Agent and, if the grantor of such security interest is a Subsidiary Guarantor
that is not already a party to the Senior Security Agreement, such Subsidiary
Guarantor becomes a party thereto.

         "Senior Subsidiary Guaranty Agreements" means the Senior Subsidiary
Guaranty Agreements setting forth the guarantees by the Subsidiary Guarantors
party thereto that the Issuer will perform its obligations under the Senior
Financing Documents.

         "Senior Vencor Guaranty Agreement" means the Senior Vencor Guaranty
Agreement dated as of the date hereof setting forth the guaranty by Vencor that
the Issuer will perform its obligations under the Senior Financing Documents,
and any replacement or successor agreement relating to any refinancing,
refunding or renewal of the Senior Credit Agreement.

         "Subsidiary Guarantors" means each Person listed on the signature pages
hereof under the caption "Subsidiary Guarantors" and each Person that shall, at
any time after the date hereof, become a party hereto and a "Subsidiary
Guarantor" as provided in Section 19.

         "Trademark License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor has granted
to any other Person, any right to use any Trademark, including, without
limitation, any agreement identified in Schedule 1 to any Trademark Security
Agreement.

         "Trademarks" means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and any other
source or business identifiers, and general intangibles of like nature, and the
rights in any of the foregoing which arise under applicable law, (ii) the
goodwill of the business symbolized thereby or associated with each of them,
(iii) all registrations and applications in connection therewith, including,
without limitation, registrations and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule 1 to any Lien
Grantor's Trademark Security Agreement, (iv) all renewals thereof, (v) all
claims for, and rights to sue for, past or future infringements of any of the
foregoing and (vi) all income, royalties, damages and payments now or hereafter
due or payable with respect to any of the foregoing, including, without
limitation, damages and payments for past or future infringements thereof.

                                      11
<PAGE>

         "Trademark Security Agreement" means a Second Priority Trademark
Security Agreement, substantially in the form of Exhibit D hereto, executed and
delivered by a Lien Grantor in favor of the Collateral Agent, for the benefit of
the Secured Parties, as amended from time to time.

         "UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York; provided that if, by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of any
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.

         "VA Receivable" means any Account with respect to which the obligor is
the Veterans' Administration or any successor thereto (or any agent thereof).

         Section 2. Representations and Warranties. Each Original Lien Grantor
represents and warrants that:

         (a)  As of the Closing Date, such Original Lien Grantor owns the Equity
Interests listed as being owned by it in Schedule 1 to the Credit Agreement,
free and clear of any Lien other than Permitted Liens. All shares of capital
stock identified in such Schedule as being beneficially owned by such Original
Lien Grantor have been duly authorized and validly issued, are fully paid and
non-assessable, and are subject to no option to purchase or similar right of any
Person. Such Original Lien Grantor is not and will not become a party to or
become otherwise bound by any agreement, other than the Financing Documents and
the Senior Financing Documents, which restricts in any manner the rights of any
present or future holder of any Pledged Equity Interest with respect thereto.

         (b)  Such Original Lien Grantor has good and marketable title to all of
its Collateral (except Intellectual Property), free and clear of any Liens other
than Permitted Liens. To the best of its knowledge, such Original Lien Grantor
has good title or other rights in and to its Existing Intellectual Property,
free and clear of any Liens other than Permitted Liens. Such Original Lien
Grantor has taken all actions necessary under the UCC to perfect its interest in
any Accounts purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors.

         (c)  Other than granting Permitted Liens, such Original Lien Grantor
has not performed any acts that might prevent the Collateral Agent from
enforcing any of the provisions of the Collateral Documents or that would limit
the Collateral Agent in any such enforcement. No financing statement, security
agreement,

                                      12
<PAGE>

mortgage or similar or equivalent document or instrument covering all or any
part of the Collateral owned by it is on file or of record in any jurisdiction
in which such filing or recording would be effective to perfect or record a Lien
on such Collateral, except financing statements, mortgages or other similar or
equivalent documents with respect to (i) Liens under the DIP Facility and the
Pre-Petition Senior Credit Agreement (so long as arrangements reasonably
satisfactory to the Collateral Agent have been made for the termination of such
financing statements, mortgages or other similar or equivalent documents on or
promptly after the Closing Date) and (ii) Permitted Liens. After the Closing, no
Collateral owned by it will be in the possession of any Person (other than such
Original Lien Grantor) asserting any claim thereto or security interest therein
(except Permitted Liens), except that (A) the Senior Collateral Agent or its
designee may have possession of Collateral as contemplated by the Senior
Collateral Documents and the Intercreditor Agreement or the Collateral Agent or
its designee may have possession of Collateral as contemplated hereby and (B)
cash and Temporary Cash Investments may be held in the Concentration Accounts.

          (d) Such Original Lien Grantor has delivered a Perfection Certificate
to the Collateral Agent. The information set forth therein is correct and
complete as of the Closing Date.

          (e) The Personal Property Security Interests constitute valid security
interests in all Personal Property Collateral owned by such Original Lien
Grantor thereby securing its Secured Obligations, and constitute security
interests therein prior to all other Liens other than Liens permitted under the
Credit Agreement to be senior in priority to the Liens of the Lenders.

          (f) Upon the delivery of the Pledged Instruments (if any) and the
Pledged Equity Securities owned by such Original Lien Grantor to the Collateral
Agent in accordance with Section 4, the Collateral Agent will have valid and
perfected security interests in such Collateral subject to no prior Lien other
than Permitted Liens.

          (g) When UCC financing statements shall have been filed in the offices
specified in such Original Lien Grantor's Perfection Certificate, the Personal
Property Security Interests will constitute perfected security interests in the
Personal Property Collateral owned by such Original Lien Grantor to the extent
that a security interest therein may be perfected by filing pursuant to the UCC,
prior (except in the case of Intellectual Property) to all Liens and rights of
others therein except Permitted Liens. When, in addition to the filing of such
UCC financing statements, the applicable Intellectual Property Filings have been
made with respect to such Lien Grantor's Intellectual Properties (including any
future filings required pursuant to Sections 5(c) and 5(d)), the Personal
Property Security

                                      13
<PAGE>

Interests will constitute perfected security interests in all right, title and
interest of such Original Lien Grantor in its Intellectual Property to the
extent that security interests therein may be perfected by such filings and, to
the best of such Original Lien Grantor's knowledge, such security interests will
be prior to all other Liens and rights of others therein except Permitted Liens.
Except for (i) the filing of such UCC financing statements, (ii) such
Intellectual Property Filings, (iii) the due recordation of memoranda of lease
with respect to the Master Lease Agreements and any assignment thereof to the
Issuer and (iv) the due recordation of the Fee Mortgages and the Leasehold
Mortgages, no registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution or delivery of
the Collateral Documents or is necessary for the validity or enforceability
thereof or for the perfection or due recordation of the Security Interests or
(except with respect to the capital stock of any Insurance Subsidiary) for the
enforcement of the Security Interests.

          (h) Such Original Lien Grantor's Collateral is insured in accordance
with the requirements of the Credit Agreement.

         Section 3. The Security Interests.

          (a) In order to secure the full and punctual payment of its Secured
Obligations in accordance with the terms thereof, each Lien Grantor hereby
grants to the Collateral Agent for the benefit of the Secured Parties a
continuing security interest in and to all of the following property of such
Lien Grantor, whether now owned or existing or hereafter acquired or arising and
regardless of where located:

                    (i)    all Accounts;

                    (ii)   all Documents;

                    (iii)  all Equipment;

                    (iv)   all General Intangibles;

                    (v)    all Goods;

                    (vi)   all Instruments;

                    (vii)  all Inventory;

                    (viii) all Chattel Paper;

                                      14
<PAGE>

                    (ix)  all Equity Interests in other Persons now or hereafter
               beneficially owned by such Lien Grantor, all rights and
               privileges of such Lien Grantor with respect to such Equity
               Interests, and all dividends, distributions and other payments
               with respect thereto;

                    (x)   all books and records (including, without limitation,
               customer lists, credit files, computer programs, printouts and
               other computer materials and records) of such Lien Grantor
               pertaining to any of its Collateral;

                    (xi)  such Lien Grantor's ownership interest in the
               Collateral Accounts, all cash deposited therein from time to
               time, all Liquid Investments made with amounts on deposit therein
               and all of such Lien Grantor's other monies and property of any
               kind in the possession or under the control of the Collateral
               Agent; and

                    (xii) all Proceeds of the collateral described in the
               foregoing clauses (i) through (xi);

provided that the following property is excluded from the foregoing security
interests: (i) motor vehicles, (ii) deposit accounts (other than the Collateral
Accounts and the Concentration Accounts), (iii) subject to Section 5.12(c) of
the Credit Agreement, Equity Interests in Cornerstone, (iv) Instruments retained
for collection pursuant to Section 4(d), (v) promissory notes outstanding on the
Closing Date and evidencing loans made by either Vencor or the Issuer to current
and former officers of Vencor not exceeding $16,000,000 in aggregate principal
amount and (vi) any Equity Interests, general intangibles or other rights
arising under or subject to any contracts, instruments, licenses or other
documents if (but only to the extent that) the grant of a security interest
therein would constitute a material violation of a valid and enforceable
restriction in favor of a third party, unless and until any required consents
shall have been obtained. Each Lien Grantor shall use all reasonable efforts to
obtain any such required consent that is reasonably obtainable; provided that no
Lien Grantor shall be obligated to obtain any such consent with respect to any
Retained Collection Rights or Third Party Lease.

               (b)  The Security Interests are granted as security only and
shall not subject the Collateral Agent or any other Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of any Lien
Grantor with respect to any of the Collateral or any transaction in connection
therewith.

               (c)  If the superintendent of insurance or other similar official
having jurisdiction over any Insurance Subsidiary determines that any pledge of
the

                                      15
<PAGE>

shares of capital stock of such Insurance Subsidiary hereunder constitutes
the acquisition of or a change of control with respect to such Insurance
Subsidiary as to which the prior approval of such superintendent or similar
official was required, then, immediately upon the relevant Lien Grantor's (1)
written memorialization of oral notice or (2) receipt of written notice from
such official of such determination and without any action on the part of the
Collateral Agent or any other Person, such pledge shall be rendered void ab
initio and of no effect. Upon any such occurrence, (i) the Collateral Agent
shall, at such Lien Grantor's written request and expense, if then in its
possession, return the certificates representing such capital stock to such Lien
Grantor and execute and deliver such documents as such Lien Grantor shall
reasonably request to evidence such Lien Grantor's retention of all rights in
such capital stock and (ii) such Lien Grantor shall promptly submit a request to
the superintendent of insurance or other appropriate official for approval of
the pledge of such shares to the Collateral Agent hereunder and, upon receipt of
such approval, shall forthwith pledge and deposit with the Collateral Agent
certificates representing all of the outstanding shares of capital stock of such
Insurance Subsidiary to be held as Pledged Equity Securities subject to all
relevant provisions of this Agreement.

          (d) The Issuer shall not, and shall not permit any other Lien Grantor
to, create, assume or suffer to exist any Lien on the Provisional Application or
any interest relating thereto, other than any Lien in favor of the Collateral
Agent and the Exit Facility Collateral Agent.

          Section 4. Delivery of Certain Collateral. (a) On the Closing Date,
each Original Lien Grantor is delivering to the Collateral Agent as Collateral
hereunder all stock certificates or other certificates representing Equity
Interests in other Persons then owned by it, provided that such delivery will be
deemed to be made to the extent any such certificate is already held by Morgan
in its capacity as collateral agent under the Pre-Petition Senior Credit
Agreement and DIP Facility.

          (b) On the date it signs and delivers its Security Agreement
Supplement, each Lien Grantor (other than an Original Lien Grantor) will deliver
to the Collateral Agent as Collateral hereunder all stock certificates or other
certificates representing Equity Interests in other Persons then owned by it.

          (c) After the Closing Date (in the case of an Original Lien Grantor)
or the date of its Security Agreement Supplement (in the case of any other Lien
Grantor), if any Lien Grantor receives (i) any stock certificate or other
certificate representing Equity Interests in another Person then owned by it or
(ii) any Instrument, in each case in which a security interest is granted
pursuant to Section 3 hereof or pursuant to the Security Agreement Supplement
signed by it, such

                                      16
<PAGE>

Lien Grantor will immediately deliver such certificate or Instrument to the
Collateral Agent to be held by it as Collateral hereunder.

          (d) Notwithstanding the foregoing, so long as no Event of Default
shall have occurred and be continuing, each Lien Grantor may retain for
collection in the ordinary course any Instruments received by it in the ordinary
course of business, and the Collateral Agent shall, promptly upon request by
such Lien Grantor, make appropriate arrangements for making any other Instrument
pledged by such Lien Grantor hereunder available to it for purposes of
presentation, collection or renewal (any such arrangement to be effected, to the
extent deemed appropriate by the Collateral Agent, against trust receipt or like
document).

          (e) All Pledged Equity Securities delivered to the Collateral Agent
hereunder will be delivered in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent. All Pledged
Instruments delivered to the Collateral Agent hereunder will be endorsed to the
order of the Collateral Agent, or accompanied by duly executed instruments of
assignment, all in form and substance satisfactory to the Collateral Agent.

          (f) Notwithstanding the foregoing, no certificate or Instrument shall
be required to be delivered to the Collateral Agent by a Lien Grantor if and so
long as such certificate or Instrument is required to be delivered to and held
by the Senior Collateral Agent.

          Section 5. Further Assurances; Covenants. Each Lien Grantor covenants
as follows:

          (a) It will not change its name, identity or corporate structure in
any manner unless permitted by Section 7.03 of the Credit Agreement and unless
such Lien Grantor shall have given the Collateral Agent prior notice thereof and
either (i) delivered an updated Perfection Certificate to the Collateral Agent
or (ii) certified to the Collateral Agent that the Perfection Certificate most
recently delivered pursuant to this Agreement is correct and complete as of the
date of such notice; provided that the Issuer may change its name to "Kindred
Healthcare Operating, Inc." and Vencor may change its name to "Kindred
Healthcare, Inc." on the Closing Date.

          (b) It will not change the location of (i) its chief executive office
or chief place of business or (ii) the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable locations
described in its Perfection Certificate (after the delivery of such Perfection
Certificate), unless such Lien Grantor shall have given the Collateral Agent
prior notice thereof. It will not in

                                      17
<PAGE>

any event change the location of any Collateral owned by it if such change would
cause the Security Interests in such Collateral to lapse or, if perfected prior
to such change of location, cease to be perfected.

          (c) (i) It will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without limitation, any
Intellectual Property Filings and any filings of financing or continuation
statements under the UCC) that from time to time may be necessary or desirable,
or that the Collateral Agent may reasonably request, in order to create,
preserve, perfect, confirm or validate the Security Interests in such Lien
Grantor's Collateral or to enable the Collateral Agent and the other Secured
Parties to obtain the full benefits of the Collateral Documents, or to enable
the Collateral Agent to exercise and enforce any of its rights, powers and
remedies thereunder with respect to any of such Lien Grantor's Collateral. To
the extent permitted by applicable law, such Lien Grantor authorizes the
Collateral Agent to execute and file such financing statements or continuation
statements without such Lien Grantor's signature appearing thereon. Such Lien
Grantor agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement. Such Lien Grantor shall pay the costs of, or incidental to, any
recording or filing of any such financing or continuation statements in which it
is named as the debtor. Such Lien Grantor hereby constitutes the Collateral
Agent its attorney-in-fact to execute and file all Intellectual Property Filings
required or so requested for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; and such power, being coupled with an
interest, shall be irrevocable until such Lien Grantor's Collateral is released
pursuant to Section 18.

                  (ii) Without limiting clause (i), it will enter into any
          amendments to this Agreement and to any other Financing Document and
          take any other action, at its expense, that the Collateral Agent may
          reasonably request or as may be necessary or desirable in connection
          with the proposed revisions to Article 9 of the UCC, in order to
          create, preserve, perfect, confirm or validate the Security Interests
          in such Lien Grantor's Collateral or to enable the Collateral Agent
          and the other Secured Parties to obtain the full benefits of the
          Collateral Documents, or to enable the Collateral Agent to exercise
          and enforce any of its rights, powers and remedies thereunder with
          respect to any of such Lien Grantor's Collateral.

         (d)      Within 30 days after each March 31 and September 30
(commencing with the first such date to occur after the Closing Date), it will
(i) sign and deliver to the Collateral Agent any Intellectual Property Security
Agreement necessary to grant Security Interests in any Intellectual Properties

                                      18
<PAGE>

owned by it on such March 31 or September 30 that are not covered by the
Security Interests granted in any previous Intellectual Property Security
Agreements so signed and delivered by it and (ii) make all Intellectual Property
Filings reasonably necessary to record the Security Interests in such
Intellectual Properties.

          (e) At least 30 days before it takes any action contemplated by
Section 5(a) or 5(b), such Lien Grantor will, at its expense, cause to be
delivered to the Collateral Agent an officer's certificate, in form and
substance satisfactory to the Collateral Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and protect
the Security Interests against all creditors of and purchasers from such Lien
Grantor (except any continuation statements specified in such officer's
certificate that are to be filed more than six months after the date thereof)
have been filed in each filing office necessary for such purpose and that all
filing fees and taxes, if any, payable in connection with such filings have been
paid in full; provided that if the only action contemplated is a change in the
name of a Lien Grantor to the name set forth below the name of such Lien Grantor
on the Perfection Certificate delivered in connection with the Closing, then
such Lien Grantor will at its expense (i) cause to be delivered to the
Collateral Agent an officer's certificate, in form and substance satisfactory to
the Collateral Agent, specifying the date on which such name change is to take
effect (the "Effective Date") (such certificate to be delivered to the
Collateral Agent at least three days prior to the Effective Date) and (ii)
deliver to the Collateral Agent no later than June 20, 2001, all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and protect
the Security Interests against all creditors of and purchasers from such Lien
Grantor and evidence satisfactory to the Collateral Agent that such financing
statements and amendments or supplements thereto, continuation statements and
other documents will be filed in each filing office necessary for such purpose
by June 30, 2001 and that all filing fees and taxes, if any, payable in
connection with such filings will be paid in full by such date.

          (f) If any of its Collateral is at any time in the possession or
control of any warehouseman, bailee or agent, such Lien Grantor will notify such
warehouseman, bailee or agent of the Security Interests and instruct it to hold
all such Collateral for the Collateral Agent's account subject to the Collateral
Agent's instructions.

          (g) It shall keep full and accurate books and records relating to its
Collateral, and stamp or otherwise mark such books and records in such manner

                                      19
<PAGE>

as the Collateral Agent may reasonably request in order to reflect the Security
Interests.

          (h) It shall use its best efforts to cause to be collected from its
account debtors, as and when due, any and all amounts owing under or on account
of each of its Accounts (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Accounts. Subject to the
rights of the Collateral Agent and the other Secured Parties hereunder if an
Event of Default shall have occurred and be continuing, such Lien Grantor may
allow in the ordinary course of business as adjustments to amounts owing under
its Accounts (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which such Lien Grantor finds
appropriate in accordance with sound business judgment and (ii) refunds or
credits, all in accordance with such Lien Grantor's ordinary course of business
consistent with its historical collection practices. The costs and expenses
(including, without limitation, attorney's fees) of collection, whether incurred
by such Lien Grantor or the Collateral Agent, shall be borne by such Lien
Grantor.

          (i) If an Enforcement Notice is in effect, such Lien Grantor will,
consistent with the terms of the Credit Agreement, if requested to do so by the
Collateral Agent, promptly notify (and such Lien Grantor hereby authorizes the
Collateral Agent so to notify) each account debtor in respect of any of its
Accounts or Instruments that such Collateral has been assigned to the Collateral
Agent hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Collateral Agent or its designee.

          (j) Such Lien Grantor will not sell, lease, exchange, assign or
otherwise dispose of, or grant any option with respect to, any of its
Collateral; provided that, unless an Enforcement Notice is in effect, (i) such
Lien Grantor may sell, lease or exchange its Inventory and obsolete, unused or
unnecessary Equipment, in each case in the ordinary course of business and (ii)
such Lien Grantor may sell any of its Collateral if (x) the sale thereof does
not violate any covenant in the Credit Agreement and (y) in the case of an Asset
Sale (other than the Kingfish Transaction), the Net Cash Proceeds thereof are
applied as provided in Section 2.06(a) of the Credit Agreement. Concurrently
with any sale or exchange (other than a sale or exchange to another Lien
Grantor) permitted by the foregoing proviso, the Security Interests in the
assets sold or exchanged (but not in any Proceeds arising from such sale or
exchange) shall cease immediately without any further action on the part of the
Collateral Agent or any other Secured Party.

                                      20
<PAGE>

          (k) Such Lien Grantor will, promptly upon request, provide to the
Collateral Agent all information and evidence it may reasonably request
concerning its Collateral to enable the Collateral Agent to enforce the
provisions of the Collateral Documents.

          (l) From time to time upon request by the Collateral Agent, such Lien
Grantor shall, at its expense, cause to be delivered to the Secured Parties an
Opinion of Counsel satisfactory to the Collateral Agent as to such matters
relating to the transactions contemplated hereby as the Required Lenders may
reasonably request.

          (m) Such Lien Grantor shall notify the Collateral Agent promptly if it
knows that any application or registration relating to any material Intellectual
Property owned or licensed by it may become abandoned or dedicated, or of any
adverse determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding in
the United States Copyright Office, the United States Patent and Trademark
Office or any court) regarding such Lien Grantor's ownership of such material
Intellectual Property, its right to register or patent the same, or its right to
keep and maintain the same. If any of such Lien Grantor's rights to any material
Intellectual Property are infringed, misappropriated or diluted by a third
party, such Lien Grantor shall notify the Collateral Agent within 30 days after
it learns thereof and shall, unless such Lien Grantor shall reasonably determine
that any such action would be of negligible value, economic or otherwise,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as such Lien Grantor shall reasonably deem appropriate under
the circumstances to protect such Intellectual Property.

          Section 6. Concentration Accounts. (a) The Issuer shall establish (or
transfer into the name of the Collateral Agent) one or more accounts
(collectively, the "Concentration Accounts") which shall be maintained in the
name of and under the exclusive control of the Collateral Agent and into which
collected cash owned by the Issuer and the other Lien Grantors shall be
deposited from time to time, provided that if and so long as the Issuer and the
other Lien Grantors are subject to and complying with requirements similar to
this Section 6 imposed by the Senior Collateral Documents, the Issuer and the
other Lien Grantors need not comply with the requirements of this Section 6 (and
the following subsections of this Section 6 shall be applied accordingly). Each
Concentration Account shall be maintained with a bank (a "Concentration Account
Bank") that (i) is reasonably acceptable to the Collateral Agent and (ii) if not
a Lender, enters into an Account Control Agreement. The Collateral Agent shall
instruct each Concentration Account Bank to transfer, from time to time, amounts
on deposit in each

                                      21
<PAGE>

Concentration Account maintained with it to such other account or accounts as
the Issuer may request, unless and until the Collateral Agent rescinds such
instructions. The Collateral Agent shall not rescind such instructions unless
requested to do so by the Required Lenders at a time when an Event of Default
shall have occurred and be continuing.

          (b) Amounts on deposit in the Concentration Accounts may be invested
and re-invested from time to time in such Temporary Cash Investments as Vencor
or the Issuer shall determine from time to time; provided that, in order to
provide the Collateral Agent, for the benefit of the Secured Parties, with a
perfected security interest therein, (x) the books and records of the relevant
Concentration Account Bank shall reflect the fact that such Temporary Cash
Investments are held for the account of the Collateral Agent and (y) each such
Temporary Cash Investment either:

              (i)  is issued in the name of the relevant Concentration Account
          Bank or evidenced by a negotiable certificate or instrument which
          (together with any appropriate instrument of transfer) is delivered
          to, and held by, such Concentration Account Bank or an agent thereof
          (which shall not be any Lien Grantor or any of its Affiliates) in a
          State where possession thereof perfects the Security Interest therein;
          or

              (ii) if not so issued or evidenced, is subject to pledge under
          applicable law and regulations and as to which (in the opinion of
          counsel to the Collateral Agent) appropriate measures shall have been
          taken to perfect the relevant Security Interest.

All right, title and interest in and to the cash amounts on deposit from time to
time in the Concentration Accounts together with any Temporary Cash Investments
from time to time made pursuant to this subsection (b) shall vest in the
Collateral Agent, shall constitute part of the relevant Lien Grantor's
Collateral hereunder and shall not constitute payment of the Secured Obligations
unless and until applied thereto as provided in Section 15. If an Enforcement
Notice is in effect, the Collateral Agent may (i) instruct any Concentration
Account Bank to retain, in any Concentration Account maintained by it, all cash
and Temporary Cash Investments then held by it in such Concentration Account,
(ii) instruct such Concentration Account Bank to liquidate any or all Temporary
Cash Investments held by it in such Concentration Account and/or (iii) withdraw
any amounts held in any Concentration Account and apply such amounts in the
manner specified in Section 15.

                                      22
<PAGE>

          SECTION 7. Collateral Accounts. (a) Promptly after the Collateral
Agent determines that any Net Cash Proceeds of any Asset Sale (other than in
connection with the Kingfish Transaction) of the Issuer or a Restricted
Subsidiary or that any Casualty Proceeds with respect to property of the Issuer
or a Restricted Subsidiary are to be deposited pursuant to Section 2.06(a) of
the Credit Agreement, the Collateral Agent shall establish an account (such Lien
Grantor's "Reduction Event Account") with the Administrative Agent, in the name
and under the exclusive control of the Collateral Agent, into which all Net Cash
Proceeds with respect to Asset Sales (other than in connection with the Kingfish
Transaction) of such Lien Grantor and all Casualty Proceeds with respect to
property of such Lien Grantor shall be deposited from time to time, provided
that if and so long as the Issuer or any other Lien Grantor is subject to and
complying with requirements similar to Section 2.06(a) of the Senior Credit
Agreement, and in particular is required to deposit any Net Cash Proceeds of an
Asset Sale or any Casualty Proceeds with the Senior Collateral Agent, the Issuer
and the other Lien Grantors need not comply with the requirements of this
Section 7 (and the following subsections of this Section 7 shall be applied
accordingly).

          (b) So long as no Enforcement Notice is in effect, Net Cash Proceeds
or Casualty Proceeds, as the case may be, to be released from a Reduction Event
Account pursuant to either clause (A) or (C) of Section 2.06(a) of the Credit
Agreement shall be released by the Collateral Agent to the relevant Lien Grantor
at such times and in such amounts as such Lien Grantor shall request in
accordance with the provisions of clause (A) or (C), as the case may be, of
Section 2.06(a) of the Credit Agreement. Any such request shall be accompanied
by a certificate of a Financial Officer describing in reasonable detail the
purpose for which such funds have been or will be expended and the date (which
shall not be later than 30 days after the date of such certificate) by which
such Lien Grantor is obligated or otherwise committed to make such payment,
provided that no such certificate shall be required if the aggregate Casualty
Proceeds requested for the restoration, repair, replacement or rebuilding of the
relevant assets is less than $100,000 with respect to any Casualty Event. If
immediately available cash on deposit in any Lien Grantor's Reduction Event
Account is not sufficient to make any such distribution to it, the Collateral
Agent shall cause to be liquidated, as promptly as practicable, such Liquid
Investments in such Reduction Event Account as shall be required to obtain
sufficient cash to make such distribution and, notwithstanding any other
provision of this Section 7, such distribution shall not be made until such
liquidation has taken place.

          (c) So long as no Enforcement Notice is in effect, the Collateral
Agent shall distribute to the Administrative Agent, at its request from time to
time, the amounts on deposit in the Reduction Event Account which are required
to be

                                      23
<PAGE>

applied to prepay Loans in accordance with clause (B) of Section 2.06(a) of the
Credit Agreement.

          (d) Promptly after the Collateral Agent determines that any cash
proceeds of any Lien Grantor's Collateral are to be realized upon any exercise
of remedies pursuant to the Collateral Documents, the Collateral Agent shall
establish an account with respect to such Lien Grantor (such Lien Grantor's
"Collateral Proceeds Account") with the Administrative Agent, in the name and
under the exclusive control of the Collateral Agent, into which all such cash
proceeds of such Lien Grantor's Collateral shall be deposited from time to time
(unless required to be deposited in another Collateral Account). This subsection
(d) shall not apply to any cash proceeds that are deposited in a Concentration
Account and are not required to be deposited in any Collateral Account.

          (e) Amounts on deposit in any Collateral Account shall be invested and
re-invested from time to time in such Liquid Investments as the relevant Lien
Grantor shall determine. Any income received with respect to the balance from
time to time standing to the credit of any Collateral Account, including any
interest or capital gains on Liquid Investments, shall remain, or be deposited,
in such Collateral Account. All right, title and interest in and to the cash
amounts on deposit from time to time in any Collateral Account together with any
Liquid Investments from time to time made pursuant to this subsection (e) shall
vest in the Collateral Agent, shall constitute part of the relevant Lien
Grantor's Collateral hereunder and shall not constitute payment of its Secured
Obligations until applied thereto as provided in Section 15. If an Enforcement
Notice is in effect, any amounts held in any Collateral Account shall be
retained in such Collateral Account and, if and when requested by the
Administrative Agent, shall be withdrawn by the Collateral Agent and applied in
the manner specified in Section 15.

          (f) For purposes hereof, "Liquid Investments" means any Temporary Cash
Investment that (i) matures within 30 days after it is acquired by or for the
account of the Collateral Agent and (ii) in order to provide the Collateral
Agent, for the benefit of the Secured Parties, with a perfected security
interest therein, either:

              (i) is issued in the name of the Collateral Agent or a financial
          intermediary acting for its account or is evidenced by a negotiable
          certificate or instrument which (together with any appropriate
          instrument of transfer) is delivered to, and held by, the Collateral
          Agent or an agent thereof (which shall not be any Lien Grantor or any
          of its Affiliates) in a State where possession thereof perfects the
          Security Interest therein; or

                                      24
<PAGE>

                (ii) if not so issued or evidenced, is a Temporary Cash
         Investment which is subject to pledge under applicable law and
         regulations and as to which (in the opinion of counsel to the
         Collateral Agent) appropriate measures shall have been taken to perfect
         the relevant Security Interest.

         (g) The Collateral Agent shall, on a monthly basis, provide the Issuer
with or arrange for the Issuer to be provided with a statement of the balance
standing to the credit of the Reduction Event Account, which statement shall
indicate each payment into and from the Reduction Event Account during the
preceding calendar month.

         SECTION 8. Record Ownership of Pledged Equity Securities. If directed
to do so by the Required Lenders at any time when an Event of Default has
occurred and is continuing, the Collateral Agent shall cause the Pledged Equity
Securities (or any portion thereof specified in such directions) to be
transferred of record into the name of the Collateral Agent or its nominee;
provided that no such transfer shall be made with respect to any capital stock
of any Insurance Subsidiary unless any required regulatory approvals under
applicable state law shall have been obtained. Promptly upon receiving any such
directions, the Collateral Agent will notify each relevant Lien Grantor thereof.
Each Lien Grantor will promptly give to the Collateral Agent copies of any
notices and other communications received by it with respect to Pledged Equity
Securities registered in its name, and the Collateral Agent will promptly give
to such Lien Grantor copies of any notices and other communications received by
the Collateral Agent with respect to such Lien Grantor's Pledged Equity
Securities registered in the name of the Collateral Agent or its nominee. So
long as no Enforcement Notice is in effect, the Collateral Agent shall pay over
to each relevant Lien Grantor all Cash Distributions received by the Collateral
Agent upon or with respect to any Pledged Equity Securities held of record in
the name of the Collateral Agent or its nominee.

         SECTION 9. Right to Vote Pledged Equity Securities. (a) Unless an
Enforcement Notice directing the Collateral Agent to vote the Pledged Equity
Securities is in effect, each Lien Grantor shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect to
the Pledged Equity Securities owned by it, and the Collateral Agent shall, upon
receiving a written request from such Lien Grantor, deliver to such Lien Grantor
or as specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of such Pledged Equity Securities
which are registered in the name of the Collateral Agent or its nominee as shall
be specified in such request and be in form and substance satisfactory to the
Collateral Agent. Unless an Enforcement Notice directing the Collateral Agent to
do so is in effect,

                                      25
<PAGE>

the Collateral Agent shall have no right to take any action which the owner of a
Pledged Partnership Interest or Pledged LLC Interest is entitled to take with
respect thereto, except the right to receive and retain payments and other
distributions to the extent provided in Section 10.

         (b) If an Enforcement Notice directing the Collateral Agent to do so
is in effect, the Collateral Agent shall have the right to the extent permitted
by law (and, in the case of a Pledged Partnership Interest or Pledged LLC
Interest, by the relevant partnership agreement, operating agreement or other
governing document) and each Lien Grantor shall take all such action as may be
necessary or appropriate to give effect to such right, to vote and to give
consents, ratifications and waivers, and take any other action with respect to
any or all of the Pledged Equity Interests with the same force and effect as if
the Collateral Agent were the absolute and sole owner thereof; provided that the
Collateral Agent shall not have the right to vote or to give consents,
ratifications or waivers with respect to the capital stock of any Insurance
Subsidiary to the extent that such action would require prior regulatory
approval under applicable state law unless such approval shall have been
granted.

         SECTION 10. Right to Receive Distributions on Collateral. Subject to
Section 18, the Collateral Agent shall have the right to receive and to retain
as Collateral hereunder all dividends, interest and other payments and
distributions made upon or with respect to the Pledged Equity Interests and each
Lien Grantor shall take all such action as the Collateral Agent may deem
necessary or appropriate to give effect to such right; provided that, unless an
Enforcement Notice is in effect, this sentence shall not apply to Cash
Distributions. All such dividends, interest and other payments and distributions
which are received by any Lien Grantor (except Cash Distributions received when
no Enforcement Notice is in effect) shall be received in trust for the benefit
of the Secured Parties and shall be segregated from other assets of such Lien
Grantor and shall, promptly upon such Lien Grantor's receipt thereof, be
delivered or paid over to the Collateral Agent in the same form as received
(with any necessary endorsements or executed assignments in blank), together
with a statement identifying the source of such Collateral and stating that it
is being delivered to the Collateral Agent to be held as Collateral under this
Agreement. If an Enforcement Notice is withdrawn pursuant to Section 21 (and no
other Enforcement Notice is then in effect), the Collateral Agent's right to
retain Cash Distributions under this Section 10 shall cease and the Collateral
Agent shall pay over to the relevant Lien Grantor(s) any Cash Distributions
retained by it during the continuance of such Enforcement Notice.

         SECTION 11. General Authority. Each Lien Grantor hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power of

                                      26
<PAGE>

substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of such
Lien Grantor, to the extent permitted by law to exercise, at any time and from
time to time while an Enforcement Notice directing it to do so is in effect, all
or any of the following powers with respect to all or any of such Lien Grantor's
Collateral:

                        (i)    to demand, sue for, collect, receive and give
        acquittance for any and all monies due or to become due upon or
        by virtue thereof,

                        (ii)   to settle, compromise, compound, prosecute or
        defend any action or proceeding with respect thereto,

                        (iii)  to sell, transfer, assign or otherwise deal in or
        with the same or the proceeds or avails thereof, as fully and
        effectually as if the Collateral Agent were the absolute owner
        thereof, and

                        (iv)   to extend the time of payment of any or all
        thereof and to make any allowance and other adjustments with reference
        thereto;

provided that the Collateral Agent shall give such Lien Grantor not less than
ten days' prior written notice of the time and place of any sale or other
intended disposition of any Personal Property Collateral owned by such Lien
Grantor and such other notices as may be required by the Credit Agreement,
except in respect of any such Personal Property Collateral which threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Collateral Agent and each Lien Grantor agree that such notice
constitutes "reasonable notification" within the meaning of Section 9-504(3) of
the UCC.

         Section 12. Remedies upon Enforcement Notice. (a) Upon being instructed
to do so in an Enforcement Notice or in written instructions given by the
Required Lenders at any time while an Enforcement Notice is in effect, the
Collateral Agent may exercise (or cause its co-agents and co-trustees, if any,
to exercise) any or all of the remedies available to it (or to such co-agents or
co-trustees) under the Collateral Documents.

         (b) Upon being instructed to do so in an Enforcement Notice or in
written instructions given by the Required Lenders at any time while an
Enforcement Notice is in effect, the Collateral Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the UCC (whether or
not in effect in the jurisdiction where such rights are exercised) with respect
to any Personal Property Collateral and, in addition, the Collateral Agent may,
without being required to give any notice, except as provided in the Credit
Agreement or herein or as may be required by mandatory provisions of law,
withdraw all cash

                                      27
<PAGE>

and Temporary Cash Investments held in any of the Collateral Accounts or
Concentration Accounts and apply such cash and Temporary Cash Investments and
other cash, if any, then held by it as Collateral as specified in Section 15
and, if there shall be no such cash or if such cash shall be insufficient to pay
all the Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery, and at such price or prices as the
Required Lenders shall have advised the Collateral Agent are satisfactory;
provided that the right of the Collateral Agent to sell or otherwise realize
upon the capital stock of any Insurance Subsidiary shall be subject to the
Collateral Agent's or the relevant Lien Grantor's obtaining, to the extent
necessary under applicable law, the prior approval of such sale or other
realization by the superintendent of insurance or other similar official having
jurisdiction with respect to such Insurance Subsidiary. Any Secured Party may be
the purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations, at
any private sale). The Collateral Agent is authorized, in connection with any
such sale, if it deems it advisable so to do, to restrict the prospective
bidders on or purchasers of any of the securities included in the Collateral to
a limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or sale of any of such securities, to cause to be placed on any
security included in the Collateral a legend to the effect that such security
has not been registered under the Securities Act of 1933 and may not be disposed
of in violation of the provisions of said Act, and to impose such other
limitations or conditions in connection with any such sale as the Collateral
Agent deems necessary or advisable in order to comply with said Act or any other
law. Each Lien Grantor agrees that it will execute and deliver such documents
and take such other action as the Collateral Agent deems necessary or advisable
in order that any such sale may be made in compliance with law. Upon any such
sale the Collateral Agent shall have the right to deliver, assign and transfer
to the purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Lien Grantor
which may be waived, and each Lien Grantor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. Notice of any
such sale shall be given to the relevant Lien Grantor(s) as required by Section
11 (including as required by the Credit Agreement) and shall in case of a public
sale, state the time and place fixed for such sale, in case of sale at a
broker's board or on a securities exchange, state the board or exchange at which
such sale is to be made and the day on which the Collateral, or the portion
thereof so being sold, will first be offered for sale at such board or exchange,
and in case of a private

                                      28
<PAGE>

sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix in the notice of such sale.
At any such sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such sale pursuant to any such notice. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Collateral Agent until the selling price is paid by
the purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. Upon being instructed to do so by the Required Lenders in an
Enforcement Notice or in written instructions given at any time while an
Enforcement Notice is in effect, the Collateral Agent, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction. The foregoing provisions of this subsection shall apply to Real
Property Collateral only to the extent permitted by applicable law and the
provisions of any applicable Mortgage or other document.

         (c) For the purpose of enforcing any and all rights and remedies under
this Agreement, the Collateral Agent may (i) require each Lien Grantor to, and
each Lien Grantor agrees that it will, at its expense and upon the request of
the Collateral Agent, forthwith assemble all or any part of its Personal
Property Collateral as directed by the Collateral Agent and make it available at
a place designated by the Collateral Agent which is, in its opinion, reasonably
convenient to the Collateral Agent and such Lien Grantor, whether at the
premises of such Lien Grantor or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of the
peace, any premises where any of the Personal Property Collateral is or may be
located, and without charge or liability to it seize and remove such Personal
Property Collateral from such premises, (iii) have access to and use such Lien
Grantor's books and records relating to its Collateral and (iv) prior to the
disposition of its Personal Property Collateral, store or transfer it without
charge in or by means of any storage or transportation facility owned or leased
by such Lien Grantor, process, repair or recondition it or otherwise prepare it
for disposition in any manner and to the extent the Collateral Agent deems
appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical process
used by such Lien Grantor. The Collateral

                                      29
<PAGE>

Agent may also render any or all of such Personal Property Collateral unusable
at such Lien Grantor's premises and may dispose of such Personal Property
Collateral on such premises without liability for rent or costs. The foregoing
provisions of this subsection shall apply to Real Property Collateral only to
the extent permitted by applicable law and the provisions of any applicable
Mortgage or other document.

         (d) Without limiting the generality of the foregoing, if an Enforcement
Notice is in effect,

                   (i) the Collateral Agent may, upon proper notice as provided
         in Section 11 hereof, license, or sublicense, whether general, special
         or otherwise, and whether on an exclusive or non-exclusive basis, any
         Intellectual Property included in the Collateral throughout the world
         for such term or terms, on such conditions and in such manner as the
         Collateral Agent shall in its sole discretion determine; provided that
         such licenses do not conflict with any existing licenses;

                   (ii) the Collateral Agent may, upon proper notice as provided
         in Section 11 hereof (without assuming any obligations or liability
         thereunder), at any time and from time to time, in its sole and
         reasonable discretion, enforce (and shall have the exclusive right to
         enforce) against any licensee or sublicensee all rights and remedies of
         any Lien Grantor in, to and under any of its Intellectual Property and
         take or refrain from taking any action under any thereof, and each Lien
         Grantor hereby releases the Collateral Agent and each of the other
         Secured Parties from, and agrees to hold the Collateral Agent and each
         of the other Secured Parties free and harmless from and against any
         claims and expenses arising out of, any lawful action so taken or
         omitted to be taken with respect thereto, except for claims and
         expenses arising from the Collateral Agent's or such Secured Party's
         gross negligence or willful misconduct; and

                   (iii) upon request by the Collateral Agent (which shall not
         be construed as implying any limitation on the rights or powers of the
         Collateral Agent), each Lien Grantor will execute and deliver to the
         Collateral Agent a power of attorney, in form and substance
         satisfactory to the Collateral Agent, for the implementation of any
         lease, assignment, license, sublicense, grant of option, sale or other
         disposition of any Intellectual Property owned by such Lien Grantor or
         any action related thereto. In the event of any such disposition
         pursuant to this Section, subject to confidentiality restrictions
         imposed on such Lien Grantor in any license or similar agreement, such
         Lien Grantor shall supply its know-how and expertise relating to or the
         products or services made or rendered in

                                      30
<PAGE>

         connection with Patents, and its customer lists and other records
         relating to such Intellectual Property and to the distribution of said
         products or services, to the Collateral Agent.

         Section 13. Fees and Expenses; Indemnification. The Issuer agrees that
it will forthwith upon demand pay to the Collateral Agent:

               (i) the amount of any taxes which the Collateral Agent may
         have been required to pay by reason of the Security Interests or to
         free any of the Collateral from any Lien thereon;

               (ii) the amount of any and all reasonable out-of-pocket
         expenses, including transfer taxes and reasonable fees and
         disbursements of counsel and of any other experts, which the Collateral
         Agent may incur in connection with (w) the administration or
         enforcement of this Agreement, including such expenses as are incurred
         to preserve the value of the Collateral and the validity, perfection,
         rank and value of any Security Interest, and all insurance expenses and
         all expenses of protecting, storing, warehousing, appraising, insuring,
         handling, maintaining and shipping any Collateral, (x) the collection,
         sale or other disposition of any Collateral, (y) the exercise by the
         Collateral Agent of any of the rights or powers conferred upon it
         hereunder or (z) any Enforcement Notice;

               (iii) the amount of any fees that the Issuer shall have agreed
         in writing to pay to the Collateral Agent and that shall have become
         due and payable in accordance with such written agreement; and

               (iv) the amount required to indemnify the Collateral Agent for,
         or hold it harmless and defend it against, any loss, liability or
         expense (including the reasonable fees and expenses of its counsel and
         any experts or co-agents appointed hereunder) incurred or suffered by
         the Collateral Agent in connection with this Agreement, except to the
         extent that such loss, liability or expense arises from the Collateral
         Agent's gross negligence or willful misconduct or a breach of any duty
         that the Collateral Agent has under this Agreement (after giving effect
         to Sections 14 and 16).

Any such amount not paid to the Collateral Agent on demand shall bear interest
for each day until paid at the rate per annum set forth in Section 2.02(b) of
the Credit Agreement.

                                      31
<PAGE>

         Section 14. Limitation on Duty of Collateral Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody and
preservation thereof, the Collateral Agent shall have no duty as to any Personal
Property Collateral in its possession or control or in the possession or control
of any agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Personal Property Collateral in its possession if such
Personal Property Collateral is accorded treatment substantially equal to that
which it accords its own property, and shall not be liable or responsible for
any loss or damage to any of the Personal Property Collateral, or for any
diminution in the value thereof, by reason of any act or omission of any agent
or bailee selected by the Collateral Agent in good faith or by reason of any act
or omission by the Collateral Agent pursuant to instructions from the Required
Lenders (including, without limitation, any voting instruction pursuant to
Section 9), except to the extent that such liability arises from the Collateral
Agent's gross negligence or willful misconduct.

         Section 15. Application of Proceeds. (a) So long as the Intercreditor
Agreement is in effect, following a Triggering Event (as defined therein), the
Collateral Agent shall apply (i) the proceeds of any sale of, or other
realization upon, all or any part of the Collateral, (ii) any cash held in the
Reduction Event Accounts and the Collateral Proceeds Accounts and (iii) any cash
withdrawn by it from the Concentration Accounts as set forth in the
Intercreditor Agreement.

         (b) At all times when the Intercreditor Agreement is not in effect,
upon being instructed to do so in an Enforcement Notice or in written
instructions given by the Required Lenders at any time while an Enforcement
Notice is in effect, the Collateral Agent shall apply (i) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral, (ii) any
cash held in the Reduction Event Accounts and the Collateral Proceeds Accounts
and (iii) any cash withdrawn by it from the Concentration Accounts in the
following order of priorities:

               first, to pay the expenses of such sale or other realization,
         including reasonable compensation to agents of and counsel for the
         Collateral Agent, and all expenses, liabilities and advances incurred
         or made by the Collateral Agent in connection with the Collateral
         Documents, and any other amounts then due and payable to the Collateral
         Agent pursuant to Section 13 hereof and to the other Agents pursuant to
         Section 12.03 of the Credit Agreement;

               second, to pay the unpaid principal of the Secured Obligations
         ratably, until payment in full of the principal of all Secured
         Obligations shall have been made;

                                      32
<PAGE>

               third, to pay all interest (including Post-Petition Interest)
         on the Secured Obligations and all fees payable under the Credit
         Agreement ratably, until payment in full of all such interest and fees
         shall have been made;

               fourth, to pay all other Secured Obligations ratably, until
         payment in full of all such other Secured Obligations shall have been
         made; and

               finally, to pay to the relevant Lien Grantor or its successors
         or assigns, or as a court of competent jurisdiction may direct, any
         surplus then remaining from the proceeds of the Collateral owned by it;

provided that Collateral owned by a Guarantor and any proceeds thereof shall be
applied pursuant to the foregoing clauses first, second, third and fourth only
to the extent that the Secured Obligations referred to therein are guaranteed by
such Guarantor (and, in the case of a Subsidiary Guarantor, subject to the
limitation in Section 10 of its Subsidiary Guaranty Agreement). The Collateral
Agent may make such distributions hereunder in cash or in kind or, on a ratable
basis, in any combination thereof.

         (c) In making the payments and allocations required by this Section,
the Collateral Agent may rely upon information supplied to it pursuant to
Section 16(f). All distributions made by the Collateral Agent pursuant to this
Section shall be final (except in the event of manifest error) and the
Collateral Agent shall have no duty to inquire as to the application by the
Secured Parties of any amount distributed to them.

         SECTION 16. Concerning the Collateral Agent. (a) The Collateral Agent
is authorized to take all such action as is provided or permitted to be taken by
it as Collateral Agent under the Collateral Documents and all other action
reasonably incidental thereto. As to any matters not expressly provided for
herein or in an Enforcement Notice or in written requests, directions or
instructions given as expressly provided in Section 6, 7, 9, 12 or 15,
including, without limitation, the timing and methods of realization upon the
Collateral, the Collateral Agent shall act or refrain from acting in accordance
with written instructions from the Required Lenders or, in the absence of such
instructions, in accordance with its discretion (subject to Section 16(c));
provided that the Collateral Agent shall not be obligated to comply with any
such instructions that are inconsistent with the provisions of the Collateral
Documents.

         (b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any Collateral, whether impaired
by

                                      33
<PAGE>

operation of law or by reason of any action or omission to act on its part under
the Collateral Documents. The Collateral Agent shall have no duty to ascertain
or inquire as to the performance or observance of any of the terms of this
Agreement, the Credit Agreement or any other agreement relating to the Secured
Obligations.

         (c) The obligations of the Collateral Agent under the Collateral
Documents are only those expressly set forth therein. In any case in which the
Collateral Agent is authorized to exercise any power or discretion, the
Collateral Agent may refrain from such exercise unless directed in writing by
the Required Lenders to act in the manner specified in such direction. Without
limiting the generality of the foregoing, the Collateral Agent shall not be
required to take any action with respect to any Enforcement Notice, except as
expressly provided in Sections 12 and 15.

         (d) The Collateral Agent may:

               (i) consult with legal counsel (who may be counsel for the
         Issuer or any Guarantor) and

               (ii) to the extent that the Collateral Agent in good faith
         deems it appropriate in connection with its duties hereunder to do so,
         consult with independent public accountants and other experts selected
         by it in connection with any matter arising under the Collateral
         Documents and shall not be liable for any action taken or omitted to be
         taken by it in good faith in accordance with the advice of such
         counsel, accountants or experts.

         (e) Neither the Collateral Agent nor any of its directors, officers,
agents, or employees shall be liable for any action taken or not taken by it in
connection with any Collateral Document (i) in accordance with directions set
forth in an Enforcement Notice or (ii) with the consent or at the request of the
Required Lenders or (iii) in the absence of its own gross negligence or willful
misconduct. However, nothing in this subsection (e) shall affect any rights any
Lien Grantor may have (x) against the Lenders for requesting the Administrative
Agent to give the directions set forth in an Enforcement Notice or (y) against
the Required Lenders for giving any other consent, request, notice or
instruction. Neither the Collateral Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with any Collateral Document, (ii) the performance or observance of
any of the covenants or agreements of any Lien Grantor or (iii) the validity,
effectiveness or genuineness of any Collateral Document or any other instrument
or writing furnished in connection therewith. The Collateral Agent shall not
incur any liability by acting

                                      34
<PAGE>

in reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, telex, facsimile or similar writing) believed by it
to be genuine or to be signed by the proper party or parties.

         (f) For all purposes of the Collateral Documents, including without
limitation determining from time to time the amounts of the Secured Obligations
or whether any notice, direction or instruction has been given by the Required
Lenders or any other Secured Party or Secured Parties entitled to give the same
under any provision of the Collateral Documents, the Collateral Agent shall be
entitled to rely upon information from the following sources (and may refrain
from acting on the basis of such information until two Business Days after it
receives all such information required to enable it to take such action):

                 (i) the Administrative Agent for information as to the Lender
         Parties and their respective Secured Obligations outstanding under the
         Credit Agreement (including whether any action has been taken or
         instruction given by the Required Lenders);

                 (ii) any Secured Party for information as to itself and its
         Secured Obligations, to the extent that the Collateral Agent has not
         received such information from the Administrative Agent; and

                 (iii) any Lien Grantor for information as to any Secured Party
         and its Secured Obligations, to the extent that the Collateral Agent
         has not received such information from the sources referred to in
         clauses (i) and (ii) above.

         (g)  The Collateral Agent shall have no liability to any Lien Grantor
or any Secured Party for actions taken in reliance on such information, except
to the extent that such liability arises from the Collateral Agent's gross
negligence or willful misconduct.

         (h)  (i) The Collateral Agent may resign at any time (effective upon
acceptance by a successor Collateral Agent of its appointment hereunder) by
giving written notice thereof to the Administrative Agent, each of the Secured
Parties Requesting Notice and the Issuer. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Collateral Agent.
If no successor Collateral Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Collateral Agent gives notice of resignation, the retiring Collateral
Agent may, on behalf of the Secured Parties, appoint a successor Collateral
Agent, which shall be a commercial bank organized or licensed under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least

                                      35
<PAGE>

$100,000,000. Upon the acceptance of its appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be discharged
from its duties and obligations hereunder. After any retiring Collateral Agent's
resignation hereunder as Collateral Agent, the provisions of this Section and
Sections 13 and 14 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was the Collateral Agent.

                 (ii) Without prejudice to its rights under paragraph (i),
         Morgan may resign as Collateral Agent at any time and may appoint any
         other subsidiary of J.P. Morgan Chase & Co. to such role by giving
         written notice thereof to each of the Secured Parties Requesting Notice
         and the Issuer. Upon such appointment, such subsidiary shall thereupon
         succeed to and become vested with all the rights and duties of the
         Collateral Agent and Morgan shall be discharged from its duties and
         obligations in such capacity hereunder. After Morgan resigns as
         Collateral Agent under this paragraph (ii), the provisions of this
         Section and Sections 13 and 14 shall inure to its benefit as to any
         actions taken or omitted to be taken by it while it was Collateral
         Agent.

          (i) Within two Business Days after it receives or sends any notice
referred to in this subsection (i), the Collateral Agent shall send to the
Administrative Agent and each of the Secured Parties Requesting Notice, copies
of any Enforcement Notice received by the Collateral Agent, any notice
withdrawing an Enforcement Notice received by the Collateral Agent pursuant to
Section 21 and any other notice given by the Collateral Agent to any Lien
Grantor, or received by it from any Lien Grantor, pursuant to Section 11, 12, 15
or 18. The Collateral Agent shall also send to the Lien Grantors copies of any
Enforcement Notice or any notice withdrawing an Enforcement Notice received by
the Collateral Agent.

          (j) The Collateral Agent may refuse to act on any notice, direction or
instruction from the Administrative Agent, the Required Lenders, or any Secured
Party, or any agent, trustee or similar representative thereof which, in the
Collateral Agent's opinion, is contrary to law or the provisions of any
Collateral Document, is unduly prejudicial to Secured Parties not joining in
such notice, direction or instruction or may expose the Collateral Agent to
liability (unless the Collateral Agent shall have been adequately indemnified
for such liability by the Secured Parties that gave, or instructed the
Administrative Agent to give, such notice, direction or instruction).

                                      36
<PAGE>

     Section 17. Appointment of Co-collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one or more other
persons, either to act as co-agent or co-agents, jointly with the Collateral
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions of any Collateral Document and may be specified in the instrument
of appointment (which may, in the discretion of the Collateral Agent, include
provisions for the protection of such co-agent or separate agent similar to the
provisions of Section 16).

     Section 18. Termination of Security Interests; Release of Collateral;
Reinstatement. (a) When all outstanding Secured Obligations shall have been
indefeasibly paid in full, the Security Interests shall terminate and all rights
to each item of Collateral shall revert to the Lien Grantor that owns such item
of Collateral.

     (b)  At any time before the Security Interests terminate pursuant to
subsection (a) of this Section, so long as an Enforcement Notice is not in
effect, the Collateral Agent shall, upon the written request of the Issuer,
release any of the Collateral (but not all or substantially all of the
Collateral) with the prior written consent of the Required Lenders.

     (c)  At any time before the Security Interests terminate pursuant to
subsection (a) of this Section, unless an Enforcement Notice is in effect, (i)
the Collateral Agent shall release Collateral (but not all or substantially all
the Collateral) upon receiving from the Administrative Agent written
instructions (A) directing the Collateral Agent to release such Collateral, (B)
stating that the Issuer has requested such release pursuant to Section 2.10 of
the Credit Agreement and (C) stating that the Administrative Agent believes that
the Issuer is entitled to such release pursuant to said Section 2.10 and (ii)
the Security Interests in any assets sold or exchanged (but not in any Proceeds
arising from such sale or exchange) by any Lien Grantor (other than a sale or
exchange to another Lien Grantor) in any transaction permitted by the proviso in
Section 5(j) shall cease concurrently with such sale or exchange. No such
release shall require the consent of any Secured Party and, in the case of any
release pursuant to clause (i), the Collateral Agent shall be fully protected in
relying on such instructions from the Administrative Agent.

     (d)  The Security Interests in any property abandoned by any Lien Grantor
to Ventas pursuant to Section 6.2 of any Master Lease Agreement to which the
Issuer and Vencor is a party shall be automatically terminated without any
necessity to deliver any termination statements or releases. Notwithstanding

                                      37
<PAGE>

the foregoing, at the request of Ventas, certifying that such an abandonment has
occurred, the Collateral Agent, shall execute and deliver to Ventas, at the
expense of Ventas, such documents as are necessary in order to evidence such
termination of Security Interests.

     (e)  Upon any such termination of the Security Interests or release of
Collateral pursuant to the foregoing clauses (other than clause (d)), the
Collateral Agent will, at the expense of the relevant Lien Grantor, execute and
deliver to such Lien Grantor such documents as such Lien Grantor shall
reasonably request to evidence the termination of the Security Interests or the
release of such Collateral, as the case may be.

     (f)  Notwithstanding Section 18(a), this Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against any Lien Grantor for liquidation or reorganization, should any Lien
Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any
significant part of any Lien Grantor's assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored, or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

     Section 19. Additional Subsidiary Guarantors. Any Subsidiary of the Issuer
which is not a party hereto may become a party hereto by executing and
delivering to the Collateral Agent a Security Agreement Supplement, whereupon
such Subsidiary shall become a "Subsidiary Guarantor", a "Lien Grantor" and a
party hereto.

     Section 20. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party:

          (i)  in the case of any Lien Grantor listed on the signature
     pages hereof, to it at:

                              Vencor Operating, Inc.
                              (to be renamed Kindred Healthcare Operating, Inc.)

                                      38
<PAGE>

                              680 South Fourth Avenue
                              Louisville, KY 40202
                              Attn: General Counsel
                              Facsimile: (502) 596-4075

                         with copies to:

                              Vencor Operating, Inc.
                              (to be renamed Kindred Healthcare Operating, Inc.)
                              680 South Fourth Avenue
                              Louisville, KY 40202
                              Attn: Assistant Treasurer
                              Facsimile: (502) 596-4170

                              Cleary, Gottlieb, Steen & Hamilton
                              One Liberty Plaza
                              New York, NY 10006
                              Attn: Thomas Moloney, Esq.
                                    Lindsee Granfield, Esq.

          (ii)  in the case of any other Lien Grantor, to it at its address or
     facsimile number set forth in its Security Agreement Supplement;

         (iii)  in the case of the Collateral Agent, to it at:

                              Morgan Guaranty Trust Company of New York
                              60 Wall Street
                              New York, New York 10260
                              Attention:  Houston Stebbins
                              Telephone:  (212) 648-7875
                              Facsimile:  (212) 648-5005

                         with a copy to:

                              J.P. Morgan Services
                              500 Stanton Christiana Road
                              Newark, Delaware 19713
                              Attention:  Sandra Doherty and Linda Palmer
                              Telephone:  (302) 634-3316
                              Facsimile:  (302) 634-4300

                                      39
<PAGE>

          (iv)  in the case of any Lender Party, to the Administrative Agent to
     be forwarded to such Lender Party at its address or facsimile number
     specified in or pursuant to Section 12.01 of the Credit Agreement;

          (v)   in the case of any Secured Party Requesting Notice, to it at
     such address or facsimile number as such party may hereafter specify for
     the purpose by notice to the Collateral Agent; or

          (vi)  in the case of any party, to it at such other address or
     facsimile number as such party may hereafter specify for the purpose by
     notice to the Collateral Agent and the Lien Grantors.

Each such notice, request or other communication shall be effective (x) if given
by facsimile transmission, when transmitted to the facsimile number referred to
in this Section and confirmation of receipt is received, (y) if given by mail,
ten days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (z) if given by any other means, when
delivered at the address referred to in this Section. NOTICE TO THE ISSUER UNDER
THIS AGREEMENT OR UNDER ANY OTHER FINANCING DOCUMENT SHALL CONSTITUTE NOTICE TO
ALL LIEN GRANTORS FOR ALL PURPOSES HEREUNDER AND THEREUNDER, AND NOTICE FROM THE
ISSUER UNDER THIS AGREEMENT OR UNDER ANY OTHER FINANCING DOCUMENT PURPORTING TO
BE NOTICE FROM ALL LIEN GRANTORS SHALL CONSTITUTE NOTICE FROM ALL LIEN GRANTORS
FOR ALL PURPOSES HEREUNDER AND THEREUNDER. Each Lien Grantor other than the
Issuer hereby irrevocably appoints the Issuer as such Lien Grantor's agent and
attorney-in-fact, with full authority in the place and stead of such Lien
Grantor and in the name of such Lien Grantor, the Issuer or otherwise, from time
to time in the Issuer's discretion, to execute and deliver (and receive, where
applicable) any and all written notices and communications hereunder on behalf
of the Lien Grantors to the Agents and the Lenders, and to deliver unwritten
notices and communications to the foregoing effect, and each Lender Party shall
be entitled to rely upon any such notice or communication as a notice,
communication or consent, as the case may be, of the Lien Grantors, and shall
incur no liability to the Issuer or any other Lien Grantor in acting upon any
such notice or communication that such Lender Party believes in good faith to
have been given by a duly authorized officer or other person authorized by the
Issuer.

     Section 21. Withdrawal of Enforcement Notice. An Enforcement Notice,
once given, shall remain in effect unless and until (i) the Required Lenders
notify the Collateral Agent that they wish to withdraw such Enforcement Notice,
(ii) no monies have been applied to pay any Secured Obligations pursuant to
Section 15

                                      40
<PAGE>

(except pursuant to clause first of subsection (b) thereof) as a result of such
Enforcement Notice and (iii) the Collateral Agent determines that the withdrawal
of such Enforcement Notice will not result in any liability or unreimbursed loss
to the Collateral Agent by reason of actions taken by it in reliance thereon.

     Section 22. Waivers, Remedies Not Exclusive. No failure on the part of the
Collateral Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right or remedy under any Collateral Document shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Collateral Agent of any right or remedy under the Credit Agreement or any
Collateral Agreement preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies specified in the
Collateral Documents and the Credit Agreement are cumulative and are not
exclusive of any other rights or remedies provided by law.

     Section 23. Successors and Assigns. This Agreement is for the benefit of
the Collateral Agent and the Secured Parties and their respective successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights of the holder thereof hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness. This Agreement shall be binding on the Lien Grantors and their
respective successors and assigns.

     Section 24. Changes in Writing. Neither this Agreement nor any provision
hereof may be amended, waived, discharged or terminated except in accordance
with Section 12.05 of the Credit Agreement.

     Section 25. NEW YORK LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY
THE LAWS OF SUCH JURISDICTION.

                                      41
<PAGE>

     Section 26. Severability. If any provision of any Collateral Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, the other provisions of the Collateral Documents shall remain
in full force and effect in such jurisdiction and shall be liberally construed
in favor of the Collateral Agent and the Secured Parties in order to carry out
the intentions of the parties thereto as nearly as may be possible; and the
invalidity or unenforceability of any provision thereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

     Section 27. Intercreditor Agreement. Notwithstanding any provision to the
contrary contained herein, the terms of this Agreement, the Liens created
hereby, and the rights and remedies of the Collateral Agent and the Secured
Parties hereunder, are subject to the Intercreditor Agreement and subordinated
as provided therein. Wherever in this Agreement references to the rights and
obligations of the Collateral Agent are, in furtherance of the foregoing
sentence, qualified by references to the Intercreditor Agreement or the Senior
Financing Documents, such references are intended solely for purposes of
acknowledging the provisions that the Collateral Agent, as between it and the
Senior Collateral Agent, has agreed to accept at the direction of the Secured
Parties, and no such references are intended or shall be applied to create or
impose, as between the Collateral Agent, on the one hand, and the Lien Grantors
on the other hand, any limitation on the rights of the Collateral Agent or the
obligations of the Lien Grantors; provided that if and for so long as the Issuer
and the other Lien Grantors are subject to and complying with any requirements
similar to those in this Agreement imposed by the Senior Collateral Documents,
the Issuer and the other Lien Grantors need not comply with the requirements of
this Agreement (and the provisions of this Agreement shall be applied
accordingly).

     Section 28. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.

                                      42
<PAGE>

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

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

                                   By: ____________________________________
                                       Name:
                                       Title:

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

                                   By: ____________________________________
                                       Name:
                                       Title:

                                   MORGAN GUARANTY TRUST
                                    COMPANY OF NEW YORK,
                                    as Collateral Agent

                                   By: ____________________________________
                                       Name:
                                       Title:
<PAGE>

                                        SUBSIDIARY GUARANTORS
                                        ---------------------

                                   [_____________________]
<PAGE>

                                                                    EXHIBIT A
                                           to Second Priority Security Agreement

                 SECOND PRIORITY SECURITY AGREEMENT SUPPLEMENT

     SECOND PRIORITY SECURITY AGREEMENT SUPPLEMENT (the "Security Agreement
Supplement") dated as of _______, ____, between [name of Subsidiary Guarantor]
(the "Subsidiary Guarantor") and [Morgan Guaranty Trust Company of New York], as
Collateral Agent.

     WHEREAS, Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), the Guarantors party thereto and Morgan Guaranty Trust Company
of New York, as Collateral Agent, are parties to a Second Priority Security
Agreement dated as of April 20, 2001 (as heretofore amended and/or supplemented,
the "Security Agreement");

     WHEREAS, terms defined in the Security Agreement (or whose definitions are
incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein; and

     WHEREAS, [name of Subsidiary Guarantor] desires to become a party to the
Security Agreement as an additional Lien Grantor thereunder;

     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1.  Grant of Security Interest. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, the Subsidiary Guarantor grants to the Collateral Agent for the benefit
of the Secured Parties a continuing security interest in all of the following
assets of the Subsidiary Guarantor (the "New Collateral"):

     [describe assets being added to the Collateral]

     2.  Delivery of Collateral. Concurrently with delivering this Security
Agreement Supplement to the Collateral Agent, the Subsidiary Guarantor is
complying with the provisions of Section 4 of the Security Agreement with
respect to all stock certificates and other certificates representing Equity
Interests (if any) included in the New Collateral and all Instruments (if any)
included in the New Collateral.

                                      A-1
<PAGE>

     3.  Party to Security Agreement. Upon delivery of this Security Agreement
Supplement to the Collateral Agent, the Subsidiary Guarantor will become a party
to the Security Agreement and will thereafter have all of the rights and
obligations of a Subsidiary Guarantor thereunder and be bound by all of the
provisions thereof as fully as if the Subsidiary Guarantor were one of the
original parties thereto.

     4.  Address of Subsidiary Guarantor. The address and facsimile number of
the Subsidiary Guarantor to which all notices, requests and other communications
shall be sent pursuant to Section 20 of the Security Agreement is:

     [address and facsimile number of Subsidiary Guarantor]

     5.  Representations and Warranties./1/ (a) The Subsidiary Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of [jurisdiction of incorporation].

     (b)  The Subsidiary Guarantor has delivered a Perfection Certificate to
the Collateral Agent. The information set forth therein is correct and complete
as of the date hereof. Within 60 days of the date hereof, the Subsidiary
Guarantor shall furnish to the Collateral Agent file search reports from each
UCC filing office confirming the filing information set forth in such Perfection
Certificate.

     (c)  The execution and delivery of this Security Agreement Supplement by
the Subsidiary Guarantor and the performance by it of its obligations under the
Security Agreement as supplemented hereby are within its corporate or other
powers, have been duly authorized by all necessary corporate or other action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its Organizational Documents, or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon it or result in the creation or imposition of any Lien (other than
the Liens created by the Collateral Documents and the Senior Collateral
Documents) on any of its assets.

     (d)  The Security Agreement as supplemented hereby constitutes a valid and
binding agreement of the Subsidiary Guarantor, enforceable in accordance with
its terms, except as may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance or other similar laws affecting creditors' rights generally and (ii)
general principles of equity.

__________________

  /1/ Modify as needed for any Subsidiary Guarantor that is not a corporation.

                                      A-2
<PAGE>

     (e)  As of the date hereof, the Subsidiary Guarantor owns the Equity
Interests listed as being owned by it in Schedule 1 to this Security Agreement
Supplement, free and clear of any Lien other than Permitted Liens. All shares of
capital stock identified in such Schedule as being beneficially owned by the
Subsidiary Guarantor have been duly authorized and validly issued, are fully
paid and non-assessable, and are subject to no option to purchase or similar
right of any Person. The Subsidiary Guarantor is not and will not become a party
to or become otherwise bound by any agreement, other than the Financing
Documents and the Senior Financing Documents, which restricts in any manner the
rights of any present or future holder of any Pledged Equity Interest with
respect thereto.

     (f)  The Subsidiary Guarantor has good and marketable title to all of
its Collateral (except Intellectual Property), free and clear of any Lien other
than Permitted Liens. To the best of its knowledge, the Subsidiary Guarantor has
good title or other rights in and to all Intellectual Property owned by or
licensed to it on the date hereof, free and clear of any Lien other than
Permitted Liens. The Subsidiary Guarantor has taken all actions necessary under
the UCC to perfect its interest in any Accounts purchased or otherwise acquired
by it, as against its assignors and creditors of its assignors.

     (g)  Other than granting Permitted Liens, the Subsidiary Guarantor has
not performed any acts that might prevent the Collateral Agent from enforcing
any of the provisions of the Collateral Documents or that would limit the
Collateral Agent in any such enforcement. No financing statement, security
agreement, mortgage or similar or equivalent document or instrument covering all
or any part of the Collateral owned by it is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect or
record a Lien on such Collateral, except financing statements, mortgages or
other similar or equivalent documents with respect to Permitted Liens. After the
date hereof, no Collateral owned by it will be in the possession of any Person
(other than the Subsidiary Guarantor) asserting any claim thereto or security
interest therein (except Permitted Liens), except that (i) the Senior Collateral
Agent or its designee may have possession of Collateral as contemplated by the
Senior Collateral Agreement and the Intercreditor Agreement or the Collateral
Agent or its designee may have possession of Collateral as contemplated hereby
and (ii) cash and Temporary Cash Investments may be held in the Concentration
Accounts.

     (h)  The Personal Property Security Interests constitute valid security
interests in all Personal Property Collateral owned by the Subsidiary Guarantor
thereby securing its Secured Obligations, and constitute security interests
therein prior to all other Liens other than Liens permitted under the Credit
Agreement to be senior in priority to the Liens of the Lenders.

                                      A-3
<PAGE>

     (i)  Upon the delivery of the Pledged Instruments (if any) and the Pledged
Equity Securities owned by the Subsidiary Guarantor to the Collateral Agent in
accordance with Section 4 of the Security Agreement, the Collateral Agent will
have valid and perfected security interests in such Collateral subject to no
prior Lien other than Permitted Liens.

     (j)  When UCC financing statements shall have been filed in the
appropriate offices, the Personal Property Security Interests will constitute
perfected security interests in the Personal Property Collateral owned by the
Subsidiary Guarantor to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior (except in the case of
Intellectual Property) to all Liens and rights of others therein except
Permitted Liens. When, in addition to the filing of such UCC financing
statements, the applicable Intellectual Property Filings have been made with
respect to the Subsidiary Guarantor's Intellectual Properties (including any
future filings required pursuant to Sections 5(c) and 5(d) of the Security
Agreement), the Personal Property Security Interests will constitute perfected
security interests in all right, title and interest of the Subsidiary Guarantor
in its Intellectual Property to the extent that security interests therein may
be perfected by such filings and, to the best of the Subsidiary Guarantor's
knowledge, such security interests will be prior to all other Liens and rights
of others therein except Permitted Liens. Except for (i) the filing of such UCC
financing statements, (ii) such Intellectual Property Filings, (iii) the due
recordation of memoranda of lease with respect to any Real Property Collateral
leased or subleased to the Subsidiary Guarantor and any assignments of any such
lease or sublease and (iv) the due recordation of the Fee Mortgages and the
Leasehold Mortgages, no registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of the Collateral Documents or is necessary for the
validity or enforceability thereof or for the perfection or due recordation of
the Security Interests or (except with respect to the capital stock of any
Insurance Subsidiary)) for the enforcement of the Security Interests.

     (k)  The Subsidiary Guarantor's Collateral is insured in accordance with
the requirements of the Credit Agreement.

     6.  Governing Law. This Security Agreement Supplement shall be construed
in accordance with and governed by the laws of the State of New York.

     7.  Intercreditor Agreement. Section 27 of the Security Agreement is
hereby incorporated herein by reference.

                                      A-4

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have cause this Security
Agreement Supplement to be duly executed by their respective authorized officers
as of the day and year first above written.

                                      [Name of Subsidiary Guarantor]

                                      By:_________________________
                                          Name:
                                          Title:

                                      MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                                      as Collateral Agent

                                      By:___________________________
                                          Name:
                                          Title:

                                      A-5
<PAGE>

                                                                      SCHEDULE 1
                                           to Second Priority Security Agreement
                                                                      Supplement

                           EQUITY INTERESTS OWNED BY
                             SUBSIDIARY GUARANTOR

                                                              Number of
              State of                Percentage           Shares or Units
   Name     Organization                Owned             (if certificated)
---------- --------------         ------------------  -------------------------

                                       1
<PAGE>

                                                                   EXHIBIT B
                                           to Second Priority Security Agreement

                 SECOND PRIORITY COPYRIGHT SECURITY AGREEMENT

                (Copyrights, Copyright Registrations, Copyright
                     Applications and Copyright Licenses)

         WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/ (herein
referred to as the "Lien Grantor") owns, or in the case of licenses, is a party
to, the Copyright Collateral (as defined below);

         WHEREAS, Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), the
Lenders referred to therein and Morgan Guaranty Trust Company of New York, as
Administrative Agent and Collateral Agent, are parties to a Credit Agreement
dated as of April 20, 2001 (as amended from time to time, the "Credit
Agreement");

         [WHEREAS, pursuant to the terms of a Second Priority Subsidiary
Guaranty Agreement dated as of __________, ____, the Lien Grantor has
guaranteed, subject to certain limitations, certain obligations of Vencor
Operating, Inc. (such guarantee being herein referred to as the Lien Grantor's
"Guaranty"); and]

         [WHEREAS, pursuant to the terms of the Second Priority Vencor Guaranty
Agreement dated as of April 20, 2001, the Lien Grantor has guaranteed certain
obligations of Vencor Operating, Inc. (such guarantee being herein referred to
as the Lien Grantor's "Guaranty"); and]

         WHEREAS, pursuant to the terms of the Second Priority Security
Agreement dated as of April 20, 2001 (as such agreement may be amended from time
to time, the "Security Agreement") among Vencor Operating, Inc., the Guarantors
party thereto and Morgan Guaranty Trust Company of New York, as Collateral Agent
for the Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien (as defined in the Credit Agreement) on substantially all the
assets of the Lien Grantor (except certain excluded assets), including all
right, title

________________

   /1/ Modify as needed for any Lien Grantor that is not a corporation.

                                      B-1
<PAGE>

and interest of the Lien Grantor in, to and under the Copyright Collateral (as
defined below), whether now owned or existing or hereafter acquired or arising,
to secure the Secured Obligations (as defined in the Security Agreement);

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Copyright Collateral"), whether now owned or
existing or hereafter acquired or arising:

                    (i) each Copyright (as defined in the Security Agreement)
         owned by the Lien Grantor, including, without limitation, each
         Copyright registration or application therefor referred to in Schedule
         1 hereto;

                   (ii) each Copyright License (as defined in the Security
         Agreement) to which the Lien Grantor is a party, including, without
         limitation, each Copyright License identified in Schedule 1 hereto; and

                  (iii) all proceeds of and revenues from, accounts and general
         intangibles arising out of, the foregoing, including, without
         limitation, all proceeds of and revenues from any claim by the Lien
         Grantor against third parties for past, present or future infringement
         of any Copyright, including, without limitation, any Copyright owned by
         the Lien Grantor referred to in Schedule 1, and all rights and benefits
         of the Lien Grantor under any Copyright License, including, without
         limitation, any Copyright License identified in Schedule 1 hereto.

         The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice (as defined in the Credit
Agreement) is in effect, to take with respect to the Copyright Collateral any
and all appropriate action which the Lien Grantor might take with respect to the
Copyright Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Second Priority
Copyright Security Agreement and to accomplish the purposes hereof.

         Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or

                                      B-2
<PAGE>

otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Copyright Collateral.

         The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Copyright Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.

                                      B-3
<PAGE>

         IN WITNESS WHEREOF, the Lien Grantor has caused this Second Priority
Copyright Security Agreement to be duly executed by its officer thereunto duly
authorized as of the ____ day of _______, ____.

                                              [NAME OF LIEN GRANTOR]

                                              By: __________________________
                                              Title:

         Acknowledged:

         MORGAN GUARANTY TRUST COMPANY
          OF NEW YORK, as Collateral Agent

         By: __________________________
         Title:

                                      B-4
<PAGE>

         STATE OF ________  )
                              ) ss.:
         COUNTY OF ________ )

                  I, ______________________, a Notary Public in and for said
County, in the State aforesaid, DO HEREBY CERTIFY, that
_________________________, _______________ of [NAME OF LIEN GRANTOR] (the
"Company"), personally known to me to be the same person whose name is
subscribed to the foregoing instrument as such _________________, appeared
before me this day in person and acknowledged that (s)he signed, executed and
delivered the said instrument as her/his own free and voluntary act and as the
free and voluntary act of said Company, for the uses and purposes therein set
forth being duly authorized so to do.

                  GIVEN under my hand and Notarial Seal this ___ day of
________________, _____.

         [Seal]

         ________________________________
         Signature of notary public
         My Commission expires __________

                                      B-5
<PAGE>

                                                                   Schedule 1
                                                  to Second Priority Copyright
                                                             Security Agreement
                                                            --------------------

                            [NAME OF LIEN GRANTOR]

                            COPYRIGHT REGISTRATIONS

Registration        Registration                                Expiration
------------        ------------                                ----------
     No.                Date                Title                  Date
     ---                ----                -----                  ----

                                       1
<PAGE>

                                                                    EXHIBIT C
                                           to Second Priority Security Agreement

                   SECOND PRIORITY PATENT SECURITY AGREEMENT

              (Patents, Patent Applications and Patent Licenses)

         WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/ (herein
referred to as the "Lien Grantor") owns, or in the case of licenses, is a party
to, the Patent Collateral (as defined below);

         WHEREAS, Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), the
Lenders referred to therein and Morgan Guaranty Trust Company of New York, as
Administrative Agent and Collateral Agent, are parties to a Credit Agreement
dated as of April 20, 2001 (as amended from time to time, the "Credit
Agreement");

         [WHEREAS, pursuant to the terms of a Second Priority Subsidiary
Guaranty Agreement dated as of __________, ____, the Lien Grantor has
guaranteed, subject to certain limitations, certain obligations of Vencor
Operating, Inc. (such guarantee being herein referred to as the Lien Grantor's
"Guaranty"); and]

         [WHEREAS, pursuant to the terms of the Second Priority Vencor Guaranty
Agreement dated as of April 20, 2001, the Lien Grantor has guaranteed certain
obligations of Vencor Operating, Inc. (such guarantee being herein referred to
as the Lien Grantor's "Guaranty"); and]

         WHEREAS, pursuant to the terms of the Second Priority Security
Agreement dated as of April 20, 2001 (as such agreement may be amended from time
to time, the "Security Agreement") among Vencor Operating, Inc., the Guarantors
party thereto and Morgan Guaranty Trust Company of New York, as Collateral Agent
for the Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien (as defined in the Credit Agreement) on substantially all the
assets of the Lien Grantor (except certain excluded assets), including all
right, title and interest of the Lien Grantor in, to and under the Patent
Collateral (as defined below), whether now owned or existing or hereafter
acquired or arising, to secure the Secured Obligations (as defined in the
Security Agreement);

___________________

   /1/ Modify as needed for any Lien Grantor that is not a corporation.

                                      C-1
<PAGE>

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Patent Collateral"), whether now owned or
existing or hereafter acquired or arising:

                    (i) each Patent (as defined in the Security Agreement) owned
         by the Lien Grantor, including, without limitation, each Patent
         referred to in Schedule 1 hereto;

                   (ii) each Patent License (as defined in the Security
         Agreement) to which the Lien Grantor is a party, including, without
         limitation, each Patent License identified in Schedule 1 hereto; and

                  (iii) all proceeds of and revenues from the foregoing,
         including, without limitation, all proceeds of and revenues from any
         claim by the Lien Grantor against third parties for past, present or
         future infringement of any Patent owned by the Lien Grantor, including,
         without limitation, any Patent referred to in Schedule 1 hereto, and
         all rights and benefits of the Lien Grantor under any Patent License,
         including, without limitation, any Patent License identified in
         Schedule 1 hereto.

         The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice (as defined in the Credit
Agreement) is in effect, to take with respect to the Patent Collateral any and
all appropriate action which the Lien Grantor might take with respect to the
Patent Collateral and to execute any and all documents and instruments which may
be necessary or desirable to carry out the terms of this Second Priority Patent
Security Agreement and to accomplish the purposes hereof.

         Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the Patent Collateral.

         The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the

                                      C-2
<PAGE>

rights and remedies of the Grantee with respect to the security interest in the
Patent Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

                                      C-3
<PAGE>

         IN WITNESS WHEREOF, the Lien Grantor has caused this Second Priority
Patent Security Agreement to be duly executed by its officer thereunto duly
authorized as of the ____ day of ____________, ____.

                                              [NAME OF LIEN GRANTOR]

                                      By: _______________________________
                                      Title:

         Acknowledged:

         MORGAN GUARANTY TRUST COMPANY
          OF NEW YORK, as Collateral Agent

         By: _________________________
         Title:

                                      C-4
<PAGE>

STATE OF __________ )
                    ) ss.:
COUNTY OF _________ )

         I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.

         GIVEN under my hand and Notarial Seal this ___ day of _______________,
____.

[Seal]

________________________________
Signature of notary public
My Commission expires __________

                                      C-5
<PAGE>

                                                                  EXHIBIT D
                                           to Second Priority Security Agreement

                 SECOND PRIORITY TRADEMARK SECURITY AGREEMENT

                (Trademarks, Trademark Registrations, Trademark
                     Applications and Trademark Licenses)

         WHEREAS, [Name of Lien Grantor], a _____________ corporation/1/ (herein
referred to as the "Lien Grantor") owns, or in the case of licenses, is a party
to, the Trademark Collateral (as defined below);

         WHEREAS, Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), the
Lenders referred to therein and Morgan Guaranty Trust Company of New York, as
Administrative Agent and Collateral Agent, are parties to a Credit Agreement
dated as of April 20, 2001 (as amended from time to time, the "Credit
Agreement");

         [WHEREAS, pursuant to the terms of a Second Priority Subsidiary
Guaranty Agreement dated as of __________, ____, the Lien Grantor has
guaranteed, subject to certain limitations, certain obligations of Vencor
Operating, Inc. (such guarantee being herein referred to as the Lien Grantor's
"Guaranty"); and]

         [WHEREAS, pursuant to the terms of the Second Priority Vencor Guaranty
Agreement dated as of April 20, 2001, the Lien Grantor has guaranteed certain
obligations of Vencor Operating, Inc. (such guarantee being herein referred to
as the Lien Grantor's "Guaranty"); and]

         WHEREAS, pursuant to the terms of the Second Priority Security
Agreement dated as of April 20, 2001 (as such agreement may be amended from time
to time, the "Security Agreement") among Vencor Operating, Inc., the Guarantors
party thereto and Morgan Guaranty Trust Company of New York, as Collateral Agent
for the Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the "Grantee"), the Lien Grantor has granted to the
Grantee for the benefit of such Secured Parties a continuing security interest
in or other Lien (as defined in the Credit Agreement) on substantially all the
assets of the Lien Grantor (except certain excluded assets), including all
right, title and interest of the Lien Grantor in, to and under the Trademark
Collateral (as

____________________________
     /1/ Modify as needed for any Lien Grantor that is not a corporation.

                                      D-1
<PAGE>

defined below), whether now owned or existing or hereafter acquired or arising,
to secure the Secured Obligations (as defined in the Security Agreement);

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations, a continuing security
interest in all of the Lien Grantor's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Trademark Collateral"), whether now owned or
existing or hereafter acquired or arising:

                    (i)   each Trademark (as defined in the Security Agreement)
         owned by Lien Grantor, including, without limitation, each Trademark
         registration and application referred to in Schedule 1 hereto, and all
         of the goodwill of the business connected with the use of, or
         symbolized by, each Trademark;

                    (ii)  each Trademark License (as defined in the Security
         Agreement) to which the Lien Grantor is a party, including, without
         limitation, each Trademark License identified in Schedule 1 hereto, and
         all of the goodwill of the business connected with the use of, or
         symbolized by, each Trademark licensed pursuant thereto; and

                    (iii) all proceeds of and revenues from the foregoing,
         including, without limitation, all proceeds of and revenues from any
         claim by the Lien Grantor against third parties for past, present or
         future unfair competition with, or violation of intellectual property
         rights in connection with or injury to, or infringement or dilution of,
         any Trademark owned by the Lien Grantor, including, without limitation,
         any Trademark referred to in Schedule 1 hereto, and all rights and
         benefits of the Lien Grantor under any Trademark License, including,
         without limitation, any Trademark License identified in Schedule 1
         hereto, or for injury to the goodwill associated with any of the
         foregoing.

                    The Lien Grantor hereby irrevocably constitutes and appoints
the Grantee and any officer or agent thereof, with full power of substitution,
as its true and lawful attorney-in-fact with full power and authority in the
name of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Enforcement Notice (as defined in the Credit
Agreement) is in effect, to take with respect to the Trademark Collateral any
and all appropriate action which the Lien Grantor might take with respect to the
Trademark Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Second Priority
Trademark Security Agreement and to accomplish the purposes hereof.

                                      D-2
<PAGE>

          Except to the extent permitted in the Security Agreement or the Credit
Agreement, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Trademark Collateral.

          The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.

                                      D-3
<PAGE>

          IN WITNESS WHEREOF, the Lien Grantor has caused this Second Priority
Trademark Security Agreement to be duly executed by its officer thereunto duly
authorized as of the ____ day of __________, ____.

                                        [NAME OF LIEN GRANTOR]

                                        By: _________________________
                                            Title:

         Acknowledged:

         MORGAN GUARANTY TRUST COMPANY
         OF NEW YORK, as Collateral Agent

         By: ________________________
         Title:

                                      D-4
<PAGE>

         STATE OF __________  )
                                ) ss.:
         COUNTY OF _________  )

          I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.

          GIVEN under my hand and Notarial Seal this ___ day of_______________,
 ____.

         [Seal]

         ________________________________
         Signature of notary public
         My Commission expires __________

                                      D-5
<PAGE>

                                                                      Schedule 1
                                                    to Second Priority Trademark
                                                              Security Agreement

                            [NAME OF LIEN GRANTOR]

                         U.S. TRADEMARK REGISTRATIONS

--------------------------------------------------------------------------------
       TRADEMARK                    REG. NO.                  REG. DATE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

                          U.S. TRADEMARK APPLICATIONS

--------------------------------------------------------------------------------
       TRADEMARK                    REG. NO.                  REG. DATE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

                                       1
<PAGE>

                         EXCLUSIVE TRADEMARK LICENSES

   Name of           Parties                 Date of               Subject
   Agreement    Licensor/Licensee           Agreement              Matter
-------------- ---------------------- -------------------- ---------------------

                                       2
<PAGE>

                                                                       EXHIBIT E
                                           to Second Priority Security Agreement

                            PERFECTION CERTIFICATE

         The undersigned, an authorized officer of [NAME OF LIEN GRANTOR], a
[jurisdiction of incorporation] corporation/1/ (the "Company"), hereby certify
with reference to the Second Priority Security Agreement dated as of April 20,
2001 among the Company, [the Issuer], the [other] Guarantors and Morgan Guaranty
Trust Company of New York, as Collateral Agent (terms defined therein being used
herein as therein defined), to the Collateral Agent and each other Lender Party
as follows:

         1.  Names./1/ (a) The exact corporate name of the Company as it appears
in its certificate of incorporation is as follows:

         (b) Set forth below is each other corporate name the Company has had
since its organization, together with the date of the relevant change.

         (c) Except as set forth in Schedule 1, the Company has not changed its
identity or corporate structure in any way within the past five years.

         [Changes in identity or corporate structure would include mergers,
         consolidations and acquisitions, as well as any change in the form,
         nature or jurisdiction of corporate organization. If any such change
         has occurred, include in Schedule 1 the information required by
         paragraphs 1, 2 and 3 of this certificate as to each acquiree or
         constituent party to a merger or consolidation.]

         (d) The following is a list of all other names (including trade names
or similar appellations) used by the Company or any of its divisions or other
business units at any time during the past five years:

         2.  Current Locations. (a) The chief executive office of the Company is
located at the following address:

         Mailing Address                     County           State
----------------------------------  ---------------------  -------------

______________
/1/ Modify as needed for any Lien Grantor that is not a corporation.

                                      E-1
<PAGE>

          (b) The following are all the locations where the Company maintains
any books or records relating to any Accounts:

          Mailing Address             County                 State
--------------------------------  -----------------  -----------------

          (c) The following are all the places of business of the Company not
identified above:

          Mailing Address             County                 State
--------------------------------  -----------------  -----------------

          (d) The following are all the locations where the Company maintains
any Inventory not identified above:

          Mailing Address             County                 State
--------------------------------  -----------------  -----------------

          (e) The following are the names and addresses of all Persons other
than the Company which have possession of any of the Company's Inventory:

          Mailing Address             County                 State
--------------------------------  -----------------  -----------------

          3.  Prior Locations. (a) Set forth below is the information required
by subparagraphs 2(a), 2(b) and 2(c) above with respect to each location or
place of business maintained by the Company at any time during the past five
years:

          (b) Set forth below is the information required by subparagraphs 2(d)
and 2(e) above with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:

          4.  Unusual Transactions. Except as set forth in Schedule 4, all
Accounts have been originated by the Company and all Inventory and Equipment has
been acquired by the Company in the ordinary course of its business.

          5.  File Search Reports. Attached hereto as Schedule 5(A) is a true
copy of a file search report from the Uniform Commercial Code filing officer in

                                      E-2
<PAGE>

each jurisdiction identified in paragraph 2 or 3 above with respect to each name
set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy
of each financing statement or other filing identified in such file search
reports.

           6. UCC Filings. A duly signed financing statement on Form UCC-1 in
the form required by the Collateral Agent pursuant to the Security Agreement has
been provided to the Collateral Agent for due filing in the Uniform Commercial
Code filing office in each jurisdiction identified in paragraph 2 hereof.

           7. Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph 6 above have been paid or will be paid before
or at the time of such filing.

                                      E-3
<PAGE>

         IN WITNESS WHEREOF, we have hereunto set our hands this __ day of
__________, 20____

                                                ____________________________
                                                Name:
                                                Title:

                                      E-4
<PAGE>

                                                                       EXHIBIT F
                                           to Second Priority Security Agreement

                  FORM OF SECOND PRIORITY LEASEHOLD MORTGAGE

                                      F-1
<PAGE>

                                                                       EXHIBIT G
                                           to Second Priority Security Agreement

                     FORM OF SECOND PRIORITY FEE MORTGAGE

                                      G-1
<PAGE>

                                                                       EXHIBIT H
                                           to Second Priority Security Agreement

                       FORM OF ACCOUNT CONTROL AGREEMENT

                                      H-1
<PAGE>

                                                                       EXHIBIT C

                 SECOND PRIORITY SUBSIDIARY GUARANTY AGREEMENT

     Guaranty Agreement dated as of April 20, 2001 (as amended from time to
time, this "Guaranty Agreement") by the undersigned Subsidiaries (the
"Subsidiary Guarantors") of Vencor Operating, Inc. (to be renamed Kindred
Healthcare Operating, Inc.), a Delaware corporation (the "Issuer"), for the
benefit of the Lender Parties (as such term is defined in the Credit Agreement
referred to below).

     WHEREAS, the Issuer has entered into a Credit Agreement dated as of April
20, 2001 (the "Credit Agreement") among the Issuer, Vencor, Inc. (to be renamed
Kindred Healthcare, Inc.) ("Vencor"), the Lenders party thereto and Morgan
Guaranty Trust Company of New York, as Administrative Agent and Collateral
Agent, pursuant to which the Issuer intends to issue senior secured notes with a
stated principal amount of $300,000,000 to the Lenders in partial satisfaction
of the claims of the Lenders arising under the $1,000,000,000 Credit Agreement
dated as of April 29, 1998 (as amended, the "Pre-Petition Senior Credit
Agreement") among the Issuer, Vencor and a group of banks and other financial
institutions, in connection with which Bank of America N.A. (previously named
Nationsbank N.A.) acted as administrative agent and Morgan Guaranty Trust
Company of New York acted as documentation agent and collateral agent; and

     WHEREAS, the Lenders are willing to accept the notes described above in
partial settlement of their claims under the Pre-Petition Senior Credit
Agreement only if the Issuer causes each of its Restricted Subsidiaries to
guarantee the performance of the Issuer's obligations under the Financing
Documents referred to in the Credit Agreement;

     NOW, THEREFORE, each Subsidiary Guarantor agrees as follows:

     Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
meanings:

     "Senior Collateral Agent" has the meaning set forth in the Security
Agreement.
<PAGE>

     "Senior Subsidiary Guaranty Agreement" has the meaning set forth in the
Security Agreement.

     Section 2. The Guarantees. Each Subsidiary Guarantor, jointly and
severally, unconditionally and irrevocably guarantees the full and punctual
payment of all present and future indebtedness and other obligations of the
Issuer evidenced by or arising under any Financing Document as and when the same
shall become due and payable, whether at maturity or by declaration or
otherwise, according to the terms hereof and thereof (including any interest
which accrues on any of the foregoing obligations after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Issuer, whether or not allowed or allowable as a claim in
any such proceeding). If the Issuer fails punctually to pay any indebtedness or
other obligation guaranteed hereby, each Subsidiary Guarantor unconditionally
agrees to cause such payment to be made punctually as and when the same shall
become due and payable, whether at maturity or by declaration or otherwise, and
as if such payment were made by the Issuer.

     Section 3. Taxes. Each Subsidiary Guarantor agrees to comply with Section
10.02 of the Credit Agreement as if it were a party thereto.

     Section 4. Guarantee Unconditional. Except as provided in Section 10
hereof, the obligations of each Subsidiary Guarantor under this Guaranty
Agreement shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:

     (a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Issuer or any other Guarantor under any
Financing Document by operation of law or otherwise;

     (b) any modification, amendment or waiver of or supplement to any Financing
Document;

     (c) any release, impairment, non-perfection or invalidity of any direct or
indirect security, or of any guarantee or other liability of any third party,
for any obligation of the Issuer or any other Guarantor under any Financing
Document;

     (d) any change in the corporate existence, structure or ownership of the
Issuer or any other Guarantor, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Issuer or any other Guarantor or its
assets, or any resulting release or discharge of any obligation of the Issuer or
any other Guarantor contained in any Financing Document;

                                       2
<PAGE>

     (e) the existence of any claim, set-off or other rights which such
Subsidiary Guarantor may have at any time against the Issuer, any other
Guarantor, any Lender Party or any other Person, whether or not arising in
connection with this Guaranty Agreement; provided that nothing herein shall
prevent the assertion of any such claim by separate suit or compulsory
counterclaim;

     (f) any invalidity or unenforceability relating to or against the Issuer or
any other Guarantor for any reason of any Financing Document or any provision of
applicable law or regulation purporting to prohibit the payment by the Issuer or
any other Guarantor of any amount payable by it under any Financing Document; or

     (g) any other act or omission to act or delay of any kind by the Issuer,
any other Guarantor, any Lender Party or any other Person or any other
circumstance whatsoever that might, but for the provisions of this Section,
constitute a legal or equitable discharge of such Subsidiary Guarantor's
obligations under this Guaranty Agreement.

     Section 5. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Each Subsidiary Guarantor's obligations under this Guaranty
Agreement constitute a continuing guaranty and shall remain in full force and
effect until all amounts payable by the Issuer under the Financing Documents
shall have been paid in full. If at any time any amount payable by the Issuer
under any Financing Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Issuer or
otherwise, each Subsidiary Guarantor's obligations under this Guaranty Agreement
with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.

     Section 6. Subordination. (a) The obligations of each Subsidiary Guarantor
under this Agreement (the "Second Priority Guarantee Obligations" of such
Subsidiary Guarantor) shall be subordinated in right of payment, to the extent
and in the manner provided in this Section, to the prior payment by such
Subsidiary Guarantor of its obligations under the Senior Subsidiary Guaranty
Agreement (the "Senior Guarantee Obligations" of such Subsidiary Guarantor). The
subordination provisions in this Section are for the benefit of and enforceable
by holders of Senior Obligations from time to time.

     (b) (i) No payment will be made on account of the Second Priority Guarantee
Obligations of any Subsidiary Guarantor until the payment in full of all Senior
Obligations.

                                       3
<PAGE>

          (ii) If any payment or distribution of assets of any Subsidiary
     Guarantor is received by any Lender Party in respect of the Second Priority
     Guarantee Obligations of such Subsidiary Guarantor at a time when that
     payment or distribution should not have been made as a result of clause (i)
     above, such payment or distribution will be received and held in trust for
     and will be paid over to the holders of Senior Obligations in respect of
     Senior Guarantee Obligations of such Subsidiary Guarantor which are due and
     payable and remain unpaid or unprovided for in cash or cash equivalents
     until all such Senior Guarantee Obligations have been paid in full or
     provided for in cash or cash equivalents (as allocated by the Senior
     Collateral Agent), after giving effect to any concurrent payment or
     distribution or provision therefor to the holders of Senior Obligations.

     (c)  Upon any payment or distribution of the assets of any Subsidiary
Guarantor to creditors upon a total or partial liquidation or a total or partial
dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to such Subsidiary
Guarantor or its property:

          (i)  holders of Senior Obligations are entitled to receive payment in
     full in cash of all amounts then due in respect of Senior Guarantee
     Obligations of such Subsidiary Guarantor, including all interest accrued or
     accruing on Senior Guarantee Obligations after the commencement of any
     bankruptcy, insolvency or reorganization or similar case or proceeding in
     respect of either the Issuer or such Subsidiary Guarantor at the contract
     rate (including, without limitation, any contract rate applicable upon
     default) specified in the relevant documentation, whether or not the claim
     for the interest is allowed as a claim in the case or proceeding with
     respect to the Senior Guarantee Obligations (only such payment constituting
     "payment in full") before the Lenders will be entitled to receive any
     payment on account of the Second Priority Guarantee Obligations of such
     Subsidiary Guarantor; and

          (ii) until the Senior Guarantee Obligations of such Subsidiary
     Guarantor are paid in full, any payment or distribution to which Lenders
     would be entitled but for these subordination provisions shall instead be
     made to holders of Senior Obligations as their interests may appear.

     (d)  If a payment or other distribution is made to Lenders on account of
the Second Priority Guarantee Obligations that because of these subordination
provisions should not have been made to them, the Lenders that receive the
distribution shall hold it in trust to be paid over to holders of Senior
Obligations or their representatives for application to the payment of the
Senior Guarantee Obligations.

                                       4
<PAGE>

     (e) A distribution made by a Subsidiary Guarantor under these subordination
provisions to holders of Senior Obligations of such Subsidiary Guarantor which
otherwise would have been made to the Lenders is not, as between such Subsidiary
Guarantor and the Lenders, a payment by such Subsidiary Guarantor on its Senior
Guarantee Obligations. After all Senior Guarantee Obligations of any Subsidiary
Guarantor are paid in full, Lenders will be subrogated to the rights of holders
of Senior Guarantee Obligations to receive payments in respect of Senior
Guarantee Obligations of such Subsidiary Guarantor, which, to the extent
received by Lenders, do not constitute, as between such Subsidiary Guarantor and
the Lenders, payments by such Subsidiary Guarantor on its Second Priority
Guarantee Obligations.

     (f) Subject to the Intercreditor Agreement, these subordination provisions
define the relative rights of Lenders and holders of Senior Obligations and do
not impair, as between the Subsidiary Guarantors and Lenders, the obligation of
the Subsidiary Guarantors, which are absolute and unconditional, to pay to the
Lenders the Second Priority Guarantee Obligations in accordance with their
terms. The failure to make a payment pursuant to the Second Priority Guarantee
Obligations by reason of these subordination provisions does not prevent the
occurrence of a Default, nor do these subordination provisions have any effect
on the right of the Lenders or the Administrative Agent to accelerate the
maturity of the Notes upon an Event of Default or prevent the Administrative
Agent or any Lender from exercising its available remedies upon a Default,
subject to the rights of holders of Senior Obligations, if any, to receive
distributions otherwise payable to Lenders under this Section and under the
Intercreditor Agreement.

     (g) No right of any holder of Senior Obligations to enforce the
subordination as provided herein will be impaired by any act or failure to act
by any Subsidiary Guarantor or by its failure to comply with this Agreement.

     Section 7. Waiver. Each Subsidiary Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Issuer or any other Person or against any security.

     Section 8. Subrogation and Contribution. When any Subsidiary Guarantor
makes any payment hereunder with respect to the obligations of the Issuer, such
Subsidiary Guarantor shall be subrogated to the rights of the payee against the
Issuer with respect to the portion of such obligations paid by such Subsidiary
Guarantor, and shall also have a right of contribution in respect of such
payment against all other Guarantors pro rata among them based on their
respective net fair value as enterprises; provided that such Subsidiary
Guarantor shall not enforce any payment by way of subrogation against the Issuer
or

                                       5
<PAGE>

contribution against any other Guarantor so long as any amount payable by the
Issuer under any Financing Document remains unpaid.

     Section 9.  Stay of Acceleration. If acceleration of the time for payment
of any amount payable by the Issuer under any Financing Document is stayed upon
the insolvency, bankruptcy or reorganization of the Issuer, all such amounts
otherwise subject to acceleration under the terms of such Financing Document
shall nonetheless be payable by each Subsidiary Guarantor hereunder forthwith on
demand by the Administrative Agent made at the request of the Required Lenders.

     Section 10. Limit of Liability. The Subsidiary Guarantors and the
beneficiaries of this Guaranty Agreement intend that this Guaranty Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If and to
the extent that the obligations of any Subsidiary Guarantor under this Guaranty
Agreement would, in the absence of this sentence, be adjudicated to be invalid
or unenforceable because of any applicable state or federal law relating to
fraudulent conveyances or transfers, then the amount of such Subsidiary
Guarantor's liability hereunder in respect of the obligations of the Issuer
guaranteed hereunder shall be deemed to be reduced ab initio to the maximum
amount which would be permitted without causing such Subsidiary Guarantor's
obligations hereunder to be so invalidated.

     Section 11. Notices. Notices and other communications hereunder shall be
given in writing in the manner specified in or pursuant to Section 12.01 of the
Credit Agreement.

     Section 12. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS GUARANTY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. EACH SUBSIDIARY GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY. EACH SUBSIDIARY GUARANTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, 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

                                       6
<PAGE>

SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     Section 13. Successors and Assigns. This Guaranty Agreement is for the
benefit of holders of Senior Obligations, the Lender Parties and their
respective successors and assigns. If any Loans (as evidenced by the Notes) or
other amounts payable under the Financing Documents are assigned pursuant to
Section 12.06 of the Credit Agreement, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness.

     Section 14. No Waiver. No failure or delay by any Lender Party in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in the Financing
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.

     Section 15. Amendments and Waivers. Any provision of this Guaranty
Agreement may be amended, supplemented, modified or waived as (and only as)
provided in Section 12.05 of the Credit Agreement and the Intercreditor
Agreement.

     Section 16. Counterparts. This Guaranty Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto were upon the same instrument.

     Section 17. WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT, THE OTHER FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. EACH SUBSIDIARY GUARANTOR
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES TO THE FINANCING DOCUMENTS HAVE BEEN INDUCED TO
ENTER INTO THIS GUARANTY AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AS
APPLICABLE, BY (AMONG OTHER THINGS) THE WAIVERS AND CERTIFICATIONS IN THIS
SECTION 17 AND SECTION 12.10 OF THE CREDIT AGREEMENT.

     Section 18. Intercreditor Agreement. Each Subsidiary Guarantor acknowledges
and agrees that notwithstanding anything herein to the contrary, the terms of
this Agreement are subject to the Intercreditor Agreement and subordinated as
provided therein.

                                       7
<PAGE>

     IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this Guaranty
Agreement to be duly executed by its authorized officer as of the day and year
first above written.

                         [  ]

                         By:________________________________
                            Name:
                            Title:

                         [  ]

                         By:________________________________
                            Name:
                            Title:

                         [  ]

                         By:________________________________
                            Name:
                            Title:

<PAGE>

                                                                       EXHIBIT D
                   SECOND PRIORITY VENCOR GUARANTY AGREEMENT

     Guaranty Agreement dated as of April 20, 2001 (as amended from time to
time, this "Guaranty Agreement") by Vencor, Inc. (to be renamed Kindred
Healthcare, Inc.), a Delaware corporation ("Vencor"), for the benefit of the
Lender Parties (as such term is defined in the Credit Agreement referred to
below).

     WHEREAS, Vencor Operating, Inc. (to be renamed Kindred Healthcare
Operating, Inc.), a Delaware corporation and wholly owned subsidiary of Vencor
(the "Issuer"), has entered into a Credit Agreement dated as of April 20, 2001
(the "Credit Agreement") among the Issuer, Vencor, the Lenders party thereto and
Morgan Guaranty Trust Company of New York, as Administrative Agent and
Collateral Agent, pursuant to which the Issuer intends to issue senior secured
notes with a stated principal amount of $300,000,000 to the Lenders in partial
satisfaction of the claims of the Lenders arising under the $1,000,000,000
Credit Agreement dated as of April 29, 1998 (as amended, the "Pre-Petition
Senior Credit Agreement") among the Issuer, Vencor and a group of banks and
other financial institutions, in connection with which Bank of America N.A.
(previously named Nationsbank N.A.) acted as administrative agent and Morgan
Guaranty Trust Company of New York acted as documentation agent and collateral
agent; and

     WHEREAS, the Lenders are willing to accept the notes described above in
partial settlement of their claims under the Pre-Petition Senior Credit
Agreement only if Vencor guarantees the performance of the Issuer's obligations
under the Financing Documents referred to in the Credit Agreement;

     NOW, THEREFORE, Vencor agrees as follows:

     Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
meanings:

     "Senior Collateral Agent" has the meaning set forth in the Security
Agreement.
<PAGE>

     "Senior Vencor Guaranty Agreement" has the meaning set forth in the
Security Agreement.

     Section 2. The Guarantee. Vencor unconditionally and irrevocably guarantees
the full and punctual payment of all present and future indebtedness and other
obligations of the Issuer evidenced by or arising under any Financing Document
as and when the same shall become due and payable, whether at maturity or by
declaration or otherwise, according to the terms hereof and thereof (including
any interest which accrues on any of the foregoing obligations after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Issuer, whether or not allowed or allowable
as a claim in any such proceeding). If the Issuer fails punctually to pay any
indebtedness or other obligation guaranteed hereby, Vencor unconditionally
agrees to cause such payment to be made punctually as and when the same shall
become due and payable, whether at maturity or by declaration or otherwise, and
as if such payment were made by the Issuer.

     Section 3. Guarantee Unconditional. The obligations of Vencor under this
Guaranty Agreement shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:

     (a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Issuer or any other Guarantor under any
Financing Document by operation of law or otherwise;

     (b) any modification, amendment or waiver of or supplement to any Financing
Document;

     (c) any release, impairment, non-perfection or invalidity of any direct or
indirect security, or of any guarantee or other liability of any third party,
for any obligation of the Issuer or any other Guarantor under any Financing
Document;

     (d) any change in the corporate existence, structure or ownership of the
Issuer or any other Guarantor, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Issuer or any other Guarantor or its
assets, or any resulting release or discharge of any obligation of the Issuer or
any other Guarantor contained in any Financing Document;

     (e) the existence of any claim, set-off or other rights which Vencor may
have at any time against the Issuer, any other Guarantor, any Lender Party or
any other Person, whether or not arising in connection with this Guaranty
Agreement;

                                       2
<PAGE>

provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;

     (f) any invalidity or unenforceability relating to or against the Issuer or
any other Guarantor for any reason of any Financing Document or any provision of
applicable law or regulation purporting to prohibit the payment by the Issuer or
any other Guarantor of any amount payable by it under any Financing Document; or

     (g) any other act or omission to act or delay of any kind by the Issuer,
any other Guarantor, any Lender Party or any other Person or any other
circumstance whatsoever that might, but for the provisions of this Section,
constitute a legal or equitable discharge of Vencor's obligations under this
Guaranty Agreement.

     Section 4. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Vencor's obligations under this Guaranty Agreement constitute a
continuing guaranty and shall remain in full force and effect until all amounts
payable by the Issuer under the Financing Documents shall have been paid in
full. If at any time any amount payable by the Issuer under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of the Issuer or otherwise, Vencor's
obligations under this Guaranty Agreement with respect to such payment shall be
reinstated at such time as though such payment had become due but had not been
made at such time.

     Section 5. Subordination. (a) The obligations of Vencor under this
Agreement (the "Second Priority Guarantee Obligations") shall be subordinated in
right of payment, to the extent and in the manner provided in this Section, to
the prior payment by Vencor of its obligations under the Senior Vencor Guaranty
Agreement (the "Senior Guarantee Obligations"). The subordination provisions in
this Section are for the benefit of and enforceable by holders of Senior
Obligations from time to time.

     (b) (i) No payment will be made on account of the Second Priority Guarantee
Obligations until the payment in full of all Senior Obligations.

          (ii) If any payment or distribution of assets of Vencor is received by
     any Lender Party in respect of the Second Priority Guarantee Obligations at
     a time when that payment or distribution should not have been made as a
     result of clause (i) above, such payment or distribution will be received
     and held in trust for and will be paid over to the holders of Senior
     Obligations in respect of Senior Guarantee Obligations which are due and
     payable and remain unpaid or unprovided for in cash or cash

                                       3
<PAGE>

     equivalents until all such Senior Guarantee Obligations have been paid in
     full or provided for in cash or cash equivalents (as allocated by the
     Senior Collateral Agent), after giving effect to any concurrent payment or
     distribution or provision therefor to the holders of Senior Obligations.

     (c) Upon any payment or distribution of the assets of Vencor to creditors
upon a total or partial liquidation or a total or partial dissolution of Vencor
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Vencor or its property:

          (i) holders of Senior Obligations are entitled to receive payment in
     full in cash of all amounts then due in respect of Senior Guarantee
     Obligations, including all interest accrued or accruing on Senior Guarantee
     Obligations after the commencement of any bankruptcy, insolvency or
     reorganization or similar case or proceeding in respect of either the
     Issuer or Vencor at the contract rate (including, without limitation, any
     contract rate applicable upon default) specified in the relevant
     documentation, whether or not the claim for the interest is allowed as a
     claim in the case or proceeding with respect to the Senior Guarantee
     Obligations (only such payment constituting "payment in full") before the
     Lenders will be entitled to receive any payment on account of the Second
     Priority Guarantee Obligations; and

          (ii) until the Senior Guarantee Obligations are paid in full, any
     payment or distribution to which Lenders would be entitled but for these
     subordination provisions shall instead be made to holders of Senior
     Obligations as their interests may appear.

     (d) If a payment or other distribution is made to Lenders on account of the
Second Priority Guarantee Obligations that because of these subordination
provisions should not have been made to them, the Lenders that receive the
distribution shall hold it in trust to be paid over to holders of Senior
Obligations or their representatives for application to the payment of the
Senior Guarantee Obligations.

