As filed with the Securities and Exchange Commission on May 16, 1995.
Registration No. 33-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________

VENCOR, INC.
(Exact name of registrant as specified in its charter)

Delaware 8069 61-1055020
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)

3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
(502) 569-7300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Jill L. Force
General Counsel and Secretary
Vencor, Inc.
3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
(502) 569-7300
(Name and address, including zip code, and telephone number, including area
code, of agent for service)

__________________

Copies to:

Joseph B. Frumkin Richard P. Adcock Peter Golden
Sullivan & Cromwell Senior Vice President, Fried, Frank, Harris,
125 Broad Street General Counsel and Secretary Shriver & Jacobson
New York, New York 10004 The Hillhaven Corporation One New York Plaza
(212) 558-4000 1148 Broadway Plaza New York, New York 10004
Tacoma, Washington 98402 (212) 859-8000
(206) 572-4901
__________________

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
__________________

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
__________________

CALCULATION OF REGISTRATION FEE

Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered(1) Share(2) Price(2) Registration Fee(2)

Common Stock, par value $.25 per
share, each with .667 of an
associated participating preferred
stock purchase right. . . . . 27,991,894 Shares $27.251790 $762,829,220.20 $263,046.40

<FN>
(1) Represents the amount of Vencor Common Stock estimated to
be issuable upon consummation of the Merger of The Hillhaven
Corporation with and into Veritas Holdings Corp., based upon the
number of shares of Hillhaven Common Stock oustanding on May 11, 1995.
(2) Pursuant to Rules 457(f)(1) and 457(c), and solely for purposes of
calculating the registration fee, the registration fee was
computed on the basis of the high and low prices of a share of
Hillhaven Common Stock as reported on the New York Stock Exchange
Composite Tape on May 9, 1995.
</FN>

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

VENCOR, INC.

CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K

Form S-4 Item Number and Heading Location in Prospectus

1. Forepart of Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover Inside Front and Outside
Pages of Prospectus . . . . . . . . . Back Cover Pages

3. Risk Factors, Ratio of Earnings to Summary; Certain
Fixed Charges and Other Information . Considerations; Unaudited
Pro Forma Condensed
Combined Financial
Information; The Special
Meetings; The Merger

4. Terms of the Transaction . . . . . . Summary; The Merger;
Comparison of Certain
Rights of Stockholders of
Vencor and Hillhaven;
Certain Federal Income Tax
Consequences of the Merger

5. Pro Forma Financial Information . . . Summary; Unaudited Pro
Forma Condensed Combined
Financial Information

6. Material Contacts with the Company Summary; Operations and
Being Acquired . . . . . . . . . . . Management After the
Merger; The Merger

7. Additional Information Required for *
Reoffering by Persons and Parties
Deemed to be Underwriters . . . . . .

8. Interests of Named Experts and Counsel Experts; Validity of
Shares

9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities . . . . . . . . . . .

10. Information with Respect to S-3 Incorporation of Certain
Registrants . . . . . . . . . . . . . Information by Reference;
Summary; Unaudited Pro
Forma Condensed Combined
Financial Information

11. Incorporation of Certain Information Incorporation of Certain
by Reference . . . . . . . . . . . . Information by Reference

12. Information with Respect to S-2 or S-3 *
Registrants . . . . . . . . . . .

13. Incorporation of Certain Information *
by Reference . . . . . . . . . . . .

14. Information with Respect to *
Registrants Other Than S-2 or S-3
Registrants . . . . . . . . . . . . .

15. Information with Respect to S-3 Incorporation of Certain
Companies . . . . . . . . . . . . . . Information by Reference;
Summary; Unaudited Pro
Forma Condensed Combined
Financial Information

16. Information with Respect to S-2 or S-3 *
Companies . . . . . . . . . . . . . .

17. Information with Respect to Companies *
Other than S-2 or S-3 Companies . . .

18. Information if Proxies, Consents or
Authorizations are to be Solicited:

1. Date, Time and Place Information Outside Front Cover Page;
Summary; The Special
Meetings

2. Revocability of Proxy The Special Meetings

3. Dissenters' Rights of Appraisal Summary; The Special
Meetings; The Merger;
Comparison of Certain
Rights of Stockholders of
Vencor and Hillhaven

4. Persons Making the Solicitation Outside Front Cover Page;
Summary; The Special
Meetings; The Merger
5. Interest of Certain Persons in Summary; The Merger; The
Matters to be Acted Upon and Special Meetings; Security
Voting Securities and Principal Ownership
Holders Thereof

6. Vote Required for Approval The Special Meetings

7. Directors and Executive Incorporation of Certain
Officers, Executive Information by Reference;
Compensation, and Certain Summary; Operations and
Relationships and Related Management After the
Transactions Merger

19. Information if Proxies, Consents or
Authorizations are not be
Solicited or in an Exchange Offer *

* Indicates that Item is not applicable or answer is in the negative.

[LETTERHEAD OF VENCOR, INC.]

June __, 1995

Dear Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders
of Vencor, Inc. ("Vencor") to be held at 1:00 p.m. local time, on July __,
1995 at the [Hyatt Regency, 320 West Jefferson Street, Louisville,
Kentucky]. I hope that you will be present or represented by proxy at this
important meeting.

Vencor has entered into an agreement with The Hillhaven Corporation
("Hillhaven") pursuant to which Hillhaven will be merged into a subsidiary
of Vencor. The merger, which has been unanimously approved by the Boards of
Directors of both Vencor and Hillhaven, will create one of the nation's
largest providers of healthcare services primarily focusing on the needs of
the elderly. With operations in 38 states, the merged companies will cover
more than 80% of the nation's population, with 36 long-term intensive care
hospitals and 310 nursing centers with more than 42,000 beds, 58 retail and
institutional pharmacy outlets and 23 retirement housing communities with
3,000 apartments. Healthcare services provided through this network of
facilities will include long-term intensive hospital care, long-term
nursing care, acute cardiopulmonary care, subacute and post-operative care,
inpatient and outpatient rehabilitation therapy, specialized care for
Alzheimer's disease, hospice care, pharmacy services and retirement and
assisted living.

The purpose of the Special Meeting is to approve the Agreement and
Plan of Merger among Vencor, Vencor's subsidiary, Veritas Holdings Corp.,
and Hillhaven (the "Merger Agreement") and the transactions contemplated
thereby, including the issuance in the merger of shares of Vencor common
stock to holders of Hillhaven common stock and an amendment to Vencor's
Certificate of Incorporation to increase the number of authorized shares of
Vencor common stock from 60,000,000 shares to 180,000,000 shares. The
merger and related matters are described in greater detail in the
accompanying Joint Proxy Statement/Prospectus, which we urge you to read
carefully. Your Board of Directors unanimously recommends that you vote FOR
these matters.

Approval of the matters related to the merger to be voted on at the
Special Meeting requires a favorable vote of a majority of the shares of
Vencor common stock voted at the Special Meeting. Approval of the amendment
to Vencor's Certificate of Incorporation to be voted on at the Special
Meeting requires a favorable vote of a majority of the outstanding shares
of Vencor common stock. Stockholders are entitled to vote all shares of
Vencor common stock held by them on __________, 1995, which is the record
date for the Special Meeting.

We urge you to consider carefully these important matters, which are
described in the enclosed Joint Proxy Statement/Prospectus. In order to
ensure that your vote is represented at the meeting, please indicate your
choice on the proxy form, date and sign it, and return it in the enclosed
envelope. A prompt response will be appreciated. If you are able to attend
the Special Meeting, you may revoke your proxy at any time before its exer-
cise and vote in person if you wish.

Sincerely,

W. Bruce Lunsford
Chairman of the Board, President and
Chief Executive Officer

VENCOR, INC.
3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY __, 1995

NOTICE HEREBY IS GIVEN that a Special Meeting of Stockholders (the
"Vencor Special Meeting") of Vencor, Inc., a Delaware corporation
("Vencor"), has been called by the Board of Directors of Vencor and will be
held at the [Hyatt Regency, 320 West Jefferson Street, Louisville, Kentucky
40202] at 1:00 p.m. local time on July __, 1995 to consider and vote upon
the following matters described in the accompanying Joint Proxy Statement/
Prospectus:

1. To consider and vote upon a proposal to adopt and approve an
Agreement and Plan of Merger, dated as of April 23, 1995, as it may be
amended, supplemented or modified from time to time (the "Merger Agree-
ment"), among Vencor, Veritas Holdings Corp., a Delaware corporation and
a wholly owned subsidiary of Vencor ("Vencor Sub"), and The Hillhaven
Corporation, a Nevada corporation ("Hillhaven"), and to approve the
transactions contemplated by the Merger Agreement, including the
issuance of shares of Vencor common stock, par value $.25 per share
("Vencor Common Stock"), pursuant to the Merger Agreement;

2. To consider and vote upon a proposal to amend Vencor's
Certificate of Incorporation to increase the authorized number of shares
of Vencor Common Stock from 60,000,000 shares to 180,000,000 shares; and

3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.

Notwithstanding stockholder approval of the foregoing proposals,
Vencor reserves the right to abandon the merger at any time prior to the
consummation of the merger, subject to the terms and conditions of the
Merger Agreement.

Holders of Vencor Common Stock will not be entitled to appraisal or
dissenters' rights in connection with the merger.

Only holders of Vencor Common Stock of record at the close of
business on ___________, 1995 (the "Record Date"), are entitled to notice
of and to vote at such meeting or any adjournments or postponements
thereof.

Approval of the matters to be voted upon in connection with the
merger requires the affirmative vote of a majority of the shares of Vencor
Common Stock voted at the Vencor Special Meeting. Approval of the amendment
to Vencor's Certificate of Incorporation requires the affirmative vote of a
majority of the outstanding shares of Vencor Common Stock.

A form of Proxy and a Joint Proxy Statement/Prospectus containing
more detailed information with respect to the matters to be considered at
the Vencor Special Meeting (including the Merger Agreement attached as
Appendix A thereto) accompany and form a part of this notice.

By Order of the Board of Directors

JILL L. FORCE
General Counsel and Secretary

Louisville, Kentucky
June __, 1995

__________________

THE BOARD OF DIRECTORS OF VENCOR UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE TO APPROVE THE MATTERS TO BE VOTED UPON AT THE VENCOR SPECIAL MEETING.

PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY FORM PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE VENCOR SPECIAL MEETING. YOUR PROXY WILL BE
REVOCABLE, EITHER IN WRITING OR BY VOTING IN PERSON AT THE VENCOR SPECIAL
MEETING, AT ANY TIME PRIOR TO ITS EXERCISE.

__________________

The Proxy Solicitor For Vencor:

[to come]

Call Toll Free [ ]
[ ]

YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY

THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, WA 98402
June __, 1995

Dear Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders
(the "Hillhaven Special Meeting") of The Hillhaven Corporation
("Hillhaven") to be held on July __, 1995, at 10:00 a.m., local time, at
the corporate headquarters of Hillhaven, 1148 Broadway Plaza, First Floor,
Tacoma, Washington.