     (e) A distribution made by Vencor under these subordination provisions to
holders of Senior Obligations which otherwise would have been made to the
Lenders is not, as between Vencor and the Lenders, a payment by Vencor on its
Senior Guarantee Obligations. After all Senior Guarantee Obligations of Vencor
are paid in full, Lenders will be subrogated to the rights of holders of Senior
Guarantee Obligations to receive payments in respect of Senior Guarantee
Obligations, which, to the extent received by Lenders, do not constitute, as
between Vencor and the Lenders, payments by Vencor on its Second Priority
Guarantee Obligations.

                                       4
<PAGE>

     (f) Subject to the Intercreditor Agreement, these subordination provisions
define the relative rights of Lenders and holders of Senior Obligations and do
not impair, as between Vencor and Lenders, the obligation of Vencor, which is
absolute and unconditional, to pay to the Lenders the Second Priority Guarantee
Obligations in accordance with their terms. The failure to make a payment
pursuant to the Second Priority Guarantee Obligations by reason of these
subordination provisions does not prevent the occurrence of a Default, nor do
these subordination provisions have any effect on the right of the Lenders or
the Administrative Agent to accelerate the maturity of the Notes upon an Event
of Default or prevent the Administrative Agent or any Lender from exercising its
available remedies upon a Default, subject to the rights of holders of Senior
Obligations, if any, to receive distributions otherwise payable to Lenders under
this Section and under the Intercreditor Agreement.

     (g) No right of any holder of Senior Obligations to enforce the
subordination as provided herein will be impaired by any act or failure to act
by Vencor or by its failure to comply with this Agreement.

     Section 6. Waiver. Vencor irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Issuer or any other Person or against any security.

     Section 7. Subrogation. When Vencor makes any payment hereunder with
respect to the obligations of the Issuer, Vencor shall be subrogated to the
rights of the payee against the Issuer with respect to the portion of such
obligations paid by Vencor; provided that Vencor shall not enforce any payment
by way of subrogation against the Issuer so long as any amount payable by the
Issuer under any Financing Document remains unpaid.

     Section 8. Stay of Acceleration. If acceleration of the time for payment of
any amount payable by the Issuer under any Financing Document is stayed upon the
insolvency, bankruptcy or reorganization of the Issuer, all such amounts
otherwise subject to acceleration under the terms of such Financing Document
shall nonetheless be payable by Vencor hereunder forthwith on demand by the
Administrative Agent made at the request of the Required Lenders.

     Section 9. Notices. Notices and other communications hereunder shall be
given in writing in the manner specified in or pursuant to Section 12.01 of the
Credit Agreement.

     Section 10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS GUARANTY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK (INCLUDING

                                       5
<PAGE>

SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     Section 11. Successors and Assigns. This Guaranty Agreement is for the
benefit of holders of Senior Obligations, the Lender Parties and their
respective successors and assigns. If any Loans (as evidenced by the Notes) or
other amounts payable under the Financing Documents are assigned pursuant to
Section 12.06 of the Credit Agreement, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness.

     Section 12. No Waiver. No failure or delay by any Lender Party in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in the Financing
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.

     Section 13. Amendments and Waivers. Any provision of this Guaranty
Agreement may be amended, supplemented, modified or waived as (and only as)
provided in Section 12.05 of the Credit Agreement and the Intercreditor
Agreement.

     Section 14. Intercreditor Agreement. Vencor acknowledges and agrees that
notwithstanding anything herein to the contrary, the terms of this Agreement are
subject to the Intercreditor Agreement and subordinated as provided therein.

                                       6
<PAGE>

     IN WITNESS WHEREOF, Vencor has caused this Guaranty Agreement to be duly
executed by its authorized officer as of the day and year first above written.

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

                    By:_______________________________________
                       Name:
                       Title:

                                       7
<PAGE>

                                                                       EXHIBIT E

                  SUBORDINATION AND INTERCREDITOR AGREEMENT

                                  dated as of

                                April 20, 2001

                                     among

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

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

                                      and

                  MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                  as collateral agent for the Senior Lenders

                                      and

                  MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
              as collateral agent for the Second Priority Lenders
<PAGE>

                               TABLE OF CONTENTS
                                  ___________

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                                   ARTICLE 1
                                  Definitions

Section 1.01  Incorporation by Reference.....................................  2
Section 1.02  Certain Definitions............................................  2

                                   ARTICLE 2
                Determinations Relating to Collateral; Remedies

Section 2.01  Determinations Relating to Collateral..........................  7
Section 2.02  Concentration and Collateral Accounts..........................  7
Section 2.03  Remedies.......................................................  8
Section 2.04  Right to Make Advances.........................................  8
Section 2.05  Nature of Secured Parties' Rights..............................  9
Section 2.06  Senior Obligation Payment Date.................................  9

                                   ARTICLE 3
             Application of Certain Amounts; Mandatory Prepayments

Section 3.01  Application of Proceeds of Collateral after Triggering Event...  9
Section 3.02  Payment Provisions............................................. 10
Section 3.03  Reduction Events; Mandatory Prepayments........................ 11

                                   ARTICLE 4
                                 Subordination

Section 4.01  Perfection and Priority of Security Interests.................. 12
Section 4.02  No Interference; No Right to Instruct Senior Collateral Agent;
     Payment Over; Reinstatment; Permitted Actions........................... 17

                                   ARTICLE 5
           Amendments of Documents; Limitations On Facility Amounts

Section 5.01  Amendments and Modifications of Second Priority Financing
     Documents............................................................... 20
Section 5.02  Limitation on Senior Credit Agreement.......................... 20
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                                   ARTICLE 6
              Release of Collateral; Expiration of Certain Rights

Section 6.01  Releases of Collateral......................................... 21

                                   ARTICLE 7
                                 Miscellaneous

Section 7.01  Amendments, Supplements and Waivers............................ 22
Section 7.02  Notices........................................................ 22
Section 7.03  Headings....................................................... 24
Section 7.04  Severability................................................... 24
Section 7.05  Dealings with the Borrower and the Guarantors.................. 24
Section 7.06  Binding Effect................................................. 24
Section 7.07  Counterparts................................................... 25
Section 7.08  NEW YORK LAW................................................... 25
Section 7.09  CONSENT TO JURISDICTION AND SERVICE OF PROCESS................. 25
Section 7.10  WAIVER OF JURY TRIAL........................................... 25
Section 7.11  Bailee for Perfection.......................................... 26
</TABLE>

                                      ii
<PAGE>

                   SUBORDINATION AND INTERCREDITOR AGREEMENT

     SUBORDINATION AND INTERCREDITOR AGREEMENT (as amended and modified from
time to time, this "Agreement") dated as of April 20, 2001, among VENCOR
OPERATING, INC. (to be renamed Kindred Healthcare Operating, Inc.), a Delaware
corporation (the "Borrower"), VENCOR, INC. (to be renamed Kindred Healthcare,
Inc.), a Delaware corporation ("Vencor"), MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as collateral agent for the Senior Lenders from time to time under the
Senior Financing Documents (in such capacity, together with its successors and
assigns, the "Senior Collateral Agent") and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as collateral agent for the Second Priority Lenders from time to time
under the Second Priority Financing Documents (in such capacity, together with
its successors and assigns, the "Second Priority Collateral Agent").

                                   RECITALS

     WHEREAS, the Borrower and Vencor are parties to the Senior Credit Agreement
(such term and other capitalized terms used in these recitals without definition
having the meanings set forth below) pursuant to which the Borrower intends to
borrow funds and obtain letters of credit from the Senior Lenders all on the
terms and conditions set forth therein;

     WHEREAS, the Borrower will secure its obligations under the Senior Credit
Agreement, the other Senior Financing Documents and certain specified interest
rate agreements by granting Liens on its assets to the Senior Collateral Agent
on behalf of the Senior Lenders as provided in the Senior Security Agreement and
the other Senior Collateral Documents;

     WHEREAS, the Borrower and Vencor are parties to the Second Priority Credit
Agreement pursuant to which the Borrower intends to issue senior secured notes
with a stated principal amount of $300,000,000 to the Second Priority Lenders in
partial satisfaction of the claims of the Second Priority Lenders arising under
the $1,000,000,000 Credit Agreement dated as of April 29, 1998 (as amended, the
"Pre-Petition Senior Credit Agreement") among the Borrower, Vencor and a group
of banks and other financial institutions, in connection with which Bank of
America N.A. (previously named Nationsbank N.A.) acted as administrative agent
and Morgan Guaranty Trust Company of New York acted as documentation agent and
collateral agent;

     WHEREAS, the Borrower will secure its obligations under the Second Priority
Credit Agreement and the other Second Priority Financing Documents by granting
second priority Liens on its assets to the Second Priority Collateral Agent
<PAGE>

on behalf of the Second Priority Lenders as provided in the Second Priority
Security Agreement and the other Second Priority Collateral Documents;

     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

                                   ARTICLE 1
                                  Definitions

     Section 1.01. Incorporation by Reference. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Senior
Credit Agreement.

     Section 1.02. Certain Definitions. (a) As used in this Agreement, the
capitalized terms defined in the recitals hereto shall have the meanings
specified therein, and the following terms have the meanings specified below:

     "Bankruptcy Proceeding" means any proceeding under the Bankruptcy Code or
any other Federal, state or foreign bankruptcy, insolvency, reorganization,
receivership or similar law.

     "Collateral" means the Senior Collateral and the Second Priority
Collateral.

     "Collateral Accounts" means "Collateral Accounts", as defined in the Senior
Security Agreement or the Second Priority Security Agreement as the context may
require.

     "Collateral Documents" means (i) the Senior Collateral Documents and (ii)
the Second Priority Collateral Documents.

     "Concentration Accounts" means "Concentration Accounts", as defined in the
Senior Security Agreement or the Second Priority Security Agreement as the
context may require.

     "Default Rate" means on any day (i) with respect to any payment to be made
by the Borrower or any Guarantor to any Senior Secured Party on such day, the
"Default Rate", as defined in the Senior Credit Agreement, for such day and (ii)
with respect to any payment to be made by the Borrower or any Guarantor to

                                       2
<PAGE>

any Second Priority Secured Party on such day, the "Default Rate", as defined in
the Second Priority Credit Agreement, for such day.

     "Distribution Date" means the date on which any funds are distributed by
the Senior Collateral Agent or the Second Priority Collateral Agent in
accordance with the provisions of Section 3.01.

     "Event of Default" means any "Event of Default" under any Senior Financing
Document or any "Event of Default" under any Second Priority Financing Document.

     "Fees" means, with respect to the Senior Collateral Agent or the Second
Priority Collateral Agent, any fees, expenses, reimbursements or
indemnifications payable by the Borrower or any Guarantor to such Person in such
capacity.

     "Financing Documents" means (i) the Senior Financing Documents and (ii) the
Second Priority Financing Documents.

     "Instructing Group" means, until the Senior Obligation Payment Date, the
Required Senior Lenders, and thereafter the Required Second Priority Lenders.

     "Mortgaged Property" means all property of the Borrower and the Guarantors
subject to any of the Mortgages.

     "Reduction Event Account" means "Reduction Event Account", as defined in
the Senior Security Agreement or the Second Priority Security Agreement as the
context may require.

     "Representatives" means (i) the Senior Collateral Agent and (ii) the Second
Priority Collateral Agent.

     "Required Second Priority Lenders" means the "Required Lenders", as defined
in the Second Priority Credit Agreement.

     "Required Senior Lenders" means the "Required Lenders", as defined in the
Senior Credit Agreement.

     "Second Priority Collateral" means all the "Collateral" as defined in the
Second Priority Collateral Documents and shall also include the Mortgaged
Property and the proceeds thereof.

     "Second Priority Collateral Documents" means the "Collateral Documents", as
defined in the Second Priority Security Agreement.

                                       3
<PAGE>

     "Second Priority Credit Agreement" means the $300,000,000 Credit Agreement
dated as of April 20, 2001, among the Borrower, Vencor, the financial
institutions party thereto, and Morgan Guaranty Trust Company of New York, as
administrative agent and collateral agent, as the same may be amended, restated,
supplemented or otherwise modified from time to time, together with all
replacements, refinancings, refundings and renewals thereof from time to time.

     "Second Priority Enforcement Notice" means any "Enforcement Notice", as
defined in the Second Priority Credit Agreement.

     "Second Priority Financing Documents" means the "Financing Documents", as
defined in the Second Priority Credit Agreement.

     "Second Priority Guaranty Agreements" means the "Guaranty Agreements", as
defined in the Second Priority Credit Agreement.

     "Second Priority Lenders" means the "Lenders", as defined in the Second
Priority Credit Agreement.

     "Second Priority Lien" means the Liens on the Second Priority Collateral in
favor of the Second Priority Secured Parties under the Second Priority
Collateral Documents.

     "Second Priority Mortgages" means the "Mortgages", as defined in the Second
Priority Credit Agreement.

     "Second Priority Obligations" means the "Secured Obligations", as defined
in the Second Priority Security Agreement.

     "Second Priority Secured Party" means each holder from time to time of the
Second Priority Obligations.

     "Second Priority Security Agreement" means the "Security Agreement", as
defined in the Second Priority Credit Agreement.

     "Second Priority Subsidiary Guaranty Agreement" means the "Subsidiary
Guaranty Agreement", as defined in the Second Priority Credit Agreement.

     "Second Priority Vencor Guaranty Agreement" means the "Vencor Guaranty
Agreement", as defined in the Second Priority Credit Agreement.

                                       4
<PAGE>

     "Secured Obligations" means, without duplication, (i) the Senior
Obligations and (ii) the Second Priority Obligations.

     "Secured Parties" means (i) the Senior Secured Parties and (ii) the Second
Priority Secured Parties.

     "Senior Collateral" means all the "Collateral" as defined in the Senior
Collateral Documents and shall also include the Mortgaged Property and the
proceeds thereof.

     "Senior Collateral Documents" means the "Collateral Documents", as defined
in the Senior Security Agreement.

     "Senior Credit Agreement" means the $120,000,000 Credit Agreement dated as
of April 20, 2001, among the Borrower, Vencor, the financial institutions party
thereto, Morgan Guaranty Trust Company of New York, as administrative agent and
collateral agent, and General Electric Capital Corporation, as documentation
agent and collateral monitoring agent, as the same may be amended, restated,
supplemented or otherwise modified from time to time, together with all
replacements, refinancings, refundings and renewals thereof from time to time.

     "Senior Enforcement Notice" means any "Enforcement Notice", as defined in
the Senior Credit Agreement.

     "Senior Financing Documents" means the "Financing Documents", as defined in
the Senior Credit Agreement.

     "Senior Lenders" means the "Lenders", as defined in the Senior Credit
Agreement.

     "Senior Lien" means the Liens on the Senior Collateral in favor of the
Senior Secured Parties under the Senior Collateral Documents.

     "Senior Mortgages" means the "Mortgages", as defined in the Senior Credit
Agreement.

     "Senior Obligation Payment Date" means the date on which (i) the Senior
Obligations have indefeasibly been paid in full in cash or cash equivalents,
(ii) all lending commitments under the Senior Credit Agreement have been
terminated and (iii) there are no outstanding Letters of Credit issued under the
Senior Credit Agreement other than such as have been fully cash collateralized

                                       5
<PAGE>

under documents and arrangements satisfactory to the issuer of such letters of
credit.

     "Senior Obligations" means the "Secured Obligations", as defined in the
Senior Security Agreement; provided that the principal amount of the
indebtedness under the Senior Credit Agreement included in the Senior
Obligations shall not exceed the maximum amount from time to time permitted to
be outstanding by this Agreement.

     "Senior Secured Party" means each holder from time to time of the Senior
Obligations.

     "Senior Security Agreement" means the "Security Agreement", as defined in
the Senior Credit Agreement.

     "Triggering Event" means (x) the occurrence of any Event of Default and, as
a result thereof, (A) the acceleration (including any automatic acceleration in
connection with any Bankruptcy Proceeding) of the principal amount of any Senior
Obligations or Second Priority Obligations under the terms of any Financing
Document, (B) the receipt by the Senior Collateral Agent of a Senior Enforcement
Notice or of written instructions given by the Required Senior Lenders while a
Senior Enforcement Notice is in effect, in either case, directing the Senior
Collateral Agent to exercise one or more specific rights or remedies under the
Senior Collateral Documents or (C) the receipt by the Second Priority Collateral
Agent of a Second Priority Enforcement Notice or of written instructions given
by the Required Second Priority Lenders while a Second Priority Enforcement
Notice is in effect, in either case, directing the Second Priority Collateral
Agent to exercise one or more specific rights or remedies under the Second
Priority Collateral Documents and (y) in any such case, receipt by the Second
Priority Collateral Agent of written notice thereof from the Senior Collateral
Agent (in the case of any such Event of Default arising under the Senior
Financing Documents) or receipt by the Senior Collateral Agent of written notice
thereof from the Second Priority Collateral Agent (in the case of any such Event
of Default arising under any Second Priority Financing Document).

     (b)  References in this Agreement to "Articles", "Sections", "Schedules" or
"Exhibits" are to Articles, Sections, Schedules or Exhibits of or to this
Agreement unless otherwise specifically provided. Any of the terms defined in
Section 1.02 may, unless the context otherwise requires, be used in the singular
or plural depending on the reference. "Include", "includes" and "including" are
deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing", "written" and
comparable terms refer to printing, typing, facsimile and other

                                       6
<PAGE>

means of reproducing words on paper. References to any agreement or contract are
to such agreement or contract as amended, modified or supplemented from time to
time (whether before, on or after the Closing Date) in accordance with the terms
hereof and thereof. "Hereto", "herein" and "hereof" refer to this Agreement as
amended from time to time. "Any of the Mortgaged Property" means "the Mortgaged
Property or any part thereof or interest therein".

                                   ARTICLE 2
                Determinations Relating to Collateral; Remedies

     Section 2.01. Determinations Relating to Collateral. If (i) the Second
Priority Collateral Agent shall receive any written request from the Borrower or
any Guarantor under any Second Priority Collateral Document for consent or
approval with respect to any matter or thing relating to any Collateral or the
Borrower or any Guarantor's obligations with respect thereto or (ii) there shall
be due to or from the Second Priority Collateral Agent under the provisions of
any Second Priority Collateral Document any material performance or the delivery
of any material instrument or (iii) the Second Priority Collateral Agent shall
become aware of any nonperformance by the Borrower or any Guarantor of any
covenant or any breach of any representation or warranty set forth in any Second
Priority Financing Document, then, in each such event, the Second Priority
Collateral Agent shall promptly advise the Senior Collateral Agent of the matter
or thing as to which consent has been requested or the performance or instrument
required to be delivered or the nonperformance or breach of which the Second
Priority Collateral Agent has become aware. Until the occurrence of the Senior
Obligation Payment Date, and subject to Section 6.01, the Senior Collateral
Agent and the Required Senior Lenders shall have the exclusive authority to
direct the Second Priority Collateral Agent's response to any of the events or
circumstances contemplated in clauses (i), (ii) and (iii) above.

     Section 2.02. Concentration and Collateral Accounts. Until the occurrence
of the Senior Obligation Payment Date, all Concentration Accounts and Collateral
Accounts shall be established and maintained and all amounts therein shall be
applied in accordance with the provisions of the Senior Financing Documents and
this Agreement; provided that (x) the Second Priority Collateral Agent, on
behalf of the Second Priority Lenders, shall have a second priority security
interest in such accounts and in all Temporary Cash Investments standing to the
credit thereof as set forth in the Second Priority Security Agreement and (y)
the Senior Collateral Agent shall release or arrange for the release of amounts
from such accounts from time to time to enable the Borrower or the Second
Priority Collateral Agent to make timely payments of amounts as and when they

                                       7
<PAGE>

fall due for payment under the Second Priority Financing Documents but only if
the payment of such amounts is then not prohibited by any provision hereof or of
the Senior Financing Documents. Following the occurrence of the Senior
Obligation Payment Date, all amounts in the Concentration Accounts and the
Collateral Accounts established under the Senior Security Agreement shall be
transferred to Concentration Accounts and Collateral Accounts established in
accordance with the provisions of the Second Priority Security Agreement and
such accounts shall thereafter be maintained and all amounts therein shall be
applied in accordance with the provisions of the Second Priority Security
Agreement.

     Section 2.03. Remedies. (a) Until the Senior Obligation Payment Date, the
Senior Collateral Agent and the Required Senior Lenders shall have the exclusive
right to exercise any right or remedy with respect to the Collateral and shall
have the exclusive right to determine and direct the time, method and place for
exercising such right or remedy or conducting any proceeding with respect
thereto. Following the Senior Obligation Payment Date, the Second Priority
Collateral Agent and the Required Second Priority Lenders shall have the
exclusive right to exercise any right or remedy with respect to the Collateral,
and the Required Second Priority Lenders shall have the exclusive right to
direct the time, method and place of exercising or conducting any proceeding for
the exercise of any right or remedy available to the Second Priority Collateral
Agent with respect to the Collateral, or of exercising any power conferred on
the Second Priority Collateral Agent, or for the taking of any other action
authorized by the Second Priority Collateral Documents; provided, however, that
nothing in this Section shall impair the right of the Second Priority Collateral
Agent in its discretion to take any action deemed proper by the Second Priority
Collateral Agent and which is not inconsistent with the terms hereof or any such
direction by the Required Second Priority Lenders.

     (b)  The Senior Collateral Agent will give the Second Priority Collateral
Agent prompt written notice of the occurrence of the Senior Obligation Payment
Date.

     Section 2.04. Right to Make Advances. If an advance of funds shall at any
time be required for the preservation or maintenance of any Collateral, the
Senior Collateral Agent or the Second Priority Collateral Agent shall be
entitled to make such advance after notice to the Borrower and the other
Representative of its intention to do so but without notice to any other Secured
Party; provided that the Second Priority Collateral Agent shall not be entitled
to make any such advance unless (a) it shall have given at least two days' prior
notice to the Senior Collateral Agent of its intention to do so and (b) the
Senior Collateral Agent shall not have objected during such two day period to
the Second Priority Collateral Agent

                                       8
<PAGE>

making such advance (such objection, if any, to be received by the Second
Priority Collateral Agent during such two day period). Each such advance shall
be reimbursed, with interest accrued from the date such advance was made at the
Default Rate, by the Borrower upon demand by the Senior Collateral Agent or the
Second Priority Collateral Agent, and if the Borrower fails to comply with any
such demand, out of the proceeds of any Collateral in accordance with the
provisions of Section 3.01. If any Secured Party shall receive any funds which,
under this Section 2.04, belong to the Senior Collateral Agent or the Second
Priority Collateral Agent, such Secured Party shall remit such funds promptly to
the Senior Collateral Agent or the Second Priority Collateral Agent for
distribution to itself, and before such remittance shall hold such funds in
trust for the Senior Collateral Agent or the Second Priority Collateral Agent,
as the case may be.

     Section 2.05. Nature of Secured Parties' Rights. All of the Secured Parties
shall be bound by any instruction or direction given by the Instructing Group
pursuant to this Agreement.

     Section 2.06. Senior Obligation Payment Date. Promptly upon the occurrence
of the Senior Obligation Payment Date, the Senior Collateral Agent shall notify
the Second Priority Collateral Agent and any insurer that has issued a lender's
title insurance policy with respect to the Mortgaged Properties of the
occurrence thereof.

                                   ARTICLE 3
             Application of Certain Amounts; Mandatory Prepayments

     Section 3.01. Application of Proceeds of Collateral after Triggering Event.
If, following a Triggering Event, any Collateral is sold or otherwise realized
upon (whether pursuant to the exercise of any remedy set forth in any Collateral
Document, in a Bankruptcy Proceeding or otherwise), the proceeds in respect of
such Collateral shall be applied as soon as practicable after receipt as
follows:

          FIRST: to the Senior Collateral Agent in an amount equal to the Fees
          thereof which are unpaid as of the applicable Distribution Date, to
          any Senior Secured Party which has theretofore advanced or paid any
          such Fees in an amount equal to the amount thereof so advanced or paid
          by such Senior Secured Party, pro rata based on the amounts of such
          Fees (or such advance or payment) and, without duplication, to the
          Senior Collateral Agent towards the

                                       9
<PAGE>

          payment of any other costs, expenses or amounts payable pursuant to
          clause first of Section 15(b) of the Senior Security Agreement based
          on the amounts payable thereunder;

          SECOND: to the Senior Collateral Agent and the Second Priority
          Collateral Agent to reimburse to the Senior Collateral Agent and the
          Second Priority Collateral Agent for the amount of any advance made
          pursuant to Section 2.04 hereof (with interest thereon at the Default
          Rate), pro rata based on the amounts so advanced;

          THIRD: until the Senior Obligation Payment Date, to the Senior
          Collateral Agent, for distribution to the Senior Secured Parties to be
          applied to the payment of the Senior Obligations in accordance with
          clauses second, third and fourth of Section 15(b) of the Senior
          Security Agreement;

          FOURTH: to the Second Priority Collateral Agent in an amount equal to
          the Fees thereof which are unpaid as of the applicable Distribution
          Date, to any Second Priority Secured Party which has theretofore
          advanced or paid any such Fees in an amount equal to the amount
          thereof so advanced or paid by such Second Priority Secured Party, pro
          rata based on the amounts of such Fees (or such advance or payment)
          and, without duplication, to the Second Priority Collateral Agent
          towards the payment of any other costs, expenses or amounts payable
          pursuant to clause first of Section 15(b) of the Second Priority
          Security Agreement based on the amounts payable thereunder;

          FIFTH: to the Second Priority Collateral Agent, for distribution to
          the Second Priority Secured Parties to be applied to the payment of
          the Second Priority Obligations in accordance with clauses second,
          third and fourth of Section 15(b) of the Second Priority Security
          Agreement, until all the Second Priority Obligations have been paid in
          full; and

          SIXTH: after payment in full of all Secured Obligations, to the
          Borrower and the Guarantors or their successors or assigns, as their
          interests may appear, or to whosoever may be lawfully entitled to
          receive the same or as a court of competent jurisdiction may direct.

     Section 3.02. Payment Provisions. For the purposes of applying the
provisions of Section 3.01, all interest, fees and other amounts to be paid on
any of the Secured Obligations pursuant to the terms of any Financing Document

                                      10
<PAGE>

shall, as among the Secured Parties and regardless of whether any such interest,
fees or other amounts are or would be recognized or allowed as a claim in any
bankruptcy or similar proceeding, be treated as due and owing on the Secured
Obligations.

     Section 3.03. Reduction Events; Mandatory Prepayments. (a) Until the
occurrence of the Senior Obligation Payment Date but prior to the occurrence of
a Triggering Event, if any Net Cash Proceeds of any Asset Sale (other than in
connection with the Kingfish Transaction) of the Borrower or any Restricted
Subsidiary or if any Casualty Proceeds with respect to property of the Borrower
or any Restricted Subsidiary are to be deposited into a Collateral Account
pursuant to Section 2.11(a) of the Senior Credit Agreement or Section 2.06(a) of
the Second Priority Credit Agreement, such Net Cash Proceeds or Casualty
Proceeds, as the case may be, shall be applied: first as set forth in Section
7(b) and (c) of the Senior Security Agreement and, without duplication, second
as set forth in Section 7(c) of the Second Priority Security Agreement.
Following the occurrence of the Senior Obligation Payment Date but prior to the
occurrence of a Triggering Event, such Net Cash Proceeds or Casualty Proceeds,
as the case may be, shall be applied as set forth in Section 7(b) and (c) of the
Second Priority Security Agreement.

     (b)  If on any date on or after the Closing Date but prior to the
occurrence of the Senior Obligation Payment Date or a Triggering Event, Vencor
receives any Net Cash Proceeds from any Equity Issuance, such Net Cash Proceeds
(or the applicable portion thereof) shall be applied: first as set forth in
Section 2.11(b) of the Senior Credit Agreement and, without duplication, second
as set forth in Section 2.06(b) of the Second Priority Credit Agreement.
Following the occurrence of the Senior Obligation Payment Date, such Net Cash
Proceeds shall be applied as set forth in Section 2.06(b) of the Second Priority
Credit Agreement.

     (c)  If on any date on or after the Closing Date but prior to the
occurrence of the Senior Obligation Payment Date or a Triggering Event, Vencor
receives a cash payment out of the original amount deposited and held in escrow
under the Tax Refund Escrow Agreement, such payment shall be applied: first as
set forth in Section 2.11(c) of the Senior Credit Agreement and, without
duplication, second as set forth in Section 2.06(c) of the Second Priority
Credit Agreement. Following the occurrence of the Senior Obligation Payment
Date, such cash payment shall be applied as set forth in Section 2.06(c) of the
Second Priority Credit Agreement.

     (d)  Each prepayment of loans required pursuant to the foregoing provisions
of this Section will be made together with accrued interest to the date of
prepayment and any applicable premium in accordance with the terms of the
applicable Financing Document but such interest and premium, if any, shall not

                                      11
<PAGE>

reduce the amount of principal required to be prepaid in accordance with this
Section.

     (e)  In the event the Borrower or any Restricted Subsidiary shall, at any
time after the occurrence of a Triggering Event, receive any Net Cash Proceeds
of any Asset Sale or any Casualty Proceeds which are attributable to Collateral,
such Net Cash Proceeds shall be subject to and applied in accordance with the
provisions of Section 3.01.

     (f)  Notwithstanding the foregoing, any payment made or to be made by any
Guarantor in respect of Second Priority Obligations subsequent to the occurrence
of a Triggering Event other than from the proceeds of Collateral shall be
subject to, and only made in accordance with, the subordination provisions of
the Second Priority Guaranty Agreements.

     (g)  For avoidance of doubt, paragraphs (a), (b) and (c) of Section 3.01 do
not themselves create any Liens nor do they alter the priorities of Liens which
are created by the Financing Documents.

                                   ARTICLE 4
                                 Subordination

     Section 4.01. Perfection and Priority of Security Interests. (a) Any and
all security interests, assignments, pledges, mortgages, deeds of trust, deeds
to secure debt and other liens, charges or encumbrances now existing or
hereafter created or arising of the Borrower or any Guarantor in favor of the
Second Priority Collateral Agent for the benefit of the Second Priority Secured
Parties with respect to the Collateral and securing the Second Priority
Obligations are expressly junior in priority, operation and effect to any and
all security interests, assignments, pledges, mortgages, deeds of trusts, deeds
to secure debt and other liens, charges or encumbrances now existing or
hereafter created or arising in favor of the Senior Collateral Agent for the
benefit of the Senior Secured Parties with respect to the Collateral and
securing the Senior Obligations, notwithstanding anything to the contrary
contained in any agreement or filing to which the Second Priority Collateral
Agent or any Second Priority Secured Party may now or hereafter be a party, and
regardless of the time, order or method of attachment, recording or perfection
of any financing statements or other security interests, assignments, pledges,
mortgages and other liens, charges or encumbrances or any defect or deficiency
or alleged defect or deficiency in any of the foregoing.

                                      12
<PAGE>

     (b)  The Second Priority Collateral Agent, on behalf of itself the other
Second Priority Secured Parties, acknowledges that the Senior Obligations
represent obligations under certain interest rate agreements and debt that is
revolving in nature and that the amount thereof that may be outstanding at any
time or from time to time may be increased or reduced and subsequently
reborrowed, and that the terms of the Senior Obligations may be modified,
extended or amended from time to time, and the aggregate amount of the Senior
Obligations may be increased, replaced or refinanced, all in accordance with
Section 5.02 hereof but otherwise without notice to or consent by the Second
Priority Secured Parties and without affecting the provisions hereof. The lien
priorities provided in this Section 4.01 shall not be altered or otherwise
affected by any such amendment, modification, supplement, extension, repayment,
reborrowing, increase, replacement, renewal, restatement or refinancing of
either the Senior Obligations or the Second Priority Obligations, or any portion
thereof, nor by any action that the Senior Secured Parties or the Second
Priority Secured Parties may take or fail to take in respect of the Collateral
in accordance with this Agreement.

     (c)  For purposes of perfecting the Second Priority Lien in the Collateral
and the proceeds thereof, the Borrower and Vencor, on behalf of themselves and
the Subsidiary Guarantors, and the Senior Collateral Agent hereby acknowledge
that UCC-1 financing statements, patent/trademark/copyright filings and
mortgages or other filings or recordings covering the Collateral, naming the
Borrower and one or more Guarantors as debtor, and the Second Priority
Collateral Agent, on behalf of the Second Priority Secured Parties, as secured
party, may be filed in appropriate public offices from time to time.

          (i)  The Second Priority Collateral Agent and each Second Priority
     Secured Party agrees that all UCC-1 financing statements,
     patent/trademark/copyright filings (except as provided in clause (ii)
     below) or other filings or recordings filed or recorded by or on behalf of
     the Second Priority Secured Parties shall be in form satisfactory to the
     Senior Collateral Agent and shall contain the following notation (or other
     notation substantially similar thereto): "The interest of the Secured Party
     in the collateral described herein is junior and subordinate to the
     interests of Morgan Guaranty Trust Company of New York, and its successors
     and assigns, as collateral agent for certain secured parties, including the
     lenders from time to time party to that certain $120,000,000 Credit
     Agreement dated as of April 20, 2001, as amended, restated, supplemented,
     modified, refinanced or replaced from time to time, with Vencor Operating
     Inc. (to be renamed Kindred Healthcare Operating, Inc.) and Vencor, Inc.
     (to be renamed Kindred Healthcare, Inc.) in accordance with the provisions
     of that certain Subordination and Intercreditor

                                      13
<PAGE>

     Agreement dated as of April 20, 2001, among Vencor Operating Inc. (to be
     renamed Kindred Healthcare Operating, Inc.) and Vencor, Inc. (to be renamed
     Kindred Healthcare, Inc.), and Morgan Guaranty Trust Company of New York,
     as Second Priority Collateral Agent and as Senior Collateral Agent, as
     amended from time to time."

          (ii)   In addition, the Second Priority Collateral Agent and each
     Second Priority Secured Party agrees that all mortgages, deeds of trust,
     deeds to secure debt and similar instruments (collectively, "mortgages")
     now or hereafter filed against real and/or personal property pursuant to
     any Second Priority Collateral Document in favor of or for the benefit of
     the Second Priority Collateral Agent and/or the Second Priority Secured
     Parties shall be in form satisfactory to the Senior Collateral Agent and
     shall contain the following provision (or other provision substantially
     similar thereto): "Notwithstanding any provision to the contrary herein,
     the terms of this [Mortgage], the Liens created hereby, and the rights and
     remedies of the Mortgagee and the Secured Parties hereunder, are subject to
     the Intercreditor Agreement and subordinated as provided therein."

     (d)  The Second Priority Collateral Agent, on behalf of itself and the
other Second Priority Secured Parties, hereby agrees:

          (i)    to subordinate the Second Priority Collateral Documents to any
     lease of any of the Mortgaged Properties to the same extent that the Senior
     Collateral Documents are or have been subordinated to such lease, but
     without affecting the relative priority of the Senior Collateral Documents
     and the Second Priority Collateral Documents,

          (ii)   to grant nondisturbance rights with respect to any lease of any
     of the Mortgaged Properties with respect to which the Senior Collateral
     Agent has granted nondisturbance on substantially the same terms as granted
     by the Senior Collateral Agent,

          (iii)  that if all or any portion of a Mortgaged Property is a
     leasehold interest, (A) upon termination of any lease creating such
     leasehold interest (the "Original Lease"), any right of the Second Priority
     Collateral Agent to request a "new lease" pursuant to the terms of the
     Original Lease shall be junior and subordinate to the right of the Senior
     Collateral Agent to request such a new lease and the Second Priority
     Collateral Agent shall not exercise any such right without the prior
     written consent of the Senior Collateral Agent, (B) the Second Priority
     Collateral Agent shall waive, surrender and give up any right either the
     Second Priority Collateral Agent or the Second Priority Secured Parties may
     have

                                      14
<PAGE>

     to redeem the premises demised by the Original Lease or to continue the
     Original Lease for its original term after the lessee thereunder has been
     dispossessed or ejected therefrom by process of law or otherwise and (C)
     the Senior Lien and the Second Priority Lien shall remain in force or be
     reinstated with the same relative priority that existed with respect to the
     Original Lease, and

          (iv)  that if the holder or grantor of a Second Priority Collateral
     Document pays or discharges any liens prior in right to the lien created by
     the Senior Collateral Documents with funds provided by the Second Priority
     Collateral Agent or any Second Priority Secured Party, neither the Second
     Priority Collateral Agent nor any Second Priority Secured Party shall
     acquire, by subrogation or otherwise, any claim superior or equivalent to
     the lien of the Senior Collateral Documents so long as any indebtedness
     secured by the Senior Collateral Documents remains outstanding.

     Notwithstanding anything to the contrary in the Senior Mortgages, the
Senior Collateral Agent and the Senior Secured Parties hereby consent to the
assignment of leases and rents to the Second Priority Collateral Agent for the
Second Priority Secured Parties contained in the Second Priority Mortgages for
the purpose of securing and discharging the performance by the Borrower and the
Guarantors party thereto, provided however, that such assignment is subject to
the terms of this Agreement. The Senior Collateral Agent and the Senior Secured
Parties agree that the terms of each Senior Mortgage and the rights and remedies
of the parties thereto are subject to this Agreement. The Second Priority
Collateral Agent and the Second Priority Secured Parties agree that the terms of
each Second Priority Mortgage and the rights and remedies of the parties thereto
are subject to this Agreement and subordinated as provided herein.

     (e)  The Second Priority Collateral Agent, on behalf of itself and the
other Second Priority Secured Parties, acknowledges and agrees with the Senior
Collateral Agent and the Senior Secured Parties that the arrangements described
in clauses (a), (b), (c) and (d) above are solely for the purpose of providing
the Second Priority Secured Parties with a perfected second priority Lien in the
Collateral under the Second Priority Collateral Documents and shall in no way be
construed as imposing any duties or other obligations on the Senior Collateral
Agent other than to transfer to the Second Priority Collateral Agent in
accordance with the Financing Documents (or as a court of competent jurisdiction
may otherwise direct) the proceeds, if any, that remain following a sale,
transfer or other disposition of the Collateral and the occurrence of the Senior
Obligation Payment Date or, if the Senior Collateral Agent shall still be in
possession of all or any part of such Collateral after the Senior Obligation
Payment Date, such

                                      15
<PAGE>

Collateral or such part thereof remaining, without representation or warranty on
the part of the Senior Collateral Agent or the Senior Secured Parties.

     In furtherance of the foregoing, the Second Priority Collateral Agent and
the Second Priority Secured Parties acknowledge and agree with the Senior
Secured Parties that, at all times following a Triggering Event until the Senior
Obligation Payment Date, the Senior Collateral Agent shall have the right to
sell, transfer or otherwise dispose of or deal with the Collateral as provided
in the Senior Collateral Documents without regard to the security interest of
the Second Priority Secured Parties therein, or any rights to which the Second
Priority Secured Parties would otherwise be entitled as a result of such
security interest, the only obligation of the Senior Collateral Agent to the
Second Priority Secured Parties in respect thereof being to deliver to the
Second Priority Collateral Agent (unless otherwise directed in writing by the
Second Priority Collateral Agent or by a court of competent jurisdiction) any
proceeds remaining from such sale, transfer or other disposition of such
Collateral after the Senior Obligation Payment Date or, if the Senior Collateral
Agent shall still be in possession of all or any part of such Collateral after
such payment and satisfaction in full, such Collateral or such part thereof
remaining, without representation or warranty on the part of the Senior
Collateral Agent or the Senior Secured Parties, provided that nothing contained
in this sentence shall be construed to give rise to, nor shall the Second
Priority Collateral Agent or the Second Priority Secured Parties have, any
claims whatsoever against the Senior Collateral Agent or any Senior Secured
Party on account of any act or omission to act in connection with the exercise
of any right or remedy of the Senior Collateral Agent with respect to the
Collateral that is permitted by the Collateral Documents (other than with
respect to any claims that may arise as a result of the failure of the Senior
Collateral Agent, after the Senior Obligation Payment Date, to deliver any such
remaining Collateral or proceeds to the Second Priority Collateral Agent). The
Second Priority Collateral Agent, on behalf of itself and the other Second
Priority Secured Parties, agrees that it shall not, and shall not attempt to,
exercise any rights with respect to (A) the Senior Lien in the Collateral or (B)
the Second Priority Lien in the Collateral, whether pursuant to the Second
Priority Collateral Documents or otherwise, until the Senior Obligation Payment
Date; provided that nothing in this sentence (or elsewhere in the Agreement)
shall preclude (x) exercise of the rights expressly reserved to the Second
Priority Collateral Agent and the Second Priority Secured Parties in accordance
with the terms of this Agreement or (y) the enforcement of this Agreement.

     (f)  In any Bankruptcy Proceeding, until the Senior Obligation Payment
Date, the Second Priority Collateral Agent, on behalf of itself and the other
Second Priority Secured Parties, agrees not to take any action whatsoever
(including, without limitation, voting any claim) in respect of or relating to
the

                                      16
<PAGE>

Second Priority Obligations, insofar as any such action arises from or relates
to the Second Priority Collateral Documents, the Second Priority Lien or relates
to the Collateral, in any manner that is inconsistent with or adverse to the
rights and priorities of the Senior Secured Parties as set forth herein.

     (g)  In the event that in any Bankruptcy Proceeding, the Second Priority
Secured Parties shall not have filed a proof of claim in respect of any Second
Priority Obligation by the date ten days prior to the latest date on which such
proof of claim may be filed, the Senior Collateral Agent is hereby authorized
but not obligated, on behalf of any applicable Second Priority Secured Party, to
file such proof of claim; provided that the Second Priority Secured Parties
shall be entitled to amend, vote or otherwise exercise rights in respect of any
such proof of claim so filed by the Senior Collateral Agent to the same extent
as they would be permitted under this Agreement to do so had such proof of claim
been filed by them.

     Section 4.02. No Interference; No Right to Instruct Senior Collateral
Agent; Payment Over; Reinstatment; Permitted Actions. (a) The Second Priority
Collateral Agent, on behalf of itself and the other Second Priority Secured
Parties, agrees that:

          (i)    it will not take or cause to be taken any action, the purpose
     or effect of which is to make any Second Priority Lien pari passu with, or
     to give any Second Priority Secured Party any preference or priority
     relative to, the Senior Lien or the Senior Secured Parties with respect to
     the Collateral or any part thereof,

          (ii)   it will not interfere with, hinder or delay, in any manner,
     whether by judicial proceedings or otherwise, any sale, transfer or other
     disposition of the Collateral by the Senior Collateral Agent or any other
     Senior Secured Party or any other action taken by or on behalf of the
     Senior Collateral Agent or any Senior Secured Party permitted to be taken
     by it pursuant to the Senior Collateral Documents,

          (iii)  it has no right to (A) direct the Senior Collateral Agent or
     any other Senior Secured Party to exercise any right, remedy or power with
     respect to the Collateral or pursuant to the Senior Collateral Documents or
     (B) consent to the exercise by the Senior Collateral Agent or any other
     Senior Secured Party of any right, remedy or power with respect to the
     Collateral or pursuant to the Senior Collateral Documents,

          (iv)   it will not institute or assert in any suit, Bankruptcy
     Proceeding or other proceeding any claim against the Senior Collateral

                                      17
<PAGE>

     Agent or any other Senior Secured Party seeking damages from or other
     relief by way of specific performance, instructions or otherwise, with
     respect to, and none of the Senior Collateral Agent nor any other Senior
     Secured Party shall be liable for, any action taken or omitted to be taken
     by the Senior Collateral Agent or the Senior Secured Parties with respect
     to the Collateral or pursuant to the Senior Collateral Documents,

          (v)    until the Senior Obligation Payment Date, it will not make any
     judicial or nonjudicial claim or demand or commence any judicial or non-
     judicial proceedings against the Borrower or any Guarantor under or with
     respect to any Collateral Document seeking payment or damages from or other
     relief by way of specific performance, instructions or otherwise under or
     with respect to any Collateral Document (other than filing a proof of
     claim) or exercise any right, remedy or power under or with respect to, or
     otherwise take any action to enforce, other than filing a proof of claim,
     any Collateral Document; provided, however, that (A) if there is a
     Bankruptcy Proceeding with respect to the Borrower, the Second Priority
     Collateral Agent or any Second Priority Secured Party may make claims under
     and seek to enforce any Second Priority Guaranty Agreement, subject to the
     subordination provisions thereof and to the other provisions of this
     Agreement and (B) none of the Second Priority Collateral Agent or any other
     Second Priority Secured Party may exercise any right, remedy or power under
     or with respect to any other Second Priority Collateral Document, or
     otherwise take any action to enforce rights or remedies with respect to any
     Collateral,

          (vi)   until the Senior Obligation Payment Date, it will not commence
     judicial or nonjudicial foreclosure proceedings with respect to, seek to
     have a trustee, receiver, liquidator or similar official appointed for or
     over, attempt any action to take possession of any Collateral, exercise any
     right, remedy or power with respect to, or otherwise take any action to
     enforce its interest in or realize upon, the Collateral or pursuant to the
     Second Priority Collateral Documents; provided that nothing in this
     paragraph (or elsewhere in this Agreement) shall restrict the right of the
     Second Priority Collateral Agent or any other Second Priority Secured Party
     to request "adequate protection" (within the meaning of Section 361 of the
     Bankruptcy Code) for the interests of the Second Priority Secured Parties
     in the Second Priority Collateral in the event of any Bankruptcy Proceeding
     on a basis that is not inconsistent with the rights and priorities of the
     Senior Secured Parties as set forth herein and in the Financing Documents,

                                      18
<PAGE>

          (vii)  it will not seek, and hereby waives any right, to have the
     Collateral or any part thereof marshaled upon any foreclosure or other
     disposition of the Collateral, and

          (viii) it will not attempt, directly or indirectly, whether by
     judicial proceedings or otherwise, to challenge the enforceability of any
     provision of this Agreement or any Senior Financing Document or the
     validity, perfection, priority or enforceability of the Senior Lien.

     (b)  The Second Priority Collateral Agent, on behalf of itself and the
other Second Priority Secured Parties, hereby agrees that, in the event of a
sale, transfer or other disposition of Collateral following a Triggering Event,
any security interest or lien of the Second Priority Secured Parties in such
Collateral (but not the proceeds thereof to the extent that such proceeds are to
be applied to Second Priority Obligations pursuant to Section 3.01) shall
terminate and be released automatically and without further action if the Senior
Lien in such Collateral is released. The Second Priority Collateral Agent will
execute and deliver to the Senior Collateral Agent promptly upon request
therefor all necessary instruments and documents to evidence such termination
and release.

     (c)  Except with respect to proceeds of any sale or other realization on
Collateral (i) payable prior to the occurrence of a Triggering Event to the
Second Priority Collateral Agent for the benefit of the Second Priority Secured
Parties pursuant to Section 3.03 or (ii) received by the Second Priority
Collateral Agent pursuant to distributions made by the Senior Collateral Agent
after the occurrence of a Triggering Event under Section 3.01, the Second
Priority Collateral Agent, on behalf of itself and the other Second Priority
Secured Parties, hereby agrees that if it shall obtain possession of any of the
Collateral, or shall realize any payment of insurance (including any payment on
any lender's title insurance policy with respect to the Mortgaged Properties) or
condemnation proceeds, proceeds of any sale or other disposition, rents, profits
or other income, reserve or compensation of any kind in respect of the
Collateral, in any case before the Senior Obligation Payment Date, then it shall
hold such Collateral or payment in trust for the Senior Secured Parties and
transfer such Collateral or payment, as the case may be, to the Senior
Collateral Agent for application in accordance with the provisions of Section
3.01. If, at any time, all or part of any payment with respect to the Senior
Obligations previously made is rescinded for any reason whatsoever, (i) the
Second Priority Collateral Agent and the Second Priority Secured Parties shall
promptly pay over to the Senior Collateral Agent any payment received by any of
them after the occurrence of a Triggering Event in respect of the Collateral or
proceeds thereof, and shall promptly turn any Collateral then held by any of
them over to the Senior Collateral Agent, in each case to the extent that the
Second Priority Secured Parties would not have been entitled to receive or hold
such

                                      19
<PAGE>

payment or Collateral pursuant to the terms of this Agreement had the rescinded
payment in respect of the Senior Obligations never been made in the first
instance and (ii) the provisions set forth in this Agreement shall be reinstated
as if such rescinded payment had not been made, until the Senior Obligation
Payment Date; provided, however, that the foregoing shall not require the Second
Priority Secured Parties to pay over to the Senior Collateral Agent any payment
received by them or Collateral delivered to them if such payment or delivery is
itself rescinded for any reason (and any such payment or Collateral theretofore
paid over to the Senior Secured Parties pursuant to the foregoing provisions
shall be released and delivered to the appropriate Person to the extent
necessary to effect such rescission.)

     (d)  With respect to proceeds of any sale or other realization on
Collateral to the extent payable to the Second Priority Collateral Agent for the
benefit of the Second Priority Secured Parties pursuant to Section 3.01, the
Senior Collateral Agent, on behalf of itself and the other Senior Secured
Parties, hereby agrees that if any of them shall obtain possession of any of
such proceeds before the time when the Second Priority Obligations have been
paid in full, then it shall hold such proceeds in trust for the holders of the
Second Priority Obligations and transfer such proceeds to the Second Priority
Collateral Agent.

                                   ARTICLE 5
           Amendments of Documents; Limitations on Facility Amounts

     Section 5.01. Amendments and Modifications of Second Priority Financing
Documents. (a) Unless the Required Senior Lenders have consented thereto in
writing, the Borrower shall not, Vencor shall not, the Borrower shall not permit
any Restricted Subsidiary to, and no Second Priority Secured Party shall,
consent to or solicit any amendment or supplement to, or any waiver or other
modification of any Second Priority Financing Document if the effect thereof
would be to (i) increase the amount, or accelerate the date of payment, of any
obligation of the Borrower or any Guarantor thereunder or (ii) modify or alter
in any respect the terms of the subordination provisions set forth therein
(including without limitation, in Article 11 and Section 12.05(g) of the Second
Priority Credit Agreement) or impair in any way the rights and benefits of the
Senior Secured Parties thereunder.

     Section 5.02. Limitation on Senior Credit Agreement. None of the Borrower,
Vencor or the Senior Secured Parties will amend or modify, or consent to any
amendment or modification of, the Senior Credit Agreement if the effect thereof
would be to increase the principal amount or commitments thereunder to

                                      20
<PAGE>

an amount in excess of $120,000,000 less any amounts up to an aggregate of
$45,000,000 by which the commitments under the Senior Credit Agreement have been
permanently reduced; provided that any amounts owing by the Borrower or any
Guarantor under any Designated Interest Rate Agreement (as defined in the Senior
Credit Agreement) shall be excluded form the calculation of the foregoing
amounts.

                                   ARTICLE 6
              Release of Collateral; Expiration of Certain Rights

     Section 6.01. Releases of Collateral. At any time during which no
Triggering Event has occurred and is continuing:

     (a)  If (i) any Collateral is to be disposed of in a disposition that is
specifically permitted by the Financing Documents, (ii) the Borrower delivers a
certificate to such effect to the Second Priority Collateral Agent and the
Senior Collateral Agent at least three Business Days before the date of the
requested release, and (iii) neither the Senior Collateral Agent nor the Second
Priority Collateral Agent objects before the date of the requested release that
such disposition is prohibited by the Senior Financing Documents or the Second
Priority Financing Documents, as the case may be, then the Liens in favor of the
Secured Parties under the Collateral Documents with respect to such Collateral
(but, except in the case of the Kingfish Transaction, not the proceeds thereof)
will be released automatically upon consummation of such disposition, without
the need for any consent or approval by any other Secured Party, and the Second
Priority Collateral Agent and the Senior Collateral Agent, at the expense of the
Borrower, shall execute such documents as are reasonably necessary to effectuate
such release. No such release shall require any consent or approval by any other
Secured Party.

     (b)  The Lien of any Senior Collateral Document may, at any time, be
released in whole or in part by the Senior Collateral Agent pursuant to written
directions signed by the Required Senior Lenders (or the Senior Collateral Agent
on behalf of the Required Senior Lenders), and the Lien of any Second Priority
Collateral Document may, at any time, be released in whole or in part by the
Second Priority Collateral Agent pursuant to written directions signed by the
Required Second Priority Lenders (or the Second Priority Collateral Agent on
behalf of the Required Second Priority Lenders); provided that the release of
all or substantially all of the Collateral shall require the written consent of
all Secured Parties. Except as aforesaid, no such release shall require any
consent or approval by any other Secured Party.

                                      21
<PAGE>

                                   ARTICLE 7
                                 Miscellaneous

     Section 7.01. Amendments, Supplements and Waivers. The Required Senior
Lenders and the Required Second Priority Lenders (and with respect to any such
amendment, supplement or waiver (i) which increases the obligations or reduces
the rights of the Borrower or Vencor, with the consent of the Borrower and
Vencor, (ii) which increases the obligations or reduces the rights of the Senior
Collateral Agent, with the consent of the Senior Collateral Agent and (iii)
which increases the obligations or reduces the rights of the Second Priority
Collateral Agent, with the consent of the Second Priority Collateral Agent) may
from time to time amend, supplement or waive any provision hereof. Any such
amendment, supplement or waiver shall be in writing and shall be binding upon
the Secured Parties and their respective successors and assigns.

     Section 7.02. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party:

          (i)  in the case of the Borrower or Vencor, to it at:

                 Vencor, Inc.
                 (to be renamed Kindred Healthcare, Inc.)
                 680 South Fourth Avenue
                 Louisville, KY 40202
                 Attn: General Counsel
                 Facsimile: (502) 596-4075

          with copies to:

                 Vencor, Inc.
                 (to be renamed Kindred Healthcare, Inc.)
                 680 South Fourth Avenue
                 Louisville, KY 40202
                 Attn: Assistant Treasurer
                 Facsimile: (502) 596-4170

                 Cleary, Gottlieb, Steen & Hamilton
                 One Liberty Plaza
                 New York, NY 10006

                                      22
<PAGE>

                    Attn: Thomas Moloney, Esq.
                          Lindsee Granfield, Esq.

          (ii)   in the case of the Senior Collateral Agent, to it at:

                    Morgan Guaranty Trust Company of New York
                    60 Wall Street
                    New York, New York 10260
                    Attention:  Houston Stebbins
                    Telephone:  (212) 648-7875
                    Facsimile:  (212) 648-5005

          with a copy to:

                    J.P. Morgan Services
                    500 Stanton Christiana Road
                    Newark, Delaware 19713
                    Attention:  Sandra Doherty and Linda Palmer
                    Telephone:  (302) 634-3316
                    Facsimile:  (302) 634-4300

          (iii)  in the case of the Second Priority Collateral Agent, to it at:

                    Morgan Guaranty Trust Company of New York
                    60 Wall Street
                    New York, New York 10260
                    Attention:  Houston Stebbins
                    Telephone:  (212) 648-7875
                    Facsimile:  (212) 648-5005

          with a copy to:

                    J.P. Morgan Services
                    500 Stanton Christiana Road
                    Newark, Delaware 19713
                    Attention:  Sandra Doherty and Linda Palmer
                    Telephone:  (302) 634-3316
                    Facsimile:  (302) 634-4300

          (iv)   in the case of any party, to it at such other address or
     facsimile number as such party may hereafter specify for the purpose by
     notice to the other parties hereto.

                                      23
<PAGE>

Each such notice, request or other communication shall be effective (x) if given
by facsimile transmission, when transmitted to the facsimile number referred to
in this Section and confirmation of receipt is received, (y) if given by mail,
five days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (z) if given by any other means, when
delivered at the address referred to in this Section.

     Section 7.03. Headings. Headings used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.

     Section 7.04. Severability. If any provision of this Agreement is invalid
or unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, the other provisions of this Agreement shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Senior Collateral Agent and the Senior Secured Parties in order to carry out the
intentions of the parties hereto as nearly as may be possible; and the
invalidity or unenforceability of any provision thereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

     Section 7.05. Dealings with the Borrower and the Guarantors. Upon any
application or demand by the Borrower or any Guarantor to the Second Priority
Collateral Agent or the Senior Collateral Agent to take or permit any action
under any of the provisions of this Agreement or under any Collateral Document,
the Borrower or such Guarantor, as appropriate, shall furnish to the Second
Priority Collateral Agent or the Senior Collateral Agent a certificate of an
appropriate officer stating that all conditions precedent, if any, provided for
in this Agreement or such Collateral Document, as the case may be, relating to
the proposed action have been complied with, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Agreement or any Collateral
Document relating to such particular application or demand, no additional
certificate or opinion need be furnished.

     Section 7.06. Binding Effect. (a) This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and each of the Secured
Parties and their respective successors and assigns, and nothing herein or in
any Collateral Document is intended or shall be construed to give any other
person any right, remedy or claim under, to or in respect of this Agreement or
the Collateral.

     (b)  Morgan may resign as Senior Collateral Agent or Second Priority
Collateral Agent at any time and may appoint any other subsidiary of J.P. Morgan
Chase & Co. to such role by giving written notice thereof to each of the Secured

                                      24
<PAGE>

Parties and the Borrower. Upon such appointment, such subsidiary shall thereupon
succeed to and become vested with all the rights and duties of Morgan in such
capacity and Morgan shall be discharged from its duties and obligations in such
capacity hereunder.

     Section 7.07. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.

     Section 7.08. NEW YORK LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY
THE LAWS OF SUCH JURISDICTION.

     Section 7.09. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE BORROWER
AND VENCOR EACH HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE BORROWER AND VENCOR EACH
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, 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.

     Section 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY

                                      25
<PAGE>

HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE FINANCING DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

     Section 7.11. Bailee for Perfection. The Senior Collateral Agent hereby
acknowledges that, to the extent that it holds, or a third party holds on its
behalf, possession of Collateral pursuant to the Senior Collateral Documents
which is also Collateral under the Second Priority Collateral Documents, such
possession is also for the benefit of the Second Priority Collateral Agent and
the Second Priority Secured Parties to the extent required to perfect their
security interest in such Collateral. Nothing in the preceding sentence shall be
construed to impose any additional duty on the Senior Collateral Agent with
respect to such Collateral or provide the Second Priority Collateral Agent or
any Second Priority Secured Party with any rights with respect to such
Collateral beyond those specified in this Agreement.

                                      26
<PAGE>

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

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

                              By_________________________________________
                              Name:
                              Title:

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

                              By_________________________________________
                              Name:
                              Title:
<PAGE>

                              MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                              as Senior Collateral Agent for and on
                              behalf of the Senior Lenders,

                              By____________________________________________
                              Name:
                              Title:

                              MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                              as Second Priority Collateral Agent for
                              and on behalf of the Second Priority Lenders,

                              By____________________________________________
                              Name:
                              Title:

                                      28
<PAGE>

                                                                     EXHIBIT F-1

                                                        April ___, 2001

To the Lenders and the Agents referred to below
c/o Morgan Guaranty Trust Company
of New York
as Collateral Agent and Administrative Agent
60 Wall Street
New York, NY 10260

Ladies and Gentlemen:

     In my capacity as general counsel of Vencor, Inc. (to be renamed Kindred
Healthcare, Inc.), a Delaware corporation ("Vencor"), I have acted as general
counsel of each of the Persons listed on Annex A hereto (the "Covered
Companies") in connection with (i) the Credit Agreement dated as of April ___,
2001 (the "Credit Agreement") among Vencor Operating, Inc. (to be renamed
Kindred Healthcare Operating, Inc.), a Delaware corporation (the "Issuer"),
Vencor, and the Lenders party thereto (the "Lenders"), and Morgan Guaranty Trust
Company of New York, as Collateral Agent and Administrative Agent, and the other
Financing Documents referred to therein and (ii) the Master Lease Agreements
referred to therein.  This opinion is being rendered to you pursuant to Section
3.01(o)(i)(A) of the Credit Agreement.

     Unless otherwise defined herein, capitalized terms defined in the Credit
Agreement or the Security Agreement are used herein as defined therein.

     I, or attorneys in the legal department of Vencor under my direction, have
examined originals or copies, certified or otherwise identified to my
satisfaction, of each of the agreements listed on Annex B hereto (the "Covered
Financing Documents"), the Master Lease Agreements and such other documents,
corporate records, certificates of public officials and other instruments, and
have conducted such other investigations of fact and law, as I have deemed
necessary or advisable for purposes of this opinion.

     Upon the basis of the foregoing, I am of the opinion that:

     1. Each Covered Company has been incorporated or organized and is existing
in good standing as a corporation, limited liability company or partnership
under the laws of its jurisdiction of incorporation or organization, with power
and authority (corporate and other) to own its properties and conduct its
business as contemplated by the Plan of Reorganization.

     2.  Each Covered Company has been qualified as a foreign corporation,
limited liability company or partnership for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so
<PAGE>

                                       2

                                                                  ________, 2001

as to require such qualification, except where failures to be so qualified would
not, in the aggregate, have a Material Adverse Effect.

     3. All of the outstanding shares of capital stock pledged under the
Security Agreement have been duly and validly authorized and issued, are fully
paid and non-assessable, and are owned directly or indirectly by the applicable
Lien Grantor as set forth in the Security Agreement, free and clear of all
Liens, equities or claims, except the Liens in favor of the Collateral Agent and
the Exit Facility Collateral Agent.

     4. To the best of my knowledge after due inquiry, upon consummation by the
Covered Companies of the transactions contemplated on the Effective Date, no
Covered Company is, or with the giving of notice or lapse of time or both would
be, in violation of or in default under (a) its Organizational Documents, (b)
any indenture, mortgage, deed of trust or loan agreement, (c) any lease or other
agreement or instrument known to me after due inquiry to which any Covered
Company is a party or by which it or any of its properties is bound or (d) the
Plan of Reorganization, except for violations and defaults which in the
aggregate would not have a Material Adverse Effect.

     5. To the best of my knowledge after due inquiry, the execution and
delivery by each Covered Company and its performance of its obligations under
the Covered Financing Documents and the Master Lease Agreements to which it is a
party and the consummation of the transactions contemplated therein will not:

               (a)  conflict with or result in a breach of any of the terms or
          provisions of, or constitute a default under, any indenture, mortgage,
          deed of trust, loan agreement, lease or other agreement or instrument
          known to me after due inquiry to which any Covered Company is a party
          or by which any Covered Company is bound or result in the creation or
          imposition of any Lien upon any property or assets of any Covered
          Company;

               (b)  result in any violation of the provisions of the
          Organizational Documents of any Covered Company, the Plan of
          Reorganization or any applicable law or statute or any order, rule or
          regulation of any court or governmental agency or body having
          jurisdiction over any Covered Company or any of its properties; or

               (c)  require any action by or in respect of, or filing with, any
          governmental body, agency or official, except (i) filings of Uniform
          Commercial Code financing statements (as in effect in the State of
          California) delivered to the Collateral Agent on or before the date
          hereof for filing promptly after the date hereof, (ii) Intellectual
          Property Filings, (iii) the due recordation of memoranda of lease with
          respect to the Master Lease Agreements and any assignment thereof to
          the Issuer, (iv) the due recordation of the Leasehold Mortgages, (v)
          the due recordation of the Fee Mortgages, (vi) any other filings
          required after the date hereof pursuant to Section 5.09 of the Credit
          Agreement, (vii) such other actions or filings as have been taken or
          made before the date hereof and are in full force
<PAGE>

                                       3

                                                                  ________, 2001

          and effect on the date hereof and (viii) filings of Uniform Commercial
          Code continuation statements when required,

     except for such conflicts, breaches, defaults, Liens and violations which
     in the aggregate would not be material to the Covered Companies, taken as a
     whole, and would not otherwise have a Material Adverse Effect.

     6.   Except as set forth in Schedule 8 to the Credit Agreement, there are
no legal or governmental investigations, actions, suits or proceedings pending
or, to the best of my knowledge, threatened against or affecting any Covered
Company or any of its properties or to which any Covered Company is or may be a
party or to which any property of any Covered Company is or may be the subject
which, if determined adversely to any Covered Company, could in the aggregate
have, or reasonably be expected to have, a Material Adverse Effect; and, to the
best of my knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.

     7.   Each Covered Company owns, possesses or has obtained all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all Federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, domestic or foreign, necessary to own or lease, as
the case may be, and to operate its properties and to carry on its business as
conducted as of the date hereof, except where failures to own, possess or obtain
any such licenses, permits, certificates, consents, orders, approvals or other
authorizations would not have, and could not reasonably be expected to have, in
the aggregate a Material Adverse Effect; no Covered Company has received any
notice of any proceeding relating to revocation or modification of any such
license, permit, certificate, consent, order, approval or other authorization,
except where such revocations or modifications would not have, and could not
reasonably be expected to have, in the aggregate a Material Adverse Effect; and
each Covered Company is in compliance with all laws and regulations relating to
the conduct of its business except where such noncompliance would not have, and
could not reasonably be expected to have, in the aggregate a Material Adverse
Effect.

     8.   The chief executive office of each Covered Company for purposes of
KRS 355.9-103(3)(d) is 680 South Fourth Avenue, Louisville, Kentucky 40202.

     9.   Each Covered Financing Document and Master Lease Agreement has been
duly authorized, executed and delivered by each Covered Company party thereto.

     10.  Each Covered Financing Document and Master Lease Agreement constitutes
a valid and legally binding obligation of each Covered Company party thereto,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.

     I am a member of the bar of the State of California.  The foregoing
opinions (with the exception of paragraphs (1) and (2), above) are limited to
the Federal laws of the United States, and the laws of the States of California
and New York and the General Corporation Law of the
<PAGE>

                                       4

                                                                  ________, 2001

State of Delaware and I am expressing no opinion as to the effect of laws of any
other jurisdiction. In rendering the foregoing opinions, I have relied (A) as to
matters involving the application of laws of the State of New York, upon the
opinion of Cleary, Gottlieb, Steen & Hamilton, dated and delivered to you today,
and (B) as to matters of fact, on certificates of responsible officers of the
Issuer and Vencor and information obtained from public officials and other
sources believed by me to be responsible. With respect to the opinions expressed
in paragraph (1) above, I have relied upon certificates of good standing issued
by the Secretary of State of the respective jurisdiction of incorporation of
each Covered Company. In addition, I have assumed that the Covered Documents
have been duly authorized, executed and delivered by all parties thereto other
than the Covered Companies parties thereto.
<PAGE>

                                       5

                                                                  ________, 2001

     This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without my prior written consent.

                                    Very truly yours,

                                    __________________
                                    M. Suzanne Riedman
<PAGE>

                          Annex A - Covered Companies
                          ---------------------------

1.  Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), a Delaware
    corporation.

2.  Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating, Inc.), a
    Delaware corporation.

3.  Each Restricted Subsidiary listed in Schedule 1 to the Credit Agreement.
<PAGE>

                     Annex B - Covered Financing Documents
                     -------------------------------------

1.  Credit Agreement

2.  Notes issued to the Lenders signatory to the Credit Agreement on the date
    hereof

3.  Subsidiary Guaranty Agreement

4.  Vencor Guaranty Agreement

5.  Security Agreement

6.  Leasehold Mortgages relating to the Initial Master Lease Properties and the
    Other Leased Properties

7.  Fee Mortgages relating to the Owned Properties

8.  Intercreditor Agreement

9.  Account Control Agreement

10. Copyright Security Agreement

11. Trademark Security Agreement
<PAGE>

                                                                     Exhibit F-2

                                                        April  , 2001

To the Lenders and the Agents referred to below
c/o Morgan Guaranty Trust Company
of New York
as Collateral Agent and Administrative Agent
60 Wall Street
New York, NY 10260

Ladies and Gentlemen:

     This opinion is being rendered to you in my capacity as Vice President of
Corporate Legal Affairs and Corporate Secretary of Vencor, Inc. (to be renamed
Kindred Healthcare, Inc.), a Delaware corporation ("Vencor"), in connection with
(i) the Credit Agreement dated as of April ___, 2001 (the "Credit Agreement")
among Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating, Inc.),
a Delaware corporation (the "Issuer"), Vencor, and the Lenders party thereto
(the "Lenders"), and Morgan Guaranty Trust Company of New York, as Collateral
Agent and Administrative Agent, and the other Financing Documents referred to
therein and (ii) the Master Lease Agreements referred to therein.  This opinion
is being issued to you pursuant to Section 3.01(o)(i)(B) of the Credit
Agreement.

     Unless otherwise defined herein, capitalized terms defined in the Credit
Agreement or the Security Agreement are used herein as defined therein.

     I have examined originals or copies, certified or otherwise identified to
my satisfaction, of each of the agreements listed on Annex A hereto (the
"Covered Financing Documents"), the Master Lease Agreements and such other
documents, corporate records, certificates of public officials and other
instruments, and have conducted such other investigations of fact and law, as I
have deemed necessary or advisable for purposes of this opinion.

     Upon the basis of the foregoing, I am of the opinion that:

     1.  To the best of my knowledge after due inquiry, the execution and
delivery by each of the Persons listed on Annex B hereto (each, a "Covered
Company") and its performance of its obligations under the Covered Financing
Documents and the Master Lease Agreements to which it is a party and the
consummation of the transactions contemplated therein will not require any
action by or in respect of, or filing with, any governmental body, agency or
official, except (i) filings of Uniform Commercial Code financing statements (as
in effect in the Commonwealth of Kentucky) delivered to the Collateral Agent on
or before the date hereof for filing promptly after the date hereof, (ii)
Intellectual Property Filings, (iii) the due recordation of memoranda of lease
with respect to the Master Lease Agreements and any assignment thereof to the
Issuer, (iv) the due recordation of the Leasehold Mortgages, (v) the due
recordation of the Fee Mortgages, (vi) any other filings required after the date
hereof pursuant to Section 5.09 of the Credit Agreement,
<PAGE>

                                       2

(vii) such other actions or filings as have been taken or made before the date
hereof and are in full force and effect on the date hereof and (viii) filings of
Uniform Commercial Code continuation statements when required.

     2.  The financing statements attached hereto as Annex C are in appropriate
                                                     -------
form for filing with the Secretary of State and the Jefferson County Clerk of
the Commonwealth of Kentucky. To the extent that a security interest in the
Personal Property Collateral may be perfected by the filing of a financing
statement in the Commonwealth of Kentucky, the security interest in the Personal
Property Collateral will be perfected upon the filing of such financing
statements with the Secretary of State and the Jefferson County Clerk of the
Commonwealth of Kentucky, and no further filing or recording of any document or
instrument or other action will be required so to perfect such security
interest, except that (i) continuation statements with respect to each such
financing statement must be filed within five years after the date of filing of
such financing statements and (ii) additional filings may be necessary if any
Lien Grantor changes its name, identity or corporate structure or the
jurisdiction in which its places of business, its chief executive office or its
Personal Property Collateral are located.

     I am a member of the bar of the Commonwealth of Kentucky.  The foregoing
opinions are limited to the laws of the Commonwealth of Kentucky and I am
expressing no opinion as to the effect of laws of any other jurisdiction.
<PAGE>

                                       3

     This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without my prior written consent.

                                    Very truly yours,

                                    Joseph L. Landenwich
<PAGE>

                     Annex A - Covered Financing Documents
                     -------------------------------------

1.   Credit Agreement
2.   Notes issued to the Lenders signatory to the Credit Agreement on the date
     hereof
3.   Subsidiary Guaranty Agreement
4.   Vencor Guaranty Agreement
5.   Security Agreement
6.   Leasehold Mortgages relating to the Initial Master Lease Properties and the
     Other Leased Properties
7.   Fee Mortgages relating to the Owned Properties
8.   Intercreditor Agreement
9.   Account Control Agreement
10.  Copyright Security Agreement
11.  Trademark Security Agreement
<PAGE>

                          Annex B - Covered Companies
                          ---------------------------

1.  Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), a Delaware
    corporation.
2.  Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating, Inc.), a
    Delaware corporation.
3.  Each Restricted Subsidiary listed in Schedule 1 to the Credit Agreement.
<PAGE>

                        Annex C   Financing Statements
                        ------------------------------

<PAGE>

                                                                       EXHIBIT G

Writer's Direct Dial: (212) 225-2280

                                      April 20, 2001

To the Lenders and Agents
referred to below
c/o Morgan Guaranty Trust Company
of New York,
as Collateral Agent and Administrative Agent
60 Wall Street
New York, NY 10260

Ladies and Gentlemen:

          We have acted as special New York counsel to each of Vencor, Inc. (to
be renamed Kindred Healthcare, Inc.), a Delaware corporation ("Vencor") and
Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating, Inc.), a
Delaware corporation (the "Company" and, collectively with Vencor and each
Restricted Subsidiary listed in Schedule 1 to the Credit Agreement referred to
below, the "Covered Companies"), in connection with (i) the Credit Agreement
dated as of April 20, 2001 (the "Credit Agreement") among the Company, Vencor,
the Lenders party thereto (the "Lenders"), and Morgan Guaranty Trust Company of
New York, as Collateral Agent and Administrative Agent, and the other Financing
Documents referred to therein and (ii) the Master Lease Agreements. This opinion
is being rendered to you pursuant to Section 3.01(o)(ii) of the Credit
Agreement.

          Unless otherwise defined herein, capitalized terms defined in the
Credit Agreement or the Security Agreement are used herein as defined therein.

          In arriving at the opinions expressed below, we have examined the
following documents:

               (a) an executed copy of the Credit Agreement;
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 2

               (b) copies of the Notes as issued by the Company to the Lenders;

               (c) an executed copy of the Subsidiary Guaranty Agreement;

               (d) an executed copy of the Vencor Guaranty Agreement;

               (e) an executed copy of the Security Agreement;

               (f) an executed copy of the Intercreditor Agreement;

               (g) an executed copy of the Account Control Agreement;

               (h) an executed copy of the Copyright Security Agreement;

               (i) an executed copy of the Trademark Security Agreement;

               (j) executed copies of the Master Lease Agreements;

               (k) executed copies of the Fee Mortgages relating to the Owned
     Properties (the "Covered Fee Mortgages");

               (l) executed copies of the Leasehold Mortgages relating to the
     Initial Master Lease Properties and the Other Leased Properties
     (collectively, the "Covered Leasehold Mortgages"); and

               (m) the Plan of Reorganization.

          The documents referenced in items (a) through (j) above are
collectively referred to herein as the "Covered Financing Documents", and the
Covered Financing Documents, Covered Fee Mortgages and Covered Leasehold
Mortgages are collectively referred to herein as the "Covered Documents".

          In addition, we have examined the originals, or copies certified or
otherwise identified to our satisfaction, of corporate records of each Covered
Company that is organized under the laws of the State of New York or Delaware
(each such Covered Company, a "Domestic Covered Company"), certificates of
public officials and of officers and representatives of each Domestic Covered
Company and such other persons, and we have made such investigations of law, as
we have deemed necessary as a basis for the opinions expressed below.

          In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, we have
assumed and have not verified the accuracy as to factual matters of each
document we have reviewed (including, without limitation, the accuracy of the
representations and warranties of the Company and Vencor in the Credit
Agreement).
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 3

          Based upon the foregoing and subject to further assumptions and
qualifications set forth below, it is our opinion that:

          1. Each Covered Document has been duly authorized, executed and
delivered by all necessary corporate action of each Domestic Covered Company
party thereto and has been duly executed and delivered under the laws of the
State of New York by each Covered Company other than a Domestic Covered Company
(each such Covered Company, a "Foreign Covered Company").

          2. Each Covered Financing Document constitutes a valid and binding
obligation of each Covered Company party thereto, enforceable in accordance with
its terms, provided that we express no opinion with respect to any provision
under any Covered Financing Document which under the terms of such Covered
Financing Document is governed by the laws of a jurisdiction other than the
State of New York.

          3. The execution and delivery of (i) the Covered Financing Documents
by each Covered Company party thereto and its performance of its obligations
thereunder, and (ii) the Covered Fee Mortgages and the Covered Leasehold
Mortgages by each Covered Company party thereto, and, in the case of clauses (i)
and (ii), the consummation of the transactions contemplated in each such Covered
Document at the time and in the manner therein contemplated, comply with the
requirements of, and are authorized by, the Plan of Reorganization, and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under any Covered Financing Document, the Exit Facility or
the Plan of Reorganization.

          4. The execution and delivery by each Covered Company and its
performance of its obligations under the Covered Documents to which it is a
party do not require any approval, consent, authorization or other action by, or
filing, recording or registration with, any governmental authority of the State
of New York, except (i) filings of Uniform Commercial Code (as in effect in the
State of New York, the "UCC") financing statements delivered to the Collateral
Agent on or before the date hereof for filing promptly after the date hereof,
(ii) Intellectual Property Filings, (iii) any other filings required after the
date hereof pursuant to Section 5.09 of the Credit Agreement, (iv) filings of
UCC continuation statements when required, and (v) such other consents,
authorizations, approvals or filings, if any, as may be required in connection
with the performance of the Covered Documents due to the specific nature or
scope of any particular business or activity conducted, or asset held, by a
Covered Company.

          5. No Covered Company is, or after giving effect to the transactions
contemplated by the Covered Documents will be, (i) an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, (ii) a "holding company" or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) otherwise subject to any regulatory scheme under the
Federal
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 4

laws of the United States or under the laws of the State of New York which
restricts its ability to issue the Notes under the Credit Agreement.

          6. The provisions of the Security Agreement are effective to create,
in favor of the Collateral Agent for the benefit of the Secured Parties, a valid
security interest in all Personal Property Collateral that is subject to Article
8 or 9 of the UCC of each Lien Grantor, as security for the Secured Obligations
of such Lien Grantor, except that the Security Agreement will create such
security interest in Personal Property Collateral in which such Lien Grantor has
no present rights only when such Lien Grantor acquires rights therein.

          7. Assuming that the Secured Parties have no notice of any adverse
claim (as defined in the UCC) to any of the collateral described below, and no
notice that any Instruments are overdue or have been dishonored or of any
defense against or claim to such Instrument on the part of any Person, the
Security Agreement, together with possession and retention in the State of New
York by the Collateral Agent of (i) certificated securities under Article 8 of
the UCC constituting Pledged Equity Interests, and (ii) Instruments constituting
Pledged Instruments, in each case will create, together with related duly
executed and completed blank endorsements thereof, as of the effective date of
such pledge, a valid and perfected security interest under the UCC in such
Pledged Equity Interests or Pledged Instruments, as the case may be, in favor of
the Collateral Agent for the benefit of the Secured Parties, and such security
interest will have priority over all other security interests created under the
UCC in such Pledged Equity Interests and Pledged Instruments by the Covered
Company pledging such asset, other than security interests created under the
Exit Facility.

          8. The issuance of the Notes as contemplated by the Credit Agreement
does not violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System (the "Board").

          In rendering the opinions set forth in paragraph (2) above, we express
no opinion with respect to:

          (i) the validity, binding effect or enforceability of any provision in
the Security Agreement or any other Covered Document that purports to (A) impose
on the Collateral Agent or any other person standards for the care of Personal
Property Collateral in its possession other than as provided for in Section 9-
207 of the UCC, (B) permit the Collateral Agent or any other person to vote or
otherwise exercise any rights with respect to any of the Personal Property
Collateral absent compliance with the requirements of applicable laws and
regulations as to the voting of or other exercise of rights with respect to such
Personal Property Collateral, (C) waive, or consent to the absence of compliance
with, any rights of any Covered Company, or duties owing to it as a matter of
law, except to the extent that the Covered Company may so waive or consent under
applicable law, or (D) provide indemnification of any person to the extent such
provision covers or could be construed to cover losses or claims under federal
or state securities laws or to the extent inconsistent with public policy;
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 5

          (ii)  other than as specifically set forth in paragraph (7) above, the
priority of any security interest in or to any of the Personal Property
Collateral or the perfection of any security interest in or to any of the
Personal Property Collateral; or

          (iii) the creation of the leasehold estate or provisions of the Master
Lease Agreements relating thereto or the remedies set forth in Article XVI of
the Master Lease Agreements, which are governed by the laws of the state in
which the relevant leased property is located.

          Insofar as the foregoing opinions relate to the validity, binding
effect or enforceability of any agreement or obligation of any Covered Company
(a) we have assumed that each party to such an agreement or obligation has
satisfied those legal requirements that are applicable to it to the extent
necessary to make such agreement or obligation enforceable against it (except
that no such assumption is made as to (i) any Domestic Covered Company and (ii)
any Foreign Covered Company regarding matters of the federal law of the United
States of America or the law of the State of New York) and (b) such opinions are
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity.  In addition,
certain of the remedial provisions of the Covered Documents may be further
limited or rendered unenforceable by other applicable laws and judicially
adopted principles, which, however, in our judgment do not make the remedies
provided for therein (taken as a whole) inadequate for the practical realization
of the principal benefits purported to be afforded thereby (except for the
economic consequences of procedural or other delay).

          In rendering the opinion in paragraph 3 above, we have assumed that
all conditions precedent to the Effective Date have been satisfied as set forth
in the Plan of Reorganization.

          In rendering the opinion in paragraph 4 above, we have assumed that
the Covered Companies are subject only to New York State laws and regulations
generally applicable to companies doing business in the State of New York.

          In rendering the opinion in paragraph 7 above, we have assumed that as
of the date hereof and at any time an Instrument or a certificated security is
delivered to the Collateral Agent for the benefit of the Secured Parties, the
relevant Lien Grantor will own Collateral represented by such Instrument or
certificated security free and clear of any lien, claim or encumbrance (and we
express no opinion with respect thereto). We express no opinion with respect to
the priority of the security interest of the Secured Parties against (i) any
lien, claim or other interest that arises by operation of law and is given
priority over perfected security interests, (ii) any lien or claim in favor of
the United States or any agency or instrumentality thereof (other than liens
arising under the federal or state tax laws or ERISA), and (iii) any claim given
priority pursuant to 31 U.S.C. (S)3713. In addition, insofar as the security
interest secures "future advances" within the meaning of the UCC, the priority
of such security interest will be subject to the limitations set forth in
Sections 9-301(4) and 9-312(7) of the UCC.
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 6

          In rendering the opinion in paragraph 8 above, we have assumed that
none of the Lenders is a "creditor" within the meaning of Regulation T of the
Board.

          We express no opinion as to (i) Section 12.04 of the Credit Agreement
insofar as it provides that any holder of a participation in a Note may exercise
set-off or similar rights with respect to such participation and (ii) the effect
of the law of any jurisdiction other than the State of New York wherein any
Lender may be located or wherein enforcement of the Credit Agreement or any of
the other Covered Financing Documents may be sought that limits the rates of
interest legally chargeable or collectible.

          With respect to the submission in any Covered Document to the
jurisdiction of a United States federal court sitting in the State of New York,
we express no opinion as to the subject matter jurisdiction of any such court to
adjudicate any action relating to the Covered Document where jurisdiction based
on diversity of citizenship under 28 U.S.C. (S)1332 does not exist.

          We note that the designation in any Covered Document of the U.S.
federal courts sitting in New York City as the venue for actions or proceedings
relating to such Covered Document is (notwithstanding the waiver contained in
any such Covered Document) subject to the power of such courts to transfer
actions pursuant to 28 U.S.C. (S)1404(a) or to dismiss such actions or
proceedings on the grounds that such a federal court is an inconvenient forum
for such an action or proceeding.

          The foregoing opinion is limited to the Federal laws of the United
States, and the laws of the State of New York and the General Corporation Law of
the State of Delaware, and we are expressing no opinion as to the effect of the
laws of any other jurisdiction.
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrative Agent, et al.
                                              -----
April 20, 2001
p. 7

          We are furnishing this opinion letter to you in connection with the
Covered Documents. This opinion is not to be used, circulated, quoted or
otherwise referred to for any other purpose.

                     Very truly yours,

                     CLEARY, GOTTLIEB, STEEN & HAMILTON

                     By: /s/ James F. Munsell
                         ---------------------------------
                                  James F. Munsell
<PAGE>

                                                                       EXHIBIT H

                                April 20, 2001

To the Lenders and Agents referred to below
c/o Morgan Guaranty Trust Company of New York
   As Collateral Agent and Administrative Agent
60 Wall Street
New York, NY  10260

          Re: Vencor, Inc., et al.
              -------------------

Ladies and Gentlemen:

          We have acted as Delaware bankruptcy counsel to (i) Vencor, Inc. (to
be renamed Kindred Healthcare, Inc.), a Delaware corporation ("Vencor"), and a
debtor and debtor-in-possession in a jointly administered bankruptcy case, Case
Nos. 3199-3327 (the "Case"), in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), pending under chapter 11 of the
United States Code (the "Bankruptcy Code"), and (ii) the corporations listed on
Annex A attached hereto, in connection with the Credit Agreement, dated as of
April 20, 2001 (the "Credit Agreement"), among Vencor Operating, Inc. (to be
renamed Kindred Healthcare Operating, Inc.), a Delaware corporation, Vencor, the
Swingline Bank, LC Issuing Banks and the Lenders party thereto (collectively,
the "Lenders"), Morgan Guaranty Trust Company of New York, as collateral agent
and administrative agent for the Lenders, and General Electric Capital
Corporation, as documentation agent and collateral monitoring agent, the other
Financing Documents referred to therein, and the Master Lease Agreements
referred to therein.  This opinion is being delivered to you pursuant to the
requirements of the Credit Agreement.

          In rendering this opinion, we have examined and relied upon copies of
the following documents: the Findings of Fact, Conclusions of Law and Order
Under 11 U.S.C. (S) 1129 and Rule 3020 of the Federal Rules of Bankruptcy
Procedure Confirming the Fourth Amended Plan of Reorganization of Vencor, Inc.,
et al., dated March 16, 2001 (the "Confirmation Order") executed by Judge Mary
F. Walrath in connection with the Case, a copy of which is attached hereto as
Exhibit A and a certified copy of the docket of the Clerk of the Bankruptcy
Court in the Case for the period of March 16, 2001 to April 20, 2001 (the
"Docket"), a copy of which is attached hereto as Exhibit B.  In our examination
of documents, we have
<PAGE>

Morgan Guaranty Trust Company of New York
As Collateral Agent and Administrator Agent, et al.
                                             -----
April 20, 2001
Page 2

assumed the genuineness of the signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies and the legal capacity of natural persons to
complete the execution of documents. As to facts material to our opinion, we
have relied without independent investigation on the above-referenced documents
and on the accuracy as of the date hereof of the matters therein contained. We
express no opinion below as to the existence or effect of any matter entered on
the Docket after the effective time of our review of the Docket (as referenced
below). Further, we express no view whether the terms of the Confirmation Order
are in conformance with the Bankruptcy Code or other applicable law.

          Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law and federal bankruptcy law, it is our view, based solely
upon our review of the Docket as it existed as of 12:32 p.m. on April 20, 2001,
that no notice of appeal of the Confirmation Order has been filed with the
Bankruptcy Court.

          The opinions herein expressed are intended solely for the benefit of
the addressee hereof and the Lenders and the Agents in connection with the
transactions contemplated by the Credit Agreement and may not be relied upon by
any other person or entity, or for any other purpose, without our prior written
consent.  Notwithstanding the forgoing, we hereby consent to reliance hereon by
any person becoming a Lender under the Credit Agreement.  This opinion speaks
only as of the date hereof and is based on our understandings and assumptions as
to present facts, and our review of the above-referenced documents and the
application of Delaware and federal bankruptcy law as the same exist on the date
hereof, and we undertake no obligation to update or supplement this opinion
after the date hereof for the benefit of any person or entity with respect to
any facts or circumstances that may hereafter come to our attention or any
changes in facts or law that may hereafter occur or take effect.

                                   Very truly yours,

                                   Robert J. Dehney

Enclosures
<PAGE>

                                                                        ANNEX A
                                                                           TO
                                                                       EXHIBIT H

                          Annex A--Covered Companies
                          --------------------------

     1.  Vencor, Inc. (to be renamed Kindred Healthcare, Inc.), a Delaware
corporation.

     2.  Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating,
Inc.), a Delaware corporation.

     3.  Each Restricted Subsidiary listed in Schedule 1 to the Credit
Agreement.
<PAGE>

                                                                      EXHIBIT A
                                                                         TO
                                                                      EXHIBIT H

                     IN THE UNITED STATES BANKRUPTCY COURT

                         FOR THE DISTRICT OF DELAWARE

In re:                                                 ) Case Nos. 99-3199 (MFW)
                                                       )   through 99-3327 (MFW)
Vencor, Inc., et al.,                                  )
                                                       ) Chapter 11
      Debtors and Debtors in Possession                )
                                                       ) Jointly Administered

                FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
             UNDER 11 U.S.C. (S) 1129 AND RULE 3020 OF THE FEDERAL
                   RULES OF BANKRUPTCY PROCEDURE CONFIRMING
                   THE FOURTH AMENDED PLAN OF REORGANIZATION
                            OF VENCOR, INC., et al.
          ----------------------------------------------------------

          Upon the Fourth Amended Joint Plan Of Reorganization of Vencor, Inc.
And Affiliated Debtors Under Chapter 11 Of The Bankruptcy Code, dated as of
December 14, 2000 (including all amendments and modification thereof and
exhibits thereto, the "Plan") (D.I. 4031), filed with this Court by the above-
captioned debtors and debtors in possession (collectively, the "Debtors"), and
the Fourth Amended Disclosure Statement Pursuant To Section 1125 Of The
Bankruptcy Code With Respect To The Joint Plan Of Reorganization Of Vencor Inc.
And Affiliated Debtors Under Chapter 11 of The Bankruptcy Code and the Short-
Form of Fourth Amended Disclosure Statement Pursuant To Section 1125 Of The
Bankruptcy Code With Respect To The Joint Plan Of Reorganization Of Vencor, Inc.
Any Affiliated Debtors Under Chapter 11 of The Bankruptcy Code dated as of
December 14, 2000 (respectively, the "Disclosure Statement" (D.I. 4031), the
"Short-Form Disclosure Statement" (D.I. 4032), and collectively, the "Disclosure
Materials"), and the Fourth Amended Plan Supplement To Joint Plan of
Reorganization of Vencor, Inc. And Affiliated Debtors Under Chapter 11 Of The
Bankruptcy Code (including all amendments and modification of the exhibits
thereto, the "Plan
<PAGE>

Supplement") (D.I. 4588) filed with this Court by the Debtors; and upon (a) the
hearing before this Court on December 6, 2000 to consider approval of the
Disclosure Materials and (b) the Order dated December 6, 2000 approving the
Disclosure Materials (the "Disclosure Materials Order") (D.I. 4108); and
solicitation of acceptances of the Plan having been authorized by Order dated
December 7, 2000, establishing voting procedures and approving form of ballots
and notices (the "Voting Procedures Order") (D.I. 3828); and it appearing from
the affidavits of mailing and publication filed with this Court and the Voting
Affidavit (as defined herein) that copies of the Disclosure Statement (including
the Plan as annexed thereto as Exhibit A) or Short-Form Disclosure Statement,
notice of the Confirmation Hearing (as defined herein), and ballots for
acceptances or rejections of the Plan, were transmitted to the holders of Claims
against and Interests in Vencor, Inc., et al. and other parties in interest as
required by the Voting Procedures Order, and such transmissions at such time
being due and adequate notice under the circumstances, and that notice of the
Confirmation Hearing was published in the manner required by the Voting
Procedures Order; and the Voting Procedures Order fixing February 15, 2001 at
4:00 p.m. (Eastern Standard Time) as the deadline for filing of objections to
confirmation of the Plan; and upon the declaration of George C. Vitelli (D.I.
5807), the declaration of John K. Henebery (D.I. 5806) and the statement of the
Department of Justice in support of the Plan (D.I. 5815); and upon the Ventas
Entities' response in conditional support of the Plan (D.I. 5814); and upon this
Court's Order, dated January 16, 2001 extending the time for Ventas, Inc. and
Ventas Realty, Limited Partnership to vote on the Plan and/or file a response or
objection to confirmation of the Plan (the "Ventas Voting Stipulation") (D.I.
5008); and upon the affidavit of Edward L. Kuntz dated February 20, 2001, filed
in support of confirmation of the Plan (D.I. 5779); and upon the affidavit of
Steven M. Zelin dated February 21, 2001, filed in

                                       2
<PAGE>

support of confirmation of the Plan (D.I. 5777); and a hearing to consider
confirmation of the Plan having been held before this Court commencing on March
1, 2001 (the "Confirmation Hearing"); and upon the full and complete record of
the Confirmation Hearing, including without limitation the exhibits presented
and the testimonial proffers that were accepted into evidence, and all matters
and proceedings heretofore part of the record in these cases; and for the
reasons set forth on the record by the Court and after due deliberation and
sufficient cause appearing therefor;

                    FINDINGS OF FACT AND CONCLUSIONS OF LAW
                    ---------------------------------------

                    IT IS HEREBY FOUND AND DETERMINED THAT:

          1.  All capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Plan, unless the context otherwise
requires.

          2.  This Court has jurisdiction over the Reorganization Cases pursuant
to 28 U.S.C. (S)(S) 157 and 1334.  Venue is proper before this Court pursuant to
28 U.S.C. (S)(S) 1408 and 1409.  Confirmation of the Plan is a core proceeding
under 28 U.S.C. (S) 157(b)(2), and this Court has exclusive jurisdiction to
determine whether the Plan complies with the applicable provisions of title 11
of the United States Code (the "Bankruptcy Code") and the Federal Rules of
Bankruptcy Procedures (the "Bankruptcy Rules") and should be confirmed.

          3.  This Court takes judicial notice of the docket of the
Reorganization Cases maintained by the Clerk of the Court and/or its duly
appointed agent, including, without limitation, all pleadings and other
documents filed, all orders entered, and all evidence and arguments made,
proffered or adduced at, the hearings held before the Court during the pendency
of the Reorganization Cases, including, without limitation, the hearing to
consider the adequacy of the Disclosure Materials.

                                       3
<PAGE>

          4.  The Debtors, as proponents of the Plan, have the burden of proving
the elements of Section 1129 by a preponderance of the evidence.

          5.  Notice of the Confirmation Hearing and the relevant deadlines for
submission of objections and ballots, as prescribed by this Court in the Voting
Procedures Order, has been provided and is adequate and sufficient pursuant to
Section 1128 of the Bankruptcy Code, Rules 2002(b) and 3020 of the Bankruptcy
Rules and other applicable law and rules.  Notice provided of the Confirmation
Hearing and the relevant deadlines for submission of objections and ballots and
service of the Disclosure Materials upon the individuals subject to the Debtors'
Motion for an Order Pursuant to Section 105(a) of the Bankruptcy Code and Rule
1009(a) of The Federal Rules of Bankruptcy Procedure Disallowing Certain
Scheduled Claims For Purposes Of Voting.  On The Fourth Amended Joint Plan Of
Reorganization Under Chapter 11 Of The Bankruptcy Code, as set forth in the
Affidavit of Mailing of Bridget Gallerie dated January 10, 2001 and the
Affidavit of Kathy Gerber dated January 23, 2001, is adequate and sufficient
pursuant to Section 1128 of the Bankruptcy Code, Rules 2002(b) and 3020 of the
Bankruptcy Rules and other applicable law and rules.

          6.  Ballots were transmitted to holders of claims in classes eligible
to vote on the Plan (the "Voting Classes") in accordance with the Voting
Procedures Order.

          7.  The Debtors solicited votes for the Plan from the Voting Classes
in good faith and in a manner consistent with the Bankruptcy Code.

          8.  The affidavits of Diane Rocano, dated February 26, 2001 (the
"Voting Affidavit") (D.I. 5801) and March 7, 2001 (the "Supplemental Voting
Affidavit") (D.I.T.B.D.), are consistent with Bankruptcy Rule 3018.

                                       4
<PAGE>

          9.   The classification scheme of Claims and Interests under the Plan
is reasonable.  Claims or Interests in each Class are substantially similar to
other Claims or Interests in such Class, and the Plan therefore satisfies the
requirements of Section 1122(a) of the Bankruptcy Code.

          10.  The Plan provides for the treatment of Allowed Administrative
Claims and Allowed Priority Tax Claims.  In addition, the Plan establishes the
following Classes of Claims and Interests: Class 1 (Priority Claims); Class 2
(Secured Claims); Class 3A (Convenience Claims); Class 3B (Trade Claims,
Malpractice and Other Litigation Claims, Benefits Claims, Indemnification
Claims, Employee Contact Claims and Unsecured Claims that are not Convenience
Claims); Class 4 (Senior Debt Claims); Class 5 (Ventas Claim); Class 6 (Class 6
Claims); Class 7A (Subordinated Noteholder Claims); Class 7B (Noteholder
Securities Fraud Claims); Class 8 (Put Rights); Class 10 (Punitive Damage
Claims); Class 11A (Preferred Equity Interests); Class 11B (Preferred Equity
Securities Fraud Claims); Class 12A (Common Equity Interests); and Class 12B
(Common Equity Securities Fraud Claims).  The Plan satisfies the requirements of
Section 1123(a)(1) of the Bankruptcy Code.

          11.  The Plan establishes as Class 3A a class of claims consisting
only of unsecured claims that are reduced to or less than $3,000.00.  Pursuant
to Section 1122(b) of the Bankruptcy Code, this is a reasonable amount necessary
for administrative convenience.

          12.  The following Classes of Claims are impaired and comprise the
Classes entitled to vote under the Plan: Classes 3A, 3B, 4, 5, 6, 7A and 8
(collectively, the "Voting Classes").  The following Classes of Claims are
unimpaired under the Plan Classes 1 and 2.  The following Classes of Claims or
Interests are deemed to reject the Plan by virtue of receiving no distributions
thereunder, except as otherwise provided for under this Order: Classes 7B, 10,
11A,

                                       5
<PAGE>

11B, 12A and 12B. The treatment of Claims in unimpaired Classes is specified in
Article IV of the Plan, and the treatment of Claims and Interests in impaired
Classes is specified in Article V of the Plan. Therefore, the Plan satisfies the
requirements of Sections 1123(a)(2) and 1123(a)(3) of the Bankruptcy Code.

          13.  The Plan provides for the same treatment of each Claim or
Interest of a particular Class, and the Plan satisfies the requirements of
Section 1123(a)(4) of the Bankruptcy Code.

          14.  The Plan provides for adequate means for its implementation, and
therefore satisfies the requirements of Section 1123(a)(5) of the Bankruptcy
Code.

          15.  The Plan provides for the amendment of the Certificates of
Incorporation of the Debtors in substantially the form of the Vencor Amended and
Restated Certificate of Incorporation and the Form of Certificate of Amendment
of the Certificate of Incorporation of Each Corporate Debtor filed with this
Court in the Plan Supplement on December 29, 2000 (collectively and as may be
amended or modified, the "Amended Certificates of Incorporation"), which
prohibit the issuance of nonvoting equity securities.  Any revisions to the
Amended Certificates of Incorporation filed on or prior to the Effective Date
also shall prohibit the issuance of a non-voting equity securities.
Accordingly, the Plan complies with Section 1123(a)(6) of the Bankruptcy Code.

          16.  The Plan impairs or leaves unimpaired, as the case may be, each
Class of Claims or Interests, and the Plan therefore is consistent with the
provisions of Section 1123(b)(1) of the Bankruptcy Code.

          17.  The Plan provides for the treatment under Section 365 of the
Bankruptcy Code, of all executory contracts and unexpired leases not previously
assumed or rejected or the

                                       6
<PAGE>

subject of a motion either to assume or reject pursuant to such section, and the
Plan therefore complies with the provisions of Section 1123(b)(2) of the
Bankruptcy Code.

          18.  Furthermore, the provisions of the Plan constitute a good faith
compromise and settlement of all Claims and Interests, and all controversies
respecting Claims and Interests are resolved pursuant to the Plan.  This
Confirmation Order constitutes the Court's approval of all such compromises and
settlements which, based upon the representations by the Debtors, all other
testimony proffered and evidence introduced at the Confirmation Hearing and the
full record of the Reorganization Cases, the Court finds to be fair, equitable,
within the range of reasonableness and in the best interests of the Debtors, the
Estates, creditors and other parties in interest.  Accordingly, the Plan
satisfies Section 1123(b)(3) of the Bankruptcy Code.

          19.  The Plan contains no provision that is inconsistent with the
applicable provisions of the Bankruptcy Code and therefore satisfies Section
1123(b)(6) of the Bankruptcy Code.

          20.  The Government Settlement and the allowance and settlement of the
Class 6 Claims and the payment of such claims, as set forth in Sections 5.05 and
6.12 of the Plan, constitute a good faith compromise and settlement pursuant to
Bankruptcy Rule 9019, and the Government Settlement, including the settlement
amount allocated for each of the Qui Tam Actions as enumerated on Schedule E to
the Plan, is fair, adequate and reasonable under all the circumstances.  As to
United States, et al. ex rel. Phillips-Minks, et al. v. Behavioral Healthcare
-----------------------------------------------------------------------------
Corp., et al. referenced on Schedule E and Exhibit 5 to the Plan, the
-------------
government's settlement of this Qui Tam Action is effective only to the extent
the United States has authority to compromise and settle this Qui Tam Action
pursuant to the Federal Claims Act ("FCA").  The District Court in that action
may determine, on motion of any party to that action, whether the government had

                                       7
<PAGE>

authority to settle that action. In the event the United States does not have
authority to compromise and settle this Qui Tam Action, the Claims relating to
this Qui Tam Action shall be treated as stated on the record at the Confirmation
Hearing as a Class 3B claim.

          21.  The treatment provided to the Ventas Entities under the Plan,
including, without limitation, under Section 5.04 and Article XI of the Plan,
constitute a good faith compromise and settlement pursuant to Bankruptcy Rule
9019.

          22.  All settlements in these cases, including but not limited to
settlements with the creditors in Classes 3A, 3B, 4, 5, 6, 7A, 8 and 10,
constitute good faith compromises and settlements pursuant to Bankruptcy Rule
9019.

          23.  Pursuant to Section 1123(b)(3)(B) of the Bankruptcy Code, the
Plan, except as provided therein, provides for the retention and enforcement of
all claims, rights and causes of action of the Debtors and the Estates, whether
prepetition or postpetition, and regardless of whether such claims, rights or
causes of action arise under any or all agreements and applicable law or equity,
exclusively by the Reorganized Debtors.  Under the Plan, all such claims, rights
and causes of action of the Debtors and the Estates, upon the Effective Date,
shall vest in the Reorganized Debtors and may be pursued by the Reorganized
Debtors except to the extent released under the Plan.  Accordingly, the
retention and enforcement of all such claims, rights and causes of action of the
Debtors and the Estates exclusively by the Reorganized Debtors will benefit the
Debtors' creditors and the requirements of Sections 550(a) and 1123(b)(3)(B) of
the Bankruptcy Code are satisfied.

          24.  The Plan complies with the applicable provisions of the
Bankruptcy Code, including, without limitation, Sections 1122 and 1123 of the
Bankruptcy Code.  Therefore, the Plan satisfies the requirements of Section
1129(a)(1) of the Bankruptcy Code.  In addition, in

                                       8
<PAGE>

accordance with Bankruptcy Rule 3016(a), the Plan is dated and identified with
the names of the Debtors.

          25.  The Debtors, as proponents of the Plan, have complied with each
of the applicable provisions of the Bankruptcy Code including, without
limitation, Sections 1125 and 1126 of the Bankruptcy Code, and therefore have
satisfied the requirements of Section 1129(a)(2) of the Bankruptcy Code, as
follows: (a) the Debtors are proper debtors under Section 109 of the Bankruptcy
Code and proper proponents of the Plan under Section 1121(a) of the Bankruptcy
Code; (b) the Debtors have complied with each of the applicable provisions of
the Bankruptcy Code, except as otherwise provided or permitted by orders of the
Court; and (c) the Debtors have complied with each of the applicable provisions
of the Bankruptcy Code, the Bankruptcy Rules, the Voting Procedures Order and
the Ventas Voting Stipulation in transmitting notices and solicitation materials
and in soliciting and tabulating votes on the Plan.

          26.  The Plan has been proposed in good faith and not by any means
forbidden by law.  In determining that the Plan has been proposed in good faith,
the Court has examined the totality of the circumstances surrounding the filing
and prosecution of the Debtors' Reorganization Cases and the formulation of the
Plan.  The Debtors' chapter 11 cases were filed and the Plan was proposed with
the proper purpose of reorganizing the Debtors, and expeditiously making
distributions to their creditors.  Furthermore, the Plan is the product of
extensive, arms' length negotiations among the Debtors, Ventas, the United
States, the Creditors' Committee, certain holders of the Senior Debt Claims and
Subordinated Noteholders, and each of their respective counsel and financial
advisors.  The Plan reflects the results of these negotiations and is reflective
of the interests of all the Estates' constituencies.  Thus, the Plan satisfies
the requirements of Section 1129(a)(3) of the Bankruptcy Code.

                                       9
<PAGE>

          27.  Any payments made or to be made by the Debtors for services or
for costs and expenses in, or in connection with, the Debtors' chapter 11 cases
have, to the extent required by the Bankruptcy Code, the Bankruptcy Rules and
the Orders of this Court, been approved by, or are subject to the approval of
this Court as reasonable. Accordingly, the Plan satisfies the requirements of
Section 1129(a)(4) of the Bankruptcy Code.

          28.  Section 8.07 of the Plan provides that Reorganized Vencor shall
have a board of directors consisting of seven (7) directors. The Board of
Directors or other current internal governance, as applicable, of the other
Reorganized Directors shall initially remain the same. The names and
affiliations of the persons designated pursuant to Section 8.07 of the Plan as
the initial members of the board of directors of each of the Reorganized Debtors
were disclosed to this Court prior to the Confirmation Hearing. In addition, the
Debtors disclosed the identity of any insiders that will be employed by the
Reorganized Debtors and the nature of their compensation. The appointment to
such office of each of the proposed directors and officers of each of the
Reorganized Debtors is consistent with the interests of creditors and equity
security holders and with public policy with respect to the manner of selection
of any officer or director of the Reorganized Debtors. Accordingly, the Plan
complies with Section 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.

          29.  Section 1129(a)(6) of the Bankruptcy Code is satisfied because
the Plan does not provide for any change in rates over which a governmental
regulatory commission has jurisdiction.

          30.  With respect to each impaired Class of Claims or Interests, each
holder of a Claim or Interest in such Class: (a) has accepted the Plan; or (b)
will receive or retain under the Plan on account of such Claim or Interest,
property of a value, as of the Effective Date of the

                                      10
<PAGE>

Plan, that is not less than the amount that such holder would so receive or
retain if such Debtor were to be liquidated under chapter 7 of the Bankruptcy
Code on such date. Accordingly, the Plan is in the best interests of the
creditors and satisfies the requirements of Section 1129(a)(7) of the Bankruptcy
Code.

          31.  As evidenced by the Voting Affidavit and the Supplemental Voting
Affidavit, the Plan has been accepted by each of the Voting Classes in
accordance with Section 1126 of the Bankruptcy Code and consistent with
Bankruptcy Rule 3018, the Voting Procedures Order and the Ventas Voting
Stipulation.

          32.  The Plan is deemed rejected, pursuant to Section 1126(g) of the
Bankruptcy Code, by the members of Classes 7B, 10, 11A, 11B, 12A and 12B, who
will receive no distribution and retain no interest on account of their
respective Claims or Interests, except as otherwise provided for under this
Order.

          33.  With respect to each Class of Claims or Interests designated by
the Plan, other than Classes 7B, 10, 11A, 11B, 12A and 12B, either: (a) such
Class has accepted the Plan; or (b) such Class is not impaired under the Plan.
Accordingly, the requirements of Section 1129(a)(8) of the Bankruptcy Code have
been satisfied with respect to all Claims and Interests other than those in
Classes 7B, 10, 11A, 11B, l2A and 12B. The Plan nevertheless may be confirmed
with respect to these Classes because, as stated below, the requirements of
Section 1129(b) of the Bankruptcy Code are satisfied with respect to these
Classes.

          34.  The treatment of Allowed Administrative Claims, Allowed Tax
Claims and Allowed Priority Claims under Sections 2.01, 2.03 and 4.01 of the
Plan satisfies the applicable requirements of Section 1129(a)(9)(A),(B) and (C)
of the Bankruptcy Code.

                                      11
<PAGE>

          35.  The Plan has been accepted by Classes 3A, 3B, 4, 5, 6 and 7A,
and, therefore, has been accepted by at least one impaired Class of Claims or
Interests, which acceptance has been determined without including any
acceptances of the Plan by any insider holding a Claim in such Class.
Accordingly, the requirements of Section 1129(a)(10) of the Bankruptcy Code are
satisfied with respect to the Plan.

          36.  The Plan satisfies Section 1129(a)(11) of the Bankruptcy Code
because confirmation of the Plan is not likely to be followed by liquidation or
the need for further financial reorganization of the Reorganized Debtors.

          37.  The fees payable by the Debtors to the United States Trustee or
the Clerk of this Court, as provided under 28 U.S.C. (S) 1930(a)(6), constitute
administrative expenses entitled to Priority under Section 507(a)(1) of the
Bankruptcy Code and the treatment of such fees in the Plan satisfies the
requirements of Section 1129(a)(12) of the Bankruptcy Code.

          38.  To the extent the Debtors are required to continue to provide any
retiree benefits (as that term is defined under Section 1114 of the Bankruptcy
Code), such benefits shall be continued under the Plan, and the Plan satisfies
the requirements of Section 1129(a)(13) of the Bankruptcy Code.

          39.  The requirements of Section 1129(b) of the Bankruptcy Code are
satisfied as to holders of Claims in Classes 7B, 10, 11A, 11B, 12A and 12B
because the Plan does not discriminate unfairly, and is fair and equitable, with
respect to each Class of Claims or Interests that is Impaired under, and that
has not accepted, the Plan, and no holder of any Interests of the Debtors that
is junior to the Interests of such Classes will receive or retain any property
under the Plan on account of such junior Interests.

                                      12
<PAGE>

          40.  Other than the Plan, no plan has been filed in these cases.
Accordingly, the requirements of Section 1129(c) of the Bankruptcy Code have
been satisfied.

          41.  No party in interest that is a governmental unit has requested
that the Court not confirm the Plan on the grounds that the principal purpose of
the Plan is the avoidance of taxes or the avoidance of the application of
Section 5 of the Securities Act of 1933, 15 U.S.C. (S) 77e, and the principal
purpose of the Plan is not such avoidance. Accordingly, the Plan satisfies the
requirements of Section 1129(d) of the Bankruptcy Code.

          42.  To the extent the terms of this Order may be construed to
constitute modifications to the Plan (the "Plan Modifications'), such Plan
Modifications do not materially or adversely affect or change the treatment of
any Claim against or Interest in any Debtor. Accordingly, pursuant to Bankruptcy
Rule 3019, the Plan Modifications do not require additional disclosure under
Section 1125 of the Bankruptcy Code or the resolicitation of acceptances or
rejections under Section 1126 of the Bankruptcy Code, nor do they require that
holders of Claims against or Interests in any Debtor to be afforded an
opportunity to change previously cast acceptances or rejections of the Plan as
filed with the Court. Disclosure of the Plan Modifications on the record at the
Confirmation Hearing constitutes due and sufficient notice thereof under the
circumstances of these Reorganization Cases. All references to the Plan in this
Order shall be to the Plan as so modified.

          43.  Based upon the record before the Court, the Debtors and their
agents, counsel and financial advisors have solicited votes on the Plan in good
faith and in compliance with the applicable provisions of the Bankruptcy Code
and are entitled to the protections afforded by Section 1125(e) of the
Bankruptcy Code and the exculpatory and injunctive provisions set forth in
Article XI of the Plan.

                                      13
<PAGE>

          44.  The Debtors, the Ventas Entities, each of their respective
Representatives, benefit plan administrators and trustees, and their officers,
directors, employees, agents, advisors legal and financial advisors, attorneys,
professionals, principals and agents, the Creditors' Committee and its members,
officers, directors, employees, agents, advisors, legal and financial advisors,
attorneys, professionals, principals and agents, the holders of the Senior Debt
Claims, their officers, directors, employees, agents, advisors, legal and
financial advisors, attorneys, professionals, principals and agents, and the
Subordinated Noteholders, their officers, directors, employees, agents,
advisors, legal and financial advisors, attorneys, professionals, principals and
agents (each of the foregoing solely in their capacity as such), have acted in
good faith and in compliance with the applicable provisions of the Bankruptcy
Code pursuant to Section1125(e) of the Bankruptcy Code and 1129(a)(3) of the
Bankruptcy Code, with respect to the administration of the Plan, the
solicitation of acceptances with regard thereto and the property to be
distributed thereunder.

          45.  The Court may properly retain jurisdiction over the matters set
forth in Section 13.01 of the Plan.

          46.  Upon entry of this Order, each of the conditions to confirmation
contained in Section 10.01 of the Plan shall have been satisfied.

                                    DECREES
                                    -------

          NOW THEREFORE IT IS HEREBY ORDERED, ADJUDGED, DECREED AND DETERMINED
THAT:

          1.  To the extent that any objections have not been withdrawn or
resolved by stipulation prior to the entry of this Confirmation Order or are not
resolved by the relief granted herein or as stated on the record of the
Confirmation Hearing, all such objections are hereby overruled. The stipulations
entered into with (a) the State of Georgia, Department of Revenue

                                      14
<PAGE>

(D.I. 5834), (b) the Louisiana Department of Revenue (D.I. 5835), (c) the
Missouri Department of Revenue (D.I. 5836), (d) the Tennessee Department of
Revenue (D.I. 5837), and (e) the Texas Tax Authorities (D.I. 5838) fully resolve
the objections raised by these parties and govern the treatment of the claims of
these entities under the Plan.

          2.  The findings of this Court set forth above and the conclusions of
law stated herein shall constitute findings of fact and conclusions of law
pursuant to Bankruptcy Rule 7052, made applicable to this proceeding by
Bankruptcy Rule 9014. To the extent any findings of fact shall be determined to
be a conclusion of law, it shall be so deemed, and vice versa.

          3.  The Plan complies with the requirements of Sections 1122, 1123 and
1129 of the Bankruptcy Code.

          4.  To the extent the IRS holds an allowed claim properly classified,
and to the extent entitled to interest, the interest rate shall be at the
federal statutory rate as provided by the Internal Revenue Code.

          5.  The Plan (as modified by any modifications contained in this
Confirmation Order) is confirmed under Section 1129 of the Bankruptcy Code.

          6.  The provisions of the Plan and this Confirmation Order, including
the findings of fact and conclusions of law set forth herein, are nonseverable
and mutually dependent.

          7.  Plan Classification Controlling.  The classification of Claims and
              -------------------------------
Interests for purposes of the distributions to be made under the Plan shall be
governed solely by the terms of the Plan. The classifications and amounts of
Claims, if any, set forth in the Ballots tendered or returned by the Debtors'
creditors in connection with voting on the Plan (i) were set forth on the
Ballots solely for purposes of voting to accept or reject the Plan, (ii) do not
necessarily represent, and in no event shall be deemed to modify or otherwise
affect the actual classification of such

                                      15
<PAGE>

Claims or Interests under the Plan for distribution purposes and (iii) shall not
be binding on the Debtors, the Estates, or the Reorganized Debtors.

          8.  Certain Effects of Confirmation; Discharge; Injunction; Releases.
              ----------------------------------------------------------------
All of the provisions of Article XI, including Sections 11.01, 11.02(a),
11.02(b), 11.03, 11.04, 11.05, 11.06, 11.07 and 11.08 of the Plan, as restated
or amended by this paragraph, are incorporated herein by reference as if set
forth herein in extenso. Notwithstanding anything to the contrary contained in
             ----------
the Plan, nothing in Article XI of the Plan shall be construed as providing a
discharge or release of any claims that have been or may be asserted-by
Cornerstone Insurance Company ("Cornerstone") against any of the Ventas Parties
or by one or more of the Ventas Parties against Cornerstone. The evidence
presented in connection with the Confirmation Hearing establishes that the
releases of the nondebtor Entities contained in Article XI of the Plan are fair
and necessary to the reorganization of the Debtors, and that the nondebtor
Entities receiving the benefit of the releases contained in Article XI of the
Plan have made substantial contributions toward the reorganization of the
Debtors, which are integral to the effectuation of the Plan and the consummation
of the transactions contemplated therein (including, without limitation, the
funding of distributions to holders of Allowed Claims and the Debtors'
performance under the contracts and leases assumed pursuant to the Plan).

          9.  Retention and Enforcement of Estates' Claims and Rights.  Except
              -------------------------------------------------------
as set forth in the Plan or this Confirmation Order, the Debtors shall not be
deemed to have waived or relinquished:

          (i)  any rights of causes of action (prepetition or postpetition) that
               the Debtors or the Reorganized Debtors may have currently or
               which the Reorganized Debtors may choose to assert on behalf of
               their Estates under any provision of the Bankruptcy Code or any
               similar applicable non-bankruptcy law, including without
               limitation, (i) breach of contract claims, (ii) the avoidance of
               any transfer by or obligation of the Debtors or (iii) the

                                      16
<PAGE>

               turnover of any property to the Estates, all of which are
               expressly reserved by the Plan and may only be pursued by the
               Reorganized Debtors;

          (ii) any claim, cause of action, right of setoff or other legal or
               equitable defense which the Debtors had immediately prior to the
               Petition Date, against or with respect to any Claim left
               unaltered or Unimpaired by the Plan. The Reorganized Debtors
               shall have, retain, reserve and be entitled to assert all such
               claims, causes of action, rights of setoff and other legal or
               equitable defenses which they had immediately prior to the
               Petition Date fully as if the chapter 11 cases had not been
               commenced; and all of the Reorganized Debtors' legal and
               equitable rights respecting any Claim left unaltered or
               Unimpaired by the Plan may be asserted after the Confirmation
               Date to the same extent as if the chapter 11 cases had not been
               commenced.

          10.  As of the Effective Date, the Government Settlement and the
allowance and settlement of the Class 6 Claims and the payment of such claims,
as set forth in Sections 5.05 and 6.12 of the Plan, is approved as a good faith
compromise and settlement pursuant to Bankruptcy Rule 9019, and the Government
Settlement, including the settlement amount allocated for each of the Qui Tam
Actions as enumerated on Schedule E to the Plan, is fair, adequate and
reasonable under all the circumstances. As to United States, et al. ex rel.
                                              -----------------------------
Phillips-Minks, et al. v. Behavioral Healthcare Corp., et al. referenced on
-------------------------------------------------------------
Schedule E and Exhibit 5 to the Plan, the government's settlement of this Qui
Tam Action is effective only to the extent the United States has authority to
compromise and settle this Qui Tam Action pursuant to the Federal Claims Act
("FCA"). The District Court in that action may determine, on motion of any party
to that action, whether the government had authority to settle that action. In
the event the United States does not have authority to compromise and settle
this Qui Tam Action, the Claims relating to this Qui Tam Action shall be treated
as stated on the record at the Confirmation Hearing as a Class 3B claim.

                                      17
<PAGE>

          11.  As of the Effective Date, the treatment provided to the Ventas
Entities under the Plan, including, without limitation, under Section 5.04 and
Article XI of the Plan, constitute a good faith compromise and settlement
pursuant to Bankruptcy Rule 9019.

          12.  All settlements in these cases, including settlements with the
creditors in Class 3A, 3B, 4, 5, 6, 7A, 8 and 10 are hereby approved as good
faith compromises and settlements pursuant to Bankruptcy Rule 9019.

          13.  Binding Effect.  Pursuant to Section 1141 of the Bankruptcy Code,
               --------------
effective as of the Confirmation Date, but subject to the occurrence of the
Effective Date, and except as expressly provided in the Plan, the Plan Documents
or this Confirmation Order, the provisions of the Plan (including the exhibits
to, and all documents and agreements contemplated by and executed pursuant to
the Plan) and this Confirmation Order shall be binding on (i) the Debtors, (ii)
the Reorganized Debtors, (iii) all holders of Claims against and Interests in
the Debtors, whether or not impaired under the Plan and whether or not, if
impaired, such holders accepted the Plan, and (iv) each Person or Entity
acquiring property under the Plan. The holders of liens satisfied, discharged
and released under the Plan shall execute any and all documentation reasonably
requested by the Debtors or the Reorganized Debtors evidencing the satisfaction,
discharge and release of such liens and such liens shall be deemed satisfied,
discharged and released by operation of this Order.

          14.  Revesting of Assets.  On the Effective Date, the assets of the
               -------------------
Debtors shall vest in the Reorganized Debtors. Thereafter, the Reorganized
Debtors may operate their businesses and may use, acquire, and dispose of
property free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules
and the Court. All property of the Reorganized Debtors shall be free and clear
of all Claims and Interests, and all such Claims and Interests shall be both

                                      18
<PAGE>

discharged and released to the Reorganized Debtors, except as specifically
provided in the Plan, the New Collateral Documents, the New Senior Secured
Credit Agreement, the New Senior Secured Notes, the Exit Facility, the Amended
Ventas Leases, the Tax Refund Escrow Agreement or any other Plan Document or any
documents or instruments executed in accordance therewith, or the Confirmation
Order.

          15.  Assumption and Rejection of Contracts and Leases.  Subject to
               ------------------------------------------------
Section 5.04 of the Plan, on the Effective Date, all executory contracts and
unexpired leases, including the Five Ventas Leases as assumed and simultaneously
amended to become the Amended Ventas Leases, of the Estates shall be assumed by
the Debtors pursuant to the provisions of Sections 365 and 1123 of the
Bankruptcy Code, except: (i) any executory contract or unexpired lease that is
the subject of a separate motion filed pursuant to Section 365 of the Bankruptcy
Code by the Debtors prior to the Confirmation Date; (ii) such contracts or
leases as are listed on Exhibit 8 to the Plan Supplement filed by the Debtors on
or before the Effective Date; and (iii) all executory contracts or unexpired
leases rejected under the Plan or by order of the Court entered before the
Effective Date and not subsequently assumed pursuant to an order of the Court.
Any order entered after the Confirmation Date by the Bankruptcy Court, after
notice and hearing, authorizing the rejection of an executory contract or
unexpired lease (other than a contract or lease governed by Section 5.04 of the
Plan) shall cause such rejection to be a prepetition breach under Sections
365(g) and 502(g) of the Bankruptcy Code, as if such relief were granted and
such order were entered prior to the Confirmation Date. Any Claims arising out
of the rejection of executory contracts or leases (other than a contract or
lease governed by Section 5.04 of the Plan) must be filed with the Court within
the later of the time set by any Final Order rejecting such executory contract
or unexpired lease or 30 days after the Effective Date. Any Claims not

                                      19
<PAGE>

filed within such time will be forever barred from assertion against any of the
Debtors or Reorganized Debtors, their Estates and their property. Except as
provided in Section 5.04 of the Plan, the Reorganized Debtors shall pay allowed
cure amounts arising from the assumption of executory contracts or leases as
Administrative Claims under the Plan without the need for the filing of a proof
of claim by the claimant. In addition to the retention of jurisdiction provision
contained in Section 13.01 of the Plan and subject to the provisions thereof,
the Court expressly retains jurisdiction to resolve any disputes between the
Reorganized Debtors and a party to an executory contract or lease that is
assumed regarding the cure amount that is owed as a result of the assumption of
the contract or lease, which either party can seek to resolve by application to
the Court on or after forty-five (45) days after the Effective Date if the
parties are unable to resolve the dispute consensually.

          16. General Authorizations. The Debtors and the Reorganized Debtors
              ----------------------
are authorized and empowered pursuant to Sections 105 and 1142(b) of the
Bankruptcy Code, and as applicable, Section 303 of the General Corporation Law
of the State of Delaware, 8 Del. Code (S) 303, and any other applicable state
                            ---- ----
law to take any and all actions reasonably necessary to implement the
transactions contemplated by the Confirmation Order (including without
limitation transactions contemplated by the Plan and Plan Documents as confirmed
under the Confirmation Order), all without further corporate action or action by
(or vote of) directors or stockholders of the Debtors or Reorganized Debtors,
including, without limitation, the following: (a) to reconstitute the board of
directors of each Reorganized Debtor; (b) to amend the Reorganized Debtors'
respective certificates of incorporation and by-laws, including without
limitation to effectuate a change of name with respect to Reorganized Vencor and
certain of the other Reorganized Debtors, provided that any such amended
certificates of incorporation and

                                      20
<PAGE>

amended bylaws shall continue to prohibit the issuance of non-voting equity
securities; (c) to merge any or all of the Debtors; (d) to enter into, execute
and deliver the Exit Facility and the Plan Documents, including without
limitation the New Senior Secured Credit Agreement, the New Senior Secured
Notes, the New Collateral Documents, the Amended Ventas Leases, the Registration
Rights Agreement, the New Warrant Agreement and the Tax Refund Escrow Agreement;
(e) to adopt and implement the Long-Term Incentive Plan, the Restricted Share
Plan and the New Stock Option Plan, and to pay the Performance Bonuses and
Retention Bonuses, to the extent not previously authorized by the Court and/or
paid by the Debtors; and (f) to authorize the appropriate officers of the
Reorganized Debtors to execute any documents, instruments or agreements
necessary, and perform any act that is desirable or required to comply with the
terms and conditions of the Plan and consummation of the Plan, including all
documents necessary and appropriate to execute and consummate the Exit Facility.
Such actions are approved in all respects and shall be deemed to have occurred
and be effective on the Effective Date.

          17.  Subordination Rights.  Subject to the provisions of Section 8.15
               --------------------
of the Plan, as of the Effective Date, to the fullest extent permitted by
applicable law (including but not limited to subsections (a) or (c) of Section
510 of the Bankruptcy Code), all Claims against and Interests in the Debtors and
all rights and claims between or among creditors or holders of Interests
relating in any manner whatsoever to Claims against or Interests in the Debtors,
based on any subordination rights, either contractual, legal or equitable, shall
be terminated and discharged in the manner provided for in the Plan, and all
such Claims, Interests and rights so based and all such subordination rights to
which any Entity may be entitled shall be irrevocably waived by the acceptance
by such Entity of the Plan or of any distribution pursuant to the Plan.

                                      21
<PAGE>

          18.  Status of Corporate Indemnities.  The continuance of the
               -------------------------------
Corporate Indemnities by the Reorganized Debtors, as provided in Section 12.03
of the Plan, shall be authorized and approved in all respects without any
requirement of further action by stockholders or directors of any of the Debtors
or Reorganized Debtors.

          19.  No Post-Confirmation Amendment or Filing of Claims.  Except as
               --------------------------------------------------
otherwise provided herein or in the Plan, a Claim may not be filed or amended
after the Confirmation Date without the prior authorization of the Court and,
even with such Court authorization may be amended by the holder of such Claim
solely to decrease, but not to increase, the amount or priority of the Claim.
Except as otherwise permitted herein or in the Plan, a Claim filed or amended
alter the Confirmation Date shall be deemed disallowed in full and expunged
without any action by the Debtors or the Reorganized Debtors if prior Court
authorization has not been obtained.

          20.  Payment of Fees.  As set forth in Section 14.07 of the Plan, all
               ---------------
fees payable pursuant to Section 1930 of Title 28 of the United States Code
shall be paid on or before the Effective Date, and to the extent required and
unless relieved of these obligations by further Order of the Court, shall be
paid until the Reorganization Cases are closed.

          21.  Retention of Jurisdiction.  Notwithstanding confirmation of the
               -------------------------
Plan or occurrence of the Effective Date, and except as specified in the Exit
Facility, this Court shall retain such jurisdiction as is legally permissible,
including, without limitation, for the purposes set forth in Section 13.01 of
the Plan and for the determination of cure amounts as described in this Order,
subject to the limitations set forth in Section 13.01 of the Plan.

          22.  Modification of Plan.  Subject to Section 14.12 of the Plan,
               --------------------
after the entry of this Order, the Reorganized Debtors may, upon order of the
Court, amend or modify the Plan in

                                      22
<PAGE>

accordance with Section 1127(b) of the Bankruptcy Code, or remedy any defect or
omission or reconcile any inconsistency in the Plan in such manner as may be
necessary to carry out the purpose and intent of the Plan, as modified by this
Order.

          23.  The treatment of Class 10 (Punitive Damage Claims) under the Plan
is hereby amended pursuant to Section 1127(b) of the Bankruptcy Code to provide
solely with respect to any Allowed Punitive Damage Claims that have been filed
in the State of Florida ("Florida Punitive Damage Claims") that such Claims
shall be treated as Class 3B Claims in an amount up to the lesser of (a) any
applicable state law limits with respect to such Claim or (b) the greater of (i)
$500,000 or (ii) three times any compensatory damages award (the "Punitive
Damage Amount").  To the extent that any judgment with respect to any Florida
Punitive Damage Claim exceeds the Punitive Damage Amount, the amount in excess
of the Punitive Damage Amount shall be treated as a Class 10 Claim and the
Claimant shall receive no payment for such excess amount.

          24.  Exemption from Securities Laws.  The exemption from the
               ------------------------------
requirements of Section 5 of the Securities Act of 1933, 15 U.S.C. (S) 77e, and
any state and local law requiring registration for the offer or sale of a
security provided for in Section 1145 of the Bankruptcy Code shall apply to the
New Senior Secured Notes, the New Common Stock (including New Common Stock
issued under the Performance Plan), the New Warrants, and the New Stock Options
issued pursuant to the Plan.

          25.  Exemptions from Taxation.  Pursuant to Section 1146(c) of the
               ------------------------
Bankruptcy Code: (1) the issuance, distribution, transfer or exchange of the New
Senior Secured Notes and the entry into the Exit Facility or (2) the making,
delivery or recording of any other instrument of transfer under, in furtherance
of, or in connection with, the Plan, including any mortgages, deeds

                                      23
<PAGE>

of trust, deed to secure debt, assignments or other instruments of transfer
executed in connection with any transactions arising out of, contemplated by or
in any way related to the Plan or this Confirmation Order (and including without
limitation the Security Documents, as defined in Schedule A, attached hereto)
granted by any of the Reorganized Debtors in favor of Morgan Guaranty Trust
Company as Collateral Agent), shall not be subject to any document recording
tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real
estate transfer tax, documentary transfer tax, mortgage recording tax or other
similar tax or governmental assessment, and the appropriate state and local
governmental officials or agents, including but not limited to the land title
recording officers of Alabama, Florida, Georgia, Minnesota, Oklahoma, Tennessee,
Virginia, and counties therein, and the City of New Orleans, Louisiana shall be,
and hereby are, ordered and directed to forego the collection of any such tax or
governmental assessment and to accept for filing and recordation any of the
foregoing instruments or other documents without the payment of any such tax or
governmental assessment.

          26.  Validity of Liens.  The liens granted pursuant to the Exit
               -----------------
Facility and the New Senior Secured Notes and the New Senior Secured Credit
Agreement shall be legal, valid and enforceable first priority liens, except as
otherwise provided in the Exit Facility, the New Senior Secured Credit Agreement
and the New Senior Secured Notes, and the documents to be executed and delivered
pursuant thereto shall constitute the legal, valid and binding obligations of
the Reorganized Debtors that are parties thereto.

          27.  References to Plan Provisions.  The failure specifically to
               -----------------------------
include or reference any particular provision of the Plan in this Confirmation
Order shall not diminish or

                                      24
<PAGE>

impair the effectiveness of such provision, it being the intent of the Court
that the Plan be confirmed in its entirety.

          28.  Confirmation Order Controlling.  If there is any direct conflict
               ------------------------------
between the Plan and this Confirmation Order, the terms of this Confirmation
Order shall control.

          29.  Reversal.  If any or all of the provisions of this Confirmation
               --------
Order are hereafter reversed, modified or vacated by subsequent order of this
Court or any other Court, subject to Section 14.12 of the Plan, such reversal,
modification or vacatur shall not affect the validity or enforceability of the
acts or obligations incurred or undertaken under or in connection with the Plan
prior to the Debtors' receipt of written notice of such order including, without
limitation, the obligations and indebtedness created under the Exit Facility.
Notwithstanding any such reversal, modification or vacatur of this Confirmation
Order, but subject to Section 14.12 of the Plan, any such act or obligation
incurred or undertaken pursuant to, and in reliance on, this Confirmation Order
prior to the effective date of such reversal, modification or vacatur shall be
governed in all respects by the provisions of this Confirmation Order and the
Plan and all related documents or any amendments or modifications thereto.

          30.  No Stay of Confirmation Order.  Pursuant to Bankruptcy Rule
               -----------------------------
3020(e), this Order shall not be stayed and shall be effective upon entry on the
docket of this Court.

          31.  Applicable Non-Bankruptcy Law.  To the extent provided in
               -----------------------------
Sections 1123(a) and 1142(a) of the Bankruptcy Code, the provisions of this
Confirmation Order, the Plan or any amendments or modifications thereto shall
apply and be enforceable notwithstanding any otherwise applicable nonbankruptcy
law.

          32.  Dissolution of the Creditors' Committee.  On the Effective Date,
               ---------------------------------------
the Creditors' Committee shall cease to exist and its members, employees or
agents (including

                                      25
<PAGE>

without limitation, attorneys, financial advisors, and any other professionals)
shall be released and discharged in their capacity as such from all further
authority, duties, responsibilities, and obligations related to, arising from or
in connection with the Reorganization Cases except with respect to: (i) any
matters pending before the Court to which the Creditors' Committee is a party,
until such objections or matters are resolved, (ii) all fee applications filed
or to be filed after the Effective Date pursuant to Section 330 of the
Bankruptcy Code by or on behalf of members of the Creditors' Committee or any
professionals employed by the Debtors or the Creditors' Committee, (iii)
effectuating consummation of the Plan and (iv) any post-confirmation
modifications to the Plan or the Confirmation Order.

          33.  Record Date for Distributions.  The record date for determining
               -----------------------------
the holders of the Senior Debt Claims and the Subordinated Noteholders, entitled
to receive distributions under the Plan shall be the Confirmation Date.

          34.  Distribution of New Common Stock and New Warrants.  On the
               -------------------------------------------------
Effective Date the Reorganized Debtors shall deliver all of the New Common Stock
and New Warrants to be distributed to the holders of Allowed Class 4, 5 and 7A
Claims to the Exchange Agent on behalf of such holders (or in the case of Ventas
Realty, Limited Partnership, any designee named by Ventas Realty, Limited
Partnership prior to the Effective Date) in accordance with the provisions of
Article VI of the Plan.  Pursuant to Section 6.02 of the Plan, the Debtors have
designated Wells Fargo Bank of Minnesota, NA. ("Wells Fargo"), as the Exchange
Agent and the Court hereby approves the designation of Wells Fargo as the
Exchange Agent.  Holders of Allowed Claims in Classes 4 and 7A who do not
receive distributions of New Common Stock or New Warrants due to their failure
to comply with the procedural requirements of Article VI related to the
distribution of such securities shall be treated in the same manner as provided
in

                                      26
<PAGE>

Section 6.09 of the Plan for holders of Claims that cannot be located within one
(1) year of the Effective Date, and the distributions that would otherwise be
made to such holders shall instead be reallocated and distributed pro rata among
the remaining holders of Claims in the same Class.

          35.  Administrative Claims Bar Date.  All applications for payment of
               ------------------------------
fees and expenses pursuant to Section 330 and 503(b) of the Bankruptcy Code
which were incurred before the Effective Date must be filed with the Court on or
before 4:00 p.m. (Eastern Standard Time) on the date that is the forty-five (45)
days after the Effective Date; provided however that the foregoing shall not
apply to the Class 5 Claim.  Any Person who fails to file such an application
with the Court on or before such time and date shall be forever barred from
asserting such claim against any of the Debtors, the Reorganized Debtors, or
their property, and the holder thereof shall be enjoined from commencing or
continuing any action, employment of process or act to collect, offset or
recover such claim.  Notwithstanding any prior order of this Court in these
Reorganization Cases, all requests for approval and payment of professional fees
and reimbursement of expenses, whether or not previously applied for by interim
application, may be included in such professionals' final applications for
payment of Claims as set forth herein and in the Plan.  Objections, if any, to
such claims shall be filed and served not later than five (5) business days
prior to the date set by the Court for the hearing to consider such claims.

          36.  Allowance of Malpractice and Other Litigation Claims.  The
               ----------------------------------------------------
Debtors and/or Reorganized Debtors shall file an objection to and/or contest the
allowance of the Malpractice and Other Litigation Claims on or before the
expiration of one-hundred and twenty (120) days from the Effective Date
(hereinafter the "Objection Deadline").  Failure of the Debtors or Reorganized
Debtors to file a objection to a Malpractice and Other Litigation Claim on or
before the expiration of the Objection Deadline shall constitute the allowance
of the Malpractice and

                                      27
<PAGE>

Other Litigation Claim subject only to the liquidation of the Malpractice and
Other Litigation Claim in a court of competent jurisdiction. Further, upon the
occurrence of either the filing of the objection to a Malpractice and Other
Litigation Claim by a Debtor or Reorganized Debtor or the deemed allowance of
the claim, the automatic stay of 11 U.S.C. (S) 362 shall be lifted and the
claimant shall be authorized to take all steps necessary to liquidate the
Malpractice and Other Litigation Claim; provided however, that (i) the
liquidation of the Malpractice and Other Litigation Claim shall be undertaken
solely for the purpose of liquidating the claimant's Malpractice and Other
Litigation Claim against the Debtors for purposes of receiving distributions
under the Plan, and/or receiving such insurance proceeds as may be available to
such claimant with respect to such claim; and (ii) the Court shall retain
jurisdiction over the Malpractice and Other Litigation Claims to resolve any
disputes that may arise between the Debtors, the Reorganized Debtors and the
claimants regarding the liquidation of the Malpractice and Other Litigation
Claims and the payment of distributions under the Plan for such claims, subject
to the restrictions on jurisdiction contained in 28 U.S.C. (S) 157.

          37.  Nothing herein shall be deemed to limit or otherwise preclude a
Debtor and a holder of a Malpractice and Other Litigation Claim from resolving a
Malpractice and Other Litigation Claim by settlement. In addition, to the extent
that a Malpractice and Other Litigation Claim is resolved for an amount, the
payment of which comes exclusively from the Debtors' and/or Reorganized Debtors'
insurance carriers, then no further order or intervention by the Court is
required.

          38.  The Debtors and Reorganized Debtors reserve the right to seek a
further order of the Court establishing a mediation or alternative dispute
resolution procedure for the liquidation of the Malpractice and Other Litigation
Claims arising in those states in which

                                      28
<PAGE>

mediation and/or alternative dispute resolution procedures are not a mandatory
element of the state court process.

          39.  Indenture Trustee Fees.  To the extent that, as of the Effective
               ----------------------
Date, any pending Administrative Expense Claims of the Indenture Trustees
(including a good faith estimate provided to the Debtors by each of the
Indenture Trustees of its fees and expenses accruing through the Effective
Date), are not yet allowed, the Debtors shall establish on the Effective Date a
separate Cash reserve (the "Indenture Trustees Reserve") for the Indenture
Trustees in the amount of any such outstanding Administrative Expense Claims
including the estimated fees and expenses.

          40.  The obligation of the Reorganized Vencor to pay the Indenture
Trustees their fees and expenses shall be secured by the amounts in the
Indenture Trustee Reserve established for the Indenture Trustees and the lien
rights of the Indenture Trustees under the respective indentures governing the
Subordinated Notes shall be deemed to attach to the Cash in the Indenture
Trustee Reserve to the same extent as if the Cash in the Indenture Trustees
Reserve were property received by the Indenture Trustees pursuant to the Plan.
The Indenture Trustees shall be conclusively deemed to have taken any and all
action required to perfect their lien rights as to the Cash in the Indenture
Trustees Reserve, including, without limitation, any requirement of possession
for such perfection.

          41.  In consideration for the foregoing, and subject to the
establishment of the Indenture Trustee Reserve, the Indenture Trustees are
deemed to have waived their lien rights in the property to be distributed under
the Plan to the holders of the Subordinated Notes. Upon the payment by the
Debtors or Reorganized Vencor of the Allowed Administrative Expenses Claims

                                      29
<PAGE>

of the Indenture Trustees the lien rights of the Indenture Trustees in the
Indenture Trustee Reserve shall be extinguished.

          42.  Transfer of Ventas Claims.  Any transfer of a Class 5 Claim held
               -------------------------
by a Ventas Entity shall be effective and recognized for distribution purposes
of the Plan upon the filing with the Clerk of the Bankruptcy Court by the
respective Ventas Entity of a notice of the transfer.

          43.  Post-Confirmation Notices.  On or before the tenth (10) Business
               -------------------------
Day following the date of the entry of this Confirmation Order, the Debtors or
the Reorganized Debtors, as appropriate, shall serve notice of entry of this
Confirmation Order pursuant to Bankruptcy Rules 2002(f)(7), 2002(k) and 3020(c)
to all creditors, indenture trustees and equity security holders of the Debtors
as of the date hereof

          44.  Subject to Section 14.12 of the Plan, the form of the Amended
Ventas Leases (as appropriately conformed for each master lease portfolio as
described in the form admitted as an exhibit at the Confirmation Hearing), the
Excess Stock Trust Agreement, the Tax Refund Escrow Agreement, the Registration
Rights Agreement, the New Senior Secured Notes, the New Senior Secured Credit
Agreement and the Amended and Restated Certificate of Incorporation shall be
substantially in the forms submitted as exhibits at the Confirmation Hearing or
in the case of the Registration Rights Agreement, filed with the Court, and
shall be executed and delivered on the Effective Data.

          45.  If the Effective Date does not occur, this Order shall be deemed
vacated and of no force and effect.

          46.  Postpetition Claims.  Notwithstanding any provision of the Plan,
               -------------------
for any Claims arising on or after the Petition Date that represent liabilities
incurred by the Debtors in the ordinary course of business during these
Reorganization Cases the Debtors shall remain

                                      30
<PAGE>

obligated to pay such Claims as and when they become due and payable in the
ordinary course of business, without the need for Filing an application with the
Court before the bar date for Administrative Claims or at any other time and
without regard to the terms of or any limitation of the Plan, and in accordance
with the terms and conditions of any judgment, award or agreement relating
thereto; this paragraph specifically applies without limitation to Postpetition
Personal Injury Claims alleged against the Debtors that arose on or after the
Petition Date which may be determined, liquidated and resolved in the ordinary
course of business. Holders of Postpetition Personal Injury Claim are authorized
to liquidate such Claims to judgment, settlement or otherwise without further
order of the Court and to seek payment as set forth herein.

Dated: Wilmington, Delaware
       March 16, 2001

                                             /s/ Mary F. Walrath
                                             -----------------------------------
                                             UN1TED STATES BANKRUPTCY JUDGE

                                      31
<PAGE>

                                                                      SCHEDULE A
                                                                          TO
                                                                       EXHIBIT H

                                  SCHEDULE A

                              Security Documents

          "Security Documents" shall mean:  leasehold and fee mortgages,
assignments of leases and rents, security agreements, fixture filings and
financing statements; leasehold and fee deeds of trust, assignments of leases
and rents, security agreements, fixture filings and financing statements;
leasehold and fee deeds to secure debt, assignments of leases and rents,
security agreements, fixture filings and financing statements; UCC-[1] financing
statements with respect to the foregoing instruments; and UCC-[2] fixture
filings with respect to the foregoing instruments.

          This schedule is intended to include all Security Documents relating
to property that is owned or leased by Vencor, Inc. or Vencor Operating, Inc.
located in any of the following jurisdictions:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Alabama                   Arizona                      Arkansas
-------                   -------                      --------
<S>                       <C>                          <C>
Jefferson                 Maricopa                     Pulaski
Madison                   Pima
Mobile                    Yavapai

--------------------------------------------------------------------------------
California                Colorado                     Connecticut
----------                --------                     -----------

Alameda                   Arapahoe                     Fairfield
Bakersfield               Adams                        Hartford
Kern                      Denver                       New London
Los Angeles
Orange
Riverside
Sacramento
San Bernardino
San Diego
San Francisco
San Luis Obispo
San Joaquin
San Mateo
Shasta
Ventura

--------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Delaware                  Florida                      Georgia
--------                  -------                      -------
<S>                       <C>                          <C>
                          Brevard                      Bibb
                          Broward                      Chatham
                          Clay                         Clayton
                          Dade                         Cobb
                          Palm Beach                   De Kalb
                          Pinellas                     Fayette
                          Hernando                     Fulton
                          Hillsborough                 Houston
                          Lee                          Meriwether
                          Manatee
                          Pasco
                          Sarasota
                          Seminole

--------------------------------------------------------------------------------
Idaho                     Illinois                     Indiana
-----                     --------                     -------

Ada                       Cook                         Boone
Boise                     De Kalb                      Barholomew
Canyon                                                 Clark
Gem                                                    Delaware
Latah                                                  Elkhard
Ney Perce                                              Floyd
Shoshone                                               Harrison
Washington                                             Howard
                                                       Lawrence
                                                       LaGrange
                                                       Marion
                                                       Marshall
                                                       Vanderburgh
                                                       Vigo
                                                       Wells

--------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Iowa                      Kansas                       Kentucky
----                      ------                       --------
<S>                       <C>                          <C>
                                                       Boyle
                                                       Casey
                                                       Clark
                                                       Davies
                                                       Fayette
                                                       Hardin
                                                       Jefferson
                                                       Marshall
                                                       Marion
                                                       McLean
                                                       Mercer
                                                       Warren

--------------------------------------------------------------------------------
Louisiana                 Maine                        Massachusetts
---------                 -----                        -------------

Caddo Parish              Kennebec                     Barnstable
Orleans Parish            Knox                         Berkshire
Saint Tammany Parish      Lincoln                      Bershire
                          Oxford                       Bristol
                          Penobscot                    Essex
                          Sagadahoc                    Franklin
                          York                         High Street
                                                       Lancaster
                                                       Middlesex
                                                       Norfold
                                                       Plymouth
                                                       Stoughton
                                                       Suffolk
                                                       West Roxbury
                                                       Worcester

--------------------------------------------------------------------------------
Michigan                  Minnesota                    Mississippi
--------                  ---------                    -----------

Wayne                     Hennepin                     Alcorn
                                                       Rankin

--------------------------------------------------------------------------------
Missouri                  Minnesota                    Nebraska
--------                  ---------                    --------

Cole                      Beaverhead                   Lancaster
Jackson                   Cascade
St. Louis

--------------------------------------------------------------------------------
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Nevada                      New Hampshire              New Jersey
------                      -------------              ----------
<S>                         <C>                        <C>
Clark                       Hanover
                            Hillsborough
                            Merrimack
                            Strafford

--------------------------------------------------------------------------------
New Mexico                  North Carolina             Ohio
----------                  --------------             ----

Bernalillo                  Almance                    Coshocton
                            Buncombe                   Fairfield
                            Duplin                     Franklin
                            Durham                     Guernsey
                            Forsyth                    Hocking
                            Gaston                     Lake
                            Guilford                   Licking
                            Halifax                    Lucas
                            Hertford                   Marion
                            Lenoir                     Ross
                            Lincoln                    Summit
                            Mecklenburg                Warren
                            Nash                       Washington
                            New Hanover
                            Orange
                            Pasquotank
                            Union
                            Vance
                            Wake

--------------------------------------------------------------------------------
Oklahoma                    Oregon                     Pennsylvania
--------                    ------                     ------------

Oklahoma                    Jackson                    Allegheny
                            Marion                     Berks
                                                       Northampton
                                                       Philadelphia

--------------------------------------------------------------------------------
Puerto Rico                 Rhode Island               South Carolina
-----------                 ------------               --------------
                            Providence

--------------------------------------------------------------------------------
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Tennessee                   Texas                      Utah
---------                   -----                      ----
<S>                         <C>                        <C>

Davidson                    Bexar                      Weber
Hamilton                    Dallas                     Washington
Putnam                      Harris                     Salt Lake
Shelby                      Tarrant

--------------------------------------------------------------------------------
Vermont                     Virginia                   Washington
-------                     --------                   ----------

Chittenden                  Arlington                  Clark
                            Princess Anne              Cowlitz
                            Suffolk                    King Pierce
                                                       Snohomish
                                                       Whatcom

--------------------------------------------------------------------------------
Wisconsin                   Wyoming

Brown                       Carbon
Kenosha                     Fremont
Langlade                    Laramie
Manitowoc                   Sweetwater
Marathon
Milwaukee
Outgamie
Racine
Winnebago
Wood

--------------------------------------------------------------------------------
</TABLE>

                                       5
<PAGE>

                                                                       EXHIBIT B
                                                                          TO
                                                                       EXHIBIT H

Docket for Case NoDocket Number: 99-03199-MFW VENCOR, INC.

                               Case Information

341 Meeting: 10/22/99, 11:00 A.M. at location #10
Claim Deadline: 01/07/00  523(c) Complaint Deadline: Not Applicable
District: DELAWARE [District Code 0311]
Office: U.S. BANKRUPTCY COURT [1]
Original Filing Date: 09/13/99  Original Chapter: 11

Judge: Mary F. Walrath  [AO Code A591]
Type of Filing: Voluntary                         Nature of Debt: Business
Assets available for distribution to creditors.

Fee of $830.00 paid in full.

                              Debtor Information

Type of Filing: Corporation

Debtor
------
VENCOR, INC.
DBA VENCOR HEALTHCARE, INC.
SSN: not available EIN: 61-1323993

Address:
One Vencor Place, 680 S. Fourth St.
LOUISVILLE, KY 40202-2412
County: Jefferson KY [21111]

                             Attorney Information

Attorney for Debtor:
-------------------
William H. Sudell, Jr.
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200

Trustee:
-------
 NOT YET APPOINTED

Trustee's Attorney:  None assigned.
------------------

Creditor's Attorney: None assigned.
-------------------

                            Statistical Information

Estimated Number of Creditors: 1000 or more
Estimated Assets: $10,000,001 to 50 Million
Estimated Liabilities: $10,000,001 to 50 Million
Form of business organization: Not Available
Type of business: Not Available
Number of employees: N/A
Number of equity security holders: N/A
Receipt Number: 040284
<PAGE>

                       Docket for Case No. 99-03199-MFW
                       --------------------------------

                   VENCOR, INC. (printed 04/23/01 at 14:17)

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/16/01            5973       CERTIFICATION of Charles L. Abrahams, Esq. & Request for
                                 Modification of Page 7, (P) 20 & Page 17, (P) 10 of Finding of Fact,
                                 Conclusion of Law & Order Confirming Fourth Amended Plan (Filed by
                                 Charles L. Abrahams, Atty./Realtor ELI-ANE PHILLIPS-MINKS.) Re: Item # 5950.
                                 [EOD 03/19/01] [JW]

03/16/01            5974       OMNIBUS Objection (TENTH) to Claims (Filed by Michael G. Busenkell,
                                 Atty./DEBTORS.) [EOD 03/19/01] [JW]

                               NOTICE of Motion and Hearing (Hearing only if objections filed by
                                 4/5/01 @ 4:00PM) on 04/25/01 at 02:00 P.M. at 824 Market Street, 6th Floor,
                                 Courtroom #1, Wilmington, DE 19801 [EOD 03/19/01] [JW]

                               CERTIFICATE of Service [EOD 03/19/011 [JW]

03/16/01            5975       ORDER Signed and Located in Original Document Confirming Chapter 11
                                 Plan Re: Item # 5950. [EOD 03/19/01] [JW]

03/16/01            5976       MOTION for Order Compelling Payment of Post-Petition Administration
                                 Obligation (Filed by Ian Connor Bifferato, Atty./AREA METROPOLITAN
                                 AMBULANCE Authority, d/b/a MedStar.) [EOD 03/19/01] [JW)

                               CERTIFICATE of Service [EOD 03/19/01] [JW]

3/16/01             5977       MOTION for Leave to File Proof of Claim (Filed by Ian Connor Bifferato,
                                 Atty./AREA METROPOLITAN AMBULANCE AUTHORITY, d/b/a MedStar.) [EOD
                                 03/19/01] [JW]

                               CERTIFICATE of Service [EOD 03/19/01] [JW]

03/16/01            5978       NOTICE of Motion and Hearing (Hearing only if objections filed by
                                 4/6/01 @ 4:00PM) on 04/12/01 at 02:00 P.M. at 824 Market Street, 6th
                                 Floor, Courtroom #1, Wilmington, DE 19801 Re: Item # 5976. [EOD
                                 03/19/01] [JW]

03/16/01            5979       NOTICE of Motion and Hearing (Hearing only if objections filed by
                                 4/6/01 @ 4:00PM) on 04/12/01 at 02:00 P.M. at 824 Market Street, 6th
                                 Floor, Courtroom #1, Wilmington, DE 19801 Re: Item # 5977. [EOD
                                 03/19/01] [JW]

03/16/0l            5980       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Phillip T. Evans, Esq.)
                                 [EOD 03/19/01] [JW]

03/16/01            5981       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by John B. Rogers, Esq.)
                                 [EOD 03/19/01] [JW]
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/16/01            5982       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by John B. Weiner, Esq.)
                                 [EOD 03/19/01] [JW]

03/19/01            5983       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Molly K. Lebowitz, Esq.)
                                 [EOD 03/20/01] [JW]

03/19/01            5984       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by David W. Thorne, Esq.)
                                 [EOD 03/20/01] [JW]

                               CERTIFICATE of Service [EOD 03/20/01] [JW]

03/19/01            5985       NOTICE of Hearing (Filed by Karel S. Karpe, Atty./HSBC BANK USA, as
                               Indenture Trustee.) on 03/30/01 at 09:30 A.M. at 824 Market Street, 6th
                               Floor, Courtroom #1, Wilmington, DE 19801 Re: Item 5522. [EOD 03/20/01]
                               [JW]

                               CERTIFICATE of Service [EOD 03/20/01] [JW]

03/19/01            5986       NOTICE of Withdrawal of Proofs of Claim (Filed by Julia Krebs-Markrich,
                                 Atty./EXCELSIOR CARE CENTERS, INC.) [EOD 03/20/01] [JW]

                               CERTIFICATE of Service [EOD 03/20/01] [JW]

03/19/01            5987       NOTICE of Transfer of Claim (Filed by Helena DeYoung/Liquidity
                                 Solutions, Inc.) (Medical Packaging, Inc./Liquidity Solutions, Inc.)
                                 [EOD 03/22/01] [JW]

03/20/01            5988       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice FLOWERS BAKING ATTN JOHN P COATE SR. [EOD 03/23/01] [SBM]

03/20/01            5989       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice SPARTANBURG NEUROLOGICAL SERVICES [EOD 03/23/01] [SBM]

03/20/01            5990       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice DBA SPECIAL MED RENTALS SPECIAL [EOD 03/23/01] [SBM]

03/20/01            5991       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice RESPIRATIORY CARE INC [EOD 03/23/01] [SBM]

03/20/01            5992       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice WAL MART INC ATTN MIKE GRISSOM [EOD 03/23/01] [SBM]

03/20/01            5993       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice GRUNAU ATTN: CHRISTINE L. MILLER [EOD 03/23/01] [SBM]

03/20/01            5994       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice JET MEDICAL ELECTRONICS INC ATTN DAVID WAKEFIELD [EOD 03/23/01]
                                 [SBM]
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/20/01            5995       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice C&C WASTE CONTROL ATTN:  CTRANE J D LAUBY [EOD 03/23/01] [SBM]

03/20/01            5996       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice DESERT COUNTY LIGHTING ATTN:  DOUGLAS GROTEWOLD [EOD 03/23/01]
                                 [SBM]

03/20/01            5997       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice DAVIS GLASS ATTN DAN DAVIS [EOD 03/23/01] [SBM]

03/20/01            5998       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice CAMBRIDGE NUTRACEUTICALS ATTN:  JOHN [EOD 03/23/01] [SBM]

03/20/01            5999       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice DALE SHERRATT [EOD 03/23/01] [SBM]

03/20/01            6000       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice HOSPITAL WORKERS LOCAL 285  ATTN FRANK BORGES [EOD 03/23/01]
                                 [SBM]

03/20/01            6001       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice APA MEDICAL ATTN SAMUEL OCEL [EOD 03/23/01] [SBM]

03/20/01            6002       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice PRESIDIO GORDENS ATTN HENRY HAROS [EOD 03/23/01] [SBM]

03/20/01            6003       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice KING-PAK MEATS INC ATTN DON KING [EOD 03/23/01] [SBM]

03/20/01            6004       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice ROTO ROOTER PLUMBING ATTN:  RAUL GARCIA [EOD 03/23/01] [SBM]

03/20/01            6005       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice MAYFAIR DIAGNOSTIC LAB ATTN WILLIAM J LAW [EOD 03/23/01] [SBM]

03/20/01            6006       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice THE EMPLOYMENT TIMES ATTN ANNE GRAIGS [EOD 03/23/01] [SBM]

03/20/01            6007       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice RESTAURANT APPLIANCE SERVICE [EOD 03/23/01] [SBM]
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/20/01            6008       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice BIO-TECH SYSTEMS ATTN: STEVEN A MURRAY [EOD 03/23/01] [SBM]

03/20/01            6009       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice PM REFUSE REMOVAL SERV INC ATTN STEVEN REWENKO [EOD 03/23/01]
                                 [SBM]

03/20/01            6010       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice GRAINGER ATTN H. F. HAEGERSCH [EOD 03/23/01] [SBM]

03/20/01            6011       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice RMS CALIBRATION ATTN JOHN S. CROWTHER [EOD 03/23/01] [SBM]

03/20/01            6012       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice HARKERS WHOLESALE MEAT ATTN:  JAMES A RYAN [EOD 03/23/01] [SBM]

03/20/01            6013       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice SUPPLEMENTAL HEALTH CARE SERV ATTN:  DANIEL BLATZ [EOD 03/23/01]
                                 [SBM]

03/20/01            6014       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice ARTHREX [EOD 03/23/01] [SBM]

93/19/01            6015       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice BEST CHOICE ATTN HARRY C VOET [EOD 03/23/013] [SBM]

03/19/01            6016       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice TERRY KERR 3 VILLA JARDIN [EOD 03/23/01] [SBM]

03/19/01            6017       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice GRUNAU COMPANY INC. ATTN:  CHRISTINE L. MILLER [EOD 03/23/01]
                                 [SBM]

03/19/01            6018       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice DIXON ELECTRIC [EOD 03/23/01] [SBM]

03/19/01            6019       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice CONCORD EXTENDED CARE [EOD 03/23/01] [SBM]

03/l9/01            6020       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice THE VETERAN SERVER ATTN TOM SCOTT [EOD 03/23/01] [SBM]

03/l9/01            6021       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice Wise Uniforms & Equipment ATTN:  FRANK WISE [EOD 03/23/01]
                                 [SBM]
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/19/01            6022       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                               Notice DUPONT FLOORING SYSTEMS ATTN:  FAYE CULPEPPER [EOD 03/23/01]
                               [SBM]

03/19/0l            6023       NOTICE of Transfer of Claim Other Than for Security and Waiver of
                                 Notice COMPLETE FLOORING ATTN JAMES MILLER [EOD 03/23/01] [SPM]

03/23/0l            6023A      THE ABOVE TRANSFERS OF CLAIM WERE FILED By Madison Creditors Liquidity
                                 Investors 202, LLC (TRANSFEREE) 5988 thru 6023 [EOD 03/23/01] [JW]

03/13/01            6024       ORDER Signed and Located in Original Document Vacating in Part the
                                 Order Reducing or Disallowing Certain Claims Re: Item # 5706. [EOD
                                 03/26/01] [JW] & Re: Item # 5226. [EOD 03/26/01] [JW]

03/19/01            6025       ORDER Signed and Located in Original Document (Shortening Notice) Re:
                                 Item # 5963. [EOD 03/26/01] [JW]

03/20/01            6026       Line Withdrawing Proof of Claim # 5127 (Filed by Heather Deans Foley,
                                 Atty./AJILON SERVICES, INC.) [EOD 03/26/01] [JW] CERTIFICATE of Service
                                 [EOD 03/26/01] [JW]

03/20/01            6027       CERTIFICATION of No Objection (Filed by Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 5792.[EOD 03/26/01] [JW]

03/20/01            6028       STIPULATION AND ORDER Settling Fifth Omnibus Objection to Claims
                                 w/Respect to First Colony Levee Improvement District, First Colony
                                 Municipal Utility District #9 & The City of Missouri City (Filed by
                                 Eric D. Schwartz, Atty./DEBTORS & Carl O. Sandin, Atty./FIRST COLONY
                                 LEVEE IMPROVEMENT DISTRICT, ET AL.) Re: Item # 3094. [Disposed] [EOD
                                 03/26/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Esq. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/20/01            6029       STIPULATION AND ORDER Settling Fifth Omnibus Objection to Claims
                                 w/Respect to Manatee County Tax Collector (Filed by Michael G.
                                 Busenkell, Esq., Atty./DEBTORS & Ken Burton, Jr., Atty./MANATEE COUNTY
                                 TAX COLLECTOR.) Re: Item # 3094.  [Disposed] [EOD 03/26/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Esq. [EOD Oat 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/20/01            6030       CERTIFICATION of Michael G. Busenkell, Esq. Regarding Order Further
                                 Extending Time Debtors' Must Assume/Reject Unexpired Leases Re: Item #
                                 5785.  [Disposed] [EOD 03/26/01] [JW]
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/21/01            6031       NOTICE of Appearance and Request for Service of Notices and Documents
                                 (Filed by Bruce D. Atherton, Atty./MARIA M. LEVERING, n/k/a Maria M.
                                 Froehle.) [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/21/01            6031A      OBJECTION to Eighth Omnibus Objection to Claims (Filed by Bruce D.
                                 Atherton, Atty./MARIA M. LEVERING, n/k/a Maria M. Froehie.) Re: Item #
                                 4989. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/21/01            6032       MOTION for Order Vacating in Part Order Reducing or Disallowing Certain
                                 Claims (Omnibus Objection # 9) (Filed by Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 5924. [EOD 03/26/01] [JW]

                               NOTICE of Motion (Hearing only if objections filed by 4/9/01 @ 4:00PM)
                                 CEOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/21/01            6033       CERTIFICATION of No Objection (Filed by Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 5797. [EOD 03/26/01] [JW]

03/21/01            6034       STIPULATION AND ORDER Regarding Claims of Odgen Environmental & Energy
                                 Services Company (Filed by Michael G. Busenkell, Atty./DEBTORS &
                                 Christopher Celentino, Atty./ODGEN ENVIRONMENTAL ENERGY SERVICES CO.,
                                 INC.) [Disposed] [EOD 03/26/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Esq. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/21/01            6035       STIPULATION AND ORDER Regarding Extension of Discovery Period (Filed by
                                 Christopher J. Kayser, Atty./IRS & Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 3094. [Disposed] [EOD 03/26/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Esq. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/21/01            6036       NOTICE of Service Re: Item # 5967. [EOD 03/26/01] [JW]

                               & Re: Item # 5968. [EOD 03/26/01] [JW]

                               & Re: Item # 5960. [EOD 03/26/01] [JW]

                               & Re: Item #s 5970, 5971 & 5972 [EOD 03/26/01] [JW]
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/22/01            6037       POST-PETITION Claim for Damages for Tortious Violation of Americans
                                 w/Disabilities Act of 1990  (Filed by Michael D. Bebow, Atty./ANAPERLA
                                 AUREOLES.) [EOD 03/26/01] [JW]

                               DECLARATION of Service [EOD 03/26/01] [JW]

03/22/01            6038       APPLICATION for Compensation and for Reimbursement of Expenses (Reed
                                 Smith LLP) (Filed by Jan A. T. van Amerongen, Jr., Atty./DEBTORS.)
                                 SIXTEENTH INTERIM 1/1/01 thru 1/31/01 [EOD 03/26/01] [JW]

                               NOTICE of Application (Hearing only if objections filed by 4/11/01 @
                                 4:00PM) [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/22/01            6039       APPLICATION for Compensation and for Reimbursement of Expenses (Mintz,
                                 Levin, Cohn, Ferris, Glovsky & Popeo, P.C.) (Filed by Bradley L. Kelly,
                                 Atty./DEBTORS.) TWELFTH 12/1/00 thru 12/31/00 [EOD 03/26/01] [JW]

                               NOTICE of Application (Hearing only if objections filed by 4/12/01 @
                                 4:00PM) [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/22/01            6040       APPLICATION for Compensation and for Reimbursement of Expenses (Mintz,
                                 Levin, Cohn, Ferris, Glovsky & Popeo, P.C.) (Filed by Bradley L. Kelly,
                                 Atty./DEBTORS.) THIRTEENTH 1/1/01 thru 1/31/01 [EOD 03/26/01] [JW]

                               NOTICE of Application (Hearing only if objections filed by 4/12/01 @
                                 4:00PM) [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/22/01            6041       OBJECTION to Motion to File Claims Beyond Bar Date (Filed by Michael G.
                                 Wilson, Atty./DEBTORS.) Re:  Item # 4933. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

P3/22/01            6042       DECLARATION of Kathie M. McDonald, Director & Corporate Counsel of
                                 Liability Claims for Vencor, Inc. In Support of Debtors' Objection to
                                 Motion to File Claims Beyond Bar Date Re: Item # 6041. [EOD 03/26/01]
                                 [JW]

                               & Re: Item # 4933. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
93/22/01            6043       DECLARATION of Kathie M. McDonald, Director & Corporate Counsel of
                                 Liability Claims for Vencor, Inc. In Support of Debtors' objection to
                                 File Proof of Claim Beyond Bar Date Re: Item # 6041. [EOD 03/26/01] [JW]

                               & Re: Item # 4933. [EOD 03/26/01] [JW] 3/27

03/23/01            6044       WITHDRAWAL of Appearance & Removal from 2002 Service List (Filed by
                                 Margaret A. Christian, Atty./MARGARET B. DEWETTER.) Re:  Item # 639.
                                 [Eon 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/23/01            6045       APPLICATION for Compensation and for Reimbursement of Expenses (Cleary,
                                 Gottlieb, Steen & Hamilton) (Filed by Lindsee P. Granfield,
                                 Atty./DEBTORS.) FIFTEENTH INTERIM 12/1/00 thru 12/31/00 [EOD 03/26/01]
                                 [JW]

03/23/01            6046       NOTICE of Application (Hearing only if objections filed by 4/12/01 @
                                 4:00PM) Re: Item # 6045. [EOD 03/26/01] [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/23/01            6047       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Susan D. Miner, Esq.)
                                 [EOD 03/26/01] [JW]

03/23/01            6048       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Colin H. Lindsay, Esq.)
                                 [EOD 03/26/01] [JW]

03/23/01            6049       MOTION for Relief from Stay (Filed by Kevin J. Mangan, Atty./ANNIE
                                 PEARL PRIDE.) [EOD 03/26/01] [JW]

                               NOTICE of Motion and Hearing on 04/12/01 at 02:00 P.M. at 824 Market
                                 Street, 6th Floor, Courtroom #1, Wilmington, DE 19801 [EOD 03/26/01]
                                 [JW]

                               CERTIFICATE of Service [EOD 03/26/01] [JW]

03/23/01            6050       RESPONSE to Motion to Reduce or Disallow Claim (Filed by Mary A.
                                 Stevens, Treasurer/Grant County.) [EOD 03/27/01] [JW]

03/26/01            6051       LETTER In Response to Notice of Objection to Claims  (Filed by Michael
                                 A. Mitternight, Pres./FACTORY SERVICE AGENCY INC.) [EOD 03/27/01] [JW]

03/26/01            6052       RESPONSE to Reclassifying Claim as Amended Claim Disallowing any Relief
                                 (Filed by Denise Wolf/SUPERIOR BIOMEDICAL SERVICE, INC.) [EOD 03/27/01]
                                 [JW]

03/26/01            6053       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Steven A. Brickman,
                                 Esq.) [EOD 03/27/01] [JW]

03/26/01            6054       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Allan Karell, Esq.) [EOD
                                 03/27/01] [JW]
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/26/01            6055       TRANSCRIPT of Hearing 3/15/01 [EOD 03/27/01] [JW]

03/26/01            6056       NOTICE of Service Re: Item # 5830. [EOD 03/27/01] [JW]

03/26/01            6057       NOTICE of Service Re: Item # 5950. [EOD 03/27/01] [JW]

03/26/01            6058       CERTIFICATION of No Objection (Filed by Aaron A. Garber, Atty.
                                 /OFFICIAL COMMITTEE/UNSECURED CREDITORS.) Re: Item # 5898. [EOD
                                 03/27/01] [JW]

03/26/01            6059       AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Thomas H. Grimm, Esq.)
                                 [EOD 03/27/01] [JW]

03/26/01            6060       STIPULATION AND ORDER Settling Fifth Omnibus Objection to Claims
                                 w/Respect to Canyon County Treasurer (Filed by Tracie Lloyd,
                                 Treasurer/CANYON COUNTY & Michael G. Busenkell, Atty./DEBTORS.) Re:
                                 Item # 3094. [Disposed] [EOD 03/27/01] [JW]

                               CERTIFICATE of Service [EOD 03/27/01] [JW]

03/27/01            6061       NOTICE of Withdrawal of Transfer of Claim (B G Chemicals, Inc.) (Filed
                                 by Sylvia C. Serrano/DEBT ACQUISITION COMPANY OF AMERICA V, LLC.) Re:
                                 Item # 4618. [EOD 03/27/01] [JW]

03/27/01            6062       WITHDRAWAL of Proof of Claim #8497 (Filed by Janice D. Newell,
                                 Atty./ADA COUNTY TREASURER.) [EOD 03/27/01] [JW]

                               CERTIFICATE of Service [EOD 03/27/01] [JW]

03/27/01            6063       WITHDRAWAL of Administrative Expense Claim Dated 1/12/01 ($1,996.88)
                                 (Filed by Jim Polkowski, Revenue Agent/WISCONSIN DEPT./REVENUE.) [EOD
                                 03/29/01] [JW]

03/27/01            6064       CERTIFICATE of Service Re: Item # 6045. [EOD 03/29/01] [JW]

03/27/01            6065       STIPULATION AND ORDER Settling Fifth Omnibus Objection to Claims
                                 w/Respect to Madison County Tax Collector (Filed by John P. Purbach,
                                 Atty./MADISON COUNTY TAX COLLECTOR & Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 3094. [Disposed] [EOD 03/29/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Atty./DEBTORS.) [EOD 03/29/01]
                                 [JW]
</TABLE>

                                       10
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/27/01            6066       CERTIFICATION of Counsel w/Respect to Amended Order Approving Entry
                                 Into Contract for Transfer of Operations of Facility Known as MONTVUJE
                                 & Authorizing Assumption & Assignment of Related Executory Contracts
                                 (Filed by Michael G. Busenkell, Atty./DEBTORS.) Re: Item # 5968.
                                 [Disposed] [EOD 03/29/01] [JW]

                               & Re: Item # 5782. [EOD 03/29/01] [JW]

                               CERTIFICATE of Service [EOD 03/29/01] [JW]

/27/oh              6067       COUNSEL'S Agenda with Matters Scheduled on 03/30/01 at 09:30 A.M. at
                                 824 Market Street, 6th Floor, Courtroom #1, Wilmington, DE 19801 [EOD
                                 03/29/01] [JW]

8/01                6068       NOTICE of Withdrawal of Appearance (Filed by Maureen D. Luke,
                                 Atty./NATIONAL HEALTHCARE INVESTORS, INC.) Re: Item # 904. [EOD
                                03/29/01] [JW]

13/28/01            6069       COUNSEL'S Agenda with Matters Scheduled (AMENDED) on 03/30/01 at 09:30
                                 A.M. at 824 Market Street, 6/th/ Floor, Courtroom #1, Wilmington, DE
                                 19801 Re: Item # 5057. [EOD 04/02/01] [JW]

3/29/01             6070       STIPULATION AND ORDER Settling Second Omnibus Objection to Claims
                                 w/Respect to Travelers Indemnity Company (Filed by Eric G. Waxman, III,
                                 Atty./TRAVELERS INDEMNITY COMPANY & Michael G. Busenkell,
                                 Atty./DEBTORS.) Re: Item # 1503.  [Disposed] [EOD 04/02/01] [JW]

                               CERTIFICATION of Michael G. Busenkell, Esq. [EOD 04/02/01] [JW]

                               CERTIFICATE of Service [EOD 04/02/01] [JW]

03/29/0l            6071       APPLICATION for Compensation and for Reimbursement of Expenses (Morris,
                                 Nichols, Arsht & Tunnell) (Filed by Michael G. Busenkell,
                                 Atty./DEBTORS.) SIXTEENTH INTERIM 2/1/01 thru 2/18/01 [EOD 04/02/01]
                                 [JW]

                               NOTICE of Application (Hearing only if objections filed by 4/19/01 @
                                 4:00PM) [EOD 04/02/01] [JW]

                               CERTIFICATE of Service [EOD 04/02/01] [JW]

03/30/01            6072       RESPONSE to Tenth Omnibus Objection to Claims #8590, 8591, 03142 & 7113
                                 (Filed by Gary L. Barnhart, Atty./MISSOURI DEPT./REVENUE.) Re: Item #
                                 5974. [EOD 04/02/01] [JW]

                               CERTIFICATE of Service [EOD 04/02/01] [JW]
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
----------------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
03/30/01            6073       OMNIBUS Objection (ELEVENTH) to Claims (Filed by Eric D. Schwartz,
                                 Atty./DEBTORS.) [EOD 04/02/01] [JW]

                               NOTICE of Motion and Hearing (Hearing only if objections filed by
                                 4/16/01 @ 4:00PM) on 05/09/01 at 02:00 P.M. at 824 Market Street, 6th
                                 Floor, Courtroom #1, Wilmington, DE 19801 [EOD 04/02/01] [JW]

                               CERTIFICATE of Service [EOD 04/02/01] [JW]

03/30/01            6074       AMENDMENT (FIFTH) & Supplement to Schedule F (Filed by Michael G.
                                 Wilson, Atty./DEBTORS.) [EOD 04/02/01] [JW]

                               NOTICE of Filing [EOD 04/02/01] [JW]

                               CERTIFICATE of Service [EOD 04/02/01] [JW]

03/27/01            6075       RESPONSE to Tenth Omnibus Objection to Claims (Filed by Jim Polkowski,
                                 Revenue Agent/STATE OF WISCONSIN, DEPT./REVENUE.) Re: Item # 5974.[EOD
                                 04/02/01] [JW]

03/26/01            6076       ORDER Signed and Located in Original Document Enlarging Time Within
                                 Which to File Notices of Removal Re: Item # 5797. [EOD 04/04/01] [JW]

03/26/01            6077       ORDER Signed and Located in Original Document Re:  Item # 6028. [EOD
                                 04/04/01] [JW]

03/26/01            6078       ORDER Signed and Located in Original Document Re: Item # 6029. [POD
                                 04/04/01] [JW]

03/26/01            6079       ORDER Signed and Located in Original Document Extending Time Which
                                 Debtors Must Assume/Reject Unexpired Leases Re: Item # 6030. [EOD
                                 04/04/01] [JW]

03/26/01            6080       ORDER Signed and Located in Original Document Re:  Item # 6034. [EOD
                                 04/04/01] [JW]

03/26/01            6081       ORDER Signed and Located in Original Document Regarding Extension of
                                 Discovery Period Re: Item # 6035. [EOD 04/04/01] [JW]

03/28/01            6082       ORDER Signed and Located in Original Document Re:  Item # 6060. [EOD
                                 04/04/01] [JW]

03/29/01            6083       ORDER Signed and Located in Original Document Re: Item # 6065. [EOD
                                 04/04/01] [JW]
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
03/29/01     6084     ORDER Signed and Located in Original Document (AMENDED) Approving Entry
                          Into Contract for Transfer of Operations of Facility Known as Montvue &
                          Authorizing Assumption & Assignment of Related Executory Contracts Re:
                          Item # 6066. [EOD 04/04/01] [JW]

                      & Re: Item # 5968. [EOD 04/04/01] [JW]

                      & Re: Item # 5782. [EOD 04/04/01] [JW]

04/02/01     6085     OBJECTION to Tenth Omnibus Objection to Claim  (Filed by Peter H.
                          Froelicher, Atty./LARAMIE COUNTY.) Re: Item # 5974. [EOD 04/04/01] [JW]

                          CERTIFICATE of Service [EOD 04/04/01] [JW]

04/02/01     6086     RESPONSE to Objection to Claim (Filed by Ronell Davis,
                          V.Pres./SPECIALIZED IMAGING, INC.) [EOD 04/04/01] [JW]

04/02/01     6087     WITHDRAWAL & Entry of Appearance (Filed by Louis H. Kornreich, Esq. &
                      James R. Wholly, Atty./STATE OF MAINE.) [EOD 04/04/01] [JW]

04/02/01     6088     AFFIDAVIT Under 11 U.S.C. (S) 327(e) (Filed by Frank 3. Saccomandi,
                          Esq.) [POD 04/04/01] [JW]

04/02/01     6089     RESPONSE to Tenth Omnibus Objection to Claim 8574  (Filed by Steven B.
                          Flancher, Atty./STATE OF MICHIGAN.) Re: Item # 5974. [EOD 04/04/01] [JW]

                      PROOF of Service [EOD 04/04/01] [JW]

04/02/01     6090     APPLICATION for Compensation and for Reimbursement of Expenses  (KPMG
                          LLP)  (Filed by Scott Moresco, Partner/TAX CONSULTANTS/DEBTORS.)
                          TWELFTH INTERIM 11/1/00 thru 11/30/00 [EOD 04/04/01] [JW]

                      NOTICE of Application  (Hearing only if objections filed by 4/22/01 @
                          4:00PM) [EOD 04/04/01] [JW]

                      CERTIFICATE of Service [EOD 04/04/01] [JW]

04/02/01     6091     APPLICATION for Compensation and for Reimbursement of Expenses  (KPMG
                          LLP)(  (Filed by Scott Moresco, Partner/TAX CONSULTANTS/DEBTORS.)
                          THIRTEENTH INTERIM 12/1/00 thru 12/31/00 [EOD 04/04/01] [JW]

                      NOTICE of Application  (Hearing only if objections filed by 4/22/01 @
                          4:00PM) [EOD 04/04/01] [JW]

                      CERTIFICATE of Service [EOD 04/04/01] [JW]
</TABLE>

                                       13
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
04/02/01     6092     APPLICATION for Compensation and for Reimbursement of Expenses  (KPMG
                          LLP)(  (Filed by Scott Moresco, Partner/TAX CONSULTANTS/DEBTORS.)
                          FOURTEENTH INTERIM 1/1/01 thru 1/31/01 [EOD 04/04/01] [JW]
                          NOTICE of Application  (Hearing only if objections filed by 4/22/01 @
                          4:00PM) [EOD 04/04/01] [JW]

                      CERTIFICATE of Service [EOD 04/04/01] [JW]

04/02/01     6093     APPLICATION for Compensation and for Reimbursement of Expenses  (KPMG
                          LLP)(  (Filed by Scott Moresco, Partner/TAX CONSULTANTS/DEBTORS.)
                          FIFTEENTH INTERIM 2/1/01 thru 2/28/01 [EOD 04/04/01] [JW]
                          NOTICE of Application  (Hearing only if objections filed by 4/22/01 @
                          4:00PM) [EOD 04/04/01] [JW]

                      CERTIFICATE of Service [EOD 04/04/01] [JW]

03/27/01     6094     STIPULATION AND ORDER  Settling Seventh Omnibus Objection to Claims
                          w/Respect to Hartford Specialty Co  (Filed by William P. Bowden,
                          Atty./HARTFORD SPECIALTY CO. & Michael G. Busenkell, Atty./DEBTORS.)
                          Re:  Item # 4579.[EOD 04/04/01] [JW]

                      CERTIFICATION of Michael G. Busenkell, Esq. [EOD 04/04/01] [JW]

04/03/01     6095     SUPPLEMENTAL Response to Motion to Temporary Allowance of Claim & In
                          Support of Ninth Omnibus Objection to Claim  (Filed by Michael G.
                          Busenkell, Atty./DEBTORS.)  Re:  Item # 5793.  [Disposed] [EOD
                          04/04/01] [JW]

                      &  Re:  Item # 5705. [EOD 04/04/01] [JW]

                      &  Re:  Item # 4994. [EOD 04/04/01] [JW]

                      CERTIFICATE of Service [EOD 04/04/01] [JW]

04/03/01     6096     AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by Ralph J. Ehlinger,
                          Esq.) [EOD 04/04/01] [JW]

04/03/01     6097     AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by James C. Palmer, Esq.)
                          [EOD 04/04/01] [JW]

03/30/01     6098     HEARING Adjourned  (See:  Item # 6069)  on 04/12/01 at 02:00 P.M. at
                          824 Market Street, 6/th/ Floor, Courtroom #1, Wilmington, DE 19801 Re:
                          Item # 5551. [EOD 04/09/01] [JW]

04/03/01     6099     MONTHLY Reporting Requirements  (Dec./00) [EOD 04/09/01] [JW]

                      CERTIFICATE of Service [EOD 04/09/01] [JW]
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.       Entry
-------------------------------------------------------------------------------------------------
<S>          <C>       <C>
04/03/01     6100      MONTHLY Reporting Requirements  (Jan./01) [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/03/01     6101      ORDER Signed and Located in Original Document Re:  Item # 6070. [EOD
                           04/09/01] [JW]

04/04/01     6102      RESPONSE to Tenth Omnibus Objection to Claim #'s 5932 & 5934  (Filed by
                           Karen C. Bifferato, Atty./HEALTH CARE REIT, INC.)  Re:  Item # 5974.
                           [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/04/01     6103      RESPONSE to Omnibus Objection to Claim # 2358  (Filed by Jack M. Telle,
                           Atty./DELBERT WATSON, d/b/a Watson Commercial Refrigeration.)  Re:
                           Item # 5974. [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/04/01     6104      NOTICE of Service Re:  Item # 6076. [EOD 04/09/01] [JW]

04/04/01     6105      RESPONSE to Tenth Omnibus Objection to Claims  (Filed by Gregory A.
                           Taylor, Atty./HEALTH CARE PROPERTY INVESTORS, INC.)  Re:  Item # 5974.
                           [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/04/01     6106      RESPONSE to Tenth Omnibus Objection to Claims  (Filed by Gregory A.
                           Taylor, Atty./OMNICRE PHARMACY OF MASSACHUSETTS LLC.)  Re:  Item #
                           5974. [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6107      RESPONSE in OPPOSITION to Tenth Omnibus Objection to Claims  (Filed by
                           R. Karl Hill, Atty./MEISNER ELECTRIC, INC. OF FLORIDA.)  Re:  Item #
                           5974. [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6108      RESPONSE in Protest to Disallowance of Portion of Claim  (Filed by
                           Robert P. Foster/FISHER & PHILLIPS LLP)  Re:  Item # 5974. [EOD
                           04/09/01] [JW]

04/05/01     6109      APPLICATION for Compensation and for Reimbursement of Expenses
                           (Cleary, Gottlieb, Steen & Hamilton)  (Filed by Lindsee P. Granfield,
                           Atty./DEBTORS.)  SIXTEENTH  1/1/01 thru 1/31/01 [EOD 04/09/01] [JW]

                       NOTICE of Application  (Hearing only if objections filed by 4/25/01 @
                           4:00PM) [EOD 04/09/01] [JW]

04/05/01     6110      AFFIDAVIT of Mailing w/Notice of Entry of Order Confirming Plan [EOD
                           04/09/01] [JW]
</TABLE>

                                       15
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.       Entry
-------------------------------------------------------------------------------------------------
<S>          <C>       <C>
04/05/01     6111      AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by Elizabeth D. Tyrrell,
                           Esq.) [EOD 04/09/01] [JW]

04/05/01     6112      RESPONSE to Tenth Omnibus Objection to Claim  (Filed by Richard D.
                           Becker, Atty./PROGRESS LEASING COMPANY.)  Re: Item # 5974. [EOD
                           04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6113      RESPONSE to Objection to Claim # 8352 (Filed by Joan E. Pilver,
                           Atty./STATE OF CONNECTICUT, DEPT./REVENUE.) [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6114      OBJECTION to Motion for Relief from Stay  (Filed by Michael G.
                           Busenkell, Atty./DEBTORS.)  Re:  Item # 6049. [EOD 04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6115      RESPONSE to Tenth Omnibus Objection to Claim # 5637  (Filed by Kevin J.
                           Mangan, Atty./CHARLES L. ABRAHAMS, ESQ.)  Re:  Item # 5974. [EOD
                           04/09/01] [JW]

                       CERTIFICATE of Service [EOD 04/09/01] [JW]

04/05/01     6116      THE FOLLOWING TRANSFERS OF CLAIM WERE Filed by Madison Creditor
                           Liquidity Investors 202, LLC (Transferee) [EOD 04/09/01] [JW]

04/05/01     6117      ACSYS [EOD 04/09/01] [JW]

04/05/01     6118      Accounting Solutions [EOD 04/09/01] [JW]

04/05/01     6119      American Medical Service Co. [EOD 04/09/01] [JW]

04/05/01     6120      Audio/Fireex Inc.) [EOD 04/09/01] [JW]

04/05/01     6121      AWT Environmental [EOD 04/09/01] [JW]

04/05/01     6122      Bethesda Mem Hosp [EOD 04/09/01] [JW]

04/05/01     6123      Coastal Supply [EOD 04/09/01] [JW]

04/05/01     6124      Corporate Search [EOD 04/09/01] [JW]

04/05/01     6125      D&B Tree [EOD 04/09/01] [JW]

04/05/01     6126      Ellen Beth Daroszewski [EOD 04/09/01] [JW]

04/05/01     6127      Delta Medical [EOD 04/09/01] [JW]

04/05/01     6128      Greenwood Landscape [EOD 04/09/01] [JW]

04/05/01     6129      Haiges Machinery [EOD 04/09/01] [JW]

04/05/01     6130      Henderson Fruit & Produce Co. Inc. [EOD 04/09/01] [JW]
</TABLE>

                                       16
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.       Entry
-------------------------------------------------------------------------------------------------
<S>          <C>       <C>
04/05/01     6131      HISEC, Inc. [EOD 04/09/01] [JW]

04/05/01     6132      Immucor [EOD 04/09/01] [JW]

04/05/01     6133      Dr. Markus Koster DDS [EOD 04/09/01] [JW]

04/05/01     6134      W.B. Mason, Co. [EOD 04/09/01] [JW]

04/05/01     6135      Portable XRAY [EOD 04/09/01] [JW]

04/05/01     6136      Printing & Promotion Plus [EOD 04/09/01] [JW]

04/05/01     6137      Reardon Heating Air Condition Refrigeration [EOD 04/09/01] [JW]

04/05/01     6138      Rentokil [EOD 04/09/01] [JW]

04/05/01     6139      River City Elevator Co Inc [EOD 04/09/01] [JW]

04/05/01     6140      Some Things Fishy [EOD 04/09/01] [JW]

04/05/01     6141      The Elkhart Truth [EOD 04/09/01] [JW]

04/05/01     6142      The Republic [EOD 04/09/01] [JW]

04/05/01     6143      Training Resources 2000 Inc [EOD 04/09/01] [JW]0

04/05/01     6144      Vision Medical Imaging LLC [EOD 04/09/01] [JW]

04/05/01     6145      Yarnall Warehouse Inc [EOD 04/09/01] [JW]

04/06/01     6146      WITHDRAWAL of Claim for WIT filed 2/2/01  ($544.00)  (Filed by Donald
                           W. Petersen, ILLINOIS DEPT./REVENUE.) [EOD 04/09/01] [JW]

04/06/01     6147      AFFIDAVIT of Mailing w/NOTICE of Fifth Amendment to Schedules & Bar
                           Date for Filing Proofs of Claim [EOD 04/09/01] [JW]

04/06/01     6148      NOTICE of Service  Re:  Item # 6073. [EOD 04/09/01] [JW]

04/06/01     6149      OBJECTION to Reduce Claim  (Filed by Karen Fortin/CARMAN BROOK FARM.)
                           [EOD 04/09/01] [JW]

04/06/01     6150      RESPONSE to Objection to Claim  (Filed by John F. Cappiello, Managing
                           Member/PARTY FIXINS, LLC.)  Re:  Item # 6073. [EOD 04/09/01] [JW]

03/30/01     6151      CHANGE of Address  (Filed by Steve Powell, Atty./ESTATE/JEFFREY H.
                           TITTLE.) [EOD 04/10/01] [JW]

04/06/01     6152      RESPONSE to Tenth Omnibus Objection to Claims  (Filed by Linda Crane
                           Nelsen, Revenue Officer II/KING COUNTY TREASURY DIVISION.)  Re:  Item #
                           5974. [EOD 04/11/01] [JW]

04/06/01     6153      DECLARATION of Linda Crane Nelsen, Revenue Officer II  Re:  Item #
                           6152. [EOD 04/11/01] [JW]
</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.       Entry
-------------------------------------------------------------------------------------------------
<S>          <C>       <C>
04/06/01     6154      RESPONSE to Tenth Omnibus Objection to Claims  (Filed by David G.
                           Aelvoet, Atty./TAX AUTHORITIES)  Re:  Item # 5974. [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/06/01     6155      RESPONSE to Tenth Omnibus Objection to Claims  (Filed by Marsha L.
                           Johnson, Bankruptcy Mgr./LEASE CORPORATION OF AMERICA.)  Re:  Item #
                           5974. [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/09/01     6156      APPLICATION for Compensation and for Reimbursement of Expenses  (Reed
                           Smith LLP)  (Filed by Jan A.T. van Amerongen, Jr., Atty./DEBTORS.)
                           SEVENTEENTH INTERIM 2/1/01 thru 2/28/01 [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/09/01     6157      RESPONSE to Eleventh Omnibus Objection to Claims  (Filed by John M.
                           Sheppard, Pres./CATHCART ALLIED STORAGE CO., INC.)  Re:  Item # 6073.
                           [EOD 04/11/01] [JW]

04/09/01     6158      RESPONSE to Eleventh Omnibus Objection to Claims  (Filed by Carl
                           Thompson, Claimant.)  Re:  Item # 6073. [EOD 04/11/01] [JW]

04/09/01     6159      OBJECTION to Motion for Relief from Stay  (Filed by Michael G.
                           Busenkell, Atty./DEBTORS.)  Re:  Item # 5526. [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/10/01     6160      COUNSEL'S Agenda with Matters Scheduled on 04/12/01 at 02:00 P.M. at
                           824 Market Street, 6/th/ Floor, Courtroom #1, Wilmington, DE 19801 [EOD
                           04/11/01] [JW]

04/10/01     6161      AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by Gary W. Lonergan, Esq.)
                           [EOD 04/11/01] [JW]

04/10/01     6162      APPLICATION for Compensation and for Reimbursement of Expenses
                           (Pricewaterhousecoopers LLP)  (Filed by Elliot Fuhr, Accounting
                           Advisors, Auditors & Consultants/DEBTORS.)  FIFTEENTH INTERIM 12/1/00
                           thru 12/31/00 [EOD 04/11/01] [JW]

                       NOTICE of Application  (Hearing only if objections filed by 4/30/01 @
                           4:00PM) [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]
</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.       Entry
-------------------------------------------------------------------------------------------------
<S>          <C>       <C>
04/10/01     6163      APPLICATION for Compensation and for Reimbursement of Expenses
                           (Pricewaterhousecoopers LLP)  (Filed by Elliot Fuhr, Accounting
                           Advisor, Auditors & Consultants/DEBTORS.)  SIXTEENTH INTERIM 1/1/01
                           thru 1/31/01 [EOD 04/11/01] [JW]

                       NOTICE of Application  (Hearing only if objections filed by 4/30/01 @
                           4:00PM) [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/10/01     6164      THE FOLLOWING TRANSFERS OF CLAIM WERE Filed by Madison Creditor
                           Liquidity Investors 202, LLC [EOD 04/11/01] [JW]

04/10/01     6165          Affordable Medical Transport [EOD 04/11/01] [JW]

04/10/01     6166          Coastal Training Tech [EOD 04/11/01] [JW]

04/10/01     6167          Enable Industries [EOD 04/11/01] [JW]

04/10/01     6168          Future Tech [EOD 04/11/01] [JW]

04/10/01     6169          Jennifer L. Kulla [EOD 04/11/01] [JW]

04/10/01     6170          Midcity Supply Co Inc. [EOD 04/11/01] [JW]

04/10/01     6171          Printing Inc. [EOD 04/11/01] [JW]

04/10/01     6172          The Binding Site [EOD 04/11/01] [JW]

04/10/01     6173          The Unisource Corp [EOD 04/11/01] [JW]

04/10/01     6174      RESPONSE to Objection to Claim  (Filed by Bob Franklin, Claimant.) [EOD
                           04/11/01] [JW]

04/10/01     6175      MOTION to Amend Proofs of Claim for Creditors, American Exchange Life
                           Insurance Company, et al  (Filed by Neal J. Levitsky, Atty./AMERICAN
                           EXCHANGE LIFE INSURANCE COMPANY, ET AL.) [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/10/01     6176      STIPULATION AND ORDER  Settling Fifth Omnibus Objection to Claims
                           w/Respect to Pima County, Arizona  (Filed by Alison K. North,
                           Atty./PIMA COUNTY, ARIZONA & Michael G. Busenkell, Atty./DEBTORS.)  Re:
                           Item # 3094.  [Disposed] [EOD 04/11/01] [JW]

                       CERTIFICATION of Michael G. Busenkell, Esq. [EOD 04/11/01] [JW]

                       CERTIFICATE of Service [EOD 04/11/01] [JW]

04/10/01     6177      RESPONSE to Eleventh Omnibus Objection to Claims  (Filed by Jim
                           Polkowski, Revenue Agent/STATE OF WISCONSIN, DEPT./REVENUE.)  Re:  Item
                           # 6073. [EOD 04/11/01] [JW]
</TABLE>

                                       19
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
04/10/01     6178     CERTIFICATE of Service  Re:  Item # 6109. [EOD 04/11/01] [JW]

04/09/01     6179     RESPONSE to Omnibus Objection to Claims  (Filed by Judith M. Skinner
                          (Judy Long, Entertainer).) [EOD 04/11/01] [JW]

04/06/01     6180     OBJECTION to Objection to Priority Claims  (Filed by Christine Cameron,
                          Claimant.) [EOD 04/13/01] [JW]

04/09/01     6181     RESPONSE to Eleventh Omnibus Objection to Claims  (Filed by Gary L.
                          Barnhart, Atty./MISSOURI DEPT./REVENUE.)  Re:  Item # 6073. [EOD
                          04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/09/01     6182     MOTION for Admission Pro Hac Vice  (Filed by Gary L. Barnhart,
                          Atty./MISSOURI DEPT./REVENUE.)  [Disposed] [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/09/01     6183     REQUEST for Telephone Hearing  (Filed by Gary L. Barnhart,
                          Atty./MISSOURI DEPT./REVENUE.) [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/11/01     6184     MONTHLY Reporting Requirements  (Feb./01) [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/11/01     6185     APPLICATION for Compensation and for Reimbursement of Expenses
                          (Manatt, Phelps & Phillips, LLP)  (Filed by Carl Grumer,
                          Atty./DEBTORS.)  FIFTH INTERIM 1/1/01 thru 1/31/01 [EOD 04/13/01] [JW]

04/11/01     6186     SUMMARY  Sheet-Part 1  Re:  Item # 6185. [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/11/01     6187     RESPONSE to Objection to Claim #3521  (Filed by Louise M. Anderson,
                          Claimant.) [EOD 04/13/01] [JW]

04/11/01     6188     NOTICE of Application  (Hearing only if objections filed by 5/2/01 @
                          4:00 PM)  Re:  Item # 6156. [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/11/01     6189     CERTIFICATION of Counsel Regarding Omnibus Hearing Dates  (Filed by
                          Michael G. Busenkell, Atty./DEBTORS.)  [Disposed] [EOD 04/13/01] [JW]

04/12/01     6190     RESPONSE to Objection to Claim #3401  (Filed by George A. Hess,
                          Atty./ELIZABETH HARTLEY HERRICK.) [EOD 04/13/01] [JW]

04/12/01     6191     LETTER Requesting Removal from Mailing List  (Filed by Carol Wilkins,
                          Office Mgr./MILLER'S MERRY MANOR.) [EOD 04/13/01] [JW]
</TABLE>

                                       20
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
04/12/01     6192     MOTION for Relief from Stay  (Filed by John X. Denney, Jr., Atty./MARY
                          ANN FLETCHER.) [EOD 04/13/01] [JW]

04/12/01     6193     CERTIFICATION of No Objection  (Filed by Jan A.T. van Amerongen, Jr.,
                          Atty./DEBTORS.)  Re:  Item # 6038. [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 4/13/01] [JW]

04/12/01     6194     RESPONSE to Eleventh Omnibus Objection to Claims (Filed by Steven B.
                          Flancher, Atty./STATE OF MICHIGAN.)  Re: Item # 6073. [EOD 4/13/01] [JW]
                          PROOF of Service [EOD 04/13/01] [JW]

04/12/01     6195     MEMORANDUM in OPPOSITION to Eleventh Omnibus Objection to Claims (Filed
                          by Michelle T. Sutter, Atty./OHIO DEPT./JOB & FAMILY SERVICES.)  Re:
                          Item # 6073. [EOD 04/13/01] [JW]

                      CERTIFICATION of Counsel [EOD 04/13/01] [JW]

                      CERTIFICATE OF SERVICE [EOD 04/13/01] [JW]

04/12/01     6196     RESPONSE to Objection to Claim #4302 (Filed by Edward W. Gardner,
                          Atty./LEXINGTON-FAYETTE URBAN COUNTY GOVERNMENT.) [EOD 04/13/01] [JW]

                      CERTIFICATE of Service [EOD 04/13/01] [JW]

04/11/01     6197     ORDER signed and Located in Original Document  Re:  Item # 6176. [EOD
                          04/16/01] [JW]

04/13/01     6198     OBJECTION to Objection to Proof of Claim & Request for Hearing (Filed
                          by David A. Siegel, Atty./FREDA S. MORTON.)  [EOD 04/16/01] [[JW]

                      CERTIFICATE of Service [EOD 04/16/01] [JW]

04/13/01     6199     OPPOSITION to Eleventh Omnibus Objection to Claim # 2972 w/Request for
                          Production of Documents & Interrogatories (Filed by Theodore J. Kurtz,
                          Atty./MEDIC COACH SERVICES.)  Re: Item  # 6073. [EOD 04/16/01] [JW]

                      CERTIFICATE of Mailing [EOD 04/16/01] [JW]

04/12/01     6200     HEARING held 4/12/01 (See: Item # 6160) [EOD 04/04/17/01/01] [JW]

04/12/01     6201     STIPULATION AND ORDER Modifying Stay (Bench Filed by Kevin J. Mangan,
                          Atty./COMMONWEALTH EDISON COMPANY & Michael G. Busenkell,
                          Atty./DEBTORS.)  Re:  Item # 5526.  [Disposed] [EOD 04/17/01] [JW]

                      ORDER Signed In Court  Re:  Item # 6201. [EOD 04/17/01] [JW]
</TABLE>

                                       21
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
04/12/01     6202     ORDER Signed In Court and Located In Original Document  (SUPPLEMENTAL)
                          Disallowing Certain Claim & Designating Surviving Claim & Denying
                          Motion for Temporary Allowance  Re:  Item # 6095. [EOD 04/17/01] [JW]

04/13/01     6203     RESPONSE to Eleventh Omnibus Objection to Claims (Filed by David G.
                          Aelvoet, Atty./TAX AUTHORITIES.)  Re:  Item # 6073. [EOD 04/17/01] [JW]

04/13/01     6204     NOTICE of Withdrawal of Transfer of Claim (Pentax Precision Instrument)
                          (Filed by James Bingaman/MADISON CREDITOR LIQUIDITY INVESTORS 202, LLC)
                          Re:  Item # 4919. [EOD 04/17/01] [JW]

04/13/01     6205     OBJECTION to Omnibus Objection to Claim (Filed by William & Kathleen
                          Rossano, Claimants.)  [EOD 04/17/01] [JW]

04/13/01     6206     RESPONSE to Eleventh Omnibus Objection to Claim (Filed by John Waters,
                          Atty./IOWA DEPT./REVENUE & FINANCE.)  Re:  Item # 6073. [EOD 04/17/01]
                          [JW]

                      CERTIFICATE of Service [EOD 04/17/01] [JW]

04/16/01     6207     OBJECTION to Objection to Priority Claim #5222 (Filed by Dennis E.
                          Goguen, Claimant.) [EOD 04/17/01] [JW]

04/16/01     6208     RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John E.
                          West, Atty./VINSON & ELKINS L.L.P.)  Re: Item # 6073. [EOD 04/17/01]
                          [JW]

                      CERTIFICATE of Service [EOD 04/17/01] [JW]

04/16/01     6209     RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John B.
                          Ballard, Jr. & Shereen M. Walls, Atty./STATE OF GEORGIA,
                          DEPT./COMMUNITY HEALTH)  Re:  Item # 6073. [EOD 04/17/01] [JW]

                      CERTIFICATE of Service [EOD 04/17/01] [JW]

04/16/01     6210     RESPONSE to Eleventh Omnibus Objection to Claim # 6909.  (Filed by
                          Margery E. Lieber, Atty./NATIONAL LABOR RELATIONS BOARD.)  Re:  Item #
                          6073. [EOD 04/17/01] [JW]

                      CERTIFICATE of Service [EOD 04/17/01] [JW]

04/16/01     6211     NOTICE of Withdrawal of Transfer of Claim (Prairie Farms Dairy Inc.)
                          (Filed by James Bingaman/MADISON CREDITOR LIQUIDITY INVESTORS 202,
                          LLC.)  Re:  Item # 3768. [EOD 04/17/01] [JW]

04/16/01     6212     WITHDRAWAL of Transfer of Claim (Dairy King Milk Farms)  (Filed by S.
                          Roman, Mgr./NEXT FACTORS, INC.)  Re:  Item # 4546. [EOD 04/17/01] [JW]
</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
Filing Date         No.        Entry
---------------------------------------------------------------------------------------------------------
<S>                 <C>        <C>
04/16/01            6213       RESPONSE to Objection to Claim # 17  (Filed by Carl Grumer,
                                   Atty./MANATT, PHELP & PHILLIPS, LLP) [EOD 04/17/01] [JW]

                               CERTIFICATE of Service [EOD 04/17/01] [JW]

04/16/01            6214       OBJECTION to Reduced Claim Amount  (Filed by Timothy A. Muir,
                                   Pres./BURLINGTON BUILDERS & CO.) [EOD 04/17/01] [JW]

04/16/01            6215       RESPONSE to Eleventh Omnibus Objection to Claim #4540 (Filed by John
                                   Brookie Matthews, Jr., Power/Atty./WILLIE L. MATTHEWS.)  Re:  Item #
                                   6073. [EOD 04/17/01] [JW]

04/16/01            6216       NOTICE of Service Regarding Request for Production of Documents
                                   Directed to Debtors.  [EOD 04/17/01] [JW]

04/17/01            6217       APPLICATION for Compensation and for Reimbursement of Expenses  (Mintz,
                                   Levin, Cohn, Ferris, Glovsky & Popeo, P.C.)  (Filed by Bradley J.
                                   Kelly, Atty./DEBTORS.) FOURTEENTH 2/1/01 thru 2/28/01 [EOD 04/17/01]
                                   [JW]

                               NOTICE of Application (Hearing only if objections filed by 5/7/01 @
                                   4:00PM) [EOD 04/17/01] [JW]

04/17/01            6218       AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by Isaac M. Gregorie, Jr.,
                                   Esq.)  [EOD 04/17/01] [JW]

04/17/01            6219       ORDER Signed and Located in Original Document  Re:  Item # 6182. [EOD
                                   4/20/01] [JW]

04/17/01            6220       ORDER Signed and Located in Original Document Scheduling Omnibus
                                   Hearing Dates  Re:  Item # 6189 [EOD 04/20/01] [JW]

04/17/01            6331       RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John P.
                                   Dillman, Atty./CYPRESS-FAIRBANKS INDEPENDENT SCHOOL DISTRICT.)  Re:
                                   Item # 6073. [EOD 04/20/01] [JW]

                               CERTIFICATE of Service [EOD 04/20/01] [JW]

04/17/01            6222       RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John P.
                                   Dillman, Atty./FORT BEND COUNTY.)  Re: Item # 6073. [EOD 04/20/01] [JW]

                               CERTIFICATE of Service [EOD 04/20/01] [JW]

04/17/01            6223       RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John P.
                                   Dillman, Atty./FORT BEND INDEPENDENT SCHOOL DISTRICT.)  Re: Item #
                                   6073. [EOD 04/20/01] [JW]

                               CERTIFICATE of Service [EOD 04/20/01] [JW]

04/17/01            6224       RESPONSE to Eleventh Omnibus Objection to Claims (Filed by John P.
                                   Dillman, Atty./HARRIS COUNTY/CITY OF HOUSTON.)  Re: Item # 6073. [EOD
                                   04/20/01] [JW]

                               CERTIFICATE of Service [EOD 04/20/01] [JW]
</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.      Entry
------------------------------------------------------------------------------------------------
<S>          <C>      <C>
04/17/01     6225     CERTIFICATION of No Objection  (Filed by Michael G. Busenkell,
                          Atty./DEBTORS.)  Re:  Item # 6039. [EOD 04/20/01] [JW]

04/17/01     6226     CERTIFICATION of No Objection  (Filed by Michael G. Busenkell,
                          Atty./DEBTORS.)  Re:  Item # 6040. [EOD 04/20/01] [JW]

04/17/01     6227     STIPULATION AND ORDER (AMENDED) Modifying Stay as of 5/8/01 (Filed by
                          Ian Connor Bifferato, Atty./ANNIE AU & Michael G. Busenkell,
                          Atty./DEBTORS.)  Re:  Item # 3367. [EOD 04/20/01] [JW]

                      CERTIFICATION of Michael G. Busenkell, Esq. [EOD 04/20/01] [JW]

                      CERTIFICATE of Service [EOD 04/20/01] [JW]

04/17/01     6228     STIPULATION AND ORDER Settling Second Omnibus Objection to Claims
                          w/Respect to IMBS, INC.  (Filed by Stephen Doughty, Atty./IMBS, Inc. &
                          Michael G. Busenkell, Atty./DEBTORS.)  Re:  Item #1503. [EOD 04/20/01]
                          [JW]

                      CERTIFICATION of Michael G. Busenkell, Esq. [EOD 04/20/01] [JW]

                      CERTIFICATE of Service [EOD 04/20/01] [JW]

04/18/01     6229     OBJECTION to Transfer of Claim (Filed by Nancy H. Schiltz,
                          Pres./Owner/BELTONE.)  Re:  Item # 48650. [EOD 04/20/01] [JW]

04/19/01     6230     AFFIDAVIT Under 11 U.S.C. (S) 327(e)  (Filed by Pamela A. McCallum,
                          Esq.)  [EOD 04/20/01] [JW]

                      CERTIFICATE of Service [EOD 04/20/01] [JW]

04/17/01     6231     RESPONSE to Objection to Claim #966 w/Correct Name & Address  (Filed by
                          Rex Story/STORY ELECTRICAL SERVICE, INC.)  [EOD 04/20/01] [JW]

01/29/01     6232     OBJECTION to Transfer of Claim (Jefferson Farmers Co-op)  (Filed by
                          Mark Pettit, Mgr./JEFFERSON FARMERS COOPERATIVE.)  Re:  Item # 3761.
                          [EOD 04/23/01] [JW]

04/20/01     6233     RESPONSE to Eleventh Omnibus Objection to Claims (Filed by Emily W.
                          Toler, Atty./SECRETARY DEPT./REVENUE, STATE OF LOUSIANA.)  Re: Item #
                          6073. [EOD 04/23/01] [JW]

                      CERTIFICATE of Service [EOD 04/23/01] [JW]

04/20/01     6234     RESPONSE  2 Objection to Eleventh Omnibus Objection to Claims (Filed by
                          Quentillai D. Burk, Credit Mgr./THE HARLOFF COMPANY, INC.)  Re:  Item #
                          6073. [EOD 04/23/01] [JW]

04/20/01     6235     NOTICE of Hearing on Motion to Amend Claims on 06/06/01 at 02:30 P.M.
                          at 824 Market Street, 6th Floor, Courtroom #1, Wilmington, DE  19801
                          Re:  Item # 6175 [EOD 04/23/01] [JW]

                      CERTIFICATE of Service [EOD 04/23/01] [JW]
</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>
Filing Date  No.   Entry
---------------------------------------------------------------------------------------------
<S>          <C>   <C>
04/20/01     6236  COUNSEL'S Agenda with Matters Scheduled on 04/25/01 at 02:00 P.M. at
                       824 Market Street, 6th Floor, Courtroom #1, Wilmington, DE  19801 [EOD
                       04/23/01] [JW]
</TABLE>

                                   ----------
                                   DOCKET END
                                   ----------

                                       25
<PAGE>

                                                                       EXHIBIT I

                         [Letterhead of Local Counsel]

                                           April 20, 2001

Morgan Guaranty Trust Company
 of New York, as Collateral Agent
60 Wall Street
New York, NY 10260

Ladies and Gentlemen:

     We have acted as special [State] counsel to Vencor, Inc.("Vencor") and
Vencor Operating, Inc. ("Vencor Operating"; together with Vencor, the "Vencor
Companies" and each, a "Vencor Company") in connection with the delivery of the
mortgage[s], deed[s] of trust or deed[s] to secure debt described on Exhibit A
                                                                     ---------
hereto (the "Mortgage[s]"). Unless otherwise defined herein, terms are used
herein as defined in the Mortgage[s].

     In connection with this opinion, we have examined, with respect to each of
the properties listed on Exhibit A hereto (each, a "Property"), drafts of the
                         ---------
Amended and Restated Memorand[um][a] of Lease listed on Exhibit A hereto (each,
                                                        ---------
a "Memorandum of Lease"), if any, the Mortgage[s], the financing statements
listed on Exhibit A hereto (the "Financing Statements") and such other
          ---------
documents, corporate records, certificates of public officials and other
instruments, and have conducted such other investigations of fact and law, as we
have deemed necessary or advisable for purposes of this opinion.

     In rendering this opinion, we have assumed that:

               (i)  Each Vencor Company is a corporation duly organized, validly
     existing and in good standing under the laws of its jurisdiction of
     incorporation, has been duly qualified as a foreign corporation for the
     transaction of business and has all requisite corporate power and all
     material governmental licenses, authorizations, consents and approvals
     necessary to own and operate the Mortgaged [Trust] Property.
<PAGE>

               (ii)  The execution, delivery and performance by each Vencor
     Company of the Mortgage[s] and the execution, delivery and performance by
     such Vencor Company of each of the other Financing Documents to which it is
     a party (i) are within its corporate powers, (ii) have been duly authorized
     by all necessary corporate action, (iii) do not require any authorization,
     approval or consent of, or filings or registrations with, any governmental
     or regulatory authority or agency outside of the State of __________,
     except for authorizations, consents, approvals that have already been
     obtained or filings that have already been made and that remain in effect,
     (iv) do not contravene any provision of its certificate of incorporation or
     by-laws, and (v) do not contravene or constitute a breach of or default
     under any applicable provision of the laws of any jurisdiction other than
     the State of ___________ or any applicable regulation thereunder or under
     any agreement, judgment, injunction, order, decree or other instrument
     binding upon it.

               (iii) The Mortgage[s] have been duly executed and delivered by
     each Vencor Company.

               (iv)  The Financing Documents other than the Mortgage[s]
     constitute legal, valid and binding obligations of each Vencor Company
     under the laws of the State of New York.

               (v)   Each Vencor Company owns the Mortgaged [Trust] Property
     covered by the Mortgage[s] to which such Vencor Company is a party.

          Upon the basis of the foregoing, we are of the opinion that, under
applicable law in effect on the date of this opinion:

          Based upon the foregoing, it is our opinion that:

          1. The forms of the Memorandum of Lease and Mortgage[s] are in proper
form for recordation with the [Recorder's Office] of each county in which a
Property is located in the State of [State]. The Memorand[um][a] of Lease
include all of the information required to be included under the law of the
[State] [Commonwealth] of [State] necessary to publish notice of the leasehold
interest in the relevant property created by the applicable Master Lease
Agreement. The recording of each Memorand[um][a] of Lease in the office
designated in Exhibit A hereto is the only filing, recording or registration
              ---------
necessary to publish notice of the leasehold interest in the relevant Property
created by the applicable Master Lease Agreement.

                                       2
<PAGE>

          2. The Mortgage[s] constitute legal, valid and binding obligations of
each Vencor Company that is a party thereto, enforceable in accordance with
their respective terms.

          3. No authorizations, approvals or consents of, or filings or
registrations with, any governmental or regulatory authority or agency of or in
the State of [State] are necessary for the execution, delivery or performance by
each Vencor Company of either the Memorand[um][a] of Lease or the Mortgage[s],
to which such Vencor Company is a party except for authorizations, consents,
approvals that have already been obtained or filings that have already been made
and that remain in effect or the recordings and/or filings described on Exhibit
                                                                        -------
A.
-

          4. Each Mortgage creates a valid mortgage or deed of trust or deed to
secure debt lien on the relevant Vencor Company's interest in and to the
Mortgaged [Trust] Property described therein as constitutes real property under
the law of the State of [State] and a valid security interest in such of the
other Mortgaged [Trust] Property described therein (the "UCC Property") as is
subject to the provisions of Article 9 of the Uniform Commercial Code as in
effect in the State of _______________ (the "UCC"), in each case in favor of the
Agent for the ratable benefit of the Secured Parties and securing the Secured
Obligations. The recording of the Mortgage[s] in the office designated on
Exhibit A hereto and the filing of the Financing Statements in the offices
designated in Exhibit A hereto are the only filings, recordings and
registrations necessary to perfect, publish notice of and preserve the lien of
and security interest in the Mortgaged [Trust] Property created by the
Mortgage[s] and the UCC Property created by the Mortgage[s] and the Financing
Statements, except that (i) continuation statements relating to the Financing
Statements must be filed within _____________ [state time period], and (ii)
additional filings may be necessary with respect to the UCC Property if the
Company changes its name, identity or corporate structure or the jurisdiction in
which its places of business in the State of ___________ or the UCC Property are
located.

          The foregoing opinion is subject to the following qualifications:

          (vi)   The enforceability of the Mortgage[s] may be limited by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
creditors' rights generally and by general equitable principles.

          (vii)  We note the possible unenforceability in whole or in part of
certain remedial provisions of the Mortgage[s], although the inclusion of such
provisions does not render any Liens purported to be granted or created thereby
invalid, and the Mortgage[s] contain, in our judgment, adequate remedial

                                       3
<PAGE>

provisions for the practical realization of the principal rights and benefits
intended to be afforded thereby.

          (viii) The provisions of the Mortgage[s] that permit the secured party
thereunder to take actions or make determinations may be subject to requirements
that such actions or determinations be reasonable and taken in good faith.

          (ix)   We express no opinion as to any regulatory scheme applicable
to, or any license or permit required in connection with, the business conducted
by any Vencor Company.

          (x)    We express no opinion as the right, title or interest of any
Vencor Company in or to any collateral or the value given therefor, and assume
that value is given.

          We are admitted to practice in the State of [State]. We express no
opinion as to matters under or involving the laws of any jurisdiction other than
the laws of the State of [State].

          This opinion may be relied upon by each of you, by your respective
successors and assigns, by the holders from time to time of the indebtedness
secured by the Mortgage[s].

                                       Very truly yours,

                                       4
<PAGE>

                                                                      EXHIBIT J

                                                                    ATTACHMENT I

                                    FORM OF
                           SUBORDINATION PROVISIONS

     Description of [promissory note][Guarantee] to which this Attachment I is
affixed:

     _______________________________________________________________________

     _______________________________________________________________________

     Reference is made to the [promissory note][Guarantee] described above (the
"Subordinated [Note][Guarantee]") to which this Attachment I is affixed made by
Vencor, Inc. (to be renamed Kindred Healthcare, Inc.) (the"[Issuer][Guarantor]")
in favor of [ ] (the "Subordinated Lender"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement dated as of April 20, 2001 ("the Credit Agreement") and
entered into by and among Vencor Operating, Inc. (to be renamed Kindred
Healthcare Operating, Inc.) (the "Borrower"), the [Issuer][Guarantor], the
Lenders, Swingline Bank and LC Issuing Banks party thereto, Morgan Guaranty
Trust Company of New York as Collateral Agent and Administrative Agent, and
General Electric Capital Corporation, as Documentation Agent and Collateral
Monitoring Agent. References herein to the "Lenders" includes Lenders under the
Credit Agreement (the "Senior Lenders") and lenders under the Senior Secured
Credit Agreement (the "Second Priority Lenders"). References herein to "Senior
Debt" means all Debt or obligations (whether in existence on the Closing Date or
arising afterwards, absolute or contingent, direct or indirect) for or in
respect of principal (when due, upon acceleration, upon redemption, upon
mandatory repayment or repurchase pursuant to a mandatory offer to purchase, or
otherwise), premium, interest, penalties, fees, indemnification, reimbursement
and other amounts payable and liabilities with respect to Debt or amounts owing
under the Credit Agreement, the Designated Interest Rate Agreements and the
Senior Secured Credit Agreement, including all interest accrued or accruing
after the commencement of any bankruptcy, insolvency or reorganization or
similar case or proceeding at the contract rate (including, without limitation,
any contract rate applicable upon default) specified in the relevant
documentation, whether or not the claim for such interest is allowed as a claim
in such case or proceeding.
<PAGE>

References to the "Controlling Agent" means, so long as any Senior Debt arising
under the Credit Agreement remains outstanding, the Administrative Agent and, at
any time thereafter, the administrative agent under the Senior Secured Credit
Agreement (the "Second Priority Administrative Agent"). References to the
"Subordinated Lender" shall include each subsequent holder of the Subordinated
[Note][Guarantee], each of whom agrees to the provisions hereof by its
acceptance of the Subordinated [Note][Guarantee].

     Pursuant to the requirements of the Credit Agreement and the Senior Secured
Credit Agreement, the [Issuer][Guarantor] has unconditionally guaranteed all
Senior Debt arising under the Credit Agreement, the Designated Interest Rate
Agreements and the Senior Secured Credit Agreement pursuant to the Senior
Guarantees referred to below. The Senior Lenders have agreed to make loans to
the Borrower and the LC Issuing Banks referred to in the Credit Agreement have
agreed to issue letters of credit for the account of, among others, the
Borrower, upon the terms and subject to the conditions specified in the Credit
Agreement, and the Second Priority Lenders have agreed to accept notes under the
Senior Secured Credit Agreement in partial satisfaction of their Senior Debt
Claims (as defined therein), which in each case include the requirement that the
[Issuer's][Guarantor's] obligations under the Subordinated [Note][Guarantee] be
subordinated to its obligations under such Senior Guarantees as provided herein.
The Subordinated Lender has extended credit to [the Issuer pursuant to, and upon
the terms specified in, the Subordinated Note][a Vencor Unrestricted Subsidiary,
which extension of credit is Guaranteed by the Guarantor pursuant to, and upon
the terms specified in, the Subordinated Guarantee] (all obligations of the
[Issuer][Guarantor] in respect of the Subordinated [Note][Guarantee], the
"Subordinated Obligations"). The Subordinated Lender by its execution of this
Attachment I agrees (for itself and its successors and assigns) to subordinate
its rights under the Subordinated Obligations to the rights of the Lenders under
the Senior Guarantees.

     Therefore, in consideration of these premises, the [Issuer][Guarantor] and
the Subordinated Lender agree that the terms of the Subordinated
[Note][Guarantee] are hereby amended to incorporate the subordination provisions
that follow:

     1. Agreement to Subordinate. The Subordinated Lender hereby agrees that
[the Debt evidenced by the Subordinated Notes][the obligations of the Guarantor
evidenced by the Subordinated Guarantee] shall be subordinated and junior in
right of payment, to the extent and in the manner provided in this Attachment I,
to the prior payment by the Guarantor of its obligations (the "Senior Guarantee
Obligations") under the Vencor Guaranty Agreement and the Vencor Guaranty
Agreement (as defined in the Senior Secured Credit Agreement)

                                       2
<PAGE>

(together, the "Senior Guarantees"). The subordination provisions in this
Attachment I are for the benefit of and enforceable by holders of Senior Debt or
their representatives.

      2. (a) The [Issuer][Guarantor] shall not make any payment of any
Subordinated Obligations or any claim for rescission or damages in respect
thereof and shall not repay, repurchase, redeem or otherwise retire any
Subordinated Obligations (collectively, "pay the Subordinated Obligations") if
at any time any Senior Debt has not been paid when due, whether at maturity,
upon redemption or mandatory repurchase, acceleration, or otherwise, and the
default has not been cured or waived.

         (b) During the continuance of any default (other than a default of
     the type described in clause (a)) with respect to any Senior Debt pursuant
     to which the maturity thereof may be accelerated immediately without
     further notice (except any notice that may be required to effect
     acceleration) or upon the expiration of a grace period, the
     [Issuer][Guarantor] may not make any payment of any Subordinated
     Obligations for a period (a "Payment Blockage Period"):

               (i)   commencing upon the receipt by the [Issuer][Guarantor] of
          written notice of default from any representative of holders of Senior
          Debt specifying an election to effect a Payment Blockage Period (a
          "Blockage Notice") and

               (ii)  ending 360 days thereafter (or earlier if the Payment
          Blockage Period is terminated (A) by written notice to the
          [Issuer][Guarantor] from such representative, (B) by repayment in full
          of such Senior Debt or (C) because the default giving rise to the
          Blockage Notice is no longer continuing).

     Subject to clause (a) and the preceding paragraph, unless the holders of
     such Senior Debt have accelerated the maturity of such Senior Debt, the
     [Issuer][Guarantor] may resume payments on the Subordinated Obligations
     after the Payment Blockage Period.

          (c) Not more than one Blockage Notice may be given in any consecutive
     545-day period, irrespective of the number of defaults with respect to
     Senior Debt during such period. No default which existed or was continuing
     on the date of the commencement of any Payment Blockage Period with respect
     to the Senior Debt whose holders initiated the Payment Blockage Period may
     be made the basis of the commencement of a subsequent Payment Blockage
     Period by the holders of such Senior Debt, whether or not within a period
     of 545 consecutive

                                       3
<PAGE>

     days, unless the default has been cured or waived for a period of not less
     than 90 consecutive days.

          (d) The Subordinated Lender shall promptly notify the
     Administrative Agent and the Second Priority Administrative Agent of any
     default under the Subordinated [Note][Guarantee].

      3. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution
of the assets of the [Issuer][Guarantor] to creditors upon a total or partial
liquidation or a total or partial dissolution of the [Issuer][Guarantor] or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the [Issuer][Guarantor] or its property:

          (a) holders of Senior Debt are entitled to receive payment in full in
     cash of all amounts then due in respect of Senior Guarantee Obligations,
     including all interest accrued or accruing on Senior Debt after the
     commencement of any bankruptcy, insolvency or reorganization or similar
     case or proceeding in respect of the Borrower or the [Issuer][Guarantor] at
     the contract rate (including, without limitation, any contract rate
     applicable upon default) specified in the relevant documentation, whether
     or not the claim for the interest is allowed as a claim in the case or
     proceeding with respect to the Senior Debt (only such payment constituting
     "payment in full") before the Subordinated Lender will be entitled to
     receive any payment on account of the Subordinated Obligations; and

          (b) until the Senior Debt is paid in full, any payment or distribution
     to which the Subordinated Lender would be entitled but for these
     subordination provisions shall instead be made to holders of Senior Debt or
     their representatives as their interests may appear.