At the Hillhaven Special Meeting, you will be asked to consider and
vote on a proposal to approve and adopt an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which Hillhaven will be merged with
and into (the "Merger") a wholly owned subsidiary of Vencor, Inc.
("Vencor"). The Merger will create one of the nation's largest providers of
healthcare services primarily focusing on the needs of the elderly. With
operations in 38 states, the merged company will cover more than 80% of the
nation's population, with 36 long-term intensive care hospitals and 310
nursing centers with more than 42,000 beds, 58 retail and institutional
pharmacy outlets and 23 retirement housing communities with 3,000
apartments. Healthcare services provided through this network of facilities
will include long-term intensive hospital care, long-term nursing care,
acute cardiopulmonary care, subacute and post-operative care, inpatient and
outpatient rehabilitation therapy, specialized care for Alzheimer's
disease, hospice care, pharmacy services and retirement and assisted
living.

The Board of Directors of Hillhaven has carefully reviewed and
considered the terms and conditions of the proposed Merger. In addition,
the Board of Directors of Hillhaven has received written opinions from its
financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to
the effect that, as of April 23, 1995, and as of the date hereof, and based
upon the assumptions made, matters considered and limits of review as set
forth in such opinions, the consideration to be received by the holders of
Hillhaven Common Stock (other than Tenet Healthcare Corporation) pursuant
to the Merger Agreement is fair to such holders from a financial point of
view.

HILLHAVEN'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, HILLHAVEN AND ITS STOCKHOLDERS.
ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT ALL STOCKHOLDERS VOTE FOR ITS APPROVAL AND
ADOPTION.

I urge you to review and consider carefully the accompanying Notice
of Special Meeting of Stockholders and Joint Proxy Statement/Prospectus,
which contain information about Hillhaven and Vencor and describe the
proposed Merger and certain related matters.

All stockholders are invited to attend the Hillhaven Special Meeting
in person. The affirmative vote of the holders of not less than a majority
of the outstanding shares of Hillhaven Common Stock and two-thirds of each
class of Hillhaven Preferred Stock, each voting separately as a class, will
be necessary for approval and adoption of the Merger Agreement.

If the Merger Agreement is approved and the Merger is consummated,
you will be sent a letter of transmittal with instructions for surrendering
your certificates representing shares of Hillhaven Common Stock. Please do
not send your share certificates until you receive these materials.

In order that your shares may be represented at the Hillhaven Special
Meeting, you are urged promptly to complete, sign, date and return the
accompanying Proxy in the enclosed envelope, whether or not you plan to
attend the Hillhaven Special Meeting. If you attend the Hillhaven Special
Meeting in person, you may, if you wish, vote personally on all matters
brought before the Hillhaven Special Meeting even if you have previously
returned your Proxy. Your prompt cooperation will be appreciated.

Sincerely,

Bruce L. Busby
Chairman of the Board
and Chief Executive Officer

THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, WA 98402
___________________

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY __, 1995

To the Stockholders of The Hillhaven Corporation:

Notice is hereby given that a Special Meeting of Stockholders (the
"Hillhaven Special Meeting") of The Hillhaven Corporation, a Nevada
corporation ("Hillhaven"), will be held on July __, 1995, at 10:00 a.m.,
local time, at the corporate headquarters of Hillhaven, 1148 Broadway
Plaza, First Floor, Tacoma, Washington, for the following purposes:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of April 23, 1995 (the
"Merger Agreement"), by and among Vencor, Inc., a Delaware
corporation ("Vencor"), Veritas Holdings Corp., a Delaware
corporation and a wholly owned subsidiary of Vencor, and
Hillhaven and to approve the transactions contemplated thereby.

2. To transact such other business as may properly come before the
Hillhaven Special Meeting or any adjournments or postponements
thereof.

The Board of Directors of Hillhaven has fixed the close of business
on [ ], 1995, as the record date for the determination of
stockholders entitled to notice of and to vote at the Hillhaven Special
Meeting, and only stockholders of record at such time will be entitled to
notice of, and to vote at, the Hillhaven Special Meeting.

A form of Proxy and a Joint Proxy Statement/Prospectus containing
more detailed information with respect to the matters to be considered at
the Hillhaven Special Meeting accompany this notice.

You are cordially invited and urged to attend the Hillhaven Special
Meeting in person. Whether or not you plan to attend, please complete,
sign, date and promptly return the enclosed Proxy in the enclosed self-
addressed, stamped envelope. If you attend the Hillhaven Special Meeting
and desire to revoke your Proxy and vote in person, you may do so. In any
event, a Proxy may be revoked at any time before it is voted.

THE BOARD OF DIRECTORS OF HILLHAVEN UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.

IN ORDER TO ASSURE YOUR REPRESENTATION AT THE HILLHAVEN SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS
BEING SOLICITED BY THE BOARD OF DIRECTORS OF HILLHAVEN, WHETHER OR NOT YOU
PLAN TO ATTEND THE HILLHAVEN SPECIAL MEETING. AN ADDRESSED RETURN ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR
THAT PURPOSE. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.

By Order of the Board of Directors,

Richard P. Adcock
Secretary

Tacoma, Washington
June , 1995

The Proxy Solicitor For Hillhaven:

[to come]

Call Toll Free [ ]
[ ]

YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY

Subject to Completion, dated May 16, 1995

VENCOR, INC. THE HILLHAVEN
CORPORATION
JOINT PROXY STATEMENT
VENCOR, INC.
PROSPECTUS

This Joint Proxy Statement/Prospectus is being furnished to
the stockholders of Vencor, Inc., a Delaware corporation
("Vencor"), in connection with the solicitation of proxies by
Vencor's Board of Directors (the "Vencor Board") from holders of
outstanding shares of Vencor common stock, par value $.25 per share
("Vencor Common Stock"), for use at a Special Meeting of
Stockholders of Vencor to be held on July __, 1995 and at any
adjournments or postponements thereof (the "Vencor Meeting"). This
Joint Proxy Statement/Prospectus is also being furnished to the
stockholders of The Hillhaven Corporation, a Nevada corporation
("Hillhaven"), in connection with the solicitation of proxies by
Hillhaven's Board of Directors (the "Hillhaven Board") from holders
of outstanding shares of Hillhaven's common stock, par value $.75
per share ("Hillhaven Common Stock"), from the holder of
outstanding shares of Hillhaven's Series C Preferred Stock, par
value $.15 per share ("Hillhaven Series C Preferred Stock"), and
from the holder of outstanding shares of Hillhaven's Series D
Preferred Stock, par value $.15 per share ("Hillhaven Series D
Preferred Stock" and, together with the Hillhaven Series C
Preferred Stock, the "Hillhaven Preferred Stock"), for use at a
Special Meeting of Stockholders of Hillhaven to be held on July __,
1995 and at any adjournments or postponements thereof (the
"Hillhaven Meeting," and, together with the Vencor Meeting, the
"Special Meetings").

At the Special Meetings, stockholders of Vencor and Hillhaven
will be asked to consider and vote upon a proposal to adopt and
approve an Agreement and Plan of Merger, dated as of April 23,
1995, among Vencor, Veritas Holdings Corp., a Delaware corporation
("Vencor Sub") and a wholly owned subsidiary of Vencor, and
Hillhaven (as it may be amended, supplemented or otherwise modified
from time to time, the "Merger Agreement"), which is attached as
Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference, and to approve the transactions
contemplated by the Merger Agreement. The Merger Agreement provides
for the merger (the "Merger") of Hillhaven with and into Vencor
Sub, with Vencor Sub being the corporation surviving the Merger
(sometimes hereinafter referred to as the "Surviving Corporation")
and with its name changed in the Merger to The Hillhaven
Corporation. Upon the Merger becoming effective (the "Effective
Time"), each share of Hillhaven Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares owned by
Vencor or any subsidiary of Vencor (collectively, the "Vencor
Companies") or held in Hillhaven's treasury) will be converted into
the right to receive that number of shares of Vencor Common Stock
(the "Conversion Number") determined by dividing $32.25 by the average
closing price on the New York Stock Exchange (the "NYSE") of Vencor Common
Stock (as reported in the NYSE Composite Transactions reporting system as
published in The Wall Street Journal or, if not published therein, in
another authoritative source) for the ten consecutive trading days ending
with the second trading day immediately preceding the Effective Time (the
"Vencor Average Price"); provided, that the Conversion Number will not be
less than 0.768 nor more than 0.977, except in certain limited
circumstances described in the Merger Agreement. In addition, at the
Effective Time, each share of Hillhaven Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares
owned by any Vencor Company or held in Hillhaven's treasury or held by a
holder of Hillhaven Preferred Stock exercising dissenters' rights with
respect to Hillhaven Preferred Stock ("Hillhaven Preferred Dissenting
Stockholders")) will be converted into the right to receive $900 in cash,
plus accrued and unpaid dividends to the Effective Time. See "The
Merger--Dissenters' Rights." Each share of Vencor Common Stock issued in
the Merger will be accompanied by the corresponding Vencor participating
preferred share purchase right. See "Description of Capital Stock of
Vencor."
At the Vencor Meeting, together with considering and voting upon
the approval and adoption of the Merger Agreement, stockholders of Vencor will
be asked to consider and vote upon a proposal to amend Vencor's Certificate
of Incorporation (the "Vencor Certificate") to increase the authorized
number of shares of Vencor Common Stock from 60,000,000 shares to
180,000,000 shares (the "Charter Amendment"). This amendment is necessary
to provide sufficient shares of Vencor Common Stock for issuance in the
Merger and available authorized and unissued shares for future use. See
"Amendment to the Vencor Certificate of Incorporation."

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

Vencor has filed a Registration Statement on Form S-4 (including
exhibits and amendments thereto, the "Vencor S-4 Registration Statement")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
covering the shares of Vencor Common Stock (and accompanying Vencor
participating preferred stock purchase rights) issuable in the Merger. This
Joint Proxy Statement/Prospectus constitutes both the Joint Proxy Statement
of Vencor and Hillhaven relating to the solicitation of proxies for use at
their respective Special Meetings and the Vencor Prospectus filed as part
of the Vencor S-4 Registration Statement. This Joint Proxy
Statement/Prospectus and the proxies are first being provided to
stockholders of Vencor and Hillhaven on or about June __, 1995.

For certain factors which should be considered in evaluating the
Merger, see "Certain Considerations."

THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/
PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement/Prospectus is June __, 1995.

iii

AVAILABLE INFORMATION

Each of Vencor and Hillhaven is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). The reports, proxy statements and other
information filed by Vencor and Hillhaven with the Commission can be
inspected and copied at the commission's public reference room located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the public reference facilities in the Commission's regional offices
located at: 7 World Trade Center, 13th Floor, New York, New York 10048, and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates
by writing to the Securities and Exchange Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The shares of
Vencor Common Stock and Hillhaven Common Stock are listed on the NYSE and,
as such, the periodic reports, proxy statements and other information filed
by Vencor and Hillhaven with the Commission may be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.