      4. Forbearance. (a) The Subordinated Lender agrees not to ask, demand, sue
for or take or receive from the [Issuer][Guarantor] in cash or other property or
by setoff, purchase or redemption (including, without limitation, from or by way
of collateral), payment of all or any part of the Subordinated Obligations and
agrees that in connection with any proceeding involving the Borrower or the
[Issuer][Guarantor] under any Federal or state bankruptcy, insolvency,
receivership or similar law (i) the Controlling Agent is irrevocably authorized
and empowered (in its own name or in the name of the Subordinated Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in the preceding sentence and
give acquittance therefor and to file claims and proofs of claim after the
Subordinated Lender has failed to make claims or proofs of claims in form and
substance reasonably satisfactory to the Controlling Agent prior to the date
which is 30 days before the relevant bar date, as the Controlling Agent may deem

                                       4
<PAGE>

necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Lenders and (ii) the Subordinated Lender shall duly and
promptly take such action as the Controlling Agent may request to (A) collect
amounts in respect of the Subordinated Obligations for the account of the
Lenders and to file appropriate claims or proofs of claim in respect of the
Subordinated Obligations, (B) execute and deliver to the Controlling Agent such
irrevocable powers of attorney, assignments or other instruments as the
Controlling Agent may request in order to enable the Controlling Agent to
enforce any and all claims with respect to, and any security and other Liens
securing payment of, the Subordinated Obligations and (C) collect and receive
any and all payments or distributions which may be payable or deliverable upon
or with respect to the Subordinated Obligations. A copy of these subordination
provisions may be filed with any court as evidence of the Controlling Agent's
power and authority hereunder.

          (b) Without the prior written consent of the Controlling Agent, the
     [Issuer][Guarantor] will not give, or permit to be given, and the
     Subordinated Lender will not receive, accept or demand, (i) any security of
     any nature whatsoever for any Subordinated Obligations on any property or
     assets, whether now existing or hereafter acquired, of the
     [Issuer][Guarantor] or any Affiliate of the [Issuer][Guarantor] (other than
     a Vencor Unrestricted Subsidiary) or (ii) any Guarantee (other than the
     Subordinated Guarantee), of any nature whatsoever, by the
     [Issuer][Guarantor] or any Affiliate of the [Issuer][Guarantor] (other than
     by a Vencor Unrestricted Subsidiary), of any Subordinated Obligations.

          (c) The Subordinated Lender waives the right to compel that the
     Collateral or any other property of the [Issuer][Guarantor] or the property
     of any Guarantor or any other Person be applied in any particular order to
     discharge the Senior Debt. The Subordinated Lender expressly waives the
     right to require the Lenders to proceed against the [Issuer][Guarantor],
     the Collateral or any Guarantor or any other Person, or to pursue any other
     remedy in any Lender's power which the Subordinated Lender cannot pursue
     and which would lighten the Subordinated Lender's burden, notwithstanding
     that the failure of any Lender to do so may thereby prejudice the
     Subordinated Lender. The Subordinated Lender agrees that it shall not be
     discharged, exonerated or have its obligations hereunder to the Lenders
     reduced by any Lender's delay in proceeding against or enforcing any remedy
     against the [Issuer][Guarantor], the Collateral or any Guarantor or any
     other Person; by any Lender releasing the [Issuer][Guarantor], the
     Collateral or any Guarantor or any other Person from all or any part of the
     Senior Debt; or by the discharge of the [Issuer][Guarantor], the Collateral
     or any Guarantor or any other Person by operation of law or otherwise, with
     or without the intervention or omission

                                       5
<PAGE>

     of a Lender. Any Lender's vote to accept or reject any plan of
     reorganization relating to the [Issuer][Guarantor], the Collateral, or any
     Guarantor or any other Person, or any Lender's receipt on account of all or
     part of the Senior Debt of any cash, property, or securities distributed in
     any bankruptcy, reorganization, or insolvency case, shall not discharge,
     exonerate, or reduce the obligations of the Subordinated Lender hereunder
     to the Lenders.

          (d) The Subordinated Lender waives all rights and defenses arising out
     of an election of remedies by any Lenders, even though that election of
     remedies, including without limitation any nonjudicial foreclosure with
     respect to security for the Senior Debt, has impaired the value of the
     Subordinated Lender's rights of subrogation, reimbursement, or contribution
     against the [Issuer][Guarantor] or any Guarantor or any other Person. The
     Subordinated Lender expressly waives any rights or defenses it may have by
     reason of protection afforded to the [Issuer][Guarantor] or any Guarantor
     or any other Person with respect to the Senior Debt pursuant to any anti-
     deficiency laws or other laws of similar import which limit or discharge
     the principal debtor's indebtedness upon judicial or nonjudicial
     foreclosure of real property or personal property Collateral for the Senior
     Debt.

          (e) The Subordinated Lender agrees that, without the necessity of any
     reservation of rights against it, and without notice to or further assent
     by it, any demand for payment of any Senior Debt made by a Lender may be
     rescinded in whole or in part by the Lender, and any Senior Debt may be
     continued, and the Senior Debt, or the liability of the Borrower, the
     [Issuer][Guarantor] or any other Guarantor or any other party upon or for
     any part thereof, or any Collateral or Guarantee therefor or right of
     offset with respect thereto, may, from time to time, in whole or in part,
     be renewed, extended, modified, accelerated, compromised, waived,
     surrendered, by the Lenders, in each case without notice to or further
     assent by the Subordinated Lender, which will remain bound under these
     subordination provisions and without impairing, abridging, releasing or
     affecting the subordination provided for herein.

      5. When distribution must be paid over. If a payment or other distribution
is made on account of the Subordinated Obligations to the Subordinated Lender
that because of these subordination provisions should not have been made to it,
the Subordinated Lender shall hold it in trust for holders of Senior Debt or
their representatives and pay it over to them as their interests may appear.

                                       6
<PAGE>

      6. Subrogation. A distribution made under these subordination provisions
to holders of Senior Debt which otherwise would have been made to the
Subordinated Lender is not, as between the [Issuer][Guarantor] and the
Subordinated Lender, a payment by the [Issuer][Guarantor] on its Senior
Guarantee Obligations. After all Senior Guarantee Obligations are paid in full
the Subordinated Lender will be subrogated to the rights of holders of Senior
Debt to receive payments in respect of Senior Guarantee Obligations, which, to
the extent received by the Subordinated Lender, do not constitute, as between
the [Issuer][Guarantor] and the Subordinated Lender, payments by the
[Issuer][Guarantor] on any Subordinated Obligation.

      7. Relative Rights; Subordination Not to Prevent Events of Default or
Limit Right to Accelerate. These subordination provisions define the relative
rights of the Subordinated Lender and holders of Senior Debt and do not impair,
as between the [Issuer][Guarantor] and the Subordinated Lender, the obligation
of [Issuer][Guarantor], which is absolute and unconditional, to pay to the
Subordinated Lender the Subordinated Obligations in accordance with their terms.
The failure to make a payment pursuant to the Subordinated Obligations does not
prevent the occurrence of a default, nor do these subordination provisions have
any effect on the right of the Subordinated Lender to exercise its remedies upon
a default, subject to the rights of holders of Senior Debt, if any, to receive
distributions otherwise payable to the Subordinated Lender under this Attachment
I.

      8. Subordination May Not Be Impaired by the [Issuer][Guarantor]. No right
of any holder of Senior Debt to enforce the subordination as provided herein
will be impaired by any act or failure to act by the [Issuer][Guarantor] or by
its failure to comply with these provisions.

      9. Distributions and Notices to, and Notices and Consents by,
Representatives of Holders of Senior Debt. Whenever a distribution is to be made
or a notice given to holders of Senior Debt, the distribution may be made and
the notice given to the Controlling Agent, with a copy of any such notice to the
Administrative Agent or the Second Priority Administrative Agent if it is not
the same person as the Controlling Agent. Notices or consents under this
Agreement from holders of Senior Debt under the Credit Agreement may be given
only by the Administrative Agent and from holders of Senior Debt under the
Senior Secured Credit Agreement may be given only by the Second Priority
Administrative Agent. If conflicting notices, instructions, requests, consents
or other communications are received from the Administrative Agent and the
Second Priority Administrative Agent, the notice, instruction, request or
consent or other communication from the Administrative Agent shall prevail.

                                       7
<PAGE>

     10. Reliance by Holders of Senior Debt on Subordination Provisions; No
Waiver. (a) Each Subordinated Lender by accepting the Subordinated
[Note][Guarantee] acknowledges and agrees that these subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
Senior Debt, whether created or acquired before or after the issuance of the
Subordinated [Note][Guarantee], to acquire or to hold such Senior Debt, and each
holder of Senior Debt will be deemed conclusively to have relied on these
subordination provisions in acquiring and holding such Senior Debt.

          (b) The holders of Senior Debt may, at any time and from time to time,
     without the consent of or notice to the Subordinated Lender, without
     incurring any liability or responsibility to the Subordinated Lender, and
     without impairing the rights of holders of Senior Debt under these
     subordination provisions, do any of the following:

               (i)   change the manner, place or terms of payment or extend the
          time of payment of, or renew or alter, Senior Debt or the Senior
          Guarantee Obligations or any instrument evidencing the same or any
          agreement under which Senior Debt or the Senior Guarantee Obligations
          is outstanding or secured;

               (ii)  sell, exchange, release or otherwise deal with any property
          pledged, mortgaged or otherwise securing Senior Debt or the Senior
          Guarantee Obligations;

               (iii) release any Person liable in any manner for the payment of
          Senior Debt or the Senior Guarantee Obligations; or

               (iv)  exercise or refrain from exercising any rights against the
          [Issuer][Guarantor] and any other Person.

     11. Waiver of Claims. (a) To the maximum extent permitted by law, the
Subordinated Lender waives any claim it might have against any Lender with
respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of any
Lender or its directors, officers, employees or agents (including, without
limitation, the Collateral Agent, the Administrative Agent, the Senior Secured
Administrative Agent and the Senior Secured Collateral Agent) with respect to
any exercise of rights or remedies under the loan documents relating to the
Senior Debt or any transaction relating to the Collateral. Neither the Lenders
nor any of their respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
any Guarantee or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of

                                       8
<PAGE>

any Collateral upon the request of the Borrower, the [Issuer][Guarantor], or any
of the Subsidiaries or the Subordinated Lender or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof or
any Guarantee.

          (b) The Subordinated Lender, for itself and on behalf of its
     successors and assigns, hereby waives any and all now existing or hereafter
     arising rights it may have to require the Lenders to marshal assets for the
     benefit of the Subordinated Lender, or to otherwise direct the timing,
     order or manner of any sale, collection or other enforcement of Collateral
     or enforcement of loan documents relating to the Senior Debt or the Senior
     Guarantee Obligations. The Lenders are under no duty or obligation, and the
     Subordinated Lender hereby waives any right it may have to compel the
     Lenders, to pursue any Guarantor or other Person who may be liable for the
     Senior Debt, or to enforce any Lien or Security Interest in any Collateral.

          (c) The Subordinated Lender hereby waives and releases all rights
     which a guarantor or surety with respect to the Senior Debt could exercise.

          (d) The Subordinated Lender hereby waives any duty on the part of the
     Lenders to disclose to the Subordinated Lender any fact known or hereafter
     known by the Lenders relating to the operation or financial condition of
     the Borrower, the [Issuer][Guarantor] or any Guarantor, or their respective
     businesses. The Subordinated Lender accepts the Subordinated
     [Note][Guarantee] based solely upon its independent knowledge of the
     Borrower's, the [Issuer's][Guarantor's] and the Subsidiaries' financial
     condition and business and the Subordinated Lender assumes responsibility
     for obtaining any further or future information with respect to the
     Borrower, the [Issuer][Guarantor] and the Subsidiaries or their financial
     condition or business.

     12. Further Assurances. The Subordinated Lender and the [Issuer][Guarantor]
at their own expense and at any time from time to time, upon the written request
of the Controlling Agent will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Controlling Agent
may reasonably request for the purposes of obtaining or preserving the full
benefits of these subordination provisions and of the rights and powers herein
granted.

                                       9
<PAGE>

     13. Powers Coupled with an Interest. All powers, authorizations and
agencies contained in these subordination provisions are coupled with an
interest and are irrevocable until the Senior Debt is paid in full.

     14. Notices. All notices, requests and demands to or upon any party hereto
shall be in writing and shall be given in the manner provided in Section 11.01
of the Credit Agreement or Section 12.01 of the Senior Secured Credit Agreement.
The notice information address for the Subordinated Lender is:

     _____________________________________

     _____________________________________

     _____________________________________

     ; and the notice information address for the [Issuer][Guarantor] is:

     _____________________________________

     _____________________________________

     _____________________________________.

     15. Severability. Any provision of this Attachment I which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the
terms or provisions of these subordination provisions may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Controlling Agent, the [Issuer][Guarantor] and the Subordinated Lender;
provided that any provision of these subordination provisions may be waived by
the Lenders in a letter or agreement executed by each Lender or by facsimile
transmission from each Lender.

          (b) No failure to exercise, nor any delay in exercising, on the part
     of the Lenders, any right, power or privilege hereunder shall operate as a
     waiver thereof. No single or partial exercise of any right, power or
     privilege hereunder shall preclude any other or further exercise thereof or
     the exercise of any other right, power or privilege.

                                       10
<PAGE>

          (c) The rights and remedies herein provided are cumulative, may be
     exercised singly or concurrently and are not exclusive of any other rights
     or remedies provided by law.

     17. Section Headings. The section headings used in these subordination
provisions are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.

     18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THE SUBORDINATED [NOTE][GUARANTEE] OR THIS ATTACHMENT I. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT UNDERSTANDS AND HAS SPECIFICALLY AGREED TO THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 18.

     19. Jurisdiction; Consent to Service of Process. THE SUBORDINATED
[NOTE][GUARANTEE] AND THIS ATTACHMENT I AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES THEREUNDER AND HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. SUBJECT TO THE
JURISDICTION OF THE COURT, EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS ATTACHMENT I. EACH
PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, 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.

                                       11
<PAGE>

     IN WITNESS WHEREOF, the undersigned have executed this Attachment I as of
this ______ day of ______, 200__.

                               BY: [SUBORDINATED LENDER]

                                   By:______________________________________
                                   Name:
                                   Title:

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

                                   By:______________________________________
                                   Name:
                                   Title:

                                       12
<PAGE>

                                                                       EXHIBIT K

                             ASSIGNMENT AGREEMENT

     This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and between
the parties designated as Assignor ("Assignor") and Assignee ("Assignee") above
the signatures of such parties on the Schedule of Terms attached hereto and
hereby made an integral part hereof (the "Schedule of Terms") and relates to
that certain Credit Agreement described in the Schedule of Terms (said Credit
Agreement, as amended, supplemented or otherwise modified to the date hereof and
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined).

     IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:

     SECTION 1. Assignment and Assumption.
                -------------------------

     (a) Effective upon the Settlement Date specified in Item 4 of the Schedule
of Terms (the "Settlement Date"), Assignor hereby sells and assigns to Assignee,
without recourse, representation or warranty (except as expressly set forth
herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Financing Documents with
respect to Assignor's outstanding Loans, if any, which represents, as of the
Settlement Date, the percentage interest specified in Item 3 of the Schedule of
Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Financing Documents with respect to any outstanding
Loans (the "Assigned Share").

     (b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.

     (c) Assignor hereby represents and warrants that Item 3 of the Schedule of
Terms correctly sets forth the amount of the Loans and the Percentage of
Assignee after giving effect to the assignment and assumption described above.
<PAGE>

     (d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the
Financing Documents, and shall be deemed to have made all of the covenants and
agreements contained in the Financing Documents, arising out of or otherwise
related to the Assigned Share and (ii) Assignor shall be absolutely released
from any of such obligations, covenants and agreements assumed or made by
Assignee in respect of the Assigned Share. Assignee hereby acknowledges and
agrees that the agreement set forth in this Section 1(d) is expressly made for
the benefit of the Issuer, Vencor, the Administrative Agent, the Assignor and
the Lenders and their respective successors and permitted assigns.

     (e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the outstanding Loans
shall have no effect on the Loans and the Percentage of Assignee set forth in
Item 3 of the Schedule of Terms or on the interest of Assignee in any
outstanding Loans corresponding thereto, and (iii) from and after the Settlement
Date, the Administrative Agent shall make all payments under the Credit
Agreement in respect of the Assigned Share (including without limitation all
payments of principal and accrued but unpaid interest, with respect thereto) (A)
in the case of any such interest and fees that shall have accrued prior to the
Settlement Date, to Assignor, and (B) in all other cases, to Assignee; provided
that Assignor and Assignee shall make payments directly to each other to the
extent necessary to effect any appropriate adjustments in any amounts
distributed to Assignor and/or Assignee by the Administrative Agent under the
Financing Documents in respect of the Assigned Share in the event that, for any
reason whatsoever, the payment of consideration contemplated by Section 1(b)
occurs on a date other than the Settlement Date.

     SECTION 2. Certain Representations, Warranties and Agreements.
                --------------------------------------------------

     (a) Assignor represents and warrants that it is the legal and beneficial
owner of the Assigned Share, free and clear of any adverse claim.

     (b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Financing Documents or for any representations,
warranties, recitals or statements made therein or made in any written or oral
statements or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Assignor to Assignee or
by or on behalf of the

                                       2
<PAGE>

Issuer or any of the Guarantors to Assignor or Assignee in connection with the
Financing Documents and the transactions contemplated thereby or for the
financial condition or business affairs of the Issuer or any other Person liable
for the payments of any Obligations, nor shall Assignor be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreement contained in any of the Financing Documents
or as to the existence or possible existence of any Event of Default or Default.

     (c) Assignee represents and warrants that it is an Eligible Assignee; that
it has experience and expertise in the making of loans such as the Loans; that
it has acquired the Assigned Share for its own account and not with any present
intention of selling all or any portion of such interest; and that it has
received, reviewed and approved a copy of the Credit Agreement (including all
Exhibits and Schedules thereto).

     (d) Assignee represents and warrants that it has received from Assignor
such financial information regarding the Issuer and the Guarantors as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of the Issuer
and the Guarantors in connection with the assignment evidenced by this
Agreement, and that it has made and shall continue to make its own appraisal of
the creditworthiness of the Issuer and the Guarantors. Assignor shall have no
duty or responsibility, either initially or on a continuing basis, to make any
such investigation or any such appraisal on behalf of Assignee or to provide
Assignee with any other credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any time
or times thereafter, and Assignor shall not have any responsibility with respect
to the accuracy of or the completeness of any information provided to Assignee.

     (e) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.

     SECTION 3. Miscellaneous.
                -------------

     (a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to

                                       3
<PAGE>

execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.

     (b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.

     (c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of Section 12.01 of the Credit
Agreement.

     (d) In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

     (e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.

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

                                       4
<PAGE>

     (g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of such when so executed
and delivered shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument; signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

     (h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
receipt by Administrative Agent of the processing and recordation fee referred
to in subsection 12.06(c) of the Credit Agreement, (iii) in the event Assignee
is organized under the laws of a jurisdiction outside the United States, the
delivery by Assignee to Administrative Agent of such forms, certificates or
other evidence with respect to United States federal income tax withholding
matters as Assignee may be required to deliver to Administrative Agent pursuant
to said subsection 12.06(c), (iv) if required, the execution of a counterpart
hereof by Administrative Agent as evidence of its consent to and acceptance
hereof, (v) the receipt by Administrative Agent of originals or telefacsimiles
of the counterparts described above and authorization of delivery thereof, and
(vi) the recordation by Administrative Agent in the Register of the pertinent
information regarding the assignment effected hereby in accordance with
subsection 12.06(c) of the Credit Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.

               [Remainder of page intentionally left blank]

                                       5
<PAGE>

                               SCHEDULE OF TERMS

1.   Issuer: Vencor Operating, Inc. (to be renamed Kindred Healthcare Operating,
     ------
     Inc.) (the "Issuer").

2.   Name and Date of Credit Agreement: Credit Agreement Providing for the
     ---------------------------------
     Issuance of $300,000,000 Senior Secured Notes due 2008 dated as of April
     20, 2001 by and among the Issuer, Vencor, Inc. (to be renamed Kindred
     Healthcare, Inc.) ("Vencor"), the Lenders party thereto, and Morgan
     Guaranty Trust Company of New York, as Collateral Agent and Administrative
     Agent.

3.   Amounts:
     -------
                                                               Loans
                                                               -----

     (a)  Aggregate Loans of all Lenders:                      $_____
     (b)  Assigned Share/Percentage:                            _____%
     (c)  Amount of Assigned Share of Loans                    $_____

4.   Settlement Date: __________, ____
     ---------------

5.   Payment Instructions:
     --------------------

     ASSIGNOR:                            ASSIGNEE:

     _______________________________      _______________________________

     _______________________________      _______________________________

     _______________________________      _______________________________

     Attention:_____________________      Attention:_____________________
     Reference:_____________________      Reference:_____________________

6.   Notice Addresses:
     ----------------

     ASSIGNOR:                            ASSIGNEE:

     _______________________________      _______________________________

     _______________________________      _______________________________

     _______________________________      _______________________________

     _______________________________      _______________________________
<PAGE>

7.   Signatures:
     ----------

 [NAME OF ASSIGNOR],                       [NAME OF ASSIGNEE],
 as Assignor                               as Assignee

 By:______________________                 By:______________________
 Title:______________________              Title:______________________

[Consented to and accepted in accordance with
subsection 12.06(c) of the Credit Agreement

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Administrative Agent

By:_______________________
Title:______________________]<PAGE>

                                                                    Exhibit 10.4
                             AMENDED AND RESTATED

             M A S T E R    L E A S E    A G R E E M E N T   NO. 1
             -----------------------------------------------------

                          DATED AS OF APRIL 20, 2001

                             FOR LEASE EXECUTED BY

                      VENTAS REALTY, LIMITED PARTNERSHIP,

                                   AS LESSOR

                                      AND

                                 VENCOR, INC.

                                      AND

                            VENCOR OPERATING, INC.,

                                   AS TENANT
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                             <C>
ARTICLE I.....................................................................................    2

 Section 1.1  Leased Property; Term...........................................................    2
 Section 1.2  Term............................................................................    3
 Section 1.3  Amended and Restated Lease......................................................    3
ARTICLE II....................................................................................    7

 Section 2.1  Definitions.....................................................................    7
ARTICLE III...................................................................................   24

 Section 3.1  Rent............................................................................   24
 Section 3.2  Option to Reset Base Rent, Current Rent and Accrued Rent........................   24
 Section 3.3  Additional Charges..............................................................   26
 Section 3.4  Survival........................................................................   27
 Section 3.5  Net Lease.......................................................................   28
 Section 3.6  New Common Stock................................................................   28
ARTICLE IV....................................................................................   28

 Section 4.1  Payment of Impositions..........................................................   28
 Section 4.2  Notice of Impositions...........................................................   29
 Section 4.3  Adjustment of Impositions.......................................................   29
ARTICLE V.....................................................................................   29

 Section 5.1  No Termination, Abatement, etc..................................................   29
ARTICLE VI....................................................................................   30

 Section 6.1  Ownership of the Leased Properties..............................................   30
 Section 6.2  Tenant's Personal Property......................................................   31
ARTICLE VII...................................................................................   31

 Section 7.1  Condition of the Leased Property................................................   31
 Section 7.2  Use of the Leased Property......................................................   32
 Section 7.3  Granting of Easements, etc......................................................   34
ARTICLE VIII..................................................................................   35

 Section 8.1  Compliance with Legal and Insurance Requirements, Instruments, etc..............   35
 Section 8.2  Legal Requirement Covenants.....................................................   35
 Section 8.3  Permitted Encumbrances..........................................................   36
ARTICLE IX....................................................................................   37

 Section 9.1  Maintenance and Repair..........................................................   37
 Section 9.2  Encroachments...................................................................   38
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                             <C>
ARTICLE X.....................................................................................   39

 Section 10.1  Construction of Capital Alterations to the Leased Property(ies)................   39
 Section 10.2  Capital Alterations Financed by Tenant.........................................   40
 Section 10.3  Capital Alterations Financed by Lessor.........................................   40
 Section 10.4  Non-Capital Alterations........................................................   42
 Section 10.5  Salvage........................................................................   42
 Section 10.6  Additional Requirements for Capital Alterations and Non-Capital Alterations....   42
 Section 10.7  Mortgagee's Consent............................................................   43
ARTICLE XI....................................................................................   43

 Section 11.1  Liens..........................................................................   43
ARTICLE XII...................................................................................   44

 Section 12.1  Permitted Contests.............................................................   44
ARTICLE XIII..................................................................................   45

 Section 13.1  General Insurance Requirements.................................................   45
 Section 13.2  Replacement Cost...............................................................   48
 Section 13.3  Additional Insurance...........................................................   48
 Section 13.4  Waiver of Subrogation..........................................................   48
 Section 13.5  Form Satisfactory, etc.........................................................   49
 Section 13.6  Limits; Deductibles............................................................   49
 Section 13.7  Blanket Policy.................................................................   49
 Section 13.8  No Separate Insurance..........................................................   50
 Section 13.9  Survival.......................................................................   50
ARTICLE XIV...................................................................................   50

 Section 14.1  Insurance Proceeds.............................................................   50
 Section 14.2  Reconstruction in the Event of Damage or Destruction Covered by Insurance......   51
 Section 14.3  Reconstruction in the Event of Damage or Destruction Not Covered by
 Insurance....................................................................................   52
 Section 14.4  Tenant's Property..............................................................   52
 Section 14.5  Restoration of Tenant's Property...............................................   52
 Section 14.6  No Abatement of Rent...........................................................   52
 Section 14.7  Restoration....................................................................   52
 Section 14.8  Notice.........................................................................   53
 Section 14.9  Waiver.........................................................................   53
ARTICLE XV....................................................................................   53

 Section 15.1  Definitions....................................................................   53
 Section 15.2  Parties' Rights and Obligations................................................   54
 Section 15.3  Total Taking...................................................................   54
 Section 15.4  Partial Taking.................................................................   54
 Section 15.5  Restoration....................................................................   54
 Section 15.6  Award-Distribution.............................................................   54
</TABLE>

                                      ii

<PAGE>

<TABLE>
<S>                                                                                             <C>
 Section 15.7   Temporary Taking..............................................................   55
ARTICLE XVI...................................................................................   55

 Section 16.1   Events of Default.............................................................   55
 Section 16.2   Certain Remedies..............................................................   62
 Section 16.3   Damages.......................................................................   62
 Section 16.4   Certain Effects of Separate Lease.............................................   63
 Section 16.5   Waiver........................................................................   63
 Section 16.6   Application of Funds..........................................................   63
 Section 16.7   Notice to Lessor..............................................................   64
 Section 16.8   Nature of Remedies............................................................   64
 Section 16.9   Allocable Rent................................................................   64
 Section 16.10  Special Remedies Provisions...................................................   64
 Section 16.11  No Mediation or Arbitration...................................................   74
 Section 16.12  Special Purchase Provisions...................................................   75
ARTICLE XVII..................................................................................   80

 Section 17.1   Lessor's Right to Cure Tenant's Default.......................................   80
ARTICLE XVIII.................................................................................   80

 Section 18.1   Provisions Relating to Purchase of the Leased Property........................   80
ARTICLE XIX...................................................................................   81

 Section 19.1   Exercise of Renewal Options...................................................   81
 Section 19.2   Renewal Terms.................................................................   82
 Section 19.3   Fair Market Rental Determination..............................................   83
 Section 19.4   Extended Period New Lease.....................................................   83
 Section 19.5   Revocation of Renewal Option Exercise.........................................   84
ARTICLE XX....................................................................................   84

 Section 20.1   Holding Over..................................................................   84
ARTICLE XXI...................................................................................   85

 Section 21.1   Subordination.................................................................   85
 Section 21.2   Attornment....................................................................   85
 Section 21.3   Mortgagee Cure Rights.........................................................   85
 Section 21.4   Modifications.................................................................   86
 Section 21.5   Existing Ground Leases........................................................   86
ARTICLE XXII..................................................................................   88

 Section 22.1   Notice to Lessor..............................................................   88
 Section 22.2   Definitions...................................................................   88
 Section 22.3   Consent of Leasehold Mortgagee Required.......................................   88
 Section 22.4   Default Notice................................................................   88
 Section 22.5   Procedure for Foreclosure on Default..........................................   89
 Section 22.6   Assignment or Transfer in Lieu of Foreclosure.................................   90
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                                           <C>
 Section 22.7   Separate Lease..............................................................   92
 Section 22.8   Separate Lease Properties...................................................   93
 Section 22.9   Legal Proceedings...........................................................   94
 Section 22.10  Future Amendments...........................................................   94
 Section 22.11  Estoppel Certificate........................................................   94
 Section 22.12  Notices.....................................................................   94
 Section 22.13  Erroneous Payments..........................................................   94
 Section 22.14  Exercise by Leasehold Mortgagee of Remedies Against One or More Leased
 Properties.................................................................................   95
ARTICLE XXIII...............................................................................   95

 Section 23.1   Risk of Loss................................................................   95
ARTICLE XXIV................................................................................   95

 Section 24.1   Indemnification.............................................................   95
ARTICLE XXV.................................................................................   97

 Section 25.1   Subletting and Assignment...................................................   97
 Section 25.2   Attornment..................................................................  104
 Section 25.3   Sublease Limitation.........................................................  105
 Section 25.4   Leasehold Mortgagee Rights..................................................  105
ARTICLE XXVI................................................................................  105

 Section 26.1   Financial Statements and Reporting..........................................  105
 Section 26.2   Furnishing Notice...........................................................  108
 Section 26.3   Quarterly Meetings; Facility Level Meetings and Reviews.....................  108
ARTICLE XXVII...............................................................................  109

 Section 27.1   Lessor's Right to Inspect...................................................  109
ARTICLE XXVIII..............................................................................  109

 Section 28.1   No Waiver...................................................................  109
ARTICLE XXIX................................................................................  109

ARTICLE XXX.................................................................................  109

 Section 30.1   Acceptance of Surrender.....................................................  109
ARTICLE XXXI................................................................................  110

 Section 31.1   No Merger of Title..........................................................  110
ARTICLE XXXII...............................................................................  110

 Section 32.1   Conveyance by Lessor........................................................  110
ARTICLE XXXIII..............................................................................  110

 Section 33.1   Quiet Enjoyment.............................................................  110
</TABLE>

                                      iv

<PAGE>

<TABLE>
<S>                                                                                           <C>
ARTICLE XXXIV...............................................................................  111

 Section 34.1   Notices.....................................................................  111
ARTICLE XXXV................................................................................  112

 Section 35.1   Appraisals..................................................................  112
 Section 35.2   Appointment of Appraisers...................................................  112
 Section 35.3   Section 35.3 Qualifications of Appraisers...................................  113
 Section 35.4   Section 35.4 Appraisal Process..............................................  113
 Section 35.5   Section 35.5 Binding Nature.................................................  113
 Section 35.6   Section 35.6 Costs..........................................................  114
ARTICLE XXXVI...............................................................................  114

 Section 36.1   General REIT Provisions.....................................................  114
ARTICLE XXXVII..............................................................................  115

 Section 37.1   Intentionally Omitted.......................................................  115
 Section 37.2   Lessor's Option to Purchase the Tenant's Personal Property..................  115
ARTICLE XXXVIII.............................................................................  116

 Section 38.1   Lessor May Grant Liens......................................................  116
ARTICLE XXXIX...............................................................................  116

 Section 39.1   Environmental Indemnity.....................................................  116
ARTICLE XL..................................................................................  117

 Section 40.1   Miscellaneous...............................................................  117
 Section 40.2   Non-Recourse................................................................  117
 Section 40.3   Transition of Operations....................................................  117
 Section 40.4   Right to Enter..............................................................  120
 Section 40.5   Integration.................................................................  120
 Section 40.6   Severability................................................................  120
 Section 40.7   Subject to Law..............................................................  120
 Section 40.8   Waivers.....................................................................  121
 Section 40.9   Binding Character...........................................................  121
 Section 40.10  Modification................................................................  121
 Section 40.11  Forbearance.................................................................  121
 Section 40.12  Lease Guaranty..............................................................  121
 Section 40.13  Louisiana Provisions........................................................  121
 Section 40.14  Confidentiality.............................................................  121
 Section 40.15  New Lease...................................................................  127
 Section 40.16  Partial Expiration/Termination..............................................  130
 Section 40.17  Creation of New Master Lease................................................  132
 Section 40.18  Combination of Leases.......................................................  133
 Section 40.19  Unified Commercial Operating Lease..........................................  136
 Section 40.20  Intentionally Omitted.......................................................  136
</TABLE>

                                       v

<PAGE>

<TABLE>
<S>                                                                                           <C>
 Section 40.21  No Credits..................................................................  136
ARTICLE XLI.................................................................................  136

 Section 41.1   Memorandums of Lease........................................................  136
</TABLE>
                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A - Legal Descriptions of the Land
Exhibit B - Term/Commencement Date/Expiration Date
Exhibit C - Allocation Schedule-Applicable Transferred Property Percentage
Exhibit D - Renewal Groups
Exhibit E - Leases
Exhibit F - Intentionally Omitted
Exhibit G - Form of Lease Guaranty
Schedule 1.3 - Certain Breaches and Defaults
Schedule 2.1A - Base Patient Revenues
Schedule 2.1B - Example - Calculation of Base Rent, Current Rent, Accrued Rent
and Unpaid Accrued Rent
Schedule 2.1C - Existing Ground Leases
Schedule 13.7 - Insurance Summary
Schedule 16.1(m)A - Licensed Beds as of the Commencement Date
Schedule 16.1(m)B - Minimum Licensed Beds at Certain Facilities Due to
Involuntary Reduction
Schedule 25.1.7 - Certain Existing Subleases
Schedule 40.12 - Tenant - Affiliate Sublessees

                                      vi
<PAGE>

                             AMENDED AND RESTATED
                         MASTER LEASE AGREEMENT NO. 1

     THIS AMENDED AND RESTATED MASTER LEASE AGREEMENT NO. 1 (hereinafter this
"Lease") is dated as of the 20/th/ day of April, 2001, and is between VENTAS
------
REALTY, LIMITED PARTNERSHIP, a Delaware limited partnership (together with its
successors and assigns, "Lessor"), and VENCOR, INC., a Delaware corporation
                         ------
formerly known as Vencor Healthcare, Inc. and to be known as Kindred Healthcare,
Inc. ("Vencor"), and VENCOR OPERATING, INC., a Delaware corporation to be known
       ------
as Kindred Healthcare Operating, Inc. ("Operator"; Operator, jointly and
                                        --------
severally with Vencor and permitted successors and assignees of Operator and
Vencor, "Tenant").
         ------

                                   RECITALS

     A.   First Healthcare Corporation, a Delaware corporation, Nationwide Care,
Inc., an Indiana corporation, Northwest Health Care, Inc., an Idaho corporation,
Hillhaven of Central Florida, Inc., a Delaware corporation, Vencor Hospitals
East, Inc., a Delaware corporation, Hahnemann Hospital, Inc., a Delaware
corporation, Hillhaven/Indiana Partnership, a Washington general partnership,
Carrollwood Care Center, a Tennessee general partnership, New Pond Village
Associates, a Massachusetts general partnership, St. George Nursing Home Limited
Partnership, an Oregon limited partnership, San Marcos Nursing Home Partnership,
a California general partnership, Vencor Hospitals Illinois, Inc., a Delaware
corporation, Windsor Woods Nursing Home Partnership, a Wisconsin general
partnership, Health Haven Associates, L.P., a Rhode Island limited partnership,
Oak Hill Nursing Associates, L.P., a Rhode Island limited partnership
(collectively, the "Ventas Subsidiaries"), Ventas, Inc., a Delaware corporation,
                    -------------------
and Lessor (the Ventas Subsidiaries, Ventas, Inc. and Lessor being referred to
herein as "Original Lessor"), as lessor (or sublessor, in the case of properties
           ---------------
ground leased by Original Lessor), and Vencor together with its permitted
assigns ("Original Tenant"), as tenant (or subtenant, in the case of properties
          ---------------
ground leased by Original Lessor), entered into that certain Master Lease
Agreement, dated April 30, 1998, pursuant to which, inter alia, Original Lessor
leased (or subleased, in the case of properties ground leased by Original
Lessor) to Original Tenant and Original Tenant leased (or subleased, as
aforesaid) from Original Lessor the Leased Properties (as hereinafter defined),
as such Master Lease Agreement was assigned pursuant to Assignment and
Assumption of Master Lease dated April 30, 1998 between Vencor, Inc., as
assignor, and Operator, as assignee, and as such Master Lease Agreement was
amended by First Amendment to Master Lease dated December 31, 1998 among Ventas,
Inc., Lessor, Operator and Vencor, by Second Amendment to Master Lease Agreement
No. 1 dated April 12, 1999 among Ventas, Inc., Lessor, Operator and Vencor and,
as to particular Leased Properties (hereinafter defined), by miscellaneous
recorded lease confirmations and/or supplements and recorded corrections of
lease (as so assigned and amended, the "Original Master Lease").
                                        ---------------------

     B.   Ventas, Inc. is the successor by merger to each of the Ventas
Subsidiaries and has conveyed (or assigned, in the case of ground leased
properties) to Lessor each of the Leased Properties formerly owned or ground
leased by Ventas, Inc. and/or the Ventas

                                       1
<PAGE>

Subsidiaries other than one (1) Leased Property (Facility No. 4619) title to
which was retained by Ventas, Inc. as described in the Joinder to this Lease.

     C.   Tenant is the tenant (or subtenant, in the case of ground leased
properties) under the Original Master Lease and, after April 30, 1998, Tenant
has not assigned the Original Master Lease wholly or in part.

     D.   Pursuant to the Bankruptcy Plan (as defined in Section 2.1 below),
                                                         -----------
Lessor and Tenant desire to amend and restate the Original Master Lease in its
entirety in the manner hereinafter set forth.

     E.   Pursuant to the Bankruptcy Plan and as further described in Section
                                                                      -------
3.6 below, Lessor and/or its designee(s) is receiving New Common Stock (as
---
defined in the Bankruptcy Plan) as additional rent under this Lease and the
other Leases (as defined in Section 2.1 below).
                            -----------

     F.   Immediately following the execution and delivery of this Lease, Vencor
will change its name to Kindred Healthcare, Inc. and Operator will change its
name to Kindred Healthcare Operating, Inc.

     NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor and Tenant hereby amend and restate the Original Master
Lease in its entirety as follows:

                                   ARTICLE I

     Section 1.1   Leased Property; Term. Effective as of the Commencement Date
                   ---------------------
for each Leased Property, upon and subject to the terms and conditions
hereinafter set forth, Lessor leased, and hereby leases, to Tenant and Tenant
leased, and hereby leases, from Lessor all of Lessor's rights and interest in
and to each of the following:

          (i)      the tracts, pieces and parcels of land, as more particularly
     described in Exhibit A attached hereto (collectively, the "Land"; each
                  ---------                                     ----
     parcel of Land described in Exhibit A, as amended from time to time,
                                 ---------
     excluding those parcels which have been transferred to a New Lease pursuant
     to Section 40.15 (including, without limitation, a New Lease created
        -------------
     pursuant to Section 22.7 hereof) or to a New Master Lease pursuant to
                 ------------
     Section 40.17, together with the related property described in clauses (ii)
     -------------
     through (iv) below, being referred to herein as a "Leased Property" and all
                                                        ---------------
     of such parcels of Land, together with all of such related property, being
     referred to herein collectively as the "Leased Properties"),
                                             -----------------

          (ii)     all buildings, structures, Fixtures (as hereinafter defined)
     and other improvements of every kind including, but not limited to,
     alleyways and connecting tunnels, sidewalks, utility pipes, conduits and
     lines (on-site and off-site), parking areas and roadways appurtenant to
     such buildings and structures presently situated upon the Land and Capital
     Alterations (collectively, the "Leased Improvements"),
                                     -------------------

                                       2
<PAGE>

          (iii)    all easements, rights and appurtenances relating to the Land
     and the Leased Improvements, and

          (iv)     all permanently affixed equipment, machinery, fixtures, and
     other items of real and/or personal property, including all components
     thereof, now and hereafter located in, on or used in connection with, and
     permanently affixed to or incorporated into the Leased Improvements,
     including, without limitation, all furnaces, boilers, heaters, electrical
     equipment, heating, plumbing, lighting, ventilating, refrigerating,
     incineration, air and water pollution control, waste disposal, air-cooling
     and air-conditioning systems and apparatus, sprinkler systems and fire and
     theft protection equipment, and built-in oxygen and vacuum systems, all of
     which to the greatest extent permitted by law, are hereby deemed by the
     parties hereto to constitute real estate, together with all replacements,
     modifications, alterations and additions thereto, but specifically
     excluding all items included within the category of Tenant's Personal
     Property as defined in Article II below (collectively the "Fixtures"),
                            ----------                          --------

     SUBJECT, HOWEVER, to the Permitted Encumbrances (as defined in Section 2.1
                                                                    -----------
hereof).

     SECTION 1.2   Term. To have and to hold for (1) a fixed term (the "Fixed
                   ----                                                 -----
Term") commencing on the Commencement Date  set forth in Exhibit B opposite the
----                                                     ---------
applicable Leased Property and ending at midnight on the Expiration Date so set
forth in Exhibit B, and (2) the Extended Terms provided for in Article XIX,
         ---------                                             -----------
unless this Lease is sooner terminated as hereinafter provided.

     SECTION 1.3   Amended and Restated Lease.
                   --------------------------

          SECTION 1.3.1 Tenant, pursuant to the Bankruptcy Plan (as defined in
Section 2.1 below), has assumed the Original Master Lease in its entirety, and
-----------
Lessor and Tenant have simultaneously amended and restated the Original Master
Lease in its entirety in accordance with the terms of this Lease as of the
Effective Date (as defined in Section 2.1 below) by executing this Lease. This
                              -----------
Lease shall govern and control as to all events, acts, omissions, liabilities
and obligations first occurring, arising or accruing from and after the
Effective Date (as defined in Section 2.1 below).
                              -----------

          Section 1.3.2 Without limitation of the other provisions of this
Section 1.3, the terms of the Original Master Lease shall continue to govern and
-----------
control as to all events, acts, omissions, liabilities and obligations
occurring, arising and accruing prior to the Effective Date, provided that, in
the event that (1) prior to the Effective Date, (a) a default or breach of the
terms of the Original Master Lease shall have occurred, (b) any act, event or
omission to act shall have occurred, or circumstance shall have arisen, relative
to any Legal Requirement, Authorization, Permitted Encumbrance or Superior Lease
(each as defined in Section 2.1 below) affecting any of the Leased Properties
                    -----------
that is or is potentially adverse to Lessor or Tenant, or (c) any casualty or
condemnation shall have occurred relative to any of the Leased Properties and
(2) as of the Effective Date, such default or breach remains uncured or such
act, event, omission to act or circumstance continues to be adverse or
potentially adverse to Lessor

                                       3
<PAGE>

or Tenant or such casualty or condemnation has not been fully repaired and
restored with all claims on account thereof finally settled and paid and with
the affected Leased Property re-opened for use in accordance with its Primary
Intended Use (as defined in Section 7.2.2 hereof) and the other provisions of
                            -------------
this Lease, the provisions of this Lease relative to cure periods, whether and
when an Event of Default shall be deemed to have occurred, rights and remedies
on account of any breach or default or Event of Default, contest rights, Lease
enforcement rights, casualty, condemnation, insurance and indemnification shall
govern and control. Subject to the foregoing, (x) any breach or default that
occurs, arises or accrues under the Original Master Lease prior to the Effective
Date and is not cured prior to such date is, and shall be deemed to be, a breach
or default under this Lease, to which the cure periods, rights and remedies and
other provisions of this Lease referenced in the preceding sentence shall be
applicable, unless such breach or default is specifically waived and released
under the terms of Section 1.3.4 below, and (y) with respect to any breach or
                   -------------
default described in subsection (x) above that is not specifically waived and
released under Section 1.3.4, although the cure periods, rights and remedies and
               -------------
other provisions of this Lease referenced in the preceding sentence shall be
applicable, the portion of any cure period under the Original Master Lease that
has elapsed as of the Effective Date shall be counted in determining whether and
when the applicable cure period under this Lease has expired (for example, if
(A) a breach or default occurs under the Original Master Lease prior to the
Effective Date, (B) such breach or default remains uncured as of the Effective
Date and is not specifically waived and released under the terms of Section
                                                                    -------
1.3.4, (C) Tenant receives from Lessor a written notice of default relative
-----
thereto prior to the Effective Date, and (D) by the terms of this Lease, for a
breach or default of the nature assumed in this example a cure period of thirty
(30) days following Tenant's receipt of written notice of default is allowed
prior to such breach or default becoming an Event of Default under this Lease,
then, as to such breach or default, an Event of Default shall occur if such
breach or default is not cured on or prior to the thirtieth (30th) day following
Tenant's receipt of the aforesaid notice of default, notwithstanding that such
notice was received prior to the Effective Date).

          Section 1.3.2.1     In the event that (1) prior to the Effective Date,
(a) a default or breach of the terms of the Original Master Lease shall have
occurred, (b) any act, event or omission to act shall have occurred, or
circumstances shall have arisen, relative to any Legal Requirements,
Authorization, Permitted Encumbrances or Superior Lease (each as defined in
Section 2.1 below) affecting any of the Leased Properties that is or is
-----------
potentially adverse to Lessor or Tenant, or (c) any casualty or condemnation
shall have occurred relative to any of the Leased Properties and (2) prior to
the Effective Date, such default or breach has been cured or such act, event,
omission to act or circumstance is no longer adverse or potentially adverse to
Lessor or Tenant or such casualty or condemnation has been fully repaired and
restored with all claims on account thereof finally settled and paid and with
the affected Leased Property re-opened for use in accordance with its Primary
Intended Use and the other provisions of this Lease, then no such default or
breach or other circumstance or matter described in the foregoing subsections
(a), (b) and (c) shall constitute an Event of Default under this Lease, and
neither party shall bring a claim against the other in respect of any such
default, breach, circumstance or matter, whether hereunder or under the Original
Master Lease.  Notwithstanding the foregoing, subject to Section 1.3.2 above,
                                                         -------------
neither party

                                       4
<PAGE>

waives or releases, and neither party shall be precluded from exercising, any
rights or remedies (including, without limitation, default rights and remedies)
that it may have hereunder or under the Original Master Lease (i) on account of
any non-performance by the other party of indemnification obligations that such
other party has hereunder or under the Original Master Lease relative to any
default, breach, act, event, omission to act, circumstance, casualty or
condemnation referenced in subsection (a), (b), or (c) above or (ii) if, and
insofar as, the condition described in subsection (2) above is not, or by reason
of events occurring after the Effective Date is shown to have not been, cured,
repaired, restored, re-opened or otherwise satisfied.

          Section 1.3.3 Each party hereto represents and warrants to the other
party hereto that, as of February 23, 2001, such representing party had no
knowledge of any uncured breaches by it of, or uncured defaults by it under, the
Original Master Lease or this Lease, in each case other than the breaches and
defaults disclosed by it in the portion of subpart A of Schedule 1.3 attached
                                                        ------------
hereto and incorporated herein by this reference that is applicable to it.

          Section 1.3.3.1     Lessor represents and warrants to Tenant that, as
of February 23, 2001, Lessor's Management Group (as defined below) had no Actual
Knowledge (as defined below) of any Section 1.3.3.1 Claim (as defined below) (1)
involving any act or omission by Tenant that constituted a breach or default of
the Original Master Lease by Tenant that was continuing as of February 23, 2001,
and (2) of which Lessor had not, on or prior to February 23, 2001, given Tenant
written notice (which notice is not required to have been given in accordance
with the formalities of Section 34.1 below) or of which, on or prior to February
                        ------------
23, 2001, Tenant had not obtained actual knowledge or notice (as opposed to, and
not including, constructive, imputed, assumed or other knowledge or notice). As
used in this Section 1.3.3.1, (a) the term "Lessor's Management Group" shall
             ---------------                -------------------------
mean Debra A. Cafaro, T. Richard Riney and John C. Thompson, (b) the term
"Actual Knowledge" shall mean actual knowledge (as opposed to, and not
 ----------------
including, constructive, imputed, assumed or other knowledge, and without any
obligation or duty of any kind to investigate or otherwise make inquiry) first
obtained on or after September 13, 1999 and on or prior to February 23, 2001,
and (c) the term "Section 1.3.3.1 Claim" shall mean a written claim that (x) is
made to Lessor by any governmental agency or private party that is not an
Affiliate of Tenant, (y) is based upon an act or omission of Tenant that
constitutes a breach or default by Tenant of the Original Master Lease, and (z)
describes the occurrence of an event that constitutes such a breach or default
by Tenant (other than a breach or default in the performance of Tenant's
obligations relative to payment of real estate taxes and assessments relating to
any of the Leased Properties and/or payment of any amounts owed on account of
work performed at, or materials provided to, any Leased Property, it being
agreed that claims based on any such breach or default by Tenant shall in no
event be considered a "Section 1.3.3.1 Claim" and that no representation or
warranty is made in this Section 1.3.3.1 regarding any breach or default of the
                         ---------------
nature referenced in this parenthetical clause). Lessor and Tenant further
agree that (i) Tenant shall have no rights or remedies against Lessor on account
of any breach of the representation and warranty of Lessor contained in this
Section 1.3.3.1 other than the rights and remedies set forth in subsection (ii)
---------------
below and (ii) any act or omission by Tenant that satisfies the terms of

                                       5
<PAGE>

subsections (1) and (2) above shall not constitute an Event of Default under the
Original Master Lease or this Lease unless and until, and shall constitute such
an Event of Default only if, an Event of Default shall occur on account of
Tenant's failure (A) to perform its indemnification obligations under the
Original Master Lease or this Lease relative to any such act or omission and (B)
to cure any such indemnification non-performance within the cure period
applicable to such indemnification non-performance. Tenant's aforesaid
indemnification obligations shall remain enforceable by Lessor, notwithstanding
any breach by Lessor of its representation and warranty contained in this
Section 1.3.3.1 and without any limitation on, or impairment of, such
---------------
indemnification rights due to any such breach by Lessor.

          Section 1.3.4 Each of the parties hereto hereby waives and releases
any and all rights and claims it may have against the other party hereto for, on
account of or in connection with any breach or default by such other party of or
under the Original Master Lease or this Lease and which occurred prior to the
Effective Date of this Lease (including those matters set forth on subpart A of
Schedule 1.3 hereto, but subject to subpart B of Schedule 1.3 and the other
------------                                     ------------
terms and provisions of this Section 1.3), provided, however, that,
                             -----------
notwithstanding anything to the contrary contained in this Section 1.3.4 or
                                                           -------------
elsewhere in this Section 1.3, (1) Tenant agrees that it has no defenses or
                  -----------
rights of deduction, set-off or abatement as to any of its obligations hereunder
or under the Original Master Lease, including, without limitation, payment of
Rent, and (2) without limitation of the foregoing subsection (1), the parties
are not waiving or releasing, and are expressly preserving, (a) any and all
rights and claims with respect to any breach or default that is continuing as of
the Effective Date of this Lease (other than rights and claims with respect to
any such continuing breach that is identified in subpart B of Schedule 1.3
                                                              ------------
hereto as a breach or default that is waived and released, and then only to the
extent set forth in such subpart B and subject to subsection (e) below and to
the last two sentences of Section 1.3.3.1 above), and (b) any and all rights and
                          ---------------
claims with respect to any breach or default that is identified in subpart B of
Schedule 1.3 hereto as a breach or default that is not waived or released, and
(c) any and all rights and claims with respect to any breach or default that
arises on account of actions or omissions to act occurring after February 23,
2001 and which continues after the Effective Date, and (d) subject to Section
                                                                      -------
1.3.3.1 above, any and all rights and claims with respect to any breach or
-------
default of the representations, warranties and agreements contained in Section
                                                                       -------
1.3.3 above, and (e) any and all rights and claims based upon non-performance of
-----
indemnification obligations hereunder or under the Original Master Lease
relative to any breach or default that is waived and released pursuant to this
Section 1.3 or to the acts, events, omissions to act or other circumstances on
-----------
account of which any such waived and released breach or default arose. Subject
to subsection (e) above and to the last two (2) sentences of Section 1.3.3.1
                                                             ---------------
above, each party agrees that at no time in the future shall it bring a claim
based on a breach or default that has been waived or released pursuant to this
Section 1.3.  Lessor further agrees that, provided Tenant pays, at the time and
-----------
in the manner required in the Rent Stipulation (as defined in Section 2.1
below), all "Monthly Payments," as defined in the Rent Stipulation, for the
period from February 24, 2001 through the Effective Date, Lessor shall waive any
"Agreement Rent Claim," as defined in the Rent Stipulation, for such period, and
the parties shall update Schedule 1.3, subpart A, item 2(e), and subpart B, item
                         ------------
2(e), to reflect such waiver.

                                       6
<PAGE>

          Section 1.3.5 Nothing contained in this Section 1.3 shall limit or
                                                  -----------
impair Lessor's or Tenant's rights, duties and obligations under the Indemnity
Agreement (as defined in Section 2.1 below).
                         -----------

                                  ARTICLE II

     Section 2.1   Definitions. For all purposes of this Lease, except as
                   -----------
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as at the time applicable, (iii) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (iv) the words "herein," hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:

     "Accrued Rent": (a) For the period from the Effective Date through April
      ------------
30, 2004, zero (0) and (b) for a particular Rent Calculation Year thereafter, an
amount equal to (i) the Base Rent for such Rent Calculation Year, less (ii) the
Current Rent for such Rent Calculation Year. One twelfth (1/12th) of the Accrued
Rent for a particular Rent Calculation Year shall be deemed earned by Lessor on
the first (1st) day of each month during such year.

     "Accrued Rent Interest": Interest, calculated in the manner hereinafter
      ---------------------
described, on any and all Accrued Rent under this Lease that is not paid in full
by Tenant on the date it is earned. Accrued Rent that is not paid in full by
Tenant on the date it is earned shall bear interest, until paid, at a rate equal
to the Accrued Rent Interest Rate, compounded annually on April 30 of each year,
and all such interest (including, without limitation, all additional interest
that results from compounding) is herein referred to collectively as "Accrued
Rent Interest".

     "Accrued Rent Interest Rate": On any date, a rate equal to the LIBO Rate
      --------------------------
plus 450 basis points per annum, but in no event greater than the maximum rate
then permitted under applicable law, provided, however, that, upon the
                                     --------  -------
occurrence of any Event of Default, the Accrued Rent Interest Rate shall equal,
on any date, a rate equal to the LIBO Rate plus 700 basis points per annum
(provided, however, that such 700 basis points number shall be changed to 650
basis points, if, on or prior to June 30, 2001, the reference to "2.5%"
contained in Section 2.02(b) of the Tenant Senior Secured Credit Agreement is
amended to refer instead to "2.0%"), but in no event greater than the maximum
rate then permitted under applicable law. Interest at the aforesaid rates shall
be determined for actual days elapsed based upon a 360 day year.

     "Actual Knowledge": As defined in Section 1.3.3.1.
      ----------------                 ---------------

     "Additional Charges": As defined in Article III.
      ------------------                 -----------

     "Adjusted Base Patient Revenues": Base Patient Revenues from the Leased
      ------------------------------
Properties, adjusted as follows. Without limitation of Section 7.2.3 hereof, if
                                                       -------------
a particular Facility or

                                       7
<PAGE>

Facilities within the Leased Properties, for any period after December 31, 1999,
for any reason is closed, the Base Patient Revenues that correspond to any such
closed Facility or Facilities (and, in the case of a partial year closure, the
Base Patient Revenues that correspond to any such closed Facility or Facilities
for the days or months such Facility or Facilities were closed) shall be
excluded from Base Patient Revenues in order to arrive at "Adjusted Base Patient
Revenues."

     "Affiliate": means, with respect to any Person, any other Person directly
      ---------
or indirectly controlling (including, but not limited to, all partners,
directors, officers and members of such Person), controlled by or under direct
or indirect common control with any such Person. A Person shall be deemed to
control a corporation, a partnership, a trust, or a limited liability company if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such person, through the ownership
of voting securities, partnership interests or other equity interests.

     "Ancillary Agreement": As defined in Section 25.1.7.
      -------------------                 --------------

     "Appraisal Notice": As defined in Section 35.2.
      ----------------                 ------------

     "Arbitration Question": As defined in Section 22.6(c).
      --------------------                 ---------------

     "Authorizations": As defined in Section 40.3.
                                     ------------

     "Award": As defined in Article XV.
      -----                  ----------

     "Bankruptcy Plan": That certain Fourth Amended Joint Plan Of Reorganization
      ---------------
of Vencor, Inc. And Affiliated Debtors Under Chapter 11 Of The Bankruptcy Code
dated as of December 14, 2000, filed on December 14, 2000 at docket no. 4031 in
the United States Bankruptcy Court for the District of Delaware in the cases
known as In re: Vencor, Inc., et al., Case Nos. 99-3199 (MFW) through 99-3327
(MFW), as confirmed by such Bankruptcy Court by Order dated March 16, 2001,
filed on March 16, 2001 at docket no. 5975.

     "Base Patient Revenues": Patient Revenues from the Leased Properties
      ---------------------
(adjusted, in amounts agreed upon by Lessor and Tenant, relative to so-called
"Vencare programs", but which adjustment shall not otherwise be made in the
calculation of "Patient Revenues") for the twelve (12) month period ending on
December 31, 1999, as set forth on Schedule 2.1A attached hereto and
                                   --------------
incorporated herein.

     "Base Rent": (a) For the period from the Effective Date through the last
      ---------
day of the month containing the Effective Date, rent at an annual rate equal to
the annualized amount of the "Monthly Payment", as defined in the Rent
Stipulation, payable for the month preceding such month, (b) for the period from
the first day of the month following the month containing the Effective Date
through April 30, 2001, rent at an annual rate equal to Seventy-Two Million
Eight Hundred Forty-Two Thousand Three Hundred Sixty-Six Dollars
($72,842,366.00) per annum, (c) for the period from May 1, 2001 through April
30, 2002, if the Patient Revenues for the calendar year 2000 equaled or exceeded
seventy-five percent (75%) of the Adjusted

                                       8
<PAGE>

Base Patient Revenues, rent at an annual rate equal to Seventy-Five Million
Three Hundred Ninety-One Thousand Eight Hundred Forty-Nine Dollars
($75,391,849.00) per annum and otherwise rent at an annual rate equal to
Seventy-Two Million Eight Hundred Forty-Two Thousand Three Hundred Sixty-Six
Dollars ($72,842,366.00) per annum, and (d) for a particular Rent Calculation
Year thereafter, an annual rental amount equal to the sum of (i) the Prior
Period Base Rent, plus (ii) if the Patient Revenues for the calendar year
preceding the commencement of such Rent Calculation Year equaled or exceeded
seventy-five percent (75%) of the Adjusted Base Patient Revenues, three and one-
half percent (3.5%) of the Prior Period Base Rent. (See Schedule 2.1B attached
                                                        -------------
hereto and incorporated herein for an example of the calculation of Base Rent,
Current Rent, Accrued Rent and Unpaid Accrued Rent under certain assumptions.)
Notwithstanding the foregoing, (1) in the event Lessor exercises the Reset
Option referenced in Section 3.2 hereof, then, for periods from and after the
                     -----------
Reset Date, "Base Rent" shall mean the Fair Market Rental applicable to such
period, as determined pursuant to Section 3.2 hereof and including any
                                  -----------
escalations that are part of the Fair Market Rental as so determined, and (2)
exercise of the Reset Option shall not limit the applicability of Sections 19.2
                                                                  -------------
and 19.3 hereof.
    ----

     "Business Day": Each Monday, Tuesday, Wednesday, Thursday and Friday which
      ------------
is not a day on which national banks in the City of New York, New York are
authorized, or obligated, by law or executive order, to close.

     "Capital Alterations": With respect to any Leased Property: (i) the
      -------------------
addition of one or more new buildings, or (ii) the annexation of one or more
additional structures to any portion of any of the Leased Improvements on such
Leased Property, or (iii) the material expansion or contraction of the existing
improvements on such Leased Property, or (iv) any alteration or modification
affecting the foundation, floor slab, roof or roof structure, curtain wall,
structural columns, beams or shafts or other structural components of any of the
Leased Improvements on such Leased Property (other than any alterations or
modifications affecting any of such components that do not in any material
respect adversely affect the design, efficacy and/or quality of any such
component), or (v) any alteration or modification affecting any of the
electrical, plumbing, life safety, heating, ventilating, air conditioning or
other operating systems serving any of the Leased Improvements on such Leased
Property (other than any alterations or modifications affecting any of such
systems that do not in any material respect adversely affect the design,
operating capacity, efficiency and/or quality of any such system), or (vi) any
alterations or modifications to a Leased Property, the cost of which (excluding
cosmetic refurbishing alterations or modifications, such as painting,
wallpapering or carpeting), when taken together with all other alterations and
modifications (excluding cosmetic refurbishing alterations or modifications)
performed on such Leased Property in the twelve (12) month period immediately
preceding the subject alterations or modifications, would exceed One Million
Dollars ($1,000,000) (in the case of alterations or modifications to hospital
facilities) or Five Hundred Thousand Dollars ($500,000) (in the case of
alterations or modifications to nursing center facilities or any other facility
not operated as a hospital). "Capital Alterations" shall include, without
limitation, (1) the construction of a new wing or new story on a Leased
Property, (2) the repair, replacement, restoration, remodeling or rebuilding of
the existing improvements on a Leased Property or any portion thereof, where

                                       9
<PAGE>

the purpose and effect of such work is to provide a functionally new facility
needed to provide services not previously offered, and (3) any expansion,
construction, renovation or conversion in order to increase the bed capacity of
the Facility located on a Leased Property, to change the purpose for which such
beds are utilized or to improve materially the quality of such Facility.

     "Capital Alterations Cost": The term "Capital Alterations Cost" shall mean
      ------------------------
the cost of any Capital Alteration proposed to be made by Tenant at a Leased
Property, whether or not paid for by Tenant or Lessor. Such cost shall include
(a) the cost of construction of the Capital Alterations (including site
preparation and improvement, materials, labor, supervision, and certain related
design, engineering and architectural services), the cost of any fixtures, the
cost of construction financing and miscellaneous costs approved by Lessor, (b)
if agreed to by Lessor in writing, in advance, the cost of any land contiguous
to a Leased Property that is (1) to become part of such Leased Property and (2)
is purchased for the purpose of placing thereon the Capital Alterations or any
portion thereof or of providing means of access to such Capital Alterations or
any existing improvements on such Leased Property or of providing parking
facilities for such Capital Alterations or such existing improvements, including
the cost of surveying the same, (c) the cost of insurance, real estate taxes,
water and sewage charges and other carrying charges for such Capital Alterations
during construction, (d) the cost of title insurance, (e) reasonable fees and
expenses of legal counsel, (f) filing, registration and recording taxes and
fees, (g) documentary stamp taxes, if any, and (h) all reasonable costs and
expenses of Lessor and Tenant and, if agreed to in advance by Lessor, any
Lending Institution which has committed to finance the Capital Alterations,
including, but not limited to, (i) the reasonable fees and expenses of their
respective legal counsel, (ii) all printing expenses, (iii) the amount of any
filing, registration and recording taxes and fees, (iv) documentary stamp or
transfer taxes, if any, (v) title insurance charges and appraisal fees, if any,
(vi) rating agency fees, if any, and (vii) commitment fees, if any, charged by
any Lending Institution advancing or offering to advance any portion of the
financing for such Capital Alterations.

     "Code": The Internal Revenue Code of 1986, as amended.
      ----

     "Combined Leased Properties": The Leased Properties from time to time
      --------------------------
under this Lease, together with the leased properties from time to time under
the other Combined Leases.

     "Combined Leases": The following that are from time to time in existence:
      ---------------
this Lease, the other Leases (including, without limitation, any New Master
Lease entered into pursuant to Section 40.17 of this Lease and/or the
                               -------------
corresponding sections of the other Leases) and any New Lease entered into
pursuant to Section 40.15 of this Lease (including, without limitation, any
            -------------
Separate Lease entered into pursuant to the terms of Section 22.7 hereof) or the
                                                     ------------
corresponding sections of any of the other Leases or of any such New Lease.

     "Commencement Date": As to the applicable Leased Property, the date set
      -----------------
forth opposite such Leased Property in the column "Commencement Date" on Exhibit
                                                                         -------
B attached hereto.
-

                                      10
<PAGE>

     "Condemnation, Condemnor": As defined in Article XV.
      -----------------------

     "Coverage Ratio": As to any one or more of the Combined Leased Properties,
      --------------
the ratio of the EBITDARM generated by such Combined Leased Property(ies) to
Base Rent allocable thereto under the applicable Combined Leases, in each case
for the four (4) full calendar quarters ending not less than sixty (60) days
prior to (a) the effective date of the New Master Lease, in the case of Section
                                                                        -------
40.17 hereof, or (b) the occurrence of a Section 16.10.3.1 New Lease
-----
Transaction, in the case of Section 16.10.3.1.
                            -----------------

     "Current Rent": (a) For the period from the Effective Date through April
      ------------
30, 2004, rent at an annual rate equal to the Base Rent applicable to such
period, and (b) for a particular Rent Calculation Year thereafter, an annual
rental amount equal to the sum of (i) the Prior Period Current Rent, plus (ii)
if the Patient Revenues for the calendar year preceding the commencement of such
Rent Calculation Year equaled or exceeded seventy-five percent (75%) of the
Adjusted Base Patient Revenues, two percent (2%) of the Prior Period Base Rent;
provided, however, that, from and after the Unpaid Accrued Rent Due Date, for
--------  -------
the remainder of the Rent Calculation Year during which such Unpaid Accrued Rent
Due Date occurs and for each Rent Calculation Year thereafter, subject to
satisfaction of the aforesaid 75% of Adjusted Base Patient Revenues test, the
amount referenced in this subsection (b) (ii) shall equal three and one-half
percent (3.5%), rather than two percent (2%), of the Prior Period Base Rent
(i.e. from and after the Unpaid Accrued Rent Due Date, Current Rent shall equal
Base Rent).  Notwithstanding the foregoing, (x) in the event Lessor exercises
the Reset Option referenced in Section 3.2 hereof, then, for periods from and
                               -----------
after the Reset Date, "Current Rent" shall mean the Fair Market Rental
applicable to such period, as determined pursuant to Section 3.2 hereof and
                                                     -----------
including any escalations that are part of the Fair Market Rental as so
determined, and (y) exercise of the Reset Option shall not limit the
applicability of Sections 19.2 and 19.3 hereof.
                 -------------     ----

     "Date of Taking": As defined in Article XV.
      --------------                 ----------

     "Disclosing Party": As defined in Section 40.14.
      ----------------                 -------------

     "Disclosure Date": As defined in Section 40.14.
      ---------------                 -------------

     "Disclosure Law": As defined in Section 40.14.
      --------------                 -------------

     "Disclosure Notice": As defined in Section 40.14.
      -----------------                 -------------

     "Disclosure Notification Period": As defined in Section 40.14.
      ------------------------------                 -------------

     "EBITDAR": As to any particular Leased Property or Leased Properties, or
      -------
any hospital, nursing center or other facility not covered by this Lease
(regardless of the identity of the landlord or tenant of any such other
facility) for a particular period, the earnings before interest, taxes,
depreciation, amortization and rent, attributable to such Leased Property or
Leased Properties or such other facility, as applicable, for such period, as
determined in accordance with the customary methods, procedures and accounting
principles from time to time used in the health care industry.

                                      11
<PAGE>

     "EBITDARM":  As to any particular Leased Property or Leased Properties, or
      --------
any hospital, nursing center or other facility not covered by this Lease
(regardless of the identity of the landlord or tenant of any such other
facility) for a particular period, the earnings before interest, taxes,
depreciation, amortization, rent and management fees, attributable to such
Leased Property or Leased Properties or such other facility, as applicable, for
such period, as determined in accordance with the customary methods, procedures
and accounting principles from time to time used in the health care industry.

     "Effective Date":  As defined in the Bankruptcy Plan.
      --------------

     "Encumbrance":  As defined in Article XXXVIII.
      -----------                  ---------------

     "Event of Default":  As defined in Article XVI.
      ----------------                  -----------

     "Existing Ground Leases":  Those ground leases listed on Schedule 2.1C
      ----------------------                                  -------------
attached hereto and made a part hereof, as the same may be amended or modified
in writing after the Effective Date with the written consent of Lessor and
Tenant, each acting in its sole discretion, provided, however, that, in the case
of the original ground lease for the Facility known as Vencor Hospital-Coral
Gables (Ventas Facility No. 4602), if, prior to the Effective Date, the same has
not been finalized and executed in accordance with Schedule 2.1C, then the form
                                                   -------------
thereof shall be the February 27, 2001 draft referenced in Schedule 2.1C, with
                                                           -------------
such changes therein as are approved in writing by Lessor and Tenant, each
acting in its reasonable discretion.

     "Exit Facility Documents":  The documents evidencing and securing the Exit
      -----------------------
Financing (as defined in the Bankruptcy Plan), and any amendment, restatement,
modification, refinancing or replacement thereof from time to time following the
Effective Date.

     "Expired/Terminated Properties":  As defined in Section 40.16.
      -----------------------------                  -------------

     "Extended Term":  As defined in Article XIX.
      -------------                  -----------

     "Facility": The facility being operated or proposed to be operated on the
      --------
applicable Leased Property.

     "Facility Default":  An Event of Default that relates directly to one or
      ----------------
more of the Leased Properties and/or the Facilities operated thereon (such as,
for example only and without limitation, an Event of Default arising from a
failure to maintain or repair, or to operate for the Primary Intended Use, or to
maintain the required Authorizations for, one or more of the Facilities), as
opposed to an Event of Default that, by its nature, does not relate directly to
any of the Leased Properties or Facilities (such as, for example only and
without limitation, an Event of Default arising from a breach of Section
                                                                 -------
3.1(a)).
-------

     "Facility Mortgage":  As defined in Article XIII.
      -----------------                  ------------

     "Facility Mortgagee":  As defined in Article XIII.
      ------------------                  ------------

                                      12
<PAGE>

     "Facility Termination":  As defined in Section 40.3.
      --------------------                  ------------

     "Fair Market Added Value:  The Fair Market Value (as hereinafter defined)
      -----------------------
of the applicable Leased Property (including all Capital Alterations), less, if
Tenant has performed and financed a Capital Alteration to add a new building(s)
to such Leased Property, the Fair Market Value of such Leased Property
determined as if any such new building(s) had not been constructed.

     "Fair Market Rental":  The annual amount per annum that a willing tenant
      ------------------
would pay, and a willing landlord would accept, at arm's length, for leasing of
the Leased Properties (or, if applicable, any one or more, but less than all, of
the Leased Properties) for the period of the Term (including, without
limitation, any Extended Terms) remaining from and after the date as of which
the Fair Market Rental is being determined (e.g. as of the Reset Date, in the
case of Section 3.2, and as of the commencement of an Extended Term, in the case
        -----------
of Sections 19.2 and 19.3).  The Fair Market Rental may include therein such
   -------------     ----
escalations of rent as would be paid by such a tenant, and accepted by such a
landlord, as part of an arm's length transaction entered into as of the
aforesaid Fair Market Rental determination date; provided, however, that, in
                                                 --------  -------
addition to such other market factors as may be applicable in determining the
Fair Market Rental, the Fair Market Rental shall be determined on the basis, and
on the assumptions, that (a) the Fair Market Rental may not include therein any
rent, or method of rent calculation, that would adversely affect any landlord by
virtue of it being a real estate investment trust or the ability of any such
landlord to satisfy the requirements for maintaining its status as a real estate
investment trust (and, without limitation of the foregoing, the Fair Market
Rental shall not include any rent that would fail to qualify as "rents from real
property" for purposes of Section 856(d) of the Code), (b) the Fair Market
Rental amount is to be paid absolutely net to the aforesaid landlord, without
any rights of deduction, set-off or abatement, (c) all of the Leased Properties
as to which the Fair Market Rental is being determined are in good condition and
repair (given their respective ages and prevailing health care industry
standards with respect to what is considered good condition and repair), without
any deferred maintenance (but allowing for ordinary wear and tear), are in
material compliance with any and all applicable laws, codes, ordinances and
regulations and have in full force and effect, for the benefit of the aforesaid
tenant, the Facilities and the Leased Properties, any and all necessary or
appropriate material Authorizations for use thereof in accordance with the
respective Primary Intended Uses applicable thereto, (d) the aforesaid tenant
has complied, and shall be required to comply, with the requirements of this
Lease, including, without limitation, Article XXXVI hereof, (e) the respective
                                      -------------
replacement costs of the Leased Properties as to which Fair Market Rental is
being determined are not determinative of the Fair Market Rental of such Leased
Properties, and (f) the aforesaid tenant shall have available to it, with
respect to each Leased Property as to which the Fair Market Rental is being
determined, such remaining Term as then remains, and such number of Extended
Terms as then remain unexercised, with respect to such Leased Property under the
terms of this Lease.  Notwithstanding anything to the contrary contained in this
Lease, "Fair Market Rental" shall take into account, for each of the applicable
Leased Properties, the market conditions, market levels of EBITDARM, the ratio
of market levels of EBITDARM to market levels of rent, and the actual levels of
EBITDARM at the applicable Leased Properties, in each case that are prevailing
or measured,

                                      13
<PAGE>

as applicable, as of the date as of which the Fair Market Rental is being
determined, as well as historical levels of EBITDARM at the applicable Leased
Properties (including the EBITDARM of the Leased Properties measured as of the
Effective Date).

     "Fair Market Value":  The price that a willing buyer not compelled to buy
      -----------------
would pay a willing seller not compelled to sell for the applicable Leased
Property, including all Capital Alterations, and (a) assuming the same is
unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXXV or in such other manner as shall be
                        ------------
mutually acceptable to Lessor and Tenant, and (c) not taking into account any
reduction in value resulting from any indebtedness to which such Leased Property
is subject except as expressly provided hereinbelow.  In determining such Fair
Market Value the positive or negative effect on the value of the Leased Property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any encumbrance which is
not removed at or prior to the closing of the transaction as to which such Fair
Market Value determination is being made shall be taken into account.

     "Fair Market Value Purchase Price":  The Fair Market Value of the Leased
      --------------------------------
Property less the Fair Market Added Value.

     "Fiscal Year":  The twelve (12) month period from January 1 to December 31.
      -----------

     "Final Appraiser":  As defined in Section 35.2.
      ---------------                  ------------

     "Fixed Term":  As defined in Article I.
      ----------                  ---------

     "Fixtures":  As defined in Article I.
      --------                  ---------

     "Guarantor":  Each subtenant that is an Affiliate of Tenant to which a
      ---------
Leased Property or any portion thereof is subleased, including, without
limitation, as of the Effective Date, the Affiliates of Tenant that are
referenced on Schedule 40.12 attached hereto and incorporated herein.
              --------------

     "Impositions": Shall mean for each applicable Leased Property collectively,
      -----------
all taxes (including, without limitation, all taxes imposed under the laws of
the State, as such laws may be amended from time to time, and all ad valorem,
sales and use, single business, gross receipts, transaction privilege, rent or
similar taxes as the same relate to or are imposed upon any rents from the
applicable Leased Property or upon Tenant or its business conducted upon the
applicable Leased Property, but excluding any tax based on the net income or net
profit of Lessor derived from any such rents), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents arising under any of the Existing
Ground Leases, water, sewer or other rents and charges, excises, tax levies,
fees (including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character in respect of the applicable Leased Property or any rents
therefrom or the business conducted

                                      14
<PAGE>

thereon by Tenant (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon (a) Lessor or Lessor's interest in such Leased Property, (b) such Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, an activity conducted on, or in connection with such Leased Property
or the leasing or use of such Leased Property or any part thereof by Tenant;
provided, however, nothing contained in this Lease shall be construed to require
Tenant to pay (1) any tax based on net income (whether denominated as a
franchise or capital stock or other tax) imposed on Lessor or any other person
or (2) any transfer, or net revenue tax of Lessor or any other person or (3) any
tax imposed with respect to the sale, exchange or other disposition by Lessor of
the applicable Leased Property or the proceeds thereof, except to the extent
that any tax, assessment, tax levy or charge, which Tenant is obligated to pay
pursuant to the preceding provisions of this definition and which is in effect
at any time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu thereof.

     "Indemnity Agreement":  That certain Agreement of Indemnity-Third Party
      -------------------
Leases, dated as of April 30, 1998, from Tenant and its Affiliates to Ventas,
Inc., which Indemnity Agreement remains in full force and effect in accordance
with its terms and is hereby reaffirmed and ratified.

     "Insurance Requirements":  All terms of any insurance policy required by
      ----------------------
this Lease with respect to the applicable Leased Property and all requirements
of the issuer of any such policy.

     "Land":  As defined in Article I.
      ----                  ---------

     "Lease":  As defined in the preamble hereof.
      -----

     "Lease Guaranty":  A guaranty of certain obligations of Tenant under this
      --------------
Lease executed and delivered by each Guarantor substantially in the form of
Exhibit G annexed hereto.
---------

     "Lease Year": shall mean May 1 through April 30 of each year of the Term.
      ----------

     "Leased Improvements"; "Leased Property"; "Leased Properties":  Each as
      -------------------    ---------------    -----------------
defined in Section 1.1.
           -----------

     "Leasehold Mortgage":  As defined in Section 22.2(a).
      ------------------                  ---------------

     "Leasehold Mortgagee":  As defined in Section 22.2(b).
      -------------------                  ---------------

     "Leases":  Collectively, this Lease, all of those certain leases listed in
      ------
Exhibit E attached hereto, and any New Master Lease entered into pursuant to
---------
Section 40.17 of this Lease and the corresponding section of any of the
-------------
aforesaid other leases.

                                      15
<PAGE>

     "Legal Requirements":  As to the applicable Leased Property, all federal,
      ------------------
state, county, parish, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions affecting
such Leased Property or the maintenance, construction, use, operation or
alteration thereof, whether now or hereafter enacted and in force, including,
without limitation, (i) any licensure requirements, certification requirements
under applicable federal and/or state cost reimbursement programs, including
Medicare and Medicaid (provided the applicable Facility participates in such
reimbursement), building codes and zoning regulations, (ii) any which may (x)
require repairs, modifications or alterations in or to such Leased Property or
(y) in any way adversely affect the use and enjoyment thereof, and (iii) all
permits, licenses, certificates of need, authorizations and regulations
necessary to operate such Leased Property for its Primary Intended Use.

     "Lending Institution":  Any insurance company, federally insured commercial
      -------------------
or savings bank, national banking association, savings and loan association,
credit union, employees' welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, endowment
fund, real estate investment trust, or other institutional lender or financial
enterprise, including, without limitation, any corporation qualified to be
treated for federal tax purposes as a real estate investment trust, having a net
worth of at least $50,000,000 acting on its own behalf or as agent on behalf of
other Lending Institutions.

     "Lessor":  Ventas Realty, Limited Partnership, a Delaware limited
      ------
partnership and its successors and assigns.

     "Lessor Credit Agreement": As defined in Section 22.6(b).
      -----------------------                 ---------------

     "Lessor's Management Group":  As defined in Section 1.3.3.1.
      -------------------------                  ---------------

     "LIBO Rate":  On any day, the offered rate per annum for Dollar deposits in
      ---------
the London Interbank Offered Market for contracts with a three-month term, as
reported in The Wall Street Journal on the last Business Day of the calendar
            -----------------------
month immediately preceding such day.  If The Wall Street Journal shall cease to
                                          -----------------------
report such offered rate, then the LIBO Rate, on any day, shall be the aforesaid
offered rate per annum as of the last Business Day of the calendar month
immediately preceding such day, determined by Citibank, N.A., or any successor
thereof, as the aforesaid offered rate per annum as of such last Business Day.
If the aforesaid offered rate is determined by reference to The Wall Street
                                                            ---------------
Journal, the same shall be based upon the effective rate per annum for the
-------
aforesaid contracts entered into such number of days prior to the day for which
the aforesaid offered rate is being reported by The Wall Street Journal as is
                                                -----------------------
used by The Wall Street Journal.  If the aforesaid offered rate is determined
        -----------------------
based upon the rate determined by Citibank, N.A., or any successor thereof, the
same shall be based upon the effective rate per annum for the aforesaid
contracts entered into as of approximately 11:00 a.m. (London time) two (2)
Business Days prior to the day for which the aforesaid offered rate is being
determined by Citibank, N.A., or any successor thereof.

     "Litigation Costs":   All costs reasonably incurred by Lessor in connection
      ----------------
with the enforcement of any provision of this Lease and/or in connection with
any third-party claim against Lessor or any Leased Property arising on account
of or in connection with any default

                                      16
<PAGE>

or Event of Default hereunder by Tenant, including, without limitation, costs
reasonably incurred by Lessor in investigating, settling and/or prosecuting
claims and for attorney's and legal assistant fees and expenses, court costs and
fees and consultant and witness fees and expenses.

     "Master Lease Leased Properties":  The Leased Properties under Amended and
      ------------------------------
Restated Master Lease Agreement No. 1 dated as of the Effective Date and entered
into by Ventas Realty, Limited Partnership and Tenant, exclusive of any Leased
Properties that, pursuant to Section 40.17 below, are transferred into a New
                             -------------
Master Lease in accordance with the requirements of such Section 40.17.
                                                         -------------

     "Medicaid":  A state program of medical aid established under Title XVIII
      --------
of the Social Security Act of 1965, as amended, and any successor statute
thereto and any successor programs.

     "Medicare":  The program of medical care benefits provided under Title
      --------
XVIII of the Social Security Act of 1965, as amended, and any successor statute
thereto and any successor programs thereto.

     "New Lease":  As defined in Section 40.15.
      ---------                  -------------

     "New Master Lease":  As defined in Section 40.17.
      ----------------                  -------------

     "1998 Plan of Reorganization":  As defined in Section 16.11.
      ---------------------------                  -------------

     "Non-Capital Alterations":  As defined in Section 10.4.
      -----------------------                  ------------

     "Officer's Certificate":  A certificate of Tenant signed by the chairman of
      ---------------------
the board of directors, the president, any vice president, the secretary, the
treasurer, the chief operating officer, the chief financial officer, the general
counsel or any other officer authorized to so sign by the board of directors or
by-laws of Tenant, or the general partner of Tenant or the managing member of
Tenant, as applicable, or any other person whose power and authority to act has
been authorized by delegation in writing by any person duly authorized to make
such delegation of authority.

     "Operator":  As defined in the preamble hereof.
      --------

     "Overdue Rate":  On any date, a rate equal to 2% per annum above the Prime
      ------------
Rate, but in no event greater than the maximum rate then permitted under
applicable law, provided, however, that, upon the occurrence of any Event of
Default, the Overdue Rate, when applied to any Accrued Rent, Accrued Rent
Interest or Unpaid Accrued Rent, shall equal, on any date, a rate equal to the
LIBO Rate plus 700 basis points per annum (provided, however, that such 700
basis points number shall be changed to 650 basis points, if, on or prior to
June 30, 2001, the reference to "2.5%" contained in Section 2.02(b) of the
Tenant Senior Secured Credit Agreement is amended to refer to "2.0%"), but in no
event greater than the maximum rate

                                      17
<PAGE>

then permitted under applicable law. Interest at the aforesaid rates shall be
determined for actual days elapsed based upon a 360 day year.

     "Paragraph Seven Notification Period":  As defined in Section 40.14.
      -----------------------------------                  -------------

     "Partial Expiration/Termination Date":  As defined in Section 40.16.
      -----------------------------------                  -------------

     "Partial Expiration/Termination Days":  As defined in Section 40.16.
      -----------------------------------                  -------------

     "Patient Revenues":  Revenues generated from the sale of goods or services
      ----------------
at or through the Leased Properties, whether by Tenant or any subtenant or
licensee of Tenant, or any other party, which revenues are primarily derived
from services provided to patients (including, without limitation, revenues
received or receivable for the use of or otherwise by reason of all rooms, beds
and other facilities provided, meals served, services performed or goods sold at
the Leased Properties, but excluding revenues received by Tenant as rent or
other consideration from a permitted assignment of this Lease or any part
thereof or a permitted sublease of any Leased Property(ies) or any part
thereof), and which revenues shall be measured and computed using substantially
the same methodology as during the period between April 30, 1998 and the
Effective Date and net of contractual adjustments of governmental and other
third party payors.

     "Payment Date":  Any due date for the payment of the installments of any
      ------------
component of Rent payable under this Lease.

     "Permissible Reduction Percentage":  As defined in Section 16.1.
      --------------------------------                  ------------

     "Permitted Alteration":  Any Capital Alteration or Non-Capital Alteration
      --------------------
to a Facility or Leased Property that is permitted pursuant to the terms of this
Lease.

     "Permitted Encumbrances": (a) all easements, covenants, conditions,
      ----------------------
restrictions, agreements and other matters with respect to the Leased Properties
that are of record as of the Commencement Date; (b) all easements, covenants,
conditions, restrictions, agreements and other matters with respect to the
Leased Properties, whether or not of record, that are executed by Tenant or
approved or consented to in writing by Tenant; (c) any easement or utility
agreement entered into by Lessor with respect to a Leased Property(ies) after
the Effective Date, subject to Tenant's consent, in its sole discretion; (d) any
agreement required pursuant to any Legal Requirement entered into by Lessor with
respect to a Leased Property(ies) after the Effective Date, subject to Tenant's
consent, not to be unreasonably withheld, conditioned or delayed;  (e) any
matter affecting title to the Leased Properties or any portion thereof that is
permitted under Section 7.3 or Section 9.2; and (f) any other matters affecting
                -----------    -----------
title to the Leased Properties or any portion thereof caused by Tenant or its
assignees or sublessees or their respective agents or employees, provided,
                                                                 --------
however, that, for purposes of Section 24.1 below, "Permitted Encumbrances"
-------                        ------------
shall not include any Superior Lease (other than the Existing Ground Leases),
any Facility Mortgage or other lien created by Lessor or its agents or employees
or any Leasehold Mortgage and, for purposes of Section 8.3 below, "Permitted
                                               -----------

                                      18
<PAGE>

Encumbrances" shall not include any Superior Lease, any Facility Mortgage or
other lien created by Lessor or its agents or employees or any Leasehold
Mortgage.

     "Person":  Any individual, sole proprietorship, corporation, general
      ------
partnership, limited partnership, limited liability company or partnership,
joint venture, association, joint stock company, bank, trust, estate,
unincorporated organization, any federal, state, county, or municipal government
(or agency or political subdivision thereof), endowment fund or other form of
entity.

     "Plans and Specifications":  As defined in Section 10.1.
      ------------------------                  ------------

     "Previous Period Unreported Claims":  As defined in Section 13.1.4.
      ---------------------------------                  --------------

     "Primary Intended Use":  As defined in Section 7.2.2.
      --------------------                  -------------

     "Prime Rate":  On any date, a rate equal to the annual rate on such date
      ----------
announced by Citibank, N.A., or any successor thereof, to be its prime rate.

     "Prior Period Base Rent":  As of any date after April 30, 2002, the Base
      ----------------------
Rent that was in effect immediately prior to the commencement of the Rent
Calculation Year containing such date.

     "Prior Period Current Rent":  As of any date after April 30, 2003, the
      -------------------------
Current Rent that was in effect immediately prior to the commencement of the
Rent Calculation Year containing such date.

     "Property Transfer Date":  As defined in Section 40.15.
      ----------------------                  -------------

     "Purchase Option EBITDAR":  As defined in Section 16.12.5.
      -----------------------                  ---------------

     "Qualified Arbitrator":  As defined in Section 22.6(c).
      --------------------                  ---------------

     "Qualified Successor":  As defined in Section 40.3.
      -------------------                  ------------

     "Recipient":  As defined in Section 40.14.
      ---------                  -------------

     "Refinancing Transaction": The occurrence of any of the following:(i) any
      -----------------------
transaction pursuant to which all or substantially all of the indebtedness of
Tenant under the Tenant Senior Secured Credit Agreement or Tenant Senior Secured
Notes is purchased by Tenant or any Affiliate thereof, or by anyone else at the
direction of Tenant or any such Affiliate, or is repaid; (ii) any amendment of
the Tenant Senior Secured Credit Agreement or Tenant Senior Secured Notes
pursuant to which either (x) the principal amount of Tenant's indebtedness
thereunder (as such indebtedness is in effect immediately prior to such
amendment) is increased (excepting therefrom increases attributable to the
capitalization of accrued interest or protective advances by the Senior Lender),
or (y) the loan amount, maturity or other material terms and conditions thereof
(as such terms and conditions are in effect immediately prior to such amendment)
are modified to match, better or otherwise respond to the terms and

                                      19
<PAGE>

conditions of alternative financing which has been offered to Tenant; (iii) any
bona fide, binding offer is made to Tenant to provide financing on terms better
than those of the Tenant Senior Secured Credit Agreement and Tenant Senior
Secured Notes, sufficient to (x) pay in full, or purchase at or above par, all
of the indebtedness of Tenant under the Tenant Senior Secured Credit Agreement
or Tenant Senior Secured Notes and (y) pay in full all Unpaid Accrued Rent owing
as of such date, whether or not such offer is accepted or consummated; and (iv)
the termination or expiration of this Lease; provided, however, if such
                                             --------  -------
termination occurs in connection with the creation of a Separate Lease under
Section 22.7 hereof, such termination shall not constitute a "Refinancing
------------
Transaction" and provided, further, that, if such termination or expiration
occurs prior to the occurrence of one of the events described in clauses (i)
through (iii) above, then, notwithstanding that a Refinancing Transaction shall
have occurred and the Unpaid Accrued Rent Due Date shall thereby be triggered,
until one of the events described in clauses (i) through (iii) above shall have
occurred, Lessor's right to receive, and receipt of, payment of Accrued Rent and
Unpaid Accrued Rent only, but not any other component of Rent or other amount
due to Lessor hereunder, shall be subordinate to the Senior Lender's right to
receive, and receipt of, payment of the indebtedness of Tenant under the Tenant
Senior Secured Credit Agreement and Tenant Senior Secured Notes and, upon the
occurrence of one of the events described in clauses (i) through (iii) above,
such subordination shall automatically terminate; and provided further that all
amounts received by Lessor from or for the account of Tenant with respect to
amounts due under this Lease shall, notwithstanding any characterization thereof
by Tenant, be first applied against Current Rent, Additional Charges and other
amounts then due from Tenant under this Lease (excluding Accrued Rent and Unpaid
Accrued Rent), until each of the foregoing is paid in full, before any such
amount is applied against Accrued Rent or Unpaid Accrued Rent. Notwithstanding
anything to the contrary contained herein, the term "Refinancing Transaction"
shall not include any forbearance, standstill agreement, extension of maturity
or other amendment of the Tenant Senior Secured Credit Agreement or Tenant
Senior Secured Notes entered into in order to facilitate a workout of defaults
or imminent defaults by Tenant.

     "Registration Rights Agreement":  As defined in Section 40.14.
      -----------------------------                  -------------

     "Reimbursement Period":  As defined in Section 40.3.
      --------------------                  ------------

     "REIT":  As defined in Section 36.1.1.
      ----                  --------------

     "REIT Requirements":  As defined in Section 36.1.1.
      -----------------                  --------------

     "Renewal Group":  As defined in Section 19.1 hereof.
      -------------                  ------------

     "Rent":  Collectively, Current Rent, Unpaid Accrued Rent and Additional
      ----
Charges (as defined in Section 3.3 hereof).
                       -----------

     "Rent Calculation Year":  A period from May 1 of any year through April 30
      ---------------------
of the following year.

                                      20
<PAGE>

     "Rent Stipulation":  That certain Stipulation and Order Pursuant to Section
      ----------------
365 of the Bankruptcy Code regarding Vencor, Inc., Vencor Operating, Inc. and
Vencor Nursing Centers Limited Partnership's Performance of Obligations under,
and Extending the Time within which Vencor, Inc., Vencor Operating, Inc. and
Vencor Nursing Centers Limited Partnership May Accept or Reject, Certain
Agreements between Vencor, Inc., Vencor Operating, Inc., Vencor Nursing Centers
Limited Partnership,  Ventas, Inc. and Ventas Realty, Limited Partnership dated
September 13, 1999 and entered by the Bankruptcy Court in the bankruptcy
proceedings of Tenant on September 13, 1999, at docket no. 43, as the same may
heretofore have been, or hereafter may be, amended by Lessor and Tenant, each
acting in its sole discretion.

     "Reset Date":  As defined in Section 3.2.
      ----------                  -----------

     "Reset Exercise and Payment Date":  As defined in Section 3.2.
      -------------------------------                  -----------

     "Reset Fee":  As defined in Section 3.2.
      ---------                  -----------

     "Reset Option":  As defined in Section 3.2.
      ------------                  -----------

     "Second Lease": As defined in Section 40.18.
      ------------                 -------------

     "Section 1.3.3.1 Claim":  As defined in Section 1.3.3.1.
      ---------------------                  ---------------

     "Section 16.10.3.1 New Lease Transaction": As defined in Section 16.10.3.1.
      ---------------------------------------                 -----------------

     "Section 16.10.1 Number": As defined in Section 16.10.1.
      ----------------------                 ---------------

     "Section 16.10.2.3 Proviso": As defined in Section 16.10.2.3.
      -------------------------                 -----------------

     "Section 16.10.3.2 Number":  As defined in Section 16.10.3.2.
      ------------------------                  -----------------

     "Section 16.10.3.3 Lease": As defined in Section 16.10.3.3.
      -----------------------                 -----------------

     "Section 16.12 Notice":  As defined in Section 16.12.2.
      --------------------                  ---------------

     "Section 40.3 Notice":  As defined in Section 40.3.
      -------------------                  ------------

     "Section 40.18 Date": As defined in Section 40.18.
      ------------------                 -------------

     "Section 40.18 Lease": As defined in Section 40.18.
      -------------------                 -------------

     "Senior Lender":  The lender(s) under the Tenant Senior Secured Credit
      -------------
Agreement and Tenant Senior Secured Notes, from time to time.

     "Senior Officer's Certificate":  An Officer's Certificate of Tenant signed
      ----------------------------
by the chairman of the board of directors, the president, the chief operating
officer or the general counsel of Tenant, or a Person having such title or the
equivalent thereof in the general partner or the managing member of Tenant.

                                      21
<PAGE>

     "Separate Lease":  As defined in Section 22.7.
      --------------                  ------------

     "State":  The State or Commonwealth in which the applicable Leased Property
      -----
is located.

     "Sublease Rent Payments":  As defined in Section 25.1.7.
      ----------------------                  --------------

     "Sub-Portfolio Properties":  As defined in Section 40.17.
      ------------------------                  -------------

     "Subsidiaries":  The corporations or other entities of which securities or
      ------------
similar ownership interests representing (i) ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
or (ii) a majority of the economic interest therein, are at the time directly or
indirectly owned by Tenant or any Guarantor (individually, a "Subsidiary").

     "Superior Lease": Any ground lease or other lease to which the applicable
      --------------
Leased Property is subject.

     "Superior Lessor":  The lessor under any ground lease or other lease to
      ---------------
which the applicable Leased Property is subject.

     "Superior Mortgage":  As defined in Section 21.1.
      -----------------                  ------------

     "Superior Mortgagee":  As defined in Section 21.1.
      ------------------                  ------------

     "Suspension Period":  As defined in Section 40.14.
      -----------------                  -------------

     "Taking":  A taking or voluntary conveyance during the Term of all or part
      ------
of the applicable Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of any condemnation
or other eminent domain proceeding affecting such Leased Property whether or not
the same shall have actually been commenced.

     "Tax Refund Escrow Agreement":  The Tax Refund Escrow Agreement referenced
      ---------------------------
in the Bankruptcy Plan, as the same is hereafter amended, modified or
supplemented, in each case with the written consent of Lessor, in its sole
discretion.

     "Tenant":  As defined in the preamble hereof.
      ------

     "Tenant Senior Secured Credit Agreement":  That certain Credit Agreement
      --------------------------------------
Providing for the Issuance of $300,000,000 Senior Secured Notes Due 2008 dated
as of the Effective Date between Tenant and the lenders party thereto and Morgan
Guaranty Trust Company of New York, as Collateral Agent and Administrative
Agent, and any amendment thereof following the Effective Date that does not
constitute a Refinancing Transaction.

                                      22
<PAGE>

     "Tenant Senior Secured Notes":  The "Notes" (as defined in the Tenant
      ---------------------------
Senior Secured Credit Agreement)  dated as of the Effective Date made by Vencor
Operating, Inc. payable to the order of the Lenders that are parties to the
Tenant Senior Secured Credit Agreement and any amendment thereof following the
Effective Date that does not constitute a Refinancing Transaction.

     "Tenant Shares":  As defined in Section 40.14.
      -------------                  -------------

     "Tenant's Personal Property":  All motor vehicles, machinery, equipment,
      --------------------------
furniture, furnishings, movable walls or partitions, computers or trade fixtures
or all other personal property, and consumable inventory and supplies, now owned
or hereafter acquired by Tenant and located on the applicable Leased Property or
used or useful in Tenant's business on such Leased Property, including without
limitation all modifications, replacements, alterations and additions to such
personal property installed at the expense of Tenant, except items, if any,
included within the definition of Fixtures.

     "Term":  Collectively for each applicable Leased Property,   the Fixed Term
      ----
and any Extended Terms, to the extent properly exercised pursuant to the
provisions of Article XIX, unless earlier terminated pursuant to the provisions
              -----------
of this Lease.

     "Transferred Property(ies)":  As defined in Section 40.15.
      -------------------------                  -------------

     "Transferred Property Percentage(s)":  As defined in Section 40.15.
      ----------------------------------                  -------------

     "Unaffiliated Buyer":  As defined in Section 40.17.
      ------------------                  -------------

     "Unavoidable Delays":  Delays due to strikes, lockouts, inability to
      ------------------
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto unless such lack of funds is caused by the failure of the
other party hereto to perform any obligations of such party, under this Lease,
or any guaranty of this Lease, including any obligation to provide financing
undertaken by Lessor pursuant to Article X below.

     "Unpaid Accrued Rent":  As of any date, the amount equal to (a) the sum of
      -------------------
(i) the aggregate amount of all Accrued Rent earned hereunder from the Effective
Date through such date, plus (ii) the aggregate amount of all Accrued Rent
Interest from the Effective Date through such date, less (b) the aggregate
amount of all payments made by Tenant or any other party from and after the
Effective Date on account of Accrued Rent or Accrued Rent Interest.

     "Unpaid Accrued Rent Due Date":  The date that a Refinancing Transaction
      ----------------------------
occurs.

     "Unsuitable For Its Primary Intended Use":  A state or condition of the
      ---------------------------------------
Facility located at the applicable Leased Property such that, by reason of
damage or destruction, or a partial taking by condemnation, in the good faith
judgment of Tenant, the Facility cannot be operated

                                      23
<PAGE>

on a commercially practicable basis for its Primary Intended Use taking into
account, among other relevant factors, the number of usable beds affected by
such damage or destruction or partial taking; provided, however that such
                                              --------  -------
Facility shall not be deemed to be "Unsuitable For Its Primary Intended Use" if
such Leased Property can, within one (1) year after the occurrence of such
damage, destruction or taking, be restored to substantially the same state and
condition as existed immediately prior to such damage, destruction or taking.

     "Vencor":  As defined in the preamble hereof.
      ------

     "Ventas Lessor":  A lessor that is Ventas, Inc. and/or Ventas Realty,
      -------------
Limited Partnership and/or any successor to either of them (by merger or
otherwise) and/or any Affiliate of Ventas, Inc. or Ventas Realty, Limited
Partnership or any such successor.

                                  ARTICLE III

     Section 3.1    Rent.  Tenant shall pay to Lessor, in lawful money of the
                    ----
United States of America which shall be legal tender for the payment of public
and private debts, at Lessor's address set forth in Section 34.1 below or at
                                                    ------------
such other place or to such other person(s), firm(s) or corporation(s) as Lessor
from time to time may designate in writing, Current Rent, Unpaid Accrued Rent
and Additional Charges during the Term, including, without limitation, any
Extended Terms, as hereinafter provided.  Lessor may, by written notice to
Tenant at any time and from time to time, elect to require that Rent (or
portions thereof designated by Lessor) that is payable to Lessor hereunder be
paid by wire transfer of immediately available funds to such wire transfer
account(s) as Lessor may specify in writing.

     (a) Current Rent.  Current Rent shall be payable, in the manner provided in
         ------------
Section 3.1 above, in advance in equal, consecutive monthly installments, on the
-----------
first day of each calendar month of the Term, including, without limitation, any
Extended Terms; provided, however, that, if the Effective Date occurs other than
                --------  -------
on the first day of a calendar month, the first monthly payment of Current Rent
shall be payable on the Effective Date and that the first and last monthly
payments of Current Rent shall be prorated as to any partial month (subject to
adjustment as provided in Section 10.3(b)(iv) below).
                          -------------------

     (b) Unpaid Accrued Rent.  On or before the Unpaid Accrued Rent Due Date,
         -------------------
Tenant shall pay to Lessor, in the manner provided in Section 3.1 above, all
                                                      -----------
Unpaid Accrued Rent.  Tenant shall have the right to prepay all or any portion
of the Unpaid Accrued Rent at any time, provided, however, that any such
                                        --------  -------
prepayment shall be applied first to any past due amounts owing under this Lease
(including, without limitation, any amounts due and owing as the result of an
Event of Default) and the balance to Unpaid Accrued Rent in the reverse order of
accrual (i.e. payments shall be applied first to the most recently accrued
Unpaid Accrued Rent).

     Section 3.2    Option to Reset Base Rent, Current Rent and Accrued Rent.
                    --------------------------------------------------------

     (a) Reset Option.  Lessor shall have the unilateral, one-time right and
         ------------
option (the "Reset Option") to reset the Base Rent, Current Rent and Accrued
Rent for the balance of the

                                      24
<PAGE>

Term (including, without limitation, any Extended Terms) from and after the
Reset Date (as hereinafter defined), on the terms and conditions described in
this Section 3.2.
     -----------

     (b) Reset Proposal Notice.  If Lessor desires to reset the aforesaid
         ---------------------
components of Rent, subject to subsection (c) below, Lessor shall give Tenant
notice (a "Reset Proposal Notice"), on any date that is not prior to the date
           ---------------------
which is ninety (90) days before the fifth anniversary of the Effective Date but
not later than the date which is ninety (90) days after the sixth anniversary of
the Effective Date, that, subject to a determination of the Fair Market Rental
in accordance with the provisions of this Section 3.2, Lessor may be interested
                                          -----------
in resetting the aforesaid components of Rent for the aforesaid balance of the
Term.  The Reset Proposal Notice shall set forth Lessor's proposal of Fair
Market Rental, for the aforesaid balance of the Term, including any escalations
proposed by Lessor, and shall further include Lessor's proposal for an amended
Exhibit C containing Lessor's proposed allocations of Base Rent and Current
---------
Rent, and Transferred Property Percentages, for each of the Leased Properties.
Provided that Lessor exercises the Reset Option pursuant to subsection (e)
below, the date of delivery of the Reset Proposal Notice is referred to herein
as the "Reset Date", provided, however, that, if the Reset Proposal Notice is
                     --------  -------
sent prior to the date which is ninety (90) days after the fifth anniversary of
the Effective Date, the "Reset Date" shall be the date which is ninety (90) days
after the fifth anniversary of the Effective Date.

     (c) No Periodic Reset Proposal Notice Option.  Notwithstanding the
         ----------------------------------------
provisions of subsection (b) above, but subject to Section 40.15(a)(xiv) and
                                                   ---------------------
Section 40.17 hereof, Lessor may not send a Reset Proposal Notice under this
-------------
Lease if Lessor, as lessor under this Lease, has previously sent a Reset
Proposal Notice hereunder.

     (d) Determination of Fair Market Rental and Amended Exhibit C.  Lessor and
         ---------------------------------------------------------
Tenant shall attempt to agree on the Fair Market Rental, and upon an amended
Exhibit C, promptly following the delivery of a Reset Proposal Notice.  If
Lessor and Tenant are not able to agree upon such Fair Market Rental, and upon
an amended Exhibit C, within thirty (30) days after the delivery of the Reset
           ---------
Proposal Notice, an appraisal for the determination thereof under Article XXXV
                                                                  ------------
hereof shall be conducted.  Within thirty (30) days after the expiration of the
first 30-day period referenced above, each party shall give notice to the other
party specifying the name and address of the person meeting the qualifications
set forth in Section 35.3 below designated to act as an appraiser on its behalf.
             ------------
Thereafter, the Fair Market Rental for the balance of the Term (including,
without limitation, any Extended Terms) from and after the Reset Date, and an
amended Exhibit C, shall be determined in accordance with Article XXXV hereof.
                                                          ------------

     (e) Exercise of Reset Option.  If the Fair Market Rental and amended
         ------------------------
Exhibit C, as determined pursuant to subsection (d) above, are acceptable to
Lessor, Lessor may exercise the Reset Option by delivering to Tenant a written
notice to such effect within thirty (30) days following the determination of the
Fair Market Rental, and an amended Exhibit C, as set forth in such subsection
(d), together with payment to Tenant of $2,085,946.00 as the Reset Fee and
interest on the aforesaid $2,085,946.00 at the annual rate of six percent (6%)
for the period from the applicable Reset Date through the date the aforesaid
$2,085,946.00 is paid to Tenant.

                                      25
<PAGE>

In such event, subject to and without limitation of Sections 19.2 and 19.3
                                                    -------------     ----
hereof, (i) the Base Rent, Current Rent and Accrued Rent shall, for the balance
of the Term from and after the Reset Date (including, without limitation, any
Extended Terms), be reset and adjusted, as set forth in the definitions of Base
Rent, Current Rent and Accrued Rent contained in Section 2.1 hereof, using the
                                                 -----------
Fair Market Rental, as so determined including any escalations of rent), in
making such resettings and adjustments (e.g. per such definitions, for the
period following the Reset Date, without limitation of the right of the Final
Appraiser to include within the Fair Market Rental such rent escalations and
accruals, and other rent features, as he or she deems appropriate in connection
with his or her Fair Market Rental appraisals, Accrued Rent shall equal zero),
(ii) effective as of the Reset Date, the aforesaid amended Exhibit C shall
                                                           ---------
replace the existing Exhibit C hereto, (iii) Lessor shall have no further right
                     ---------
or option under this Section 3.2 to reset the aforesaid components of Rent, and
                     -----------
(iv) with respect to the period from and after Lessor's issuance of a Reset
Proposal Notice through and including the day preceding the date (the "Reset
Exercise and Payment Date") Lessor exercises the Reset Option, and pays the
Reset Fee and interest thereon, as aforesaid, Tenant shall continue to pay Base
Rent, Current Rent and Accrued Rent at the times, in the manner and with any
scheduled adjustments therein, in each case as set forth in Section 3.1 hereof,
                                                            -----------
and, upon Lessor's exercise of the Reset Option, and payment of the Reset Fee
and interest thereon, as aforesaid, there shall immediately be due and payable
from Tenant to Lessor such additional amount of Rent as is owing from Tenant to
Lessor, or from Lessor to Tenant such amount as is owing from Lessor to Tenant
on account of any Rent overpayment, for the period from the Reset Date through
the Reset Exercise and Payment Date, after taking into account the resettings
and adjustments referenced in subsection (i) above and the amounts paid by
Tenant with respect to such period on account of Rent owing hereunder as set
forth in this subsection (iv). If Lessor fails to notify Tenant of its exercise
of the Reset Option, and to pay to Tenant the Reset Fee and any interest due and
owing thereon, on or prior to such 30th day, Lessor shall be deemed to have
declined to exercise the Reset Option based upon the Reset Proposal Notice and
Fair Market Rental and amended Exhibit C determinations relating thereto.
Subject to Section 40.15(a)(xiv) and Section 40.17 hereof, such declination by
           ---------------------     -------------
Lessor shall prevent Lessor from thereafter issuing a Reset Proposal Notice
under this Lease in accordance with subsection (b) above.

     (f) Effect of Reset.  Tenant acknowledges and agrees that, in the event
         ---------------
Lessor exercises the Reset Option, Tenant shall thereafter remain obligated to
pay Unpaid Accrued Rent and Additional Charges as provided in Sections 3.1 and
                                                              ------------
3.3 hereof, notwithstanding any resetting of Base Rent, Current Rent and Accrued
---
Rent pursuant to this Section 3.2.
                      -----------

     Section 3.3    Additional Charges.  In addition to Current Rent and Unpaid
                    ------------------
Accrued Rent payable with respect to the Leased Properties, Tenant shall pay and
discharge as and when due and payable the following (collectively "Additional
                                                                   ----------
Charges"):
-------

     (1) Impositions.  Tenant shall pay all Impositions before any fine,
         -----------
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible or, if otherwise required by
law, to Lessor, and shall promptly upon request, furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.  If any
such Imposition may, at the option of the taxpayer, lawfully be paid in

                                      26
<PAGE>

installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), subject to the terms of any applicable Facility Mortgage, Tenant
may exercise the option to pay same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event, shall pay such
installments during the Term as the same may become due and before any fine,
penalty, premium, further interest or cost may be added thereto.

     (2) Utility Charges.  Tenant shall pay all charges for electricity, power,
         ---------------
gas, oil, water, sanitary and storm sewer, refuse collection, medical waste
disposal and other utilities used or consumed in connection with each Leased
Property during the Term.

     (3) Insurance Premiums.  Tenant shall pay all premiums for the insurance
         ------------------
coverage required to be maintained pursuant to Article XIII hereof.
                                               ------------

     (4) Other Charges.  Tenant shall pay all other amounts, liabilities and
         -------------
obligations that Tenant assumes or agrees to pay under this Lease, including,
without limitation, all agreements to indemnify Lessor under Sections 12.1 and
                                                             -------------
24.1 and any and all fees, costs and expenses incurred by Tenant in the
----
operation of its business at the Facility.

     (5) Late Payment of Rent.  If any installment of Current Rent, Unpaid
         --------------------
Accrued Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Lessor or Lessor's agent or assignee) shall not be
paid within five (5) Business Days after its due date, Tenant will pay to Lessor
on demand a late charge (to the extent permitted by law) computed at the Overdue
Rate (or at the maximum rate permitted by law, whichever is the lesser) on the
amount of such installment, from the due date of such installment to the date of
payment thereof.

     To the extent that Tenant pays any Additional Charges to Lessor pursuant to
any requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Charges to the entity to which they would otherwise be due.  If
any Facility Mortgagee shall so require, or if any Additional Charges shall not
be paid to a third party payee within five (5) Business Days after its due date,
Lessor may at any time thereafter, at Lessor's option, require Tenant to deposit
into an escrow account under the sole dominion and control of Lessor (or the
applicable Facility Mortgagee), on the first day of each and every month, an
amount sufficient to insure that such escrow account shall contain an amount
sufficient to make such payment on its next due date, in which event Lessor
shall make all future payments for such expense from the escrow account.  In the
event of any failure by Tenant to pay any Additional Charges when due, Tenant
shall promptly pay and discharge, as Additional Charges, every fine, penalty,
interest and cost that may be added for non-payment or late payment of such
items.  Lessor shall have all legal, equitable and contractual rights, powers
and remedies provided either in this Lease or by statute or otherwise in the
case of non-payment of Rent.

     Section 3.4    Survival.  Tenant's obligation to pay any Rent owing
                    --------
hereunder with respect to any period on or prior to the expiration or
termination of this Lease (including, without limitation, any Extended Terms),
as this Lease applies to any or all of the Leased Properties, shall survive any
such expiration or termination.  Without limitation of the foregoing, Tenant's
obligation to pay Unpaid Accrued Rent that is owing as of the expiration

                                      27
<PAGE>

or termination of this Lease as to any or all of the Leased Properties shall
survive any such expiration or termination, and, following any such expiration
or termination until all Unpaid Accrued Rent is paid in full, Accrued Rent
Interest shall continue to accrue on Unpaid Accrued Rent, and be owing from
Tenant to Lessor, with interest at the Accrued Rent Interest Rate, compounded
annually on April 30 of each year (including, without limitation, years after
any such expiration or termination of this Lease). For example, (a) if this
Lease terminates for any reason on January 1, 2006, (b) as of such date, $100.00
of Unpaid Accrued Rent is owing, but not yet due because the Unpaid Accrued Rent
Due date has not yet occurred, and (c) the Unpaid Accrued Rent Due Date occurs
on January 1, 2007, then, notwithstanding such termination, Tenant shall remain
obligated to pay to Lessor on January 1, 2007 such $100.00 plus Accrued Rent
Interest thereon from January 1, 2006 through January 1, 2007 at the Accrued
Rent Interest Rate and with compounding on April 30, 2006.