This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Vencor S-4 Registration Statement covering the
securities offered hereby which Vencor has filed with the Commission,
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission, and to which portions reference is hereby
made for further information with respect to Vencor, Hillhaven and the
securities offered hereby. Statements contained herein concerning any
documents are not necessarily complete and, in each instance, reference is
made to the copies of such documents filed as exhibits to the Vencor
S-4 Registration Statement. Each such statement is qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

This Joint Proxy Statement/Prospectus incorporates by reference
documents not presented herein or delivered herewith. Documents relating to
Vencor, excluding exhibits to such documents unless such exhibits are
specifically incorporated herein, are available without charge upon request
to Secretary, Vencor, Inc., 3300 Providian Center, 400 West Market Street,
Louisville, Kentucky 40202. Telephone requests may be directed to Jill L.
Force at (502) 569-7300. Documents relating to Hillhaven, excluding
exhibits to such documents unless such exhibits are specifically
incorporated herein, are available without charge upon request to
Secretary, The Hillhaven Corporation, 1148 Broadway Plaza, Tacoma,
Washington 98402. Telephone requests may be directed to Richard P. Adcock
at (206) 572-4901. In order to ensure timely delivery of the documents, any
request should be made by ________________, 1995.

The following documents filed with the Commission by Vencor (File
No. 1-10989) are incorporated herein by reference: (a) Vencor Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994
Vencor 10-K"); (b) the portions of the Vencor Proxy Statement for the
Annual Meeting of Stockholders held on May 9, 1995 that have been
incorporated by reference in the 1994 Vencor 10-K; (c) Vencor Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1995;
(d) Vencor Current Reports on Form 8-K filed April 24, 1995 and May 5,
1995, (e) the description of Vencor Common Stock contained in Vencor's
Registration Statement on Form 8-A filed with the Commission January 22,
1992 and (f) the description of the Vencor Participating Preferred Stock
Purchase Rights contained in Vencor's Registration Statement on Form 8-A
filed with the Commission on July 21, 1993.

The following documents filed with the Commission by Hillhaven (File
No. 1-10426) are incorporated herein by reference: (a) Hillhaven Annual
Report on Form 10-K for the fiscal year ended May 31, 1994 (the "1994
Hillhaven 10-K"); (b) The portions of the Hillhaven Proxy Statement for the
Annual Meeting of Stockholders held on September 27, 1994 that have been
incorporated by reference in

the 1994 Hillhaven 10-K; (c) Hillhaven Quarterly Reports on Form 10-Q for
the quarterly periods ended August 31, 1994, November 30, 1994 and February
28, 1995; and (d) Hillhaven Current Reports on Form 8-K dated October 12,
1994, January 27, 1995, March 6, 1995 and April 23, 1995.

All documents filed by either Vencor or Hillhaven pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date hereof and prior to the Special Meetings shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of
such filing. Any statement contained herein or in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein or in any other subsequently filed document which also is,
or is deemed to be, incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed to constitute a part hereof, except as so modified or superseded.

No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus or in
the documents incorporated herein by reference in connection with the
solicitation and the offering made hereby and, if given or made, such
information or representation should not be relied upon as having been
authorized by Vencor or Hillhaven. This Joint Proxy Statement/Prospectus
does not constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered by this Joint Proxy Statement/Prospectus,
or the solicitation of a proxy from any person, in any jurisdiction in
which it is unlawful to make such offer, solicitation of an offer or proxy
solicitation. Neither the delivery of this Joint Proxy Statement/Prospectus
nor any distribution of the securities made under this Joint Proxy
Statement/Prospectus shall, under any circumstances, create an implication
that there has been no change in the affairs of Vencor or Hillhaven since
the date of this Joint Proxy Statement/Prospectus other than as set forth
in the documents incorporated herein by reference.

v
TABLE OF CONTENTS

Page
Available Information . . . . . . . . . . iii

Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . iii

Summary . . . . . . . . . . . . . . . . . 1
The Companies . . . . . . . . . . . . . 1
The Nationwide Transaction . . . . . . 2
The Special Meetings . . . . . . . . . 2
The Merger . . . . . . . . . . . . . . 3
Certain Federal Income Tax Consequences 9
Certain Effects of the Merger on the Rights
of Holders of Hillhaven Common Stock 9
Operations and Management After the Merger 10
Amendment to the Vencor Certificate of
Incorporation . . . . . . . . . . . . 10
Markets and Market Prices . . . . . . . 10
Selected Historical Financial Information 12
Summary Selected Unaudited Pro Forma
Condensed Combined Financial Data . . 18
Comparison of Historical and Equivalent
Per Share Data (unaudited) . . . . . 21

Certain Considerations . . . . . . . . . 23
Healthcare Reform . . . . . . . . . . . 23
Certain Financial Considerations . . 23
Reimbursement by Third Party Payors . . 23
Governmental Regulation . . . . . . . . 24
Competition . . . . . . . . . . . . . . 24
Limited Availability of Labor . . . . . 24

Unaudited Pro Forma Condensed Combined
Financial Information . . . . . . . . . 25

The Special Meetings . . . . . . . . . . 34
General . . . . . . . . . . . . . . . . 34
Date, Place and Time . . . . . . . . . 34
Record Dates . . . . . . . . . . . . . 35
Votes Required . . . . . . . . . . . . 35
Voting and Revocation of Proxies . . . 36
Solicitation of Proxies . . . . . . . . 37
Dissenters' Rights . . . . . . . . . . 37

Operations and Management After the Merger 38
Post-Merger Operations . . . . . . . . 38
Directors After the Merger . . . . . . 39
Executive Officers After the Merger . . 40
Post-Merger Dividend Policy . . . . . . 41

The Merger . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . 42
Background of the Merger . . . . . . . 42
Reasons for the Merger; Recommendations of
the Boards of Directors . . . . . . . 46
Opinions of Financial Advisors . . . . 50
Terms of the Merger . . . . . . . . . . 52
Effective Time; Closing . . . . . . . . 53
Conduct of Business Prior to Effective Time;
Certain Covenants; No Solicitations of
Transactions . . . . . . . . . . . . 53
Certain Regulatory Matters . . . . . . 55
Employee Benefits . . . . . . . . . . . 56
Indemnification and Insurance . . . . . 57
Conditions . . . . . . . . . . . . . . 57

Page

Waiver and Amendment . . . . . . . . . . 58
Termination . . . . . . . . . . . . . . . 58
Certain Termination Fees . . . . . . . . 59
Expenses . . . . . . . . . . . . . . . . 60
Accounting Treatment . . . . . . . . . . 60
Resale of Vencor Capital Stock . . . . . 60
Hillhaven Litigation . . . . . . . . . . 61
Interests of Certain Persons in the
Transactions . . . . . . . . . . . . . 61
Proposed Amendments to Vencor's Certificate
of Incorporation . . . . . . . . . . . 63
Dissenters' Rights . . . . . . . . . . . 63
Surrender of Certificates . . . . . . . . 65
New York Stock Exchange Listing . . . . . 66

Certain Federal Income Tax Consequences of the
Merger . . . . . . . . . . . . . . . . 67
Tax Opinion . . . . . . . . . . . . . . 67
Consequences to Hillhaven Stockholders 67
Fractional Shares . . . . . . . . . . 67
Consequences to Hillhaven, Vencor and
Vencor Sub . . . . . . . . . . . . . 68

Security Ownership . . . . . . . . . . . 69

Description of Vencor Capital Stock . . . 70
Vencor Common Stock . . . . . . . . . . 70
Vencor Preferred Stock . . . . . . . . 70
Delaware Anti-takeover Law and Certain
Bylaw Provisions . . . . . . . . . . . 74
Transfer Agent . . . . . . . . . . . . . 74

Comparison of Certain Rights of Stockholders
of Vencor and Hillhaven . . . . . . . . 75
General . . . . . . . . . . . . . . . . 75
Size and Classification of the Board of
Directors; Hillhaven Designated
Directors . . . . . . . . . . . . . . 75
Removal of Directors; Filling Vacancies
on the Board of Directors . . . . . . 76
Action by Written Consent . . . . . . . 76
Meetings of Stockholders . . . . . . . 77
Stockholder Proposals . . . . . . . . . 77
Required Vote for Authorization of
Certain Actions . . . . . . . . . . . 78
Amendment of Corporate Charter and Bylaws 78
Appraisal and Dissenters' Rights . . . 79
Fair Price and Anti-Greenmail Provisions 80
State Antitakeover Statutes . . . . . . 80
Rights Plans . . . . . . . . . . . . . 81
Limitation on Directors' Liability . . 82
Indemnification of Officers and Directors 83
No Cumulative Voting . . . . . . . . . 83
Conflict-of-Interest Transactions . . . 83
Dividends and Other Distributions . . . 84
Duties of Directors . . . . . . . . . . 84
Issuance of Rights or Options to Purchase
Shares to Directors, Officers and
Employees . . . . . . . . . . . . . . 84
Loans to Directors . . . . . . . . . . 85

Amendment to the Vencor Certificate of
Incorporation . . . . . . . . . . . . . 86
Purpose and Effect of the Charter
Amendment . . . . . . . . . . . . . . 86

vii
Page

Experts . . . . . . . . . . . . . . . . . 87

Validity of Shares . . . . . . . . . . . 87

Submission of Stockholder Proposals . . . 87

Appendix A--Agreement and Plan of Merger
Appendix B--Opinion of CS First Boston
Corporation
Appendix C--Opinion of Merrill, Lynch, Pierce,
Fenner & Smith Incorporated
Appendix D--Amendment to Vencor's Certificate of
Incorporation
Appendix E--Sections 78.471 to 78.502 of Nevada
Revised Statutes

SUMMARY

The following is a summary of certain information contained elsewhere
in this Joint Proxy Statement/ Prospectus and does not purport to be
complete and is qualified in its entirety by reference to the full text of
this Joint Proxy Statement/Prospectus, including the Appendices attached
hereto. As used in this Joint Proxy Statement/ Prospectus, "Vencor" refers
to Vencor, Inc. and "Hillhaven" before the Effective Time of the Merger
refers to The Hillhaven Corporation and thereafter refers to the Surviving
Corporation in the Merger (which will be renamed The Hillhaven
Corporation), and unless the context otherwise requires, such entities and
their respective subsidiaries and affiliated partnerships. The information
contained in this Joint Proxy Statement/Prospectus with respect to Vencor
has been supplied by Vencor, and the information with respect to Hillhaven
and Nationwide Care, Inc. and their respective affiliates has been supplied
by Hillhaven. Except as otherwise noted, the information in this Joint
Proxy Statement/Prospectus relating to Vencor reflects the three-for-two
stock split of Vencor Common Stock effected on October 25, 1994. Except as
otherwise noted, the information in this Joint Proxy Statement/ Prospectus
relating to Hillhaven reflects a one-for-five reverse stock split effected
on November 1, 1993.