     Section 3.5    Net Lease.  The Rent shall be paid absolutely net to Lessor,
                    ---------
without any rights of deduction, set-off or abatement, so that this Lease shall
yield to Lessor the full amount of the installments of Current Rent, Unpaid
Accrued Rent and Additional Charges, throughout the Term, including, without
limitation, any Extended Terms. This Lease is intended to be and shall be
construed as an absolutely net lease pursuant to which Lessor shall not, under
any circumstances or conditions, whether presently existing or hereafter
arising, and whether foreseen or unforeseen by the parties, be required to make
any payment or expenditure of any kind whatsoever or be under any other
obligation or liability whatsoever, except as expressly set forth herein.

     Section 3.6    New Common Stock.  Lessor and Tenant acknowledge that,
                    ----------------
pursuant to the Bankruptcy Plan, on or about the Effective Date Lessor and/or
its designee(s) is receiving certain New Common Stock (as defined in the
Bankruptcy Plan).  Lessor and Tenant acknowledge and agree that (a) such New
Common Stock is being received by Lessor and/or its designee(s) as additional
rent in consideration of the agreement of Lessor, and the lessors under the
other Leases, to enter into the Leases and thereby agree to charge Base Rent as
provided in this Lease and the other Leases, (b) such additional rent is being
paid on or about the Effective Date by the delivery of such New Common Stock to
Lessor or its designee(s), (c) such additional rent is non-refundable by Lessor,
and (d) the delivery of such New Common Stock to Lessor or its designee(s) does
not reduce the amount of Base Rent due and payable hereunder and under the other
Leases.

                                   ARTICLE IV

     Section 4.1    Payment of Impositions.  Subject to Article XII relating to
                    ----------------------
permitted contests, Tenant shall pay all Impositions as set forth in Section
                                                                     -------
3.3.   Tenant's obligation to pay such Impositions shall be deemed absolutely
---
fixed upon the date such Impositions become a lien upon the Leased Property or
any part thereof. Lessor, at its expense, shall, to the extent permitted by
applicable law, prepare and file all tax returns and reports as may be required
by governmental authorities in respect of Lessor's net income, gross receipts,
franchise taxes and taxes on its capital stock, and Tenant, at its expense,
shall, to the extent permitted by applicable laws and regulations, prepare and
file all other tax returns and reports

                                      28
<PAGE>

in respect of any Imposition as may be required by governmental authorities. If
any refund shall be due from any taxing authority in respect of any Imposition
paid by Tenant, the same shall be paid over to or retained by Tenant if no Event
of Default shall have occurred hereunder and be continuing. Any such funds
retained by Lessor due to an Event of Default shall be applied as provided in
Article XVI. essor and Tenant shall, upon request of the other, provide such
-----------
data as is maintained by the party to whom the request is made with respect to
the Leased Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any property covered by
this Lease as personal property, Tenant shall file all personal property tax
returns in such jurisdictions where it may legally so file. Lessor, to the
extent it possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Lessor is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest. Tenant may, upon notice to Lessor, at Tenant's option and at Tenant's
sole cost and expense, protest, appeal, or institute such other proceedings as
Tenant may deem appropriate to effect a reduction of real estate or personal
property assessments and Lessor, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action (including,
without limitation, signing all required forms and documents reasonably
necessary for Tenant to file and prosecute such appeal, protest or other
action), provided that Tenant shall indemnify Lessor from and against all
losses, claims, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising after the Effective Date suffered or
incurred by Lessor and caused by such cooperation, including, without
limitation, signing or providing any such forms and documents). Billings for
reimbursement by Tenant to Lessor of personal property taxes shall be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are made.

     Section 4.2    Notice of Impositions.  Lessor shall give prompt notice to
                    ---------------------
Tenant of all Impositions payable by Tenant hereunder of which Lessor at any
time has knowledge, but Lessor's failure to give any such notice shall in no way
diminish Tenant's obligations hereunder to pay such Impositions.

     Section 4.3    Adjustment of Impositions.  Impositions imposed in respect
                    -------------------------
of the tax-fiscal period during which the Term terminates or expires shall be
adjusted and prorated between Lessor and Tenant, whether or not such Imposition
is imposed before or after such termination or expiration, and Tenant's
obligation to pay its prorated share thereof shall survive such termination or
expiration.

                                   ARTICLE V

     Section 5.1    No Termination, Abatement, etc.  Except as otherwise
                    -------------------------------
specifically provided in this Lease, Tenant, to the extent permitted by law,
shall remain bound by this Lease in accordance with its terms and shall neither
take any action without the consent of Lessor to modify, surrender or terminate
the same, nor seek nor be entitled to any abatement,

                                      29
<PAGE>

deduction, deferment or reduction of Rent, or set-off against the Rent, nor
shall the respective obligations of Lessor and Tenant be otherwise affected by
reason of (a) any damage to, or destruction of, any Leased Property or any
portion thereof from whatever cause or any Taking of any Leased Property or any
portion thereof, (b) the interruption or discontinuance of any service or
utility servicing any Leased Property, (c) the lawful or unlawful prohibition
of, or restriction upon, Tenant's use of any Leased Property, or any portion
thereof, the interference with such use by any person, corporation, partnership
or other entity, or by reason of eviction by paramount title, (d) any claim
which Tenant has or might have against Lessor or by reason of any default or
breach of any warranty by Lessor under this Lease or any other agreement between
Lessor and Tenant, or to which Lessor and Tenant are parties, (e) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee or
transferee of Lessor, (f) any revocation, suspension or non-renewal of any
license, permit, approval or other Authorization necessary to operate any
Facility, (g) any withholding, non-payment, reduction or other adverse change
respecting any Medicare, Medicaid or other reimbursements due or available to
Tenant with respect to any Facility, or (h) for any other cause whether similar
or dissimilar to any of the foregoing other than a discharge of Tenant from any
such obligations as a matter of law. Tenant hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (i) modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof, or (ii) entitle
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Tenant hereunder. The obligations of Lessor and Tenant hereunder
shall be separate and independent covenants and agreements and the Rent and all
other sums payable by Tenant hereunder shall continue to be payable in all
events unless the obligations to pay the same shall be terminated by termination
of this Lease as to any Leased Property other than by reason of an Event of
Default.

                                   ARTICLE VI

     Section 6.1    Ownership of the Leased Properties.  Tenant acknowledges
                    ----------------------------------
that the Leased Properties are the property of Lessor and that Tenant has only
the right to the exclusive possession and use of the Leased Properties upon and
subject to the terms and conditions of this Lease.  Notwithstanding anything to
the contrary contained in this Lease or the Joinder hereto by Ventas, Inc., in
the case of any easement or other rights that are appurtenant to any property
owned by Lessor, Tenant agrees that neither Lessor nor Ventas, Inc. makes any
representation or warranty relative to Lessor's title thereto or whether such
appurtenances are encumbered, and neither Lessor nor Ventas, Inc. shall be
obligated to discharge any liens or encumbrances with respect to, or otherwise
to defend, Lessor's right, title and interest, if any, in any such
appurtenances.  Tenant agrees that such appurtenances shall constitute Permitted
Encumbrances, as to which Tenant shall have the obligations set forth in Section
                                                                         -------
8.3 and Section 24.1 of this Lease, provided that Tenant shall not be obligated
---     ------------
to defend or preserve any such appurtenances against any mortgages or other
liens created by the owner of the property burdened by the aforesaid
appurtenances that are senior in priority to Lessor's aforesaid appurtenant
rights.

                                      30
<PAGE>

     Section 6.2    Tenant's Personal Property.  Tenant may (and shall as
                    --------------------------
provided hereinbelow), at its expense, install, affix or assemble or place on
any parcels of the Land or in any of the Leased Improvements, any items of
Tenant's Personal Property and Tenant shall, subject to the conditions set forth
below and except for any Tenant's Personal Property that is purchased by Lessor
pursuant to Section 37.2 below, remove the same upon the expiration or any prior
            ------------
termination of the Term.  Tenant shall provide and maintain during the entire
Term all such Tenant's Personal Property as shall  be necessary in order to
operate each Facility in compliance with all licensure and certification
requirements, in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use.  Lessor acknowledges that Leasehold Mortgagee has
a security interest in Tenant's Personal Property and, upon the expiration or
earlier termination of this Lease as it relates to a Leased Property, Lessor
agrees to permit Leasehold Mortgagee to enter on such Leased Property in order
to remove such Tenant's Personal Property, so long as Leasehold Mortgagee, at no
expense to Lessor, repairs or causes to be repaired, any damage to such Leased
Property caused by any such removal, and further agrees to subordinate, and
hereby subordinates, to the lien of Leasehold Mortgagee on such Tenant's
Personal Property any lien Lessor has thereon.  All of Tenant's Personal
Property not removed by Tenant or Leasehold Mortgagee within twenty-one days
following the expiration or earlier termination of this Lease with respect to
the applicable Leased Property where such Tenant's Personal Property is located
or sold to Lessor pursuant to Section 37.2 below shall be considered abandoned
                              ------------
by Tenant and Leasehold Mortgagee and may be appropriated, sold, destroyed or
otherwise disposed of by Lessor without first giving notice thereof to Tenant or
Leasehold Mortgagee and without any payment to Tenant or Leasehold Mortgagee and
without any obligation to account therefor or otherwise disposed of in
accordance with applicable law.  Tenant will, at its expense,   restore such
Leased Property to the condition required by Section 9.1(d), including repair of
                                             --------------
all damage to the Leased Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant, Leasehold Mortgagee or Lessor.

                                  ARTICLE VII

     Section 7.1    Condition of the Leased Property.  Tenant acknowledges
                    --------------------------------
receipt and delivery of possession of each Leased Property and that Tenant has
examined and otherwise has knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder.  Tenant is
leasing the Leased Property "as is" in its present condition.  Tenant waives any
claim or action against Lessor in respect of the condition of the Leased
Property.  LESSOR MAKES NO WARRANTY OR REPRESENTATION EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS  FITNESS
FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE AS
TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT
BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.  TENANT ACKNOWLEDGES
THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT.

                                      31
<PAGE>

     Section 7.2    Use of the Leased Property.
                     -------------------------

          Section 7.2.1  Tenant shall maintain or cause to be maintained all
licenses, permits, approvals and other Authorizations needed to use and operate
for its Primary Intended Use (or any other use permitted under the terms of this
Lease) each Leased Property and the Facility located at each such Leased
Property under and in accordance with all applicable local, state and federal
laws and all applicable state and federal programs including but not limited to
appropriate certifications for reimbursement and licensure.  All of such
Authorizations shall, to the maximum extent permitted by law, relate and apply
exclusively to one or more of the Leased Properties and/or the Facilities
operated thereon.  Tenant acknowledges and agrees that, subject to applicable
law, the certificates of need issued for the Facilities are appurtenant to such
Facilities, both during and following the termination or expiration of the Term.
In jurisdictions where the certificate of need is issued to Tenant or its
subtenant, as the Facility operator, Tenant agrees that it shall cooperate with
Lessor, in accordance with Section 40.3 hereof, to turn over all of Tenant's
                           ------------
rights in connection with such certificate of need to Lessor or its designee.

          Section 7.2.2  After the Commencement Date and during the entire Term,
Tenant shall use each Leased Property and the Leased Improvements thereof as a
hospital or a nursing center and each Facility that is being used as a hospital
on the Commencement Date shall continue to be used as a hospital during the
entire Term and each Facility being used as a nursing center on the Commencement
Date shall continue to be used as a nursing center during the entire Term (such
use being the applicable Leased Property's   "Primary Intended Use").  Tenant
                                              --------------------
shall not use the applicable Leased Property or any portion thereof for any
other use without the prior written consent of Lessor, which consent shall not
be unreasonably withheld, delayed or conditioned.  No use shall be made or
permitted to be made of the applicable Leased Property, and no acts shall be
done, that will cause the cancellation of any insurance policy covering such
Leased Property or any part thereof, nor shall Tenant sell or otherwise provide
to occupants or patients therein, or permit to be kept, used or sold in or about
such Leased Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriters regulations.   Tenant
shall, at its sole cost, comply with all of the requirements pertaining to the
applicable Leased Property or other improvements of any insurance board,
association, organization or company necessary for the maintenance of insurance,
as herein provided, covering such Leased Property and Tenant's Personal
Property.

          Section 7.2.3  Tenant shall during the Term operate continuously each
Leased Property in accordance with all applicable federal, state and local laws
as a provider of health care services in accordance with its Primary Intended
Use and maintain its certifications for reimbursement and licensure and its
accreditation, if compliance with accreditation standards is required to
maintain the operations of the Facility and if a failure to comply would
adversely affect operations of the Facility.

          Section 7.2.4  Tenant shall not commit or suffer to be committed any
waste on any Leased Property, or in any Facility, nor shall Tenant cause or
permit any nuisance

                                      32
<PAGE>

thereon. Tenant shall not take or omit to take any action, the taking or
omission of which may materially impair the value or the usefulness of such
Leased Property or any part thereof for its Primary Intended Use.

          Section 7.2.5  Tenant shall neither suffer nor permit any Leased
Property or any portion thereof, including any Capital Alteration whether or not
financed by Lessor, or Tenant's Personal Property, to be used in such a manner
as (i) might reasonably tend to impair Lessor's (or Tenant's, as the case may
be) title thereto or to any portion thereof, or (ii) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the public,
as such, or of implied dedication of the applicable Leased Property or any
portion thereof.

          Section 7.2.6  Nothing contained in this Section 7.2 shall be deemed
                                                   -----------
to prevent Tenant from (i) voluntarily withdrawing from the Medicaid program,
and voluntarily de-activating its certification for participation therein, as
the same apply to a Facility(ies), or (ii) voluntarily reducing the number of
beds at a Facility(ies) as to which a certification for reimbursement under the
Medicaid program is applicable (but without affecting Tenant's certification for
participation in the Medicaid program as to any such Facility(ies) and without
reducing the number of beds at any Facility(ies) as to which a certification for
participation in the Medicaid program is applicable below any legally required
minimum number of beds), or (iii) voluntarily reducing the number of beds at a
Facility(ies) as to which a certification for reimbursement under the Medicare
program is applicable (but without affecting Tenant's certification for
participation in the Medicare program as to any such Facility(ies) and without
reducing the number of beds at any Facility(ies) as to which a certification for
participation in the Medicare program is applicable below any legally required
minimum number of beds), in each case if and so long as, in accordance with any
and all laws, statutes, rules, regulations and orders applicable to the Medicaid
and Medicare programs and certifications for participation therein and to any
such Facility(ies), Tenant or any successor operator of such Facility(ies) may
at any time at its election, without the necessity of any governmental approval
or additional Authorization (other than routine governmental re-inspections of
such Facility(ies) and any ministerial approvals and other Authorizations), as
applicable depending upon whether subsection (i), (ii) and/or (iii) above is
applicable, (a) promptly rejoin the Medicaid program, and re-activate its
certification for participation in the Medicaid program, at any such
Facility(ies) and/or (b) promptly re-activate its certification for
participation in the Medicaid program and/or Medicare program, as applicable, as
to any beds as to which a voluntary reduction under subsection (ii) and/or (iii)
above is applicable.  At the time, and as a condition, of any such voluntary
withdrawal and de-activation, or voluntary reduction, by Tenant and thereafter
within twenty (20) days after receipt of a written request therefor from Lessor
from time to time (but not more often than twice in any calendar year, unless,
after Lessor has made two (2) such requests in a calendar year, a change(s) in
Legal Requirements becomes effective, or Lessor obtains knowledge of other facts
or circumstances, suggesting a possible violation of this Section 7.2.6), Tenant
                                                          -------------
shall deliver to Lessor a Senior Officer's Certificate, in form and substance
reasonably satisfactory to Lessor, certifying that Tenant has made diligent
inquiry relative to the applicable Legal Requirements and has consulted with its
legal counsel and, based on the foregoing, certifies that Tenant has complied,
and continues to comply, with the

                                      33
<PAGE>

provisions of this Section 7.2.6 in connection with such voluntary withdrawal
                   -------------
and de-activation and/or voluntary reduction.

     Section 7.3   Granting of Easements, etc.
                   ---------------------------

          Section 7.3.1 Lessor and Tenant will, from time to time so long as no
Event of Default has occurred and is continuing, at the request of the other
party and at such requesting party's cost and expense (but subject to the
approval of the non-requesting party, which approval shall not be unreasonably
withheld, delayed or conditioned, and provided, however, that if the non-
                                      --------  -------
requesting party has not responded to any such request of the requesting party
within 30 days after receipt thereof, such request shall be deemed approved),
(i) grant easements and other rights in the nature of easements, (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the applicable Leased Property, (iii) dedicate or transfer unimproved
portions of the applicable Leased Property for road, highway or other public
purposes, (iv) execute petitions to have the applicable Leased Property annexed
to any municipal corporation or utility district, (v) execute amendments to any
covenants and restrictions affecting the applicable Leased Property and (vi)
execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interests in the applicable Leased Property), but only upon delivery of all
documentation the non-requesting party reasonably shall deem necessary and, if
Lessor is the requesting party, only if such grant, release, dedication,
transfer, petition or amendment (a) is not detrimental to the proper conduct of
the business of Tenant on the applicable Leased Property and (b) does not
materially reduce the value of the Leased Property, as reasonably determined by
Tenant, and, if Tenant is the requesting party, only if such grant, release,
dedication, transfer, petition or amendment does not materially reduce the value
of the Leased Property, as reasonably determined by Lessor.

          Section 7.3.2 Notwithstanding anything to the contrary contained in
Section 7.3.1, Section 8.3, Section 24.1 or elsewhere in this Lease, in the case
-------------  -----------  ------------
of any easement or license for a cell tower, antenna, satellite dish or other
telecommunications equipment, a parking lot or a billboard or other signage (a)
that is entered into pursuant to Section 7.3.1 hereof at the written request of
                                 -------------
Lessor and (b) from which profit is generated and all of such profit, and any
reimbursements of out of pocket costs and expenses incurred by Lessor in
connection therewith, are payable to Lessor, without any obligation of Lessor to
pay, or credit, any of the same to Tenant, (i) Tenant shall be obligated under
this Section 7.3, Section 8.3, Section 24.1 and the other provisions of this
     -----------  -----------  ------------
Lease only to refrain from taking, and to prevent its assignees and sublessees,
and the agents, employees, contractors, invitees, licensees and concessionaires
of Tenant and its assignees and sublessees, from taking, any action that would
cause or result in a breach, default, violation or termination of any such
easement or license and (ii) Lessor shall protect, indemnify, save harmless and
defend Tenant from and against all out of pocket costs and expenses (including,
without limitation, Litigation Costs), to the maximum extent permitted by law,
incurred by Tenant due to any liabilities, obligations, claims, damages,
penalties or causes of action asserted against Tenant primarily by reason of any
such easement or license and not arising due to any breach by Tenant of its
obligations under subsection (i) above.

                                      34
<PAGE>

                                 ARTICLE VIII

     Section 8.1   Compliance with Legal and Insurance Requirements,
                   -------------------------------------------------
Instruments, etc. Subject to Article XII relating to permitted contests, Tenant,
-----------------            -----------
at its expense, will promptly (a) comply with all material Legal Requirements
and Insurance Requirements in respect of the use, operation, maintenance, repair
and restoration of the applicable Leased Property, whether or not compliance
therewith shall require structural changes in any of the Leased Improvements or
interfere with the use and enjoyment of such Leased Property, and (b) procure,
maintain and comply with all licenses, certificates of need and other
Authorizations required for any use of the applicable Leased Property and
Tenant's Personal Property then being made, and for the proper erection,
installation, operation and maintenance of the applicable Leased Property or any
part thereof, including without limitation any Capital Alterations. In addition,
Tenant shall promptly send to Lessor any material deficiency report Tenant
receives from any federal, state or local licensure board or certification
agency or authority with respect to any Facility if Tenant has not cured such
deficiency within the applicable cure period.

          Section 8.1.1 Authorization Non-Compliance. In the event that Tenant
                        ----------------------------
shall receive notice from any federal, state or local agency or authority that
Tenant is not in compliance with any material Legal Requirement, license,
permit, approval, certificate of need, certification for reimbursement under
Medicare or Medicaid (with respect to any Facility that participates in such
programs) or other Authorization, Tenant shall promptly send notice to Lessor
and Tenant shall either (a) remedy any condition causing such noncompliance
within any cure period allowed therefor by the applicable agency or authority
(or, if no such cure period shall be allowed or specified by the applicable
agency or authority, promptly and diligently following Tenant's receipt of such
notice and, in any event, prior to the final unappealable revocation of any
license, permit, approval, certificate of need, certification for reimbursement
or other Authorization) or (b) prior to the expiration of such cure period (or
if no such cure period shall be allowed or specified by the applicable agency or
authority, promptly following receipt of such notice and, in any event, prior to
the final unappealable revocation of any license, permit, approval, certificate
of need, certification for reimbursement or other Authorization), commence
appropriate proceedings to contest such notice, and, thereafter, diligently
pursue such contest until there is a final unappealable determination, all in
accordance with the provisions of Sections 8.2 and 12.1 hereof.
                                  ------------     ----

     Section 8.2   Legal Requirement Covenants. Subject to the provisions of
                   ---------------------------
Article XII relating to permitted contests, Tenant covenants and agrees that
-----------
none of the Leased Properties nor any of Tenant's Personal Property shall be
used for any unlawful purpose, and Tenant shall acquire and maintain, or cause
to be acquired and maintained, all licenses, certificates, permits, provider
agreements, approvals and other Authorizations needed to operate the applicable
Leased Property in its customary manner for the Primary Intended Use, and any
other use conducted on such Leased Property as may be permitted from time to
time hereunder. Subject to Article XII, Tenant further covenants and agree s
                           -----------
that Tenant's use of each Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times conform to all
applicable local, state, and federal laws, ordinances, rules and regulations
unless the same are held by a court of competent jurisdiction to be

                                      35
<PAGE>

unlawful. Tenant may, however, upon prior written notice to Lessor, contest the
legality or applicability of any law, ordinance, rule or regulation, or any
other Legal Requirement or any licensure, certification or other Authorization
decision (including, without limitation, any notice of non-compliance referred
to in Section 8.1.1 hereof) or other Authorization if Tenant, at Tenant's own
      -------------
expense, maintains such action in good faith, by appropriate proceedings and
with due diligence, and on a regular basis fully informs Lessor of the status
of, and material developments in, any such contest and furnishes Lessor with
such additional documents and information concerning such contest as Lessor may
reasonably request from time to time. If, by the terms of any such law,
ordinance, rule or regulation or any Legal Requirement or any such licensure,
certification or other Authorization decision or any applicable court order or
stay, compliance therewith pending the prosecution of any such proceeding may
legally be delayed (a) without the incurrence of any lien, charge or liability
of any kind against the applicable Facility or Lessor's interest therein, (b)
without any loss of licensure, certification or other Authorization that would
materially and adversely impair Tenant's ability to continue to operate the
affected Facility in accordance with its Primary Intended Use during Tenant's
contest, and (c) without subjecting Lessor to any liability, civil or criminal,
for failure so to comply therewith, Tenant may delay compliance therewith until
the final unappealable determination of such proceeding, provided, however, if
                                                         --------  -------
any such lien, charge or civil or criminal liability would be incurred by reason
of any such delay, Tenant may nonetheless contest as aforesaid and delay as
aforesaid provided that such delay would not subject Lessor to criminal
liability and Tenant (i) furnishes to Lessor security reasonably satisfactory to
Lessor against any loss or injury by reason of such contest or delay, (ii)
prosecutes the contest with due diligence and in good faith, and (iii) keeps
Lessor informed, and provides additional documentation and information, relative
to such contest as described above.  Following the final unappealable
determination of any such proceeding adversely to Lessor or Tenant, Tenant shall
comply with all requirements of such determination in accordance with Section
                                                                      -------
12.1(g).
-------

     Section 8.3   Permitted Encumbrances.
                   ----------------------

          Section 8.3.1 Subject to Section 7.3.2 hereof, Tenant shall, at its
                                   -------------
own cost and expense, fully observe, perform and comply with all Permitted
Encumbrances as the same apply to or bind Lessor or any of the Leased
Properties. Subject to Section 7.3.2 hereof, Tenant shall not cause, or permit
                        -------------
its respective agents, employees, contractors, invitees, subtenants, licensees,
concessionaires or assigns (whether or not permitted hereunder) to cause,
whether by act or omission, any breach of, default under or termination of any
Permitted Encumbrance applicable to or binding upon Lessor or any of the Leased
Properties. Notwithstanding anything to the contrary contained in Section 16.1
                                                                  ------------
or elsewhere in this Lease but subject to Section 7.3.2 hereof, an Event of
                                          -------------
Default shall be deemed to have occurred under this Lease on account of Tenant's
breach of this Section 8.3.1, when, but only if, (a) Tenant's breach of this
               -------------
Section 8.3.1 also results in a breach or default of an obligation under a
-------------
Permitted Encumbrance, (b) such Permitted Encumbrance breach or default is not
cured by Tenant on or prior to the expiration of the cure period, if any,
applicable to such breach or default by the terms of the instrument creating
such Permitted Encumbrance (or such longer cure period as may be expressly
authorized by an order of a court of competent jurisdiction), and (c) on account
of such Permitted Encumbrance breach or default, a real property interest,

                                      36
<PAGE>

or a covenant, condition, restriction, license or other beneficial right,
created under such Permitted Encumbrance and benefiting Lessor or a Leased
Property is terminated or otherwise lost or at material risk of being terminated
or otherwise lost. Lessor agrees that, in the event Lessor receives any written
notice of default from a party to a Permitted Encumbrance, Lessor shall promptly
forward a copy thereof to Tenant. Tenant agrees that, if Lessor, at its option,
elects to cure an Event of Default by Tenant under this Section 8.3.1, such cure
                                                        -------------
shall not excuse Tenant from, or be deemed a cure of, such Event of Default, nor
shall Tenant's reimbursement to Lessor of any costs and expenses incurred by
Lessor in effecting any such cure be deemed a cure of any such Event of Default,
provided, however, that, notwithstanding the foregoing, even after the
--------  -------
occurrence of such an Event of Default by Tenant and/or Lessor's cure thereof,
Lessor agrees to accept Tenant's cure thereof, or reimbursement of Lessor's
costs and expenses to effect such cure, provided, and on the condition, that
Lessor has not, prior thereto, terminated this Lease as it affects the Leased
Property to which such Permitted Encumbrance relates or dispossessed Tenant from
such Leased Property.  Nothing contained in this Section 8.3 shall limit or
                                                 -----------
impair Lessor's indemnification rights under Section 24.1 below.
                                             ------------

          Section 8.3.2 If (a) a Permitted Encumbrance breach or default of the
nature described in Section 8.3.1(a) above occurs, and (b) on account thereof,
                    ----------------
if the same is not cured, the condition referenced in Section 8.3.1(c) above
                                                      ----------------
would, or is likely to, be satisfied, Tenant agrees that, notwithstanding
anything to the contrary contained in Section 17.1 below or elsewhere in this
                                      ------------
Lease, Lessor may, but shall not be obligated to, in its discretion and
regardless of whether Tenant is proceeding to cure, or attempting to cure, the
Permitted Encumbrance breach or default referenced in Section 8.3.1(a) above or
                                                      ----------------
whether the cure period referenced in Section 8.3.1(b) above has expired or is
                                      ----------------
likely to expire before completion of necessary cure efforts, take such actions
as it deems necessary or appropriate to attempt to cure such Permitted
Encumbrance breach or default, provided, however, that, if the breach or default
                               --------  -------
referenced in subsection (a) above has applicable thereto, by the express terms
of the applicable Permitted Encumbrance, a stated period to cure the same,
Lessor agrees not to commence to cure such breach or default unless and until
one-half (1/2) of the aforesaid stated cure period has elapsed. If Lessor so
proceeds to attempt to cure any such Permitted Encumbrance breach or default,
Tenant agrees, within fifteen (15) days following receipt of a written demand
therefor and reasonable supporting documentation, to reimburse Lessor for the
reasonable amount of all costs and expenses incurred by Lessor in curing, or
attempting to cure, any such Permitted Encumbrance breach or default.

                                  ARTICLE IX

     Section 9.1   Maintenance and Repair.
                   ----------------------

     (a)  Tenant, at its expense, shall keep each Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto and which are under
Tenant's control (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
such Leased Property, Tenant's Personal Property, or any portion thereof), and,
except as otherwise provided in Article XIV, shall promptly make all necessary
                                -----------

                                      37
<PAGE>

and appropriate repairs and replacements thereto, of every kind and nature,
whether interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term (concealed or otherwise). All
repairs shall, to the extent reasonably achievable, be made in good, workmanlike
and first-class manner, in accordance with all applicable federal, state and
local statutes, ordinances, by-laws, codes, rules and regulations relating to
such work. Tenant will not take or omit to take any action the taking or
omission of which might materially impair the value or usefulness of the
applicable Leased Property or any part thereof for its Primary Intended Use.

     (b)  Lessor shall not under any circumstances be required to build or
rebuild any improvements on any Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the applicable Leased Property, whether ordinary or extraordinary, structural
or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain any Leased
Property in any way, except as expressly provided herein. Tenant hereby waives,
to the extent permitted by law, the right to make repairs at the expense of
Lessor pursuant to any law in effect at the time of the execution of this Lease
or thereafter enacted.

     (c)  Except as expressly set forth in this Lease, nothing contained in this
Lease and no action or inaction by Lessor shall be construed as (i) constituting
the consent or request of Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to any Leased
Property or any part thereof, or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for, any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in any
Leased Property, or any portion thereof.

     (d)  Tenant will, upon the expiration or prior termination of the Term,
vacate and surrender the applicable Leased Property to Lessor in the condition
in which such Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Tenant to maintain the Leased Property in good order and repair
during the entire Term).

     (e)  Tenant shall establish and maintain any reserve accounts reasonably
required by a Superior Mortgagee for deferred maintenance conditions and for
capital expenditures at the Leased Property.

     Section 9.2   Encroachments. If any of the Leased Improvements on any
                   -------------
Leased Property shall, at any time, encroach upon any property, street or right-
of-way adjacent to such Leased Property, then, promptly upon the request of
Lessor or at the behest of any person

                                      38
<PAGE>

affected by any such encroachment, Tenant shall, at its expense, subject to its
right to contest the existence of any encroachment and, in such case, in the
event of any adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, whether the same shall affect Lessor or Tenant, or (ii)
make such changes in the Leased Improvements, and take such other actions, as
Tenant, in good faith exercise of its judgment deems reasonably practicable, to
remove such encroachment, including, if necessary, the alteration of any of the
Leased Improvements, and in any event take all such actions as may be necessary
in order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated prior to the assertion of such encroachment. Any such
alteration shall be made in conformity with the applicable requirements of
Article X. Tenant's obligations under this Section 9.2 shall be in addition to
---------                                  -----------
and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance and Tenant shall not be entitled to a
credit for any sums recovered by Lessor under any such policy of title or other
insurance.

                                   ARTICLE X

     Section 10.1  Construction of Capital Alterations to the Leased
                   -------------------------------------------------
Property(ies). Tenant shall not, without the prior written consent of Lessor,
-------------
which consent, except as expressly set forth below relative to tie in/connecting
Capital Alterations of the nature described below, shall not be unreasonably
withheld, delayed or conditioned, construct or install Capital Alterations on
any Leased Property. In the event that Tenant wishes to construct or install any
Capital Alteration, Tenant shall submit to Lessor in writing a proposal setting
forth in reasonable detail such Capital Alteration and shall provide to Lessor
for approval such plans and specifications, permits, licenses, contracts,
construction schedules, construction budgets and other information concerning
the proposed Capital Alteration as Lessor may reasonably request showing in
reasonable detail the scope and nature of the Capital Alteration that Tenant
desires to construct (collectively the "Plans and Specifications"). It is the
                                        ------------------------
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such Capital Alteration and the use or uses to
which it will be put. In the event that Lessor consents in writing to any
Capital Alteration, prior to commencing construction of any Capital Alteration,
Tenant shall first request Lessor to provide funds to pay for such Capital
Alteration in accordance with the provisions of Section 10.3. If Lessor
                                                ------------
declines or is unable to provide such financing on terms acceptable to Tenant,
Tenant shall provide to Lessor, prior to commencement of any construction, proof
reasonably acceptable to Lessor that Tenant has sufficient capital to complete
the construction. Furthermore, no Capital Alteration shall be made which would
tie in or connect any Leased Improvements on a Leased Property with any other
improvements on property adjacent to such Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless Tenant shall have obtained the prior
written approval of Lessor, which approval in Lessor's sole discretion may be
granted, withheld, delayed or conditioned. Tenant shall reimburse Lessor for all
reasonable costs and expenses incurred by

                                      39
<PAGE>

Lessor in reviewing the proposal and the Plans and Specifications for a Capital
Alteration and for inspecting the applicable Leased Property and otherwise
monitoring the construction of the Capital Alteration, including, without
limitation, the reasonable cost of engaging consultants to assist Lessor in
connection with any or all of the foregoing.

     Section 10.2  Capital Alterations Financed by Tenant. If Tenant provides
                   --------------------------------------
or arranges such financing, there shall be no adjustment in Base Rent, Current
Rent or Unpaid Accrued Rent by reason of any such Capital Alteration.

     Section 10.3  Capital Alterations Financed by Lessor.
                   --------------------------------------

     (a)  Tenant shall request that Lessor provide or arrange financing for a
Capital Alteration by providing to Lessor such information about the Capital
Alteration as Lessor may reasonably request including without limitation
all information referred to in Section 10.1 above. Lessor may, but shall be
                               ------------
under no obligation to, obtain the funds necessary to meet the request. Within
sixty (60) days after receipt of a request, Lessor shall notify Tenant as to
whether it will finance the proposed Capital Alteration and, if so, the terms
and conditions upon which it would do so, including the terms of any amendment
to this Lease. In no event shall the portion of the projected Capital
Alterations Cost comprised of land, if any, materials, labor charges and
fixtures be less than ninety percent (90%) of the total amount of such cost.
Tenant may withdraw its request by notice to Lessor at any time before or after
receipt of Lessor's terms and conditions. If Tenant desires to accept Lessor's
offer to finance the proposed Capital Alteration, Tenant shall notify Lessor
within thirty (30) days after Tenant's receipt of Lessor's offer.

     (b)  If Lessor agrees to finance the proposed Capital Alteration, Tenant
shall provide Lessor with the following prior to any advance of funds:

          (i)      all customary or other reasonably required loan
     documentation;

          (ii)     any information, certificates, licenses, permits or documents
     requested by either Lessor or any third party lender with whom Lessor has
     agreed or may agree to provide financing which are necessary to confirm
     that Tenant will be able to use the Capital Alteration upon completion
     thereof in accordance with the Primary Intended Use, including all required
     federal, state or local government licenses and approvals;

          (iii)    an Officer's Certificate and, if requested, a certificate
     from Tenant's architect, setting forth in reasonable detail the projected
     (or actual, if available) cost of the proposed Capital Alteration;

          (iv)     an amendment to this Lease, duly executed and acknowledged,
     in form and substance reasonably satisfactory to Lessor and Tenant,
     providing for (1) any change in the Rent that is set forth in Lessor's
     offer to finance and accepted by Tenant, any change in the legal
     description of the Land, and any change in Exhibit C hereof (including any
                                                ---------
     and all allocat ions of Rent and Transferred Property Percentages contained
     therein) that is appropriate on account of any change in the Rent as
     aforesaid

                                      40
<PAGE>

     (specifically, Lessor's and Tenant's agreed upon changes to the Base Rent
     and Current Rent allocable to the affected Leased Property(ies), if any,
     shall be incorporated into an amended Exhibit C, and the Transferred
                                           ---------
     Property Percentages allocable to all of the Leased Properties shall then
     be recalculated and incorporated into such amended Exhibit C) and (2) an y
                                                        ---------
     other Lease amendments as may be necessary or appropriate;

          (v)      a deed (in the customary form used to convey commercial
     properties within the relevant jurisdiction) conveying title to Lessor to
     any land acquired for the purpose of constructing the Capital Alterations
     free and clear of any liens or encumbrances except those approved by
     Lessor, accompanied by a final as-built survey thereof satisfactory to
     Lessor if reasonably required by Lessor;

          (vi)     endorsements to any outstanding policy of title insurance, if
     any, covering the applicable Leased Property or commitments therefor
     satisfactory in form and substance to Lessor (A) updating the same without
     any additional exception except as may be permitted by Lessor; and (B)
     increasing the coverage thereof by an amount equal to the Fair Market Value
     of the Capital Alteration (except to the extent covered by the owner's
     policy of title insurance referred to in subsection (vii) below);

          (vii)    if appropriate, (A) an owner's policy of title insurance
     insuring fee simple title to any land conveyed to Lessor pursuant to
     subsection (v) free and clear of all liens and encumbrances except those
     approved by Lessor and (B) a lender's policy of title insurance
     satisfactory in form and substance to Lessor and the lending institution
     advancing any portion of the Capital Alterations Cost;

          (viii)   if deemed necessary by Lessor, an M.A.I. appraisal of the
     Leased Property indicating that the value of the applicable Leased Property
     upon completion of the Capital Alteration exceeds the Fair Market Value
     thereof prior thereto by an amount not less than 95% of the Capital
     Alterations Cost; and

          (ix)     such other certificates (including, but not limited to,
     endorsements increasing the insurance coverage, if any, at the time
     required by Section 13.1), documents, opinions of counsel, appraisals,
                 ------------
     surveys, certified copies of duly adopted resolutions of the Board of
     Directors of Tenant authorizing the execution and delivery of the lease
     amendment and any other instruments as may be reasonably required by Lessor
     and any lending institution advancing or reimbursing Tenant for any portion
     of the Capital Alterations Cost.

     (c)  Upon making a request to finance a Capital Alteration, if and when
such financing is actually consummated, Tenant shall pay or agree to pay all
reasonable costs and expenses of Lessor and any Lending Institution which has
committed to finance such Capital Alteration paid or incurred by them in
connection with the financing of the Capital Alterations, including, but not
limited to, (i) the reasonable fees and expenses of their respective counsel,
(ii) all printing expenses, (iii) the amount of any filing, registration and
recording taxes and fees, (iv) documentary stamp taxes, if any, (v) title
insurance and survey charges, appraisal

                                      41
<PAGE>

fees, if any, and rating agency fees, if any, (vi) any other applicable
consulting fees (including without limitation engineering and environmental),
and (vii) commitment fees, if any.

     Section 10.4  Non-Capital Alterations. Tenant shall have the right to
                   -----------------------
make additions, modifications or improvements to any Leased Property which are
not Capital Alterations ("Non-Capital Alterations") from time to time as it, in
                          -----------------------
its discretion, may deem to be desirable for its uses and purposes, provided
that such action will not alter the character or purpose or detract from the
value or operating efficiency thereof and will not impair the revenue producing
capability of the affected Leased Property or adversely affect the ability of
Tenant to comply with the provisions of this Lease. The cost of such Non-Capital
Alterations, modifications or improvements to a Leased Property shall be paid by
Tenant.

     Section 10.5  Salvage. All materials which are scrapped or removed in
                   -------
connection with the making of either Capital Alterations permitted by Section
                                                                      -------
10.1 or Non-Capital Alterations permitted by Section 10.4 or repairs required by
----                                         ------------
Article IX shall be or become the property of Lessor or Tenant depending on
----------
which party is paying for, or providing the financing for, such work.

     Section 10.6  Additional Requirements for Capital Alterations and Non-
                   -------------------------------------------------------
Capital Alterations. Tenant shall comply with the following requirements in
-------------------
connection with Permitted Alterations:

     (a)    In the case of Capital Alterations, the Permitted Alteration shall
be made substantially in accordance with the Plans and Specifications submitted
to Lessor, to the extent applicable.

     (b)    The Permitted Alterations and the installation thereof shall comply
with all applicable Legal Requirements and all Insurance Requirements.

     (c)    The Permitted Alterations shall be performed in a good and
workmanlike manner, shall not impair the value or the structural integrity of
the applicable Leased Property, and shall be free and clear of mechanic's liens.

     (d)    Intentionally omitted.

     (e)    Tenant shall, at Tenant's expense, obtain a builder's completed
value risk policy of insurance insuring against the risks of physical loss,
including collapse and transit coverage, in a nonreporting form, covering the
total value of the work performed, and equipment, supplies and materials, and
insuring initial occupancy. Lessor and any Facility Mortgagee shall be
additional named insureds of such policy. Lessor shall have the right to approve
the form and substance of such policy, which approval shall not be unreasonably
withheld, delayed or conditioned.

     (f)    Tenant shall pay the premiums required to increase the amount of
insurance coverages required by Article XIII to reflect the increased value of
                                ------------
the applicable Leased

                                      42
<PAGE>

Property resulting from the Permitted Alterations, and shall deliver to Lessor a
certificate evidencing the increase in coverage.

     (g)    In the case of Capital Alterations, Tenant shall, not less than
sixty (60) days after completion of the Capital Alterations, deliver to Lessor a
revised "as-built" set of Plans and Specifications for the Capital Alterations
in form and substance reasonably satisfactory to Lessor.

     (h)    In the case of Capital Alterations, Tenant shall, not later than
thirty (30) days after Lessor sends an invoice, reimburse Lessor for any
reasonable costs and expenses, including attorneys' fees and architects' and
engineers' fees, incurred in connection with reviewing proposed Capital
Alterations and ensuring Tenant's compliance with the terms of this Article X.
                                                                    ---------

     (i)    All Capital Alterations and Non-Capital Alterations shall, without
payment by Lessor at any time (other than as expressly agreed by Lessor pursuant
to Section 10.3 above), be included under the terms of this Lease and upon
   ------------
expiration or earlier termination of this Lease shall pass to and become the
property of Lessor free and clear of all encumbrances, other than Permitted
Encumbrances.

     (j)    Except as expressly agreed by Lessor and Tenant pursuant to Section
                                                                        -------
10.3(b)(iv) above, (1) there shall be no adjustment in Base Rent, Current Rent
-----------
or Unpaid Accrued Rent by reason of any Capital Alteration or Non-Capital
Alteration and (2) no Capital Alteration or Non-Capital Alteration shall be
treated by Lessor or Tenant as rent, or amounts in lieu of rent, paid by Tenant,
or any other kind of gross income to Lessor, for income tax purposes.

     Section 10.7  Mortgagee's Consent. Tenant shall not commence construction
                   -------------------
of any Capital Alteration until Lessor shall have obtained the consent of any
applicable Facility Mortgagee or Superior Lessor, if such consent is required.
Lessor agrees to use commercially reasonable efforts to obtain promptly any such
consent, if such consent is necessary.

                                  ARTICLE XI

     Section 11.1  Liens. Subject to the provisions of Article XII relating to
                   -----
permitted contests, Tenant will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon any Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of this Lease, (c) liens for those taxes of
Lessor which Tenant is not required to pay hereunder, (d) subleases permitted by
Article XXV, (e) liens for Impositions or for sums resulting from noncompliance
-----------
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are in the
process of being contested as permitted by Article XII, (f) liens of mechanics,
                                           -----------
laborers, materialmen, suppliers or vendors for sums either disputed in good
faith or not yet due, provided that (1) the payment of such sums shall not be
postponed under any related contract

                                      43
<PAGE>

for more than sixty (60) days after the completion of the action giving rise to
such lien and such reserve or other appropriate provisions as shall be required
by law or generally accepted accounting principles shall have been made therefor
or (2) any such liens are in the process of being contested as permitted by
Article XII, and (g) any liens which are the responsibility of Lessor pursuant
-----------
to the provisions of Article XXXVIII. Notwithstanding the foregoing, Tenant
                     ---------------
shall bond over any lien affecting the applicable Leased Property if Lessor
shall reasonably request, or if any applicable Facility Mortgagee shall so
require.

                                  ARTICLE XII

     Section 12.1  Permitted Contests. Tenant, on its own or on Lessor's behalf
                   ------------------
(or in Lessor's name), but at Tenant's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or any lien, attachment, levy, encumbrance, charge or claim not
otherwise permitted by Article XI, provided that (a) in the case of an unpaid
                       ----------
Imposition, lien, attachment, levy, encumbrance, charge, or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Lessor and from the applicable Leased Property, (b) neither the
applicable Leased Property nor any Rent therefrom nor any part thereof or
interest therein would be reasonably likely to be in danger of being sold,
forfeited, attached or lost, (c) in the case of a Legal Requirement, Lessor
would not be in any immediate danger of criminal liability for failure to comply
therewith pending the outcome of such proceedings and the contest provisions of
Section 8.2 have been satisfied, (d) Tenant shall indemnify and hold harmless
-----------
Lessor from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Tenant in connection therewith
or as a result thereof, (e) in the case of a Legal Requirement and/or
Imposition, lien, encumbrance or charge, Tenant shall give such reasonable
security as may be demanded by Lessor to insure ultimate payment of or
compliance with the same and to prevent any sale or forfeiture of the affected
Leased Property or the Rent by reason of such non-payment or non-compliance,
provided, however, the provisions of this Article XII shall not be construed to
--------  -------                         -----------
permit Tenant to contest the payment of Rent (except as to contests concerning
the method of computation or the basis of levy of any Imposition or the basis
for the assertion of any other claim) or any other sums payable by Tenant to
Lessor hereunder, (f) in the case of an Insurance Requirement, the coverage
required by Article XIII shall be maintained, and (g) if such contest is
            ------------
resolved against Lessor or Tenant by a final unappealable determination, Tenant
shall, as Additional Charges due hereunder, pay to the appropriate payee the
amount required to be paid, together with all interest and penalties accrued
thereon, within ten (10) days after such determination (or within such shorter
period as may be required by the terms of such determination), and comply,
within any cure period allowed therefor by the applicable agency or authority
(or if no such cure period shall be allowed or specified by the applicable
agency or authority, promptly and diligently following the effective date of
such determination and, in any event, prior to the final unappealable revocation
of any license, permit, approval, certificate of need, certificate for
reimbursement or other Authorization), with the applicable Legal Requirement,
Insurance Requirement, plan of correction or other remedial requirements of the
applicable agency or authority; provided, however, that this subsection (g) is
                                --------  -------
not intended, and shall not be construed, to afford Tenant any cure or grace

                                      44
<PAGE>

period beyond the effective date of any final unappealable determination, unless
and only to the extent that (i) such determination specifically conditions the
imposition or taking effect of the adverse legal, regulatory or other
consequences in issue upon Tenant's failure to make a specified payment or to
take specified compliance, curative or remedial action following the effective
date of such determination or (ii) Tenant is proceeding diligently and in good
faith to effect an assignment or sublet under Section 25.1.11 hereof and the
                                              ---------------
applicable agency(ies) or authority(ies) is not enforcing such final order,
pending consummation of such assignment or sublet.  Lessor, at Tenant's expense,
shall execute and deliver to Tenant such authorizations and other documents as
may reasonably be required in any such contest, and, if reasonably requested by
Tenant or if Lessor so desires, Lessor shall join as a party therein.  Tenant
shall indemnify and save Lessor harmless against any liability, cost or expense
of any kind that may be imposed upon Lessor in connection with any such contest
and any loss resulting therefrom.

                                 ARTICLE XIII

     Section 13.1   General Insurance Requirements.  During the Term, Tenant
                    ------------------------------
shall at all times keep each Leased Property, and all property located in or on
any Leased Property, including Leasehold Improvements, Fixtures and Tenant's
Personal Property, insured with the kinds and amounts of insurance described
below.  This insurance shall be written by companies authorized to do insurance
business in the State in which the applicable Leased Property is located, which
companies shall have a rating at least as high as the rating required by any
applicable Facility Mortgagee.  The policies must name as loss payee (i) the
holder of any mortgage, deed of trust or other security agreement ("Facility
                                                                    --------
Mortgagee") securing any  Encumbrance placed on the applicable Leased Property
---------
in accordance with the provisions of Article XXXVIII ("Facility Mortgage") by
                                     ---------------   -----------------
way of a standard form of mortgagee's loss payable endorsement or (ii) if no
such Facility Mortgage encumbers the applicable Leased Property, Lessor and, in
the case of any commercial general liability and/or umbrella liability insurance
coverages, must name Lessor and any Superior Mortgagee(s) as additional
insureds.  Losses shall be payable to Lessor and/or Superior Mortgagee as
provided in Article XIV.  Any loss adjustment shall require the written consent
            -----------
of Lessor, Tenant, Leasehold Mortgagee and Facility Mortgagee whenever the loss
exceeds twenty percent (20%) of the Facility's Fair Market Value.  Evidence of
insurance shall be deposited with Lessor and, if requested, with any Superior
Lessor, Leasehold Mortgagee and Facility Mortgagee(s).  If any provision of any
Facility Mortgage requires deposits of insurance premiums to be made with such
Facility Mortgagee, Tenant shall either pay to Lessor monthly the amounts
required and Lessor shall transfer such amounts to each Facility Mortgagee, or,
pursuant to written direction by Lessor, Tenant shall make such deposits
directly with such Facility Mortgagee.  The policies on each Leased  Property,
including the Leasehold Improvements, and Fixtures and Tenant's Personal
Property, shall insure against the following risks:

          Section 13.1.1      Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as "All Risk", including
flood, the backup of sewers and drains, earthquake, breakage of plate glass and
all physical loss perils including but not limited to sprinkler leakage, in an
amount not less than one hundred percent

                                      45
<PAGE>

(100%) of the then full replacement cost thereof (as defined below in Section
                                                                      -------
13.2), subject to no coinsurance requirement or on an agreed amount basis;
----

          Section 13.1.2 Broad form comprehensive boiler and machinery
insurance, on a blanket repair and replace basis, with limits for each accident
in an amount not less than one hundred percent (100%) of the then full
replacement cost (as defined in Section 13.2) of the Leased Property;
                                ------------

          Section 13.1.3 Business Interruption insurance on a Business
Interruption, Gross Profits or Gross Rents form, including all standing charges,
with a period of indemnity of no less than twelve (12) months, resulting from
loss or damage as described in Section 13.1.1 or 13.1.2, subject to no
                               --------------    ------
coinsurance requirement or on an agreed amount basis;

          Section 13.1.4 Claims for bodily injury, including death resulting
therefrom, personal injury and property damage on an occurrence basis, under a
policy of commercial general liability ("CGL") insurance (including, without
limitation, broad form property damage and broad form contractual liability) for
a limit of not less than Fifty Million and No/100 Dollars ($50,000,000.00) per
occurrence, combined single limit.  Relative to the insurance referenced in this
Section 13.1.4, Tenant shall be permitted to use a claims made policy form
--------------
rather than an occurrence based policy form for its primary, and/or its excess
liability, CGL insurance, only if:

     (a)  an occurrence based form of primary or excess liability, as
applicable, CGL insurance policy cannot be obtained solely because occurrence
based forms of primary or excess liability, as applicable, CGL insurance are not
offered in the insurance market place for for-profit hospital and/or nursing
center companies or

     (b)  a majority of the five (5) largest (determined by revenue) companies
(exclusive of Tenant) in the for-profit hospital and/or nursing center industry
maintain claims made forms of primary or excess liability, as applicable, CGL
insurance for their primary or excess liability, as applicable, CGL insurance
policies.

     (For example, relative to the foregoing conditions, if occurrence based
forms of primary CGL insurance are offered in the insurance market place for
for-profit hospital and/or nursing center companies, but Tenant is unable to
obtain an occurrence based form of excess liability CGL insurance solely because
occurrence based forms of excess liability CGL insurance are not offered in the
insurance market place for for-profit hospital and/or nursing center companies,
and a majority of the aforesaid five largest companies maintain occurrence based
forms of primary CGL insurance and claims made forms of excess liability CGL
insurance, a claims made form of excess liability CGL insurance would be
permitted subject to compliance with the other requirements of this Section
                                                                    -------
13.1.4, but a claims made form of primary CGL insurance would not be permitted).
------
Prior to making any such switch to or renewing any claims made policy, Tenant
shall be obligated to provide to Lessor supporting evidence demonstrating the
existence of condition (a) or (b), and the sufficiency of such evidence shall be
subject to the advance written approval of Lessor, in its reasonable discretion.
If Tenant so switches to a claims made form of policy, in addition to complying

                                      46
<PAGE>

with the requirements referenced below in this Section 13.1.4, Tenant shall be
                                               --------------
obligated to switch back to occurrence based coverage at the end of the then
current claims made policy term unless condition (a) or (b) exists as
demonstrated by supporting evidence reasonably approved in advance and in
writing by Lessor.  If Tenant satisfies the above referenced tests for switching
to, or continuing to maintain, a claims made form of policy, any claims made
policy that it purchases must include therein the right to purchase a "tail"
that insures against so called "incurred but not reported claims" for a period
of at least three (3) years following the expiration of such claims made policy.
In addition, from and after any such switch to a claims made form of policy,
Tenant must, after the expiration of each claims made policy that Tenant
obtains, as to each such expiring claims made policy, either:

          (i)  continue to insure Lessor and all Facility Mortgagees and
     Superior Lessors with the required amount of primary and/or excess
     liability, as applicable depending upon the nature of such expiring claims
     made policy, CGL insurance coverage, on a claims made policy form that
     includes coverage against all so-called "incurred but not reported claims"
     relating to any period on or prior to the expiration of the expiring policy
     ("Previous Period Unreported Claims"), an additional ten (10) years
     following the expiration of such expiring claims made policy (which
     coverage may be obtained, for example, (A) through the renewal or rolling-
     over of a claims made based CGL policy providing the required amounts of
     coverage and including coverage against Previous Period Unreported Claims
     for consecutive 1-year periods for such ten (10) year period, or (B)
     through the purchase of a three (3) year claims made based CGL "tail"
     policy providing the required amounts of coverage and including coverage
     against Previous Period Unreported Claims followed by purchases of claims
     made based CGL policies providing the required amounts of coverage and
     including coverage against all Previous Period Unreported Claims for
     consecutive 1-year periods for the remaining seven (7) years of such ten
     (10) year period) (in connection with the purchase of claims made CGL
     insurance coverage pursuant to this subsection (i), any claims made CGL
     insurance coverage that is obtained by Tenant may exclude therefrom any
     claims incurred during any period that an occurrence based form of primary
     or excess liability, as applicable depending on the nature of the expiring
     claims made policy, CGL insurance policy providing the required amounts of
     coverage and insuring Lessor and all Facility Mortgagees and Superior
     Lessors was in effect), or

          (ii) insure Lessor and all Facility Mortgagees and Superior Lessors by
     obtaining the required amount of primary and/or excess liability, as
     applicable, CGL insurance on an occurrence based policy form that includes
     therein as insured claims all claims (x) incurred prior to the inception of
     such occurrence based CGL insurance policy and after the latest of (1) the
     Effective Date, (2) the date that is ten (10) years prior to the inception
     of such occurrence based CGL insurance policy or (3) the day preceding the
     date that Tenant, pursuant to the terms of this Section 13.1.4, first
                                                     --------------
     switched to a claims made form of primary or excess liability, as
     applicable depending on the nature of such expiring claims made policy, CGL
     insurance policy (relative to the period described in this subsection
     (ii)(x), any occurrence based CGL policy that is obtained by Tenant
     pursuant to this subsection (ii) may exclude therefrom any claims

                                      47
<PAGE>

     incurred during any period that an occurrence based form of primary or
     excess liability, as applicable depending on the nature of the expiring
     claims made policy, CGL insurance policy providing the required amounts of
     coverage and insuring Lessor and all Facility Mortgagees and Superior
     Lessors was in effect) and (y) not yet reported prior to such inception;

          Section 13.1.5      Claims arising out of malpractice in an amount not
less than Twenty Five Million and No/100 Dollars ($25,000,000.00) for each
person and for each claim in the aggregate;

          Section 13.1.6      Intentionally Omitted;

          Section 13.1.7      Intentionally Omitted;

          Section 13.1.8 Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, in commercially reasonable amounts acceptable to Lessor for
a limit of not less than Five Million and No/100 Dollars ($5,000,000.00).

     Section 13.2   Replacement Cost.  The term "full replacement cost," as used
                    ----------------
herein, shall mean the actual replacement cost of the property requiring
replacement from time to time including an increased cost of construction
endorsement, without reduction or deduction for depreciation.  Tenant shall have
the full replacement cost redetermined by an accredited appraiser approved by
Lessor (which approval shall not be unreasonably withheld, delayed or
conditioned), hereinafter referred to as "impartial appraiser", every five years
during the Term, and at such other times that either party believes that full
replacement cost has increased or decreased.  Tenant shall forthwith, on receipt
of such determination by such impartial appraiser, give written notice thereof
to Lessor.  The determination of such impartial appraiser shall be final and
binding on the parties hereto, and Tenant shall forthwith increase, or may
decrease, the amount of the insurance carried pursuant to this Section, as the
case may be, to the amount so determined by the impartial appraiser.  Each party
shall pay one-half (1/2) of the fee, if any, of the impartial appraiser.

     Section 13.3   Additional Insurance.  In addition to the insurance
                    --------------------
described above, Tenant shall maintain such additional insurance as may
reasonably be required from time to time by any Facility Mortgagee and, further,
shall at all times maintain adequate worker's compensation insurance coverage
for all persons employed by Tenant on each Leased Property.  Such worker's
compensation insurance shall be in accordance with the requirements of
applicable local, state and federal law.

     Section 13.4   Waiver of Subrogation.  Lessor and Tenant agree that
                    ---------------------
(insofar as and to the extent that such agreement may be effective without
invalidating or making it impossible to secure insurance coverage from
responsible insurance companies doing business in the State) with respect to any
property loss that is covered by insurance then being carried by Lessor or
Tenant, respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss
where such insurance is valid

                                      48
<PAGE>

and collectible respecting any such loss; and they further agree that their
respective insurance companies shall have no right of subrogation against the
other on account thereof, even though extra premium may result therefrom.
Nothing contained herein is intended, nor shall it be construed, to require that
Lessor maintain any insurance coverage.

     Section 13.5   Form Satisfactory, etc.  All of the policies of insurance
                    -----------------------
referred to in this Section shall be written in form satisfactory to Lessor and
any Superior Lessor and Facility Mortgagee and by insurance companies
satisfactory to Lessor and any Superior Lessor and Facility Mortgagee.  Lessor
agrees that it will not unreasonably withhold, delay or condition its approval
as to the form of the policies of insurance or as to the insurance companies
selected by Tenant.  Tenant shall pay all of the premiums therefor not later
than the earlier of the date which is thirty (30) days after Tenant's receipt of
an invoice therefor or the due date of the applicable premium, and shall deliver
such policies or certificates thereof to Lessor prior to their effective date
(and, with respect to any renewal policy, prior to the expiration of the
existing policy), and in the event of the failure of Tenant either to effect
such insurance in the names herein called for or to pay the premiums  therefor,
or to deliver such policies or certificates thereof to Lessor and each Superior
Lessor and Facility Mortgagee at the times required, Lessor shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable to Lessor  upon written demand
therefor, and failure  to repay the same shall constitute an Event of Default
within the meaning of Section 16.1(c).  Each insurer mentioned in this Section
                      ---------------
shall agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Lessor and any Superior Lessor and Facility
Mortgagee, that it will give to Lessor thirty (30) days' written notice before
the policy or policies in question shall be materially altered, allowed to
expire or canceled.

     Section 13.6   Limits; Deductibles.  In the event that either party shall
                    -------------------
at any time deem the limits of the personal injury or property damage public
liability insurance then carried to be either excessive or insufficient or in
the event that Lessor shall at any time deem the deductible amount under any
insurance then carried by Tenant pursuant to this Article XIII to be excessive,
                                                  ------------
the parties shall endeavor to agree on the proper and reasonable limits or
deductible amount, as applicable, for such insurance to be carried; and such
insurance shall thereafter be carried with the limits or deductible amount, as
applicable, thus agreed on until further change pursuant to the provisions of
this Section.  If the parties  shall be unable to agree thereon, the proper and
reasonable limits or deductible amount, as applicable, for such insurance to be
carried shall be determined by an impartial third party selected by the parties.
Nothing herein shall permit the amount of insurance to be reduced below, or the
deductible amount under any insurance carried by Tenant pursuant to this Article
                                                                         -------
XIII to be increased above, the amount or amounts required by any of the
----
Facility Mortgages or by any Superior Lessor.

     Section 13.7   Blanket Policy.  Notwithstanding anything to the contrary
                    --------------
contained in this Section but subject to any requirements of any applicable
Facility Mortgagee, Tenant's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant; provided, however, that
                                                        --------  -------
the coverage afforded Lessor will not be reduced or diminished or otherwise be

                                      49
<PAGE>

different from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
                                                              ------------
otherwise satisfied.  Lessor agrees that the blanket coverage described in
Schedule 13.7 attached hereto and incorporated herein satisfies the requirements
-------------
of Section 13.1 as of February 23, 2001.
   ------------

     Section 13.8   No Separate Insurance.  Tenant shall not on Tenant's own
                    ---------------------
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article, or increase the amounts of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Lessor and all Superior Lessors and Facility Mortgagees,
are included therein as additional insureds, and the loss is payable under said
insurance in the same manner as losses are payable under this Lease.  Tenant
shall immediately notify Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional policy or additional policies.

     Section 13.9   Survival.  All of Tenant's obligations under this Article
                    --------                                          -------
XIII or otherwise relating to obtaining, and maintaining, claims made coverages,
----
and/or switching back to occurrence based coverage, shall survive the expiration
or termination of this Lease as it applies to any or all of the Leased
Properties.

                                  ARTICLE XIV

     Section 14.1   Insurance Proceeds.  All proceeds payable by reason of any
                    ------------------
loss or damage to the applicable Leased Property, or any portion thereof, and
insured under any policy of insurance required by Article XIII (excluding
                                                  ------------
Business Interruption Insurance, as described in Section 13.1.3, covering
                                                 --------------
Tenant's obligations under this Lease for the payment of Rent, the disposition
of the proceeds of which is described below) shall be paid to Lessor or a third
party designated by Lessor and held by Lessor or such third party in trust and
shall be made available for reconstruction or repair, as the case may be, of any
damage to or destruction of the Leased Property, or any portion thereof, and
shall be paid out by Lessor or such third party from time to time for the
reasonable costs of such reconstruction or repair.  Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction
shall be paid to Tenant upon completion of any such repair and restoration,
except that, in the event neither Lessor nor Tenant is required or elects to
repair and restore as aforesaid, all such insurance proceeds shall be retained
by Lessor free and clear (except as otherwise provided in Section 14.2.4).  All
                                                          --------------
salvage resulting from any risk covered by insurance shall belong to Lessor
except that any salvage  relating to Tenant's Personal Property shall belong to
Tenant.  All proceeds of the aforesaid Business Interruption Insurance shall be
paid to Lessor or a third party designated by Lessor and held by Lessor or such
third party in trust.  Business Interruption Insurance proceeds shall be applied
first towards payment of any Rent that is due to Lessor as of the date such
proceeds are received by Lessor or such third party, and the balance of such
proceeds shall be immediately paid to Tenant, except if and to the extent that
the same have been paid by the insurer as a prepayment on account of Rent to

                                      50
<PAGE>

become due under this Lease in which event Lessor or such third party shall hold
any such funds in trust and apply such funds to such Rent as the same becomes
due.

     Section 14.2   Reconstruction in the Event of Damage or Destruction Covered
                    ------------------------------------------------------------
by Insurance.
------------

          Section 14.2.1 If, during the  Term, any Leased Property is totally or
partially destroyed from a risk covered by the insurance described in Article
                                                                      -------
XIII and the Facility located thereon is rendered Unsuitable for Its Primary
----
Intended Use, Tenant shall either (A) restore the Facility to substantially the
same condition as existed immediately before the damage or destruction, or (B)
offer to acquire the applicable Leased Property from Lessor for a purchase price
equal to the Fair Market Value Purchase Price of the Leased Property immediately
prior to such damage or destruction.  In the event Lessor does not accept
Tenant's aforesaid offer to purchase, Tenant may (i) withdraw its offer to
purchase the Leased Property and proceed to restore the Facility to
substantially the same condition as existed immediately before the damage or
destruction or (ii) provided and on the conditions that, at the time of such
damage or destruction, Tenant had in full force and effect the insurance
required under Section 13.1.1 and Section 13.1.2 above, there exists no defense
               --------------     --------------
to, or limitation upon, the insurer's coverage of such damage or destruction
under such insurance, and Tenant pays to Lessor, on or prior to the hereinafter
described termination, the amount of any deductible or other uninsured portion
of the loss resulting from any such damage or destruction, terminate this Lease
as to such Leased Property, in which event Lessor shall be entitled to retain
the insurance proceeds.

          Section 14.2.2 If, during the Term, any Leased Property is totally or
partially destroyed from a risk covered by the insurance described in Article
                                                                      -------
XIII, but the Facility located thereon is not thereby rendered Unsuitable for
----
its Primary Intended Use, Tenant shall restore such Facility to substantially
the same condition as existed immediately before the damage or destruction.
Such damage or destruction shall not terminate this Lease as to such Leased
Property.

          Section 14.2.3 If the cost of the repair or restoration of any Leased
Property exceeds the amount of proceeds received by Lessor from the insurance
required under Article XIII, Tenant shall be obligated to contribute any excess
               ------------
amounts needed to restore such Leased Property.  Prior to commencement of
construction, Tenant shall either (a) provide Lessor with an irrevocable,
unconditional, freely transferable letter of credit issued by a Lending
Institution, in the full amount of such difference and in form and substance
acceptable to Lessor (and Lessor shall be entitled to draw thereon if Tenant
fails to proceed diligently with such construction or to pay its contractors for
such construction in a timely manner or to renew or extend such letter of credit
at any time the same is scheduled to expire within forty-five (45) days, and the
funds from any such draw shall be held in trust and be disbursed by Lessor as
provided in subsection (b) below and elsewhere in this Article XIV), or (b) pay
                                                       -----------
such difference to Lessor, to be held in trust by Lessor, together with any
other insurance proceeds, for application to the cost of repair and restoration.

                                      51
<PAGE>

          Section 14.2.4      In the event Lessor accepts Tenant's offer to
purchase the applicable Leased Property as provided above, this Lease shall
terminate as to the applicable Leased Property upon payment of the purchase
price and the provisions of Section 40.16 hereof shall apply. Upon receipt of
                            -------------
the purchase price from Tenant, Lessor shall remit to Tenant all insurance
proceeds pertaining to such Leased Property then held in trust by Lessor or any
third party designated by Lessor and shall assign to Tenant all of Lessor's
rights in and to any insurance proceeds payable on account of such damage or
destruction.

     Section 14.3   Reconstruction in the Event of Damage or Destruction Not
                    --------------------------------------------------------
Covered by Insurance.  If during the Term any Leased Property and the Facility
--------------------
located thereon is totally or partially destroyed from a risk not covered by the
insurance described in Article XIII, whether or not such damage or destruction
                       ------------
renders the Facility Unsuitable for Its Primary Intended Use, Tenant shall
restore the Facility to substantially the same condition it was in immediately
before such damage or destruction and such damage or destruction shall not
terminate this Lease as to such Leased Property.

     Section 14.4   Tenant's Property.  All insurance proceeds payable by reason
                    -----------------
of any loss of or damage to any of the Tenant's Personal Property or Permitted
Alterations financed by Tenant shall be paid to Tenant and Tenant shall hold
such insurance proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Permitted Alterations financed by Tenant.

     Section 14.5   Restoration of Tenant's Property.  If Tenant is required or
                    --------------------------------
elects to restore the applicable Leased Property as provided in Section 14.2 or
                                                                ------------
14.3, Tenant shall also restore all alterations and improvements made by Tenant,
----
Tenant's Personal Property and all Capital Alterations financed by Tenant.

     Section 14.6   No Abatement of Rent.  This Lease shall remain in full force
                    --------------------
and effect and Tenant's obligation to make payments of Rent and to pay all other
charges required under this Lease shall remain unabated during the Term
notwithstanding any damage involving any Leased Property (provided that Lessor
shall credit against such payments any amounts paid to Lessor as a consequence
of such damage under any business interruption insurance obtained by Tenant);
provided, however, that, effective upon the purchase of any Leased Property or
--------  -------
termination of this Lease as to the applicable Leased Property pursuant to and
in accordance with Section 14.2, this Lease shall terminate as to such Leased
                   ------------
Property and the provisions of Section 40.16 hereof shall apply.  The provisions
                               -------------
of this Article XIV shall be considered an express agreement governing any cause
        -----------
of damage or destruction to the applicable Leased Property and, to the maximum
extent permitted by law, no local or state statute, law, rule, regulation or
ordinance in effect during the Term which provides for such a contingency shall
have any application in such case.

     Section 14.7   Restoration.   If Tenant is required or elects to restore
                    -----------
the applicable Leased Property as provided in Section 14.2 or 14.3, Tenant shall
                                              ------------    ----
promptly repair, rebuild, or restore the applicable Leased Property, so as to
make such Leased Property at least equal in value to such Leased Property as it
existed immediately prior to such occurrence and as nearly

                                      52
<PAGE>

similar to it in character as is practicable and reasonable. Prior to commencing
such repairs or rebuilding, Tenant shall submit to Lessor for Lessor's approval,
which approval shall not be unreasonably withheld, delayed or conditioned, Plans
and Specifications pursuant to Section 10.1. Promptly after receiving Lessor's
                               ------------
approval of the Plans and Specifications, Tenant shall commence repairs and
rebuilding and will prosecute the repairs and rebuilding to completion with
diligence, subject, however,  to strikes, lockouts, acts of God, embargoes,
governmental restrictions, and other causes beyond Tenant's reasonable control.
Subject to the provisions of any applicable Facility Mortgage, Lessor shall make
available to Tenant the insurance proceeds (net of all administrative and
collection costs, including reasonable attorneys' fees) paid to Lessor for such
repair and rebuilding as it progresses.  Payments shall be made against
certification of the architect approved by Lessor (which approval shall not be
unreasonably withheld. delayed or conditioned) responsible for the supervision
of the repairs and rebuilding that the work had been performed substantially in
conformance with the Plans and Specifications and the value of the work in place
is equal to not less than 110% of the aggregate amount advanced by Lessor for
the payment of such work.  Prior to commencing the repairing and rebuilding,
Tenant shall deliver to Lessor for Lessor's approval a schedule setting forth
the estimated monthly draws for such work.  Subject to the provisions of any
applicable Facility Mortgage, Lessor shall contribute to such payments out of
the insurance proceeds being held in trust by Lessor an amount equal to the
proportion that the total net amount so held by Lessor bears to the total
estimated cost of repairing and rebuilding, multiplied by the payment by Tenant
on account of such work.  Lessor may, however, withhold ten percent (10%) from
each payment until the work has been completed and proof has been furnished to
Lessor that no lien or liability has attached or will attach to the applicable
Leased Property or to Lessor in connection with repairing and rebuilding.

     Section 14.8   Notice.  If during the Term any Leased Property and/or the
                    ------
Facility located thereon is totally or partially damaged or destroyed, and the
restoration and repair of such damage or destruction is in Tenant's reasonable
estimation likely to cost in excess of $200,000.00 in the aggregate, then Tenant
shall provide Lessor with written notice of such damage or destruction within
fifteen (15) days after Tenant's discovery thereof.  The notice requirement of
this Section 14.8 shall apply regardless of whether such damage or destruction
     ------------
is from a risk covered by the insurance described in Article XIII, and
                                                     ------------
regardless of whether such damage or destruction renders the Facility Unsuitable
for Its Primary Intended Use.

     Section 14.9   Waiver.  Tenant hereby waives any statutory rights of
                    ------
termination which may arise by reason of any damage or destruction of the
applicable Leased Property which Tenant is obligated to restore or may restore
under any of the provisions of this Lease.

                                  ARTICLE XV

     Section 15.1   Definitions.
                    -----------

          Section 15.1.1 "Condemnation" means, as to any Leased Property, (a)
                          ------------
the exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor, (b) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat

                                      53
<PAGE>

of condemnation or while legal proceedings for condemnation are pending and (c)
a taking or voluntary conveyance of all or part of such Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any condemnation or other eminent domain proceeding affecting such
Leased Property.

          Section 15.1.2 "Date of Taking" means, as to the applicable Leased
                          --------------
Property, the date the Condemnor has the right to possession of such Leased
Property, or any portion thereof, in connection with a Condemnation.

          Section 15.1.3 "Award" means all compensation, sums or anything of
                          -----
value awarded, paid or received on a total or partial condemnation.

          Section 15.1.4 "Condemnor" means any public or quasi-public authority,
                          ---------
or private corporation or individual, having the power of condemnation.

     Section 15.2   Parties' Rights and Obligations.  If during the Term there
                    -------------------------------
is any taking of all or any part of the applicable Leased Property by
Condemnation, the rights and obligations of the parties shall be determined by
this Article XV.
     ----------

     Section 15.3   Total Taking.  If any Leased Property is totally taken by
                    ------------
condemnation, this Lease shall terminate as to such Leased Property on the Date
of Taking, in which event the provisions of Section 40.16 hereof shall apply.
                                            -------------

     Section 15.4   Partial Taking.  If a portion of any Leased Property is
                    --------------
taken by Condemnation, this Lease shall remain in effect as to such Leased
Property if the Facility located thereon is not thereby rendered Unsuitable for
Its Primary Intended Use, but if the Facility is thereby rendered Unsuitable for
its Primary Intended Use, this Lease shall terminate as to such Leased Property
on the Date of Taking, in which event the provisions of Section 40.16 hereof
                                                        -------------
shall apply.

     If as a result of any such partial taking by Condemnation, this Lease is
not terminated as provided above, Tenant's obligation to make payments of Rent
and to pay all other charges required under this Lease shall remain unabated
during the Term notwithstanding such Condemnation (provided that Lessor shall
credit against such payments any amount of any Award attributable to Tenant's
business interruption).

     Section 15.5   Restoration.  If there is a partial taking of the applicable
                    -----------
Leased Property and this Lease remains in full force and effect pursuant to
Section 15.4, Tenant at its cost shall accomplish all necessary restoration.
------------

     Section 15.6   Award-Distribution.
                    ------------------

     (a)  In the event of any partial taking of any Leased Property, the entire
Award shall belong to and be paid to Lessor, except that, subject to the rights
of the Facility Mortgagees, Tenant shall be entitled to receive from the Award,
if and to the extent such Award specifically includes such item, the following:

                                      54
<PAGE>

          (i)    A sum attributable to the Capital Alterations paid for by
     Tenant; and

          (ii)   A sum specifically attributable to Tenant's Personal Property
     and any reasonable removal and relocation costs included in the Award; and

          (iii)  A sum specifically attributable to the cost of restoring the
     Leased Property in accordance with Section 15.5 hereof.
                                        ------------

     (b)  In the event of a total taking of any Leased Property, the Award shall
be divided between Lessor and Tenant in such proportions relative to the
appraised values of their relative estates determined in accordance with Section
                                                                         -------
35.1, taking into account the value of improvements owned by Lessor and
----
Permitted Alterations paid for by Tenant.  Tenant shall also receive a sum
specifically attributable to Tenant's Personal Property and any reasonable
removal and relocation costs included in the Award.

     Section 15.7   Temporary Taking.  The taking of any Leased Property, or any
                    ----------------
part thereof, by military or other public authority shall constitute a taking by
condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months.  During any such six (6) month period
all the provisions of this Lease shall remain in full force and effect and Base
Rent, Current Rent and Unpaid Accrued Rent shall not be abated or reduced during
such period of taking.

                                  ARTICLE XVI

     Section 16.1   Events of Default.  The occurrence of any one or more of the
                    -----------------
following events shall constitute an "Event of Default" under this Lease:
                                      ----------------

     (a)  if a default by Tenant shall occur under the Indemnity Agreement and,
in the case of a monetary default, such default is not cured within a period of
five (5) days after receipt of notice from Lessor or, in the case of a non-
monetary default, such default is not cured within a period of thirty (30) days
after receipt of notice from Lessor, unless such default cannot with due
diligence be cured within a period of thirty (30) days, in which case such
period of time shall be extended to such period of time (not to exceed 180 days)
as may be necessary to cure such default with all due diligence, provided that
such cure is completed within 180 days (this subsection (a) shall not apply if
and for so long as Lessor is neither Ventas Realty, Limited Partnership, nor
Ventas, Inc. nor an Affiliate of either of such entities), or

     (b)  if Tenant shall fail to make payment of the Rent or any other sum
payable under or pursuant to the terms of this Lease when the same becomes due
and payable and such failure is not cured within a period of five (5) days after
receipt of notice from Lessor, or

     (c)  if Tenant shall fail to observe or perform any term, covenant or
condition of this Lease not specifically provided for in this Section 16.1 and
                                                              ------------
such failure is not cured within a period of thirty (30) days after receipt of
notice from Lessor, unless such failure cannot with due diligence be cured
within a period of thirty (30) days, in which case such period of time

                                      55
<PAGE>

shall be extended to such period of time (not to exceed 180 days) as may be
necessary to cure such default with all due diligence provided that such cure is
completed within 180 days, or

     (d)  if Tenant shall fail to observe or perform any term, covenant or
agreement on its part to be performed or observed pursuant to Section 8.1.1,
                                                              -------------
Section 11.1, the last sentence of Section 8.2, Section 12.1(g) or Section 13.1,
------------                       -----------  ---------------    ------------
or

     (e)  any Guarantor shall fail to observe or perform any term, covenant or
agreement on its part to be performed or observed pursuant to any Lease Guaranty
and such failure shall not be cured within any applicable cure period provided
in such Lease Guaranty, or

     (f)  there shall occur a final unappealable determination by applicable
federal, state or local authorities of Tenant's non-compliance with Legal
Requirements applicable to a Facility located on any Leased Property, or of the
revocation of any license, permit, approval or other Authorization (including,
without limitation, any certificate of need) required for the lawful operation
of the Facility located on any Leased Property in accordance with its Primary
Intended Use, or any other circumstances under which Tenant is required by a
final unappealable determination of any such authority to cease operations of
such Facility in accordance with its Primary Intended Use as currently operated
(provided, however, that, without limitation of Section 12.1(g) hereof, before
                                                ---------------
any such determination becomes final and unappealable, Tenant shall have the
right to contest the same in accordance with Sections 8.1.1, 8.2 and 12.1(a)-(f)
                                             --------------  ---     -----------
hereof), or

     (g)  any material representation or warranty made by or on behalf of Tenant
or any Guarantor under or in connection with this Lease or any document,
certificate or agreement delivered in connection with this Lease shall prove to
have been false or misleading in any material respect on the day when made or
deemed made, or

     (h)  if any Tenant or any Guarantor shall:

          (i)    admit in writing its inability to pay its debts generally as
     they become due,

          (ii)   file a petition in bankruptcy or a petition to take advantage
     of any insolvency act,

          (iii)  make an assignment for the benefit of its creditors,

          (iv)   consent to the appointment of a receiver of itself or of the
     whole or any substantial part of its property, or

          (v)    file a petition or answer seeking reorganization or arrangement
     under the Federal bankruptcy laws or any other applicable law or statute of
     the United States of America or any State thereof, or

                                      56
<PAGE>

     (i)  any petition shall be filed by or against any Tenant or any Guarantor
or any subsidiary of either under Federal bankruptcy laws, or any other
proceeding shall be instituted by or against any Tenant or any Guarantor or such
subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for any
Tenant or any Guarantor or such subsidiary, or for any substantial part of the
property of any Tenant or any Guarantor or such subsidiary, and such proceeding
is not dismissed within ninety (90) days after institution thereof, or any
Tenant or any Guarantor or such subsidiary shall take any action to authorize or
effect any of the actions set forth above in this subsection (i) (this
subsection (i) shall not apply to the appointment of a receiver, trustee,
custodian or other similar official in any proceeding(s) other than bankruptcy,
reorganization, insolvency and other creditors' rights proceedings of the nature
referenced in this subsection (i)), or

     (j)  if any Tenant or any Guarantor shall be liquidated or dissolved, or
shall begin proceedings toward such liquidation or dissolution, or

     (k)  if the estate or interest of Tenant in any Leased Property or any part
thereof shall be levied upon or attached in any proceeding and the same shall
not be vacated or discharged within the later of ninety (90) days after
commencement thereof or 30 days after receipt by Tenant of notice thereof from
Lessor, (unless Tenant shall be contesting such lien or attachment in good faith
in accordance with Article XII hereof), or
                   -----------

     (l)  if any receiver, trustee, custodian or other similar official is
appointed for any Tenant, any Guarantor or any of the Facilities and any such
appointment is not dismissed prior to the entry of a final, unappealable order
approving such appointment (provided, however, that this subsection (l) shall
not apply to any such official appointed in bankruptcy, reorganization,
insolvency or other creditors' rights proceedings of the nature referenced in
subsection (i) above), and, in the case of the appointment of any such official
as to whom this subsection (l) does apply, prior to the entry of a final
unappealable order approving the appointment of such official and denying any
requested dismissal thereof, without limitation of Section 12.1(g) hereof, no
                                                   ---------------
Event of Default shall be deemed to have occurred under this subsection (l) so
long as Tenant is contesting such appointment in accordance with Sections 8.2
                                                                 ------------
and 12.1(a)-(f) hereof), or
    -----------

     (m)  Subject to Section 16.10 hereof:
                     -------------

          (i)    an Event of Default shall occur hereunder if the number of
     licensed beds for any Facility is reduced by more than the Permissible
     Reduction Percentage (as hereinafter defined) applicable to such Facility
     of the number of licensed beds in such Facility on the Commencement Date
     (which number of licensed beds, as of the Commencement Date and after
     adjusting for the effect of subsection (m)(i)(1) below, Tenant represents
     and warrants to Lessor is as set forth in Schedule 16.1(m)A attached hereto
     and made a part hereof) (provided, however, that, (1) for purposes of this
                              --------  -------

                                      57
<PAGE>

     subsection (m), in the case of the Leased Properties known as Vencor
     Hospital - Chicago North (Facility No. 4637), Vencor Hospital - Minneapolis
     (Facility No. 4659), Cascade Care Center (Facility No. 218), and Arden
     Rehabilitation & Healthcare Center (Facility No. 114), the number of
     licensed beds in the Facilities at such Leased Properties on the
     Commencement Date shall be deemed to equal, respectively, one hundred
     sixty-five (165), ninety-two (92), ninety-three (93) and ninety (90), (2)
     if Washington State determines that Tenant's bankruptcy reorganization
     constitutes a change of control and, as a result, Tenant loses its license
     with respect to all or a portion of the 41 beds that are banked relative to
     Queen Anne Healthcare, Seattle, Washington (Facility No. 462), and Tenant's
     contest thereof pursuant to subpart B of Schedule 1.3 does not result in
                                              ------------
     the restoration of such licensed beds, for purposes of this subsection (m),
     the number of licensed beds at such Facility on the Commencement Date shall
     be deemed to equal the number of beds at such Facility as of the
     Commencement Date minus the number of the aforesaid banked beds for which
     licensure is lost due to Washington State's aforesaid determination, and
     (3) the voluntary removal from service (so called "bed banking") of  not
     more than twenty-five percent (25%) of the number of licensed beds in a
     particular Facility on the Commencement Date shall not constitute a
     reduction of licensed beds for purposes of this subsection (m), if and for
     so long as, for purposes of this subsection (3), (a) any such beds that are
     voluntarily removed from service by Tenant are removed from service with
     the approval of all applicable governmental authorities, (b) such beds
     continue to be considered "licensed beds" by the applicable governmental
     authorities, (c) after diligent inquiry relative to the applicable Legal
     Requirements and after consultation with its legal counsel, Tenant is not
     aware of any reason why the applicable regulatory authorities would not
     authorize such reintroduction by Tenant or any successor operator at any
     time, in the discretion of Tenant or such successor operator, as
     applicable, and without the necessity of any governmental approval or
     reapproval or additional Authorization (other than routine governmental re-
     inspections of such Facility(ies) and any ministerial approvals, re-
     approvals or other Authorizations), and (d) at the time, and as a
     condition, of any such voluntary removal and thereafter within twenty (20)
     days after receipt of a written request therefor from Lessor from time to
     time (but not more often than twice in any calendar year, unless, after
     Lessor has made two (2) such requests in a calendar year, a change(s) in
     Legal Requirements becomes effective, or Lessor obtains knowledge of other
     facts or circumstances, suggesting a possible violation of subsection (a),
     (b) or (c) above or of the other provisions of this Section 16.1(m)),
                                                         ---------------
     Tenant shall deliver to Lessor a Senior Officer's Certificate, in form and
     substance reasonably satisfactory to Lessor, certifying that Tenant has
     made diligent inquiry relative to the applicable Legal Requirements and has
     consulted with its legal counsel and, based on the foregoing, certifies
     that Tenant has complied, and continues to be in compliance, with the
     provisions of subsections (a), (b) and (c) above and the other provisions
     of this Section 16.1(m)); and
             ---------------

          (ii)   As used in this subsection (m), the "Permissible Reduction
     Percentage" for a particular Facility shall equal the lesser of (1) ten
     percent (10%) or (2) the difference between twenty-five percent (25%) and
     the percentage of licensed beds at

                                      58
<PAGE>

     such Facility on the Commencement Date that, as of the calculation date,
     have been voluntarily removed from service by Tenant in accordance with
     subsection (m)(i)(3) above, provided, however, that (x) in the case of the
                                 --------  -------
     Facilities known as Vencor Hospital -Chicago North (Facility No. 4637),
     Vencor Hospital - Minneapolis (Facility No. 4659), Cascade Care Center
     (Facility No. 218), and Arden Rehabilitation & Healthcare Center (Facility
     No. 114), the reference in subsection (m)(ii)(1) above shall equal five
     percent (5%) (reduced from ten percent (10%)), (y) in the case of the
     Facility known as Queen Anne Healthcare, Seattle, Washington (Facility No.
     462), if, as described in subsection (m)(i)(2) above, such Facility loses
     licensure of any previously banked beds, the reference in subsection
     (m)(ii)(1) above shall equal five percent (5%) (reduced from ten percent
     (10%)), and (z) in the case of any Facilities listed on Schedule 16.1(m)B
                                                             -----------------
     attached hereto and made a part hereof as to which any involuntary
     reduction in the number of licensed beds has occurred in compliance with
     subsection (m)(iii) below, the reference in subsection (m)(ii)(1) above
     shall equal, as of any date, subject to subsection (m)(iii)(5) below, the
     greater of (A) five percent (5%) or (B) that percentage, not greater than
     ten percent (10%), calculated by subtracting from the number of licensed
     beds at such Facility as of such date the number of licensed beds set forth
     in the "95% of Minimum" column of Schedule 16.1(m)B as it applies to such
                                       -----------------
     Facility and then dividing the result of such subtraction by the number of
     licensed beds at such Facility as of such date. (For example, if Tenant
     voluntarily removes from service, in accordance with the requirements of
     subsection (m)(i)(3) above, fifteen percent (15%) or less of the aforesaid
     licensed beds at a particular Facility as to which neither subsection
     (m)(ii)(x) nor (m)(ii)(y) nor (m)(ii)(z) above applies, the "Permissible
     Reduction Percentage" would equal ten percent (10%) for such Facility, but
     if, for example, Tenant voluntarily removes from service, in accordance
     with the requirements of subsection (m)(i)(3) above, twenty percent (20%)
     of the aforesaid licensed beds at such Facility, the "Permissible Reduction
     Percentage" applicable to such Facility would equal five percent (5%)
     (i.e., under subsection (m)(ii)(2) above, 25%-20%=5%). Also, for example,
     if a particular Facility listed on Schedule 16.1(m)B had, as of the
                                        -----------------
     Commencement Date, 120 licensed beds, such Facility had not lost any
     licensed beds other than 38 licensed beds lost through an involuntary
     reduction that complies with subsection (m)(iii) below (so that, as of a
     particular date, such Facility has 82 licensed beds), and Schedule 16.1(m)B
                                                               -----------------
     sets forth 80 licensed beds in the "Minimum Number of Licensed Beds" column
     as it applies to such Facility and 76 licensed beds in the "95% of Minimum"
     column as it applies to such Facility, the percentage referenced in the
     foregoing subsection (m)(ii)(z) would equal 7.317% (82 licensed beds minus
     76 licensed beds equals 6 licensed beds and 6 licensed beds divided by 82
     licensed beds equals 7.317%, which is greater than the 5.0% referenced in
     subsection (m)(ii)(z)(A) above); and

          (iii)  The provisions of this subsection (m)(iii) shall not apply to
     any of the Leased Properties other than the thirteen (13) Leased Properties
     referenced on Schedule 16.1(m)B:  An involuntary reduction of the nature
                   -----------------
     referenced in subsection (m)(iii)(1) below in the number of licensed beds
     for any Facility listed on Schedule 16.1(m)B below the minimum number of
                                -----------------
     licensed beds set forth in the "Minimum Number of

                                      59
<PAGE>

     Licensed Beds" column of Schedule 16.1(m)B as it applies to such Facility
                              -----------------
     shall constitute an Event of Default under this Section 16.1(m), but,
                                                     ---------------
     notwithstanding any voluntary removal from service of licensed beds, an
     involuntary reduction in the number of licensed beds for any of the
     thirteen (13) Facilities listed on Schedule 16.1(m)B down to, but not
     below, the minimum number of licensed beds set forth in the "Minimum Number
     of Licensed Beds" column of Schedule 16.1(m)B as it applies to such
                                 -----------------
     Facility shall not constitute an Event of Default under this Section
                                                                  -------
     16.1(m) provided and on the conditions that (1) the involuntary reduction
     -------
     is required by the applicable state regulatory authority primarily because
     of physical space limitations at the applicable Facility and any such
     physical space limitations are not the result of any alterations to the
     Facility made after the Effective Date; (2) Tenant uses its best efforts
     and due diligence to contest through all available processes (but not
     including any obligation on Tenant's part to make physical alterations to
     the affected Facility) the involuntary reduction and, in regular and timely
     consultation with Lessor, explores other alternatives (e.g. sale or banking
     of the licensed beds that are the subject of such involuntary reduction,
     with any such sale of beds to be subject to the prior written approval of
     Lessor, in its sole discretion, and with all proceeds from any such sale to
     be paid, and belong, to Lessor); (3) Tenant provides written notice to
     Lessor of such involuntary reduction within two (2) Business Days of
     Tenant's receipt of notice of the involuntary reduction and allows Lessor,
     if it so desires in its sole discretion, to participate in the contest of
     such involuntary reduction and, if it so desires in its sole discretion, to
     require that Tenant allow Lessor, at Tenant's cost, to control such contest
     (including, without limitation, prosecuting legal proceedings in Lessor's
     and/or Tenant's name); (4) Tenant shall not settle any contest of any such
     involuntary reduction without Lessor's prior written consent, in its sole
     discretion; and (5) following any such involuntary reduction as to a
     particular Facility listed on Schedule 16.1(m)B and whether or not Tenant
                                   -----------------
     has complied with the preceding conditions (1), (2), (3) and (4), Tenant
     shall in no event voluntarily reduce the number of licensed beds at such
     Facility by any amount, or

     (n)  if Tenant shall become subject to regulatory sanctions and Tenant has
failed to cure or satisfy such regulatory sanctions (including, without
limitation, through payment of any such sanctions, if the same are monetary in
nature) within its specified regulatory cure period in any material respect with
respect to any Facility (provided, however, that, without limitation of Section
                         --------  -------                              -------
12.1(g) hereof, prior to the imposition of such sanctions on Tenant by final
-------
unappealable order of any governmental agency or authority, no Event of Default
shall be deemed to have occurred under this subsection (n) so long as Tenant is
contesting the imposition of such sanctions in accordance with Sections 8.2 and
                                                               ------------
12.1(a)-(f) hereof), or
-----------

     (o)  if, except pursuant to the terms hereof, Tenant voluntarily ceases
operations on any Leased Property, or

     (p)  if Tenant shall fail to observe or perform any term, covenant or other
obligation of Tenant set forth in Article XXVI hereof and such failure is not
                                  ------------
cured within a period of ten (10) days after receipt of notice thereof from
Lessor, or

                                      60
<PAGE>

     (q)  subject to Section 16.10 hereof, there shall occur a revocation of
                     -------------
certification for reimbursement under Medicare or Medicaid with respect to any
Facility that participates in such programs and, within one hundred twenty (120)
days following such revocation, Tenant fails to have its aforesaid certification
fully restored (provided, however, that Tenant shall be given an additional
                --------  -------
sixty (60) days beyond the aforesaid one hundred twenty (120) day period to have
its aforesaid certification fully restored if, on or prior to the aforesaid one
hundred twentieth (120th) day, Tenant delivers to Lessor a Senior Officer's
Certificate, in form and substance reasonably satisfactory to Lessor, certifying
that (i) the only requirement that remains unsatisfied in order for Tenant to
have its aforesaid certification fully restored is a re-inspection of the
applicable Facility by the applicable regulatory authority, and (ii) Tenant has
made diligent inquiry relative to the applicable Legal Requirements and has
consulted with its legal counsel and, based on the foregoing, certifies that
Tenant is not aware of any reason why Tenant will not pass its aforesaid re-
inspection, or why Tenant's aforesaid certification will not be fully restored,
in each case within the aforesaid additional sixty (60) day period), or

     (r)  an Event of Default shall occur as described in Section 8.3.1 above,
                                                          -------------
or

     (s)  an Event of Default shall occur as described in Section 21.5.1 below,
                                                          --------------
or

     (t)  If Tenant shall exercise a purchase option relative to a Leased
Property(ies) in accordance with Section 16.12 hereof and thereafter fail to
                                 -------------
purchase the subject Leased Property(ies), and otherwise perform and discharge
its duties, liabilities and obligations on account of such exercise, strictly in
accordance with the terms and conditions of Section 16.12 hereof, or
                                            -------------

     (u)  An Event of Default (as defined in the Tenant Senior Secured Credit
Agreement) arising from the failure to pay principal or interest with respect to
the Tenant Senior Secured Notes, or any other event of default arising from the
failure to pay principal or interest with respect to any other indebtedness for
borrowed money of Tenant with an aggregate outstanding principal amount equal to
or exceeding $50 million, shall have occurred; or

     (v)  the acceleration of the maturity of the Tenant Senior Secured Notes,
or the acceleration of the maturity of any other indebtedness for borrowed money
of Tenant with an aggregate outstanding principal amount equal to or exceeding
$50 million, shall have occurred.

     Upon the occurrence of any Event of Default, Lessor may, at its option,
terminate this Lease (i) in the case of any Event of Default, as to all Leased
Properties and/or (ii) if such Event of Default is a Facility Default, as to any
of the Leased Property(ies) to which such Event of Default relates, by giving
not less than ten (10) days' notice of such termination and upon the expiration
of such 10-day period or other time period fixed in such notice, if any, during
which 10-day or other time period Tenant shall have no right to cure the Event
of Default in question, the Term shall terminate as to all Leased Properties or
as to the Leased Property(ies) to which such Event of Default relates, as
specified in such notice, all rights of Tenant under this Lease shall cease as
to the Leased Property(ies) so specified, and, if the Leased Property(ies) so
specified are less than all of the Leased Properties, the provisions of

                                      61
<PAGE>

Section 40.16 hereof shall apply. Lessor shall have all rights at law and in
-------------
equity available to Lessor as a result of Tenant's breach of this Lease, subject
to Section 16.10.
   -------------

     Tenant shall pay, to the maximum extent permitted by law, as Additional
Charges all Litigation Costs as a result of any Event of Default hereunder.

     Section 16.2   Certain Remedies.  If an Event of Default shall have
                    ----------------
occurred (and the event giving rise to such Event of Default has not been cured
within the curative period relating thereto, if any, as set forth in the
applicable subsection of Section 16.1 above or elsewhere herein), whether or not
                         ------------
this Lease has been terminated pursuant to Section 16.1, Tenant shall, to the
                                           ------------
maximum extent permitted by law, if and to the extent required by Lessor so to
do, immediately surrender to Lessor the Leased Property(ies) as to which the
Lease has been or may be terminated pursuant to Section 16.1 and quit the same,
                                                ------------
and Lessor may enter upon and repossess the Leased Properties by reasonable
force, summary proceedings, ejectment or otherwise, and may remove Tenant and
all other persons and any and all personal property from the Leased Properties
subject to rights of any occupants or patients and to any requirement of law.

     Section 16.3   Damages.  To the extent permitted by law, neither (a) the
                    -------
termination of this Lease pursuant to Section 16.1, (b) the repossession of any
                                      ------------
or all of the Leased Properties or any portion thereof, (c) the failure of
Lessor to relet any or all of the Leased Properties or any portion thereof, (d)
the reletting of any or all of the Leased Properties or any portion thereof, nor
(e) the failure of Lessor to collect or receive any rentals due upon any such
reletting, shall relieve Tenant of any of its liability and obligations
hereunder, all of which shall survive any such termination, repossession or
reletting.  In the event of any such termination, subject to Section 16.4 below,
                                                             ------------
Tenant shall forthwith pay to Lessor, at Lessor's option, as liquidated damages
with respect to Rent for each Leased Property as to which such termination has
occurred, either:

     (A)  the sum of:

          (i)    the unpaid Rent allocable to each such Leased Property in
     accordance with Section 16.9 hereof which had been earned at the time of
                     ------------
     termination, which Rent and other sums shall bear interest at the lesser of
     the Overdue Rate and the maximum annual rate permitted by law from the date
     when due until paid; and

          (ii)   whether or not Lessor previously collected any amounts pursuant
     to clause (B) below, the then net present value (computed using a discount
     rate equal to the Prime Rate) of the amount of unpaid Rent allocable to
     each such Leased Property in accordance with Section 16.9 hereof for the
                                                  ------------
     balance of the Term following the date of termination (excluding, however,
     any period following termination on account of which Lessor previously
     collected Rent pursuant to clause (B) below) without any obligation or
     deemed obligation on the part of Lessor to mitigate damages, or

     (B) each installment of Rent allocable to each such Leased Property in
accordance with Section 16.9 hereof and other sums payable with respect to each
                ------------
such Leased Property by

                                      62
<PAGE>

Tenant to Lessor under this Lease as the same becomes due and payable, which
Rent and other sums shall bear interest at the lesser of the Overdue Rate and
the maximum annual rate permitted by law from the date when due until paid, to
the extent that such Rent and other sums exceed the rent and other sums actually
collected by Lessor for the corresponding period pursuant to any reletting of
each such Leased Property (without any obligation or deemed obligation on the
part of Lessor to mitigate damages).

     In case of any Event of Default, re-entry, expiration and dispossession by
summary proceedings or otherwise, Lessor may, with or without terminating this
Lease, (a) relet any or all of the Leased Properties or any part or parts
thereof, either in the name of Lessor or otherwise, for a term or terms which
may, at Lessor's option, be equal to, less than or exceed the period which would
otherwise have constituted the balance of the Term and may grant concessions or
free rent to the extent that Lessor considers advisable and necessary to relet
the same, and (b) make such reasonable alterations, repairs and decorations in
the applicable Leased Property or any portion thereof as Lessor, in its sole
judgment, considers advisable and necessary for the purpose of reletting the
applicable Leased Property; and such reletting and the making of such
alterations, repairs and decorations shall not operate or be construed to
release Tenant from liability hereunder as aforesaid (subject to Section 16.3(B)
                                                                 ---------------
above if and to the extent the same is applicable).  Lessor shall in no event be
liable in any way whatsoever for failure to relet any Leased Property, or, in
the event that any Leased Property is relet, for failure to collect the rent
under such reletting.  To the fullest extent permitted by law, Tenant hereby
expressly waives any and all rights of redemption granted under any present or
future laws in the event of Tenant's being evicted or dispossessed, or in the
event of Lessor's obtaining possession of any Leased Property, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease.

     Section 16.4   Certain Effects of Separate Lease.  Lessor agrees that, in
                    ---------------------------------
the event this Lease is terminated as to a particular Leased Property and
immediately thereafter a Separate Lease is entered into with respect to such
Leased Property pursuant to Section 22.7 below, (a) Lessor shall not proceed
                            ------------
against Tenant under Section 16.3(A) above relative to such Leased Property
                     ---------------
unless and until an Event of Default shall occur under such Separate Lease and
(b) Rent collected by Lessor under any such Separate Lease relative to such
Leased Property shall be credited by Lessor against the amounts owing to Lessor
under Section 16.3(B) above relative to such Leased Property.  Nothing contained
      ---------------
in this Section 16.4 shall affect or impair Lessor's rights under Sections
        ------------                                              --------
16.3(A) and (B) above relative to other Leased Properties.
-------     ---

     Section 16.5   Waiver.  If this Lease is terminated pursuant to Section
                    ------                                           -------
16.1, whether in whole or, in the case of any Facility Default, in part, Tenant
----
waives, to the maximum extent permitted by applicable law, (a) any right of
redemption, re-entry or repossession, (b) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
                                                                       -------
XVI, and (c) the benefit of any moratorium laws or any laws now or hereafter in
---
force exempting property from liability for rent or for debt.

     Section 16.6   Application of Funds.  Any payments received by Lessor under
                    --------------------
any of the provisions of this Lease during the existence or continuance of any
Event of Default (and

                                      63
<PAGE>

such payment is made to Lessor rather than Tenant due to the existence of an
Event of Default) shall be applied to Tenant's obligations in the order which
Lessor may determine or as may be prescribed by the laws of the State where the
applicable Leased Property is located.

     Section 16.7   Notice to Lessor.  If Tenant or any subtenant receives a
                    ----------------
notice of any material regulatory deficiency from any regulatory agency, Tenant
shall deliver a copy of such notice to Lessor in accordance with Section 34.1.
                                                                 ------------

     Section 16.8   Nature of Remedies.  To the maximum extent permitted by law,
                    ------------------
the rights and remedies of Lessor and Tenant under this Lease, at law and in
equity shall be cumulative and may be exercised concurrently or successively, on
one or more occasions, as Lessor or Tenant, as applicable, deems appropriate in
its sole discretion, as often as occasion therefor arises.  To the maximum
extent permitted by law, each such right and remedy shall be in addition to all
other such rights and remedies, and the exercise by Lessor or Tenant, as
applicable, of any one or more of such rights and remedies shall not preclude
the simultaneous or subsequent exercise of any or all other such rights and
remedies.  Without limiting the generality of the foregoing, liquidated damages
in respect of Rent provided for in clauses (A) and (B) of Section 16.3 hereof,
                                                          ------------
and in Section 20.1 hereof, shall be payable by Tenant in addition to, and not
       ------------
in lieu of, any other damages suffered by Lessor in connection with any default
or Event of Default by Tenant (including, without limitation, Litigation Costs
and costs of reletting).

     Section 16.9   Allocable Rent.  For purposes of this Lease, without
                    --------------
limitation of Section 40.15 or 40.16 hereof, (a) the Additional Charges
              -------------    -----
allocable to a Leased Property shall be the Additional Charges with respect to
such Leased Property, and (b) the Current Rent, Accrued Rent, Unpaid Accrued
Rent and Accrued Rent Interest allocable to a Leased Property shall be, for each
such item, the product of (i) the amount of such item, multiplied by (ii) the
Transferred Property Percentage for such Leased Property as set forth in Exhibit
                                                                         -------
C (as modified from time to time in accordance herewith).
-

     Section 16.10  Special Remedies Provisions.  The intention of this Section
                    ---------------------------                         -------
16.10 is to set forth certain special provisions applicable to Events of Default
-----
under Section 16.1(m) and/or Section 16.1(q) of this Lease and to Lessor's
      ---------------        ---------------
rights and remedies upon the occurrence of such Events of Default.  This Section
                                                                         -------
16.10 has no application to other Events of Default under this Lease and is not
-----
intended to alter or limit Lessor's rights and remedies with respect to such
other Events of Default or, except as specifically set forth in this Section
                                                                     -------
16.10, for any other purpose.  Subject to the foregoing, Lessor and Tenant agree
-----
that, notwithstanding anything to the contrary contained in this Lease:

          Section 16.10.1  For purposes of this Lease, subject to Sections
                                                                  --------
16.10.3.1 and 16.10.3.2 below, references to the "Section 16.10.1 Number" shall,
---------     ---------                           ----------------------
as of a particular date, mean and refer to (a) the number 1 (if the number of
Leased Properties as to which this Lease remains in full force and effect as of
such date equals twenty (20) or less), (b) the number 2 (if the number of Leased
Properties as to which this Lease remains in full force and effect as of such
date equals between twenty-one (21) and forty (40), both inclusive), or (c) the

                                      64
<PAGE>

number 3 (if the number of Leased Properties as to which this Lease remains in
full force and effect as of such date equals forty-one (41) or more).

          Section 16.10.2

               Section 16.10.2.1   If the Section 16.10.1 Number applicable to
this Lease, as determined pursuant to Section 16.10.1 above, equals one (1), the
                                      ---------------
following provisions shall apply:

     If, and for so long as, one or more Events of Default of the nature
     referenced in Section 16.1(m) and/or Section 16.1(q) of this Lease has
                   ---------------        ---------------
     occurred and is continuing (as described below), Lessor shall be entitled
     to exercise all rights and remedies available to it under this Lease on
     account of any then continuing Event of Default under Section 16.1(m)
                                                           ---------------
     and/or Section 16.1(q), provided that Lessor may only exercise termination
            ---------------
     and/or dispossession rights and remedies on account of such Section 16.1(m)
     and/or Section 16.1(q) Event(s) of Default against either (i) any one or
            ---------------
     more of the Leased Properties to which such Event(s) of Default relate or
     (ii) all Leased Properties covered by this Lease.

               Section 16.10.2.2   If the Section 16.10.1 Number applicable to
this Lease, as determined pursuant to Section 16.10.1 above, equals two (2) or
                                      ---------------
more, the following provisions shall apply:

     If, and for so long as, an Event of Default of the nature referenced in
     Section 16.1(m) and/or Section 16.1(q) of this Lease has occurred and is
     ---------------        ---------------
     continuing (as described below) with respect to fewer than the Section
     16.10.1 Number (as determined pursuant to Section 16.10.1 hereof) of the
                                               ---------------
     Leased Properties, then, on account of any Event of Default under Section
                                                                       -------
     16.1(m) and/or Section 16.1(q) of this Lease, Lessor may not exercise any
     -------        ---------------
     termination and/or dispossession rights and remedies available to it under
     this Lease on account of such Section 16.1(m) and/or Section 16.1(q)
     Event(s) of Default against any Leased Property other than the Leased
     Property to which the aforesaid Event of Default relates.  If, however, an
     Event of Default of the nature referenced in such Section 16.1(m) and/or
                                                       ---------------
     Section 16.1(q) of this Lease has occurred and is continuing (as described
     ---------------
     below) with respect to the Section 16.10.1 Number or more Leased
     Properties, Lessor shall be entitled to exercise all rights and remedies
     available to it under this Lease on account of any then continuing Event of
     Default under Section 16.1(m) and/or Section 16.1(q), provided that Lessor
                   ---------------        ---------------
     may only exercise termination and/or dispossession rights and remedies on
     account of such Section 16.1(m) and/or Section 16.1(q) Event(s) of Default
                     ---------------        ---------------
     against either (i) any one or more of the Leased Properties to which such
     Event(s) of Default relate or (ii) all Leased Properties covered by this
     Lease.

               Section 16.10.2.3   For purposes of Sections 4.1, 16.1(m),
                                                   ------------  -------
16.1(q), 16.10, 17.1, 19.1, 25.1.1, 25.1.2 and 25.1.3 of this Lease, if an Event
-------  -----  ----  ----  ------  ------     ------
of Default shall occur under Section 16.1(m) or Section 16.1(q) of this Lease,
                             ---------------    ---------------
except as otherwise agreed in writing by Lessor, in its sole and absolute
discretion, the same shall be deemed to be "continuing" at

                                      65
<PAGE>

all times from and after the date that such Event of Default first arises
(including, without limitation, at all times from and after the date that Lessor
terminates this Lease as it applies to the Leased Property to which the
aforesaid Event of Default relates or dispossesses Tenant from such Leased
Property), unless, prior to the date that Lessor terminates this Lease as it
applies to the Leased Property to which the aforesaid Event of Default relates
or dispossesses Tenant from such Leased Property, such Event of Default is cured
"in-kind" by rectifying and reversing the particular event, circumstance or
condition that constitutes or causes such Event of Default; provided (the
"Section 16.10.2.3 Proviso"), however, that, if the applicable Section 16.10.1
 -------------------------
Number, as determined pursuant to Section 16.10.1 above, equals two or more, if
                                  ---------------
(a) an Event of Default of the nature referenced in Section 16.1(m) and/or
                                                    ---------------
Section 16.1(q) of this Lease has occurred and is continuing (as described
---------------
above) with respect to fewer than the Section 16.10.1 Number of the Leased
Properties and (b) Lessor has terminated this Lease as it applies to a Leased
Property to which an aforesaid Event of Default relates or has dispossessed
Tenant from such Leased Property, then, for purposes of Sections 4.1, 17.1,
                                                        ------------  ----
25.1.1, 25.1.2 and 25.1.3, the aforesaid Event of Default relating to such
------  ------     ------
Leased Property shall not be deemed to be "continuing" as to Leased Properties
other than such terminated or dispossessed Leased Property; in such event, the
rights and remedies available to Lessor or the limitation of Tenant's rights
under such sections which arise in the case of a continuing Event of Default
shall apply only to the Leased Property on which the Event of Default under
Section 16.1(m) or Section 16.1(q) has occurred, as illustrated by Examples 5, 6
---------------    ---------------                                 ----------  -
and 7 of Section 16.10.5 below.
    -    ---------------

               Section 16.10.2.4 The limitations on Lessor's rights and remedies
set forth in this Section 16.10.2: (a) apply only to Events of Default under
                  ---------------
Section 16.1(m) and/or Section 16.1(q) of this Lease and not to any other Events
---------------        ---------------
of Default under this Lease, (b) apply only to Lessor's termination and
dispossession rights and remedies on account of Events of Default under Section
                                                                        -------
16.1(m) and/or Section 16.1(q) of this Lease and, subject to the terms of the
-------        ---------------
Section 16.10.2.3 Proviso, not to any other rights and remedies available to
Lessor on account of any such Events of Default, and (c) do not change any of
the other provisions of this Lease as they may relate to Events of Default under

Section 16.1(m) and/or Section 16.1(q) of this Lease (e.g. pursuant to Section
---------------        ---------------                                 -------
24.1(d) of this Lease, Tenant shall remain obligated to indemnify Lessor with
-------
respect to any such Section 16.1(m) and/or Section 16.1(q) Event of Default).
                    ---------------        ---------------

          Section 16.10.3  The intention of this Section 16.10.3 is to set forth
                                                 ---------------
special rules regarding the calculation of the Section 16.10.1 Number and
thereby to limit the ability of Lessor and Tenant, through transactions of the
specified nature described in this Section 16.10.3, to evade certain of the
                                   ---------------
intended goals of this Section 16.10.
                       -------------

               Section 16.10.3.1   Notwithstanding Section 16.10.1 above, if
                                                   ---------------
(a)(i) a New Lease under Section 40.15 hereof (other than a New Lease that is a
                         -------------
Separate Lease created under Section 22.7 hereof) is created from this Lease or
(ii) this Lease constitutes a New Lease created under Section 40.15 of another
                                                      -------------
lease demising any of the Master Lease Leased Properties (other than a New Lease
that is a Separate Lease created under Section 22.7 of such other lease) and (b)
                                       ------------
as of the date immediately prior to such New Lease creation

                                      66
<PAGE>

transaction (a "Section 16.10.3.1 New Lease Transaction"), under this Lease (if
                ---------------------------------------
subsection (a)(i) above is applicable) or the other lease referenced in
subsection (a)(ii) above (if subsection (a)(ii) above is applicable) one or more
Events of Default of the nature referenced in Section 16.1(m) and/or Section
                                              ---------------        -------
16.1(q) of such lease had occurred and were continuing (as described in Section
-------                                                                 -------
16.10.2.3 hereof or of such other lease, as applicable) with respect to any of
---------
the Master Lease Leased Properties covered hereby or thereby, as applicable,
then, the Section 16.10.1 Number that would otherwise apply to this Lease, but
for the terms of this Section 16.10.3.1, shall be increased by one (1) if and
                      -----------------
only if all of the following conditions are met relative to this Lease:

     (x) As of the date immediately following the aforesaid Section 16.10.3.1
New Lease Transaction, an Event of Default of the nature referenced in Section
                                                                       -------
16.1(m) and/or Section 16.1(q) of this Lease (whether this Lease is the New
-------        ---------------
Lease, or the lease from which a New Lease is created, involved in the aforesaid
Section 16.10.3.1 New Lease Transaction) has occurred and is continuing (as
described in Section 16.10.2.3 hereof) with respect to a number of the Leased
             -----------------
Properties then covered by this Lease that equals or exceeds the Section 16.10.1
Number that would be applicable to this Lease as of such date (assuming, for
purposes of this subsection (x), that this Section 16.10.3.1 is not applicable);
                                           -----------------
and

     (y) For the four (4) full calendar quarters ending not less than sixty (60)
days prior to the aforesaid Section 16.10.3.1 New Lease Transaction, (1) the
Leased Properties, if any, that continue to be covered by this Lease (whether
this Lease is the New Lease, or the lease from which a New Lease is created,
involved in the aforesaid Section 16.10.3.1 New Lease Transaction) and have as
their Primary Intended Use use as a hospital have a Coverage Ratio that is
fifteen percent (15%) or more higher than the Coverage Ratio of all of the
Master Lease Leased Properties that are covered by this Lease and the other
lease involved in the aforesaid Section 16.10.3.1 New Lease Transaction or (2)
the Leased Properties, if any, that continue to be covered by this Lease and
have as their Primary Intended Use use as a nursing center have a Coverage Ratio
that is ten percent (10%) or more higher than the Coverage Ratio of all of the
Master Lease Leased Properties that are covered by this Lease and the other
lease involved in the aforesaid Section 16.10.3.1 New Lease Transaction; and

     (z) No Event(s) of Default (other than Section 16.1(m) and/or Section
                                            ---------------        -------
16.1(q) Events of Default) have occurred and are continuing under this Lease.
-------

     Example 1:  Assume this Lease covers 25 Leased Properties and that no Event
     ---------
of Default under Section 16.1(m) and/or Section 16.1(q) or any other provision
                 ---------------        ---------------
of this Lease has occurred or is continuing.  Assume further that a New Lease
covering 10 Leased Properties and not constituting a Separate Lease under
Section 22.7 is created from this Lease pursuant to Section 40.15 hereof.  This
------------                                        -------------
Section 16.10.3.1 would not apply, and the Section 16.10.1 Number applicable to
-----------------
this Lease would be determined pursuant to Section 16.10.1(a) hereof (because
                                           ------------------
this Lease would then cover 15 Leased Properties), without any adjustment
pursuant to this Section 16.10.3.1, because requirement (b) above is not met.
                 -----------------
The Section 16.10.1 Number for this Lease would equal one (1).  For the
aforesaid New Lease (because such New

                                      67
<PAGE>

Lease would cover 10 Leased Properties), the Section 16.10.1 Number would also
equal one (1).