The Companies

Vencor

Vencor operates a network of healthcare services for patients who
suffer from cardiopulmonary disorders. The foundation of Vencor's network
is a nationwide chain of long-term intensive care hospitals. Vencor's
hospitals treat medically complex, chronically ill patients who generally
are dependent upon ventilators or other life-support devices. Vencor's
Vencare contract services division treats lower acuity patients at nursing
homes and hospitals owned by third parties. Through its subsidiary, Ventech
Systems, Inc. ("Ventech"), Vencor is developing ProTouch(TM), a
comprehensive paperless clinical information system designed to increase
the operating efficiencies of Vencor's hospitals, as well as other
healthcare facilities.

Since its inception in 1985, Vencor has created the nation's largest
network of long-term intensive care hospitals. As of May 5, 1995, Vencor
owned, leased or managed 35 intensive care hospitals, one general acute
care hospital and one long-term hospital unit located in 17 states with a
total of 3,276 licensed beds. As of May 1, 1995, Vencor's Vencare division
had contracts to provide respiratory care services and supplies to
approximately 740 nursing centers and subacute care services to 32 nursing
centers and hospitals located in 26 states.

Vencor was incorporated in Kentucky in 1983 and commenced operations
in 1985. It was reorganized as a Delaware corporation in 1987. Its
principal executive offices are located at 3300 Providian Center, 400 West
Market Street, Louisville, Kentucky 40202 and its telephone number is (502)
569-7300.

Hillhaven

Hillhaven operates nursing centers, pharmacies and retirement housing
communities. Based upon the number of beds in service and net operating
revenues, Hillhaven is the second-largest long-term care provider in the
United States and believes that it is one of the leading providers of
Alzheimer's care. Pharmacy operations are conducted through Hillhaven's
wholly-owned subsidiary, Medisave Pharmacies, Inc.

Hillhaven provides a wide range of diversified healthcare services,
including long-term care and subacute medical and rehabilitation services,
such as wound care, oncology treatment, brain injury care, stroke therapy
and orthopedic therapy. Subacute medical and rehabilitation services are
offered at all of Hillhaven's nursing centers and are the fastest growing
components of Hillhaven's nursing center operations. Hillhaven believes
that it is also one of the largest providers of management services for

physical, occupational and speech therapy programs in the United States. In
addition, Hillhaven currently provides long-term care to residents of
Hillhaven's nursing centers with Alzheimer's disease through 68 Alzheimer's
care units.

Hillhaven has entered into the Nationwide Share Exchange Agreement
(as defined below) pursuant to which it will acquire Nationwide Care, Inc.
and certain of its affiliated entities. See "--The Nationwide Transaction."

Hillhaven was incorporated under the laws of the state of Nevada in
May 1989. Its principal executive offices are located at 1148 Broadway
Plaza, Tacoma, Washington 98402, and its telephone number is
(206) 572-4901.

The Nationwide Transaction

Hillhaven has entered into an Amended and Restated Agreement and Plan
of Share Exchange and Agreement to Assign Partnership Interests, executed
on April 14, 1995, but dated as of February 27, 1995 (the "Nationwide Share
Exchange Agreement"), with Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation
("PEI"), and Meadowvale Skilled Care Center, Inc., an Indiana corporation
("Meadowvale"), and certain Nationwide affiliated partnerships, pursuant to
which the stockholders of Nationwide will receive upon consummation of the
transaction an aggregate of 5,000,000 shares of Hillhaven Common Stock,
subject to adjustment if the average closing price per share of Hillhaven
Common Stock for the ten days immediately preceding such consummation is
less than $24, but in no event will such stockholders receive more than
5,500,000 shares of Hillhaven Common Stock (the "Nationwide Transaction").
Hillhaven presently expects the Nationwide Transaction to be completed on
or before June 30, 1995.

Nationwide operates long-term healthcare centers located in Indiana,
Ohio and Florida. Nationwide's operations include 23 nursing centers with a
total of 3,257 licensed beds, two retirement centers with a total of 240
units, two assisted living centers totaling 162 units and 40 additional
assisted living units located in one of the retirement centers. Of
Nationwide's 27 centers, 14 are owned, 11 are leased and two are managed
for other parties. Twenty-one of Nationwide's centers are located in
Indiana, three are located in Ohio and three are located in Florida.

Unless otherwise stated, any discussion in this Joint Proxy
Statement/Prospectus relating to the operations of Vencor following the
Merger or the operations of Hillhaven, assumes that the Nationwide
Transaction was consummated prior to the Effective Time of the Merger.

The Special Meetings

Vencor

The Vencor Meeting to consider and vote on approval and adoption of
the Merger Agreement and the transactions contemplated thereby and the
Charter Amendment will be held on July __, 1995 at 1:00 p.m. local time, at
the [Hyatt Regency, 320 West Jefferson Street, Louisville, Kentucky]. Only
holders of record of Vencor Common Stock at the close of business on
_________, 1995 (the "Vencor Record Date") will be entitled to vote at the
Vencor Meeting. At _________, 1995, there were ________ shares of Vencor
Common Stock outstanding and entitled to vote. Each share of Vencor Common
Stock is entitled to one vote.

Hillhaven

The Hillhaven Meeting to consider and vote on approval and adoption
of the Merger Agreement and the transactions contemplated thereby, will be
held on July __, 1995 at 10:00 a.m. local time, at the corporate head-
quarters of Hillhaven, 1148 Broadway Plaza, First Floor, Tacoma,
Washington. Only holders of record of Hillhaven Stock at the close of
business on _______, 1995 (the "Hillhaven Record Date") will be entitled to
vote at the Hillhaven Meeting. At ________, 1995, there were outstanding
and entitled to vote _______ shares of Hillhaven Common Stock, 35,000
shares of Hillhaven Series C Preferred Stock and ________ shares of
Hillhaven Series D Preferred Stock. Each share of Hillhaven Common Stock
and Hillhaven Preferred Stock (collectively, "Hillhaven Stock") is entitled
to one vote.

For additional information relating to the Special Meetings, see "The
Special Meetings."

The Merger

The Merger Agreement provides for a business combination between
Vencor and Hillhaven in which, subject to the satisfaction of the
conditions therein, Hillhaven will be merged with and into Vencor Sub and
the holders of Hillhaven Common Stock will be issued Vencor Common Stock in
a transaction intended to qualify as a pooling of interests for accounting
purposes and as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), for federal
income tax purposes. As a result of the Merger, the successor to Hillhaven
would become a wholly-owned subsidiary of Vencor and such subsidiary will
be renamed The Hillhaven Corporation. In the Merger, each outstanding share
of Hillhaven Common Stock will be converted into a fraction of a share of
Vencor Common Stock (the "Conversion Number") determined by dividing $32.25
by the Vencor Average Price, except that the Conversion Number will not be
less than 0.768 or greater than 0.977 except in certain limited
circumstances described under "The Merger--Terms of the Merger" and each
share of Hillhaven Preferred Stock will be converted into the right to
receive $900 in cash, plus accrued and unpaid dividends to the Effective
Time. Each outstanding share of Vencor Common Stock will remain outstanding
and be unaffected by the Merger. As a result of the Merger, except in certain
limited circumstances described under "The Merger--Terms of the Merger,"
holders of Hillhaven Common Stock immediately prior to the Merger will own
between approximately 49% and 55% of the Vencor Common Stock on a primary basis
after the Merger, depending upon the Conversion Number.

Recommendations of the Boards of Directors

Vencor. The Vencor Board has unanimously determined that the terms of
the Merger Agreement and the transactions contemplated thereby are fair to,
and in the best interests of, Vencor and its stockholders. Accordingly, the
Vencor Board has unanimously approved the Merger Agreement and unanimously
recommends that the stockholders of Vencor vote FOR approval and adoption
of the Merger Agreement and the transactions contemplated thereby and vote
FOR the adoption of the Charter Amendment. The recommendation of the Vencor
Board is based on a number of factors described in "The Merger--Reasons for
the Merger; Recommendations of the Boards of Directors-- Vencor."

Hillhaven. The Hillhaven Board has unanimously determined that the
terms of the Merger Agreement and the transactions contemplated thereby are
fair to, and in the best interests of, Hillhaven and its stockholders.
Accordingly, the Hillhaven Board has unanimously approved the Merger
Agreement and unanimously recommends that the stockholders of Hillhaven
vote FOR approval and adoption of the Merger Agreement. The recommendation
of the Hillhaven Board is based on a number of factors described in "The
Merger--Reasons for the Merger; Recommendations of the Boards of
Directors--Hillhaven."

Opinions of Financial Advisors

Vencor. CS First Boston Corporation ("First Boston") has delivered
its written opinions to the Vencor Board, dated April 23, 1995 and the date
of this Joint Proxy Statement/Prospectus, to the effect that, as of such
dates, the consideration, taken as a whole, to be paid by Vencor in the
Merger is fair to Vencor from a financial point of view. A copy of the
opinion of First Boston, dated as of the date hereof, which sets forth the
assumptions made, procedures followed, matters considered, limitations on
and the scope of the review by First Boston in rendering its opinion, is
attached as Appendix B to this Joint Proxy Statement/ Prospectus and is
incorporated herein by reference. Vencor stockholders are urged to read
First Boston's opinion in its entirety. See "The Merger--Opinions of
Financial Advisors--Vencor."

Hillhaven. Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") has delivered its written opinions, dated April 23, 1995
and the date of this Joint Proxy Statement/Prospectus, to the Hillhaven
Board to the effect that, as of such dates, and based upon the assumptions
made, matters considered and limits of review as set forth in such
opinions, the consideration to be received by the holders of shares of
Hillhaven Common Stock (other than Tenet Healthcare Corporation ("Tenet"))
pursuant to the Merger Agreement is fair to such holders from a financial
point of view. A copy of the opinion of Merrill Lynch dated as of the date
hereof, is attached as Appendix C to this Joint Proxy Statement/Prospectus.
Holders of shares of Hillhaven Common Stock are urged to, and should, read
such opinion in its entirety. See "The Merger--Opinions of Financial
Advisors--Hillhaven."

Effective Time

The Merger will become effective at the Effective Time which will
occur on the date and at such time as both the Certificate of Merger is
filed with the Secretary of State of the State of Delaware and the Articles
of Merger are filed with the Secretary of State of the State of Nevada. See
"The Merger--Effective Time; Closing."

Covenants

The Merger Agreement provides that, during the period from the date
of the Merger Agreement until the Effective Time, except as otherwise
contemplated by the Merger Agreement, each of Vencor and Hillhaven will,
and each of its respective subsidiaries will, conduct its business only in
the ordinary course consistent with past practice and use its respective
reasonable best efforts to preserve intact its business organization and
its relationships with third parties and to keep available the services of
their present officers and key employees. See "The Merger--Conduct of
Business Prior to Effective Time; Certain Covenants; No Solicitations of
Transactions--Operational Covenants" for a discussion of additional
restrictions on Vencor, Hillhaven and their subsidiaries with respect to
the conduct of their respective businesses prior to the Effective Time.

as reasonably practicable, notify the other after receipt of any
Acquisition Proposal or any indication that any person or entity is
considering making an Acquisition Proposal and identify the party with whom
it has negotiated or to whom it has disclosed confidential information. An
"Acquisition Proposal" is defined in the Merger Agreement as any good faith
offer or proposal for a merger or other business combination involving
Vencor or Hillhaven, as the case may be, or any of their respective
subsidiaries or the acquisition of any equity interest in, or a substantial
portion of the assets of, it or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement. See "The Merger--Conduct
of Business Prior to Effective Time; Certain Covenants; No Solicitations of
Transactions--No Solicitations."

Regulatory Matters

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. Vencor and Hillhaven will
each file a Premerger Notification and Report Form (a "Notification and
Report Form") pursuant to the HSR Act with the Antitrust Division of the
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC"). The
required waiting period under the HSR Act will expire at 11:59 p.m. on the
date which is 30 days following the filing of such Notification and Report
Form, unless extended by a request for additional information or
documentary material or unless earlier termination of the waiting period is
granted. Vencor and Hillhaven expect to make the required filings under the
HSR Act prior to June 1, 1995. At any time before or after the Effective
Time, the FTC, the DOJ or others could take action under the antitrust laws
with respect to the Merger, including seeking to enjoin the consummation of
the Merger, to rescind the Merger or to require divestiture of substantial
assets of Vencor, Hillhaven or the Surviving Corporation. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be
made or, if such a challenge is made, that it would not be successful.

In addition, Hillhaven and Vencor are required to file notices with,
and in some jurisdictions obtain approvals or consents from, various state
agencies responsible for the licensure or certification of healthcare
facilities in states where Hillhaven conducts its nursing center business
or Vencor conducts its businesses.

Employee Benefits

Hillhaven officers and employees hold outstanding stock awards in the
form of stock option grants, restricted stock grants and performance share
grants under the Hillhaven 1990 Stock Incentive Plan (the "Stock Incentive
Plan"). Hillhaven directors hold outstanding stock option grants under the
Hillhaven Directors' Stock Option Plan (the "Directors' Stock Plan" and,
together with the Stock Incentive Plan, the "Hillhaven Option Plans").
Under the Directors' Stock Plan, the Merger constitutes an event pursuant
to which all outstanding options will become exercisable and vested. The
Merger Agreement does not provide for continuation of stock option grants
and restricted stock grants under the Stock Incentive Plan and accordingly
all stock option awards will become exercisable and vested and all
restrictions on restricted stock grants will lapse in accordance with the
terms of the Stock Incentive Plan. Vencor will deliver in respect of each
stock option granted under the Directors' Stock Plan and the Stock
Incentive Plan the number of shares of Vencor Common Stock equal to the
product of (x) the result of multiplying the Conversion Number by a
fraction, the numerator of which is the excess, if any, of the product of
the Conversion Number and the Vencor Average Price (the "Transaction
Value") over the exercise or strike price of such Hillhaven Option, and the
denominator of which is the Transaction Value and (y) the number of shares
of Hillhaven Common Stock subject to such Hillhaven Option. The Merger
Agreement provides that Vencor will continue the performance share grants
under the Stock Incentive Plan and immediately after the Merger satisfy its
obligations under such performance share grants by the delivery to holders
of such grants a number of shares of Vencor Common Stock equal to the
product of (x) .75 multiplied by the Conversion Number and (y) the number
of shares of Hillhaven Conversion Stock subject to such award.

Hillhaven officers and employees hold investment options (the "PIP
Options") to purchase Hillhaven's Convertible Debentures due May 29, 1999
(the "PIP Convertible Debentures") granted pursuant to Hillhaven's
Performance Investment Plan. As a result of the Merger, these PIP Options,
whether or not exercisable, and whether or not vested, will become fully
exercisable and vested. Each PIP Option which is then outstanding will be
canceled and in consideration of such cancellation, Vencor will deliver for
each PIP Option the number of shares of Vencor Common Stock having a value
equal to the value which a PIP Optionholder would realize upon exercising
an option immediately prior to the Effective Time. Such value is equal to
the product of (x) the result of multiplying the Conversion Number by a
fraction, the numerator of which is the excess, if any, of the Transaction
Value over $15.7105 (which represents the exercise price of $16.5375 less
the amount attributable to the participant's original capital contribution
of $.8270) and the denominator of which is the Transaction Value and
(y) the number of shares of Hillhaven Common Stock subject to such PIP
Option upon the conversion of the underlying PIP Convertible Debentures and
Hillhaven Series B Preferred Stock, par value $.___ per share (the
"Hillhaven Series B Preferred Stock").

Vencor has agreed to honor and perform, and to cause the Surviving
Corporation to honor and perform, all severance, indemnification and
similar agreements of Hillhaven identified in the Merger Agreement.
Hillhaven, however, will use its best efforts to amend all severance
agreements to eliminate, as a basis upon which severance benefits may be
paid, all references to changes in title. For the purposes of Hillhaven's
Supplemental Executive Retirement Plan, the consummation of the Merger at
the Effective Time will be deemed to be a change in control.

See "The Merger--Employee Benefits."

Conditions

The respective obligations of Vencor and Hillhaven to consummate the
Merger is subject to a number of conditions, including the following: (a)
approval by the Hillhaven stockholders of the Merger Agreement, (b)
approval by the Vencor stockholders of (i) the Merger and the issuance of
Vencor Common Stock in connection therewith and any necessary amendment to
Vencor's stock option plans and (ii) the Charter Amendment, (c) expiration
or termination of the waiting period applicable to the Merger under the HSR
Act, (d) receipt of all material consents, authorizations, orders, and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body, (e) there being in effect no
provision of any applicable domestic law or regulation and no judgment,
injunction, order or decree of a court or governmental agency or authority
of competent jurisdiction which has the effect of making the Merger illegal
or would otherwise restrain or prohibit the consummation of the Merger,
(f) the declaration of effectiveness by the Commission under the Securities
Act of the Vencor S-4 Registration Statement, of which this Joint Proxy
Statement/Prospectus is a part, and no stop order suspending such
effectiveness being in effect and no proceedings for such purpose having
been initiated or threatened by the Commission, (g) approval for listing on
the NYSE, subject to official notice of issuance, of Vencor's Common Stock
to be issued in the Merger, (h) receipt by Vencor and Hillhaven of an
opinion from Ernst & Young LLP and KPMG Peat Marwick LLP, respectively, to
the effect that the Merger will qualify as a pooling of interests under
generally accepted accounting principles and the Commission will not have
objected to such accounting treatment, and (i) receipt of all material
third party consents. See "The Merger--Conditions" for a discussion of
additional conditions to which the Merger is subject.

Waiver and Amendment

The Merger Agreement provides that, subject to the applicable
provisions of the General Corporation Law of the State of Delaware
("Delaware Law") and the corporation law of the State of Nevada ("Nevada
Law"), any provision of the Merger Agreement may be amended or waived prior
to the Effective Time, if such amendment or waiver is in writing and
signed, in the case of an amendment by Hillhaven, Vencor and Vencor Sub or,
in the case of a waiver, by the party against whom the waiver is to be
effective; provided that any waiver shall be effective against a party if
the Board of Directors of such party approves such waiver or amendment. The
failure or delay by any party in exercising any right, power or privilege,
however, does not operate as a waiver of such right, power or privilege.
See "The Merger --Waiver and Amendment."

Termination

The Merger Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time, whether before or after any requisite
stockholder approval, (i) by mutual consent of Vencor and Hillhaven by
action of their respective Boards or (ii) by action of either the Vencor or
Hillhaven Board if (a) the Merger has not been consummated by December 31,
1995, (b) if any of the stockholder approvals required pursuant to the
Merger Agreement have not been obtained due to the failure to obtain the
requisite vote upon a vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof, (c) there has been a material breach
of any (x) representation or warranty contained in the Merger Agreement on
the part of the other party which cannot be cured prior to the Effective
Time or (y) covenants or agreements set forth in the Merger Agreement on
the part of the other party which breach by its nature cannot be cured or,
if curable, is not cured within 30 days after written notice is given by
the terminating party, or (d) there is any applicable domestic law, rule or
regulation that makes the consummation of the Merger illegal or if any
judgment, injunction, order or decree of a court or governmental agency or
authority of competent jurisdiction restrains or prohibits the consummation
of the Merger, and such judgment, injunction, order or decree is final and
nonappealable.

In addition, the Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, (i) by action of the
Vencor Board, if the Hillhaven Board does not recommend in this Joint Proxy
Statement/Prospectus that Hillhaven's stockholders approve and adopt the
Merger Agreement and the Merger, or if the Hillhaven Board withdraws,
changes or modifies its recommendation in any manner adverse to Vencor, or
(ii) by action of the Hillhaven Board, if the Vencor Board does not
recommend in this Joint Proxy Statement/ Prospectus that Vencor's
stockholders approve the issuance of Vencor Common Stock in connection with
the Merger.

Furthermore, the Merger Agreement states that it may be terminated
and the Merger abandoned at any time prior to the Effective Time by
Hillhaven if the product of the Vencor Average Price (defined to be the
average closing price on the NYSE of Vencor Common Stock for the ten
consecutive trading days ending with the second trading day immediately
preceding the Effective Time) times the Conversion Number is less than
$31.00 per share. Hillhaven, however, may not terminate the Merger
Agreement if Vencor advises Hillhaven in writing that the Conversion Number
will be determined by dividing $31.00 by the Vencor Average Price without
regard to any maximum imposed on the Conversion Number by the Merger
Agreement. Hillhaven may also terminate the Merger Agreement and abandon
the Merger at any time prior to the Effective Time if Hillhaven receives an
unsolicited written Acquisition Proposal that Hillhaven's Board determines
in good faith, after consultation with its legal and financial advisors, is
reasonably likely to lead to a transaction that is more favorable to its
stockholders than the Merger and that failing to take such action would be
a breach of the Hillhaven Board's fiduciary duties. Hillhaven, however, may
not terminate the Merger Agreement and abandon the Merger unless it has
provided Vencor and Vencor Sub with five business days prior written notice
of its intent to terminate the Merger Agreement due to such an Acquisition
Proposal. The written notice must include a detailed summary of the terms
and

conditions of the Acquisition Proposal. If Hillhaven elects to terminate
the Merger Agreement and abandon the Merger due to such Acquisition
Proposal, Hillhaven will pay a termination fee to Vencor. If the Merger
Agreement is terminated under certain other specified circumstances,
certain termination fees and expense reimbursement provisions will become
applicable. See "The Merger--Termination" and "--Certain Termination Fees."