     Example 2:  Same assumed facts as in Example 1, except that, as of the date
     ---------                            ---------
immediately prior to the Section 16.10.3.1 New Lease Transaction referenced in
Example 1, an Event of Default under Section 16.1(m) and/or Section 16.1(q) had
                                     ---------------        ---------------
occurred and was continuing with respect to one (1) Leased Property and such
Leased Property remains a part of this Lease (thus satisfying requirement (b)
above).  Requirement (x) above would be met as to this Lease, because,
immediately following the assumed Section 16.10.1.1 New Lease Transaction, an
Event of Default under Section 16.1(m) and/or Section 16.1(q) would exist under
                       ---------------        ---------------
this Lease with respect to one (1) Leased Property, and such number of Leased
Properties equals the Section 16.10.1 Number that would be applicable to this
Lease as a 15 Leased Properties lease, assuming, for purposes of requirement (x)
above, that this Section 16.10.3.1 is not applicable.  Also, requirement (z)
                 -----------------
above would be met, as assumed in Example 1.  Accordingly, in the circumstances
                                  ---------
of Example 2, a review of Coverage Ratios pursuant to subsection (y) above would
   ---------
be needed in order to determine whether a change in the Section 16.10.1 Number
applicable to this Lease is mandated by this Section 16.10.3.1.  On the other
                                             -----------------
hand, for the aforesaid New Lease (because such New Lease would cover 10 Leased
Properties and because requirement (x) above is not met), the Section 16.10.1
Number would equal one (1).

     Example 3:  Same assumed facts as in Example 2.  Assume further that the
     ---------                            ---------
Coverage Ratios of the hospitals and nursing centers that remain subject to this
Lease, determined for the four (4) full calendar quarters ending not less than
sixty (60) days prior to the assumed Section 16.10.3.1 New Lease Transaction,
equal, respectively, 1.575:1 and 1.500:1 and that the Coverage Ratios of the
hospitals and nursing centers included in the 25 Leased Properties that were
covered by this Lease immediately prior to the aforesaid transaction, for the
same period, equal, respectively, 1.500:1 and 1.450:1.  In the circumstances of
this Example 3, this Section 16.10.3.1 would not apply, and the Section 16.10.1
                     -----------------
Number applicable to this Lease would be determined pursuant to Section
                                                                -------
16.10.1(a) hereof (because this Lease would then cover 15 Leased Properties),
----------
without any adjustment pursuant to this Section 16.10.3.1, because requirement
                                        -----------------
(y) above is not met.  The Section 16.10 Number for this Lease would equal one
(1).  For the aforesaid New Lease, for the reasons stated in Example 2, the
Section 16.10.1 Number would also equal one (1).

     Example 4:  Same assumed facts as in Example 2.  Assume further that the
     ---------                            ---------
Coverage Ratios of the hospitals and nursing centers that remain subject to this
Lease, determined for the four (4) full calendar quarters ending not less than
sixty (60) days prior to the assumed Section 16.10.3.1 New Lease Transaction,
equal, respectively, 1.575:1 and 1.653:1 and that the Coverage Ratios of the
hospitals and nursing centers included in the 25 Leased Properties that were
covered by this Lease immediately prior to the aforesaid transaction, for the
same period, equal, respectively, 1.500:1 and 1.450:1.  In the circumstances of
this Example 4, the Section 16.10.1 Number that is applicable to this Lease
     ---------
immediately following the assumed Section 16.10.3.1 New Lease Transaction,
would, pursuant to this Section 16.10.3.1, be increased from one (1) to two (2),
                        -----------------
because both requirement (a) and requirement (b) above are met, and
        ----

                                      68
<PAGE>

all of requirement (x) (as described in Example 2), requirement (y) (because the
                                        ---------
Coverage Ratio for nursing centers covered by this Lease is fourteen percent
(14%) higher (1.45 x. 1.14 = 1.653) than the Coverage Ratio for all nursing
centers covered by the pre-transaction 25 Leased Properties lease) and
requirement (z) (as described in Example 2) above are met.  For the aforesaid
                                 ---------
New Lease, for the reasons stated in Example 2, the Section 16.10.1 Number would
                                     ---------
equal one (1).

          Section 16.10.3.2   Notwithstanding Section 16.10.1 above, if (a) this
                                              ---------------
Lease is, pursuant to Section 40.18 hereof, the Section 40.18 Lease (as defined
                      -------------             -------------------
in Section 40.18) and (b) as a result of Section 16.1(m) and/or Section 16.1(q)
   -------------                         ---------------        ---------------
Events of Default that had occurred and were continuing under this Lease and the
other lease(s) involved in the Section 40.18 lease combination transaction
                               -------------
immediately prior to such transaction, immediately following the transaction
pursuant to which this Lease became a Section 40.18 Lease, an Event of Default
of the nature referenced in Section 16.1(m) and/or Section 16.1(q) of this Lease
                            ---------------        --------------
has occurred and is continuing (as described in Section 16.10.2.3 hereof) with
                                                -----------------
respect to a number of the Leased Properties then covered by this Lease (the

"Section 16.10.3.2 Number") that equals or exceeds the Section 16.10.1 Number
-------------------
that would be applicable to this Lease as of such date (assuming, for purposes
of this subsection (b), that this Section 16.10.3.2 is not applicable), and (c)
                                  -----------------
immediately following the transaction pursuant to which this Lease became a
Section 40.18 Lease, no Event of Default (other than Section 16.1(m) and/or
                                                     ---------------
Section 16.1(q) Events of Default) has occurred and is continuing under this
---------------
Lease, then, the Section 16.10.1 Number that would otherwise apply to this
Lease, but for the terms of this Section 16.10.3.2, shall be increased by one
                                 -----------------
(1) (and provided further that, if requirements (a), (b) and (c) above are met
and this Lease, as the Section 40.18 Lease, (X) covers forty-one (41) or more
Leased Properties and the Section 16.10.3.2 Number for this Lease, as the
Section 40.18 Lease, exceeds three (3), then the Section 16.10.1 Number
applicable to this Lease shall be adjusted to equal the aforesaid Section
16.10.3.2 Number plus one (1) or (Y) covers twenty-one (21) to forty (40), both
inclusive, Leased Properties and the number (the "Subsection Y Number") equal to
the Section 16.10.3.2 Number for this Lease, as the Section 40.18 Lease, minus
the number of Leased Properties, if any, as to which, following such lease
combination transaction, Tenant will continue to have an available and
exercisable purchase option under Section 16.12 exceeds two (2), then the
                                  -------------
Section 16.10.1 Number applicable to this Lease shall be adjusted to equal the
Subsection (Y) Number plus one (1) or (Z) covers twenty (20) or less Leased
Properties and the number (the "Subsection Z Number") equal to the Section
16.10.3.2 Number for this Lease, as the Section 40.18 Lease, minus the number of
Leased Properties, if any, as to which, following such lease combination
transaction, Tenant will continue to have an available and exercisable purchase
option under Section 16.12 exceeds one (1), then the Section 16.10.1 Number
             -------------
applicable to this Lease shall be adjusted to equal the Subsection Z Number plus
one (1)).

     Example 1:  Assume that a lease covering 50 Master Lease Leased Properties
     ---------
is subdivided into Lease A covering 35 Master Lease Leased Properties and Lease
B covering 15 Master Lease Leased Properties and that no Event of Default under
Section 16.1(m) and/or Section 16.1(q) or any other provision has occurred or is
---------------        ---------------
continuing under either of such leases.  Assume further that, pursuant to
Section 40.18, such two (2) leases are combined and
-------------

                                      69
<PAGE>

that Lease A is the Section 40.18 Lease. This Section 16.10.3.2 would not
                                                  -----------------
apply, and the Section 16.10.1 Number applicable to Lease A would be determined
pursuant to Section 16.10.1(c) hereof (because Lease A would then cover 50
            ------------------
Master Lease Leased Properties), without any adjustment pursuant to this Section
                                                                         -------
16.10.3.2, because, although requirements (a) and (c) above are met relative to
---------
Lease A, requirement (b) above is not met as to Lease A.

     Example 2:  Same assumed facts as in Example 1, except assume three (3)
     ---------                            ---------
Master Lease Leased Properties are subject to continuing Section 16.1(m) and/or
                                                         ---------------
Section 16.1(q) Events of Default immediately prior to the assumed Section 40.18
---------------                                                    -------------
transaction, 2 of which are within the 35 Master Lease Leased Properties Lease A
and 1 of which is within the 15 Master Lease Leased Properties Lease B.
Immediately following the assumed Section 40.18 transaction, the recombined 50
                                  -------------
Master Lease Leased Properties Lease A would have included therein 3 Master
Lease Leased Properties that are subject to continuing Section 16.1(m) and/or
                                                       ---------------
Section 16.1(q) Events of Default, which number equals the Section 16.10.1
---------------
Number that would be applicable to the combined 50 Master Lease Leased
Properties Lease A pursuant to Section 16.10.1(c) above, but for this Section
                               ------------------                     -------
16.10.3.2, and therefore, pursuant to Section 16.10.3.2, the Section 16.10.1
----------                            -----------------
Number that is applicable to the combined Lease A would be increased from three
(3) to four (4).

     Example 3:  Same assumed facts as in Example 1, except assume four (4)
     ---------                            ---------
Master Lease Leased Properties are subject to continuing Section 16.1(m) and/or
                                                         ---------------
Section 16.1(q) Events of Default immediately prior to the assumed Section 40.18
---------------                                                    -------------
transaction, 2 of which are within the 35 Master Lease Leased Properties Lease A
and 2 of which are within the 15 Master Lease Leased Properties Lease B.
Immediately following the assumed Section 40.18 transaction, the recombined 50
                                  -------------
Master Lease Leased Properties Lease A would have included therein 4 Master
Lease Leased Properties that are subject to continuing Section 16.1(m) and/or
                                                       ---------------
Section 16.1(q) Events of Default, which number exceeds the Section 16.10.1
---------------
Number that would be applicable to the combined 50 Master Lease Leased
Properties Lease A pursuant to Section 16.10.1(c) above, but for this Section
                               ------------------                     -------
16.10.3.2.  Requirements (a), (b) and (c) above are met relative to Lease A,
---------
and, in addition, Lease A meets the requirements of the proviso at the end of
Section 16.10.3.2.  Therefore, pursuant to Section 16.10.3.2, the Section
-----------------                          -----------------
16.10.1 Number that is applicable to the combined Lease A would equal five (5)
(i.e. the Section 16.10.3.2 Number+1).

          Section 16.10.3.3   If a Separate Lease is created under Section 22.7
                                                                   ------------
of any lease of any of the Master Lease Leased Properties and, at the time such
lease is created an Event of Default under Section 16.1(m) and/or Section
                                           ---------------        -------
16.1(q) has occurred and is continuing with respect to any Master Lease Leased
-------
Property(ies) included in such Separate Lease or, within two (2) years
thereafter, such an Event of Default arises under such Separate Lease with
respect to any Master Lease Leased Property(ies) included in such Separate
Lease, then, for all purposes of each Section 16.10.3.3 Lease (as hereinafter
defined), (a) any such Event of Default under such Separate Lease shall also be
considered an Event of Default under Section 16.1(m) and Section 16.1(q) of any
                                     ---------------     ---------------
lease (a "Section 16.10.3.3 Lease") that, or that  derives from a lease that, at
          -----------------------
any time during the two (2) years that preceded the creation of

                                      70
<PAGE>

such Separate Lease, included any Master Lease Leased Property included in such
Separate Lease and as to which such a Section 16.1(m) and/or Section 16.1(q)
                                      ---------------        ---------------
Event of Default has occurred and is continuing under such Separate Lease and
(b) each Master Lease Leased Property as to which such a Section 16.1(m) and/or
                                                         ---------------
Section 16.1(q) Event of Default has occurred and is continuing under such
---------------
Separate Lease shall, for all purposes of Section 16.10 and Section 19.1(b) of
                                          -------------     ---------------
each Section 16.10.3.3 Lease, be counted as a leased property as to which a
Section 16.1(m) and/or Section 16.1(q) Event of Default had occurred and was
---------------        ---------------
continuing the same as if a Section 16.1(m) and/or Section 16.1(q) Event of
                            ---------------        ---------------
Default had occurred and was continuing under such Section 16.10.3.3 Lease
relative to a Master Lease Leased Property included in such Section 16.10.3.3
Lease.

     Example 1:  Assume that a lease of 15 Master Lease Leased Properties
     ---------
includes Property A as to which a Section 16.1(m) Event of Default has occurred
                                  ---------------
and is continuing and that, on account of an Event of Default under such lease,
Lessor terminates such lease as it applies to Property A, so that the remaining
lease covers 14 Master Lease Leased Properties.  Assume further that, pursuant
to Section 22.7 of such lease, a Separate Lease under Section 22.7 is entered
   ------------                                       ------------
into with a leasehold mortgagee or its designee relative to Property A.  As a
result of Section 16.10.3.3, the Section 16.1(m) Event of Default relative to
          -----------------      ---------------
Property A will also be considered an Event of Default under Section 16.1(m) of
                                                             ---------------
the aforesaid remaining lease of 14 Master Lease Leased Properties and Property
A will, for all purposes of Section 16.10 and Section 19.1(b) of such remaining
                            -------------     ---------------
lease, be counted as a leased property as to which a Section 16.1(m) Event of
                                                     ---------------
Default had occurred and was continuing the same as if a Section 16.1(m) Event
                                                         ---------------
of Default had occurred and was continuing under such remaining lease relative
to a Master Lease Leased Property included in such remaining lease.

     Example 2:  Assume that a lease of 15 Master Lease Leased Properties
     ---------
includes no properties as to which a Section 16.1(m) and/or Section 16.1(q)
                                     ---------------        ---------------
Event of Default has occurred and is continuing and that, on account of an Event
of Default under such lease, Lessor terminates such lease as it applies to
Property A, so that the remaining lease covers 14 Master Lease Leased
Properties.  Assume further that, pursuant to Section 22.7 of such lease, a
                                              ------------
Separate Lease under Section 22.7 is entered into with a leasehold mortgagee or
its designee relative to Property A.  Assume further that several months later a
Section 16.1(m) Event of Default arises relative to Property A.  As a result of
Section 16.10.3.3, the Section 16.1(m) Event of Default relative to Property A
-----------------
will also be considered an Event of Default under Section 16.1(m) of the
                                                  ---------------
aforesaid remaining lease of 14 Master Lease Leased Properties and Property A
will, for all purposes of Section 16.10 and Section 19.1(b) of such remaining
                          -------------     ---------------
lease, be counted as a leased property as to which a Section 16.1(m) Event of
Default had occurred and was continuing the same as if a Section 16.1(m) Event
                                                         ---------------
of Default had occurred and was continuing under such remaining lease relative
to a Master Lease Leased Property included in such remaining lease.

     Example 3: Same assumed facts as in Example 2, except assume further that
     ---------                           ---------
the 15 Master Lease Leased Properties lease referenced in such example was
formed several months prior to the creation of the Separate Lease as the result
of the division of a 60 Master Lease Leased Properties lease into two leases,
the aforesaid 15 Master Lease Leased Properties lease

                                      71

<PAGE>

and a 45 Master Lease Leased Properties lease. As a result of Section 16.10.3.3,
                                                              -----------------
the Section 16.1(m) Event of Default relative to Property A will also be
    ---------------
considered an Event of Default under Section 16.1(m) of both the remaining lease
                                     ---------------
of 14 Master Lease Leased Properties and the aforesaid 45 Master Lease Leased
Properties lease and Property A will, for all purposes of Section 16.10 and
                                                          -------------
Section 19.1(b) of such remaining lease and such 45 Master Lease Leased
---------------
Properties lease, be counted as a leased property as to which a Section 16.1(m)
                                                                ---------------
Event of Default had occurred and was continuing the same as if a Section
                                                                  -------
16.1(m) Event of Default had occurred and was continuing under such remaining
-------
lease relative to a Master Lease Leased Property included therein and under such
45 Master Lease Leased Properties lease relative to a Master Lease Leased
Property included therein. This is because, several months prior to the creation
of the Separate Lease, Property A was included in the aforesaid 60 Master Lease
Leased Properties lease and both the 14 Master Lease Leased Properties lease and
the 45 Master Lease Leased Properties lease derive from such 60 Master Lease
Leased Properties lease.

          Section 16.10.4  Lessor shall have no obligation of any kind or nature
to accept, or to treat as a default cure, any monetary or other form of cure in
lieu of the mandated "in-kind", Facility-specific cure.  For example, even if
Lessor, in its sole and absolute discretion, receives, and accepts, full
monetary compensation from Tenant on account of all damages suffered by Lessor
due to the loss of certification for reimbursement under Medicaid at a
particular Facility and whether such receipt occurs through a voluntary
arrangement or through the exercise of any remedy hereunder, the Section 16.1(q)
                                                                 ---------------
Event of Default arising from such loss of certification shall, unless Lessor
otherwise agrees in writing, in its sole and absolute discretion, for purposes
of Sections 4.1, 16.1(q), 16.10, 17.1, 19.1, 25.1.1, 25.1.2 and 25.1.3 of this
   ------------  -------  -----  ----  ----  ------  ------     ------
Lease, subject, if the Section 16.10.1 Number is 2 or greater, to the Section
16.10.2.3 Proviso, be considered to be "continuing" unless, prior to termination
of this Lease as it applies to such Facility, or dispossession of Tenant from
such Facility, as described in Section 16.10.2.3 above, such certification for
                               -----------------
such Facility is fully restored.  Nothing contained in this Section 16.10 shall
                                                            -------------
limit or affect the provisions of this Article XVI providing that Lessor has no
obligation or deemed obligation to mitigate damages on account of any default by
Tenant.

          Section 16.10.5  The following examples are intended to illustrate
further the application of this Section 16.10:
                                -------------

     Example 1:  If an Event of Default occurs under Section 16.1(m) hereof
     ---------                                       ---------------
because the number of licensed beds at a particular Facility has been reduced to
a number below the required number of licensed beds for such Facility, such
Event of Default shall be deemed to be "continuing" for purposes of Sections
                                                                    --------
4.1, 16.1(m), 16.10, 17.1, 19.1, 25.1.1, 25.1.2 and 25.1.3 of this Lease,
------------  -----  ----  ----  ------  ------     ------
subject, if applicable, to the Section 16.10.2.3 Proviso, unless, prior to
termination of this Lease as it applies to such Facility, or dispossession of
Tenant from such Facility, as described in Section 16.10.2.3 above, the number
                                           -----------------
of licensed beds at such Facility is returned to the required number.

                                      72
<PAGE>

     Example 2:  If an Event of Default of the type described in Example 1 has
     ---------                                                   ---------
occurred and is continuing (as described above) with respect to a Leased
Property, and Lessor has terminated this Lease as it applies to the Leased
Property to which such aforesaid Event of Default relates or Lessor has
dispossessed Tenant from such Leased Property, then, if the Section 16.10.1
Number applicable to this Lease equals two (2) or more and Events of Default of
the nature referenced in Section 16.1(m) and/or Section 16.1(q) of this Lease
                         ---------------        ---------------
have occurred and are continuing (as described above) with respect to fewer than
the Section 16.10.1 Number of the Leased Properties, such Event of Default, for
purposes of Sections 4.1, 17.1, 25.1.1, 25.1.2 and 25.1.3, shall not be deemed
            ------------  ----  ------  ------     ------
to be "continuing" as to any other Leased Properties; in such event, the rights
and remedies available to Lessor or the limitation of Tenant's rights under such
sections which arise in the case of a continuing Event of Default shall apply
only to the Leased Property on which the Event of Default under Section 16.1(m)
                                                                ---------------
has occurred (as illustrated in Examples 5, 6 and 7 below).

     Example 3:  If an Event of Default occurs under Section 16.1(q) hereof due
     ---------                                       ---------------
to a loss of Medicaid certification at a particular Facility, such Event of
Default shall be deemed to be "continuing" for purposes of Sections 4.1,
                                                           ------------
16.1(q), 16.10, 17.1, 19.1, 25.1.1, 25.1.2 and 25.1.3 of this Lease, subject, if
-------  -----  ----  ----  ------  ------     ------
applicable, to the Section 16.10.2.3 Proviso, unless, prior to termination of
this Lease as it applies to such Facility, or dispossession of Tenant from such
Facility, as described above, such Facility's certification for reimbursement
under Medicaid is fully restored.

     Example 4:  If an Event of Default of the type described in Example 3 has
     ---------
occurred and is continuing (as described above) with respect to a Leased
Property, and Lessor has terminated this Lease as it applies to the Leased
Property to which such aforesaid Event of Default relates or Lessor has
dispossessed Tenant from such Leased Property, then, if the Section 16.10.1
Number applicable to this Lease equals two (2) or more and Events of Default of
the nature referenced in Section 16.1(m) and/or Section 16.1(q) of this Lease
                         ---------------        ---------------
have occurred and are continuing (as described above) with respect to fewer than
the Section 16.10.1 Number of the Leased Properties, such Event of Default, for
purposes of Sections 4.1, 17.1, 25.1.1, 25.1.2 and 25.1.3, shall not be deemed
            ------------  ----  ------  ------     ------
to be "continuing" as to any other Leased Properties; in such event, the rights
and remedies available to Lessor or the limitation of Tenant's rights under such
sections which arise in the case of a continuing Event of Default shall apply
only to the Leased Property on which the Event of Default under Section 16.1(q)
                                                                ---------------
has occurred (as illustrated in Examples 5, 6 and 7 below).

     Example 5:  If (i) an Event of Default of the nature referenced in Section
     ---------                                                          -------
16.1(m) and/or Section 16.1(q) of this Lease has occurred and is continuing (as
-------        ---------------
described above) with respect to Leased Property X and no other Leased
Properties, (ii) Lessor has terminated this Lease as it applies to Leased
Property X or dispossessed Tenant from such Leased Property X, (iii) the Section
16.10.1 Number applicable to this Lease exceeds 1 (so that Section 16.10.2.2 is
                                                           -----------------
applicable and, in light of subsections (i) and (ii) of this Example,
requirements (a) and (b) of the Section 16.10.2.3 Proviso are met), and (iv)
pursuant to Section 4.1, a refund shall be due from a taxing authority in
respect of an Imposition paid by Tenant relative to Leased Property X, then
Tenant would not receive such refund and such refund would be retained by

                                      73

<PAGE>

Lessor and applied as provided in Article XVI, but Tenant would continue to be
paid or retain (as provided in Section 4.1) any Imposition refund from Leased
Properties other than Leased Property X.

     Example 6:  If (i) an Event of Default of the nature referenced in Section
     ---------
16.1(m) and/or Section 16.1(q) of this Lease has occurred and is continuing (as
described above) with respect to Leased Property X and no other Leased
Properties, (ii) Lessor has terminated this Lease as it applies to Leased
Property X or dispossessed Tenant from such Leased Property X, and (iii) the
Section 16.10.1 Number applicable to this Lease exceeds 1 (so that Section
                                                                   -------
16.10.2.2 is applicable and, in light of subsections (i) and (ii) of this
---------
Example, requirements (a) and (b) of the Section 16.10.2.3 Proviso are met),
then, pursuant to Section 17.1, Lessor would be entitled, to the extent
                  ------------
permitted by law, to enter on Leased Property X for the purpose of curing such
continuing Event of Default, but Lessor would not be entitled to exercise the
remedies provided in Section 17.1 with respect to any other Leased Properties.
                     ------------

     Example 7:  If (i) an Event of Default of the nature referenced in Section
     ---------
16.1(m) and/or Section 16.1(q) of this Lease has occurred and is continuing (as
               ---------------
described above) with respect to Leased Property X and no other Leased
Properties, (ii) Lessor has dispossessed Tenant from Leased Property X, (iii)
the Section 16.10.1 Number applicable to this Lease exceeds 1 (so that Section
                                                                       -------
16.10.2.2 is applicable and, in light of subsections (i) and (ii) of this
---------
Example, requirements (a) and (b) of the Section 16.10.2.3 Proviso are met), and
(iv) Tenant desires to sublet, pursuant to Section 25.1.2(ii), up to an
                                           ------------------
aggregate of 20% of the rentable square footage of each of Leased Properties X
and Y without obtaining the consent of Lessor, then Tenant would not be entitled
to sublet any portion of Leased Property X without the consent of Lessor, but
Tenant would be entitled to sublet such portion of Leased Property Y without
obtaining the consent of Lessor.

     Example 8:  Same assumed facts as in Example 7, except that the Section
     ---------                            ---------
16.10.1 Number applicable to this Lease equals 2, and an Event of Default of the
nature referenced in Section 16.1(m) has also occurred and is continuing
                     ---------------
relative to another of the Leased Properties.  Section 16.10.2.2 would be
                                               -----------------
applicable, but requirement (a) of the Section 16.10.2.3 Proviso would not be
met.  Tenant would not be entitled to sublet any portion of Leased Property X or
Leased Property Y without the consent of Lessor.

     Section 16.11  No Mediation or Arbitration.  Notwithstanding anything to
                    ---------------------------
the contrary set forth herein or in that certain Agreement and Plan of
Reorganization dated as of April 30, 1998 by and between Ventas and Vencor
Healthcare, Inc. ("1998 Plan of Reorganization"), (a) upon any Event of Default
                   ---------------------------
by Tenant, Lessor shall be entitled to proceed immediately to enforce its rights
and remedies pursuant to this Article XVI and the other terms of this Lease, (b)
                              -----------
neither any Event of Default, nor the rights and obligations of Tenant and
Lessor under this Lease, shall be subject to mediation or arbitration of any
kind, and (c) the provisions of Article VI of the 1998 Plan of Reorganization
                                ----------
shall not apply to this Lease or any of the Combined Leases.

                                      74
<PAGE>

     Section 16.12  Special Purchase Provisions.  It is the intention of this
                    ---------------------------
Section 16.12 to set forth specific provisions that, in limited circumstances,
-------------
for a limited number of times and only in connection with the occurrence of
Events of Default under Section 16.1(m) and/or Section 16.1(q) of this Lease,
                        ---------------        ---------------
allow Tenant a non-renewing right to purchase a Leased Property(ies) and thereby
to reduce the number of Leased Properties as to which Section 16.1(m) and/or
                                                      ---------------
Section 16.1(q) Events of Default continue to exist to below the applicable
---------------
Section 16.10.1 Number, and, by doing so strictly on the terms and conditions
provided in this Section 16.12, thereby to avoid the exercise by Lessor of
                 -------------
termination and/or dispossession rights and remedies against all Leased
Properties covered hereby on account of such Section 16.1(m) and/or Section
                                             ---------------        -------
16.1(q) Event(s) of Default.  Tenant's purchase rights as set forth in this
-------
Section 16.12 are not applicable to any other Events of Default or in any other
-------------
circumstances and are strictly limited in number and non-renewing.

     Section 16.12.1

          Section 16.12.1.1   If the number of Leased Properties as to which
this Lease is in full force and effect equals twenty (20) or less, subject to

Section 16.12.1.2 below, a purchase option will be exercisable by Tenant on
-----------------
account of a Section 16.1(m) and/or Section 16.1(q) Event of Default with
             ---------------        ---------------
respect to only two (2) Leased Properties in the aggregate during the Term,
after which no further purchase option under this Section 16.12 will be
                                                  -------------
available to, or exercisable by, Tenant.

          Section 16.12.1.2   If the number of Leased Properties as to which
this Lease is in full force and effect equals twenty-one (21) to forty (40),
both inclusive, a purchase option will be exercisable by Tenant on account of a
Section 16.1(m) and/or Section 16.1(q) Event of Default with respect to only one
---------------        ---------------
(1) Leased Property in the aggregate during the Term, after which no further
purchase option under this Section 16.12 will be available to, or exercisable
                           -------------
by, Tenant, and provided that, if (a) this Lease at any time was in full force
and effect with respect to twenty-one (21) to forty (40), both inclusive, Leased
Properties and at such time Tenant exercised a purchase option under this
Section 16.12 and on account of a Section 16.1(m) and/or Section 16.1(q) Event
-------------                     ---------------        ---------------
of Default with respect to a Leased Property and (b) this Lease thereafter is in
full force and effect with respect to less than twenty-one (21) Leased
Properties due to creation of a Separate Lease under Section 22.7, a casualty or
                                                     ------------
condemnation termination relative to a Leased Property(ies) or for any other
reason (other than Lessor's unilateral creation of a New Lease under Section
                                                                     -------
40.15 or a New Master Lease under Section 40.17), no further purchase option
-----                             -------------
under this Section 16.12 will be available to, or exercisable by, Tenant.
           -------------

          Section 16.12.1.3   If the number of Leased Properties as to which
this Lease is in full force and effect equals forty-one (41) or more, then,
notwithstanding anything to the contrary contained in this Section 16.12, this
                                                           -------------
Section 16.12 shall not apply, and no purchase option will be available to, or
-------------
exercisable by, Tenant on account of a Section 16.1(m) and/or Section 16.1(q)
                                       ---------------        ---------------
Event of Default.

                                      75
<PAGE>

          Section 16.12.1.4   For all purposes of this Section 16.12, once a
purchase option is exercised relative to a Leased Property(ies), it may not be
revoked, and it shall exhaust Tenant's available purchase options, as described
in Section 16.12.1.1 and Section 16.12.1.2, as applicable, above, to the extent
   -----------------     -----------------
of the number of Leased Properties as to which such exercise applies.

          Section 16.12.1.5   No purchase option will be available to, or
exercisable by, Tenant on account of any Event of Default under this Lease other
than Section 16.1(m) and/or Section 16.1(q) Events of Default.
     ---------------        ---------------

     Section 16.12.2  If (a) an Event of Default under Section 16.1(m) and/or
                                                       ---------------
Section 16.1 (q) of this Lease has occurred and is continuing (as described in
----------------
Section 16.10.2.3 hereof) with respect to a number of the Leased Properties
-----------------
covered by this Lease that equals or exceeds the Section 16.10.1 Number that is
applicable to this Lease and (b) Lessor intends to exercise termination and/or
dispossession rights and remedies against all Leased Properties covered by this
Lease on account of such Event(s) of Default and (c) no Events of Default (other
than Section 16.1(m) and/or Section 16.1(q) Events of Default) have occurred and
     ---------------        ---------------
are continuing under this Lease, then, unless (i) Tenant has previously
exhausted its available purchase option(s) (as described in Section 16.12.1.1 or
                                                            -----------------
Section 16.12.1.2, as applicable, above) or (ii) if Tenant has any remaining
-----------------
purchase option(s), by exercising the same Tenant would not be able to reduce
the number of Leased Properties as to which an Event of Default under Section
                                                                      -------
16.1(m) and/or Section 16.1(q) of this Lease has occurred and is continuing (as
-------        ---------------
described in Section 16.10.2.3 hereof) to a number fewer than the Section
             -----------------
16.10.1 Number that is applicable to this Lease:

          (x)  Lessor will provide to Tenant a written notice (a "Section 16.12
                                                                  -------------
               Notice") that Lessor intends to exercise termination and/or
               ------
               dispossession rights and remedies against all Leased Properties
               covered by this Lease on account of such Section 16.1(m) and/or
                                                        ---------------
               Section 16.1(q) Events(s) of Default.  If the number of Leased
               ---------------
               Properties as to which an Event of Default under Section 16.1(m)
                                                                ---------------
               and/or Section 16.1(q) has occurred and is continuing exceeds the
                      ---------------
               number of Leased Properties as to which a purchase option remains
               available to Tenant and, by exercising its available purchase
               option(s), Tenant would be able to reduce the number of Leased
               Properties as to which an Event of Default under Section 16.1(m)
                                                                ---------------
               and/or Section 16.1(q) of this Lease has occurred and is
                      ---------------
               continuing to a number fewer than the Section 16.10.1 Number that
               is applicable to this Lease, the aforesaid Section 16.12 Notice
               shall specify as to which Leased Property(ies) a purchase option
               shall be applicable.  Otherwise, the purchase option will apply
               to each Leased Property as to which a Section 16.1(m) and/or
                                                     ---------------
               Section 16.(q) Event of Default has occurred and is continuing.
               --------------

          (y)  If Tenant desires to exercise its purchase option, Tenant must so
               notify Lessor in writing within seven (7) days of its receipt of
               the aforesaid

                                      76
<PAGE>

               Section 16.12 Notice relating thereto and Tenant must exercise
               such purchase option against all Leased Properties as to which
               the purchase option is applicable as provided in subsection (x)
               above. If Tenant does not so exercise its purchase option, Tenant
               shall be deemed to have waived its purchase option relative to
               all of the Leased Properties to which the same is applicable.

          (z)  If Lessor provides a Section 16.12 Notice as aforesaid, all of
               the references in the penultimate paragraph of Section 16.1 of
                                                              ------------
               this Lease to 10 days shall be revised so that any notice of
               termination given by Lessor as provided in such penultimate
               paragraph shall take effect no sooner than three (3) Business
               Days following the later of (1) Lessor's giving of its notice of
               termination or (2) the expiration of Tenant's seven (7) day
               period, as provided in subsection (y) above, relative to such
               Section 16.12 Notice, and not otherwise be restricted as to the
               effective date thereof by such penultimate paragraph.

          Section 16.12.3  If Tenant exercises a purchase option relative to a
particular Leased Property(ies), the closing with respect thereto will occur
within forty-five (45) days of Tenant's receipt of the applicable Section 16.12
Notice.  At such closing, Lessor will, by special warranty deed, convey to
Tenant or its designee all of Lessor's right, title and interest in the subject
Leased Property(ies), subject to the Permitted Encumbrances, and will cause to
be released any Facility Mortgage(s) or other liens created by Lessor or its
agents or employees relative to the subject Leased Property(ies) (and, if Lessor
is unable to cause such release(s) as of the initially scheduled closing date,
the closing date shall be extended as necessary to allow Lessor additional time
to cause such release(s)), and Tenant will pay in cash, to or as directed by
Lessor, the purchase price therefor, as described in Section 16.12.5 below,
                                                     ---------------
subject, if applicable as described below, to a credit against the purchase
price in favor of Tenant and in the amount, if any, described below.  Such
conveyance will be on an "AS IS", "WITH ALL FAULTS" basis and without any
representation or warranty (except as set forth in the aforesaid special
warranty deed).  Upon the occurrence of such closing, this Lease will terminate,
in accordance with Section 40.16, insofar as it applies to the purchased Leased
                   -------------
Property(ies), but all accrued obligations, or obligations that survive
termination, with respect to the purchased Leased Property(ies) shall survive
such termination.  Relative to the foregoing, if Tenant closes with respect to a
particular Leased Property strictly in accordance with the terms and conditions
provided in this Section 16.12, and, prior to such closing, Lessor has sued, and
                 -------------
collected damages from, Tenant on account of a Section 16.1(m) and/or Section
                                               ---------------        -------
16.1(q) Event of Default relative to such Leased Property, Tenant shall be
-------
entitled to a credit against the purchase price for such Leased Property equal
to a sum, not to exceed the purchase price, equal to (a) the amount of the
damages so collected by Lessor from Tenant in the aforesaid lawsuit, less (b)
the amount of all attorneys' fees, court costs, witness fees and other costs and
expenses incurred by Lessor in connection with such lawsuit or Section 16.1(m)
                                                               ---------------
and/or Section 16.1(q) Event of Default.
       ---------------

                                      77
<PAGE>

          Section 16.12.4  If Tenant exercises a purchase option relative to a
Leased Property(ies), and closes with respect thereto strictly in accordance
with the terms and conditions provided in this Section 16.12, then, for purposes
                                               -------------
of Sections 16.1 and 16.10 of this Lease, the Section 16.1(m) and/or Section
                                              ---------------        -------
16.1(q) Event of Default relative to the purchased Leased Property(ies) will be
-------
deemed to have been cured (but without limitation of Lessor's indemnity rights
under Section 24.1 hereof and other rights and remedies that survive the
      ------------
applicable termination of this Lease that results from Tenant's purchase of such
Leased Property(ies)), but, for purposes of Section 16.12.1.1 and Section
                                            -----------------     -------
16.12.1.2, Tenant will have exhausted that number of its available purchase
---------
options as equals the number of Leased Properties as to which it has so
exercised its purchase option.  If, as a result of such cure, the number of the
Leased Properties as to which an Event of Default under Section 16.1(m) and/or
Section 16.1(q) of this Lease is reduced to a number fewer than the Section
16.10.1 Number that is applicable to this Lease, Lessor will, for so long as
such condition continues to exist, be precluded from exercising termination
and/or dispossession rights and remedies against all Leased Properties covered
by this Lease on account of the then remaining Event(s) of Default under Section
                                                                         -------
16.1(m) and/or Section 16.1(q) of this Lease, but not on account of any other
-------        ---------------
Event of Default under this Lease.

          Section 16.12.5  The purchase price for each Leased Property as to
which a purchase option is exercised by Tenant will be separately determined for
each Leased Property and will equal, at Lessor's separate election for each
Leased Property, either (a) the sum calculated by dividing the Base Rent per
annum applicable to such Leased Property for the year next following the
applicable closing date by nine percent (9.0%) or (b) the product of ten (10.0)
times the Purchase Option EBITDAR, as hereinafter defined, for such Leased
Property.  The Purchase Option EBITDAR for a particular Leased Property will
equal the highest twelve (12) consecutive month EBITDAR for such Leased Property
occurring during the period commencing three (3) years prior to (i) the first
day of the month during which a Section 16.1(m) Event of Default first occurred
                                ---------------
with respect to such Leased Property or (ii) the first day of the month during
which a revocation of certification for reimbursement under Medicare or Medicaid
first occurred with respect to such Leased Property, whichever is earlier, and
ending on the last day of the month preceding the month during which the closing
occurs with respect to such Leased Property.  For example, if Tenant exercises a
purchase option relative to a particular Leased Property, the closing with
respect thereto occurs on April 15, 2004, a Section 16.1(m) Event of Default
                                            ---------------
arose on January 14, 2004, such Leased Property was decertified for Medicare on
July 15, 2003 and a Section 16.1(q) Event of Default arose on account thereof on
                    ---------------
November 12, 2003, the period referenced above would commence on July 1, 2000
and end on March 31, 2004.

          Section 16.12.6  If this Lease and a Second Lease are combined as
provided in Section 40.18 of this Lease, for purposes of determining whether any
            -------------
further purchase option is available to Tenant in such combined lease and, if
so, as to how many Leased Properties such an option is available, all purchase
option exercises that occurred under this Lease and the Second Lease prior to
such combination shall be counted the same as if they occurred under the
combined lease.

                                      78
<PAGE>

          Section 16.12.7  Notwithstanding anything to the contrary contained in
this Section 16.12, this Section 16.12 will be included in the Lease and be
     -------------       -------------
effective only if and for so long as inclusion thereof does not cause this Lease
to be considered a capital lease, rather than an operating lease, for all
accounting, tax and legal purposes, as determined by the independent auditors
for both Lessor and Tenant.

          Section 16.12.8  The following examples are intended to illustrate
further the application of this Section 16.12:
                                -------------

     Example 1:  Assume that, within a lease of 25 Master Lease Leased
     ---------
     Properties, no Events of Default exist other than Events of Default under

     Section 16.1(m) and/or Section 16.1(q) that have occurred and are
     ---------------        ---------------
     continuing relative to Property A and Property B and that Lessor provides a
     Section 16.12 Notice on account thereof, which notice specifies Property A
     as the property as to which Tenant's one (1) available purchase option
     (pursuant to the number limitation set forth in Section 16.12.1.2) shall be
                                                     -----------------
     available.  Assume further that Tenant exercises its purchase option
     relative to Property A and closes its purchase of Property A in strict
     accordance with the terms and conditions provided in this Section 16.12.
                                                               -------------
     On account of such exercise, Tenant would have exhausted its purchase
     option rights under such lease, and, on account of such purchase, (a) the
     Section 16.1(m) and/or Section 16.1(q) Event of Default relative to
     ---------------        ---------------
     Property A would have been cured, leaving Property B as the only leased
     property as to which a continuing Section 16.1(m) and/or Section 16.1(q)
                                       ---------------        ---------------
     Event of Default continues, and (b) because the Section 16.10.1 Number
     applicable to such lease would equal 2, the continuation of a Section
                                                                   -------
     16.1(m) and/or Section 16.1(q) Event of Default with respect to Property B
     -------        ---------------
     and no other leased properties would not, pursuant to the terms of Section
                                                                        -------
     16.10.2.2, be sufficient to permit Lessor to exercise termination and/or
     ---------
     dispossession rights and remedies against any leased property other than
     Property B.

     Example 2:  Same assumed facts as in Example 1 and assume further that an
     ---------
     additional Section 16.1(m) Event of Default arises under such lease with
                ---------------
     respect to Property C.  Lessor would be permitted to exercise termination
     and/or dispossession rights and remedies against all leased properties
     under such lease, in accordance with Section 16.10.2.2, because the number
                                          -----------------
     of such Section 16.1(m) and/or Section 16.1(q) Events of Default under such
             ---------------        ---------------
     lease would equal 2 (Property B and Property C), which number equals the
     Section 16.10.1 Number applicable to such lease.  Also, because Tenant has
     exhausted its purchase option rights under such lease as described on
     Example 1, Section 16.12 would no longer be applicable to grant Tenant any
     ---------  -------------
     purchase option rights and Lessor would be permitted to exercise such
     termination and/or dispossession rights and remedies against all leased
     properties under such lease without providing any Section 16.12 Notice to
                                                       -------------
     Tenant or additional purchase option to Tenant.

     Example 3: Assume that, within a lease of 10 Master Lease Leased
     ---------
     Properties, no Events of Default exist other than Events of Default under
     Section 16.1(m) and/or Section 16.1(q) that have occurred and are
     ---------------        ---------------
     continuing relative to Property X, Property

                                      79
<PAGE>

     Y and Property Z. Lessor would not be obligated to provide a Section 16.12
     Notice to Tenant prior to exercise of termination and/or dispossession
     rights and remedies against all leased properties under such lease. A lease
     of 10 leased properties is eligible for purchase options with respect to 2
     leased properties during the Term (Section 16.12.1.1). Even if Tenant
                                        -----------------
     exercised such 2 purchase options and closed thereunder, a Section 16.1(m)
                                                                ---------------
     and/or Section 16.1(q) Event of Default would continue to exist under such
            ---------------
     lease and the precondition to an exercisable purchase option, and receipt
     of a Section 16.12 Notice, referenced in Section 16.12.2(ii) would
                                              -------------------
     therefore not be met.

                                 ARTICLE XVII

     Section 17.1   Lessor's Right to Cure Tenant's Default.  If an Event of
                    ---------------------------------------
Default shall have occurred and be continuing,  Lessor, without waiving or
releasing any obligation or Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of Tenant, and may, to the extent permitted by
law, enter upon any or each Leased Property or any portion thereof for the
purpose of curing such Event of Default and take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate in connection with curing such
Event of Default.  No such entry shall be deemed an eviction of Tenant.  All
reasonable sums so paid by Lessor and all reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses, in each
case, to the maximum extent permitted by law) so incurred, together with
interest thereon (to the maximum extent permitted by law) as Additional Charges
hereunder at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessor, shall be paid by Tenant to Lessor on demand.  The
obligations of Tenant and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.  Nothing contained
in this Section 17.1 shall limit or impair Lessor's rights and remedies under
        ------------
Section 8.3.2 or Section 21.5.2.
-------------    --------------

                                 ARTICLE XVIII

     Section 18.1   Provisions Relating to Purchase of the Leased Property.  In
                    ------------------------------------------------------
the event Tenant purchases any Leased Property from Lessor pursuant to any of
the terms of Article XIV hereof, Lessor shall, upon receipt from Tenant of the
             -----------
applicable purchase price, together with full payment of all Rent due and
payable or other charges due and payable with respect to any period ending on or
before the date of the purchase, deliver to Tenant an appropriate deed or other
conveyance (in the customary form used to convey commercial properties within
the relevant jurisdiction) conveying the entire interest of Lessor in and to
such Leased Property to Tenant free and clear of all encumbrances other than (i)
those that Tenant has agreed hereunder to pay or discharge, (ii) those mortgage
liens, if any, which Tenant has agreed in writing to accept and to take title
subject to and (iii) Permitted Encumbrances.  The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid in cash to Lessor or as Lessor may direct, in federal
or other immediately available funds except as otherwise mutually agreed by
Lessor and Tenant other than as specifically provided above, such Leased
Property shall be conveyed to Tenant on an "as is" basis, and in its then
physical condition.  Closing of any such sale shall be contingent upon and

                                      80
<PAGE>

subject to Tenant obtaining all required governmental consents and approvals for
such transfer and if such sale shall fail to be consummated by reason of the
inability of Tenant to obtain all such approvals and consents, any options to
extend the Term of this Lease which otherwise would have expired during the
escrow period to such proposed sale shall be deemed to remain in effect for 30
days after termination of the escrow or other arrangement covering the closing
of such proposed sale.  All expenses of such  conveyance, including, without
limitation, the cost of title examination or standard coverage title insurance,
if reasonably required under the circumstances then existing, attorneys' fees
incurred by Lessor in connection with such conveyance and release, and transfer
taxes, shall be paid by Lessor.  Recording fees shall be paid for by Tenant.
Upon the closing of any such sale, the provisions of Section 40.16 hereof shall
                                                     -------------
apply.

                                  ARTICLE XIX

     Section 19.1   Exercise of Renewal Options.  Tenant is hereby granted the
                    ---------------------------
right to renew this Lease, with respect to all, but not less than all, of those
Leased Properties within the applicable group as shown on Exhibit D annexed
hereto (herein, a "Renewal Group") for three (3), 5-year option renewal terms
                   -------------
(collectively, the "Extended Terms" and each an "Extended Term") upon giving
                    --------------               -------------
written notice to Lessor of each such renewal at least one (1) year but not more
than eighteen (18) months prior to the termination of the then current Term
applicable to such Renewal Group, provided and on the conditions that, at the
time Tenant gives a renewal notice as set forth above relative to a Renewal
Group and at the time of the commencement of the applicable Extended Term for
such Renewal Group, (a) an Event of Default (other than any Facility Defaults of
the nature referenced in Section 16.1(m) and/or Section 16.1(q) of this Lease)
                         ---------------        ---------------
shall not have occurred and be continuing (as described in Section 16.10.2.3
                                                           -----------------
above) under this Lease and (b) Facility Defaults of the nature referenced in
Section 16.1(m) and/or Section 16.1(q) of this Lease shall not have occurred and
---------------        ---------------
be continuing (as described in Section 16.10.2.3 above) with respect to the
Section 16.10.1 Number or more Leased Properties.  Tenant may not exercise its
option for more than one Extended Term at a time.  If Tenant exercises a renewal
option as aforesaid relative to a Renewal Group, Tenant may nevertheless revoke
such exercise, if and so long as the requirements of Section 19.5 below are
                                                     ------------
strictly complied with.  For purposes of this Section 19.1, if an Event of
                                              ------------
Default shall occur under Section 16.1(m) or Section 16.1(q) of this Lease,
                          ---------------    ---------------
whether the same is, or is deemed to be, "continuing" shall be determined as
provided in Section 16.10 above.
            -------------

     Example 1:  If (i) an Event of Default of the nature referenced in Section
     ---------                                                          -------
16.1(m) and/or Section 16.1(q) of this Lease has occurred and is continuing (as
-------        ---------------
described in Section 16.10.2.3 above) with respect to Leased Property X and no
             -----------------
other Leased Properties, (ii) Lessor has terminated this Lease as it applies to
Leased Property X or dispossessed Tenant from such Leased Property X, (iii) the
Section 16.10.1 Number applicable to this Lease exceeds 1 (so that the condition
referenced in Section 19.1(b) is met), and (iv) Tenant desires to renew this
              ---------------
Lease, pursuant to Section 19.1, with respect to a Renewal Group which does not
                   ------------
include Leased Property X, then Tenant would be entitled to renew this Lease
with respect to all of the Leased Properties in such Renewal Group.  See the
following examples for examples

                                      81
<PAGE>

of Lessor's and Tenant's respective rights relative to renewal of the Renewal
Group that includes Lease Property X.

     Example 2:  Same assumed facts as in Example 1, except assume that Lessor
     ---------                            ---------
has not terminated this Lease as it applies to Leased Property X, but Lessor has
dispossessed Tenant from Leased Property X, and that the Renewal Group that
Tenant desires to renew includes Leased Property X.  Tenant would be entitled to
renew this Lease with respect to all of the Leased Properties in such Renewal
Group, but any such renewal would include renewal of Leased Property X.  Section
                                                                         -------
19.1 does not create any right allowing Tenant to renew less than all of a
----
Renewal Group as to which this Lease remains in effect.  As to Leased Property
X, Tenant has been dispossessed, not terminated, and therefore any renewal would
need to include Leased Property X.

     Example 3:  Same assumed facts as in Example 2, except assume that Lessor
     ---------                            ---------
has terminated this Lease as it applies to Leased Property X.  Tenant would be
entitled to renew this Lease with respect to all of the Leased Properties in the
Renewal Group that formerly included Leased Property X, without being obligated
to renew this Lease as to Leased Property X.  Due to the termination of this
Lease as it applies to Leased Property X, the aforesaid Renewal Group no longer
includes Leased Property X, and Tenant is entitled to renew this Lease as to all
of the Renewal Group as to which this Lease remains in effect.

     Example 4:  Same assumed facts as in Examples 1, 2, and 3, except that, in
     ---------                            ----------  -      -
each case, assume that the applicable Section 16.10.1 Number is 1.  Tenant would
not be entitled to renew this Lease as to any Renewal Group included in this
Lease, as the condition referenced in Section 19.1(b) would not be met in each
                                      ---------------
of such Examples.

     Example 5:  Same assumed facts as in Example 3, except assume that the
     ---------
Section 16.10.1 Number applicable to this Lease is 2 and that a Section 16.1(m)
                                                                ---------------
Event of Default has occurred and is continuing with respect to Master Lease
Leased Property Y included in a Separate Lease as to which this Lease is a
Section 16.10.3 Lease and as to which Sections 16.10.3(a) and (b) are
                                      -------------------     ---
applicable.  Tenant would not be entitled to renew this Lease as to any Renewal
Group included in this Lease.  The aforesaid Section 16.1(m) Event of Default
                                             ---------------
under such Separate Lease relative to Master Lease Leased Property Y would count
as a Section 16.1(m) Event of Default under this Lease the same as if Master
     ---------------
Lease Leased Property Y was included in this Lease, and, after aggregating such
Section 16.1(m) Event of Default relative to Master Lease Leased Property Y with
---------------
the Section 16.1(m) Event of Default relative to Leased Property X, the
    ---------------
condition referenced in Section 19.1(b) would not be met.
                        ---------------

     Section 19.2   Renewal Terms.  During each Extended Term, all of the terms
                    -------------
and conditions of this Lease shall continue in full force and effect, subject,
however, to the following provisions.  In the first Extended Term, Base Rent,
Current Rent and Accrued Rent shall be calculated using the method applicable
during the last year of the Fixed Term.  In the case of each Extended Term after
the first Extended Term, if the portion of Base Rent applicable to the
applicable Renewal Group (based upon the aggregate Transfer Property Percentages
for the Leased Properties in such Renewal Group) for the first year of any such

                                      82
<PAGE>

Extended Term is less than Fair Market Rental of such Renewal Group (as
determined in accordance with this Section 19.2 and Section 19.3 hereof), then
                                   ------------     ------------
Base Rent and Current Rent for such year for such Renewal Group shall each be an
amount equal to such Fair Market Rental.  If Base Rent and Current Rent for such
first year of any such Extended Term for such Renewal Group are based upon Fair
Market Rental as determined pursuant to this Section 19.2 and Section 19.3
                                             ------------     ------------
hereof, the Base Rent and Current Rent in the remaining years of such Extended
Term and any subsequent Extended Terms for such Renewal Group (subject, however,
to the re-application of this Section to the first year and subsequent years of
any subsequent Extended Term) shall be escalated as is determined and required
by the terms of the Fair Market Rental determination for such Renewal Group.

     Section 19.3   Fair Market Rental Determination.  At any time within thirty
                    --------------------------------
(30) days after receipt from Tenant of a notice of renewal under Section 19.1
                                                                 ------------
hereof (other than a notice of renewal for the first Extended Term), Lessor may,
by written notice to Tenant, request that Fair Market Rental of the applicable
Renewal Group, and Fair Market Rental of each Leased Property within such
Renewal Group, be determined by appraisal under the procedures of Article XXXV
                                                                  ------------
hereof and in such event such Fair Market Rentals shall be so determined in
accordance with the procedures of such Article XXXV.  Lessor's failure to
                                       ------------
deliver such notice to Tenant within thirty (30) days after receiving Tenant's
notice of renewal shall preclude Lessor from any claim that Base Rent for the
first year of the Extended Term to which such notice of renewal relates for the
applicable Renewal Group is less than Fair Market Rental of such Renewal Group,
and thereafter Base Rent and Current Rent for such Renewal Group for such
Extended Term (but only for that particular Extended Term) shall be determined
as set forth in the definitions of "Base Rent" and "Current Rent" set forth in
Section 2.1 hereof, without any application of Section 19.2.  If Lessor has
timely delivered such notice to Tenant, and thereafter Fair Market Rental of the
applicable Renewal Group is determined under Article XXXV hereof, the
                                             ------------
determination of whether such appraised Fair Market Rental is higher than Base
Rent applicable to the applicable Renewal Group shall be made by Lessor, in its
sole and exclusive discretion, which determination shall be binding on Lessor
and Tenant and not subject to further review.

     Section 19.4   Extended Period New Lease.  If Base Rent and Current Rent
                    -------------------------
for a Renewal Group for the first year of any Extended Term after the first
Extended Term are based upon Fair Market Rental as determined pursuant to

Section 19.2 and Section 19.3 hereof, then effective as of the first day of such
------------     ------------
Extended Term, such Renewal Group shall be transferred from this Lease to a New
Lease entered into pursuant to, and otherwise in compliance with, the terms and
conditions of Section 40.15 hereof and this Lease shall be amended as set forth
              -------------
in such Section 40.15.  Such New Lease shall include therein an Exhibit C that
        -------------                                           ---------
allocates the aggregate Base Rent and Current Rent payable thereunder to the
individual Leased Properties covered by such New Lease, and assigns Transferred
Property Percentages to such Leased Properties, in a manner that is consistent
with the respective Fair Market Rentals of such Leased Properties as determined
pursuant to Section 19.2 and Section 19.3 hereof.
            ------------     ------------

                                      83
<PAGE>

     Section 19.5   Revocation of Renewal Option Exercise.  In the event (a)
                    -------------------------------------
Tenant exercises a renewal option relative to a Renewal Group in accordance with

Section 19.1 above, (b) such renewal option relates to an Extended Term for such
------------
Renewal Group other than the first Extended Term applicable to such Renewal
Group, and (c) Lessor, in accordance with Section 19.3 above, requests that Fair
                                          ------------
Market Rental of the applicable Renewal Group, and Fair Market Rental of each
Leased Property within such Renewal Group, be determined by appraisal under the
procedures of Article XXXV hereof, Tenant may revoke its aforesaid exercise,
              ------------
provided and on the condition that, whether or not the Fair Market Rental
determinations referenced in subsection (c) above have been completed, Tenant
must notify Lessor of its revocation of its aforesaid exercise not less than one
(1) year prior to the termination of the then current Term applicable to such
Renewal Group; provided, however, if Tenant gives its written renewal notice to
               --------  -------
Lessor in accordance with Section 19.1 above on or before the date which is
                          ------------
seventeen (17) months prior to the termination of the then current Term
applicable to such Renewal Group, then Tenant shall have until the earlier of
(i) nine (9) months prior to the termination of the then current Term applicable
to such Renewal Group and (ii) fifteen (15) days after the date upon which the
Fair Market Rental determinations referenced in subsection (c) above have been
completed to notify Lessor of its revocation.  In the event Tenant so revokes
its aforesaid exercise relative to a Renewal Group, Tenant's remaining renewal
option(s) relative to such Renewal Group shall be deemed to have been
irrevocably waived and terminated.

                                  ARTICLE XX

     Section 20.1   Holding Over.  If Tenant shall for any reason remain in
                    ------------
possession of any Leased Property after the expiration of the Term or earlier
termination of the Term (other than solely due to Lessor's failure, on or prior
to (a) the ninetieth (90th) day preceding the expiration of the Term as to such
Leased Property or (b) if this Lease is terminated prior to such expiration due
to Lessor's default, the earlier termination of the Term as to such Leased
Property, to have notified Tenant that Lessor has procured a Qualified Successor
for such Leased Property), such possession shall, at the option of Lessor in its
sole discretion as to each such Leased Property, be as a month-to-month tenant
during which time Tenant shall pay as rental each month (which rental
constitutes liquidated damages with respect to Rent, and not a penalty for the
period to which it relates), one and one-half times the aggregate of (i) one-
twelfth of the aggregate annual amounts of Current Rent and Accrued Rent payable
as of the end of the preceding Term and, in the case of a month-to-month tenancy
as to less than all of the Leased Properties, allocable to the Leased
Property(ies) in question in accordance with Section 16.9 hereof; (ii) all
                                             ------------
Additional Charges accruing during the month and (iii) all other sums, if any,
payable by Tenant pursuant to the provisions of this Lease with respect to the
Leased Property(ies) in question.  During such period of month-to-month tenancy,
Tenant shall be obligated to perform and observe all of the terms, covenants and
conditions of this Lease with respect to the Leased Property(ies) in question,
but shall have no rights hereunder other than the right, to the extent given by
law to month-to-month tenancies to continue its occupancy and use of the
applicable Leased Property.  Subject to Section 40.3, nothing contained herein
                                        ------------
shall constitute the consent, express or implied, of Lessor to the holding over
of Tenant after the expiration or earlier termination of this Lease.

                                      84
<PAGE>

                                  ARTICLE XXI

     Section 21.1   Subordination.  This Lease and all rights of Tenant
                    -------------
hereunder are subject and subordinate to all Facility Mortgages and all Superior
Leases which may now or hereafter affect Lessor's interest in the applicable
Leased Property and any interest of any Superior Lessor (all such leases and
mortgages, collectively, the "Superior Mortgages"), and to all renewals,
                              ------------------
modifications, consolidations, replacements and extensions of the Superior
Mortgages, provided, however, that, in the case of any Superior Mortgages (other
           --------  -------
than the Existing Ground Leases), Tenant's aforesaid subordination shall be
conditioned on Tenant's receipt of a so-called "non-disturbance" agreement in
favor of Tenant from any such Superior Lessor (other than the Superior Lessors
under the Existing Ground Leases) or Superior Mortgagee (defined below) on such
Superior Lessor's or Superior Mortgagee's commercially reasonable standard form.
This Section shall be self-operative and no further instrument of subordination
shall be required.  In confirmation of such subordination, Tenant agrees to
execute and deliver promptly any commercially reasonable form of instrument (in
recordable form, if requested) that Lessor, any Superior Lessor or the holder of
any Superior Mortgage (a "Superior Mortgagee") may request to evidence such
                          ------------------
subordination.  Lessor shall use its reasonable efforts to obtain from each
currently existing Facility Mortgagee a so-called "non-disturbance" agreement in
favor of Tenant on such Facility Mortgagee's standard form.

     Section 21.2   Attornment.  If the interests of Lessor under this Lease are
                    ----------
transferred by reason of, or assigned in lieu of, foreclosure or other
proceedings for enforcement of any such Superior Mortgage, or if any Superior
Lease shall be terminated then Tenant shall, at the option of such purchaser,
assignee or any Superior Lessor, as the case may be, (x) attorn to such party
and perform for its benefit all the terms, covenants and conditions of this
Lease on Tenant's part to be performed with the same force and effect as if such
party were the landlord originally named in this Lease, or (y) enter into a New
Lease with such party, as landlord, pursuant to Section 40.15 hereof for the
                                                -------------
remaining Term and otherwise on the same terms and conditions of this Lease
except that such successor landlord shall not be (i) liable for any previous
act, omission or negligence of Lessor under this Lease; (ii) subject to any
counterclaim, defense or offset which theretofore shall have accrued to Tenant
against Lessor; (iii) bound by any previous modification or amendment of this
Lease or by any previous prepayment of more than one month's rent, unless such
modification, amendment or prepayment shall have been approved in writing by the
Superior Lessor or the Superior Mortgagee through or by reason of which such
successor landlord shall have succeeded to the rights of Lessor under this Lease
or, in case of any such prepayment, such prepayment of rent has actually been
delivered to such successor landlord; or (iv) liable for any security deposited
pursuant to this Lease unless such security has actually been delivered to such
successor landlord.  Nothing contained in this Section shall be construed to
impair any right otherwise exercisable by any such owner, holder or lessee.

     Section 21.3   Mortgagee Cure Rights.  If any act or omission by Lessor
                    ---------------------
would give Tenant the right, immediately or after lapse of time, to cancel or
terminate this Lease or to claim a partial or total eviction, or abatement of
rent, setoff or counterclaim not otherwise expressly permitted by the terms of
this Lease, Tenant will not exercise any such right until (i)

                                      85
<PAGE>

it has given written notice of such act or omission to each Superior Mortgagee
whose name and address shall have previously been furnished to Tenant, by
delivering notice of such act or omission addressed to each such party at its
last address so furnished, (ii) Lessor shall have failed to cure the same within
the time limits set forth in this Lease, and (iii) following the giving of such
notice, no Superior Mortgagee and no Superior Lessor shall have remedied such
act or omission (x) in the case of an act or omission which is capable of being
remedied without possession of this Leased Property, within the cure period
available to Lessor under this Lease plus sixty (60) days and (y) in the case of
any act or omission which is incapable of being remedied without possession of
the applicable Leased Property, within sixty (60) days following the date on
which possession is obtained (either by such Superior Mortgagee or Superior
Lessor or by a receiver in an action commenced by such Superior Mortgagee or
Superior Lessor), provided a Superior Mortgagee or Superior Lessor has promptly
                  --------
commenced action to obtain possession and shall diligently pursue such action to
completion and provided further that such Superior Mortgagee or Superior Lessor
shall, with reasonable diligence, give Tenant notice of its intention to, and
commence and continue to, remedy such act or omission or cause the same to be
remedied.

     Section 21.4   Modifications.  Tenant shall execute any modification of
                    -------------
this Lease requested by any Superior Mortgagee or prospective Superior Mortgagee
to cause the terms of this Lease to conform with customary and reasonable
mortgage financing requirements, provided that such modifications (i) do not
materially adversely increase the obligations of Tenant hereunder or materially
diminish Tenant's rights under this Lease or materially impair the right of a
Leasehold Mortgagee, (ii) do not increase Rent payable hereunder, and (iii) are
requested by any such Superior Mortgagee or prospective Superior Mortgagee only
at the time of its initial loan advance or any subsequent extension of the
maturity date of its loan or material modification of the terms of its loan.
Tenant will not unreasonably withhold, delay or condition its consent to such
modification, provided subsections (i), (ii) and (iii) above are complied with.

     Section 21.5   Existing Ground Leases.
                    ----------------------

          Section 21.5.1  Tenant shall, at its own cost and expense, fully
observe, perform and comply with all of the obligations of Lessor, as lessee,
under all Existing Ground Leases, including, without limitation, all obligations
relating to use of the Leased Properties, payment of ground rents, taxes,
assessments and utility charges, maintenance and alterations of the Leased
Properties and assignment and subletting.  Tenant shall not cause, or permit its
respective agents, employees, contractors, invitees, subtenants, licensees,
concessionaires or assigns (whether or not permitted hereunder) to cause,
whether by act or omission, any breach of, default under or termination of any
Existing Ground Lease.  Notwithstanding anything to the contrary contained in
Section 16.1 or elsewhere in this Lease, an Event of Default shall be deemed to
------------
have occurred under this Lease on account of Tenant's breach of this Section
                                                                     -------
21.5.1, when, and only if, (i) Tenant's breach of this Section 21.5.1 also
------                                                 --------------
results in a breach or default of an obligation under an Existing Ground Lease
and (ii) such Existing Ground Lease breach or default is not cured by Tenant on
or prior to the expiration of the cure period, if any, applicable to such breach
or default by the terms of such Existing Ground Lease (or such

                                      86
<PAGE>

longer cure period as may be expressly authorized by an order of a court of
competent jurisdiction), and (iii) if the Existing Ground Lease breach or
default referenced in subsection (i) above is a non-monetary, non-material
breach or default of the Existing Ground Lease, on account of such Existing
Ground Lease breach or default, such Existing Ground Lease is at material risk
of being terminated or has been terminated. Lessor agrees that, in the event
Lessor receives any written notice of default from the ground lessor under any
Existing Ground Lease, Lessor shall promptly forward a copy thereof to Tenant,
and, in the event Lessor's Management Group obtains actual knowledge (as opposed
to, and not including, constructive, imputed, assumed or other knowledge, and
without any obligation to investigate or otherwise make inquiry) of any breach
or default by the ground lessee under any Existing Ground Lease, then, unless
Lessor's Management Group has the aforesaid actual knowledge that Tenant already
has knowledge of such breach or default, Lessor shall promptly notify Tenant in
writing of such breach or default. Lessor further agrees that Lessor shall
timely exercise any options to renew or extend contained in the Existing Ground
Leases, as and to the extent necessary from time to time so that each Existing
Ground Lease shall not expire prior to the expiration or termination of this
Lease as it applies to the Leased Property affected by such Existing Ground
Lease (including any Extended Terms applicable to such Leased Property). Tenant
agrees that, if Lessor, at its option, elects to cure an Event of Default under
this Section 21.5.1, such cure shall not excuse Tenant from, or be deemed a cure
     --------------
of, such Event of Default, nor shall Tenant's reimbursement to Lessor of any
costs and expenses incurred by Lessor in affecting any such cure be deemed a
cure of any such Event of Default, provided, however, that, notwithstanding the
                                   --------  -------
foregoing, even after the occurrence of such an Event of Default by Tenant
and/or Lessor's cure thereof, Lessor agrees to accept Tenant's cure thereof, or
reimbursement of Lessor's costs and expenses to effect such cure, provided, and
on the condition, that Lessor has not, prior thereto, terminated this Lease as
it affects the Leased Property to which such Existing Ground Lease relates or
dispossessed Tenant from such Leased Property.  Nothing contained in this
Section 21.5 shall limit or impair Lessor's indemnification rights under Section
------------                                                             -------
24.1 below.
----

          Section 21.5.2  If (a) an Existing Ground Lease breach or default of
the nature described in Section 21.5.1(i) above occurs, and (b) in the case of a
                        -----------------
non-monetary, non-material Existing Ground Lease breach or default, on account
thereof, if the same is not cured, the condition referenced in Section
                                                               -------
21.5.1(iii) above would, or is likely to, be satisfied, Tenant agrees that,
-----------
notwithstanding anything to the contrary contained in Section 17.1 above or
elsewhere in this Lease, Lessor may, but shall not be obligated to, in its
discretion and regardless of whether Tenant is proceeding to cure, or attempting
to cure, the Existing Ground Lease breach or default referenced in Section
                                                                   -------
21.5.1(i) above or whether the cure period referenced in Section 21.5.1(ii)
---------                                                ------------------
above has expired or is likely to expire before completion of necessary cure
efforts, take such actions as it deems necessary or appropriate to attempt to
cure such Existing Ground Lease breach or default, provided, however, that, if
                                                   --------  -------
the breach or default referenced in subsection (a) above has applicable thereto,
by the express terms of the applicable Existing Ground Lease, a stated period to
cure the same, Lessor agrees not to commence to cure such breach or default
unless and until one-half (1/2) of the aforesaid stated cure period has elapsed.
If Lessor so proceeds to attempt to cure any such Existing Ground Lease breach
or default, Tenant agrees, within fifteen (15) days following receipt of a
written

                                      87
<PAGE>

demand therefor and reasonable supporting documentation, to reimburse Lessor for
the reasonable amount of all costs and expenses incurred by Lessor in curing, or
attempting to cure, any such Existing Ground Lease breach or default.

                                 ARTICLE XXII

     Section 22.1   Notice to Lessor.  If Tenant shall mortgage Tenant's
                    ----------------
interest in one or more Leased Properties to a Lending Institution in accordance
with the terms of this Lease, and if the holder of the Leasehold Mortgage shall
provide Lessor with a true copy of the Leasehold Mortgage and the name and
address of the Leasehold Mortgagee (as hereinafter defined) and Lessor shall
approve the Leasehold Mortgage, Lessor and Tenant agree that the provisions of
this Section shall apply in respect to the Leasehold Mortgage.  Lessor hereby
approves of the standard Leasehold Mortgage form draft that was forwarded to
Lessor's counsel on February 28, 2001 and that is intended to be used in
connection with the Tenant Senior Secured Notes and further agrees that it would
approve the same form for use in connection with the Exit Financing; provided,
however, that such approval shall not constitute an agreement by Lessor to be
bound by the terms of any such Leasehold Mortgage.  In the event of any
assignment of a Leasehold Mortgage or in the event of a change of address of a
Leasehold Mortgagee or of an assignee of a Leasehold Mortgage, notice of the new
name and address shall be provided to Lessor.

     Section 22.2   Definitions.
                    -----------

     (a) The term "Leasehold Mortgage" as used in this Section shall include a
mortgage, a deed of trust, a deed to secure debt, or other security instrument
by which Tenant's leasehold estate is mortgaged or otherwise transferred, to
secure a debt.  "Leasehold Mortgage" shall be deemed to refer to all of the
Leasehold Mortgages delivered to secure a debt.

     (b) The term "Leasehold Mortgagee" as used in this Section shall refer to
any and all holders of a Leasehold Mortgage approved by Lessor pursuant to the
terms hereof.  Lessor hereby approves of Morgan Guaranty Trust Company of New
York, as collateral agent, as the initial Leasehold Mortgagee, and any agent for
any credit facilities secured by Tenant's leasehold interest hereunder that are
entered into by Tenant as part of the Bankruptcy Plan.

     Section 22.3   Consent of Leasehold Mortgagee Required.  No cancellation or
                    ---------------------------------------
surrender (other than a termination following the occurrence of an Event of
Default) and no amendment to or modification of, this Lease shall be effective
as to the Leasehold Mortgagee without the prior written consent of such
Leasehold Mortgagee, unless an amendment or modification is not reasonably
likely to result in a material adverse effect on the rights of the Leasehold
Mortgagee, the lien of the Leasehold Mortgages, or the value of the leasehold
interest demised hereunder.

     Section 22.4   Default Notice.  Lessor, upon providing Tenant any notice
                    --------------
of:  (a) default under this Lease or (b) a termination of this Lease, in whole
or in part, shall at the same time provide a copy of such notice to the
Leasehold Mortgagee.  From and after the time

                                      88
<PAGE>

such notice has been given to a Leasehold Mortgagee, the Leasehold Mortgagee
shall have the same period, after the giving of such notice upon it, for
remedying any default or acts or omissions which are the subject matter of such
notice or causing the same to be remedied, as is given Tenant after the giving
of such notice to Tenant, plus (i) except if subsection (ii) below is
applicable, thirty (30) days to remedy, commence to remedy or cause to be
remedied the defaults or acts or omissions which are the subject matter of such
notice specified in any such notice, provided that such defaults are capable of
being cured by the Leasehold Mortgagee or on behalf of the Leasehold Mortgagee,
or (ii) fifteen (15) days to remedy any Rent defaults which are the subject
matter of such notice specified in any such notice. Lessor shall accept such
performance by or at the instigation of the Leasehold Mortgagee as if the same
had been done by Tenant. Tenant authorizes each Leasehold Mortgagee to take any
such action at the Leasehold Mortgagee's option and does hereby authorize entry
upon the Leased Properties by the Leasehold Mortgagee for such purpose. If
Leasehold Mortgagee has failed to cure Tenant's default within the above-
mentioned time period, Lessor may exercise its rights and remedies specified in
Sections 16.2, 16.3 and 17.1.
-------------  ----     ----

     Section 22.5   Procedure for Foreclosure on Default.
                    ------------------------------------

     (a) If the Leasehold Mortgagee has commenced taking steps to acquire or
sell Tenant's interest in this Lease by foreclosure of the Leasehold Mortgage or
other appropriate means, the Leasehold Mortgagee shall provide Lessor notice of
the same and shall prosecute the same to completion with due diligence.

     (b) Following Lessor's receipt of such notice and so long as the Leasehold
Mortgagee continues to prosecute to completion with due diligence such
foreclosure or other means of acquiring or selling Tenant's interest in this
Lease, and provided that the Leasehold Mortgagee complies with its obligations
under subsection (c) below, this Lease shall not then terminate, and the time
for completion by such Leasehold Mortgagee of its proceedings shall continue so
long as such Leasehold Mortgagee is enjoined or stayed and thereafter for so
long as such Leasehold Mortgagee proceeds to complete steps to acquire or sell
Tenant's interest in this Lease by foreclosure of the Leasehold Mortgage or by
other appropriate means with reasonable diligence and continuity.  Nothing in
this Section 22.5, however, shall be construed to extend this Lease beyond the
     ------------
original term thereof, as extended by any options to extend the term of this
Lease properly exercised by Tenant or a Leasehold Mortgagee in accordance with
Article XIX, nor to require a Leasehold Mortgagee to continue such foreclosure
-----------
proceedings after the default by Tenant has been cured.  If the default by
Tenant shall be cured and the Leasehold Mortgagee shall discontinue such
foreclosure proceedings, this Lease shall continue in full force and effect as
if Tenant had not defaulted under the Lease.

     (c) In addition, during such period, the Leasehold Mortgagee shall pay or
cause to be paid the rent, additional rent and other monetary obligations of
Tenant under this Lease as the same become due, and continue its good faith
efforts to perform, or cause to be performed, all of Tenant's other obligations
under this Lease.

                                      89
<PAGE>

     Section 22.6   Assignment or Transfer in Lieu of Foreclosure.
                    ---------------------------------------------

     (a) For the purposes of this Section 22.6, the making of a Leasehold
                                  ------------
Mortgage shall not be deemed to constitute an assignment or transfer of this
Lease or of the leasehold estate hereby created, nor shall any Leasehold
Mortgagee, as such, be deemed to be an assignee or transferee of this Lease or
of the leasehold estate hereby created so as to require the Leasehold Mortgagee,
as such, to assume the performance of any of the terms, covenants or conditions
on the part of Tenant to be performed hereunder, but the purchaser at any sale
of this Lease and of the leasehold estate hereby created in any proceedings for
the foreclosure of any Leasehold Mortgage, or the assignee or transferee of this
Lease and of the leasehold estate hereby created under any instrument of
assignment or transfer in lieu of the foreclosure of any Leasehold Mortgage,
shall be deemed to be an assignee or transferee within the meaning of this
Section 22.6, and shall be deemed to have agreed to perform all of the terms,
------------
covenants and conditions on the part of Tenant to be performed hereunder from
and after the date of such purchase and assignment.

     (b) Prior to any such purchase or assignment pursuant to a foreclosure or
similar proceeding, or any transaction in lieu thereof, the Leasehold Mortgagee
shall notify Lessor of the proposed transferee and obtain Lessor's written
consent to such purchase or assignment.  Subject to any state or other
governmental requirements, Lessor shall not unreasonably withhold, condition or
delay its consent to any sale or assignment, provided that (a) the purchaser or
assignee (1) shall be a creditworthy entity with sufficient financial stability
to satisfy its financial obligations under the Lease, (2) shall have not less
than four years experience in operating health care facilities for the purpose
of the applicable Facility's Primary Intended Use, (3) has a favorable business
and operational reputation and character and (4) shall assume in writing and
agree to keep and perform all of the terms of this Lease on the part of Tenant
to be performed hereunder from and after the date of such purchase and
assignment and (b) an original counterpart of each such purchase and sale
agreement or instrument of assignment or transfer in lieu of foreclosure of any
Leasehold Mortgage, duly executed by Tenant and such purchaser or assignee, as
the case may be, in the form and substance satisfactory to Lessor, shall be
delivered promptly to Lessor.  Lessor's obligation to consent to a sale or
assignment is subject to any reasonable approval rights of any Facility
Mortgagee and/or the lenders under that certain Amended and Restated Credit,
Security, Guaranty and Pledge Agreement, dated as of April 29, 1998, amended and
restated as of January 31, 2000, among Lessor, as borrower, the guarantors named
therein and the lenders named therein and with Bank of America, N.A., as Issuing
Bank and as Administrative Agent, and Morgan Guaranty Trust Company of New York,
as Documentation Agent, as the same may be amended, restated and/or replaced
from time to time ("Lessor Credit Agreement").
                    -----------------------

     (c)  (i)  In the event of any dispute between Lessor and any Leasehold
Mortgagee or Tenant regarding whether Lessor has unreasonably withheld,
conditioned or delayed its consent to any sale or assignment in violation of

Section 22.6(b) or whether the other requirements of Section 22.6(b) have been
---------------                                      ---------------
satisfied (the questions of whether Lessor has so violated Section 22.6(b)
                                                           ---------------
and/or whether the aforesaid other requirements of Section 22.6(b) have been
                                                   ---------------
satisfied are herein referred to collectively as the "Arbitration Question"), as
                                                      --------------------
their

                                      90
<PAGE>

sole remedy on account of any such dispute, Lessor may initiate an arbitration
under this Section 22.6(c) by written notice to Tenant and such Leasehold
           ---------------
Mortgagee, or such Leasehold Mortgagee or Tenant may initiate an arbitration
under this Section 22.6(c) by written notice to Lessor, in each case
           ---------------
to decide the Arbitration Question.

          (ii)   In such event, within ten (10) days following the issuance of
any such arbitration initiation notice, each of Lessor and such Leasehold
Mortgagee (for itself and Tenant) shall appoint a Qualified Arbitrator (as
defined below), and, within seven (7) days following the appointment of such two
(2) Qualified Arbitrators, such two (2) Qualified Arbitrators shall appoint a
third Qualified Arbitrator. If either Lessor or such Leasehold Mortgagee (for
itself and Tenant) shall fail to appoint a Qualified Arbitrator within the
aforesaid ten (10) day period, the Qualified Arbitrator appointed by the other
shall alone proceed to determine the Arbitration Question. If the two (2)
Qualified Arbitrators appointed by Lessor and such Leasehold Mortgagee (for
itself and Tenant) are unable to agree within the aforesaid seven (7) day period
upon a third Qualified Arbitrator, then either Lessor or such Leasehold
Mortgagee (for itself and Tenant), upon written notice to the other, may apply
for such appointment to the American Arbitration Association in New York City
(or any organization successor thereto) in accordance with the rules then
prevailing of the American Arbitration Association (or such successor
organization) and, if the American Arbitration Association (or such successor
organization) shall fail to appoint said third Qualified Arbitrator within
fifteen (15) days after such request is made, then either Lessor or such
Leasehold Mortgagee (for itself and Tenant) may apply, on notice to the other to
the Supreme Court, New York County (or any other court in New York City having
jurisdiction) for the appointment of such third Qualified Arbitrator.

          (iii)  The three (3) Qualified Arbitrators that are so appointed (or
the single Qualified Arbitrator appointed by Lessor or such Leasehold Mortgagee
(for itself and Tenant) in the limited circumstance referenced above) shall
decide the Arbitration Question within fifteen (15) days following their or his
appointment.

          (iv)   Each of Lessor and such Leasehold Mortgagee (for itself and
Tenant) shall be entitled to present evidence and arguments to the
arbitrator(s).  If either Lessor or such Leasehold Mortgagee (for itself and
Tenant) submits one or more affidavits as part of its submission, the submitting
party agrees, if requested by the other party, to produce such affiants for
cross-examination under oath on the record at the hearings before the
arbitrator(s).  There shall be no pre-hearing discovery of any sort, unless
specifically ordered by the arbitrator(s) upon a finding that such discovery is
essential to the decision-making process.  The parties to the arbitration shall
conduct the arbitration in a cooperative spirit, in good faith, and in a manner
designed to achieve expedition and economy.

          (v)    The determination of the Arbitration Question by the three (3)
Qualified Arbitrator(s) (or the single Qualified Arbitrator acting alone as
above provided) shall be conclusive upon Lessor, such Leasehold Mortgagee and
Tenant and a final, unappealable judgment rendered by such arbitrator(s)
relative to the Arbitration Question may be entered in any court having
appropriate jurisdiction.  The arbitrator or arbitrators, as the case may be,

                                      91
<PAGE>

shall be required to give written notice to Lessor, such Leasehold Mortgagee and
Tenant stating his or their determination relative to the Arbitration Question,
and shall furnish to each of Lessor, such Leasehold Mortgagee and Tenant a
signed copy of such determination.

          (vi)   Each of Lessor and such Leasehold Mortgagee (for itself and
Tenant) shall pay its own counsel fees and the witness fees and similar expenses
of preparing for its presentation of evidence and arguments at the arbitration
hearing(s) and of making such presentation.  Lessor and such Leasehold Mortgagee
(for itself and Tenant) shall equally share any fees payable to the
arbitrator(s), provided, however, that the three (3) Qualified Arbitrators (or
               --------  -------
the single Qualified Arbitrator acting alone as above provided) shall have the
authority to award costs to the prevailing party in the arbitration if such
arbitrator(s) finds that the non-prevailing party acted in bad faith in
connection with any arbitration hereunder.

          (vii)  As used in this subsection (c), the term "Qualified Arbitrator"
means a person or entity that is neither an Affiliate of Lessor, such Leasehold
Mortgagee or Tenant nor interested in any financial manner in the outcome of the
Arbitration Question or in Lessor, Tenant or any Leasehold Mortgagee and has at
least ten (10) years experience as an owner or operator of nursing centers or
hospitals or as a senior executive officer and/or director of the American
Health Care Association and/or the Federation of American Health Systems or any
successor organizations thereto or as a senior executive officer of a publicly
traded healthcare real estate investment trust.

     Section 22.7   Separate Lease.  In the event of any termination of this
                    --------------
Lease, in whole or in part, Lessor agrees to enter into a new lease ("Separate
                                                                      --------
Lease") of the Leased Property(ies) in question with the Leasehold Mortgagee or
-----
its designee for the remainder of the term of this Lease, effective as of the
date of termination, at the rent and additional rent, and upon the terms,
covenants and conditions (including all options to renew but excluding
requirements which are not applicable or which have already been fulfilled)
identical to this Lease, provided:

     (a) The Leasehold Mortgagee shall make written request upon Lessor for such
Separate Lease within sixty (60) days after the date the Leasehold Mortgagee
receives Lessor's notice of termination of this Lease given pursuant to Section
                                                                        -------
22.4.
----

     (b) At the time of the execution and delivery of such Separate Lease, the
Leasehold Mortgagee or its designee shall pay or cause to be paid to Lessor any
and all sums which would at the time of execution and delivery thereof be due
pursuant to this Lease but for such termination and, in addition thereto, all
reasonable expenses, including reasonable attorneys' fees, which Lessor shall
have incurred by reason of such termination and the execution and delivery of
the Separate Lease and which have not otherwise been received by Lessor from
Tenant or other party in interest under Tenant.  Upon the execution of such
Separate Lease, Lessor shall allow to the tenant named therein as an offset
against the sums otherwise due under this Section 22.7(b) or under the Separate
                                          ---------------
Lease, an amount equal to the net income derived by Lessor from the Leased
Properties during the period from the date of termination of this Lease to the
date of the beginning of the lease term of such Separate Lease.  In the event

                                      92
<PAGE>

of a controversy as to the amount to be paid to Lessor pursuant to this Section
                                                                        -------
22.7(b), the payment obligation shall be satisfied if Lessor shall be paid the
-------
amount not in controversy, and the Leasehold Mortgagee or its designee shall
agree to pay any additional sum ultimately determined to be due plus interest at
the Overdue Rate and such obligation shall be adequately secured.

     (c) Such Separate Lease shall be deemed to be a New Lease and the
provisions of Section 40.15 shall apply.
              -------------

     (d) The Leasehold Mortgagee or its designee shall agree to remedy any of
Tenant's defaults of which said Leasehold Mortgagee was notified by Lessor's
notice of termination given pursuant to Section 22.4 and which are reasonably
                                        ------------
susceptible of being so cured by Leasehold Mortgagee or its designee.

     (e) The tenant under such Separate Lease shall have the same right, title
and interest in and to the Leased Properties to which such Separate Lease
relates and the buildings and improvements thereon as Tenant had under this
Lease.

     (f) The tenant under any such Separate Lease shall be liable to perform the
obligations imposed on Tenant by such Separate Lease only during the period such
tenant under such Separate Lease has ownership of such leasehold estate.

     (g) Notwithstanding anything to the contrary contained in this Section
                                                                    -------
22.7, in connection with obtaining a New Lease with respect to a particular
----
Leased Property as provided herein and in Section 40.15, (i) if, prior to the
                                          -------------
effective date of any such New Lease, Lessor has exercised its right to collect
amounts from Tenant with respect to such Leased Property pursuant to Section
                                                                     -------
16.3(A)(ii) hereof, in order to cure existing monetary defaults relative to such
-----------
Leased Property, Leasehold Mortgagee or its designee shall not be obligated to
pay to Lessor any amount on account of the net present value of any Rent
allocable to such Leased Property for the period from and after the effective
date of such New Lease, but instead shall pay such Rent for such period at the
time and in the manner set forth in such New Lease and consistent with Article
                                                                       -------
III hereof; (ii) Leasehold Mortgagee or its designee shall not be required to
---
cure any non-monetary defaults by Tenant that are not reasonably susceptible of
being cured by Leasehold Mortgagee or its designee; and (iii) notwithstanding
clause (iv) of the definition of "Refinancing Transaction," although Leasehold
Mortgagee or its designee shall be obligated to assume Tenant's liability for
all Unpaid Accrued Rent allocable to the applicable Leased Property as part of
such New Lease, such Unpaid Accrued Rent, including any Unpaid Accrued Rent
accruing after the effective date of such New Lease, shall not be due and
payable until a Refinancing Transaction occurs under clause (i), (ii) or (iii)
of the definition of "Refinancing Transaction."

     Section 22.8   Separate Lease Properties.  If more than one Leasehold
                    -------------------------
Mortgagee shall request a Separate Lease pursuant to Section 22.7(a) as to the
                                                     ---------------
same Leased Property(ies), Lessor shall enter into such Separate Lease with the
Leasehold Mortgagee whose mortgage is prior in lien, or with the designee of the
Leasehold Mortgagee.  Lessor, without liability to Tenant or any Leasehold
Mortgagee with an adverse claim, may rely upon a mortgagee title

                                      93
<PAGE>

insurance policy or policies issued by a responsible title insurance company as
the basis for determining the appropriate Leasehold Mortgagee who is entitled to
such Separate Lease.

     Section 22.9   Legal Proceedings.  Lessor shall give each Leasehold
                    -----------------
Mortgagee prompt notice of any legal proceedings between Lessor and Tenant
involving obligations under this Lease.  Each Leasehold Mortgagee shall have the
right to intervene in any such proceedings and be made a party to such
proceedings, and the parties hereto do hereby consent to such intervention.  In
the event that any Leasehold Mortgagee shall not elect to intervene or become a
party to any such proceedings, Lessor shall give the Leasehold Mortgagee notice
of, and a copy of any decision made in, any such proceedings, which shall be
binding on all Leasehold Mortgagees not intervening after receipt of notice of
such proceedings.

     Section 22.10  Future Amendments.  In the event on any occasions hereafter
                    -----------------
Tenant seeks to mortgage the leasehold estate created hereby, Lessor agrees to
amend this Lease from time to time to the extent reasonably requested by a
Lending Institution proposing to make Tenant a loan secured by a first lien upon
Tenant's leasehold estate, provided that such proposed amendments do not
adversely affect the rights of Lessor or its interest in the Leased Properties.
All reasonable expenses incurred by Lessor in connection with any such amendment
shall be paid by Tenant.

     Section 22.11  Estoppel Certificate.  Lessor and Tenant  shall, without
                    --------------------
charge, at any time and from time to time hereafter, within ten (10) days after
written request of the other party to do so, certify by written instrument duly
executed and acknowledged to any mortgagee or purchaser, or proposed Leasehold
Mortgagee or Superior Mortgagee or proposed purchaser, or any other person, firm
or corporation specified in such request:  (a) as to whether this Lease has been
supplemented or amended, and if so, the substance and manner of such supplement
or amendment; (b) as to the validity and force and effect of this Lease; (c) as
to the existence of any Event of Default hereunder; (d) as to the existence of
any offsets, counterclaims or defenses hereto on the part of either party; (e)
as to the commencement and expiration dates of the Term of this Lease; and (f)
as to any other matters as may be reasonably so requested.  Any such certificate
may be relied upon by the other party and any other person, firm or corporation
to whom the same may be exhibited or delivered, and the contents of such
certificate shall be binding on the party so certifying.

     Section 22.12  Notices.  Notices from Lessor to the Leasehold Mortgagee
                    -------
shall be mailed to the address furnished Lessor pursuant to Section 22.1 and
                                                            ------------
those from the Leasehold Mortgagee to Lessor shall be mailed to the address
designated pursuant to the provisions of Section 34.1 hereof.  Such notices,
                                         ------------
demands and requests shall be given in the manner described in Section 34.1 and
                                                               ------------
shall in all respects be governed by the provisions of that section.

     Section 22.13  Erroneous Payments.  No payment made to Lessor by a
                    ------------------
Leasehold Mortgagee shall constitute agreement that such payment was, in fact,
due under the terms of this Lease; and a Leasehold Mortgagee having made any
payment to Lessor pursuant to Lessor's wrongful, improper or mistaken notice or
demand shall be entitled to the return of

                                      94
<PAGE>

any such payment or portion thereof provided such Leasehold Mortgagee shall have
made demand therefor not later than one year after the date of its payment.

     Section 22.14  Exercise by Leasehold Mortgagee of Remedies Against One or
                    ----------------------------------------------------------
More Leased Properties.  Lessor acknowledges that each of the Leased Properties
----------------------
is covered, and may in the future be covered, by a separate Leasehold Mortgage
and that, due to the fact that the applicable law of each jurisdiction differs
as to the procedures (including, without limitation, the periods for notices of
sale to be published) for the exercise by a Leasehold Mortgagee of remedies
under a Leasehold Mortgage and that certain of the Leasehold Mortgages may be of
Leased Properties located in jurisdictions that are subject to anti-deficiency
judgment, election of remedies and/or one-form-of-action statutes making it
advisable for a Leasehold Mortgagee to exercise remedies with respect to such
Leased Properties in a certain order, the Leasehold Mortgagee may be required
under applicable law to, or due to applicable remedial limitations including
those described above, may reasonably elect to exercise remedies against less
than all of the Leased Properties at a particular time and/or may elect, or may
be required by applicable law, to exercise remedies against the Leased
Properties in a particular order.  Therefore, Lessor agrees that its obligations
under this Article XXII are applicable to each Leased Property.  For example,
           ------------
Lessor may be asked to enter into a Separate Lease with respect to less than all
of the Leased Properties pursuant to Section 22.7 and/or Lessor may be asked to
                                     ------------
approve a proposed transferee of a particular Leased Property pursuant to
Section 22.6(b).
---------------

                                 ARTICLE XXIII

     Section 23.1   Risk of Loss.  During the Term of this Lease, the risk of
                    ------------
loss or of decrease in the enjoyment and beneficial use of each Leased Property
in consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
attachments, levies or executions (other than by Lessor and those claiming from,
through or under Lessor) is assumed by Tenant, and, in the absence of gross
negligence, willful misconduct or breach of this Lease by Lessor pursuant to
Section 38.3, Lessor shall in no event be answerable or accountable therefor nor
------------
shall any of the events mentioned in this Section entitle Tenant to any
abatement of Rent.

                                 ARTICLE XXIV

     Section 24.1   Indemnification.  Notwithstanding the existence of any
                    ---------------
insurance provided for in Article XIII, and without regard to the policy limits
                          ------------
of any such insurance, Tenant will protect, indemnify, save harmless and defend
Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and reasonable expenses (including, without
limitation, Litigation Costs), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Lessor by reason of:  (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any Leased Property or adjoining sidewalks, including without limitation
any claims of malpractice, (b) any use, misuse, non-use, condition, maintenance
or repair by Tenant or anyone claiming under Tenant, including agents,
contractors, invitees or visitors of any Leased

                                      95
<PAGE>

Property or Tenant's Personal Property, (c) any Impositions (which are the
obligations of Tenant to pay pursuant to the applicable provisions of this
Lease), (d) any failure on the part of Tenant or anyone claiming under Tenant to
perform or comply with any of the terms of this Lease, (e) subject to Section
                                                                      -------
7.3.2 hereof, any failure by Tenant to observe, perform and comply with the
-----
terms of any Existing Ground Lease or other Permitted Encumbrance applicable to
or binding upon Lessor or any of the Leased Properties or any breach of, default
under or termination of any such Existing Ground Lease or other Permitted
Encumbrance caused, whether by act or omission, by Tenant or its agents,
employees, contractors, invitees, subtenants, licensees, concessionaires or
assigns (whether or not permitted hereunder), and (f) the non-performance of any
of the terms and provisions of any and all existing and future subleases of any
Leased Property to be performed by the subtenant thereunder. Any amounts which
become payable by Tenant under this Section shall be paid within ten (10) days
after liability therefor on the part of Tenant is determined by litigation or
otherwise, and if not timely paid, shall bear interest (to the extent permitted
by law) at the Overdue Rate from the date of such determination to the date of
payment. Tenant, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Lessor or may
compromise or otherwise dispose of the same as Tenant sees fit. Nothing herein
shall be construed as indemnifying Lessor against its own negligent acts or
omissions or willful misconduct. If at any time Lessor shall have notice of a
claim, Lessor shall give reasonably prompt written notice of such claim to
Tenant; provided that (i) Lessor shall have no liability for a failure to give
        -------- ----
notice of any claim of which Tenant has otherwise been notified or has knowledge
and (ii) the failure of Lessor to give such a notice to Tenant shall not limit
the rights of Lessor or the obligations of Tenant with respect to such claim
except to the extent that Tenant incurs actual expenses or suffers actual
monetary loss as a result of such failure. Tenant shall have the right to
control the defense or settlement of any claim, provided that (A) Tenant shall
first confirm in writing to Lessor that such claim is within the scope of this
indemnity and that Tenant shall pay any and all amounts required to be paid in
respect of such claim and (B) if the compromise or settlement of any such claim
shall not result in the complete release of Lessor from the claim so compromised
or settled, the compromise or settlement shall require the prior written
approval of Lessor. Lessor shall have the right to approve counsel engaged to
defend such claim and, at its election and sole cost and expense, shall have the
right, but not the obligation, to participate in the defense of any claim.

     Lessor shall indemnify, save harmless and defend Tenant from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses imposed upon or incurred by or asserted against Tenant as a
result of the gross negligence or willful misconduct of Lessor under and in
connection with this Lease.

     Tenant's and Lessor's respective duties, liabilities and obligations under
this Article shall survive the expiration or termination of this Lease as to any
or all of the Leased Properties.  For example, if (x) John Doe is injured in a
slip-and-fall accident that occurs at Leased Property A on January 1, 2002 and
of which Lessor has no notice or knowledge, (y) this Lease terminates for any
reason on March 1, 2002 with respect to Leased Property A, and (z) on July 1,
2002, John Doe begins a lawsuit against Lessor on account of the aforesaid
accident, then, notwithstanding such termination, Tenant's indemnification and
other

                                      96
<PAGE>

obligations with respect to such accident and lawsuit under subsection (a) above
and the other provisions of this Article shall survive such termination with
respect to Leased Property A.

     New Mexico Limitation on Indemnification.  To the extent, if at all, that
     ----------------------------------------
N.M. Stat. Ann. (S) 56-7-1 is applicable to any agreement to indemnify in this
Lease, or any related documents, such an agreement to indemnify will not extend
to liability, claims, damages, losses or expenses, including fees of lawyers,
arising out of (i) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or specifications by an indemnitee or
the agents or employees of the indemnitee or (ii) the giving of or the failure
to give directions or instructions by the indemnitee, or the agents or employees
of the indemnitee, where such giving or failure to give directions or
instructions is the primary cause of bodily injury to persons or damage to the
property.

                                  ARTICLE XXV

     Section 25.1   Subletting and Assignment.
                    -------------------------

          Section 25.1.1 Notwithstanding anything to the contrary contained in
this Lease but subject to Sections 25.4 and 25.1.11 below, Tenant shall have no
                          -------------     -------
right, directly or indirectly, to assign this Lease in part under any
circumstances.  Subject to the foregoing, except as expressly provided herein,
Tenant shall not, without the prior written consent of Lessor, which consent
shall not be unreasonably withheld, delayed or conditioned so long as no Event
of Default has occurred and is continuing hereunder, assign this Lease in its
entirety or mortgage, pledge, hypothecate, encumber or otherwise transfer any
interest in this Lease in whole or in part or sublease all or any part of any
Leased Property or suffer or permit this Lease or the leasehold estate created
hereby or thereby or any other rights arising under this Lease to be assigned in
its entirety or to be transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily or involuntarily or by
operation of law, or permit the use or occupancy of any Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided.  For purposes of this Section 25.1, an assignment of this Lease shall
                                ------------
be deemed to include any change in control of any Tenant, as if such change in
control or transaction were an assignment of this Lease.  Changes in control of
any Tenant shall include, without limitation, (a) a change in the composition of
the board of directors of any Tenant or any Guarantor such that at the end of
any period of twelve (12) consecutive months the persons constituting a majority
of such board of directors are not the same as the persons constituting a
majority at the start of such period (or persons appointed by such majority),
(b) the sale or other disposition of (i) all or any part of its interest in any
Guarantor or (ii) all or substantially all of the assets of any Guarantor or any
Tenant (other than a bona fide pledge in connection with a financing approved by
Lessor), and (c) a merger or consolidation involving any Guarantor or any
Tenant, which results in the stockholders of any Guarantor or any Tenant
immediately prior to such event owning less than 50% of the capital stock of the
surviving entity or any public parent of the surviving entity.  For purposes of
this Section 25.1, a sublease of all or any part of any Leased Property shall be
     ------------
deemed to include any concessionaire agreement, license agreement or other
agreement involving use or possession of all or any part of any Leased Property.

                                      97
<PAGE>

          Section 25.1.2  Subject to the provisions of Section 25.3 below and
                                                       ------------
any other express conditions or limitations set forth herein, so long as no
Event of Default has occurred and is continuing hereunder, Tenant may, without
the consent of Lessor, (i) assign this Lease in its entirety or sublet all or
any part of any Leased Property to any Affiliate of Tenant, or (ii) sublet up to
an aggregate of 20% of the rentable square footage of any Facility (x) in the
normal course of the Primary Intended Use such as but not limited to leasing of
space for major moveable equipment or functional departments such as pathology,
pharmacy and radiology, or (y) to concessionaires or other third party users or
operators of portions of the Leased Property, provided that, in the case of both
clauses (i) and (ii) above, the assignee or subtenant in question is duly
licensed and possessed of all Authorizations necessary for the conduct of its
activities and the operation of such Leased Property or portion thereof in
accordance with all applicable laws. So long as no Event of Default has occurred
and is continuing hereunder, Lessor shall not unreasonably withhold, delay or
condition its consent to any other subletting of the Leased Properties in whole
or in part or assignment of this Lease in its entirety, provided that (a) in the
case of a subletting, (1) the subtenant shall comply with the provisions of
Section 25.2, and (2) if the subtenant is an Affiliate of any Tenant, the
------------
subtenant shall execute and deliver to Lessor a Lease Guaranty in accordance
with Section 40.12 hereof, (b) the assignee or subtenant (1) shall be a
     -------------
creditworthy entity with sufficient financial stability to satisfy its
obligations under the Lease, (2) shall have not less than four years experience
in operating health care facilities for the purpose of the applicable Facility's
Primary Intended Use, (3) has a favorable business and operational reputation
and character, (4) has all licenses, permits, approvals and other Authorizations
required to operate the Leased Property(ies) in question for the Primary
Intended Use (or any other use permitted under the terms of this Lease), and (5)
in the case of an assignment, shall assume in writing and agree to keep and
perform all of the terms of this Lease on the part of Tenant to be kept and
performed and shall be, and become, jointly and severally liable with Tenant for
the performance thereof, (c) an original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in the form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor, and (d) in case of either an assignment
or subletting, Tenant shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Tenant
hereunder. Lessor's obligation to consent to a subletting or assignment is
subject to any reasonable approval rights of any Facility Mortgagee and/or the
lenders under the Lessor Credit Agreement.

          Section 25.1.3  If this Lease is assigned or if any Leased Property or
any part thereof is sublet (or occupied by any entity other than Tenant and its
employees), Lessor, after an Event of Default occurs and so long as it is
continuing, may collect the rents from such assignee, subtenant or occupant, as
the case may be, and apply the net amount collected to the Rent herein reserved,
but no such collection shall be deemed a waiver of the provisions set forth in
Section 25.1.1, the acceptance by Lessor of such assignee, subtenant or
--------------
occupant, as the case may be, as a tenant or release of Tenant  from the future
performance of its covenants, agreements or obligations contained in this Lease.

                                      98
<PAGE>

          Section 25.1.4  No subletting or assignment shall in any way impair
the continuing primary liability of Tenant hereunder, and no consent to any
subletting or assignment in any particular instance shall be deemed a waiver of
the prohibition set forth in this Section 25.1. No assignment, subletting or
                                  ------------
occupancy shall affect the Primary Intended Use.  Any subletting, assignment or
other transfer of Tenant's interest in this Lease in contravention of this
Section 25.1 shall be void at Lessor's option.
------------

          Section 25.1.5  If Tenant shall desire to assign this Lease or sublet
all (but not a portion) of any Leased Property other than an assignment or
sublease to an Affiliate, it shall first submit in writing to Lessor a notice
("Tenant's Notice") indicating (a) the name of the proposed assignee or
  ---------------
subtenant, (b) the material terms of the proposed assignment or sublease, (c)
the nature and character of the business which the proposed assignee or
subtenant will conduct at the applicable Leased Property, (d) reasonable
financial data concerning the proposed assignee or subtenant, and (e) the
effective date of the proposed assignment or the commencement date and
expiration date of the proposed sublease.  Tenant shall additionally submit to
Lessor any other information concerning the proposed assignment or sublease
which Lessor may reasonably request and, prior to the effective date of any
assignment permitted hereunder or the commencement date of any sublease
permitted hereunder, Tenant shall deliver to Lessor evidence reasonably
satisfactory to Lessor that the assignee or subtenant has all licenses, permits,
approvals and other Authorizations necessary to operate each Leased Property for
the Primary Intended Use (or any other use permitted under the terms of this
Lease).  Except to the extent such subletting or assignment is authorized under
Section 25.1.11 below, if such notice is given, Lessor may, at its option,
---------------
terminate this Lease as to the applicable Leased Property, in which event, the
provisions of Section 40.16 hereof shall apply.  Lessor shall exercise its
              -------------
option by notice to Tenant within 30 days after Tenant's Notice (or receipt by
Lessor of all information reasonably requested by Lessor pursuant to this
Section 25.1.5), and during such 30-day period, Tenant shall not have the right
--------------
to assign this Lease or sublet such space.

          Section 25.1.6  If Lessor exercises its option under Section 25.1.5 to
                                                               --------------
terminate this Lease, this Lease shall terminate (either as to each Leased
Property or as to the applicable Leased Property, whichever is applicable) on
the date which is 60 days following Tenant's Notice or on such later date as may
be specified in Tenant's Notice, all Rent allocable to the Leased Property(ies)
in question in accordance with Section 16.9 hereof shall be paid and apportioned
                               ------------
to the date of such termination and the provisions of Section 40.16 hereof shall
                                                      -------------
apply in the event this Lease remains in effect as to any Leased Properties.  If
Lessor shall exercise its options under Section 25.1.5, Lessor may, and shall
                                        --------------
have no liability to Tenant if Lessor shall, lease to Tenant's prospective
subtenant or assignee.

          Section 25.1.7  (a) Except in the case of an assignment or sublet
pursuant to Section 25.1.2(i) hereof and subject to subsections (b) and (c)
            -----------------
below, Tenant shall pay to Lessor, as Additional Charges, (i) as and when
received by Tenant, 80% of any consideration (including, without limitation,
capital stock, stock options or warrants, license fees and all other forms of
remuneration) received on account of any assignment and (ii) 80% (50%, rather
than 80%, in the case of the existing subleases scheduled on Schedule 25.1.7
                                                             ---------------
attached hereto

                                      99
<PAGE>

and made a part hereof, as such subleases are in effect on December 14, 2000 and
only for the remaining term thereof, it being agreed that, if any such sublease
is extended (other than pursuant to the terms of sublease extension rights in
existence as of December 14, 2000), or after December 14, 2000 is materially
amended, for the extension term, or after any such material amendment, the
applicable percentage in this subsection (ii) shall be 80%, not 50%) of the
excess of:

               (x) any rents, additional charges, or other consideration
               (including, without limitation, capital stock, stock options or
               warrants, license fees and all other forms of remuneration)
               payable to Tenant under any sublease, after deducting therefrom
               brokerage commissions and legal fees paid by Tenant in connection
               with such subletting, over (y) the sum of (1) a share of the Base
               Rent, real estate taxes and assessments, insurance premiums and
               charges for utility usage that, on a monthly basis, are owing
               with respect, or otherwise allocable, to the applicable Leased
               Property (with such share to be equal to (A) if the applicable
               sublease relates primarily to use of areas within the
               Facility(ies) located on the applicable Leased Property, the
               product of the total of the aforesaid Base Rent, real estate
               taxes and assessments, insurance premiums and utility usage
               charges owing with respect, or allocable, to the applicable
               Leased Property for a particular month times a fraction, the
               numerator of which is the number of rentable square feet under
               the applicable sublease and the denominator of which is the
               aggregate number of rentable square feet in the Facility(ies)
               located on the applicable Leased Property, and (B) if the
               applicable sublease relates primarily to use of areas outside the
               Facility(ies) located on the applicable Leased Property, that
               portion of the aforesaid real estate taxes, insurance premiums
               and charges for utility usage as are, in the reasonable judgment
               of Tenant (and with supporting documentation to be delivered to
               Lessor upon written request), attributable to the areas outside
               the Facility(ies) located on the applicable Leased Property),
               plus (2) the amount (amortized, if applicable, as described
               below) of the actual out of pocket costs, if any, incurred by
               Tenant (on behalf of itself and, to the extent related to
               "Sublease Rent Payments" (as defined below), on behalf of
               Lessor's 80% (or 50%, if applicable as described above) share
               thereof) from time to time during the applicable sublease and
               directly attributable to (aa) extending telephone service to the
               portion of the applicable Leased Property that is subleased per
               the applicable sublease or (bb) performing repairs to the portion
               of the applicable Leased Property that is subleased per the
               applicable sublease (and, for purposes of this subsection (2) and
               the calculation of "Sublease Rent Payments", as hereinafter
               defined, (X) in the case of any costs of the nature referenced in
               this subsection (2) that, in accordance with generally accepted
               accounting principles, are treated as capital costs, such costs
               shall be amortized on a straight line basis over the longer of
               the useful

                                      100
<PAGE>

               life of the improvements or repairs to which such costs relate or
               the initial term of the applicable sublease, and in each month
               the amortized amount of such costs shall be deemed to have been
               incurred by Tenant, and (Y) in the case of all other costs of the
               nature referenced in this subsection (2), such costs shall be
               treated as incurred by Tenant as and when expended),

(such excess of (ii)(x) over (ii)(y) is referred to herein as the "Sublease Rent
                                                                   -------------
Payments").  Lessor's share, as aforesaid, of any such Sublease Rent Payments
--------
shall be paid by Tenant to Lessor as and when the Sublease Rent Payments are
received by Tenant; provided, however, that:
                    --------  -------

               (cc) within sixty (60) days after the end of each calendar year,
               Tenant shall deliver to Lessor a Senior Officer's Certificate
               certifying the amount of Lessor's share of Sublease Rent Payments
               for the preceding calendar year and setting forth how such amount
               was calculated and containing a detailed breakdown of the
               revenues and expenses used in making such calculation, and,
               within thirty (30) days after Lessor's receipt of such
               certificate, if the aggregate amount paid by Tenant to Lessor
               during such preceding calendar year on account of Lessor's share
               of Sublease Rent Payments for such year exceeds the amount of
               Lessor's share as shown in such certificate, then, subject to
               subsection (dd) below, Lessor shall pay the overage to Tenant,
               and, if the aggregate amount paid by Tenant to Lessor during such
               preceding calendar year on account of Lessor's share of Sublease
               Rent Payments for such year is less than the amount of Lessor's
               share as shown in such certificate, Tenant shall pay such
               deficiency to Lessor.  Lessor shall be entitled, upon three (3)
               Business Days prior written notice and within normal business
               hours, to review, and make abstracts from and copies of, Tenant's
               books, accounts and records relative to Tenant's subleases of any
               Leased Property and the calculation of Lessor's share of Sublease
               Rent Payments for any period; and

               (dd) for purposes of subsection (cc) above and the other
               provisions of this Section 25.1.7, Lessor's share of Sublease
                                  --------------
               Rent Payments shall in no event be a negative number and, for all
               purposes of subsection (cc) above and the other provisions of
               this Section 25.1.7, for any calendar year in which the amount
                    --------------
               referenced in subsection (ii)(x) above for such year is less than
               the amount referenced in subsection (ii)(y) above for such year,
               the "Sublease Rent Payments" shall be deemed to equal zero for
               such year.  (For example, if Tenant subleases a portion of a
               Leased Property, subsection (ii) above is applicable thereto,
               during a particular calendar year Sublease Rent Payments are
               received by Tenant in the aggregate amount of $100.00, and during
               such calendar year Tenant paid to Lessor the following monthly
               amounts on account of Lessor's share of

                                      101
<PAGE>

               Sublease Rent Payments: for each of the months January through
               July, $20.00 (i.e.: $140.00 in aggregate) and for each of the
               months August through December, $0.00, then, within thirty (30)
               days after Lessor's receipt of Tenant's aforesaid Senior
               Officer's Certificate for such calendar year, Lessor would be
               obligated to pay to Tenant $60.00, representing the overage of
               the aggregate amount received by Lessor during such calendar year
               ($140.00) over Lessor's share of the Sublease Rent Payments for
               such calendar year ($80.00 or 80% of $100.00). Alternatively, if
               the preceding facts are assumed except that, during the subject
               calendar year, the amount referenced in subsection (ii)(x) above
               is less than the amount referenced in subsection (ii)(y) above by
               $50.00, then, pursuant to subsection (dd) above, the Sublease
               Rent Payments for such calendar year shall be deemed to equal
               $0.00, and, consequently, within thirty (30) days following
               receipt of Tenant's aforesaid Senior Officer's Certificate for
               such calendar year, Lessor would be obligated to pay to Tenant
               $140.00, representing the overage of the aggregate amount
               received by Lessor during such calendar year ($140.00) over
               Lessor's share of the deemed Sublease Rent Payments for such
               calendar year ($0.00 or 80% of $0.00)).