Accounting Treatment

Vencor and Hillhaven believe that the Merger will qualify as a
pooling of interests for accounting and financial reporting purposes, and
have been so advised by their respective independent public accountants.
Under this method of accounting, Vencor will restate its consolidated
financial statements to include the assets, liabilities, shareholders'
equity and results of operations of Hillhaven. It is anticipated that upon
consummation of the Merger, the fiscal year of the combined company will be
the calendar year.

Consummation of the Merger is conditioned upon the receipt by each of
Vencor and Hillhaven of a letter from their respective independent public
accountants stating that the Merger, in their respective opinions, will
qualify as a pooling of interests for accounting purposes. See "The
Merger--Accounting Treatment" and " --Conditions" and "Unaudited Pro Forma
Condensed Combined Financial Information."

Interests of Certain Persons in the Transactions

In considering the recommendations of Hillhaven's Board, stockholders
should be aware that certain members of management and of the Hillhaven
Board have certain interests in the Merger that are in addition to the
interests of stockholders generally.

Pursuant to the treatment under the Merger Agreement of Hillhaven's
Option Plans and PIP Options, and assuming a Conversion Number of 0.977 and
a Transaction Value of $31.00, Messrs. Busby and Marker would each receive
an aggregate of ______ and _____ shares of Vencor Common Stock,
respectively, the other seven executive officers of Hillhaven would receive
an aggregate of ______ shares of Vencor Common Stock and other officers and
employees of Hillhaven would receive an aggregate of _______ shares of
Vencor Common Stock. See "The Merger--Employee Benefits." In addition,
under preexisting severance agreements with executive officers of
Hillhaven, including each of Hillhaven's five most highly compensated
executive officers, such executive officers may receive a payment of
severance compensation upon certain terminations of their employment in the
event of a change in control as defined in such agreements.

Pursuant to the Merger Agreement, Vencor has agreed to fulfill
Hillhaven's obligations under the Directors' Retirement Plan with respect
to each of Hillhaven's outside directors, whether or not such director
continues as a Hillhaven Designated Director (as defined herein). Under the
Directors' Retirement Plan each outside director will receive an annual
retirement payment of $25,440 for a period of ten years following the
Merger. Also, the Merger constitutes an event accelerating vesting under
the Directors' Stock Plan and, as a result, the directors of Hillhaven
other than Messrs. Busby and Marker will each have options for an aggregate
of 12,000 shares of Hillhaven Common Stock, with an average exercise price
of $27.25, which will become exercisable and vested and will be exchanged
for shares of Vencor Common Stock in the same manner as described under
"The Merger--Employee Benefits" for Hillhaven officer and employee stock
options. Pursuant to the Merger Agreement, from and after the Effective
Time, each of Vencor and the Surviving Corporation will indemnify, defend
and hold harmless the present and former officers and directors of
Hillhaven and its subsidiaries against all losses, claims, damages and
liability for acts or omissions occurring at or prior to the Effective Time
to the fullest extent that Hillhaven and its subsidiaries would have been
permitted under applicable law and under the Articles of Incorporation and
Bylaws of Hillhaven or such subsidiary. For at least six years after the
Effective Time, Vencor will use its best efforts to, without any lapse in
coverage, provide directors' and officers' liability insurance for acts

or omissions occurring prior to the Effective Time covering those persons
currently covered by Hillhaven's directors' and officers' liability
insurance policy on terms, coverage and limits no less favorable than the
policy in effect on the date of the Merger Agreement. In no event, however,
will Vencor be required to pay annually more than 200% of the premium paid
by Hillhaven in its most recently ended fiscal year.

Pursuant to the Merger Agreement, Vencor has agreed to take all
actions that shall be necessary to cause the number of directors comprising
the full Vencor Board at the Effective Time to be increased so that the
three Hillhaven Designated Directors can be appointed to the Vencor Board
to have terms expiring at the Vencor Annual Meeting of Stockholders to be
held in 1996. The following three members of the Hillhaven Board will be
the Hillhaven Designated Directors: Bruce L. Busby, Walter F. Beran and
Jack O. Vance. In addition, Vencor has agreed to cause the Hillhaven
Designated Directors to be nominated for election to the Vencor Board at
the Vencor Annual Meeting of Stockholders to be held in 1996. See
"Operations and Management After the Merger--Directors After the Merger."

For more complete information concerning the interests of executives
and directors of Hillhaven in the Merger, stockholders of Vencor and
Hillhaven should review the information set forth under "The
Merger--Interests of Certain Persons in the Transactions."

Dissenters' Rights

Holders of Vencor Common Stock will not be entitled to any
dissenters', appraisal or preemptive rights as a result of the matters to be
voted upon at the Vencor Meeting.

Holders of Hillhaven Common Stock will not be entitled to any
dissenters' or appraisal rights as a result of the matters to be voted upon
at the Hillhaven Meeting.

Under Nevada Law, the holder of Hillhaven Preferred Stock will have
certain dissenters' rights as a result of the Merger to demand payment of
the "fair value" of its shares of Hillhaven Preferred Stock. A person
having a beneficial interest in Hillhaven Preferred Stock that is held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever dissenters' rights the
beneficial owner may have.

A holder of Hillhaven Preferred Stock as of the record date for the
Hillhaven Meeting who elects to dissent from the approval and adoption of
the Merger Agreement and who has not voted in favor thereof is entitled
under NRS Section 78.497 of Nevada Law, as an alternative to receiving the
applicable Merger consideration for such Hillhaven Preferred Stock, to
receive fair value of the shares, plus accrued interest. The obligation of
Hillhaven under this section may be judicially enforced. See "The
Merger--Dissenters' Rights" and Section 78.497 of Nevada Law included
herein as Appendix E.

NYSE Listing

Pursuant to the Merger Agreement, Vencor agrees to use its best
efforts to cause the shares of Vencor Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Effective Time.

Certain Federal Income Tax Consequences

The Merger is intended to qualify, for federal income tax purposes,
as a reorganization within the meaning of Section 368(a) of the Code so
that, in general, no gain or loss would be recognized by holders of
Hillhaven Common Stock with respect thereto on the exchange of their
Hillhaven Common Stock for Vencor Common Stock, except in respect of cash
received in lieu of fractional shares, and no gain or loss

would be recognized by Vencor, Vencor Sub or Hillhaven. Under the Merger
Agreement, it is a condition precedent to the obligation of Vencor to
consummate the Merger that it will have received an opinion of counsel to
the effect that the Merger would constitute a reorganization within the
meaning of Section 368(a) of the Code, and to the obligation of Hillhaven
that it will have received an opinion of counsel to the effect that the
Merger should constitute a reorganization within the meaning of Section
368(a) of the Code. For a further discussion of the federal income tax
consequences of the Merger, see "Certain Federal Income Tax Consequences
of the Merger."

Certain Effects of the Merger on the Rights of Holders of Hillhaven Common
Stock

Upon consummation of the Merger, holders of shares of Hillhaven
Common Stock will become stockholders of Vencor. The internal affairs of
Vencor are governed by Delaware Law and Vencor's Certificate of
Incorporation and Bylaws. The Merger will result in certain differences in
the rights of holders of Hillhaven Common Stock. See "Description of
Vencor Capital Stock" and "Comparison of Certain Rights of Stockholders of
Vencor and Hillhaven."

Operations and Management After the Merger

Vencor and Hillhaven believe that the Merger presents a unique
strategic opportunity to form one of the nation's largest providers of
healthcare services primarily focusing on the needs of the elderly. After
the Merger, Vencor will have operations in 38 states enabling it to reach
approximately 80% of the nation's population. Vencor's post-Merger
operations will include 36 long-term intensive care hospitals and 310
nursing centers with more than 42,000 beds, 58 retail and institutional
pharmacy outlets and 23 retirement housing communities with approximately
3,000 apartments. Healthcare services provided through this network of
facilities will include long-term intensive hospital care, long-term
nursing care, acute cardiopulmonary care, subacute and post-operative care,
inpatient and outpatient rehabilitation therapy, specialized care for
Alzheimer's disease, hospice care, pharmacy services and retirement and
assisted living. In addition, through contracts with approximately 1,322
non-affiliated nursing and subacute centers, the combined companies will
provide a broad array of respiratory, physical, occupational and speech
therapy and subacute services.

Vencor management believes that as a result of the Merger, Vencor
will have increased revenues of approximately $100 million per year by
1997. These increased revenues are expected to be achieved through cross-
marketing of a broad array of contract services to non-affiliated nursing
and subacute care centers as well cross-referrals of long-term patients.

After the Merger, Vencor expects to realize annual cost savings of
approximately $15 million (before taxes) by 1997. These cost savings will
be achieved through elimination of duplicate corporate services and
functions, improved purchasing and reduced financing costs. The managements
of Vencor and Hillhaven also expect to realize additional cost savings
through implementation of Vencor's Ventech clinical information system in
the Hillhaven nursing centers. This ProTouch(TM) system is now operating in
a majority of the Vencor hospitals and has resulted in increased
productivity and decreased labor costs. It is expected that similar results
can be realized when the system is installed in the Hillhaven nursing
centers. The additional savings related to the implementation of the
Ventech system are expected to reach approximately $15 million (before taxes)
annually by 1998.

After the Merger, Bruce L. Busby, Walter F. Beran and Jack O. Vance,
current members of the Hillhaven Board, will become members of the Vencor
Board.

See "Operations and Management After the Merger."

Amendment to the Vencor Certificate of Incorporation

At the Vencor Meeting, the holders of Vencor Common Stock will
consider and vote upon the Charter Amendment as set forth in Appendix D to
this Joint Proxy Statement/Prospectus. If adopted, the Charter Amendment
will increase the number of authorized shares of Vencor Common Stock from
60,000,000 shares to 180,000,000 shares. The Charter Amendment will not be
effected unless the Merger is consummated. Likewise, the Merger cannot be
effected absent shareholder approval of the Charter Amendment. See "The
Special Meetings" and "Amendment to the Vencor Certificate of
Incorporation."

Markets and Market Prices

Vencor Common Stock has been listed and traded on the NYSE under the
symbol VC since February 4, 1992. Prior to such time, Vencor Common Stock
was listed and traded on NASDAQ under the symbol VCOR. Hillhaven Common
Stock has been listed and traded on the NYSE under the symbol HIL since
November 2, 1993. Prior to such time, Hillhaven Common Stock was listed and
traded on the American Stock Exchange under the symbol HIL. The Hillhaven
Preferred Stock is not listed or admitted for trading on a national
securities exchange. Application will be made to list the shares of Vencor
Common Stock to be issued pursuant to the Merger on the NYSE.

On April 30, 1995, there were 1,129 holders of record of Vencor
Common Stock, 9,515 holders of record of Hillhaven Common Stock, one holder
of record of Hillhaven Series C Preferred Stock and one holder of record of
Hillhaven Series D Preferred Stock.