In the event of a foreclosure by a Leasehold Mortgagee as to a particular Leased
Property(ies), Lessor's right to 80% (50%, in the circumstances described above
relative to the existing subleases scheduled on Schedule 25.1.7 hereof) of such
                                                ---------------
Sublease Rent Payments relating to such Leased Property(ies) shall be
subordinate to such Leasehold Mortgagee's right of payment.  In the event of an
assignment or sublet pursuant to Section 25.1.2(i) hereof, the provisions of
this Section 25.1.7 shall apply to any further assignment or sublet to a person
     --------------
or entity that is not an Affiliate of Tenant.

          (b) Notwithstanding anything to the contrary provided in this Lease,
in the event Tenant enters into a sublease, license agreement, easement or other
agreement (an "Ancillary Agreement") pursuant to which a third party is given
               -------------------
the right to access, maintain or operate on any Leased Property, any antenna,
cell tower, satellite dish, cable or wire installation, or other communication
or telecommunication equipment, any billboard or signage, or any facility or
service not within the primary scope of Tenant's business as it is conducted on
the Effective Date, Tenant shall pay Lessor, as Additional Charges as and when
payable to Tenant, 80% of any consideration (including, without limitation,
capital stock, stock options or warrants, license fees and all other forms of
remuneration) received on account of such Ancillary Agreement.  At the request
of Lessor, Tenant shall direct the third party in any Ancillary Agreement to pay
Lessor's 80% share of such consideration directly to Lessor.  No such Ancillary
Agreement shall be entered into by Tenant without the prior written consent of
Lessor, which consent shall not be unreasonably withheld, delayed or conditioned
so long as Tenant complies with the applicable requirements of subsections (a)
through (d) of Section 25.1.2 above.
               --------------

                                      102
<PAGE>

          (c) Notwithstanding anything to the contrary contained in subsection
(a)(ii) above, Lessor shall not be entitled to any Sublease Rent Payments on
account of any sublease of space within a Leased Property for a flower shop,
beauty salon, barber shop, gift shop, restaurant, cafeteria, coffee shop, snack
shop or the like or any other concessionaires (which term shall not include,
without limitation, medical offices and clinics and other providers of medical
services) typically found in nursing centers or hospitals (as applicable
depending upon the Primary Intended Use of the particular Leased Property)
(including those subleases of the nature referenced in this subsection (c)
existing at the Leased Properties as of the Effective Date), so long as the
aggregate square footage of such Leased Property that is subleased for such uses
does not exceed twenty percent (20%) of the rentable space within the
Facility(ies) located on such Leased Property.

          Section 25.1.8   Any assignment and/or sublease must provide that (a)
it shall be subject and subordinate to all of the terms and conditions of this
Lease, (b) the use of the applicable Leased Property shall be restricted to the
applicable Primary Intended Use and shall not conflict with any Legal
Requirement, Insurance Requirement or any other provision of this Lease, (c) no
sublessee or assignee shall be permitted to further sublet all or any part of
the applicable Leased Property or assign this Lease or its sublease except as
expressly provided in this Lease and (d) in the event of cancellation or
termination of this Lease for any reason whatsoever or of the surrender of this
Lease whether voluntary, involuntary or by operation of law, prior to the
expiration date of such sublease, including extensions and renewals granted
thereunder, at Lessor's option, the subtenant shall make full and complete
attornment to Lessor for the balance of the term of the sublease, which
attornment shall be evidenced by an agreement in form and substance reasonably
satisfactory to Lessor and which the subtenant shall execute and deliver within
5 days after request by Lessor, its successors or assigns and the subtenant
shall waive the provisions of any law now or hereafter in effect which may give
the subtenant any right of election to terminate the sublease or to surrender
possession in the event any proceeding is brought by Lessor to terminate this
Lease.

          Section 25.1.9   Any assignment of this Lease or sublease of the
applicable Leased Property in contravention of the express terms of this Article
                                                                         -------
XXV shall be voidable at Lessor's option and the acceptance of rent by Lessor
---
from any such unauthorized assignee or subtenant shall not constitute a
recognition or acceptance of the tenancy of such unauthorized assignee or
subtenant.

          Section 25.1.10  Tenant shall pay to Lessor, within ten (10) business
days after request therefor, all costs and expenses, including without
limitation reasonable attorneys' fees,  incurred by Lessor in connection with
any request by Tenant to assign this Lease or sublet the applicable Leased
Property.

          Section 25.1.11  Notwithstanding the other prohibitions and
restrictions on assignment and subletting contained in this Section 25.1,
                                                            ------------
provided Tenant shall have complied with the notice and information requirements
of Section 25.1.5 above, Tenant shall have the right to assign or sublet to a
   --------------
non-Affiliate (x) without the consent of Lessor, not more than ten percent (10%)
in the aggregate of the Master Lease Leased Properties which are nursing

                                      103
<PAGE>

centers and (y) with Lessor's consent (which consent shall not be unreasonably
withheld, delayed or conditioned), not more than two (2) Master Lease Leased
Properties which are hospitals, but only if either (i) the applicable regulatory
authorities have threatened, or commenced proceedings, to revoke Tenant's
Medicaid or Medicare certification for reimbursement or other Authorizations
necessary to operate such nursing center or hospital Leased Property, as
applicable, or (ii) Tenant cannot profitably operate such Leased Property, in
which event:

          (a) such assignment and/or subletting shall comply in all respects
with clauses (a) through (d) of the second sentence of Section 25.1.2 above
                                                       --------------
(upon Tenant's request, Lessor agrees to provide an estoppel certificate
certifying that, to the best of Lessor's knowledge, such clauses (a) through (d)
have been satisfied or, if such is not the case to the best of Lessor's
knowledge, certifying the manner in which such clauses have not been satisfied
to the best of Lessor's knowledge);

          (b) Lessor shall give such assignee or subtenant assurances of quiet
enjoyment, in accordance with a mutually satisfactory non-disturbance and
attornment agreement, such that so long as such assignee or subtenant pays Rent
allocable to such Leased Property and otherwise complies with all covenants and
obligations of the Tenant under this Lease with respect to such Leased Property,
no other default under this Lease shall affect or give rise to any right to
terminate its leasehold of such Leased Property; and

          (c) any default by such assignee or subtenant in the payment of Rent
or in complying with all other covenants and obligations of the Tenant with
respect to such Leased Property shall continue to constitute a default under
this Lease, entitling Lessor to all its rights and remedies hereunder.

To the extent that any of the Master Lease Leased Properties are hereafter the
subject of a New Lease, Tenant shall continue to have the right to assign or
sublet such Master Lease Leased Properties upon compliance with this Section
                                                                     -------
25.1.11, but such right to assign or sublet, whether under this Lease or
-------
comparable provisions of any and all New Leases, shall never exceed ten percent
(10%) in the aggregate of the nursing centers included within the Master Lease
Leased Properties or two (2) hospitals included within the Master Lease Leased
Properties.

     Section 25.2   Attornment.  Tenant shall insert in each sublease permitted
                    ----------
under Section 25.1 provisions to the effect that (a) such sublease is subject
      ------------
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder (except to the extent such subtenant is entitled to
quiet enjoyment assurances under Section 25.1.11 above), (b) in the event this
                                 ---------------
Lease shall terminate before the expiration of such sublease, the subtenant
thereunder will, at Lessor's option, attorn to Lessor and waive any right the
subtenant may have to terminate the sublease or to surrender possession
thereunder, as a result of the termination of this Lease, and (c) in the event
the subtenant receives a written notice from Lessor or Lessor's assignees, if
any, stating that an Event of Default has occurred, the subtenant shall
thereafter be obligated to pay all rentals accruing under said sublease directly
to

                                      104
<PAGE>

the party giving such notice, or as such party may direct. All rentals received
from the subtenant by Lessor or Lessor's assignees, if any, as the case may be,
shall be credited against the amounts owing by Tenant under this Lease.

     Section 25.3   Sublease Limitation.  Anything contained in this Lease to
                    -------------------
the contrary notwithstanding, Tenant shall not sublet the Leased Property on any
basis such that the rental to be paid by the subtenant thereunder would be
based, in whole or in part, on either (i) the income or profits derived by the
business activities of the subtenant, or (ii) any other formula such that any
portion of the sublease rental received by Lessor would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.

     Section 25.4   Leasehold Mortgagee Rights.  Nothing contained in this
                    --------------------------
Article XXV shall limit or impair any rights of the Leasehold Mortgagee under
-----------
Article XXII, including, without limitation, any such rights to obtain a
------------
Leasehold Mortgage upon less than all of the Leased Properties and, in the
circumstances referenced in Section 22.7, to obtain a Separate Lease as to less
                            ------------
than all of the Leased Properties.

                                  ARTICLE XXVI

     Section 26.1   Financial Statements and Reporting. Each Tenant shall
                    ----------------------------------
maintain, for itself and its subsidiaries, a system of accounting established
and administered in accordance with generally accepted accounting principles,
and shall provide Lessor with the following information:

     (a) As soon as available but in no event later than forty-five (45) days
after the close of each fiscal month and within fifty (50) days after the close
each of the first three fiscal quarters, for Tenant, an unaudited consolidated
balance sheet and statement of operations as of the close of each such period
and the related unaudited consolidated statements of income, cash flows and
stockholders equity for such period and for the year to date of Tenant and its
Subsidiaries (collectively, "Financial Statements"), setting forth in each case
                             --------------------
in comparative form the corresponding figures for the previous year, all
prepared in accordance with generally accepted accounting principles and all
certified in an Officer's Certificate to Lessor as being complete and accurate
to the best of Tenant's knowledge, subject to normal year end adjustments.  In
the case of any Officer's Certificate and related financial statements that are
required under this subsection (a) and relate to any period on or prior to the
date which is 120 days after the Effective Date, Tenant may, to the extent
necessary, qualify the same by stating that they remain subject to any
adjustments required by "fresh-start accounting", provided and on the conditions
that (i) as soon as reasonably practicable following the completion of such
"fresh-start accounting" adjustments, but in any event within five (5) Business
Days following such completion, Tenant shall deliver to Lessor a revised
Officer's Certificate and related financial statements that comply with this
subsection (a) and omit the aforesaid "fresh-start accounting" qualifications
and (ii) Tenant shall at all times comply with all applicable securities and
other Legal Requirements relative to the reporting and disclosure of Tenant's
financial condition;

                                      105
<PAGE>

     (b)  Within one hundred (100) days after the close of each Fiscal Year, (i)
for Tenant, consolidated Financial Statements, in each case with accompanying
notes and schedules, prepared in accordance with generally accepted accounting
principles and audited by a firm of independent certified public accountants of
recognized standing selected by Tenant, which accountants shall have issued an
audit report thereon; and (ii) an Officer's Certificate certifying to Lessor the
amount of Patient Revenues for such Fiscal Year for each Facility, for all of
the Facilities in the aggregate under this Lease and for all of the Facilities
in the aggregate under all of the Leases, and attaching reasonably detailed
documentation thereof;

     (c)  Within fifty (50) days after the close of each of the first three
fiscal quarters, and within one hundred (100) days after the close of each
Fiscal Year, the following information and data for each Facility, in each case
in paper format or electronic computer format: (1) income statements that
include, without limitation, a breakdown of Patient Revenues and other revenues
itemized by payor type and a breakdown of operating expenses to the extent
reasonably available under the then current facility operation reports, but
including, at a minimum, itemization of Facility rental expense, overhead
charges or management fees, bad debt expense and any material non-recurring
charges; and (2) patient census by payor type;

     (d)  As soon as available but in no event later than sixty (60) days
following the commencement of each Fiscal Year, annual budgets for the operation
during such Fiscal Year of each Facility, of all Facilities in the aggregate
under this Lease and of all Facilities in the aggregate under all of the Leases,
and to the extent reasonably available, a breakdown of projected Patient
Revenues and other revenues itemized by payor type and a breakdown of projected
operating expenses itemized to reflect, at a minimum, Facility rental expense,
overhead charges or management fees, bad debt expense and any non-recurring
charges;

     (e)  Within one hundred (100) days after the close of each Fiscal Year, or
otherwise upon request by Lessor in connection with a proposed sale or
refinancing of a Facility or Facilities by Lessor, for Tenant and each
Guarantor, as applicable, an Officer's Certificate certifying to Lessor and
Lessor's designees (which certificate may be relied upon by Lessor and any
prospective purchaser or mortgagee of any Leased Property) the following
information:

          (i)    this Lease is unmodified and is in full force and effect (or
     that this Lease is in full force and effect as modified and setting forth
     the modifications);

          (ii)   the dates to which Rent has been paid;

          (iii)  all Facilities are in good standing with respect to all
     necessary federal, state and local licenses, permits and other
     Authorizations;

          (iv)   each Facility that participates in the Medicare program is in
     compliance with the terms of its Medicare Provider Agreement and in good
     standing with the Medicare program;

                                      106
<PAGE>

          (v)    each Facility that participates in the Medicaid program is in
     compliance with the terms of its Medicaid Provider Agreement and in good
     standing with the Medicaid program;

          (vi)   the current number of licensed beds at each Facility; and

          (vii)  Tenant and each applicable Guarantor is not in default in the
     performance of this Lease or its Guaranty, as applicable, or if an Event of
     Default exists, specifying the same in reasonable detail;

at the request of Lessor, together with complete and accurate copies (originals
of which shall be made available for inspection upon request by Lessor) of all
licenses, permits and other Authorizations necessary to operate the Facilities
in accordance with all applicable laws;

     (f)  As soon as reasonably available, copies of any Forms 10K, 10Q and 8K
and any other annual, quarterly, monthly or other reports, copies of all
registration statements and any other public information which any Tenant or any
of its Subsidiaries files with the Securities Exchange Commission or any other
governmental authority;

     (g)  Promptly upon the furnishing thereof to the shareholders of any
Tenant, copies of all statements, reports, notices and proxy statements so
furnished;

     (h)  Such supplements to the foregoing documents and such other information
and reports (including, without limitation non-financial information), as any
Senior Lender, any Facility Mortgagee or any Superior Mortgagee may reasonably
request, provided such supplements, and such information and reports, are
consistent with the types of supplements, reports and information generally
utilized by such institutions within the financing industry;

     (i)  (i)  On a weekly basis until the first anniversary of the Effective
Date, (x) a consolidated weekly cash flow report of Tenant and its Subsidiaries
and (y) a consolidated weekly patient census report (reported separately for
hospitals and nursing centers) for Tenant, with each of such reports to be in
substance (but not necessarily in form) consistent with the forms of such
reports that Lessor received during the first ten (10) months of 2000, (ii) on a
monthly basis during the Term, (x) a consolidated monthly cash flow report of
Tenant and its Subsidiaries and (y) a consolidated monthly patient census report
(reported separately for hospitals and nursing centers) for Tenant, (iii) all
other information, reports, materials and certificates that are from time to
time delivered, pursuant to the requirements of any loan documents that are from
time to time binding upon Tenant or any of its Subsidiaries or Affiliates, by
Tenant or any of its Subsidiaries or Affiliates to any of the Senior Lenders, or
any of the holders of any of the Exit Facility Documents or any other loan
documents evidencing or securing borrowed indebtedness of Tenant or its
Subsidiaries or Affiliates, or any of their respective agents, representatives
or consultants, with all such information, reports, materials and certificates
to be delivered to Lessor at the same time and in the same manner as the same
are delivered to any of the Senior Lenders, any of the aforesaid holders and/or
any of their respective agents, representatives or consultants, (iv) on a
monthly basis during the Term, a monthly consolidated survey deficiency summary
report, with such report

                                      107
<PAGE>

to be in substance (but not necessarily in form) consistent with the report
dated October 2000 that was delivered to Lessor and listing each of the Master
Lease Leased Properties and indicating for each Master Lease Leased Property
whether any survey, citation or report alleging a deficiency that is material in
relation to such Master Lease Leased Property (using the October 2000 report as
a baseline) has been issued with respect thereto during the period covered by
such report and, if so, setting forth the identity of the agency or authority
that issued such citation or report, a description of the alleged material
deficiency and the timetable or deadline for curing the same (and, promptly
following receipt of a written request therefor from Lessor to Tenant, Tenant
shall further deliver to Lessor any Facility-specific survey reports requested
by Lessor), and (v) promptly following receipt of a written request therefor
from Lessor to Tenant, copies of any Facility-specific environmental,
engineering or other reports or studies that are in Tenant's possession or
control and so requested by Lessor; and

     (j) If Lessor is a Ventas Lessor, within fifty (50) days following the
close of each fiscal quarter, a Senior Officer's Certificate setting forth
whether any Event(s) of Default under Section 16.1(m) and/or Section 16.1(q) of
                                      ---------------        ---------------
this Lease or any other lease demising any of the Master Lease Leased Properties
has occurred and is continuing (as described in Section 16.10) and, if so,
                                                -------------
specifying the Master Lease Leased Property(ies) at which such Event(s) of
Default has so occurred and is continuing.

     Section 26.2   Furnishing Notice.  Within five (5) days after Tenant
                    -----------------
receives notice or otherwise obtains knowledge of any of the following
occurrences, Tenant shall give written notice thereof in the form of an
Officer's Certificate to Lessor, which notice shall set forth details of the
occurrence referred to therein and shall state what action Tenant has taken, and
proposes to take, with respect thereto:

     (a)  any written notice of termination or suspension of any Facility from
participation in the Medicare or Medicaid program; and

     (b)  any written notice of non-renewal of any license or other
Authorization affecting any of the Facilities or its operation (including copies
thereof).

     Section 26.3   Quarterly Meetings; Facility Level Meetings and Reviews.  On
                    -------------------------------------------------------
a quarterly basis, Tenant shall permit, and upon request by Lessor shall make
appropriate arrangements for, Lessor and/or its representatives to discuss the
affairs, operations, finances and accounts of Tenant and its Subsidiaries and
Affiliates with, and be advised as to the same by, senior officers of Tenant
(and such of Tenant's independent accountants and other financial advisors as
would be relevant to the topic of the particular meeting), all as Lessor may
deem appropriate for the purpose of verifying any report(s) delivered by Tenant
to Lessor under this Lease or for otherwise ascertaining compliance with this
Lease by Tenant or the business, operational or financial condition of Tenant
and/or its Subsidiaries and Affiliates and/or any of their respective
Facilities.  Without limitation of the foregoing, from time to time promptly
following receipt of written notice from Lessor to Tenant (and in any event
within ten (10) Business Days of such receipt), Tenant shall permit, and shall
make appropriate arrangements for, Lessor and/or its representatives or
designees to discuss the business, operational and

                                      108
<PAGE>

financial condition of specific Facility(ies) designated by Lessor with, and be
advised as to the same by, appropriate personnel of Tenant and its Subsidiaries
and Affiliates having operational and accounting responsibilities for the
Facility(ies) so specified by Lessor and to review, and make abstracts from and
copies of, the books, accounts and records of Tenant and its Subsidiaries and
Affiliates relative to any such Facility(ies), in each case provided, and on the
condition, that any such discussions or reviews, abstracting or copying shall
not materially interfere with Tenant's business operations relative to any
affected Facility(ies). Unless otherwise agreed in writing by Lessor and Tenant,
all of the discussions, reviews, abstracting and copying referenced in this
Section 26.3 shall occur during normal business hours.

                                 ARTICLE XXVII

     Section 27.1   Lessor's Right to Inspect.  Tenant shall permit Lessor, any
                    -------------------------
then current or prospective Superior Mortgagee or other lender to Lessor, any
then current or prospective investment banker, mortgage broker or other
professional engaged by Lessor, any prospective purchaser of any Leased Property
or any interest in Lessor or any Affiliate of Lessor and/or, only during any
permitted exhibition period under Section 40.4 below, any prospective lessee,
                                  ------------
and its and their respective authorized representatives, to enter upon and
conduct a physical inspection of any Leased Property during usual business hours
and, except in an emergency, upon not less than three (3) business days prior
notice, subject to any security, health, safety or confidentiality requirements
of any governmental agency or insurance requirement relating to the Leased
Properties, or imposed by law or applicable regulations and provided that no
such entry or inspection shall materially interfere with Tenant's business
operations within the affected Leased Property(ies).  Nothing contained in this
Section 27.1 shall limit or impair Lessor's right to enter upon and inspect the
------------
Leased Properties, or any of Lessor's other rights or remedies, upon the
occurrence of any Event of Default by Tenant.

                                ARTICLE XXVIII

     Section 28.1   No Waiver.  No failure by Lessor or Tenant to insist upon
                    ---------
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term.  To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.

                                 ARTICLE XXIX

                            Intentionally omitted.

                                  ARTICLE XXX

     Section 30.1   Acceptance of Surrender.  No surrender to Lessor of this
                    -----------------------
Lease or of any Leased Property or any part of any thereof, or of any interest
herein or therein, shall be valid or effective unless agreed to and accepted in
writing by Lessor and no act by Lessor or any

                                      109
<PAGE>

representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.

                                 ARTICLE XXXI

     Section 31.1   No Merger of Title.  There shall be no merger of this Lease
                    ------------------
or of the leasehold estate created thereby by reason of the fact that the same
person, firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (b) the fee estate in any
Leased Property.

                                 ARTICLE XXXII

     Section 32.1   Conveyance by Lessor.  Lessor may, without the consent or
                    --------------------
approval of Tenant, sell, transfer, assign, convey or otherwise dispose of any
or all of the Leased Properties.  If Lessor or any successor owner of any Leased
Property shall sell, transfer, assign, convey or otherwise dispose of any Leased
Property in accordance with the terms hereof other than as security for a debt,
and the purchaser, grantee, assignee or transferee of the Leased Property shall
expressly assume all obligations of Lessor hereunder with respect to such Leased
Property arising or accruing from and after the date of such sale, conveyance,
transfer, assignment or other disposition and shall be reasonably capable of
performing the obligations of Lessor hereunder, Lessor or such successor owner,
as the case may be, shall thereupon be released from all future liabilities and
obligations of Lessor under this Lease with respect to such Leased Property
arising or accruing from and after the date of such sale, conveyance, transfer,
assignment or other disposition as to such Leased Property and all such future
liabilities and obligations with respect to such Leased Property shall thereupon
be binding upon such purchaser, grantee, assignee or transferee.  Lessor agrees
to deliver to Tenant and any Leasehold Mortgagee, promptly following the
consummation of any such sale, conveyance, transfer, assignment or other
disposition (other than as security for a debt), written notice of such sale,
conveyance, transfer, assignment or other disposition and, if applicable, a copy
of the aforesaid assumption agreement.  In the event of any such sale, transfer,
assignment, conveyance or other disposition (other than as security for a debt)
of less than all of the Leased Properties, the provisions of Section 40.15
                                                             -------------
hereof shall apply.

                                ARTICLE XXXIII

     Section 33.1   Quiet Enjoyment.  So long as Tenant shall pay all Rent as
                    ---------------
the same becomes due and shall fully comply with all of the terms of this Lease
and fully perform its obligations hereunder and thereunder, Tenant shall
peaceably and quietly have, hold and enjoy each Leased Property for the Term
hereof, free of any claim or other action by Lessor or anyone claiming by,
through or under Lessor, but subject to all Permitted Encumbrances, including,
without limitation, liens and encumbrances of record as of the date hereof or
otherwise permitted to be created by Lessor hereunder, liens as to the
obligations of Lessor that are either not yet due or which are being contested
in good faith and by proper proceedings, and liens hereafter consented to by
Tenant.  No failure by Lessor to comply with the foregoing covenant shall give
Tenant any right to cancel or terminate this Lease or abate,

                                      110
<PAGE>

reduce or make a deduction from or offset against the Rent or any other sum
payable under this Lease, or to fail to perform any other obligation of Tenant
hereunder. Notwithstanding the foregoing, Tenant shall have the right, by
separate and independent action, to pursue any claim it may have against Lessor
as a result of a breach by Lessor of the covenant of quiet enjoyment contained
in this Section.

                                 ARTICLE XXXIV

     Section 34.1   Notices.  All notices, demands, requests, consents,
                    -------
approvals and other communications hereunder shall be in writing and delivered
or mailed (by registered or certified mail, return receipt requested or
reputable nationally recognized overnight courier service and postage prepaid),
addressed to the respective parties, as follows:

          (a)  if to either Tenant:
               Vencor, Inc. (following its name change: Kindred Healthcare,
               Inc.)
               Vencor Operating, Inc. (following its name change:  Kindred
               Healthcare Operating, Inc.)
               680 South 4th Avenue
               Louisville, Kentucky 40202-2612
               Attention:  Chief Financial Officer

          with copies to:

               Vencor, Inc. (following its name change: Kindred Healthcare,
               Inc.)
               Vencor Operating, Inc. (following its name change:  Kindred
               Healthcare Operating, Inc.)
               680 South 4th Avenue
               Louisville, Kentucky 40202-2612
               Attention:  General Counsel
          and

               Renee Richmond
               J.P. Morgan
               500 Stanton Christiana Road - 3/OPS2
               Newark, DE 19713
          and

               Houston A. Stebbins
               Morgan Guaranty Trust Company
               60 Wall Street, 23rd Floor
               New York, New York 10260

          (b)  if to Lessor:
               Ventas Realty, Limited Partnership
               4360 Brownsboro Road

                                      111
<PAGE>

               Suite 115
               Louisville, Kentucky 40207
               Attention:  President

               with a copy to:

               Ventas, Inc.
               Ventas Realty, Limited Partnership
               4360 Brownsboro Road
               Suite 115
               Louisville, Kentucky 40207
               Attention:  General Counsel

or to such other address as either party may hereunder designate, and shall be
effective upon receipt.

                                  ARTICLE XXXV

     Section 35.1   Appraisals.  In the event that it becomes necessary to
                    ----------
determine the Fair Market Rental of the Leased Properties or any thereof or the
allocation of Base Rent and Current Rent among the Leased Properties or any
thereof, or the Transferred Property Percentages applicable to the Leased
Properties or any thereof, to be contained in Exhibit C hereto or the Fair
Market Value or Fair Market Value Purchase Price of any property, in each case
for any purpose of this Lease, and the parties cannot agree amongst themselves
on such values, allocations or percentages, the procedures of this Article XXXV
                                                                   ------------
shall apply.

     Section 35.2   Appointment of Appraisers.  The party required or permitted
                    -------------------------
to request an appraisal or other determination under this Article XXXV shall,
                                                          ------------
within the applicable time period, if any, specified in this Lease, give written
notice (an "Appraisal Notice") to the other party, which Appraisal Notice shall
state the requesting party's desire for an appraisal or other determination
under this Article XXXV, and identify which matters are to be appraised or
           ------------
determined (e.g., Fair Market Rental of the Leased Properties, and creation of
an amended Exhibit C hereto, pursuant to Section 3.2 hereof).  Within thirty
           ---------                     -----------
(30) days after receipt of any such Appraisal Notice by the party to which such
Appraisal Notice is directed, each party shall, by written notice to the other
party, appoint an appraiser meeting the qualifications set forth below selected
by such party to act as appraiser on its behalf.  If either party fails so to
appoint an appraiser within the aforesaid thirty (30) day period, the appraiser
selected by the other party shall act as the "Final Appraiser" hereinafter
described.  If both parties appoint an appraiser as aforesaid in a timely
manner, within ten (10) days after such two appraisers are appointed, such two
appraisers shall meet and agree upon a third appraiser meeting the
qualifications set forth below (herein, the "Final Appraiser").  The two
                                             ---------------
appraisers selected by the parties shall, promptly following their agreement
upon a Final Appraiser, provide written notice of the identity of the aforesaid
Final Appraiser to each of Lessor and Tenant.  Such appointment shall be binding
on the parties.  If the two appraisers selected by the parties are unable to
agree upon a Final Appraiser within the aforesaid ten (10) day period, then
either party may request that the American Arbitration Association or any
successor organization

                                      112
<PAGE>

thereto appoint a Final Appraiser meeting the qualifications set forth below
within twenty (20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such Final
Appraiser shall have been appointed in such manner within such twenty (20) day
period or within ninety (90) days after issuance of the original Appraisal
Notice, either Lessor or Tenant may apply to any court having jurisdiction to
have such appointment made by such court.

     Section 35.3   Qualifications of Appraisers.  Each of the two appraisers
                    ----------------------------
selected by the parties, and the Final Appraiser, must (a) be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) and/or a person employed by an accounting firm that, at the time of
such appointment, is one of the five (5) largest public accounting firms in the
United States and (b) have not less than five (5) years experience, and
substantial expertise, in valuing hospitals and nursing centers and/or
determining the fair market rental value of hospitals and nursing centers.

     Section 35.4   Appraisal Process.  The Final Appraiser appointed in
                    -----------------
accordance with the foregoing procedures shall complete the appraisals, and make
any other determinations, submitted to him or her in accordance with the terms
of this Lease within sixty (60) days after his or her appointment and shall
notify each of Lessor and Tenant of his or her appraisals and other
determinations.  In performing such appraisals, and making such other
determinations, the Final Appraiser shall make the assumptions, and follow any
other directives or instructions, contained in this Lease relative to the
subject matter of the Final Appraiser's appointment, and, without limitation of
the foregoing, in the case of any appraisal of Fair Market Rental applicable to
the Leased Properties or any thereof or any allocation of Base Rent and Current
Rent among the Leased Properties or any thereof (and any related amendment of
Exhibit C hereto and allocation of Transferred Property Percentages among the
---------
Leased Properties or any thereof), the Final Appraiser shall not allocate an
amount of Base Rent and Current Rent to any particular Leased Property that
would result in this Lease, as it applies to such Leased Property, being treated
as a capital lease, rather than an operating lease, under generally accepted
accounting principles or under the applicable rules of the Financial Accounting
Standards Board and, in making determinations of the amount of Base Rent and
Current Rent that will be allocated to particular Leased Properties for purposes
of Exhibit C, shall consider the effect of his or her allocation of Base Rent
   ---------
and Current Rent to a particular Leased Property upon Tenant's ability to obtain
reimbursements at such Facility under third party payor programs, but in all
events without increasing or decreasing the aggregate amount of Base Rent and
Current Rent payable under this Lease with respect to the Leased Properties as a
whole.

     Section 35.5   Binding Nature.  The provisions of this Article XXXV, and
                    --------------                          ------------
related provisions of this Lease, providing for determination of certain values,
allocations, percentages and other matters by the Final Appraiser shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law.

                                      113
<PAGE>

     Section 35.6   Costs.  Lessor and Tenant shall each pay the fees and
                    -----
expenses of the appraiser appointed by it, and each shall pay one-half of the
fees and expenses of the Final Appraiser, and one-half of all other costs and
expenses, incurred in connection with each appraisal, provided, however, that,
                                                      --------  -------
notwithstanding the foregoing, Lessor, not Tenant, shall pay the fees and
expenses of the appraisers appointed by Lessor and Tenant, and of the Final
Appraiser, in the case of any appraisal initiated under Section 3.2 hereof.
                                                        -----------

                                 ARTICLE XXXVI

     Section 36.1   General REIT Provisions.
                    -----------------------

          Section 36.1.1 Tenant understands that, in order for Ventas, Inc.,
Lessor's general partner, to qualify as a real estate investment trust ("REIT"),
                                                                         ----
the following requirements (the "REIT Requirements") must be satisfied:
                                 -----------------

          (i)    Rent allocable for purposes of Section 856 of the Code to
     Lessor's personal property that is leased to Tenant under a lease at the
     beginning and end of a calendar year cannot exceed 15% of the total Rent
     under such lease.

          (ii)   Tenant cannot sublet the property that is leased to it by
     Lessor, or enter into any similar arrangement, on any basis such that the
     rental or other amounts paid by the sublessee thereunder would be based, in
     whole or in part, on either (i) the net income or profits derived by the
     business activities of the sublessee or (ii) any other formula such that
     any portion of the rent paid by Tenant to Lessor would fail to qualify as
     "rents from real property" within the meaning of Section 856(d) of the
     Code.

          (iii)  Tenant cannot transfer or assign Tenant's rights under the
     Lease to, or sublease the property leased to it by Lessor to, or enter into
     any similar arrangement with, any person in which Lessor has provided
     written notice to Tenant that it owns, directly or indirectly, a 10% or
     more interest, within the meaning of Section 856(d)(2)(B) of the Code.

          Section 36.1.2 Notwithstanding any other provisions of this Lease to
the contrary, Tenant agrees, and agrees to use reasonable efforts to cause its
Affiliates, to cooperate in good faith with Lessor to ensure that the REIT
Requirements are satisfied, including, but not limited to, providing Lessor with
information about the ownership of Tenant, and its Affiliates to the extent that
such information is reasonably available.  Tenant agrees, and agrees to use
reasonable efforts to cause its Affiliates, upon request by Lessor to take
reasonable action necessary to ensure compliance with the REIT Requirements.
Immediately after becoming aware that the REIT Requirements are not, or will not
be, satisfied, Tenant shall notify, or use reasonable efforts to cause its
Affiliates to notify, Lessor of such noncompliance.

     Lessor agrees to reimburse Tenant for the reasonable amount of any out of
pocket expenses incurred by Tenant or its Affiliates in satisfying the
requirements of this Section 36.1.2.
                     --------------

                                      114
<PAGE>

          Section 36.1.3 Lessor and Tenant agree that, for all income tax
purposes, they shall accrue and report and maintain the Accrued Rent, Accrued
Rent Interest and Unpaid Accrued Rent for each Rent Calculation Year (or the
portion thereof falling within a taxable period) in the amounts specified in
this Lease for each Rent Calculation Year and shall not report as income or
deduct, as the case may be, amounts of income or deduction allocable to such
Rent Calculation Year in a manner inconsistent with such amounts, it being the
intent of the parties that accrual of income and deductions for federal and
other income tax purposes shall be in the same amounts and at the same times as
such amounts are specified in this Lease.  Lessor and Tenant acknowledge and
agree that the provisions of this Lease relative to Base Rent and the deferred
payment of portions of the Base Rent and the accrual of interest on such
deferred Rent have been negotiated at arms-length and have been included herein
for the sole purpose of improving the creditworthiness of Tenant and obtaining
the necessary approvals of the Bankruptcy Plan, including, without limitation,
satisfying the requirements relative to the feasibility of the Bankruptcy Plan.
Neither Lessor nor Tenant shall treat this Lease as subject to rent leveling (or
constant rental accrual) under the disqualified rental agreement rules of
Section 467 of the Code.

                                ARTICLE XXXVII

     Section 37.1   Intentionally Omitted.

     Section 37.2   Lessor's Option to Purchase the Tenant's Personal Property.
                    ----------------------------------------------------------
Effective on not less than ninety (90) days prior written notice given at any
time within one hundred eighty (180) days prior to the expiration of the Term,
but not later than ninety (90) days prior to such expiration, or such shorter
notice as shall be appropriate if this Lease is terminated in whole or in part
or Tenant is dispossessed of any of the Leased Properties prior to the
expiration of the Term, subject to the rights of any Leasehold Mortgagee in
respect of Tenant's Personal Property, Lessor or its designee shall have the
option to purchase all (but not less than all) of Tenant's Personal Property
located at the Leased Property(ies) in question, if any, at any expiration or
termination of the Term, for a purchase price equal to the unamortized portion
of the original cost based upon the economic useful life, as defined by the
American Hospital Guide (or, if such guide ceases to be published by the
American Hospital Association, a substitute guide or other economic useful life
reference book mutually agreed upon by Lessor and Tenant, each acting
reasonably), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements
(including those financing statements filed in connection with the Leasehold
Mortgages) and other encumbrances to which such Personal Property is subject.
Promptly following demand by Lessor (but in any event within thirty (30) days
following such demand), Tenant shall deliver to Lessor a computation and
statement, in form, content and detail reasonably satisfactory to Lessor, of the
purchase price described above as of the date of such expiration, termination or
dispossession, as the case may be, for all of Tenant's Personal Property located
at the Leased Property(ies) in question.

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<PAGE>

                                ARTICLE XXXVIII

     Section 38.1   Lessor May Grant Liens.  Without the consent of Tenant,
                    ----------------------
Lessor may, subject to the terms and conditions set forth below in this Section
                                                                        -------
38.1, from time to time, directly or indirectly, create or otherwise cause to
----
exist any lien, encumbrance or title retention agreement ("Encumbrance") upon
                                                           -----------
any Leased Property or any portion thereof or interest therein, whether to
secure any borrowing or other means of financing or refinancing. Any lender,
which takes an interest in the applicable Leased Property pursuant to this
Article XXXVIII, (a) shall agree to give Tenant the same notice, if any, given
---------------
to Lessor of any default or acceleration of any obligation underlying any such
mortgage or any sale in foreclosure under such mortgage, (b) shall agree to
permit Tenant to cure any such default on Lessor's behalf within any applicable
cure period, and Tenant shall be reimbursed by Lessor for any and all out-of-
pocket costs incurred to effect any such cure (including reasonable attorneys'
fees), (c) shall agree to permit Tenant to appear by its representative and to
bid at any sale in foreclosure made with respect to any such mortgage and (d)
shall agree not to disturb Tenant's possession so long as Tenant is not in
default in performing its obligations hereunder.

                                 ARTICLE XXXIX

     Section 39.1   Environmental Indemnity.  Tenant hereby agrees to hold
                    -----------------------
harmless Lessor, any successors to Lessor's interest in this Lease and in any
Leased Property, and Lessor's and such successors' directors, officers,
partners, members, employees and agents from and against any losses, claims,
damages (including consequential damages), penalties, fines, liabilities
(including strict liability), costs (including cleanup and recovery costs), and
expenses (including expenses of litigation and reasonable attorneys' fees)
incurred by Lessor or any other indemnitee or assessed against the Leased
Property by virtue of any claim or lien by any governmental or quasi-
governmental unit, body, or agency, or any third party, for cleanup costs or
other costs pursuant to the Comprehensive Environmental Response Compensation
and Liability Act of 1980, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, all as amended from time to time, and
all state laws and federal and state regulations pursuant to the foregoing
(collectively "Environmental Laws").  Tenant's indemnity shall survive the
               ------------------
expiration or any termination of this Lease.  Provided, however, Tenant shall
                                              --------  -------
have no indemnity obligation with respect to (i) Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the applicable Leased Property shall have fully terminated or (ii) Hazardous
Materials first introduced to the Leased Property prior to the date hereof,
except to the extent arising from any deterioration on or after the date hereof
in any condition existing prior to the April 30, 1998.  "Hazardous Materials"
means any substance the presence of which poses a hazard to the health or safety
of persons on or about the Leased Property or which requires removal or
remediation under any Environmental Law, including without limitation, any
substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous or is included within the meaning of "hazardous substance", "hazardous
waste", "toxic substance", or "pollutant" as defined in any Environmental Law.
At any time during the Term of this Lease, Lessor may require one or more
environmental audits of the Leased Properties, in such form, scope and substance
as specified by Lessor, at Tenant's expense.  Tenant shall, within thirty (30)
days

                                      116
<PAGE>

after receipt of an invoice from Lessor, reimburse Lessor for all costs and
expenses incurred in reviewing any environmental audit, including without
limitation, reasonable attorneys' fees and costs.

                                  ARTICLE XL

     Section 40.1   Miscellaneous.  Anything contained in this Lease to the
                    -------------
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Lessor arising prior to any date of termination or expiration of this Lease
shall survive such termination or expiration.  If any term or provision of this
Lease or any application hereof shall be invalid or unenforceable, the remainder
of this Lease and any other application of such term or provision shall not be
affected thereby.  If any late charges provided for in any provision of this
Lease are based upon a rate in excess of the maximum rate permitted by
applicable law, the parties agree that such charges shall be fixed at the
maximum permissible rate.  Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing and
in recordable form signed by Lessor and Tenant.  All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

     Section 40.2   Non-Recourse.  Tenant specifically agrees to look solely to
                    ------------
Lessor's and any successor owner's interest in the Leased Properties for
recovery of any judgment from Lessor, it being specifically agreed that neither
Lessor, any such successor owner, nor any officer, director, employee, lender,
agent or Affiliate of Lessor or any such successor owner shall ever be
personally liable for any such judgment or for the payment of any monetary
obligation to Tenant.  Tenant shall have no recourse against any other property
or assets of Lessor or any successor owner, or against any property or assets of
any officer, director, shareholder, partner, lender, agent or Affiliate of
Lessor or any successor owner.  The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Tenant might
otherwise have to obtain injunctive relief against Lessor or Lessor's successors
in interest, or any action not involving the personal liability of Lessor
(original or successor).  Furthermore, except as otherwise expressly provided
herein, in no event shall Lessor (original or successor) ever be liable to
Tenant for any special, indirect or consequential damages suffered by Tenant
from whatever cause.

     Section 40.3   Transition of Operations.
                    ------------------------

     (a) Upon the expiration or earlier termination of the Term as to any Leased
Property, or any dispossession of Tenant as to any Leased Property, Tenant
shall, to the maximum extent permitted by applicable law, transfer to Lessor or
Lessor's designee and/or cooperate in all reasonable respects with Lessor or
Lessor's designee to enable Lessor or Lessor's designee to apply for and obtain
all licenses, operating permits, provider agreements, provider status,
certificates of need, certificates of exemption, approvals, waivers, variances
and other governmental, quasi-governmental and private authorizations necessary
for the operation of the Leased Property as to which the Term is expired or
terminated or as to which

                                      117
<PAGE>

Tenant has been dispossessed and the Facilities located thereon, or any of them,
for their respective Primary Intended Uses (collectively "Authorizations");
                                                          --------------
provided that the costs and expenses of any such transfer or obtaining of
--------
Authorizations shall be paid by Lessor or Lessor's designee unless such
termination or dispossession results from an Event of Default, in which event
the costs and expenses of any such transfer or obtaining of Authorizations shall
be paid by Tenant. It is the express intention of the parties that at the
expiration or earlier termination of the Term as to any Leased Property, and
upon any dispossession of Tenant in connection with any Event of Default as to
any Leased Property, any and all Authorizations needed to operate each Leased
Property as to which the Term is expired or terminated, or as to which Tenant
has been dispossessed, for its Primary Intended Use shall, to the maximum extent
permitted by applicable law, remain with such Leased Property and shall be
transferred into the name of Lessor or Lessor's designee, regardless of whether
such Authorization is in the name of Tenant at any time during the Term. Without
limiting the generality of the foregoing, Tenant shall furnish to Lessor or its
designee complete and accurate documents and information in Tenant's possession,
custody or control necessary or reasonably requested by Lessor or its designee
in connection with any such transfer or the completion and processing of any
applications for Authorizations.

     (b) In anticipation of the expiration of this Lease as to any Leased
Property, upon the earlier termination of this Lease as to any Leased Property,
and/or upon any dispossession of Tenant in connection with any Event of Default
as to any Leased Property, Tenant shall cooperate with Lessor in all reasonable
respects to facilitate and effectuate the orderly transfer of operations at the
affected Facility(ies) as a going concern; provided, however, that, unless such
                                           --------  -------
termination or dispossession results from an Event of Default by Tenant,
notwithstanding anything to the contrary contained in this subsection (b),
Tenant shall not be required to incur any out-of-pocket operating losses or
costs in so cooperating.  Such cooperation shall include, without limitation:
(i) furnishing to Lessor or any prospective successor operator of a Facility
designated by Lessor complete and accurate books, records, files, documents and
information in Tenant's possession, custody or control necessary or reasonably
requested by Lessor or its designee in connection with the assessment and/or
assumption of the operations of such Facility(ies); (ii) facilitating the
evaluation and employment by Lessor or its designee of such employees of Tenant
as Lessor or its designee may elect to evaluate or employ, including, without
limitation, to the extent permitted by law, affording Lessor or its designee
access to all relevant personnel files, records, documents and information in
Tenant's possession, custody or control; and (iii) assigning to Lessor or its
designee such assignable patient, vendor, service provider and other contracts
relating to the Facility(ies) in question as Lessor or its designee may request;
provided, however, that Tenant's cooperation obligation shall not include
--------  -------
undertaking primary responsibility for such transfer of operations.

     (c) Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not, prior to the ninetieth (90th) day preceding the expiration of
this Lease as to any Leased Property, commence to wind up and terminate the
operations of the Facility operated thereon by relocating the patients or
occupants thereof to other health care facilities (a "Facility Termination").
                                                      --------------------
If Lessor has not notified Tenant in writing prior to the ninetieth (90th) day
preceding the expiration of this Lease as to a Leased Property and the Facility
thereon that

                                      118
<PAGE>

Lessor has procured a successor operator for such Facility who has submitted
applications for the Authorizations required to assume the operations of such
Facility (a "Qualified Successor"), then Tenant may commence the Facility
             -------------------
Termination and, upon the expiration of this Lease as to such Leased Property
and Facility, Tenant shall vacate such Leased Property and surrender possession
thereof to Lessor in accordance with all of the applicable requirements of this
Lease. If, prior to the ninetieth (90th) day preceding the expiration of this
Lease as to a Leased Property and the Facility thereon, Lessor notifies Tenant
in writing that Lessor has procured a Qualified Successor for such Facility,
Tenant shall not commence the Facility Termination (any notice of the nature
referenced in this sentence is herein referred to as a "Section 40.3 Notice").
                                                        --------------------
In such event, Tenant shall thereafter operate such Facility in accordance with
all of the requirements of this Lease until the earliest to occur of (i) the
date (on or after the expiration of this Lease as to such Leased Property and
Facility) on which such Qualified Successor will assume the operation of such
Facility, as specified in a written notice from Lessor to Tenant given not less
than thirty (30) days prior to the date of such assumption, (ii) the date that
is ninety (90) days after the expiration of this Lease as to such Leased
Property and Facility, and (iii) the date (on or after the expiration of this
Lease as to such Leased Property and Facility) which is ninety (90) days after
Tenant receives written notice from Lessor that, notwithstanding the foregoing,
Tenant may commence the Facility Termination, on which earliest date, Tenant
shall vacate the Leased Property in question and surrender possession thereof to
Lessor in accordance with all of the applicable requirements of this Lease. In
the event Lessor sends Tenant a Section 40.3 Notice and, as a result thereof,
Tenant operates a Facility beyond the aforesaid expiration date applicable
thereto, then, from and after the expiration of this Lease as to such Facility
and until the earliest to occur of the dates described in clauses (i), (ii) and
(iii) above (the "Reimbursement Period"), Lessor shall reimburse Tenant for any
                  --------------------
operating deficits of such Facility that Tenant may be required to fund out-of-
pocket on account of operating losses and expenses of such Facility incurred by
Tenant with respect to the Reimbursement Period. Any such reimbursement shall be
due from Lessor to Tenant within thirty (30) days after written request by
Tenant, provided that Tenant shall furnish such documentation of such operating
deficits, losses and expenses as Lessor may reasonably request. For purposes of
determining the amount of any operating deficits, or operating losses and
expenses, so incurred by Tenant with respect to the Reimbursement Period, Lessor
and Tenant agree that (1) there shall be included therein, without limitation,
(x) Rent, which shall continue to be due and payable or accrue, as the case may
be, at the same rates as are in effect prior to the expiration of the Term, and
(y) any increase in employee severance, and all costs and liabilities, that may
be incurred by Tenant in connection with Tenant's employees' employment by
virtue of Tenant's delayed compliance with the Worker Adjustment and Retraining
Notification Act, or any similar State law, due to Tenant's cooperation and
other obligations under this subsection (c), and (2) Tenant shall serve upon its
employees any notice required under the Worker Adjustment and Retraining
Notification Act, or any similar State law, as soon as reasonably practicable
after it becomes clear when the Reimbursement Period will end, whether due to
Tenant's receipt of a written notice under subsection (i) or (iii) above or due
to the terms of subsection (ii) above which provides that, in all events, the
Reimbursement Period shall end no later than the date referenced in such
subsection (ii). In lieu of the aforesaid reimbursement from Lessor, Tenant may
instead elect to continue to be responsible for payment of all costs and
expenses of continuing to comply

                                      119
<PAGE>

with this Lease as to such Facility during the Reimbursement Period, provided
and on the condition that Tenant provides written notice to Lessor of such
election within fifteen (15) days after Tenant's receipt of Lessor's Section
40.3 Notice. In the event Tenant so elects to forego its aforesaid reimbursement
from Lessor, during the Reimbursement Period, Current Rent and Accrued Rent
allocable to such Facility shall be payable in the manner set forth in Section
                                                                       -------
3.1 of this Lease, but with each such component of Rent being reduced to one-
---
half (1/2) of the respective amounts thereof that were allocable to such
Facility as of the expiration of the Term as to such Facility. In the event
Lessor sends Tenant a Section 40.3 Notice and, as a result thereof, Tenant
operates a Facility beyond the expiration date applicable thereto, any Facility
Default that occurs with respect to such Facility and Leased Property during the
Reimbursement Period shall in no event give rise to any right in favor of Lessor
to exercise any rights or remedies under Article XVI hereof with respect to any
                                         -----------
other Facility or Leased Property.

     Section 40.4   Right to Enter.  Lessor and Lessor's agent shall have the
                    --------------
right to enter the applicable Leased Property at all reasonable times for the
purpose of exhibiting the Leased Property to others (i) if Tenant has not
exercised its right with respect to any applicable Extended Term within the time
period set forth in this Lease, or (ii) during the last eighteen (18) months of
the Term (if all available options for Extended Terms have previously been
exercised).

     Section 40.5   Integration.  This Lease contains the entire agreement
                    -----------
between Lessor and Tenant with respect to the subject matter hereof.  No
representations, warranties or agreements have been made by Lessor except as set
forth in this Lease.

     Section 40.6   Severability.  If any term or provision of this Lease is
                    ------------
held or deemed by Lessor to be invalid or unenforceable, such term or provision
shall be modified as slightly as possible so as to render it valid and
enforceable; if such term or provision, as modified, shall be held or deemed
invalid or unenforceable, such holding shall not affect the remainder of this
Lease and same shall remain in full force and effect, unless such holding
substantially deprives Tenant of the use of the Leased Property(ies) or Lessor
of the rents herein reserved, in which event this Lease shall forthwith
terminate as if by expiration of the Term.

     Section 40.7   Subject to Law.
                    --------------

     (a) All rights, powers and remedies provided herein may be exercised only
to the extent that the exercise thereof, including those which do not require
the giving of notice, does not violate any applicable law, and are intended to
be limited to the extent necessary so that they will not render this Lease
invalid or unenforceable under any applicable law.  All waivers, consents,
confessions and releases provided for in this Lease are effective only to the
extent permitted by applicable law.

     (b) This Lease was negotiated in the State of New York, which State the
parties agree has a substantial relationship to the parties and to the
underlying transaction embodied hereby.  In all respects, the law of the State
of New York shall govern the validity of and enforceability of the obligations
of the parties set forth herein, but all provisions hereof relating

                                      120
<PAGE>

to the creation of the leasehold estate and remedies set forth in Article XVI
                                                                  -----------
shall be governed by the laws of the State in which each applicable Leased
Property that is the subject of dispute is located and the parties hereto will
submit to jurisdiction and the laying of venue for any suit on this Lease in the
Commonwealth of Kentucky.

     Section 40.8   Waivers.  No waiver of any condition or covenant herein
                    -------
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant herein construed as a waiver of such default, or of
Lessor's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.

     Section 40.9   Binding Character.  This Lease shall be binding upon and
                    -----------------
shall inure to the benefit of the heirs, successors, personal representatives,
and permitted assigns of Lessor and Tenant.

     Section 40.10  Modification.  This Lease may be only be modified by a
                    ------------
writing signed by both Lessor and Lessee.

     Section 40.11  Forbearance.  No delay or omission by either party hereto to
                    -----------
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.

     Section 40.12  Lease Guaranty.  In the event of any sublease of any Leased
                    --------------
Property(ies) or any portion thereof to an Affiliate of any Tenant pursuant to
the terms of this Lease, regardless of whether Lessor's prior consent is
required therefor, such subtenant shall execute and deliver a Lease Guaranty
relative to the Leased Property(ies) or portion thereof subleased by it.  Tenant
represents and warrants to Lessor that Schedule 40.12 attached hereto and made a
                                       --------------
part hereof reflects the identities of all Affiliates of any Tenant from whom a
Lease Guaranty is required hereunder as of the Effective Date and the respective
Leased Properties (or parts thereof) subleased by each of such Affiliates.
Tenant agrees, from time to time within fifteen (15) days after receipt of a
written request therefor from Lessor, to deliver to Lessor an Officer's
Certificate which updates all of the information contained in Schedule 40.12.
                                                              --------------

     Section 40.13  Louisiana Provisions.  Notwithstanding anything to the
                    --------------------
contrary contained herein, with respect to any Leased Property located in
Louisiana, for all purposes of this Lease the word "servitude" shall be
substituted for the word "easement," the word "servitudes" shall be substituted
for the word "easements," the term "immovable property" shall be substituted for
the terms "real property" and "real estate" and the term "movable property"
shall be substituted for the term "personal property" wherever such terms appear
in this Lease.

     Section 40.14  Confidentiality.
                    ---------------

                                      121
<PAGE>

     (a)  Each of Lessor and Tenant agrees that, except as otherwise explicitly
provided in this Section 40.14, all Information (as defined below) provided by
                 -------------
Lessor to Tenant and by Tenant to Lessor (the party providing such Information
being referred to as "Disclosing Party" and the party receiving the Information
                      ----------------
being referred to as "Recipient") will be kept confidential and will not,
                      ---------
without Disclosing Party's prior written consent, be disclosed by Recipient, in
whole or in part, to any person, in any manner whatsoever.

     (b)  Recipient may disclose Information:

          (i)  to those of Recipient's officers, directors and employees who are
     informed by Recipient of the confidential nature of the Information and who
     agree, for Disclosing Party's benefit, to act in accordance with the terms
     and conditions of this Section 40.14; Recipient will be responsible for any
                            -------------
     breach of this Section 40.14 by such persons.
                    -------------

          (ii) in the case where Lessor is the Recipient

               (A)  to the extent the Information is both (x) of a financial,
               operating, regulatory, business or similar nature, and (y) has
               been aggregated to relate to any or all of the Leases, a
               jurisdiction or jurisdictions (such as a state or region), a
               class or classes of asset (e.g. nursing facilities or hospitals)
               or any other category, in each case so long as such disclosure is
               not on a per Leased Property basis; or

               (B)  if Lessor is a Ventas Lessor, to the extent the Information
               relates to a particular Master Lease Leased Property(ies), and
               either

                    (w)  is provided to Facility Mortgagees, prospective
               Facility Mortgagees, Superior Lessors, prospective Superior
               Lessors, purchasers, prospective purchasers, tenants or
               prospective tenants of such Master Lease Leased Property(ies);
               provided that any such party listed in this clause (w) who
               receives such Information is informed by Lessor or the Ventas
               Lessor(s) of the applicable Master Lease Leased Property(ies) of
               the confidential nature of the Information and agrees with Lessor
               or the Ventas Lessor(s) of the applicable Master Lease Leased
               Property(ies) to keep such Information confidential pursuant to a
               standard confidentiality agreement; and provided further that
               such Information may be disclosed to tenants or prospective
               tenants only if either (i) Tenant has not, at least seventeen
               (17) months prior to the then current Term applicable to the
               related Renewal Group, given to the Ventas Lessor of the
               applicable Master Lease Leased Property written notice of
               Tenant's intention to renew the applicable lease with respect to
               the Master Lease Leased Properties within such Renewal Group, or
               (ii) an Event of Default has occurred under the applicable lease
               of such Master Lease Leased Property(ies); or

                                      122
<PAGE>

                      (x) is disclosed in connection with or following a sale,
                 closure, material casualty, default or prospective default with
                 respect to such Master Lease Leased Property; or

                      (y) relates to the location or size of, or the number of
                 licensed beds at, such Master Lease Leased Property or the rent
                 for such Master Lease Leased Property; or

                      (z) is of the type customarily disclosed by a public
                 healthcare real estate investment trust; or

                 (C)  if Lessor is not a Ventas Lessor, to the extent the
                 Information relates to a particular Leased Property(ies), and
                 either

                      (w) is provided to Facility Mortgagees, prospective
                 Facility Mortgagees, Superior Lessors, prospective Superior
                 Lessors, purchasers, prospective purchasers, tenants or
                 prospective tenants of such Leased Property(ies); provided that
                 any such party listed in this clause (w) who receives such
                 Information is informed by Lessor of the confidential nature of
                 the Information and agrees with Lessor to keep such Information
                 confidential pursuant to a standard confidentiality agreement;
                 and provided further that such Information may be disclosed to
                 tenants or prospective tenants only if either (i) Tenant has
                 not, at least seventeen (17) months prior to the then current
                 Term applicable to the related Renewal Group, given to Lessor
                 written notice of Tenant's intention to renew this Lease with
                 respect to the Leased Properties within such Renewal Group, or
                 (ii) an Event of Default has occurred under the Lease of such
                 Leased Property(ies); or

                      (x) is disclosed in connection with or following a sale,
                 closure, material casualty, default or prospective default with
                 respect to such Leased Property; or

                      (y) relates to the location or size of, or the number of
                 licensed beds at, such Leased Property or the rent for such
                 Leased Property; or

                      (z) is of the type customarily disclosed by a public
                 healthcare real estate investment trust.

          (iii)  to the extent Recipient reasonably determines that disclosure
     of the Information is required by any Legal Requirement applicable to
     Recipient or any applicable rule, regulation, or requirement of any
     securities exchange on which the Recipient's securities are listed or
     admitted for trading (a "Disclosure Law") pursuant to the procedures set
                              --------------
     forth in Section 40.14(h) below.
              ----------------

                                      123
<PAGE>

          (iv)    in connection with any proceeding in which Recipient is
     attempting to protect or enforce any rights and/or remedies in connection
     with this Lease or any of the other Leases, but only to the extent
     necessary to protect or enforce such rights and/or remedies.

          (v)     to any person in a confidential relationship with the
     Recipient, including Recipient's auditors, advisors, consultants, lawyers,
     and others who agree with Recipient to be bound by a standard
     confidentiality agreement, such as lenders, prospective lenders,
     purchasers, potential purchasers, tenants and prospective tenants;
     provided, however, that Recipient shall not be liable to Disclosing Party
     for any breach by such persons of such confidential relationship or
     confidentiality arrangements; provided further, however, that Recipient
     shall assign to Disclosing Party (or enforce on Disclosing Party's behalf
     and at Disclosing Party's cost) the Recipient's rights under such
     confidentiality agreement or obligations.

          (vi)    to the extent legally compelled to disclose any of the
     Information pursuant to a subpoena or other legal process having the force
     of law.  Recipient will provide Disclosing Party with prompt notice so that
     Disclosing Party or any of its representatives may seek a protective order
     or other appropriate remedy.  In the event that such protective order or
     other remedy is not obtained, Recipient will furnish only that portion of
     the Information which Recipient has been advised is legally required and
     Recipient will exercise its reasonable efforts to attempt to obtain
     reliable assurance that confidential treatment will be accorded the
     Information so to be furnished.  In any event, Recipient will cooperate
     with (and not oppose) any reasonable action by Disclosing Party to obtain
     an appropriate protective order or other reliable assurance that
     confidential treatment will be accorded such Information.

          (vii)   in the case where Lessor is the Recipient, to the extent
     Lessor reasonably determines that the Information is required under
     Disclosure Law applicable to Lessor to be disclosed in connection with a
     distribution (a "Ventas Stockholder Distribution") by Lessor (or any of its
                      --------------------------------
     transferees) to Lessor's stockholders of the common stock of Tenant
     received by Lessor upon consummation of Tenant's bankruptcy case (the
     "Tenant Shares") pursuant to the procedures set forth in Section 40.14(h)
      -------------                                           ----------------
     below; provided; however, that in connection with a Ventas Stockholder
     Distribution pursuant to a registration statement prepared by Tenant under
     the terms of the Registration Rights Agreement by and among Tenant, Lessor
     and certain other parties thereto (the "Registration Rights Agreement"), no
                                             -----------------------------
     such disclosure shall be permitted during either (A) a Shelf Suspension
     pursuant to Section 3 of the Registration Rights Agreement, or (B) a
     "black-out period" applicable to "Holders" pursuant to Section 5 of the
     Registration Rights Agreement.

          (viii)  in the case where Lessor is the Recipient, pursuant to the
     procedures set forth in Section 40.14(h) below, to the extent Lessor
                             ----------------
     reasonably determines that the Information is required to be disclosed
     under Disclosure Law applicable to Lessor in connection with a sale by
     Lessor of Tenant Shares and notice of such proposed

                                      124
<PAGE>

     disclosure occurs pursuant to a Disclosure Notice received by Tenant no
     later than 15 Business Days after (A) the filing by Tenant of a report on
     Form 8-K, 10-Q or 10-K, (B) the termination of a Shelf Suspension pursuant
     to Section 3 of the Registration Rights Agreement, (C) the termination of a
     "black-out period" applicable to "Holders" pursuant to Section 5 of the
     Registration Rights Agreement, or (D) Tenant shall have provided Lessor
     with written notice of any "Accretive Transaction" as defined in and in
     accordance with the requirements of Article Twelfth of Tenant's Amended and
     Restated Certificate of Incorporation.

     (c) Information means (i) all and any data, reports, including any survey
deficiency reports or summaries thereof, forecasts, records, agreements and
other information (whether written, magnetic, digital or in any other form)
furnished after the Effective Date by Disclosing Party or by any of its
representatives or advisors to Recipient that is both (x) material and
proprietary, and (y) in the case where Tenant is the Disclosing Party, that is
required to be furnished pursuant to Section 8.1; 8.2; 26.1(b)(ii) (but only to
                                     -----------  ---  -----------
the extent furnished on a per Master Lease Leased Property basis (if Lessor is a
Ventas Lessor) or on a per Leased Property basis (if Lessor is not a Ventas
Lessor)); 26.1(c); 26.1(d); 26.1(e)(iii), (iv), (v) or (vii); 26.1(h); and
          -------  -------  ------------  ----  ---    -----  -------
26.1(i), and (ii) EBITDAR, profitability, census and regulatory deficiency data
-------
for each Master Lease Leased Property (if Lessor is a Ventas Lessor) or for each
Leased Property (if Lessor is not a Ventas Lessor).  For purposes of this
Section 40.14, information and other materials will be deemed furnished or
-------------
prepared by, or furnished to, a person if furnished or prepared by, or if
furnished to, such person or an affiliate of such person, or any employee,
agent, partner, representative or advisor of such person.  As used in this
Section 40.14, person means any natural person and any corporation, partnership,
-------------
association, firm or other entity or organization of any kind whatsoever, and
all references to Recipient in this Section 40.14 shall include its affiliates,
                                    -------------
and an affiliate of a designated person means a second person which (directly or
indirectly) controls, is controlled by, or is under common control with, such
designated person; provided, however, that Lessor and Tenant shall not be deemed
to be affiliates.

     (d) The obligations under Section 40.14(a) will not apply to any
                               ----------------
Information which (i) was known to Recipient prior to Disclosing Party's
disclosure of such Information to Recipient (unless Recipient's knowledge was
obtained confidentially or from a source which to Recipient's knowledge was not
permitted to disclose such Information to Recipient) or (ii) becomes available
to Recipient on a nonconfidential basis from a source (other than Disclosing
Party or any of its employees, agents, representatives or advisors) who to the
knowledge of the Recipient is not prohibited from disclosing such Information to
Recipient by any legal, contractual or fiduciary obligation.

     (e) Recipient acknowledges that remedies at law may be inadequate to
protect against breach of the provisions of this Section 40.14, and Recipient
                                                 -------------
hereby in advance agrees that Disclosing Party shall not be obligated to
establish actual damages or the inadequacy of monetary damages in seeking an
injunction.  Such injunctive relief will not be deemed to be the exclusive
remedy for a breach by Recipient of the provisions of this Section, but will be
in addition to all other remedies available at law or equity to Disclosing
Party.

                                      125
<PAGE>

     (f)  Lessor shall have the right to temporarily suspend Tenant's obligation
to provide it with Information pursuant to the terms of this Lease or otherwise
for a specified period of time or for a period of time terminating upon the
occurrence of a specified event, including notice from Lessor (the "Suspension
                                                                    ----------
Period").  During the Suspension Period, Tenant shall, if requested by Lessor,
------
deliver such Information to a third party in a confidential relationship with
Lessor.  Upon expiration or termination of the Suspension Period, Tenant will
deliver to Lessor within three Business Days all Information that Tenant
otherwise would have been required to deliver during the Suspension Period and
shall immediately, once again, be subject to all of the information delivery
requirements set forth in this Lease.

     (g)  Recipient acknowledges that no failure or delay in exercising any
right under this Section 40.14 shall operate as a waiver thereof, nor will any
                 -------------
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder.

     (h)  In connection with any proposed disclosure pursuant to Section
                                                                 -------
40.14(b)(iii), (vii) or (viii), the Recipient shall provide the Disclosing Party
-------------  -----    ------
with advance written notice of the proposed disclosure shall set forth the
Information to be disclosed, the proposed date of disclosure (the "Disclosure
                                                                   ----------
Date"), the basis for such disclosure as well as the manner of such disclosure
----
(the "Disclosure Notice").  The Disclosure Notice shall be delivered to the
      -----------------
Disclosing Party no later than the Disclosure Notification Date (as defined
below).  The Recipient and the Disclosing Party shall cooperate with one another
and negotiate in good faith to seek a mutually satisfactory resolution with
respect to such proposed disclosure.  In the event the Disclosing Party has not,
prior to the Disclosure Date, either (A) consented to the proposed disclosure
(or such modified disclosure as the Recipient and Disclosing Party may mutually
agree) or (B) itself made disclosure of the Information contained in such
Disclosure Notice (or such modified disclosure as the Recipient and Disclosing
Party may mutually agree) the Recipient may disclose such Information to the
extent and in the manner set forth in such Disclosure Notice.

     (i)  Disclosure Notification Date shall mean the latest of the dates set
forth below:

          (A)  five (5) Business Days prior to the Disclosure Date;

          (B)  in the case of Section 40.14(b)(iii), such shorter period of time
                              ---------------------
prior to the Disclosure Date which is reasonable (in light of the nature of the
Information to be disclosed and the Disclosure Law applicable thereto);

          (C)  in the case of Section 40.14(b)(vii), two Business Days preceding
                              ---------------------
any previously publicly announced date for the Ventas Stockholder Distribution;
and

          (D)  in the case of Section 40.14(b)(viii)(D), three (3) Business Days
                              -------------------------
in advance of the date Lessor is obligated to accept or reject Tenant's offer to
purchase securities in connection with the Accretive Transaction.

                                      126
<PAGE>

     Section 40.15  New Lease.  Lessor shall have the right, at any time and
                    ---------
from time to time during the Term for a legitimate business purpose, by written
notice to Tenant, to require Tenant to execute an amendment to this Lease
whereby one or more Leased Properties (individually, a "Transferred Property" or
                                                        --------------------
collectively, "Transferred Properties") is separated and removed from this
               ----------------------
Lease, and to simultaneously execute a substitute lease with respect to such
Transferred Property(ies), in which case:

     (a)  Lessor and Tenant shall execute a new lease (the "New Lease") for such
                                                           ---------
Transferred Property(ies), effective as of the date specified in subsection (c)
below (the "Property Transfer Date"), in the same form and substance as this
            ----------------------
Lease, but with the following changes thereto:

          (i)    The initial Base Rent for such Transferred Property(ies) shall
     be an amount equal to the product of (x) the percentage(s) set forth
     opposite the Transferred Property(ies) on Exhibit C, attached hereto and
     made a part hereof (the "Transferred Property Percentage(s)"), and (y)
                              ----------------------------------
     aggregate Base Rent in effect under this Lease on the Property Transfer
     Date;

          (ii)   The initial Current Rent for such Transferred Property(ies)
     shall be an amount equal to the product of (x) the Transferred Property
     Percentage(s), and (y) aggregate Current Rent in effect under this Lease on
     the Property Transfer Date;

          (iii)  To the extent that there is any Unpaid Accrued Rent under this
     Lease as of such Property Transfer Date, then an amount of such Unpaid
     Accrued Rent equal to the product of (x) the Transferred Property
     Percentage(s), and (y) the aggregate amount of Unpaid Accrued Rent under
     this Lease as of the Property Transfer Date, shall be deemed to be
     outstanding under the New Lease;

          (iv)   Any rental escalations required under the New Lease to be made
     on the May 1 immediately following the Property Transfer Date shall be made
     under the New Lease on such May 1, in the full amount required as if such
     Transferred Property(ies) had been under the New Lease for a full year,
     notwithstanding that the period from the Property Transfer Date to such
     succeeding May 1 may be less than one full year;

          (v)    "Base Patient Revenues" as defined in Section 2.1 of the New
                                                       -----------
     Lease shall mean the Base Patient Revenues from the Transferred
     Property(ies) for the calendar year ending on December 31, 1999 as set
     forth on Schedule 2.1A;
              -------------

          (vi)   Intentionally omitted;

          (vii)  If and for so long as the lessor under any New Lease is not a
     Ventas Lessor, Tenant (A) shall not be required under such New Lease to
     provide to such new lessor Facility-specific information related to
     Facilities or Leased Properties which are not included in such New Lease,
     (B) shall exclude from consolidated facility information that is required
     under Section 26.1 of such New Lease facility information which relates to
           ------------
     Facilities or Leased Properties not included in such New Lease and (C)

                                      127
<PAGE>

     shall continue to be required to provide information relative to Tenant, as
     opposed to Leased Properties and Facilities, on the same basis as such
     information is provided to Ventas Lessors;

          (viii)  Without limitation of subsection (xiv) below, under Section
                                                                      -------
     3.2 of the New Lease, the Reset Fee under such New Lease shall be an amount
     ---
     equal to the product of (x) the Transferred Property Percentage(s), and (y)
     the Reset Fee applicable to this Lease on the Property Transfer Date;

          (ix)    Exhibit C to such New Lease shall include (A) rent only for
                  ---------
     the Transferred Property(ies) covered by such New Lease; and (B) a
     Transferred Property Percentage for each such Transferred Property, equal
     to the percentage that the rent for such Transferred Property comprises of
     the aggregate rents for all Transferred Properties under such New Lease
     (and the aggregate of all Transferred Property Percentages under such New
     Lease shall equal 100%);

          (x)     Subject to Section 22.7(g) hereof and without limitation and
                             ---------------
     subject to the provisions of Sections 16.10, 19.1, 25.1.11 and 40.18 of
                                  --------------  ----  -------     -----
     this Lease and all other leases demising any of the Master Lease Leased
     Properties, the New Lease shall provide that the tenant thereunder shall be
     responsible for the payment, performance and satisfaction of all duties,
     obligations and liabilities arising under this Lease, insofar as they
     relate to the Transferred Property(ies) subject to the New Lease, that were
     not paid, performed and satisfied in full prior to the effective date of
     the New Lease (and Tenant under this Lease shall also be responsible for
     the payment, performance and satisfaction of the aforesaid duties,
     obligations and liabilities not paid, performed and satisfied in full prior
     to the effective date of such New Lease), and shall further provide that
     the tenant thereunder shall not be responsible for the payment, performance
     or satisfaction of any duties, obligations and liabilities of Tenant under
     this Lease arising after the Property Transfer Date;

          (xi)    If the New Lease relates to a single Leased Property, all
     references to multiple Leased Properties in the New Lease shall be
     eliminated; provided, however, the foregoing portion of this clause (xi) is
                 --------  -------
     without limitation of and subject to the provisions of Sections 16.10,
                                                            --------------
     19.1, 25.1.11 and 40.18 of this Lease and all other leases demising any of
     ----  -------     -----
     the Master Lease Leased Properties;

          (xii)   The New Lease shall not include any cross-default provisions
     that would make Tenant's default under this Lease or under any other New
     Lease entered into in accordance with this Lease or under any of the other
     Leases or under any New Lease entered into in accordance with any of such
     other Leases an event of default under such New Lease; provided, however,
                                                            --------  -------
     the foregoing portion of this clause (xii) is without limitation of and
     subject to the provisions of Sections 16.10, 19.1, 25.1.11 and 40.18 of
                                  --------------  ----  -------     -----
     this Lease and all other leases demising any of the Master Lease Leased
     Properties;

                                      128
<PAGE>

          (xiii)  At the election of Lessor, any one or more of the provisions
     of the New Lease pertaining to Ventas, Inc.'s REIT status shall be deleted,
     including, without limitation, Section 25.3 and Article XXXVI hereof; and
                                    ------------     -------------

          (xiv)   The New Lease (but not including any New Master Lease under
     Section 40.17 hereof) shall include within Section 3.2 thereof a new
     -------------                              -----------
     subsection (g) thereof providing that (1) Lessor under this Lease shall
     have the sole and exclusive power and authority to exercise the rights of
     the lessor under Section 3.2 of each lease relating to one or more Master
                      -----------
     Lease Leased Properties (including the rights of the lessor under Section
     3.2 of such New Lease), and to bind such lessor with respect thereto and
     (2) the rights of such lessor under Section 3.2 of such New Lease, acting
                                         -----------
     through Lessor as provided in subsection (1) above, must be exercised
     consistently and simultaneously with Lessor's exercise of such rights under
     this Lease (for example, if a Reset Proposal Notice is to be sent, or the
     Reset Option is to be exercised, or determinations by appraisal are to be
     requested, the same must be done at the same time for all of the Leased
     Properties under this Lease and such New Lease (including the Transferred
     Properties subject to such New Lease) and, if the Reset Option is to be
     exercised, the full Reset Fee applicable to this Lease as of the Effective
     Date (i.e. $2,085,946.00), must be paid to Tenant in connection with, and
     as a condition of, any such exercise.

     (b)  Upon execution of such New Lease, and effective as of the Property
Transfer Date, this Lease shall be deemed to be modified and amended as follows:

          (i)     The Transferred Property(ies) shall be excluded from the
     Leased Properties hereunder;

          (ii)    Base Rent hereunder shall be reduced by the amount set forth
     in Section 40.15(a)(i) above;
        -------------------

          (iii)   Current Rent hereunder shall be reduced by the amount set
     forth in Section 40.15(a)(ii) above;
              --------------------

          (iv)    To the extent that there is any Unpaid Accrued Rent under this
     Lease as of such Property Transfer Date, the amount of such Unpaid Accrued
     Rent shall be reduced by the amount set forth in Section 40.15(a)(iii)
                                                      ---------------------
     above;

          (v)     "Base Patient Revenues", as defined in Section 2.1 hereof,
     shall be deemed to be reduced by the amount set forth in Section
                                                              -------
     40.15(a)(v) above;
     -----------

          (vi)    Intentionally omitted;

          (vii)   Under Section 3.2 of this Lease, the Reset Fee shall be
                        -----------
     reduced by the amount described in Section 40.15(a)(viii) above; and
                                        ----------------------

          (viii)  Exhibit C shall be modified so as to remove the allocation of
                  ---------
     rents and the Transferred Property Percentage(s) for the Transferred
     Property(ies), and the

                                      129
<PAGE>

     Transferred Property Percentages of the Leased Properties remaining under
     this Lease shall be recalculated so that each such Leased Property shall
     have a Transferred Property Percentage equal to the percentage that the
     rent for such Leased Property comprises of the aggregate rents for all
     Leased Properties remaining under this Lease, and so that the aggregate of
     all Transferred Property Percentages for Leased Properties remaining under
     this Lease equals 100%.

     (c) In the case of any New Lease that is entered into in accordance with
Section 22.7 hereof, such New Lease shall be effective as of the date of
------------
termination of this Lease with respect to the applicable Leased Property(ies).
In the case of any New Lease that is entered into in accordance with Section
                                                                     -------
19.4 hereof, such New Lease shall be effective as of the effective date therefor
----
specified in such Section 19.4.  In the case of all other New Leases, such New
                  ------------
Lease shall be effective on the date which is the earlier of (i) the date the
New Lease is fully executed and delivered by the parties thereto and (ii) the
date specified in the written notice from Lessor to Tenant requiring a New Lease
as described above, which date shall be no sooner than ten (10) days, nor later
than sixty (60) days, after the date such notice is issued.

     (d) Tenant shall take such actions and execute and deliver such documents,
including without limitation the New Lease and new or amended Memorandum(s) of
Lease and, if requested by Lessor, an amendment to this Lease, as are reasonably
necessary and appropriate to fully effectuate the provisions and intent of this
Section 40.15 and Lessor shall execute and deliver such new or amended
-------------
Memorandum(s) of Lease as are reasonably necessary and appropriate to fully
effectuate the provisions and intent of this Section 40.15 and an amendment of
                                             -------------
this Lease in accordance with Section 40.15(b) above.
                              ----------------

     (e) Each Leasehold Mortgagee, Superior Lessor and Superior Mortgagee hereby
consents to the provisions of this Section 40.15 and agrees, upon request of
                                   -------------
Lessor, to execute an instrument consenting to the execution and delivery of the
New Lease and of an amendment to this Lease, consistent with the foregoing
provisions.

     (f) Each party shall bear its own costs and expenses in connection with any
New Lease entered into in accordance with Section 19.4 hereof.  In all other
                                          ------------
cases, the party requesting a New Lease under this Section 40.15 (and, for such
                                                   -------------
purpose, Tenant shall be deemed to be the requesting party in the case of any
New Lease entered into in accordance with Section 22.7 hereof and Lessor shall
                                          ------------
be deemed to be the requesting party in the case of any New Lease entered into
in accordance with Section 40.17 hereof) shall, promptly following receipt of a
                   -------------
written demand therefor and reasonable supporting documentation, reimburse the
other party hereto for its out-of-pocket costs and expenses incurred in
connection with such New Lease, including, without limitation, reasonable
attorneys' fees and any recording fees incurred by such other party in
connection with the recording of new or amended Memorandum(s) of Lease.

     Section 40.16  Partial Expiration/Termination.  In the event this Lease
                    ------------------------------
expires or terminates as to one or more, but less than all, of the Leased
Properties (herein, the "Expired/Terminated Properties"), but no Separate Lease
                         -----------------------------
pursuant to Section 22.7 or New
            ------------

                                      130
<PAGE>

Lease in accordance with the terms of Section 40.15 (e.g. pursuant to the terms
                                      -------------
of Section 19.4 or Section 40.15), is entered into on account thereof, effective
   ------------    -------------
as of the date of such expiration or termination (the "Partial
                                                       -------
Expiration/Termination Date"), the following provisions shall be applicable:
---------------------------

     (a) The Expired/Terminated Properties shall be excluded from the Leased
Properties hereunder (but without limitation and subject to the provisions of
Sections 16.10, 19.1, 25.1.11 and 40.18 of this Lease and all other leases
--------------  ----  -------     ------
demising any of the Master Lease Leased Properties;

     (b) All Base Rent and Current Rent attributable to the Expired/Terminated
Properties (determined based upon the aggregate of the Transferred Property
Percentages applicable to the Expired/Terminated Properties), and all Additional
Charges attributable to the Expired/Terminated Properties, shall be due and
payable as of the Partial Expiration/ Termination Date, and all Unpaid Accrued
Rent attributable to the Expired/Terminated Properties (determined in the same
manner) shall continue to be owing from Tenant to Lessor and continue to bear
Accrued Rent Interest, and shall be due and payable as of the Unpaid Accrued
Rent Due Date.  The respective amounts of the Base Rent, Current Rent and Unpaid
Accrued Rent attributable to the Leased Properties other than the
Expired/Termination Properties as of the Partial Expiration/Termination Date
shall equal the respective amounts thereof immediately prior to such Partial
Expiration/Termination Date less the respective amounts thereof allocated to the
Expired/Terminated Properties as aforesaid;

     (c) "Base Patient Revenues", as defined in Section 2.1 hereof, shall have
                                                -----------
excluded therefrom all Base Patient Revenues attributable to the
Expired/Terminated Properties, as set forth on Schedule 2.1A;

     (d) "Patient Revenues", as defined in Section 2.1 hereof, shall have
                                           -----------
excluded therefrom all Patient Revenues attributable to the Expired/Terminated
Properties;

     (e) Intentionally omitted;

     (f) Under Section 3.2 of this Lease, the Reset Fee shall be reduced by an
               -----------
amount equal to the product of (i) the aggregate of the Transferred Property
Percentages applicable to the Expired/Terminated Properties and (ii) the Reset
Fee applicable to this Lease as of the Partial Expiration/Termination Date;

     (g) Exhibit C shall be modified so as to remove the allocation of rents to
         ---------
the Expired/Terminated Properties, and the Transferred Property Percentages of
the Leased Properties remaining under this Lease shall be recalculated so that
each such Leased Property shall have a Transferred Property Percentage equal to
the percentage that the rent for such Leased Property comprises of the aggregate
rents for all Leased Properties remaining under this Lease, and so that the
aggregate of all Transferred Property Percentages for the Leased Properties
remaining under this Lease equals 100%;

                                      131
<PAGE>

     (h) Nothing in this Section 40.16 shall be deemed to limit or impair any of
                         -------------
Lessor's or Tenant's rights and remedies at law, in equity, under this Lease or
otherwise relative to the Expired/Terminated Properties or the Leased Properties
that remain subject to this Lease;

     (i) Tenant shall take such actions and execute and deliver such documents,
including, without limitation, if requested by Lessor, an amendment to this
Lease, as are reasonably necessary and appropriate to fully effectuate the
provisions and intent of this Section 40.16.
                              -------------

     (j) Each Leasehold Mortgagee, Superior Lessor and Superior Mortgagee hereby
consents to the provisions of this Section 40.16 and agrees, upon request of
                                   -------------
Lessor, to execute an instrument consenting to the execution and delivery of an
amendment to this Lease, consistent with the foregoing provisions.

     Section 40.17  Creation of New Master Lease.  In the event of a sale during
                    ----------------------------
the first twenty-four (24) full calendar months following the Effective Date to
a single purchaser that is not an Affiliate of Lessor (the "Unaffiliated Buyer")
                                                            ------------------
of twenty (20) or more of the Combined Leased Properties (collectively, the
"Sub-Portfolio Properties"), Lessor, acting in concert with the other lessors of
-------------------------
Sub-Portfolio Properties, shall have the right to require that the Sub-Portfolio
Properties be excluded from the then existing Combined Leases and that Tenant
enter into an additional master lease (the "New Master Lease") of the Sub-
                                            ----------------
Portfolio Properties with the Unaffiliated Buyer, as lessor, provided that each
of the following conditions is satisfied:  (i) the Coverage Ratio of the Sub-
Portfolio Properties that are operated as hospitals is not greater than fifteen
percent (15%) above or below the Coverage Ratio of the Combined Leased
Properties that are operated as hospitals other than the Sub-Portfolio
Properties (for example, if the Coverage Ratio of the Combined Leased Properties
that are operated as hospitals other than the Sub-Portfolio Properties were
1.5:1, then the Coverage Ratio of the Sub-Portfolio Properties that are operated
as hospitals must not exceed 1.72:1 or be less than 1.28:1); (ii) the Coverage
Ratio of the Sub-Portfolio Properties that are operated as nursing centers is
not greater than ten percent (10%) above or below the Coverage Ratio of the
Combined Leased Properties that are operated as nursing centers other than the
Sub-Portfolio Properties; and (iii) by the creation of the New Master Lease,
Lessor shall not cause any of the Combined Leases, as it applies to any of the
Combined Leased Properties, to be treated as a capital lease, rather than an
operating lease, under generally accepted accounting principles or under the
applicable rules of the Financial Accounting Standards Board.  In the event that
Lessor wishes to exercise its rights under this Section 40.17, Lessor, together
                                                -------------
with the other lessors of Sub-Portfolio Properties, shall give written notice
thereof to Tenant not less than thirty (30) days prior to the anticipated date
of closing of the sale of the Sub-Portfolio Properties to the Unaffiliated Buyer
(it being agreed, however, that, in the event such notice is given but the
anticipated closing for any reason fails to occur, Lessor shall retain the
right, on the terms set forth in this Section 40.17, thereafter to send a
                                      -------------
further notice under this Section 40.17).  The New Master Lease shall be deemed
                          -------------
to constitute a New Lease and shall be subject to Section 40.15, except that, as
                                                  -------------
set forth in subsection (a)(xiv) of Section 40.15, clauses (1) and (2) of such
                                    -------------
subsection (a)(xiv) shall not apply to such New Master Lease.  For purposes of
such New Master Lease, the Sub-Portfolio Properties shall constitute the "Master
Lease Leased Properties" thereunder.

                                      132
<PAGE>

Notwithstanding anything to the contrary contained herein, the right under
Section 40.17 of each of the Combined Leases to require Tenant to enter into the
-------------
New Master Lease may only be exercised once for all of the Combined Leases.

     Section 40.18  Combination of Leases.  If Lessor is the lessor under both
                    ---------------------
this Lease and another lease demising a Master Lease Leased Property(ies) (the
"Second Lease"), Lessor shall have the right, at any time during the Term, by
 ------------
written notice to Tenant, to require that this Lease and the Second Lease be
combined and to require Tenant to execute an amendment to this Lease whereby (a)
if this Lease is the Section 40.18 Lease (as hereinafter defined), the Master
Lease Leased Properties covered by the Second Lease are added as Leased
Properties under this Lease and otherwise merged into this Lease or (b) if the
Second Lease is the Section 40.18 Lease, the Leased Properties covered by this
Lease are added as Leased Properties under the Second Lease and otherwise merged
into the Second Lease, in each case subject to the following terms and
conditions:

          (i)  References in this Lease to the "Section 40.18 Lease" shall mean
                                                -------------------
     and refer to whichever of this Lease or the Second Lease is chosen by
     Lessor to be the Section 40.18 Lease.

          (ii) If this Lease is the Section 40.18 Lease, effective as of the
     date specified in subsection (iv) below (the "Section 40.18 Date"), this
                                                   ------------------
     Lease shall be deemed to be modified and amended as follows:

               (1)  The Master Lease Leased Properties included in the Second
Lease shall be included as the Leased Properties under this Lease;

               (2)  Base Rent under this Lease shall be the combination of the
respective amounts of the Base Rent under this Lease and the Second Lease;

               (3)  Current Rent under this Lease shall be the combination of
the respective amounts of the Current Rent under this Lease and the Second
Lease;

               (4)  The amount of the Unpaid Accrued Rent under this Lease shall
be the combination of the respective amounts of any Unpaid Accrued Rent under
this Lease and the Second Lease;

               (5)  Any rental escalations that would otherwise have been
required to be made under the Second Lease on the May 1 immediately following
the Section 40.18 Date shall be made under this Lease on such May 1, in the full
amount required as if the Master Lease Leased Properties referenced in
subsection (1) above had been under this Lease for a full year, notwithstanding
that the period from the Section 40.18 Date to such succeeding May 1 may be less
than one full year;

               (6)  "Base Patient Revenues", as defined in Section 2.1 of this
                                                           -----------
Lease, shall be increased by the amount of the Base Patient Revenues from the
Master Lease Leased Properties included in the Second Lease for the calendar
year ending on December 31, 1999 as

                                      133
<PAGE>

set forth in Schedule 2.1A of the Second Lease, and Schedule 2.1A of this Lease
             -------------                          -------------
shall be deemed modified and amended accordingly;

               (7)  If and for so long as the lessor under this Lease is not
Ventas, Inc. or Ventas Realty, Limited Partnership or any successor to either of
them (by merger or otherwise) or any Affiliate of Ventas, Inc. or Ventas Realty,
Limited Partnership or any such successor, Tenant (A) shall not be required
under this Lease to provide to such lessor Facility-specific information related
to Facilities or Leased Properties which are not included in this Lease, (B)
shall exclude from consolidated facility information that is required under
Section 26.1 of this Lease facility information which relates to Facilities or
------------
Leased Properties not included in this Lease and (C) shall continue to be
required to provide information relative to Tenant, as opposed to Leased
Properties and Facilities, on the same basis as such information is provided to
Ventas-related lessors;

               (8)  Under Section 3.2 of this Lease, the Reset Fee shall be the
                          -----------
combination of the respective amounts of the Reset Fee applicable to this Lease
and the Second Lease;

               (9)  Exhibit C to this Lease shall be modified and amended so as
                    ---------
to add thereto the allocations of rents relative to the Master Lease Leased
Properties included in the Second Lease that were previously included in Exhibit
                                                                         -------
C to the Second Lease, and the Transferred Properties Percentages of the Leased
-
Properties included in this Lease (including, without limitation, the additional
Master Lease Leased Properties referenced in subsection (1) above) shall be
recalculated so that each such Leased Property shall have a Transferred Property
Percentage equal to the percentage that the rent for such Leased Property
comprises of the aggregate rents for all Leased Properties included in this
Lease and so that the aggregate of all Transferred Property Percentages for
Leased Properties included in this Lease equals 100%;

               (10) Tenant under this Lease shall be responsible for the
payment, performance and satisfaction of all duties, obligations and liabilities
arising under the Second Lease, insofar as they relate to the Master Lease
Leased Properties subject to the Second Lease, that were not paid, performed and
satisfied in full prior to the Section 40.18 Date, and, without limitation of
the foregoing, (x) any Event of Default that had occurred, arisen or accrued
under the Second Lease prior to the Section 40.18 Date shall be, and shall be
deemed to be, an Event of Default under this Lease, as to which the rights and
remedies and other provisions of this Lease shall be applicable, (y) any breach
or default that had occurred, arisen or accrued under the Second Lease prior to
the Section 40.18 Date but had not yet become an Event of Default under the
Second Lease as of the Section 40.18 Date shall be, and be deemed to be, a
breach or default under this Lease, as to which the cure periods, rights and
remedies and other provisions of this Lease shall be applicable, and (z) with
respect to any breach or default described in subsection (y) above, although the
cure periods, rights and remedies and other provisions of this Lease shall be
applicable, the portion of any cure period under the Second Lease that had
elapsed as of the Section 40.18 Date shall be counted in determining whether and
when the applicable cure period under this Lease has expired; and

                                      134
<PAGE>

                (11) The Master Lease Leased Properties referenced in subsection
(1) above shall otherwise be incorporated into this Lease as Leased Properties
included under this Lease the same as if this Lease, from the inception of the
Second Lease, had included the aforesaid Master Lease Leased Properties as
Leased Properties hereunder on the rent, lease terms and other economic terms
described in the Second Lease.

          (iii) If this Lease is not the Section 40.18 Lease, effective as of
     the Section 40.18 Date, this Lease shall be modified and amended as
     necessary (x) to incorporate into the Second Lease as Leased Properties
     thereunder the Leased Properties covered by this Lease the same as if the
     Leased Properties covered by this Lease had, from the inception of this
     Lease, been included in the Second Lease as Leased Properties thereunder on
     the rent, lease terms and other economic terms described in this Lease and
     (y) otherwise to comply with the requirements of Section 40.18 of the
                                                      -------------
     Second Lease, as the Section 40.18 Lease thereunder.  Tenant acknowledges
     and agrees that, without limitation of Section 40.18(ii)(10) above, the
                                            ---------------------
     modification and amendment referenced in this subsection (iii) shall not
     result in Tenant being released from any duties, liabilities or obligations
     that had accrued under this Lease through the Section 40.18 Date.

          (iv)  In the case of any combination of leases pursuant to this
     Section 40.18, such combination shall be effective on the date which is the
     -------------
     earlier of (x) the date the required modifications and amendments to the
     Lease and Second Lease are fully executed and delivered by the parties
     thereto and (y) the date specified in the written notice from Lessor to
     Tenant requiring a combination of this Lease and the Second Lease as
     described above, which date shall be no sooner than ten (10) days, nor
     later than sixty (60) days, after the date such notice is issued.

          (v)   Each of Lessor and Tenant shall take such actions and execute
     and deliver such documents, including, without limitation, required
     modifications and amendments to this Lease and the Second Lease and new or
     amended Memorandum(s) of Lease, as are reasonably necessary and appropriate
     to effectuate fully the provisions and intent of this Section 40.18.
                                                           -------------

          (vi)  Each Leasehold Mortgagee, Superior Lessor and Superior Mortgagee
     hereby consents to the provisions of this Section 40.18 and agrees, upon
                                               -------------
     request of Lessor, to execute an instrument consenting to the execution and
     delivery of the required modifications and amendments to this Lease and the
     Second Lease, consistent with the foregoing provisions.

          (vii) Lessor shall, promptly following receipt of a written demand
     therefor and reasonable supporting documentation, reimburse Tenant for its
     out-of-pocket costs and expenses incurred in connection with the required
     modifications and amendments to this Lease and the Second Lease, including,
     without limitation, reasonable attorneys' fees and any recording fees
     incurred by Tenant in connection with the recording of new or amended
     Memorandum(s) of Lease.

                                      135
<PAGE>

     Section 40.19  Unified Commercial Operating Lease.  It is acknowledged and
                    ----------------------------------
agreed that, except as otherwise expressly provided herein, the inclusion of
each of the Leased Properties on a continuing basis in the leasing transaction
provided for herein is an essential element of such transaction for Lessor, and
that, except as otherwise expressly provided herein, Lessor shall not be
obligated and may not be required to lease less than all of the Leased
Properties to Tenant pursuant to this Lease.  It is further acknowledged and
agreed that this Lease is not a residential lease within the meaning of the U.S.
Bankruptcy Code, as amended, and that this Lease is an operating lease, and not
a capital lease, for all accounting, tax and legal purposes.

     Section 40.20  Intentionally omitted.

     Section 40.21  No Credits.  Notwithstanding anything to the contrary set
                    ----------
forth in this Lease or otherwise, except as otherwise expressly provided in the
Bankruptcy Plan relative to the Tax Refund Escrow Agreement, Lessor shall not be
required to pay, make or give to Tenant, and Tenant shall not be entitled to,
any credits, offsets, prorations or payments of any kind or nature whatsoever on
account of any payment, nonpayment or other event occurring prior to the
Effective Date.

                                  ARTICLE XLI

     Section 41.1   Memorandums of Lease.  Lessor and Tenant shall, promptly
                    --------------------
upon the request of either, enter into short form memorandums of this Lease, in
form suitable for recording under the laws of the State in which each Leased
Property is located, in which reference to this Lease, and all extension options
contained herein, shall be made.  Relative to the foregoing and notwithstanding
anything to the contrary contained in this Lease, any such Memorandums of Lease
shall not reference the existence of any option to purchase in favor of Tenant
under Section 16.12 of this Lease unless and until the number of Leased
      -------------
Properties covered by this Lease equals forty (40) or less, at which time, upon
the request of Tenant, any existing Memorandums of Lease shall be amended by
Lessor and Tenant, or new Memorandums of Lease shall be entered into by Lessor
and Tenant (for example in the circumstance where this Lease (a) constitutes a
New Lease as to which no previous Memorandums of Lease have been entered into
and (b) covers forty (40) or less Leased Properties), referencing that, in
limited circumstances following the occurrence of certain limited types of
Events of Default by Tenant, Tenant may have an option to purchase in certain
circumstances one (1) Leased Property, and in other circumstances two (2) Leased
Properties, covered by this Lease as to which the aforesaid types of Events of
Default have occurred and are continuing.  Thereafter, when and if any such
option(s) to purchase under Section 16.12 of this Lease have ceased to be
                            -------------
available to and exercisable by Tenant for any reason (e.g. due to Tenant's
exercise of all of its available options to purchase under Section 16.12 or on
                                                           -------------
account of this Lease being involved in a Section 40.18 lease combination
                                          -------------
transaction where the resulting Section 40.18 Lease covers in excess of forty
(40) Leased Properties or otherwise provides to Tenant no available and
exercisable option(s) to purchase under Section 16.12), upon the request of
                                        -------------
Lessor, any existing Memorandum(s) of Lease that reference any option to
purchase in favor of Tenant shall be amended to delete any such reference.
Without limitation

                                      136
<PAGE>

of Lessor's obligations under and except as otherwise provided in Section
                                                                  -------
40.15(f) and Section 40.18(vii), Tenant shall pay all costs and expenses of
--------     ------------------
recording any such Memorandums of Lease or amendments thereto and for releasing
any such Memorandums of Lease that relate to a particular Leased Property(ies)
upon any expiration or termination of this Lease as it relates to any such
Leased Property(ies).

            [The remainder of this page is intentionally left blank]

                                      137
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
their respective corporate seals to be hereunto affixed and attested by their
respective officers hereunto duly authorized.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Witness                                                  VENCOR, INC.
<S>                                                      <C>
/s/ Judy Menkin
----------------------------------------------
Name: Judy Menkin                                        By:/s/ Richard A. Lechleiter
                                                            -------------------------
                                                            Name: Richard A. Lechleiter

/s/ Janell M. Sawyer
----------------------------------------------                  Title: Vice President, Finance,
Name: Janell M. Sawyer                                   Corporate Controller and Treasurer

---------------------------------------------------------------------------------------------------
                                                         VENCOR OPERATING, INC.

/s/ Judy Menkin
----------------------------------------------
Name: Judy Menkin                                        By:/s/ Richard A. Lechleiter
                                                            ------------------------
                                                            Name: Richard A. Lechleiter
/s/ Janell M. Sawyer                                        Title: Vice President, Finance
----------------------------------------------           Corporate Controller and Treasurer
Name: Janell M. Sawyer

---------------------------------------------------------------------------------------------------
                                                         VENTAS REALTY, LIMITED
                                                         PARTNERSHIP

/s/ Janell M. Sawyer
----------------------------------------------
Name: Janell M. Sawyer                                   By:  Ventas, Inc., its general partner

/s/ John C. Thompson
----------------------------------------------
Name: John C. Thompson                                   By:/s/ T. Richard Riney
                                                            --------------------
                                                            Name:  T. Richard Riney
                                                            Title: Executive Vice President
---------------------------------------------------------------------------------------------------
</TABLE>

                                      138
<PAGE>

                                    JOINDER
                                    -------

     The undersigned, VENTAS, INC., a Delaware corporation, hereby joins in the
foregoing Amended and Restated Master Lease Agreement No. 1 solely for the
purposes of (i) confirming to the Tenant under the aforesaid Lease that, to the
best of its knowledge, except as described in subsection (ii) below, title to
the Leased Properties is held in the name of the Lessor under the aforesaid
Lease, rather than in the name of the respective entities that were the lessor
under the "Original Master Lease" referenced in the aforesaid Lease, and that,
if it is determined that title has not properly been transferred to such Lessor,
Ventas, Inc. shall cause the conveyance of such title to Lessor, effective as of
the Effective Date referenced in the aforesaid Lease, (ii) confirming to the
aforesaid Tenant that, to the best of its knowledge, title to the Leased
Property commonly known as Vencor Hospital -  Pittsburgh (Facility No. 4619) is
held in the name of Ventas, Inc., and (iii) subject to Section 40.2 of the
                                                       ------------
aforesaid Lease, joining with Ventas Realty, Limited Partnership, on a joint and
several basis, as Lessor under the aforesaid Lease with respect to, and only
with respect to, the aforesaid Vencor Hospital -Pittsburgh Leased Property, and
for no other purposes.  Notwithstanding anything to the contrary contained in
the aforesaid Lease, the aforesaid Tenant acknowledges and agrees, by the
acceptance of this Joinder, that, except as provided in subsection (i) above,
Ventas, Inc. shall have no liability or obligations under the aforesaid Lease,
as lessor or otherwise, with respect to any Leased Property other than the
aforesaid Vencor Hospital -Pittsburgh Leased Property.

Witness                               VENTAS, INC.

/s/ Janell M. Sawyer                  By: /s/ T. Richard Riney
--------------------                      --------------------
Name: Janell M. Sawyer                    Name:   T. Richard Riney
                                          Title:  Executive Vice President

/s/ John C. Thompson
--------------------
Name: John C.Thompson

                                      139

<PAGE>

                           ALL PURPOSE ACKNOWLEDGMENT

STATE OF NEW YORK        )
                         )
COUNTY OF NEW YORK       )

On March 29, 2001 before me, a notary public, personally appeared Richard A.
Lechleiter,

 .    personally known to me-OR-

 .    proved to me on the basis of satisfactory evidence to be the person(s)
     whose name(s) is/are subscribed to the within instrument and acknowledged
     to me that he/she/they executed the same in his/her/their authorized
     capacity(ies), and that by his/her/their signature(s) on the instrument the
     person(s), or the entity upon behalf of which the person(s) acted, executed
     the instrument.

     Witness my hand and official seal.

     /s/ Bruce Robinson
     ------------------
     SIGNATURE OF NOTARY

     IMPRESS NOTARY SEAL:

________________________________________________________________________________
CAPACITY CLAIMED BY SIGNER:              SIGNER IS REPRESENTING

 .  INDIVIDUALS(S)                        Vencor, Inc., a Delaware corporation
x  CORPORATE OFFICER(S)

         TITLE

         TITLE

 .  PARTNER(S)
 .  ATTORNEY-IN-FACT
 .  TRUSTEE(S)
 .  OTHER___________________

________________________________________________________________________________

                                      140
<PAGE>

STATE OF NEW YORK       )
                        )
COUNTY OF NEW YORK      )

On March 29, 2001 before me, a notary public, personally appeared Richard A.
Lechleiter,

 .    personally known to me-OR-

 .    proved to me on the basis of satisfactory evidence to be the person(s)
     whose name(s) is/are subscribed to the within instrument and acknowledged
     to me that he/she/they executed the same in his/her/their authorized
     capacity(ies), and that by his/her/their signature(s) on the instrument the
     person(s), or the entity upon behalf of which the person(s) acted, executed
     the instrument.

     Witness my hand and official seal.

     /s/ Bruce Robinson
     ------------------
     SIGNATURE OF NOTARY

IMPRESS NOTARY SEAL:

________________________________________________________________________________
CAPACITY CLAIMED BY SIGNER:       SIGNER IS REPRESENTING

 .  INDIVIDUALS(S)                 Vencor Operating, Inc., a Delaware corporation
x  CORPORATE OFFICER(S)

         TITLE

         TITLE

 .  PARTNER(S)
 .  ATTORNEY-IN-FACT
 .  TRUSTEE(S)
 .  OTHER__________________

________________________________________________________________________________

                                      141
<PAGE>

STATE OF NEW YORK       )
                        )
COUNTY OF NEW YORK      )

On March 29, 2001 before me, a notary public, personally appeared T. Richard
Riney,

     personally known to me-OR-

     proved to me on the basis of satisfactory evidence to be the person(s)
     whose name(s) is/are subscribed to the within instrument and acknowledged
     to me that he/she/they executed the same in his/her/their authorized
     capacity(ies), and that by his/her/their signature(s) on the instrument the
     person(s), or the entity upon behalf of which the person(s) acted, executed
     the instrument.

     Witness my hand and official seal.

     /s/ Bruce Robinson
     ------------------
     SIGNATURE OF NOTARY

     IMPRESS NOTARY SEAL:

________________________________________________________________________________
CAPACITY CLAIMED BY SIGNER:           SIGNER IS REPRESENTING

                                      Ventas, Inc., a Delaware corporation, in
 .  INDIVIDUALS(S)                     its capacity as the general partner of
x  CORPORATE OFFICER(S)               Ventas Realty, Limited Partnership, a
          TITLE - Executive Vice      Delaware limited partnership
                  President

          TITLE

 .  PARTNER(S)
 .  ATTORNEY-IN-FACT
 .  TRUSTEE(S)
 .  OTHER___________________

________________________________________________________________________________

                                      142
<PAGE>

STATE OF NEW YORK        )
                         )
COUNTY OF NEW YORK       )

On March 29, 2001 before me, a notary public, personally appeared T. Richard
Riney,

     personally known to me-OR-

     proved to me on the basis of satisfactory evidence to be the person(s)
     whose name(s) is/are subscribed to the within instrument and acknowledged
     to me that he/she/they executed the same in his/her/their authorized
     capacity(ies), and that by his/her/their signature(s) on the instrument the
     person(s), or the entity upon behalf of which the person(s) acted, executed
     the instrument.

     Witness my hand and official seal.

     /s/ Bruce Robinson
     ------------------
     SIGNATURE OF NOTARY

     IMPRESS NOTARY SEAL:

________________________________________________________________________________
CAPACITY CLAIMED BY SIGNER:             SIGNER IS REPRESENTING

 .    INDIVIDUALS(S)                     Ventas, Inc., a Delaware corporation
x    CORPORATE OFFICER(S)

         TITLE - Executive Vice
                 President

         TITLE

 .    PARTNER(S)
 .    ATTORNEY-IN-FACT
 .    TRUSTEE(S)
 .    OTHER_____________________

_______________________________________________________________________________

                                      143
<PAGE>

                                   Exhibit A
                                   ---------

                              Legal Descriptions

                                      144
<PAGE>

                                   EXHIBIT B
                                   ---------

                      Term Commencement/Expiration Dates
                      ----------------------------------

                       Master Lease #1 (CMBS Portfolio)

*    See the Original Master Lease for the Commencement Date of the Lease
     relative to each Facility.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                        Commencement        Lease
        Facility ID                   Name                         City        State        Date       Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>    <C>           <C>                                     <C>               <C>      <C>            <C>
Hospitals
----------------------------------------------------------------------------------------------------------------------
1          4622      Vencor Hospital - San Leandro           San Leandro        CA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
2          4693      Recovery Inn of Menlo Park              Menlo Park         CA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
3          4690      Vencor Hospital - Northlake             Northlake          IL           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
4          4620      Vencor Hospital - LaGrange              LaGrange           IN           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
5          4659      Vencor Hospital - Minneapolis           Golden Valley      MN           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
6          4656      Vencor Hospital - Phoenix               Phoenix            AZ           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
7          4642      Vencor Hospital - Orange County         Westminster        CA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
8          4648      Vencor Hospital - San Diego             San Diego          CA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
9          4602      Vencor Hospital - Coral Gables          Coral Gables       FL           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
10         4652      Vencor Hospital - North Florida         Green Cove Spr.    FL           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
11         4637      Vencor Hospital - Chicago North         Chicago            IL           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
12         4638      Vencor Hospital - Indianapolis          Indianapolis       IN           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
13         4633      Vencor Hospital - Louisville            Louisville         KY           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
14         4680      Vencor Hospital - St. Louis             St. Louis          MO           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
15         4618      Vencor Hospital - Oklahoma City         Oklahoma City      OK           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
16         4619      Vencor Hospital - Pittsburgh            Oakdale            PA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
17         4628      Vencor Hospital - Chattanooga           Chattanooga        TN           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
Nursing Centers
----------------------------------------------------------------------------------------------------------------------
1           167      Canyonwood Nursing & Rehab. Ctr.        Redding            CA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
2           525      La Veta Healthcare Center               Orange             CA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
3           562      Andrew House Healthcare                 New Britain        CT           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
4           406      Muncie Health Care & Rehab.             Muncie             IN           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
5           779      Westview Nursing & Rehab. Center        Bedford            IN           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
6           280      Winchester Centre for Health/Rehab.     Winchester         KY           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
7           783      Lexington Centre for Health & Rehab.    Lexington          KY           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
8           784      Northfield Centre for Health & Rehab.   Louisville         KY           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      145
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                        Commencement        Lease
        Facility ID                   Name                         City        State        Date       Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>     <C>          <C>                                     <C>               <C>      <C>            <C>
9           507      Country Manor Rehab. & Nsg. Center      Newburyport        MA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
10          582      Colony House Nsg. & Rehab. Ctr.         Abington           MA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
11          550      Norway Rehabilitation & Living Center   Norway             ME           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
12          558      Fieldcrest Manor Nursing Home           Waldoboro          ME           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
13          416      Park Place Health Care Center           Great Falls        MT           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
14          704      Guardian Care of Roanoke Rapids         Roanoke Rapids     NC           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
15          806      Chapel Hill Rehab. & Healthcare Ctr.    Chapel Hill        NC           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
16          577      Minerva Park Nursing & Rehab. Ctr.      Columbus           OH           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
17          635      Coshocton Health & Rehab. Ctr.          Coshocton          OH           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
18          132      Madison Healthcare & Rehab. Ctr.        Madison            TN           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
19          140      Wasatch Care Center                     Ogden              UT           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
20          247      St. George Care and Rehab. Center       St. George         UT           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
21          114      Arden Rehabilitation & Healthcare Ctr.  Seattle            WA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
22          180      Vencor of Vancouver HC & Rehab.         Vancouver          WA           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
23          767      Colony Oaks Care Center                 Appleton           WI           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
24          482      Wind River Healthcare & Rehab. Ctr.     Riverton           WY           *         April 30, 2008
----------------------------------------------------------------------------------------------------------------------
25          150      Nob Hill Healthcare Center              San Francisco      CA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
26          335      Lawton Healthcare Center                San Francisco      CA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
27          745      Aurora Care Center                      Aurora             CO           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
28          567      Nutmeg Pavilion Healthcare              New London         CT           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
29          660      Savannah Specialty Care Center          Savannah           GA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
30          218      Cascade Care Center                     Caldwell           ID           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
31          221      Lewiston Rehabilitation and Care Ctr.   Lewiston           ID           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
32          409      Mountain Valley Care and Rehab.         Kellogg            ID           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
33          113      Southwood Health & Rehab Center         Terre Haute        IN           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
34          286      Columbia Healthcare Facility            Evansville         IN           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
35          501      Blue Hills Alzheimers Care Center       Stoughton          MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
36          516      Hammersmith House Nsg. Care Ctr.        Saugus             MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
37          518      Timberlyn Heights Nsg. & Alz. Ctr.      Great Barrington   MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
38          537      Quincy Rehab. &  Nursing Center         Quincy             MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
39          573      Eagle Pond Rehab. & Living Center       South Dennis       MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
40          581      Blueberry Hill Healthcare               Beverly            MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
41          588      Walden Rehab. & Nursing Center          Concord            MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
42        985/198    Harrington House Nsg. & Rehab. Ctr.     Walpole            MA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
43          433      Parkview Acres Care & Rehab Ctr.        Dillon             MT           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
44          137      Sunnybrook Alzheimers & HC Spec.        Raleigh            NC           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      146
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                        Commencement        Lease
        Facility ID                   Name                         City        State        Date       Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>    <C>           <C>                                     <C>               <C>      <C>            <C>
45          188      Cypress Pointe Rehab & HC Center        Wilmington         NC           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
46          190      Winston-Salem Rehab & HC Center         Winston-Salem      NC           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
47          191      Silas Creek Manor                       Winston-Salem      NC           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
48          707      Rehab. & Nursing Center of Monroe       Monroe             NC           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
49          593      Hanover Terrace Healthcare              Hanover            NH           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
50          560      Franklin Woods Health Care Center       Columbus           OH           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
51          572      Winchester Place Nsg. & Rehab. Ctr.     Canal Winchester   OH           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
52          868      Lebanon Country Manor                   Lebanon            OH           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
53          452      Sunnyside Care Center                   Salem              OR           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
54          884      Masters Health Care Center              Algood             TN           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
55          825      Nansemond Pointe Rehab. & HC Ctr.       Suffolk            VA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
56          829      River Pointe Rehab. & Healthc. Ctr.     Virginia Beach     VA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
57          127      Northwest Continuum Care Center         Longview           WA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
58          165      Rainier Vista Care Center               Puyallup           WA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
59          185      Heritage Health & Rehab. Center         Vancouver          WA           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
60          769      North Ridge Med. & Rehab. Center        Manitowoc          WI           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
61          772      Family Heritage Med. & Rehab. Ctr.      Wisconsin Rapids   WI           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
62          775      Sheridan Medical Complex                Kenosha            WI           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
63          776      Woodstock Health & Rehab. Center        Kenosha            WI           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
64          441      Mountain Towers Healthcare & Rehab      Cheyenne           WY           *         April 30, 2010
----------------------------------------------------------------------------------------------------------------------
65          436      Valley Healthcare & Rehab. Center       Tucson             AZ           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
66          742      Sonoran Rehab & Care Center             Phoenix            AZ           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
67          738      Bay View Nursing & Rehab. Center        Alameda            CA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
68          117      East Manor Medical Care Center          Sarasota           FL           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
69          112      Royal Oaks Healthcare & Rehab Ctr.      Terre Haute        IN           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
70          327      Laurel Ridge Rehab. & Nursing Ctr.      Jamaica Plain      MA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
71          527      Briarwood Health Care Nursing Ctr.      Needham            MA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
72          528      Westridge Healthcare Center             Marlborough        MA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
73          529      Bolton Manor Nursing Home               Marlborough        MA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
74          538      West Roxbury Manor                      West Roxbury       MA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
75          552      Shore Village Rehab. & Nursing Ctr.     Rockland           ME           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
76          555      Brentwood Rehab. & Nsg. Center          Yarmouth           ME           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
77          138      Blue Ridge Rehab. & Healthcare Ctr.     Asheville          NC           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
78          724      Rehab. & Health Center of Gastonia      Gastonia           NC           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
79          591      Dover Rehab. & Living Center            Dover              NH           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
80          640      Las Vegas Healthcare & Rehab. Ctr.      Las Vegas          NV           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      147
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                        Commencement        Lease
        Facility ID                   Name                         City        State        Date       Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>    <C>           <C>                                     <C>               <C>      <C>            <C>
81          655      Federal Heights Rehab. & Nsg. Ctr.      Salt Lake City     UT           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
82          462      Queen Anne Healthcare                   Seattle            WA           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
83          483      Sage View Care Center                   Rock Springs       WY           *         April 30, 2013
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      148
<PAGE>

                                   Exhibit C
                                   ---------

       Allocation Schedule - Applicable Transferred Property Percentages

<TABLE>
<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                          City          State      Type       Beds       Lease
-----------                  ----                          ----          -----      ----       ----       -----
<S>           <C>                                    <C>                 <C>        <C>        <C>        <C>
              Master Lease 1
              --------------
    4618      Vencor Hospital - Oklahoma City        Oklahoma City        OK        LTAC         59          1
    4622      Vencor Hospital - San Leandro          San Leandro          CA        LTAC         99          1
    4619      Vencor Hospital - Pittsburgh           Oakdale              PA        LTAC         63          1
    4659      Vencor Hospital - Minneapolis          Golden Valley        MN        LTAC         92          1
    4642      Vencor Hospital - Orange County        Westminster          CA        LTAC         99          1
    4693      Recovery Inn of Menlo Park             Menlo Park           CA        LTAC         16          1
    4638      Vencor Hospital - Indianapolis         Indianapolis         IN        LTAC         59          1
    4633      Vencor Hospital - Louisville           Louisville           KY        LTAC        374          1
    4620      Vencor Hospital - LaGrange             LaGrange             IN        LTAC         62          1
    4602      Vencor Hospital - Coral Gables         Coral Gables         FL        LTAC         53          1
    4652      Vencor Hospital - North Florida        Green Cove Spr.      FL        LTAC         60          1
    4648      Vencor Hospital - San Diego            San Diego            CA        LTAC         70          1
    4656      Vencor Hospital - Phoenix              Phoenix              AZ        LTAC         58          1
    4628      Vencor Hospital - Chattanooga          Chattanooga          TN        LTAC         49          1
    4680      Vencor Hospital - St. Louis            St. Louis            MO        LTAC         60          1
    4637      Vencor Hospital - Chicago North        Chicago              IL        LTAC        165          1
    4690      Vencor Hospital - Northlake            Northlake            IL        LTAC         94          1
     132      Madison Healthcare & Rehab Ctr.        Madison              TN        SNF         102          1
     280      Winchester Centre for Health/Rehab.    Winchester           KY        SNF         192          1
     406      Muncie Health Care & Rehab.            Muncie               IN        SNF         205          1
     577      Minerva Park Nursing & Rehab. Ctr.     Columbus             OH        SNF         101          1
     635      Coshocton Health & Rehab. Center       Coshocton            OH        SNF         110          1
     779      Westview Nursing & Rehab. Center       Bedford              IN        SNF         149          1
     783      Lexington Centre for Health & Rehab.   Lexington            KY        SNF         180          1
     784      Northfield Centre for Health & Rehab.  Louisville           KY        SNF         120          1
     507      Country Manor Rehab. & Nsg. Center     Newburyport          MA        SNF         123          1
     550      Norway Rehabilitation & Living Center  Norway               ME        SNF          70          1
     558      Fieldcrest Manor Nursing Home          Waldoboro            ME        SNF          70          1
     562      Andrew House Healthcare                New Britain          CT        SNF          90          1

<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                         City           Bundle    Initial Rent    % of ML      Rent @
-----------                  ----                         ----           ------    ------------    -------    May 1 2001
                                                                                                              ----------
<S>           <C>                                   <C>                  <C>       <C>             <C>        <C>
              Master Lease 1
              --------------
    4618      Vencor Hospital - Oklahoma City       Oklahoma City            1         972,033      1.334%    1,006,054
    4622      Vencor Hospital - San Leandro         San Leandro              1       1,498,038      2.057%    1,550,470
    4619      Vencor Hospital - Pittsburgh          Oakdale                  2       1,232,954      1.693%    1,276,107
    4659      Vencor Hospital - Minneapolis         Golden Valley            2       1,020,339      1.401%    1,056,051
    4642      Vencor Hospital - Orange County       Westminster              3       3,295,782      4.525%    3,411,135
    4693      Recovery Inn of Menlo Park            Menlo Park               3         675,828      0.928%      699,482
    4638      Vencor Hospital - Indianapolis        Indianapolis             4       1,650,794      2.266%    1,708,572
    4633      Vencor Hospital - Louisville          Louisville               5       2,945,159      4.043%    3,048,239
    4620      Vencor Hospital - LaGrange            LaGrange                 6         374,915      0.515%      388,037
    4602      Vencor Hospital - Coral Gables        Coral Gables             7         717,985      0.986%      743,115
    4652      Vencor Hospital - North Florida       Green Cove Spr.          7       3,008,434      4.130%    3,113,729
    4648      Vencor Hospital - San Diego           San Diego                8       1,705,029      2.341%    1,764,705
    4656      Vencor Hospital - Phoenix             Phoenix                  8         780,534      1.072%      807,852
    4628      Vencor Hospital - Chattanooga         Chattanooga              9         621,694      0.853%      643,453
    4680      Vencor Hospital - St. Louis           St. Louis                9         930,349      1.277%      962,911
    4637      Vencor Hospital - Chicago North       Chicago                 10       5,197,734      7.136%    5,379,655
    4690      Vencor Hospital - Northlake           Northlake               10         896,843      1.231%      928,232
     132      Madison Healthcare & Rehab Ctr.       Madison                  1         324,947      0.446%      336,320
     280      Winchester Centre for Health/Rehab.   Winchester               1       1,089,131      1.495%    1,127,251
     406      Muncie Health Care & Rehab.           Muncie                   1       1,234,136      1.694%    1,277,331
     577      Minerva Park Nursing & Rehab. Ctr.    Columbus                 1         346,911      0.476%      359,053
     635      Coshocton Health & Rehab. Center      Coshocton                1         442,101      0.607%      457,574
     779      Westview Nursing & Rehab. Center      Bedford                  1         388,507      0.533%      402,105
     783      Lexington Centre for Health & Rehab.  Lexington                1         561,764      0.771%      581,426
     784      Northfield Centre for Health & Rehab. Louisville               1         605,183      0.831%      626,365
     507      Country Manor Rehab. & Nsg. Center    Newburyport              2         955,333      1.312%      988,770
     550      Norway Rehabilitation & Living Center Norway                   2         159,378      0.219%      164,957
     558      Fieldcrest Manor Nursing Home         Waldoboro                2         192,515      0.264%      199,253
     562      Andrew House Healthcare               New Britain              2         333,887      0.458%      345,573
</TABLE>

                                      149
<PAGE>

<TABLE>
<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                          City          State      Type       Beds       Lease
-----------                  ----                          ----          -----      ----       ----       -----
<S>           <C>                                    <C>                 <C>        <C>        <C>        <C>
     582      Colony House Nsg. & Rehab. Ctr.        Abington            MA         SNF        102           1
     704      Guardian Care of Roanoke Rapids        Roanoke Rapids      NC         SNF        110           1
     767      Colony Oaks Care Center                Appleton            WI         SNF        102           1
     806      Chapel Hill Rehab. & Healthcare Ctr.   Chapel Hill         NC         SNF        120           1
     114      Arden Rehabilitation & Healthcare Ctr  Seattle             WA         SNF         90           1
     140      Wasatch Care Center                    Ogden               UT         SNF         69           1
     167      Canyonwood Nursing & Rehab. Ctr.       Redding             CA         SNF        115           1
     180      Vencor of Vancouver HC & Rehab.        Vancouver           WA         SNF         98           1
     247      St. George Care and Rehab. Center      St. George          UT         SNF        159           1
     416      Park Place Health Care Center          Great Falls         MT         SNF        223           1
     482      Wind River Healthcare & Rehab. Ctr     Riverton            WY         SNF         90           1
     525      La Veta Healthcare Center              Orange              CA         SNF        112           1
     112      Royal Oaks Healthcare & Rehab Ctr.     Terre Haute         IN         SNF        230           1
     138      Blue Ridge Rehab. & Healthcare Ctr.    Asheville           NC         SNF        120           1
     436      Valley Healthcare & Rehab. Center      Tucson              AZ         SNF        143           1
     462      Queen Anne Healthcare                  Seattle             WA         SNF        171           1
     483      Sage View Care Center                  Rock Springs        WY         SNF        101           1
     640      Las Vegas Healthcare & Rehab. Ctr.     Las Vegas           NV         SNF         79           1
     655      Federal Heights Rehab. & Nsg. Ctr.     Salt Lake City      UT         SNF        154           1
     724      Rehab. & Health Center of Gastonia     Gastonia            NC         SNF        118           1
     738      Bay View Nursing & Rehab. Center       Alameda             CA         SNF        180           1
     742      Sonoran Rehab & Care Center            Phoenix             AZ         SNF        100           1
     117      East Manor Medical Care Center         Sarasota            FL         SNF        169           1
     327      Laurel Ridge Rehab. & Nursing Ctr.     Jamaica Plain       MA         SNF        120           1
     527      Briarwood Health Care Nursing Ctr      Needham             MA         SNF        120           1
     528      Westridge Healthcare Center            Marlborough         MA         SNF        196           1
     529      Bolton Manor Nursing Home              Marlborough         MA         SNF        160           1
     538      West Roxbury Manor                     West Roxbury        MA         SNF         76           1
     552      Shore Village Rehab. & Nursing Ctr.    Rockland            ME         SNF         61           1
     555      Brentwood Rehab. & Nsg. Center         Yarmouth            ME         SNF         83           1
     591      Dover Rehab. & Living Center           Dover               NH         SNF        112           1
     113      Southwood Health & Rehab Center        Terre Haute         IN         SNF        149           1
     190      Winston-Salem Rehab & HC Center        Winston-Salem       NC         SNF        230           1
     191      Silas Creek Manor                      Winston-Salem       NC         SNF         99           1

<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                         City           Bundle    Initial Rent    % of ML      Rent @
-----------                  ----                         ----           ------    ------------    -------    May 1.2001
                                                                                                              ----------
<S>           <C>                                    <C>                 <C>       <C>             <C>        <C>
     582      Colony House Nsg. & Rehab. Ctr.        Abington               2         316,678       0.435%        327,762
     704      Guardian Care of Roanoke Rapids        Roanoke Rapids         2         568,841       0.781%        588,750
     767      Colony Oaks Care Center                Appleton               2         287,087       0.394%        297,135
     806      Chapel Hill Rehab. & Healthcare Ctr.   Chapel Hill            2         220,527       0.303%        228,245
     114      Arden Rehabilitation & Healthcare Ctr  Seattle                3         456,556       0.627%        472,535
     140      Wasatch Care Center                    Ogden                  3         335,511       0.461%        347,254
     167      Canyonwood Nursing & Rehab. Ctr.       Redding                3         662,015       0.909%        685,186
     180      Vencor of Vancouver HC & Rehab.        Vancouver              3         618,775       0.849%        640,432
     247      St. George Care and Rehab. Center      St. George             3         946,028       1.299%        979,139
     416      Park Place Health Care Center          Great Falls            3         833,356       1.144%        862,524
     482      Wind River Healthcare & Rehab. Ctr     Riverton               3         615,712       0.845%        637,262
     525      La Veta Healthcare Center              Orange                 3         401,720       0.551%        415,780
     112      Royal Oaks Healthcare & Rehab Ctr.     Terre Haute            4       1,190,235       1.634%     1, 231,893
     138      Blue Ridge Rehab. & Healthcare Ctr.    Asheville              4         419,738       0.576%        434,429
     436      Valley Healthcare & Rehab. Center      Tucson                 4         352,342       0.484%        364,674
     462      Queen Anne Healthcare                  Seattle                4         538,325       0.739%        557,167
     483      Sage View Care Center                  Rock Springs           4         388,002       0.533%        401,582
     640      Las Vegas Healthcare & Rehab. Ctr.     Las Vegas              4         344,272       0.473%        356,321
     655      Federal Heights Rehab. & Nsg. Ctr.     Salt Lake City         4         961,347       1.320%        994,994
     724      Rehab. & Health Center of Gastonia     Gastonia               4         572,588       0.786%        592,628
     738      Bay View Nursing & Rehab. Center       Alameda                4         249,232       0.342%        257,955
     742      Sonoran Rehab & Care Center            Phoenix                4         299,588       0.411%        310,074
     117      East Manor Medical Care Center         Sarasota               5         153,403       0.211%        158,772
     327      Laurel Ridge Rehab. & Nursing Ctr.     Jamaica Plain          5         321,150       0.441%        332,390
     527      Briarwood Health Care Nursing Ctr      Needham                5         195,563       0.268%        202,408
     528      Westridge Healthcare Center            Marlborough            5         430,741       0.591%        445,817
     529      Bolton Manor Nursing Home              Marlborough            5         868,823       1.193%        899,232
     538      West Roxbury Manor                     West Roxbury           5         100,952       0.139%        104,485
     552      Shore Village Rehab. & Nursing Ctr.    Rockland               5         270,114       0.371%        279,568
     555      Brentwood Rehab. & Nsg. Center         Yarmouth               5         160,817       0.221%        166,446
     591      Dover Rehab. & Living Center           Dover                  5         950,555       1.305%        983,824
     113      Southwood Health & Rehab Center        Terre Haute            6         994,842       1.366%      1,029,661
     190      Winston-Salem Rehab & HC Center        Winston-Salem          6         449,460       0.617%        465,191
     191      Silas Creek Manor                      Winston-Salem          6         458,678       0.630%        474,732
</TABLE>

                                      150

<PAGE>

<TABLE>
<CAPTION>
 Ventas, Inc.
---------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                  3.50%

Facility ID                  Name                          City          State      Type       Beds       Lease
-----------                  ----                          ----          -----      ----       ----       -----
<S>           <C>                                    <C>                 <C>        <C>        <C>        <C>
     286      Columbia Healthcare Facility           Evansville            IN       SNF        186           1
     560      Franklin Woods Health Care Center      Columbus              OH       SNF        100           1
     572      Winchester Place Nsg. & Rehab. Ctr.    Canal Winchestr.      OH       SNF        201           1
     868      Lebanon Country Manor                  Lebanon               OH       SNF        100           1
     884      Masters Health Care Center             Algood                TN       SNF        175           1
     501      Blue Hills Alzheimer's Care Center     Stoughton             MA       SNF        101           1
     516      Hammersmith House Nsg. Care Ctr.       Saugus                MA       SNF         88           1
     518      Timberlyn Heights Nsg. & Alz. Ctr.     Great Barrington      MA       SNF         78           1
     537      Quincy Rehab. & Nursing Center         Quincy                MA       SNF        139           1
     567      Nutmeg Pavilion Healthcare             New London            CT       SNF        140           1
     573      Eagle Pond Rehab. & Living Center      South Dennis          MA       SNF        142           1
     581      Blueberry Hill Healthcare              Beverly               MA       SNF        146           1
     593      Hanover Terrace Healthcare             Hanover               NH       SNF        100           1
     150      Nob Hill Healthcare Center             San Francisco         CA       SNF        180           1
     218      Cascade Care Center                    Caldwell              ID       SNF         93           1
     221      Lewiston Rehabilitation and Care Ctr.  Lewiston              ID       SNF         96           1
     335      Lawton Healthcare Center               San Francisco         CA       SNF         75           1
     409      Mountain Valley Care and Rehab.        Kellogg               ID       SNF         68           1
     433      Parkview Acres Care & Rehab Ctr.       Dillon                MT       SNF        108           1
     441      Mountain Towers Healthcare & Rehab     Cheyenne              WY       SNF        170           1
     745      Aurora Care Center                     Aurora                CO       SNF        120           1
     137      Sunnybrook Alzheimer's & HC Spec.      Raleigh               NC       SNF        126           1
     188      Cypress Pointe Rehab & HC Center       Winmington            NC       SNF        100           1
     198      Harrington House Nsg. & Rehab. Ctr.    Walpole               MA       SNF         90           1
     588      Walden Rehab. & Nursing Center         Concord               MA       SNF        123           1
     660      Savannah Specialty Care Center         Savannah              GA       SNF        104           1
     707      Rehab. & Nursing Center of Monroe      Monroe                NC       SNF        174           1
     825      Nansemond Pointe Rehab. & HC Ctr.      Suffolk               VA       SNF        194           1
     829      River Pointe Rehab. & Healthc. Ctr.    Virginia Beach        VA       SNF        148           1
     127      Northwest Continuum Care Center        Longview              WA       SNF         74           1
     165      Rainier Vista Care Center              Puyallup              WA       SNF        120           1
     185      Heritage Health & Rehab. Center        Vancouver             WA       SNF         53           1
     452      Sunnyside Care Center                  Salem                 OR       SNF        124           1
     769      North Ridge Med. & Rehab. Center       Manitowoc             WI       SNF        131           1

<CAPTION>
 Ventas, Inc.
---------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                  3.50%

Facility ID                  Name                         City           Bundle    Initial Rent    % of ML      Rent @
-----------                  ----                         ----           ------    ------------    -------    May 1 2001
                                                                                                              ----------
<S>           <C>                                    <C>                 <C>       <C>             <C>        <C>
     286      Columbia Healthcare Facility           Evansville             6          810,620      1.113%     838,992
     560      Franklin Woods Health Care Center      Columbus               6          481,038      0.660%     497,875
     572      Winchester Place Nsg. & Rehab. Ctr.    Canal Winchestr.       6          614,880      0.844%     636,401
     868      Lebanon Country Manor                  Lebanon                6          251,174      0.345%     259,965
     884      Masters Health Care Center             Algood                 6        1,022,857      1.404%   1,058,657
     501      Blue Hills Alzheimer's Care Center     Stoughton              7          563,114      0.773%     582,823
     516      Hammersmith House Nsg. Care Ctr.       Saugus                 7          139,621      0.192%     144,508
     518      Timberlyn Heights Nsg. & Alz. Ctr.     Great Barrington       7          384,490      0.528%     397,947
     537      Quincy Rehab. & Nursing Center         Quincy                 7          700,900      0.962%     725,432
     567      Nutmeg Pavilion Healthcare             New London             7          493,173      0.677%     510,434
     573      Eagle Pond Rehab. & Living Center      South Dennis           7        1,245,992      1.711%   1,289,602
     581      Blueberry Hill Healthcare              Beverly                7        1,126,980      1.547%   1,166,424
     593      Hanover Terrace Healthcare             Hanover                7          459,296      0.631%     475,371
     150      Nob Hill Healthcare Center             San Francisco          8        2,061,072      2.829%   2,133,210
     218      Cascade Care Center                    Caldwell               8          297,276      0.408%     307,680
     221      Lewiston Rehabilitation and Care Ctr.  Lewiston               8          325,299      0.447%     336,685
     335      Lawton Healthcare Center               San Francisco          8          810,485      1.113%     838,852
     409      Mountain Valley Care and Rehab.        Kellogg                8          266,099      0.365%     275,412
     433      Parkview Acres Care & Rehab Ctr.       Dillon                 8          305,851      0.420%     316,555
     441      Mountain Towers Healthcare & Rehab     Cheyenne               8          191,308      0.263%     198,004
     745      Aurora Care Center                     Aurora                 8          510,249      0.700%     528,107
     137      Sunnybrook Alzheimer's & HC Spec.      Raleigh                9          345,748      0.475%     357,849
     188      Cypress Pointe Rehab & HC Center       Winmington             9          629,983      0.865%     652,033
     198      Harrington House Nsg. & Rehab. Ctr.    Walpole                9          744,821      1.023%     770,890
     588      Walden Rehab. & Nursing Center         Concord                9          732,432      1.006%     758,067
     660      Savannah Specialty Care Center         Savannah               9          542,713      0.745%     561,708
     707      Rehab. & Nursing Center of Monroe      Monroe                 9          579,880      0.796%     600,176
     825      Nansemond Pointe Rehab. & HC Ctr.      Suffolk                9        1,094,475      1.503%   1,132,782
     829      River Pointe Rehab. & Healthc. Ctr.    Virginia Beach         9          589,794      0.810%     610,436
     127      Northwest Continuum Care Center        Longview              10          419,399      0.576%     434,078
     165      Rainier Vista Care Center              Puyallup              10        1,040,604      1.429%   1,077,025
     185      Heritage Health & Rehab. Center        Vancouver             10           35,101      0.048%      36,330
     452      Sunnyside Care Center                  Salem                 10          210,756      0.289%     218,132
     769      North Ridge Med. & Rehab. Center       Manitowoc             10          611,307      0.839%     632,702
</TABLE>

                                      151
<PAGE>

<TABLE>
<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                          City          State      Type       Beds       Lease
-----------                  ----                          ----          -----      ----       ----       -----
<S>           <C>                                    <C>                 <C>        <C>        <C>        <C>
     772      Family Heritage Med. & Rehab. Ctr.     Wisconsin Rapids      WI       SNF        140           1
     775      Sheridan Medical Complex               Kenosha               WI       SNF        106           1
     776      Woodstock Health & Rehab. Center       Kenosha               WI       SNF        183           1

              Hospitals                                                                      1,532
              SNFs                                                                          10,469
              Total Master Lease 1                                                          12,001

<CAPTION>
 Ventas, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C                                                                                                                    3.50%

Facility ID                  Name                         City           Bundle    Initial Rent    % of ML      Rent @
-----------                  ----                         ----           ------    ------------    -------    May 1 2001
                                                                                                              ----------
<S>           <C>                                   <C>                  <C>       <C>             <C>        <C>
     772      Family Heritage Med. & Rehab. Ctr.    Wisconsin Rapids         10      192,491        0.264%     199,228
     775      Sheridan Medical Complex              Kenosha                  10      519,824        0.714%     538,018
     776      Woodstock Health & Rehab. Center      Kenosha                  10      399,455        0.548%     413,436

              Hospitals                                                           27,524,443       37.786%  28,487,798
              SNFs                                                                45,317,924       62.214%  46,904,051
              Total Master Lease 1                                                72,842,366      100.000%  75,391,849
</TABLE>

                                      152
<PAGE>

                                   EXHIBIT D
                                   ---------

                                Renewal Groups
                                --------------

                       Master Lease #1 (CMBS Portfolio)
                       --------------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Renewal
                                                                                                                          Group
           Facility ID             Name                             City         State     Lease Expiration Date          Number
------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>           <C>                                     <C>             <C>      <C>                            <C>
    1          4622      Vencor Hospital - San Leandro           San Leandro        CA    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    2          4618      Vencor Hospital - Oklahoma City         Oklahoma City      OK    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    3           406      Muncie Health Care & Rehab.             Muncie             IN    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    4           779      Westview Nursing & Rehab. Center        Bedford            IN    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    5           280      Winchester Centre for Health/Rehab.     Winchester         KY    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    6           783      Lexington Centre for Health & Rehab.    Lexington          KY    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    7           784      Northfield Centre for Health & Rehab.   Louisville         KY    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    8           577      Minerva Park Nursing & Rehab. Ctr.      Columbus           OH    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    9           635      Coshocton Health & Rehab. Ctr.          Coshocton          OH    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    10          132      Madison Healthcare & Rehab. Ctr.        Madison            TN    April 30, 2008                     #1
------------------------------------------------------------------------------------------------------------------------------------
    11         4659      Vencor Hospital - Minneapolis           Golden Valley      MN    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    12         4619      Vencor Hospital - Pittsburgh            Oakdale            PA    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    13          562      Andrew House Healthcare                 New Britain        CT    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    14          507      Country Manor Rehab. & Nsg. Center      Newburyport        MA    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    15          582      Colony House Nsg. & Rehab. Ctr.         Abington           MA    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    16          550      Norway Rehabilitation & Living Center   Norway             ME    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    17          558      Fieldcrest Manor Nursing Home           Waldoboro          ME    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    18          704      Guardian Care of Roanoke Rapids         Roanoke Rapids     NC    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    19          806      Chapel Hill Rehab. & Healthcare Ctr.    Chapel Hill        NC    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    20          767      Colony Oaks Care Center                 Appleton           WI    April 30, 2008                     #2
------------------------------------------------------------------------------------------------------------------------------------
    21         4693      Recovery Inn of Menlo Park              Menlo Park         CA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    22         4642      Vencor Hospital - Orange County         Westminster        CA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    23          167      Canyonwood Nursing & Rehab. Ctr.        Redding            CA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    24          525      La Veta Healthcare Center               Orange             CA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    25          416      Park Place Health Care Center           Great Falls        MT    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    26          140      Wasatch Care Center                     Ogden              UT    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    27          247      St. George Care and Rehab. Center       St. George         UT    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      153
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Renewal
                                                                                                                          Group
            Facility ID              Name                         City            State     Lease Expiration Date         Number
------------------------------------------------------------------------------------------------------------------------------------
<S>         <C>          <C>                                     <C>              <C>     <C>                            <C>
    28          114      Arden Rehabilitation & Healthcare Ctr.  Seattle            WA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    29          180      Vencor of Vancouver HC & Rehab.         Vancouver          WA    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    30          482      Wind River Healthcare & Rehab. Ctr.     Riverton           WY    April 30, 2008                     #3
------------------------------------------------------------------------------------------------------------------------------------
    31         4638      Vencor Hospital - Indianapolis          Indianapolis       IN    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    32          436      Valley Healthcare & Rehab. Center       Tucson             AZ    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    33          742      Sonoran Rehab & Care Center             Phoenix            AZ    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    34          738      Bay View Nursing & Rehab. Center        Alameda            CA    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    35          112      Royal Oaks Healthcare & Rehab Ctr.      Terre Haute        IN    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    36          138      Blue Ridge Rehab. & Healthcare Ctr.     Asheville          NC    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    37          724      Rehab. & Health Center of Gastonia      Gastonia           NC    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    38          640      Las Vegas Healthcare & Rehab. Ctr.      Las Vegas          NV    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    39          655      Federal Heights Rehab. & Nsg. Ctr.      Salt Lake City     UT    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    40          462      Queen Anne Healthcare                   Seattle            WA    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    41          483      Sage View Care Center                   Rock Springs       WY    April 30, 2013                     #4
------------------------------------------------------------------------------------------------------------------------------------
    42         4633      Vencor Hospital - Louisville            Louisville         KY    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    43          117      East Manor Medical Care Center          Sarasota           FL    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    44          327      Laurel Ridge Rehab. & Nursing Ctr.      Jamaica Plain      MA    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    45          527      Briarwood Health Care Nursing Ctr.      Needham            MA    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    46          528      Westridge Healthcare Center             Marlborough        MA    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    47          529      Bolton Manor Nursing Home               Marlborough        MA    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    48          538      West Roxbury Manor                      West Roxbury       MA    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    49          552      Shore Village Rehab. & Nursing Ctr.     Rockland           ME    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    50          555      Brentwood Rehab. & Nsg. Center          Yarmouth           ME    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    51          591      Dover Rehab. & Living Center            Dover              NH    April 30, 2013                     #5
------------------------------------------------------------------------------------------------------------------------------------
    52         4620      Vencor Hospital - LaGrange              LaGrange           IN    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    53          113      Southwood Health & Rehab Center         Terre Haute        IN    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    54          286      Columbia Healthcare Facility            Evansville         IN    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    55          190      Winston-Salem Rehab & HC Center         Winston-Salem      NC    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    56          191      Silas Creek Manor                       Winston-Salem      NC    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    57          560      Franklin Woods Health Care Center       Columbus           OH    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    58          572      Winchester Place Nsg. & Rehab. Ctr.     Canal Winchester   OH    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    59          868      Lebanon Country Manor                   Lebanon            OH    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    60          884      Masters Health Care Center              Algood             TN    April 30, 2010                     #6
------------------------------------------------------------------------------------------------------------------------------------
    61         4602      Vencor Hospital - Coral Gables          Coral Gables       FL    April 30, 2010                     #7
------------------------------------------------------------------------------------------------------------------------------------
    62         4652      Vencor Hospital - North Florida         Green Cove Spr.    FL    April 30, 2010                     #7
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      154
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Renewal
                                                                                                                           Group
             Facility ID                         Name                   City         State     Lease Expiration Date       Number
------------------------------------------------------------------------------------------------------------------------------------
<S>          <C>           <C>                                     <C>               <C>      <C>                          <C>
  63            567        Nutmeg Pavilion Healthcare              New London         CT      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  64            501        Blue Hills Alzheimers Care Center       Stoughton          MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  65            516        Hammersmith House Nsg. Care Ctr.        Saugus             MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  66            518        Timberlyn Heights Nsg. & Alz. Ctr.      Great Barrington   MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  67            537        Quincy Rehab. &  Nursing Center         Quincy             MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  68            573        Eagle Pond Rehab. & Living Center       South Dennis       MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  69            581        Blueberry Hill Healthcare               Beverly            MA      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  70            593        Hanover Terrace Healthcare              Hanover            NH      April 30, 2010                 #7
------------------------------------------------------------------------------------------------------------------------------------
  71           4656        Vencor Hospital - Phoenix               Phoenix            AZ      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  72           4648        Vencor Hospital - San Diego             San Diego          CA      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  73            150        Nob Hill Healthcare Center              San Francisco      CA      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  74            335        Lawton Healthcare Center                San Francisco      CA      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  75            745        Aurora Care Center                      Aurora             CO      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  76            218        Cascade Care Center                     Caldwell           ID      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  77            221        Lewiston Rehabilitation and Care Ctr.   Lewiston           ID      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  78            409        Mountain Valley Care and Rehab.         Kellogg            ID      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  79            433        Parkview Acres Care & Rehab Ctr.        Dillon             MT      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  80            441        Mountain Towers Healthcare & Rehab      Cheyenne           WY      April 30, 2010                 #8
------------------------------------------------------------------------------------------------------------------------------------
  81           4680        Vencor Hospital - St. Louis             St. Louis          MO      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  82           4628        Vencor Hospital - Chattanooga           Chattanooga        TN      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  83            660        Savannah Specialty Care Center          Savannah           GA      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  84            588        Walden Rehab. & Nursing Center          Concord            MA      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  85        985/198        Harrington House Nsg. & Rehab. Ctr.     Walpole            MA      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  86            137        Sunnybrook Alzheimers & HC Spec.        Raleigh            NC      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  87            188        Cypress Pointe Rehab & HC Center        Wilmington         NC      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  88            707        Rehab. & Nursing Center of Monroe       Monroe             NC      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  89            825        Nansemond Pointe Rehab. & HC Ctr.       Suffolk            VA      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  90            829        River Pointe Rehab. & Healthc. Ctr.     Virginia Beach     VA      April 30, 2010                 #9
------------------------------------------------------------------------------------------------------------------------------------
  91           4690        Vencor Hospital - Northlake             Northlake          IL      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  92           4637        Vencor Hospital - Chicago North         Chicago            IL      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  93            452        Sunnyside Care Center                   Salem              OR      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  94            127        Northwest Continuum Care Center         Longview           WA      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  95            165        Rainier Vista Care Center               Puyallup           WA      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  96            185        Heritage Health & Rehab. Center         Vancouver          WA      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  97            769        North Ridge Med. & Rehab. Center        Manitowoc          WI      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      155
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Renewal
                                                                                                                           Group
             Facility ID                         Name                   City         State     Lease Expiration Date       Number
------------------------------------------------------------------------------------------------------------------------------------
<S>          <C>           <C>                                     <C>               <C>      <C>                          <C>
  98            772        Family Heritage Med. & Rehab. Ctr.      Wisconsin Rapids   WI      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
  99            775        Sheridan Medical Complex                Kenosha            WI      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
 100            776        Woodstock Health & Rehab. Center        Kenosha            WI      April 30, 2010                #10
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      156
<PAGE>

                                   Exhibit E
                                   ---------

                                    Leases

1.   Amended and Restated Master Lease No. 1 dated as of April 17, 2001 by and
     between Ventas Realty, Limited Partnership, as lessor, and Vencor, Inc. and
     Vencor Operating, Inc., as tenant.

2.   Amended and Restated Master Lease No. 2 dated as of April 17, 2001 by and
     between Ventas Realty, Limited Partnership, as lessor, and Vencor, Inc. and
     Vencor Operating, Inc., as tenant.

3.   Amended and Restated Master Lease No. 3 dated as of April 17, 2001 by and
     between Ventas Realty, Limited Partnership, as lessor, and Vencor, Inc. and
     Vencor Operating, Inc., as tenant.

4.   Amended and Restated Master Lease No. 4 dated as of April 17, 2001 by and
     between Ventas Realty, Limited Partnership, as lessor, and Vencor, Inc. and
     Vencor Operating, Inc., as tenant.

                                      157
<PAGE>

                                   Exhibit F
                                   ---------

                             INTENTIONALLY OMITTED

                                      158
<PAGE>

                                   Exhibit G
                                   ---------

                            Form of Lease Guaranty
                            ----------------------

                               GUARANTY OF LEASE
                               -----------------

     THIS GUARANTY OF LEASE, dated as of ____________________, by and from
___________________________, a __________________________ having an address at
_____________________________________________________________ ("Guarantor"),
with respect to that certain Amended and Restated Master Lease Agreement No. 1,
dated as of ____________________________ (the "Lease"), between Ventas Realty,
                                               -----
Limited Partnership, a Delaware limited partnership ("Lessor"), and Vencor,
                                                      ------
Inc., a Delaware corporation to be known as Kindred Healthcare, Inc., and Vencor
Operating, Inc., a Delaware corporation to be known as Kindred Healthcare
Operating, Inc. (collectively, "Tenant"), covering the Leased Properties (as
                                ------
defined in the Lease) identified therein, including, without limitation, that
certain Leased Property more particularly described on Exhibit A attached hereto
(the "Premises"), all or a portion of which is subleased by Tenant to Guarantor.
      --------

     WHEREAS, Guarantor desires, and Lessor requires, that this agreement be
furnished so that Guarantor, being obligated to do so, can fulfill the terms and
conditions of the Lease with respect to the Premises with the same effect as if
the Lease had been entered into with Guarantor as the tenant with respect to the
Premises thereunder.

     NOW, THEREFORE, in consideration and recognition of the execution of the
Lease, and other good and valuable consideration and intending to be legally
bound hereby, Guarantor hereby unconditionally guarantees, and unconditionally
becomes surety to Lessor, its successors and assigns for, the payment of all
rent, additional charges and other sums owing under the Lease with respect to,
or allocable to, the Premises (and Guarantor acknowledges and agrees that, in
the event any delinquency exists under the Lease in the payment of Base Rent,
Current Rent, Accrued Rent or Unpaid Accrued Rent, Lessor shall, for purposes of
the foregoing clause, allocate such delinquency pro rata among the Leased
Properties based upon the respective Transferred Property Percentages applicable
to the Leased Properties) and the full, faithful and punctual performance of
each and all of the covenants, agreements and conditions of the Lease to be kept
and performed by Tenant with respect to the Premises, in accordance with and
within the times prescribed by the Lease, as well as all other liabilities now
or hereafter contracted by Tenant with Lessor pursuant to the Lease with respect
to the Premises and together, to the extent the same are chargeable to Tenant
under the Lease, with all costs and expenses (including, without limitation,
reasonable attorneys fees) incurred by Lessor with respect to the Premises in
connection with any of the foregoing and/or in connection with the enforcement
of Lessor's rights against Tenant or Guarantor with respect to the Premises (all
of the foregoing being hereinafter collectively referred to as the
"Liabilities").  In the event Tenant fails to pay, perform or observe, as
 -----------
applicable, any of the Liabilities, and such failure is not cured within the
cure period, if any, provided to Tenant by the terms of the Lease, an Event of
Default shall be deemed to have occurred under this Guaranty.  Guarantor agrees
that it shall be obligated to keep itself informed as to the status of Tenant's
payment, performance and observance of the Liabilities and that Lessor shall not
be

                                      159
<PAGE>

obligated to give Guarantor, and Guarantor shall not be entitled to, notice of
any failure by Tenant to pay, perform or observe, as applicable, any of the
Liabilities, provided, however, that Lessor agrees to accept the cure of any
             --------  -------
such failure, on or prior to the expiration of the cure period, if any, provided
to Tenant by the terms of the Lease, by either Tenant or Guarantor.

     Guarantor further agrees as follows:

          1.   Lessor shall have the right from time to time, and at any time in
     its sole discretion, without notice to or consent from Guarantor, and
     without affecting, impairing, or discharging in whole or in part, the
     Liabilities of Guarantor hereunder: to modify, change, extend, alter, amend
     or supplement in any respect whatever, any agreement or transaction between
     Lessor and Tenant or between Lessor and any other party liable for the
     Liabilities, or any portion or provision thereof; to grant extensions of
     time and other indulgences of any kind to Tenant; to compromise, release,
     substitute, exercise, enforce or fail or refuse to exercise or enforce any
     claims, rights or remedies of any kind which Lessor may have at any time
     against Tenant or any other party liable for the Liabilities, or any
     thereof, or with respect to any security of any kind held by Lessor at any
     time under any agreement or otherwise. The Liabilities of Guarantor shall
     not be affected, impaired or discharged, in whole or in part, by reason of
     payments by Tenant of all or a portion of the Liabilities, to the extent
     such payments shall be turned over as "voidable preferences" or otherwise
     required to be refunded or disgorged, or by reason of any action whatsoever
     taken by Lessor with respect to any security in which Lessor may at any
     time have any interest or against any other party liable for all or any
     part of the Liabilities.

          2.   Guarantor waives: (a) all notices, including but not limited to
     (i) notice of acceptance of this Guaranty, (ii) notice of presentment,
     demand for payment, or protest of any of the Liabilities, or the obligation
     of any person, firm or corporation held by Lessor as collateral security,
     and (iii) notice of any failure by Tenant to pay, perform or observe, as
     applicable, any of the Liabilities or of any Event of Default (as defined
     in the Lease); (b) all defenses, offsets and counterclaims which Guarantor
     may at any time have to any of the Liabilities, except to the extent the
     same is a valid defense, offset or counterclaim on the part of Tenant; and
     (c) all notices of the financial condition or of any adverse or other
     change in the financial condition of Tenant.

          3.   Lessor may, without notice, assign this Guaranty in whole or in
     part, and no assignment or transfer of the Lease or subletting of the
     Premises shall operate to extinguish or diminish the liability of Guarantor
     hereunder.

          4.   The liability of Guarantor under this Guaranty shall be primary
     with respect to any right of action which shall accrue to Lessor under the
     Lease, and Lessor may, at its option, proceed against Guarantor without
     having to commence any action, or having obtained any judgment, against
     Tenant.

                                      160
<PAGE>

          5.   The Liabilities of Guarantor shall not be affected, impaired or
     discharged, in whole or in part, by reason of: (a) the entry of an order
     for relief pursuant to the United States Bankruptcy Code by or against
     Tenant; (b) the proposal of or the consummation of a plan of reorganization
     concerning Tenant; (c) the assignment of Tenant's obligations under the
     Lease or any other or further sublease of any portion of the Premises,
     whether or not any such assignment or sublease is permitted under the
     Lease; or (d) except by reason of actual payment and performance of
     Tenant's obligations under the Lease, the discharge of the obligations of
     Tenant to Lessor, provided, however, if Tenant, in accordance with the
                       --------  -------
     requirements of the Lease, assigns the Lease (including, without
     limitation, if and to the extent permitted under Section 25.1.11 or Section
                                                              -------
     25.4 of the Lease, by virtue of a partial assignment of the Lease with
     ----
     respect to the Premises) to a Person (as defined in the Lease) that is not
     an Affiliate (as defined in the Lease) of Tenant, Tenant shall not be
     released from any of its duties, liabilities or obligations under the Lease
     on account of any such assignment, but Guarantor shall be released from
     this Guaranty insofar as it relates to any Liabilities of Tenant assumed by
     the assignee and arising on account of any breach or default of the Lease
     occurring after the date of such assignment.

          6.   The waiver of any right by Lessor or its failure to exercise
     promptly any right shall not be construed as the waiver of any other right
     including the right to exercise the same at any time thereafter. No waiver
     or modification of any of the terms or conditions of this Guaranty shall be
     binding against Lessor unless such waiver or modification is in a writing
     signed by Lessor.

          7.   The liability of Guarantor shall bind the respective
     representatives, successors and assigns of Guarantor and shall inure to the
     benefit of Lessor, its successors and assigns.

          8.   This Guaranty shall be governed by, and construed in accordance
     with, the laws of the State of New York without reference to the choice of
     law principles thereof. Guarantor hereby agrees to submit to the
     jurisdiction of any court of general jurisdiction sitting in the State of
     New York and designates any officer or supervisory employee of Lessor
     located at the Premises as its agent and attorney in fact for the purpose
     of accepting service and making an appearance on its behalf in such
     proceeding and taking all such acts as may be necessary or appropriate in
     order to confer jurisdiction on it upon such court, provided such agent and
     attorney in fact shall promptly send a true copy of all materials so served
     to Guarantor at the address and in the manner specified in Section 9 below,
                                                                ---------
     and Guarantor stipulates that such consent and appointment is irrevocable
     and coupled with an interest.

          9.   All notices, demands, requests, consents, approvals and other
     communications hereunder shall be in writing and delivered or mailed (by
     registered or certified mail, return receipt requested, or reputable
     nationally recognized overnight courier service and postage prepaid),
     addressed to the respective parties, as follows:

                                      161
<PAGE>

          (a)  if to Guarantor:

                    ___________________________
                    ___________________________
                    ___________________________
                    ___________________________
                    Attention: __________________

               with a copy to:

                    ___________________________
                    ___________________________
                    ___________________________
                    ___________________________
                    Attention: __________________

          (b)  if to Lessor:

                    Ventas Realty, Limited Partnership
                    4360 Brownsboro Road
                    Suite 115
                    Louisville, Kentucky 40207
                    Attention:  President

               with a copy to:

                    Ventas, Inc.
                    Ventas Realty, Limited Partnership
                    4360 Brownsboro Road
                    Suite 115
                    Louisville, Kentucky 40207
                    Attention:  General Counsel

or to such other address as either party may hereunder designate, and shall be
effective upon receipt.

                                      162
<PAGE>

     IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed and
sealed as of the day and year first above written.

                              ______________________________, a
                              ______________________________

                              By:___________________________
                                 Name:______________________
                                 Title:_____________________

                                      163
<PAGE>

                                  Schedule 1.3
                                  ------------

                         Certain Breaches and Defaults
                         -----------------------------

A.   Disclosed Breaches and Defaults
     -------------------------------

     1.   Lessor Breaches and Defaults under the Original Master Lease and/or
          this Lease Disclosed by Lessor:

          None.

     2.   Tenant Breaches and Defaults under the Original Master Lease and/or
          this Lease Disclosed by Tenant:

          (a)  Intentionally omitted.

          (b)  Reduction in the number of licensed beds in excess of the 10%
               threshold established by Section 16.1(m) of the Original Master
                                        ---------------
               Lease with respect to the following Facilities:  Vencor Hospital-
               Chicago North (Facility 4637) reduced to 165 licensed beds,
               Vencor Hospital-Minneapolis (Facility 4659) reduced to 92
               licensed beds and Cascade Care Center (Facility 218) reduced to
               93 licensed beds.

          (c)  Reduction in licensed beds in excess of the 10% threshold
               established by Section 16.1(m) of the Original Master Lease upon
                              ---------------
               Tenant's emergence from bankruptcy, if Washington State
               determines that Tenant's bankruptcy reorganization constitutes a
               change of control and, as a result, Tenant loses its license with
               respect to 41 beds currently banked relative to Queen Anne
               Healthcare, Seattle, WA (Facility 462).

          (d)  Minimum Rent (as defined in the Original Master Lease) required
               by Section 3.1(a) of the Original Master Lease in the amount of
                  --------------
               $7,343,235.00 for periods prior to September 1, 1999 has not been
               paid.

          (e)  The amount of the "Agreement Rent Claim", as defined in the Rent
               Stipulation, for the period from September 1, 1999 through
               November 30, 2000, has not been paid (it is understood that the
               Escalation Amount included in Minimum Rent (as defined in the
               Original Master Lease) that took effect under the Original Master
               Lease as of May 1, 2000 is included in the defined term
               "Agreement Rent Claim" for purposes of this subsection (e)).

(f)            Overdue Rate charges required by Section 3.1(b)(5) of the
                                                -----------------
               Original Master Lease for the late payment of Minimum Rent (as
               defined in the Original Master Lease) have not been paid.

                                      164
<PAGE>

B.   Provisions Regarding Whether, And To What Extent, Breaches and Defaults
     -----------------------------------------------------------------------
     From Subpart A Above Are Waived And Released Or Conditionally Waived And
     ------------------------------------------------------------------------
     Released
     --------

     1.   Provisions regarding whether, and to what extent, Lessor breaches and
          defaults disclosed in subpart A above are waived and released or
          conditionally waived and released by Tenant:

          Not applicable.

     2.   Provisions regarding whether, and to what extent, Tenant breaches and
          defaults disclosed in subpart A above are waived and released or
          conditionally waived and released by Lessor:

          (a)  Intentionally omitted.

          (b)  The breaches and defaults referenced in Paragraph 2(b) of subpart
               A above are waived and released by Lessor.  Nothing in this
               subsection (b) shall limit the terms of Section 16.1(m) of this
                                                       ---------------
               Lease as it applies on and after the Effective Date to the
               Facilities referenced in Paragraph 2(b) of subpart A above.

          (c)  If Washington State determines that Tenant's bankruptcy
               reorganization constitutes a change of control, the breach and
               default referenced in Paragraph 2(c) of subpart A above is waived
               and released by Lessor, subject to Tenant's obligation to use its
               best efforts and due diligence to reverse such determination
               and/or otherwise re-acquire licensure for any such licensed beds
               that are so lost.  Without limitation of Section 16.1(m)(i)(2) or
               Section 16.1(m)(ii)(y) of the Lease, with regard to the
               referenced Washington Facility, Lessor does not waive or release
               any rights it may have on account of any loss of bed licensure
               other than the loss of bed licensure for up to 41 banked beds (as
               to Queen Anne Healthcare, Seattle, Washington (Facility 462)).
               Nothing in this subsection (c) shall limit the terms of Section
                                                                       -------
               16.1(m) of this Lease as it applies on and after the Effective
               -------
               Date to such Washington Facility.

          (d)  The breach and default referenced in Paragraph 2(d) of subpart A
               above is waived and released by Lessor.

          (e)  The breach and default referenced in Paragraph 2(e) of subpart A
               above is waived and released by Lessor.

          (f)  The breach and default referenced in Paragraph 2(f) of subpart A
               above is waived and released by Lessor.

                                      165
<PAGE>

                                 Schedule 2.1A
                                 -------------

                             Base Patient Revenues
                             ---------------------

Total Base Patient Revenues for 1999 for Master Lease #1
(CMBS Portfolio)                                                $718,814,900

                                      166
<PAGE>

                                 SCHEDULE 2.1A
                                 -------------

                             Base Patient Revenues

                       Master Lease #1 (CMBS Portfolio)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Base Patient
                                                                                                                      Revenues
                                                                                                                        for
      Facility ID                          Name                                    City                 State          1999
------------------------------------------------------------------------------------------------------------------------------------
 Hospitals
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                     <C>                         <C>        <C>
 1       4622       Vencor Hospital - San Leandro                           San Leandro                  CA        $ 16,096,645
------------------------------------------------------------------------------------------------------------------------------------
 2       4693       Recovery Inn of Menlo Park                              Menlo Park                   CA           7,403,340
------------------------------------------------------------------------------------------------------------------------------------
 3       4690       Vencor Hospital - Northlake                             Northlake                    IL          13,788,597
------------------------------------------------------------------------------------------------------------------------------------
 4       4620       Vencor Hospital - LaGrange                              LaGrange                     IN          13,998,235
------------------------------------------------------------------------------------------------------------------------------------
 5       4659       Vencor Hospital - Minneapolis                           Golden Valley                MN          16,675,579
------------------------------------------------------------------------------------------------------------------------------------
 6       4656       Vencor Hospital - Phoenix                               Phoenix                      AZ          13,711,980
------------------------------------------------------------------------------------------------------------------------------------
 7       4642       Vencor Hospital - Orange County                         Westminster                  CA          19,773,858
------------------------------------------------------------------------------------------------------------------------------------
 8       4648       Vencor Hospital - San Diego                             San Diego                    CA          13,972,633
------------------------------------------------------------------------------------------------------------------------------------
 9       4602       Vencor Hospital - Coral Gables                          Coral Gables                 FL          10,504,997
------------------------------------------------------------------------------------------------------------------------------------
10       4652       Vencor Hospital - North Florida                         Green Cove Spr.              FL          15,366,005
------------------------------------------------------------------------------------------------------------------------------------
11       4637       Vencor Hospital - Chicago North                         Chicago                      IL          28,351,957
------------------------------------------------------------------------------------------------------------------------------------
12       4638       Vencor Hospital - Indianapolis                          Indianapolis                 IN          12,459,025
------------------------------------------------------------------------------------------------------------------------------------
13       4633       Vencor Hospital - Louisville                            Louisville                   KY          28,918,283
------------------------------------------------------------------------------------------------------------------------------------
14       4680       Vencor Hospital - St. Louis                             St. Louis                    MO          14,861,727
------------------------------------------------------------------------------------------------------------------------------------
15       4618       Vencor Hospital - Oklahoma City                         Oklahoma City                OK          10,537,698
------------------------------------------------------------------------------------------------------------------------------------
16       4619       Vencor Hospital - Pittsburgh                            Oakdale                      PA          13,538,612
------------------------------------------------------------------------------------------------------------------------------------
17       4628       Vencor Hospital - Chattanooga                           Chattanooga                  TN          10,948,143
------------------------------------------------------------------------------------------------------------------------------------
Nursing
Centers
------------------------------------------------------------------------------------------------------------------------------------
 1        167       Canyonwood Nursing & Rehab. Ctr.                        Redding                      CA           6,073,620
------------------------------------------------------------------------------------------------------------------------------------
 2        525       La Veta Healthcare Center                               Orange                       CA           4,941,977
------------------------------------------------------------------------------------------------------------------------------------
 3        562       Andrew House Healthcare                                 New Britain                  CT           5,333,198
------------------------------------------------------------------------------------------------------------------------------------
 4        406       Muncie Health Care & Rehab.                             Muncie                       IN           8,411,543
------------------------------------------------------------------------------------------------------------------------------------
 5        779       Westview Nursing & Rehab. Center                        Bedford                      IN           4,879,665
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      167
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Base Patient
                                                                                                                      Revenues
                                                                                                                        for
     Facility ID                           Name                                    City                 State          1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                     <C>                         <C>         <C>
 6        280       Winchester Centre for Health/Rehab.                     Winchester                   KY           8,187,653
------------------------------------------------------------------------------------------------------------------------------------
 7        783       Lexington Centre for Health & Rehab.                    Lexington                    KY           8,989,461
------------------------------------------------------------------------------------------------------------------------------------
 8        784       Northfield Centre for Health & Rehab.                   Louisville                   KY           5,926,583
------------------------------------------------------------------------------------------------------------------------------------
 9        507       Country Manor Rehab. & Nsg. Center                      Newburyport                  MA           6,699,581
------------------------------------------------------------------------------------------------------------------------------------
10        582       Colony House Nsg. & Rehab. Ctr.                         Abington                     MA           4,702,680
------------------------------------------------------------------------------------------------------------------------------------
11        550       Norway Rehabilitation & Living Center                   Norway                       ME           2,635,155
------------------------------------------------------------------------------------------------------------------------------------
12        558       Fieldcrest Manor Nursing Home                           Waldoboro                    ME           2,689,093
------------------------------------------------------------------------------------------------------------------------------------
13        416       Park Place Health Care Center                           Great Falls                  MT           7,854,429
------------------------------------------------------------------------------------------------------------------------------------
14        704       Guardian Care of Roanoke Rapids                         Roanoke Rapids               NC           4,406,893
------------------------------------------------------------------------------------------------------------------------------------
15        806       Chapel Hill Rehab. & Healthcare Ctr.                    Chapel Hill                  NC           4,805,478
------------------------------------------------------------------------------------------------------------------------------------
16        577       Minerva Park Nursing & Rehab. Ctr.                      Columbus                     OH           3,953,135
------------------------------------------------------------------------------------------------------------------------------------
17        635       Coshocton Health & Rehab. Ctr.                          Coshocton                    OH           3,739,858
------------------------------------------------------------------------------------------------------------------------------------
18        132       Madison Healthcare & Rehab. Ctr.                        Madison                      TN           4,166,836
------------------------------------------------------------------------------------------------------------------------------------
19        140       Wasatch Care Center                                     Ogden                        UT           2,873,583
------------------------------------------------------------------------------------------------------------------------------------
20        247       St. George Care and Rehab. Center                       St. George                   UT           6,793,923
------------------------------------------------------------------------------------------------------------------------------------
21        114       Arden Rehabilitation & Healthcare Ctr.                  Seattle                      WA           4,939,534
------------------------------------------------------------------------------------------------------------------------------------
22        180       Vencor of Vancouver HC & Rehab.                         Vancouver                    WA           4,760,019
------------------------------------------------------------------------------------------------------------------------------------
23        767       Colony Oaks Care Center                                 Appleton                     WI           3,676,565
------------------------------------------------------------------------------------------------------------------------------------
24        482       Wind River Healthcare & Rehab. Ctr.                     Riverton                     WY           4,475,747
------------------------------------------------------------------------------------------------------------------------------------
25        150       Nob Hill Healthcare Center                              San Francisco                CA          15,088,627
------------------------------------------------------------------------------------------------------------------------------------
26        335       Lawton Healthcare Center                                San Francisco                CA           3,866,161
------------------------------------------------------------------------------------------------------------------------------------
27        745       Aurora Care Center                                      Aurora                       CO           5,437,730
------------------------------------------------------------------------------------------------------------------------------------
28        567       Nutmeg Pavilion Healthcare                              New London                   CT           6,081,736
------------------------------------------------------------------------------------------------------------------------------------
29        660       Savannah Specialty Care Center                          Savannah                     GA           4,378,920
------------------------------------------------------------------------------------------------------------------------------------
30        218       Cascade Care Center                                     Caldwell                     ID           3,845,090
------------------------------------------------------------------------------------------------------------------------------------
31        221       Lewiston Rehabilitation and Care Ctr.                   Lewiston                     ID           3,933,963
------------------------------------------------------------------------------------------------------------------------------------
32        409       Mountain Valley Care and Rehab.                         Kellogg                      ID           2,964,187
------------------------------------------------------------------------------------------------------------------------------------
33        113       Southwood Health & Rehab Center                         Terre Haute                  IN           6,163,598
------------------------------------------------------------------------------------------------------------------------------------
34        286       Columbia Healthcare Facility                            Evansville                   IN           7,628,530
------------------------------------------------------------------------------------------------------------------------------------
35        501       Blue Hills Alzheimers Care Center                       Stoughton                    MA           4,970,110
------------------------------------------------------------------------------------------------------------------------------------
36        516       Hammersmith House Nsg. Care Ctr.                        Saugus                       MA           4,640,148
------------------------------------------------------------------------------------------------------------------------------------
37        518       Timberlyn Heights Nsg. & Alz. Ctr.                      Great Barrington             MA           3,814,102
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      168
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Base Patient
                                                                                                                       Revenues
                                                                                                                          for
      Facility ID                          Name                                    City               State             1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                     <C>                       <C>            <C>
38        537       Quincy Rehab. &  Nursing Center                         Quincy                     MA            6,819,280
------------------------------------------------------------------------------------------------------------------------------------
39        573       Eagle Pond Rehab. & Living Center                       South Dennis               MA            9,268,100
------------------------------------------------------------------------------------------------------------------------------------
40        581       Blueberry Hill Healthcare                               Beverly                    MA            8,172,314
------------------------------------------------------------------------------------------------------------------------------------
41        588       Walden Rehab. & Nursing Center                          Concord                    MA            5,848,199
------------------------------------------------------------------------------------------------------------------------------------
42        985       Harrington House Nsg. & Rehab. Ctr.                     Walpole                    MA            6,823,684
------------------------------------------------------------------------------------------------------------------------------------
43        433       Parkview Acres Care & Rehab Ctr.                        Dillon                     MT            2,670,202
------------------------------------------------------------------------------------------------------------------------------------
44        137       Sunnybrook Alzheimers & HC Spec.                        Raleigh                    NC            4,120,020
------------------------------------------------------------------------------------------------------------------------------------
45        188       Cypress Pointe Rehab & HC Center                        Wilmington                 NC            5,534,751
------------------------------------------------------------------------------------------------------------------------------------
46        190       Winston-Salem Rehab & HC Center                         Winston-Salem              NC            8,908,950
------------------------------------------------------------------------------------------------------------------------------------
47        191       Silas Creek Manor                                       Winston-Salem              NC            4,296,247
------------------------------------------------------------------------------------------------------------------------------------
48        707       Rehab. & Nursing Center of Monroe                       Monroe                     NC            6,212,182
------------------------------------------------------------------------------------------------------------------------------------
49        593       Hanover Terrace Healthcare                              Hanover                    NH            5,315,134
------------------------------------------------------------------------------------------------------------------------------------
50        560       Franklin Woods Health Care Center                       Columbus                   OH            4,299,783
------------------------------------------------------------------------------------------------------------------------------------
51        572       Winchester Place Nsg. & Rehab. Ctr.                     Canal Winchester           OH            6,413,141
------------------------------------------------------------------------------------------------------------------------------------
52        868       Lebanon Country Manor                                   Lebanon                    OH            4,515,958
------------------------------------------------------------------------------------------------------------------------------------
53        452       Sunnyside Care Center                                   Salem                      OR            4,056,259
------------------------------------------------------------------------------------------------------------------------------------
54        884       Masters Health Care Center                              Algood                     TN            6,724,400
------------------------------------------------------------------------------------------------------------------------------------
55        825       Nansemond Pointe Rehab. & HC Ctr.                       Suffolk                    VA            7,640,630
------------------------------------------------------------------------------------------------------------------------------------
56        829       River Pointe Rehab. & Healthc. Ctr.                     Virginia Beach             VA            4,944,191
------------------------------------------------------------------------------------------------------------------------------------
57        127       Northwest Continuum Care Center                         Longview                   WA            3,898,016
------------------------------------------------------------------------------------------------------------------------------------
58        165       Rainier Vista Care Center                               Puyallup                   WA            8,552,758
------------------------------------------------------------------------------------------------------------------------------------
59        185       Heritage Health & Rehab. Center                         Vancouver                  WA            1,862,339
------------------------------------------------------------------------------------------------------------------------------------
60        769       North Ridge Med. & Rehab. Center                        Manitowoc                  WI            5,251,261
------------------------------------------------------------------------------------------------------------------------------------
61        772       Family Heritage Med. & Rehab. Ctr.                      Wisconsin Rapids           WI            5,005,779
------------------------------------------------------------------------------------------------------------------------------------
62        775       Sheridan Medical Complex                                Kenosha                    WI            4,702,777
------------------------------------------------------------------------------------------------------------------------------------
63        776       Woodstock Health & Rehab. Center                        Kenosha                    WI            6,357,863
------------------------------------------------------------------------------------------------------------------------------------
64        441       Mountain Towers Healthcare & Rehab                      Cheyenne                   WY            5,854,087
------------------------------------------------------------------------------------------------------------------------------------
65        436       Valley Healthcare & Rehab. Center                       Tucson                     AZ            4,985,657
------------------------------------------------------------------------------------------------------------------------------------
66        742       Sonoran Rehab & Care Center                             Phoenix                    AZ            3,975,345
------------------------------------------------------------------------------------------------------------------------------------
67        738       Bay View Nursing & Rehab. Center                        Alameda                    CA            7,409,462
------------------------------------------------------------------------------------------------------------------------------------
68        117       East Manor Medical Care Center                          Sarasota                   FL            4,055,966
------------------------------------------------------------------------------------------------------------------------------------
69        112       Royal Oaks Healthcare & Rehab Ctr.                      Terre Haute                IN            8,592,182
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      169
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                                           Base Patient
                                                                                             Revenues
                                                                                               for
      Facility ID                    Name                           City        State          1999
--------------------------------------------------------------------------------------------------------
<S>      <C>        <C>                                         <C>             <C>       <C>
70       327        Laurel Ridge Rehab. & Nursing Ctr.          Jamaica Plain      MA       5,299,787
--------------------------------------------------------------------------------------------------------
71       527        Briarwood Health Care Nursing Ctr.          Needham            MA       5,852,172
--------------------------------------------------------------------------------------------------------
72       528        Westridge Healthcare Center                 Marlborough        MA       8,967,772
--------------------------------------------------------------------------------------------------------
73       529        Bolton Manor Nursing Home                   Marlborough        MA       7,551,643
--------------------------------------------------------------------------------------------------------
74       538        West Roxbury Manor                          West Roxbury       MA       2,634,960
--------------------------------------------------------------------------------------------------------
75       552        Shore Village Rehab. & Nursing Ctr.         Rockland           ME       2,522,147
--------------------------------------------------------------------------------------------------------
76       555        Brentwood Rehab. & Nsg. Center              Yarmouth           ME       3,968,987
--------------------------------------------------------------------------------------------------------
77       138        Blue Ridge Rehab. & Healthcare Ctr.         Asheville          NC       4,704,442
--------------------------------------------------------------------------------------------------------
78       724        Rehab. & Health Center of Gastonia          Gastonia           NC       5,270,910
--------------------------------------------------------------------------------------------------------
79       591        Dover Rehab. & Living Center                Dover              NH       9,226,504
--------------------------------------------------------------------------------------------------------
80       640        Las Vegas Healthcare & Rehab. Ctr.          Las Vegas          NV       4,090,697
--------------------------------------------------------------------------------------------------------
81       655        Federal Heights Rehab. & Nsg. Ctr.          Salt Lake City     UT       6,874,615
--------------------------------------------------------------------------------------------------------
82       462        Queen Anne Healthcare                       Seattle            WA       5,510,241
--------------------------------------------------------------------------------------------------------
83       483        Sage View Care Center                       Rock Springs       WY       3,616,681
--------------------------------------------------------------------------------------------------------
Total Patient Revenues for 1999 for Master Lease #1 (CMBS                                 718,814,900
 Portfolio)
--------------------------------------------------------------------------------------------------------
</TABLE>

                                      170
<PAGE>

                                 Schedule 2.1B
                                 -------------
   Example - Calculation of Base Rent, Current Rent, Accrued Rent and Unpaid
   -------------------------------------------------------------------------
                                Accrued Rent/1/
                                ---------------
                        [FOR ILLUSTRATION PURPOSES ONLY]
                        -------------------------------

Assumptions
-----------

1.   Base Rent and Current Rent for February, 2001 equals $14,550,223.25.
2.   The Effective Date occurs on February 1, 2001.
3.   The 75% Patient Revenues test for rent escalations is satisfied each year.
4.   No Refinancing Transaction occurs or is deemed to have occurred.
5.   No Reset Option is exercised.
6.   No termination of the Lease as to any Leased Property occurs.
7.   No New Lease or New Master Lease is entered into.
8.   No prepayment of Accrued Rent or Accrued Rent Interest occurs.
9.   The LIBO Rate at all times equals 6.75%
10.  No default or Event of Default by Tenant occurs.

<TABLE>
<CAPTION>
                                                              Unpaid Accrued
                                                              Rent, including
                                                                Compounded
                                                               Accrued Rent
                                                               Interest and
                                                               Excluding All          Unpaid Accrued Rent,
                                                               Other Accrued           Including Accrued      Unpaid Accrued Rent,
                                                               Rent Interest, as of   Rent Interest, as of      Including Accrued
                                                                  Month                     Month              Rent Interest, as of
    Month       Current Rent   Accrued Rent    Base Rent       Commencement              Commencement              Month End
    <S>         <C>            <C>           <C>            <C>                    <C>                       <C>
    02/01       14,550,223.25       0        14,550,223.25          0                         0                         0
    03/01       14,550,223.25       0        14,550,223.25          0                         0                         0
    04/01       14,550,223.25       0        14,550,223.25          0                         0                         0
____________________________
</TABLE>

       The same Schedule 2.1B is being used in this Lease and the other Leases
                -------------
and the assumed amounts of Base Rent and Current Rent are reflective of the
aggregate amounts of Base Rent and Current Rent owed under this Lease and the
other Leases. To obtain an illustration applicable to this Lease only, the
assumed amounts of Base Rent and Current Rent would need to be proportionally
reduced based upon the amounts of Base Rent and Current Rent assumed to be owing
under this Lease in relation to the aforesaid assumed aggregate amounts of Base
Rent and Current Rent under this Lease and the other Leases.

                                      171
<PAGE>

<TABLE>
<CAPTION>
                                                              Unpaid Accrued
                                                              Rent, Including
                                                                Compounded
                                                               Accrued Rent
                                                               Interest and
                                                               Excluding All          Unpaid Accrued Rent,
                                                               Other Accrued          Including Accrued        Unpaid Accrued Rent,
                                                               Rent Interest, as of   Rent Interest, as of      Including Accrued
                                                                  Month                     Month              Rent Interest, as of
    Month       Current Rent   Accrued Rent    Base Rent       Commencement              Commencement              Month End
    <S>      <C>               <C>          <C>                <C>                    <C>                      <C>
    05/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    06/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    07/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    08/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    09/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    10/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    11/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    12/01    15,059,481.06        0         15,059,481.06           0                         0                         0
    01/02    15,059,481.06        0         15,059,481.06           0                         0                         0
    02/02    15,059,481.06        0         15,059,481.06           0                         0                         0
    03/02    15,059,481.06        0         15,059,481.06           0                         0                         0
    04/02    15,059,481.06        0         15,059,481.06           0                         0                         0
    05/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    06/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    07/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    08/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    09/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    10/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    11/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    12/02    15,586,562.90        0         15,586,562.90           0                         0                         0
    01/03    15,586,562.90        0         15,586,562.90           0                         0                         0
    02/03    15,586,562.90        0         15,586,562.90           0                         0                         0
    03/03    15,586,562.90        0         15,586,562.90           0                         0                         0
    04/03    15,586,562.90        0         15,586,562.90           0                         0                         0
    05/03    16,132,092.60        0         16,132,092.60           0                         0                         0
    06/03    16,132,092.60        0         16,132,092.60           0                         0                         0
</TABLE>
                                      172
<PAGE>

<TABLE>
<CAPTION>
                                                              Unpaid Accrued
                                                              Rent, Including
                                                                Compounded
                                                               Accrued Rent
                                                               Interest and
                                                               Excluding All          Unpaid Accrued Rent,
                                                               Other Accrued           Including Accrued     Unpaid Accrued Rent,
                                                               Rent Interest, as of   Rent Interest, as of      Including Accrued
                                                                  Month                     Month              Rent Interest, as of
    Month       Current Rent   Accrued Rent    Base Rent       Commencement              Commencement              Month End
    <S>       <C>              <C>            <C>              <C>                    <C>                      <C>
    07/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    08/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    09/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    10/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    11/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    12/03     16,132,092.60             0     16,132,092.60                0                     0                         0
    01/04     16,132,092.60             0     16,132,092.60                0                     0                         0
    02/04     16,132,092.60             0     16,132,092.60                0                     0                         0
    03/04     16,132,092.60             0     16,132,092.60                0                     0                         0
    04/04     16,132,092.60             0     16,132,092.60                0                     0                         0
    05/04     16,454,734.45    241,981.39     16,696,715.84       241,981.39            241,981.39                244,325.58
    06/04     16,454,734.45    241,981.39     16,696,715.84       483,962.78            486,306.97                490,844.12
    07/04     16,454,734.45    241,981.39     16,696,715.84       725,944.17            732,825.51                739,858.09
    08/04     16,454,734.45    241,981.39     16,696,715.84       967,925.56            981,839.48                991,216.26
    09/04     16,454,734.45    241,981.39     16,696,715.84     1,209,906.95          1,233,197.65              1,244,540.53
    10/04     16,454,734.45    241,981.39     16,696,715.84     1,451,888.33          1,486,521.91              1,500,587.08
    11/04     16,454,734.45    241,981.39     16,696,715.84     1,693,869.72          1,742,568.47              1,758,448.50
    12/04     16,454,734.45    241,981.39     16,696,715.84     1,935,851.50          2,000,429.89              2,019,183.45
    01/05     16,454,734.45    241,981.39     16,696,715.84     2,177,832.50          2,261,164.84              2,282,262.59
    02/05     16,454,734.45    241,981.39     16,696,715.84     2,419,813.89          2,524,243.98              2,545,417.35
    03/05     16,454,734.45    241,981.39     16,696,715.84     2,661,795.28          2,787,398.74              2,813,184.88
    04/05     16,454,734.45    241,981.39     16,696,715.84     2,903,776.67          3,055,166.27              3,082,389.18/*/
</TABLE>
_________________________

/*/ Includes $178,612.51 of Accrued Rent Interest for the period from 5/04 -
    04/05 that is compounded as of 04/30/05.

                                      173
<PAGE>

<TABLE>
<CAPTION>
                                                              Unpaid Accrued
                                                              Rent, Including
                                                                Compounded
                                                               Accrued Rent
                                                               Interest and
                                                               Excluding All          Unpaid Accrued Rent,
                                                               Other Accrued           Including Accrued       Unpaid Accrued Rent,
                                                               Rent Interest, as of   Rent Interest, as of      Including Accrued
                                                                  Month                     Month              Rent Interest, as of
    Month       Current Rent   Accrued Rent    Base Rent       Commencement              Commencement              Month End
    <S>         <C>            <C>           <C>               <C>                    <C>                     <C>
    05/05       16,788,668.77    492,432.13  17,281,100.90        3,574,821.31/*/           3,574,821.31/*/        3,609,452.39/*/
    06/05       16,788,668.77    492,432.13  17,281,100.90        4,067,253.43/*/           4,101,884.51/*/        4,140,015.01/*/
</TABLE>

                                      174
<PAGE>

                                 Schedule 2.1C
                                 -------------

                            Existing Ground Leases
                            ----------------------

Master Lease No. 1

     1.   Facility 525: Lease dated June 11, 1962 between Mary G. Newcom,
          ------------
          Richard B. Newcom and Mary Beth Potter Querfurth (who acquired title
          as Mary Beth Potter) and Orange Square Development Corporation and
          recorded on June 29, 1962 at Book 6162, Page 162 as document no. 23059
          in the official records of Orange County, California; Lease assignment
          recorded May 12, 1964 at Book 7040, Page 498 in the aforesaid official
          records from Orange Square Development Corporation to H. H. of Orange,
          Inc.; Lease assignment recorded May 12, 1964 at Book 7040, Page 501 in
          the aforesaid official records from Oraveta, Inc. to H.H. of Orange,
          Inc.; Assignment and Assumption of Lease dated November 4, 1992
          between NME Properties, Inc. (formerly Hillhaven, Inc.) and First
          Healthcare Corporation and recorded on November 12, 1992 as document
          no. 92-772410 in the aforesaid official records; Assignment and
          Assumption of Lease dated as of September 30, 1998 between Ventas,
          Inc. and Ventas Realty, Limited Partnership and recorded on September
          28, 2000 as document no. 20000516574 in the aforesaid official
          records; Consent and Estoppel Certificate dated August 23, 2000
          executed by RB Newcom Enterprises, David Newcom and T.J. Properties
          Trust and recorded on ______________, 2000 as document no.
          _____________ in the aforesaid official records.

     2.   Facility 4602:  Lease/Use Agreement and Declaration of Restrictive
          -------------
          Covenant and First Amendment dated _______________, 2001 between the
          City of Coral Gables and Ventas Realty, Limited Partnership; Consent
          and Estoppel Certificate dated _____________, 2001 executed by the
          City of Coral Gables.

                                      175
<PAGE>

                                 Schedule 13.7
                                 -------------

                               Insurance Summary
                               -----------------
        ---------------------------------------------------------------
                                 VENCOR, INC.

                                   PROPERTY

                               INSURANCE SUMMARY
       ---------------------------------------------------------------

NAMED INSURED:        Vencor, Inc.
-------------
ADDRESS:              680 South Fourth Avenue
-------
                      Louisville, KY  40202
EFFECTIVE DATE:       12/1/00 to 12/1/01
--------------
PERILS INSURED:       All Risk Property excluding Boiler & Machinery and
--------------        including Flood and Earthmovement
INTEREST:             All Real and Personal Property owned or used by the
--------              Insured and similar Property of Others for which
                      they are legally liable or have assumed liability
                      or agreed to insure.
VALUATION:            Real and Personal Property    Replacement Cost
---------
                      Time Element                  Actual Loss Sustained

LIMITS:               $150,000,000 Loss Limit
------
COVERAGES:
---------
                      Property Damage                             Policy Limits
                      Business Interruption                       Policy Limits
                      Automatic Acquisition Coverage-120 Days     $20,000,000
                      Errors and Omissions                        $20,000,000
                         Flood Zone A & B                         $10,000,000
                         Earthquake in California, Alaska,        $10,000,000
                         Hawaii and Puerto Rico
                      Expediting Expense                          $5,000,000
                      Service Interruption - PD/TE (II)           $20,000,000
                         Florida                                  $15,000,000
                      Transit                                     $2,500,000
                      Floater/Unnamed Location                    $2,500,000
                                                                  Per location
                      Leasehold Interest                          Policy Limits
                      Ordinary Payroll                            80 days
                      Property in the Course of Construction      Policy Limits
                      Rental Income                               Policy Limits
                      Contingent Business Interruption            $5,000,000
                      Valuable Papers and Records                 $20,000,000
                      Professional Fees                           $500,000
                      Radioactive Contamination                   $3,000,000
                      Debris Removal                              Policy Limits
                      Decontamination Expense                     $100,000
                      Extra Expense                               Policy Limits

                                      176
<PAGE>

COVERAGES:
---------
                      Accounts Receivable                          $20,000,000
                      Demolition & Increased Cost of Construction  Policy Limits
                      EDP Equipment & Media Reconstruction         $3,000,000
                      Extended Period of Indemnity                 365 Days
                      Fine Arts                                    $500,000
                      Brands and Labels                            Policy Limits
                      Earthmovement (1)                            $100,000,000
                         California                                $50,000,000
                      Flood (1)                                    $100,000,000

TIV:    $2,852,213,000 (III)
---
I       Limits are per occurrence and in the annual aggregate
II      8 hour waiting period to apply
III     Pro-rata additions and deletions

DEDUCTIBLES:          Deductible - $100,000 per occurrence.
-----------
                      2% of affected TIV for Florida Named Wind Storm, subject
                      to a $250,000 minimum.
                      5% California Earthmovement subject to a $250,000 minimum
                      $250,000 per occurrence Flood - Zone A and V'

CONDITIONS:           90 Day Notice of Cancellation
----------
                      . Y2k Exclusions
                      . Omnibus Named Insured Wording

                                      177
<PAGE>

--------------------------------------------------------------------------------
                                 VENCOR, INC.

                             BOILER AND MACHINERY

                               INSURANCE SUMMARY
--------------------------------------------------------------------------------

NAMED INSURED:      Vencor, Inc.
-------------
ADDRESS:            680 South Fourth Avenue
-------             Louisville, KY  40202

EFFECTIVE DATE:     12/1/00 to 12/1/01
--------------
PERILS INSURED:     Boiler & Machinery Breakdown
--------------
INTEREST:           All Real and Personal Property owned or used by the
--------            Insured and similar Property of Others for which they are
                    legally liable or have assumed liability or agreed to
                    insure
LIMITS:             Equipment breakdown        -   $100,000,000
------
                    Property Damage            -   Included
                    Business Income            -   Included
                    Extra Expenses             -   Combined with Business Income
                    Service Interruption       -   Combined with Business Income
                    Perishable Goods           -   $100,000
                    Computer Equipment         -   $100,000
                    Demolition and ICC         -   $100,000
                    Expediting Expense         -   $100,000
                    Hazardous Substances       -   $100,000
                    CFC Refrigerants           -   $ 25,000
                    Newly Acquired locations   -   $250,000
TIV:                $2,852,213,000
---
DEDUCTIBLES:        $25,000 Combined, All Coverages
-----------
CONDITIONS:         Extended Business Income: 365 days
----------
                    Newly Acquired Locations: 120 days
                    Absolute Seepage, pollution & Contamination Exclusions
                    Y2k Exclusions

                                      178
<PAGE>

--------------------------------------------------------------------------------
                                 VENCOR, INC.

                                     CRIME

                               INSURANCE SUMMARY
--------------------------------------------------------------------------------

NAMED INSURED:     Vencor, Inc.
-------------
ADDRESS:           680 South Fourth Avenue
--------           Louisville, KY  40202

EFFECTIVE DATE:    1/1/00 to 1/1/01
--------------
LIMITS:            $50,000,000
------
COVERAGE:          Includes employee theft, depositor's forgery, computer theft
--------           and funds transfer fraud
DEDUCTIBLE:        $50,000
----------

--------------------------------------------------------------------------------
                                  VENCOR, INC.

                              AUTOMOBILE LIABILITY

                               INSURANCE SUMMARY
--------------------------------------------------------------------------------
NAMED INSURED:     Vencor, Inc.
-------------
ADDRESS:           680 South Fourth Avenue
-------            Louisville, KY 40202

EFFECTIVE DATE:    1/1/00 to 1/1/01
--------------
LIMITS:            $130,000,000
------
COVERAGE:          Includes owned and non-owned vehicles
--------
DEDUCTIBLE:        None
----------
                                      179
<PAGE>

--------------------------------------------------------------------------------
                                 VENCOR, INC.

                             WORKERS COMPENSATION

                               INSURANCE SUMMARY
--------------------------------------------------------------------------------
NAMED INSURED:     Vencor, Inc.
-------------
ADDRESS:           680 South Fourth Avenue
-------            Louisville, KY  40202

EFFECTIVE DATE:    1/1/00 to 1/1/01
--------------
LIMITS:            Required statutory limits
------

                                      180
<PAGE>

--------------------------------------------------------------------------------
                                 VENCOR, INC.
                               GENERAL LIABILITY
                               INSURANCE SUMMARY
--------------------------------------------------------------------------------
NAMED INSURED:      Vencor, Inc.
-------------
ADDRESS:            680 South Fourth Avenue
-------
                    Louisville, KY 40202

EFFECTIVE DATE:     11/30/00 to date indicated below for particular layer
--------------
LIMITS:             $130,000,000
------
                      $2,000,000 Primary (to 11/30/01); Deductible:  None
                      $23,000,000 in excess of first $2,000,000 (to 1/1/03);
                           Deductible:  None
                      $105,000,000 in excess of first $25,000,000 (to 1/1/02)

--------------------------------------------------------------------------------
                                 VENCOR, INC.
                                  MALPRACTICE
                               INSURANCE SUMMARY
--------------------------------------------------------------------------------
NAMED INSURED:      Vencor, Inc.
-------------

ADDRESS:            680 South Fourth Avenue
-------
                    Louisville, KY  40202

EFFECTIVE DATE:     11/30/00 to date indicated below for particular layer
--------------
LIMITS:             $130,000,000
------
                      $2,000,000 Primary (to 11/30/01); Deductible:  None
                      $23,000,000 in excess of first $2,000,000 (to 1/1/03);
                           Deductible:  None
                      $105,000,000 in excess of first $25,000,000 (to 1/1/02)

                                      181
<PAGE>

                               Schedule 16.1(m)A
                               -----------------

                   Licensed Beds as of the Commencement Date
                   -----------------------------------------

                                Master Lease #1
                                ---------------

*    Deemed number of licensed beds as of the Commencement Date per Section
     16.1(m)(i)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    No. Licensed Beds at
                                                                                                       at commencement
           Facility ID                   Name                         City        State                     Date
------------------------------------------------------------------------------------------------------------------------------------
Hospitals
------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>                                          <C>               <C>                <C>

    1             4622  Vencor Hospital - San Leandro           San Leandro        CA                       99
------------------------------------------------------------------------------------------------------------------------------------
    2             4693  Recovery Inn of Menlo Park              Menlo Park         CA                       16
------------------------------------------------------------------------------------------------------------------------------------
    3             4690  Vencor Hospital - Northlake             Northlake          IL                       94
------------------------------------------------------------------------------------------------------------------------------------
    4             4620  Vencor Hospital - LaGrange              LaGrange           IN                       62
------------------------------------------------------------------------------------------------------------------------------------
    5             4659  Vencor Hospital - Minneapolis           Golden Valley      MN                      111 (92*)
------------------------------------------------------------------------------------------------------------------------------------
    6             4656  Vencor Hospital - Phoenix               Phoenix            AZ                       58
------------------------------------------------------------------------------------------------------------------------------------
    7             4642  Vencor Hospital - Orange County         Westminster        CA                       99
------------------------------------------------------------------------------------------------------------------------------------
    8             4648  Vencor Hospital - San Diego             San Diego          CA                       70
------------------------------------------------------------------------------------------------------------------------------------
    9             4602  Vencor Hospital - Coral Gables          Coral Gables       FL                       53
------------------------------------------------------------------------------------------------------------------------------------
   10             4652  Vencor Hospital - North Florida         Green Cove Spr.    FL                       60
------------------------------------------------------------------------------------------------------------------------------------
   11             4637  Vencor Hospital - Chicago North         Chicago            IL                      205 (165*)
------------------------------------------------------------------------------------------------------------------------------------
   12             4638  Vencor Hospital - Indianapolis          Indianapolis       IN                       59
------------------------------------------------------------------------------------------------------------------------------------
   13             4633  Vencor Hospital - Louisville            Louisville         KY                      374
------------------------------------------------------------------------------------------------------------------------------------
   14             4680  Vencor Hospital - St. Louis             St. Louis          MO                       60
------------------------------------------------------------------------------------------------------------------------------------
   15             4618  Vencor Hospital - Oklahoma City         Oklahoma City      OK                       59
------------------------------------------------------------------------------------------------------------------------------------
   16             4619  Vencor Hospital - Pittsburgh            Oakdale            PA                       63
------------------------------------------------------------------------------------------------------------------------------------
   17             4628  Vencor Hospital - Chattanooga           Chattanooga        TN                       49
------------------------------------------------------------------------------------------------------------------------------------
Nursing Facilities
------------------------------------------------------------------------------------------------------------------------------------
    1              167  Canyonwood Nursing & Rehab. Ctr.        Redding            CA                      115
------------------------------------------------------------------------------------------------------------------------------------
    2              525  La Veta Healthcare Center               Orange             CA                      112
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      182
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      No. Licwnsed Beds
                                                                                                      at Commencement
              Facility ID              Name                         City           State                    Date
------------------------------------------------------------------------------------------------------------------------------------
   <S>             <C>     <C>                                     <C>             <C>                <C>
    3              562     Andrew House Healthcare                 New Britain        CT                       90
------------------------------------------------------------------------------------------------------------------------------------
    4              406     Muncie Health Care & Rehab.             Muncie             IN                      205
------------------------------------------------------------------------------------------------------------------------------------
    5              779     Westview Nursing & Rehab. Center        Bedford            IN                      149
------------------------------------------------------------------------------------------------------------------------------------
    6              280     Winchester Centre for Health/Rehab.     Winchester         KY                      192
------------------------------------------------------------------------------------------------------------------------------------
    7              783     Lexington Centre for Health & Rehab.    Lexington          KY                      180
------------------------------------------------------------------------------------------------------------------------------------
    8              784     Northfield Centre for Health & Rehab.   Louisville         KY                      120
------------------------------------------------------------------------------------------------------------------------------------
    9              507     Country Manor Rehab. & Nsg. Center      Newburyport        MA                      123
------------------------------------------------------------------------------------------------------------------------------------
   10              582     Colony House Nsg. & Rehab. Ctr.         Abington           MA                      102
------------------------------------------------------------------------------------------------------------------------------------
   11              550     Norway Rehabilitation & Living Center   Norway             ME                       70
------------------------------------------------------------------------------------------------------------------------------------
   12              558     Fieldcrest Manor Nursing Home           Waldoboro          ME                       70
------------------------------------------------------------------------------------------------------------------------------------
   13              416     Park Place Health Care Center           Great Falls        MT                      223
------------------------------------------------------------------------------------------------------------------------------------
   14              704     Guardian Care of Roanoke Rapids         Roanoke Rapids     NC                      110
------------------------------------------------------------------------------------------------------------------------------------
   15              806     Chapel Hill Rehab. & Healthcare Ctr.    Chapel Hill        NC                      120
------------------------------------------------------------------------------------------------------------------------------------
   16              577     Minerva Park Nursing & Rehab. Ctr.      Columbus           OH                      101
------------------------------------------------------------------------------------------------------------------------------------
   17              635     Coshocton Health & Rehab. Ctr.          Coshocton          OH                      110
------------------------------------------------------------------------------------------------------------------------------------
   18              132     Madison Healthcare & Rehab. Ctr.        Madison            TN                      102
------------------------------------------------------------------------------------------------------------------------------------
   19              140     Wasatch Care Center                     Ogden              UT                       69
------------------------------------------------------------------------------------------------------------------------------------
   20              247     St. George Care and Rehab. Center       St. George         UT                      159
------------------------------------------------------------------------------------------------------------------------------------
   21              114     Arden Rehabilitation & Healthcare Ctr.  Seattle            WA                      100 (90)*
------------------------------------------------------------------------------------------------------------------------------------
   22              180     Vencor of Vancouver HC & Rehab.         Vancouver          WA                       98
------------------------------------------------------------------------------------------------------------------------------------
   23              767     Colony Oaks Care Center                 Appleton           WI                      102
------------------------------------------------------------------------------------------------------------------------------------
   24              482     Wind River Healthcare & Rehab. Ctr.     Riverton           WY                       90
------------------------------------------------------------------------------------------------------------------------------------
   25              150     Nob Hill Healthcare Center              San Francisco      CA                      180
------------------------------------------------------------------------------------------------------------------------------------
   26              335     Lawton Healthcare Center                San Francisco      CA                       75
------------------------------------------------------------------------------------------------------------------------------------
   27              745     Aurora Care Center                      Aurora             CO                      120
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      183
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      No. Licwnsed Beds
                                                                                                      at Commencement
              Facility ID            Name                           City           State                    Date
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
   <S>             <C>    <C>                                     <C>                <C>               <C>
   28              567    Nutmeg Pavilion Healthcare              New London         CT                      140
-----------------------------------------------------------------------------------------------------------------------------------
   29              660    Savannah Specialty Care Center          Savannah           GA                      104
-----------------------------------------------------------------------------------------------------------------------------------
   30              218    Cascade Care Center                     Caldwell           ID                      112 (93*)
-----------------------------------------------------------------------------------------------------------------------------------
   31              221    Lewiston Rehabilitation and Care Ctr.   Lewiston           ID                       96
-----------------------------------------------------------------------------------------------------------------------------------
   32              409    Mountain Valley Care and Rehab.         Kellogg            ID                       68
-----------------------------------------------------------------------------------------------------------------------------------
   33              113    Southwood Health & Rehab Center         Terre Haute        IN                      149
-----------------------------------------------------------------------------------------------------------------------------------
   34              286    Columbia Healthcare Facility            Evansville         IN                      186
-----------------------------------------------------------------------------------------------------------------------------------
   35              501    Blue Hills Alzheimers Care Center       Stoughton          MA                      101
-----------------------------------------------------------------------------------------------------------------------------------
   36              516    Hammersmith House Nsg. Care Ctr.        Saugus             MA                       88
-----------------------------------------------------------------------------------------------------------------------------------
   37              518    Timberlyn Heights Nsg. & Alz. Ctr.      Great Barrington   MA                       78
-----------------------------------------------------------------------------------------------------------------------------------
   38              537    Quincy Rehab. &  Nursing Center         Quincy             MA                      139
-----------------------------------------------------------------------------------------------------------------------------------
   39              573    Eagle Pond Rehab. & Living Center       South Dennis       MA                      142
-----------------------------------------------------------------------------------------------------------------------------------
   40              581    Blueberry Hill Healthcare               Beverly            MA                      146
-----------------------------------------------------------------------------------------------------------------------------------
   41              588    Walden Rehab. & Nursing Center          Concord            MA                      123
-----------------------------------------------------------------------------------------------------------------------------------
   42          985/198    Harrington House Nsg. & Rehab. Ctr.     Walpole            MA                       90
-----------------------------------------------------------------------------------------------------------------------------------
   43              433    Parkview Acres Care & Rehab Ctr.        Dillon             MT                      108
-----------------------------------------------------------------------------------------------------------------------------------
   44              137    Sunnybrook Alzheimers & HC Spec.        Raleigh            NC                      126
-----------------------------------------------------------------------------------------------------------------------------------
   45              188    Cypress Pointe Rehab & HC Center        Winmington         NC                      100
-----------------------------------------------------------------------------------------------------------------------------------
   46              190    Winston-Salem Rehab & HC Center         Winston-Salem      NC                      230
-----------------------------------------------------------------------------------------------------------------------------------
   47              191    Silas Creek Manor                       Winston-Salem      NC                       99
-----------------------------------------------------------------------------------------------------------------------------------
   48              707    Rehab. & Nursing Center of Monroe       Monroe             NC                      174
-----------------------------------------------------------------------------------------------------------------------------------
   49              593    Hanover Terrace Healthcare              Hanover            NH                      100
-----------------------------------------------------------------------------------------------------------------------------------
   50              560    Franklin Woods Health Care Center       Columbus           OH                      100
------------------------------------------------------------------------------------------------------------------------------------
   51              572    Winchester Place Nsg. & Rehab. Ctr.     Canal Winchester   OH                      201
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      184
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                     No. Licensed Beds
          Facility ID              Name                          City            State              at Commencement Date
---------------------------------------------------------------------------------------------------------------------------------
<S>       <C>           <C>                                     <C>                <C>                     <C>
   52        868        Lebanon Country Manor                   Lebanon            OH                      100
---------------------------------------------------------------------------------------------------------------------------------
   53        452        Sunnyside Care Center                   Salem              OR                      124
---------------------------------------------------------------------------------------------------------------------------------
   54        884        Masters Health Care Center              Algood             TN                      175
---------------------------------------------------------------------------------------------------------------------------------
   55        825        Nansemond Pointe Rehab. & HC Ctr.       Suffolk            VA                      194
---------------------------------------------------------------------------------------------------------------------------------
   56        829        River Pointe Rehab. & Healthc. Ctr.     Virginia Beach     VA                      148
---------------------------------------------------------------------------------------------------------------------------------
   57        127        Northwest Continuum Care Center         Longview           WA                       74
---------------------------------------------------------------------------------------------------------------------------------
   58        165        Rainier Vista Care Center               Puyallup           WA                      120
---------------------------------------------------------------------------------------------------------------------------------
   59        185        Heritage Health & Rehab. Center         Vancouver          WA                       53
---------------------------------------------------------------------------------------------------------------------------------
   60        769        North Ridge Med. & Rehab. Center        Manitowoc          WI                      131
---------------------------------------------------------------------------------------------------------------------------------
   61        772        Family Heritage Med. & Rehab. Ctr.      Wisconsin Rapids   WI                      140
---------------------------------------------------------------------------------------------------------------------------------
   62        775        Sheridan Medical Complex                Kenosha            WI                      106
---------------------------------------------------------------------------------------------------------------------------------
   63        776        Woodstock Health & Rehab. Center        Kenosha            WI                      183
---------------------------------------------------------------------------------------------------------------------------------
   64        441        Mountain Towers Healthcare & Rehab      Cheyenne           WY                      170
---------------------------------------------------------------------------------------------------------------------------------
   65        436        Valley Healthcare & Rehab. Center       Tucson             AZ                      143
---------------------------------------------------------------------------------------------------------------------------------
   66        742        Sonoran Rehab & Care Center             Phoenix            AZ                      100
---------------------------------------------------------------------------------------------------------------------------------
   67        738        Bay View Nursing & Rehab. Center        Alameda            CA                      180
---------------------------------------------------------------------------------------------------------------------------------
   68        117        East Manor Medical Care Center          Sarasota           FL                      169
---------------------------------------------------------------------------------------------------------------------------------
   69        112        Royal Oaks Healthcare & Rehab Ctr.      Terre Haute        IN                      230
---------------------------------------------------------------------------------------------------------------------------------
   70        327        Laurel Ridge Rehab. & Nursing Ctr.      Jamaica Plain      MA                      120
---------------------------------------------------------------------------------------------------------------------------------
   71        527        Briarwood Health Care Nursing Ctr.      Needham            MA                      120
---------------------------------------------------------------------------------------------------------------------------------
   72        528        Westridge Healthcare Center             Marlborough        MA                      196
---------------------------------------------------------------------------------------------------------------------------------
   73        529        Bolton Manor Nursing Home               Marlborough        MA                      160
---------------------------------------------------------------------------------------------------------------------------------
   74        538        West Roxbury Manor                      West Roxbury       MA                       76
---------------------------------------------------------------------------------------------------------------------------------
   75        552        Shore Village Rehab. & Nursing Ctr.     Rockland           ME                       61
---------------------------------------------------------------------------------------------------------------------------------
   76        555        Brentwood Rehab. & Nsg. Center          Yarmouth           ME                       83
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      185
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
          Facility ID              Name                          City            State               No. Licensed Beds
                                                                                                    at Commencement Date
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
<S>       <C>           <C>                                     <C>                <C>                     <C>
   77        138        Blue Ridge Rehab. & Healthcare Ctr.     Asheville          NC                      120
---------------------------------------------------------------------------------------------------------------------------------
   78        724        Rehab. & Health Center of Gastonia      Gastonia           NC                      118
---------------------------------------------------------------------------------------------------------------------------------
   79        591        Dover Rehab. & Living Center            Dover              NH                      112
---------------------------------------------------------------------------------------------------------------------------------
   80        640        Las Vegas Healthcare & Rehab. Ctr.      Las Vegas          NV                       79
---------------------------------------------------------------------------------------------------------------------------------
   81        655        Federal Heights Rehab. & Nsg. Ctr.      Salt Lake City     UT                      154
---------------------------------------------------------------------------------------------------------------------------------
   82        462        Queen Anne Healthcare                   Seattle            WA                      171
---------------------------------------------------------------------------------------------------------------------------------
   83        483        Sage View Care Center                   Rock Springs       WY                      101
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  186

<PAGE>

                               Schedule 16.1(m)B
                               -----------------

   Minimum Licensed Beds at Certain Facilities Due to Involuntary Reduction
   ------------------------------------------------------------------------

<TABLE>
<CAPTION>
 Master Lease No. 1
-------------------
                                                                  Minimum Number of    95% of Minimum
                                                                  -----------------    --------------
Facility No.                   Facility Name                        Licensed Beds
------------                   -------------                        -------------
<S>    <C>             <C>                                        <C>                  <C>
 1.    4620            Vencor Hospital - LaGrange                         55                 53
 2.    4628            Vencor Hospital - Chattanooga                      44                 42
 3.    4633            Vencor Hospital - Louisville                      133                127
 4.    4690            Vencor Hospital - Northlake                        78                 75
 5.     117            East Manor Medical Care Center                    141                134
 6.     137            Sunnybrook Alzheimer & HC Spec.                    99                 95
 7.     185            Heritage Health & Rehab Center                     48                 46
 8.     433            Parkview Acres Care & Rehab Center                 95                 91
 9.     555            Brentwood Rehab & Nursing Center                   72                 69
10.     655            Federal Heights Rehab & Nursing Center            127                121
11.     769            North Ridge Med. & Rehab Center                   116                111
12.     772            Family Heritage Med. & Rehab Center               118                113
13.     776            Woodstock Health & Rehab Center                   136                130
</TABLE>

The parties agree that the licensed beds number that appears in the "95% of
Minimum" column for a particular Facility shall equal 95% of the number of
licensed beds shown in the "Minimum Number of Licensed Beds" column for such
Facility, in each case rounded up to the closest whole number of licensed beds.

                                      187
<PAGE>

                                Schedule 25.1.7
                                ---------------

                          Certain Existing Subleases
                          --------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
   Facility Number - Name          Subtenant                     Date of Sublease       Square Footage
------------------------------------------------------------------------------------------------------------------
<S>                            <C>                               <C>                    <C>
0655 - Federal Heights         IHC Health Services                    9/15/99                   388
------------------------------------------------------------------------------------------------------------------
4633 - VH Louisville           Xodiax                                 3/6/00                    9,955
------------------------------------------------------------------------------------------------------------------
4659 - VH Minneapolis          Minnesota Lung Center                  5/1/98                    4,232
                               Hennepin Faculty Assoc.                1/1/99                    693
------------------------------------------------------------------------------------------------------------------
4680 - VH St. Louis            Kwame Construction                     Verbal                    9 Parking Spaces
                               Park Plaza Chase Co.                                             86 Parking Spaces
                               Maring-Weissman                        Verbal                    20 Parking Spaces
                               Del Coronado Apts.                     Not dated                 20 Parking Spaces
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      188
<PAGE>

                                Schedule 40.12
                                --------------
                         Tenant - Affiliate Sublessees
                         -----------------------------
                       Master Lease #1 (CMBS Portfolio)
                       --------------------------------

*    VO is the operator of this facility; there is no applicable tenant-
affiliate at this facility.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------

Facility                Name                               City                 State           Tenant-Affiliate
   ID
-----------------------------------------------------------------------------------------------------------------------------
<S>         <C>                                          <C>                     <C>
  4622      Vencor Hospital - San Leandro                San Leandro             CA                  VO*
-----------------------------------------------------------------------------------------------------------------------------
  4618      Vencor Hospital - Oklahoma City              Oklahoma City           OK                  VHE
-----------------------------------------------------------------------------------------------------------------------------
   406      Muncie Health Care & Rehab.                  Muncie                  IN                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
   779      Westview Nursing & Rehab. Center             Bedford                 IN                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
   280      Winchester Centre for Health/Rehab.          Winchester              KY                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
   783      Lexington Centre for Health & Rehab.         Lexington               KY                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
   784      Northfield Centre for Health & Rehab.        Louisville              KY                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
   577      Minerva Park Nursing & Rehab. Ctr.           Columbus                OH                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   635      Coshocton Health & Rehab. Ctr.               Coshocton               OH                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   132      Madison Healthcare & Rehab. Ctr.             Madison                 TN                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
  4659      Vencor Hospital - Minneapolis                Golden Valley           MN                  THC - Minneapolis, Inc.
-----------------------------------------------------------------------------------------------------------------------------
  4619      Vencor Hospital - Pittsburgh                 Oakdale                 PA                  VHE
-----------------------------------------------------------------------------------------------------------------------------
   562      Andrew House Healthcare                      New Britain             CT                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   507      Country Manor Rehab. & Nsg. Center           Newburyport             MA                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   582      Colony House Nsg. & Rehab. Ctr.              Abington                MA                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   550      Norway Rehabilitation & Living Center        Norway                  ME                  VNCW
-----------------------------------------------------------------------------------------------------------------------------
   558      Fieldcrest Manor Nursing Home                Waldoboro               ME                  VNCW
-----------------------------------------------------------------------------------------------------------------------------
   704      Guardian Care of Roanoke Rapids              Roanoke Rapids          NC                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   806      Chapel Hill Rehab. & Healthcare Ctr.         Chapel Hill             NC                  VNCE
-----------------------------------------------------------------------------------------------------------------------------
   767      Colony Oaks Care Center                      Appleton                WI                  VNCLP
-----------------------------------------------------------------------------------------------------------------------------
  4693      Recovery Inn of Menlo Park                   Menlo Park              CA                  RIMP
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      189
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------

Facility                Name                               City                 State           Tenant-Affiliate
   ID
-----------------------------------------------------------------------------------------------------------------------------
<S>         <C>                                          <C>                     <C>
 4642       Vencor Hospital - Orange County              Westminster             CA                 VO*
-----------------------------------------------------------------------------------------------------------------------------
  167       Canyonwood Nursing & Rehab. Ctr.             Redding                 CA                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  525       La Veta Healthcare Center                    Orange                  CA                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  416       Park Place Health Care Center                Great Falls             MT                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  140       Wasatch Care Center                          Ogden                   UT                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  247       St. George Care and Rehab. Center            St. George              UT                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  114       Arden Rehabilitation & Healthcare Ctr.       Seattle                 WA                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  180       Vencor of Vancouver HC & Rehab.              Vancouver               WA                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  482       Wind River Healthcare & Rehab. Ctr.          Riverton                WY                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
 4638       Vencor Hospital - Indianapolis               Indianapolis            IN                 VHLP
-----------------------------------------------------------------------------------------------------------------------------
  436       Valley Healthcare & Rehab. Center            Tucson                  AZ                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  742       Sonoran Rehab & Care Center                  Phoenix                 AZ                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  738       Bay View Nursing & Rehab. Center             Alameda                 CA                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  112       Royal Oaks Healthcare & Rehab Ctr.           Terre Haute             IN                 VNCLP
-----------------------------------------------------------------------------------------------------------------------------
  138       Blue Ridge Rehab. & Healthcare Ctr.          Asheville               NC                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  724       Rehab. & Health Center of Gastonia           Gastonia                NC                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  640       Las Vegas Healthcare & Rehab. Ctr.           Las Vegas               NV                 Vencor Nevada, L.L.C.
-----------------------------------------------------------------------------------------------------------------------------
  655       Federal Heights Rehab. & Nsg. Ctr.           Salt Lake City          UT                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  462       Queen Anne Healthcare                        Seattle                 WA                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
  483       Sage View Care Center                        Rock Springs            WY                 VNCW
-----------------------------------------------------------------------------------------------------------------------------
 4633       Vencor Hospital - Louisville                 Louisville              KY                 VHLP
-----------------------------------------------------------------------------------------------------------------------------
  117       East Manor Medical Care Center               Sarasota                FL                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  327       Laurel Ridge Rehab. & Nursing Ctr.           Jamaica Plain           MA                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  527       Briarwood Health Care Nursing Ctr.           Needham                 MA                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  528       Westridge Healthcare Center                  Marlborough             MA                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
  529       Bolton Manor Nursing Home                    Marlborough             MA                 VNCE
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      190
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
     Facility        Name                                     City                State     Tenant-Affiliate
        ID
------------------------------------------------------------------------------------------------------------------------------------
     <S>    <C>                                          <C>                     <C>        <C>
       538    West Roxbury Manor                           West Roxbury            MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       552    Shore Village Rehab. & Nursing Ctr.          Rockland                ME          VNCW
------------------------------------------------------------------------------------------------------------------------------------
       555    Brentwood Rehab. & Nsg. Center               Yarmouth                ME          VNCW
------------------------------------------------------------------------------------------------------------------------------------
       591    Dover Rehab. & Living Center                 Dover                   NH          VNCW
------------------------------------------------------------------------------------------------------------------------------------
      4620    Vencor Hospital - LaGrange                   LaGrange                IN          VHLP
------------------------------------------------------------------------------------------------------------------------------------
       113    Southwood Health & Rehab Center              Terre Haute             IN          VNCLP
------------------------------------------------------------------------------------------------------------------------------------
       286    Columbia Healthcare Facility                 Evansville              IN          VNCLP
------------------------------------------------------------------------------------------------------------------------------------
       190    Winston-Salem Rehab & HC Center              Winston-Salem           NC          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       191    Silas Creek Manor                            Winston-Salem           NC          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       560    Franklin Woods Health Care Center            Columbus                OH          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       572    Winchester Place Nsg. & Rehab. Ctr.          Canal Winchester        OH          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       868    Lebanon Country Manor                        Lebanon                 OH          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       884    Masters Health Care Center                   Algood                  TN          VNCLP
------------------------------------------------------------------------------------------------------------------------------------
      4602    Vencor Hospital - Coral Gables               Coral Gables            FL          VHE
------------------------------------------------------------------------------------------------------------------------------------
      4652    Vencor Hospital - North Florida              Green Cove Spr.         FL          VHE
------------------------------------------------------------------------------------------------------------------------------------
       567    Nutmeg Pavilion Healthcare                   New London              CT          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       501    Blue Hills Alzheimers Care Center            Stoughton               MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       516    Hammersmith House Nsg. Care Ctr.             Saugus                  MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       518    Timberlyn Heights Nsg. & Alz. Ctr.           Great Barrington        MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       537    Quincy Rehab. &  Nursing Center              Quincy                  MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       573    Eagle Pond Rehab. & Living Center            South Dennis            MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       581    Blueberry Hill Healthcare                    Beverly                 MA          VNCE
------------------------------------------------------------------------------------------------------------------------------------
       593    Hanover Terrace Healthcare                   Hanover                 NH          VNCW
------------------------------------------------------------------------------------------------------------------------------------
      4656    Vencor Hospital - Phoenix                    Phoenix                 AZ          VHW
------------------------------------------------------------------------------------------------------------------------------------
      4648    Vencor Hospital - San Diego                  San Diego               CA          VO*
------------------------------------------------------------------------------------------------------------------------------------
       150    Nob Hill Healthcare Center                   San Francisco           CA          VNCW
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      191
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
     Facility        Name                                   City               State        Tenant-Affiliate
        ID
------------------------------------------------------------------------------------------------------------------------------------
    <S>     <C>                                          <C>                    <C>         <C>
       335  Lawton Healthcare Center                     San Francisco           CA            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       745  Aurora Care Center                           Aurora                  CO            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       218  Cascade Care Center                          Caldwell                ID            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       221  Lewiston Rehabilitation and Care Ctr.        Lewiston                ID            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       409  Mountain Valley Care and Rehab.              Kellogg                 ID            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       433  Parkview Acres Care & Rehab Ctr.             Dillon                  MT            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       441  Mountain Towers Healthcare & Rehab           Cheyenne                WY            VNCW
------------------------------------------------------------------------------------------------------------------------------------
      4680  Vencor Hospital - St. Louis                  St. Louis               MO            VHE
------------------------------------------------------------------------------------------------------------------------------------
      4628  Vencor Hospital - Chattanooga                Chattanooga             TN            VHLP
------------------------------------------------------------------------------------------------------------------------------------
       660  Savannah Specialty Care Center               Savannah                GA            VNCLP
------------------------------------------------------------------------------------------------------------------------------------
       588  Walden Rehab. & Nursing Center               Concord                 MA            VNCE
------------------------------------------------------------------------------------------------------------------------------------
   985/198  Harrington House Nsg. & Rehab. Ctr.          Walpole                 MA            VNCE
------------------------------------------------------------------------------------------------------------------------------------
       137  Sunnybrook Alzheimers & HC Spec.             Raleigh                 NC            VNCE
------------------------------------------------------------------------------------------------------------------------------------
       188  Cypress Pointe Rehab & HC Center             Wilmington              NC            VNCE
------------------------------------------------------------------------------------------------------------------------------------
       707  Rehab. & Nursing Center of Monroe            Monroe                  NC            VNCE
------------------------------------------------------------------------------------------------------------------------------------
       825  Nansemond Pointe Rehab. & HC Ctr.            Suffolk                 VA            VNCE
------------------------------------------------------------------------------------------------------------------------------------
       829  River Pointe Rehab. & Healthc. Ctr.          Virginia Beach          VA            VNCE
------------------------------------------------------------------------------------------------------------------------------------
      4690  Vencor Hospital - Northlake                  Northlake               IL            THC - Chicago, Inc.
------------------------------------------------------------------------------------------------------------------------------------
      4637  Vencor Hospital - Chicago North              Chicago                 IL            THC - Chicago, Inc.
------------------------------------------------------------------------------------------------------------------------------------
       452  Sunnyside Care Center                        Salem                   OR            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       127  Northwest Continuum Care Center              Longview                WA            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       165  Rainier Vista Care Center                    Puyallup                WA            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       185  Heritage Health & Rehab. Center              Vancouver               WA            VNCW
------------------------------------------------------------------------------------------------------------------------------------
       769  North Ridge Med. & Rehab. Center             Manitowoc               WI            VNCLP
------------------------------------------------------------------------------------------------------------------------------------
       772  Family Heritage Med. & Rehab. Ctr.           Wisconsin Rapids        WI            VNCLP
------------------------------------------------------------------------------------------------------------------------------------
       775  Sheridan Medical Complex                     Kenosha                 WI            VNCLP
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      192
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
     Facility         Name                               City                 State         Tenant-Affiliate
        ID
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                 <C>                  <C>            <C>
       776  Woodstock Health & Rehab. Center             Kenosha                 WI          VNCLP
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

LEGEND
CGHC - Courtland Gardens Health Center, Inc.
HHC - Homestead Health Center, Inc.
LHCC - Lafayette Health Care Center, Inc.
RIMP - Recovery Inn of Menlo Park L.L.C.
VHE - Vencor Hospitals East, L.L.C.
VHW - Vencor Hospitals West, L.L.C.
VHLP - Vencor Hospital Limited Partnership
VNCE - Vencor Nursing Centers East, L.L.C.
VNCLP - Vencor Nursing Centers Limited Partnership
VNCW - Vencor Nursing Centers West, L.L.C.
VO - Vencor Operating, Inc.

                                      193

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