On December 19, 1994, the last day prior to Tenet filing an amendment
to its Schedule 13D disclosing that it was reviewing its alternatives for
its investment in Hillhaven, the last reported sale price on the NYSE
Composite Tape for Hillhaven Common Stock was $19.25. On April 21, 1995,
the last trading date prior to the joint public announcement by Vencor and
Hillhaven of the signing of the Merger Agreement, the last reported sale
prices on the NYSE Composite Tape were $37.00 per share for Vencor Common
Stock and $24.50 per share for Hillhaven Common Stock.

The following table sets forth, for the calendar quarters indicated
(ended March 31, June 30, September 30 and December 31), the range of high
and low sales prices of Vencor Common Stock and Hillhaven Common Stock as
reported on the NYSE Composite Tape. The prices in the table for Vencor
Common Stock are adjusted to reflect a three-for-two stock split effected
on October 25, 1994. The prices in the table for Hillhaven Common Stock are
adjusted to reflect a one-for-five reverse stock split effected on
November 1, 1993.

Vencor Common Stock Hillhaven Common Stock
High Low High Low

1993:
First quarter . . . . . . . $24 1/8 $14 $21 1/4 $12 13/16
Second quarter . . . . . . . 19 1/2 13 7/8 18 3/4 13 1/8
Third quarter . . . . . . . 20 7/8 13 18 1/8 14 3/8
Fourth quarter . . . . . . . 19 7/8 14 3/8 20 5/16 16 9/16

1994:
First quarter . . . . . . . 24 7/8 19 1/8 22 7/8 18 3/8
Second quarter . . . . . . . 24 20 21 3/8 17 5/8
Third quarter . . . . . . . 30 3/8 22 3/8 24 17 3/8
Fourth quarter . . . . . . . 30 5/8 25 3/4 22 3/4 18 5/8

1995:
First quarter . . . . . . . 37 27 1/8 28 3/4 20 1/4
Second quarter
(through June __, 1995) .

On June __, 1995, the last reported sale prices on the NYSE Composite
Tape were $_____ per share of Vencor Common Stock and $_____ per share of
Hillhaven Common Stock. If the Effective Time of the Merger was June __,
1995, the Conversion Number, which is determined by dividing $32.25 by the
average closing price on the NYSE of Vencor Common Stock for the ten
consecutive trading days ending with the second trading day immediately
preceding the Effective Time, would have been ______. As a result, each
share of Hillhaven Common Stock issued and outstanding as of such time
would have been converted into the right to receive 0._____ of a share of
Vencor Common Stock in the Merger.

Because the Conversion Number is subject to fluctuation based on the
market value of Vencor Common Stock, the number of shares of Vencor Common
Stock which each holder of Hillhaven Common Stock will have a right to
receive in the Merger may increase or decrease prior to the Effective Time.

Neither Vencor nor Hillhaven has paid a dividend on outstanding
shares of Vencor Common Stock or Hillhaven Common Stock, as the case may
be, and neither Vencor nor Hillhaven expects to pay a dividend on outstand-
ing shares of Vencor Common Stock or Hillhaven Common Stock, as the case
may be, in the foreseeable future.

Selected Historical Financial Information

The following selected historical financial data of Vencor, Hillhaven
and Nationwide coincides with their respective annual reporting periods:
Vencor (December 31), Hillhaven (May 31) and Nationwide (September 30). It
is anticipated that upon consummation of the Merger, the fiscal year of the
combined company will be the calendar year. Accordingly, fiscal years of
the combined company subsequent to the Merger will include the financial
information of Hillhaven and Nationwide on a calendar year basis. See

"The Merger--Accounting Treatment" and "Unaudited Pro Forma Condensed
Combined Financial Information."

Vencor

The selected historical consolidated financial data of Vencor set
forth below have been derived from the financial statements of Vencor for
each of the five fiscal years for the period ended December 31, 1994 and
the unaudited three-month periods ended March 31, 1995 and 1994. The
financial statements for each of the five fiscal years for the period ended
December 31, 1994 have been audited by Ernst & Young LLP, independent
auditors. The selected historical consolidated financial data set forth
below should be read in conjunction with the historical financial
statements and notes thereto contained in the 1994 Vencor 10-K and the
Vencor Quarterly Report on Form 10-Q for the three months ended March 31,
1995, which are incorporated by reference herein, and in conjunction with
the unaudited pro forma condensed combined financial information and notes
thereto contained elsewhere in this Joint Proxy Statement/Prospectus. See
"Incorporation of Certain Information by Reference," "Available
Information" and "Unaudited Pro Forma Condensed Combined Financial
Information."

Vencor, Inc.
Selected Historical Consolidated Financial Data

For the Three Months
Ended March 31, For the Years Ended December 31,
1995 1994 1994 1993 1992 1991 1990
(Unaudited)
(Dollars and Shares in Thousands, Except Per Share Amounts)

Income Statement Data:
Net revenues
Patient revenues $119,614 $86,305 $396,766 $276,587 $210,721 $132,404 $77,194
Other revenues 817 658 3,252 5,648 3,969 2,897 2,650
Net revenues 120,431 86,963 400,018 282,235 214,690 135,301 79,844

Expenses
Salaries, wages and benefits 61,994 43,397 197,336 132,492 102,133 64,848 39,719
Supplies 13,245 10,781 46,662 33,020 26,399 17,041 10,400
Rent 4,578 4,038 16,757 14,930 12,924 9,173 5,210
Other operating expenses 17,767 13,013 59,535 44,328 35,147 23,178 16,058
Depreciation and amortization 5,701 4,088 20,390 12,705 7,402 3,248 1,494
Interest 2,147 1,773 6,787 6,375 2,129 725 1,373
Total expenses 105,432 77,090 347,467 243,850 186,134 118,213 74,254

Income before income taxes 14,999 9,873 52,551 38,385 28,556 17,088 5,590
Income taxes 5,851 3,953 21,135 15,461 11,128 7,002 2,274
Net income $ 9,148 $ 5,920 $ 31,416 $ 22,924 $ 17,428 $ 10,086 $ 3,316
Net income per share
Primary $ 0.34 $ 0.23 $ 1.20 $ 0.85 $ 0.63 $ 0.42 $ 0.19
Fully diluted $ 0.31 $ 0.23 $ 1.13 $ -- $ -- $ -- $ --

Shares used in per share
calculation
Primary 27,288 25,470 25,994 27,072 27,507 24,047 17,348
Fully diluted 31,711 25,470 30,417 -- -- -- --

EBITDA(1)(3) $22,847 $15,734 $79,728 $57,465 $38,087 $21,061 $ 8,457
EBIT(2)(3) 17,146 11,646 59,338 44,760 30,685 17,813 6,953

Balance Sheet Data (at end of
period):
Working capital $86,625 $ 65,364 $76,907 $61,670 $54,546 $72,826 $20,265
Total assets 455,604 313,359 390,372 294,265 294,229 148,234 56,123
Long-term debt, less current
portion 123,889 116,310 141,899 116,370 116,830 866 12,761
Shareholders' equity 261,104 141,312 183,727 131,096 144,801 126,047 30,191
Book value per common share $ 9.37 $ 5.67 $ 7.19 $ 5.31 $ 5.38 $ 4.75 $ 1.58

Selected Statistical Data
(unaudited) (at end of period):
Number of hospitals 35 28 34 29 22 17 13
Number of beds 2,859 2,316 2,511 2,198 1,717 1,250 996
Patient days 113,165 100,124 403,623 293,367 223,483 150,564 109,303
Percentage of net revenues from
inpatient hospital operations 83% 93% 90% 97% 98% 98% 97%
Average daily census 1,258 1,104 1,123 875 620 459 312

<FN>
(1) EBITDA is earnings before interest, income taxes, depreciation and
amortization and nonrecurring items.
(2) EBIT is earnings before interest and income taxes.
(3) EBITDA and EBIT do not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and do not necessarily represent amounts of cash necessary to fund
cash requirements. This data should not be considered in isolation and
is not intended to be a substitute for income statement data as a
measure of Vencor's profitability.
</FN>

Hillhaven

The selected historical consolidated and combined financial data of
Hillhaven (excluding Nationwide) set forth below have been derived from
the financial statements of Hillhaven and its predecessor for each of the
four fiscal years ended May 31, 1994, the four-month period ended May 31,
1990 and the eight-month period ended January 31,1990, and the unaudited
nine-month periods ended February 28, 1995 and 1994. The financial
statements for each of the periods indicated have been audited by KPMG Peat
Marwick LLP, independent accountants. The selected historical consolidated
and combined financial data set forth below should be read in conjunction
with the historical financial statements and notes thereto contained in the
1994 Hillhaven 10-K and the Hillhaven Quarterly Report on Form 10-Q for the
nine months ended February 28, 1995, which are incorporated by reference
herein, and in conjunction with the unaudited pro forma condensed combined
financial information and notes thereto contained elsewhere in this Joint
Proxy Statement/Prospectus. See "Incorporation of Certain Information by
Reference," "Available Information" and "Unaudited Pro Forma Condensed
Combined Financial Information."

The Hillhaven Corporation
Selected Historical Consolidated and Combined Financial Data

Four Months Eight Months
Nine months ended ended ended
February 28, Years ended May 31, May 31, Jan. 31,
1995 1994 (1) 1994 (1) 1993 (1) 1992 (1) 1991 (1) 1990 (1) 1990 (1)
(Unaudited) (Dollars in Thousands, Except Per Share Information)

Income Statement Data (2):
Net revenues . . . . . $1,177,640 $1,107,155 $ 1,484,825 $1,394,472 $1,330,007 $1,271,266 $ 392,636 $ 750,390
Expenses:
Operating and
administrative . 999,460 938,732 1,255,332 1,180,974 1,144,390 1,094,456 335,102 646,300
Interest . . . . . 36,664 41,677 56,178 63,600 56.863 43,800 13,707 43,170
Depreciation and
amortization . . 42,646 40,738 54,395 53,651 46,698 33,650 10,087 28,448
Rent . . . . . . . 40,648 41,829 56,280 56,687 71,665 101,604 35,648 39,570
Restructuring . . . -- (20,225) (20,225) 5,769 92,529 -- -- --
Adjustment to carrying
value of properties
previously reported
as discontinued
operations . . . -- -- -- -- 20,736 -- -- --

Net expenses . . . . . 1,119,418 1,042,751 1,401,960 1,360,681 1,432,881 1,273,510 394,544 757,488

Income (loss) from operations 58,222 64,404 82,865 33,791 (102,874) (2,244) (1,908) (7,098)
Income tax (expense) benefit
on income (loss) from
operations . . . . (19,248) (18,165) (23,385) 7,116 (543) (136) (266) 3,049
Reinstatement of discontinued
operations . . . . -- -- -- -- 24,743 4,379 2,647 5,785
Extraordinary charge - early
extinguishment of debt, net of
income taxes . . . (222) (1,013) (1,062) (565) -- -- -- --
Cumulative effect of
change in accounting for
income taxes . . . -- -- -- (1,103) -- -- -- --

Net income (loss) . . . $ 38,752 $ 45,226 $ 58,418 $ 39,239 $ (78,674) $ 1,999 $ 473 $ 1,736
Net income (loss)
per common share
- primary . . . . . $1.17 $1.57 $1.96 $1.51 $(3.63) $.09 $.02 --
- fully diluted . . $1.06 $1.31 $1.68 -- -- -- -- --

EBITDA (3) . . . . . . $137,532 $126,594 $173,213 $156,811 $113,952 $75,206 $21,886 $64,520

EBIT (3) . . . . . . . 94,886 85,856 118,818 103,160 67,254 41,556 11,799 36,072

Balance Sheet Data (at end of period):

Working capital . . . . $ 61,926 $ 34,490 $ 37,673 $ 78,886 $ 59,619 $ 78,771 $ 90,577 $ 45,058
Total assets . . . . . 1,233,582 1,181,251 1,192,493 1,224,012 1,178,909 817,823 683,707 561,294
Long-term debt . . . . 589,619 599,902 579,035 819,202 834,452 443,095 337,476 250,824
Stockholders' equity . 404,688 350,292 363,747 181,602 141,274 182,204 172,209 446,921
Book value per common
share (4) . . . . . 14.13 12.33 12.79 8.17 6.38 8.26 7.89 --

Other Information (unaudited) (at end of period):
Nursing Centers
Number of nursing centers
owned, leased and operated 271 272 272 284 334 342 343 343
Number of licensed beds 34,074 34,143 34,162 35,139 41,089 42,239 42,409 42,367
Average occupancy rate
for the period . . 93.0% 93.5% 93.4% 93.4% 91.6% 90.6% 90.4% 90.8%
Nursing centers managed
for others . . . . 15 16 16 17 17 19 19 18
Number of licensed beds
managed for others 1,967 2,087 2,087 2,263 2,263 2,442 2,532 2,412
Pharmacy Outlets . . . 58 85 77 88 131 118 121 127
Retirement Housing/Assisted Living
Communities . . . . . 19 20 19 21 27 27 24 24
Number of Units . . . . 2,679 2,722 2,622 2,884 3,288 3,237 2,700 2,652

<FN>

(1) On October 31, 1994, Hillhaven acquired closely-held CPS
Pharmaceutical Services, Inc. ("CPS") and Advanced Infusion Systems,
Inc. ("AIS") in a business combination accounted for as a pooling of
interests. Accordingly, prior year information has been restated to
reflect these acquisitions.

(2) Income statement data for Hillhaven are not necessarily comparable to
those of its predecessor for periods prior to January 31, 1990 due to
the spin-off from Tenet.

(3) Excludes restructuring items, adjustment to carrying value of
properties previously reported as discontinued operations,
extraordinary charges, reinstatement of discontinued operations and
cumulative effect of change in accounting for income taxes.

(4) Computed based on the actual number of shares of Hillhaven Common
Stock outstanding at the balance sheet date, excluding 4,179,520
shares of Hillhaven Common Stock held in trust, and including
1,262,062 shares of Hillhaven Common Stock issued in connection with
the acquisition of CPS and AIS.
</FN>

Nationwide

The selected historical consolidated financial data of Nationwide set
forth below have been derived from the financial statements of Nationwide
for each of the five fiscal years ended September 30, 1994 and the
unaudited five-month periods ended February 28, 1995 and 1994. The selected
historical consolidated financial data set forth below should be read in
conjunction with the unaudited pro forma condensed combined financial
information and notes thereto contained elsewhere in this Joint Proxy
Statement/Prospectus. See "Unaudited Pro Forma Condensed Combined Financial
Information."

Nationwide Care, Inc.
Selected Historical Consolidated Financial Data

Five months ended
February 28, Years ended September 30,
1995 1994 1994 1993 1992 1991 1990
(Unaudited) (In thousands, except statistical data)

Statement of Operations Data(1)(2):
Revenue, net . . . . . . . . . . . . . . . . . $53,196 $48,929 $120,724 $66,161 $43,348 $36,075 $30,718
Expenses:
Healthcare services . . . . . . . . . . . . 40,341 36,700 90,384 45,907 28,417 24,124 20,122
Selling, general and administrative . . . . 2,887 2,128 5,971 4,307 2,775 2,645 2,292
Leases and rental . . . . . . . . . . . . . 3,017 2,955 7,085 2,671 1,353 1,419 1,309
Depreciation and amortization . . . . . . . 1,179 1,071 2,947 2,738 2,308 2,281 2,086
Income from operations . . . . . . . . . . . . 5,772 6,075 14,337 10,538 8,495 5,606 4,909
Interest expense, net . . . . . . . . . . . . . 2,083 1,853 4,778 3,669 3,540 3,839 4,080
Other income . . . . . . . . . . . . . . . . . -- -- -- -- -- -- 22
Income before income taxes and extraordinary
items . . . . . . . . . . . . . . . . . . . 3,689 4,222 9,559 6,869 4,955 1,767 851
Income taxes(3) . . . . . . . . . . . . . . . . 1,750 2,015 4,600 1,744 380 -- --
Income before extraordinary items . . . . . . . 1,939 2,207 4,959 5,125 4,575 1,767 851
Extraordinary items . . . . . . . . . . . . . . -- -- -- (1,652) 380 -- --
Net income . . . . . . . . . . . . . . . . . . $ 1,939 $ 2,207 $ 4,959 $ 3,473 $ 4,955 $ 1,767 $ 851

EBITDA (4) . . . . . . . . . . . . . . . . . . $6,951 $7,145 $17,284 $13,276 $10,803 $7,887 $7,017
EBIT (4) . . . . . . . . . . . . . . . . . . . 5,772 6,075 14,337 10,538 8,495 5,606 4,931

Balance Sheet Data (at end of period):
Working capital (deficit) . . . . . . . . . . . $ 7,255 $ 5,008 $ 2,830 $ 2,281 $ 530 $(1,205) $(1,315)
Total assets . . . . . . . . . . . . . . . . . 83,359 71,464 75,939 69,132 41,287 38,036 38,501
Long-term debt . . . . . . . . . . . . . . . . 48,163 43,598 43,045 42,404 37,716 37,119 39,192
Stock warrants and redeemable preferred stock . 7,261 7,371 7,169 7,254 -- -- --
Other shareholders' and partners' equity
(deficit)(5) . . . . . . . . . . . . . . . . . 8,468 3,997 6,621 1,667 (3,717) (6,224) (6,104)

Statistical Data (unaudited) (at end of period):
Nursing centers . . . . . . . . . . . . . . . . 23 24 23 24 18 19 19
Nursing center beds . . . . . . . . . . . . . . 3,257 3,357 3,257 3,357 2,067 2,127 2,127
Assisted living/retirement centers . . . . . . 4 3 3 3 2 2 2
Assisted living/retirement center units . . . . 442 370 370 370 277 277 277
Overall nursing center occupancy rate, period
ended . . . . . . . . . . . . . . . . . . . . . 91.0% 90.4% 90.4% 92.6% 93.6% 91.1% 88.5%

<FN>

(1) As a result of the Royal Oaks Acquisition, the Regency Center
leases and the reorganization of Nationwide in July 1993 (the
"Reorganization"), the statement of operations data prior to the
dates of the aforementioned transactions are not comparable to
statement of operations data subsequent to the aforementioned
transactions.

(2) The selected financial data set forth above includes only
Nationwide. Two other entities contemplated in the Nationwide
Transaction, Meadowvale and PEI, are not included in the above
data. The two entities are not included because (1) Meadowvale's
operations are already included in Nationwide's financial
statements; only the real estate is being acquired in connection
with the Nationwide Transaction; and (2) PEI is immaterial (less
than 1% of Nationwide's total revenues).

(3) Prior to the Reorganization, certain of the businesses now
comprising Nationwide were taxed as S Corporations and certain of
the businesses were partnerships; therefore, income was not subject
to federal or state income taxes.

(4) Excludes extraordinary items.

(5) Prior to the Reorganization, shareholders' and partners' equity
(deficit) consists of the combined capital structure of separate
corporations and partnerships. As of the date of the
Reorganization, the retained earnings (deficit) of the
S Corporations and partnerships was transferred to the common stock
of Nationwide.
</FN>

Summary Selected Unaudited Pro Forma Condensed Combined Financial Data

The selected unaudited pro forma condensed combined financial data are
presented assuming the Merger will be accounted for as a pooling of inter-
ests. The income statement data included in the pro forma combined
financial data reflects the combination of the historical operating results
of Vencor for the years ended December 31, 1994, 1993 and 1992, and for the
three months ended March 31, 1995 and 1994 with the restated historical
operating results of Hillhaven for the year ended November 30, 1994 and
historical operating results for the years ended May 31, 1993 and 1992 and
for the three months ended February 28, 1995 and 1994 and the historical
operating results of Nationwide for the years ended September 30, 1994,
1993 and 1992 and for the three months ended December 31, 1994 and 1993,
respectively. The unaudited pro forma condensed combined financial data do
not reflect the restructuring charge expected to be incurred by Vencor and
Hillhaven in connection with the Merger, and do not give effect to the
revenue enhancements and cost savings expected to be realized in connection
with the Merger. The pro forma condensed combined financial data are not
necessarily indicative of the results or financial position that actually would
have occurred had the Merger been consummated prior to January 1, 1992 or that
may be obtained in the future. See "Unaudited Pro Forma Condensed Combined
Financial Information" and "Operations and Management After the Merger."

Vencor, Inc. and The Hillhaven Corporation
Summary Selected Unaudited Pro Forma Condensed Combined Financial Data

For the Three Months Ended
March 31, For the Years Ended December 31,

1995 1994 1994 1993 1992
(In Thousands, Except Per Share Amounts)

Income Statement Data:
Net revenues
Patient revenues $481,315 $414,917 $1,759,778 $1,468,322 $1,347,613
Other revenues 66,703 74,661 293,873 275,170 240,432
Net revenues 548,018 489,578 2,053,651 1,743,492 1,588,045

Expenses
Salaries, wages and benefits 318,431 276,159 1,161,053 985,163 921,508
Supplies 42,740 37,483 161,244 126,473 117,940
Rent 19,835 19,895 79,643 74,323 85,968
Other operating expenses 96,424 92,863 370,992 330,014 299,817
Depreciation and amortization 20,936 18,368 78,787 69,126 56,408
Interest 15,421 15,379 63,129 73,559 62,399
Restructuring -- -- -- 5,769 92,529
Adjustment to carrying value of
properties previously
reported as discontinued
operations -- -- -- -- 20,736
Total expenses 513,787 460,147 1,914,848 1,664,427 1,657,305
Income (loss) before income taxes,
extraordinary charges and
cumulative effect of change in
accounting for income taxes 34,231 29,431 138,803 79,065 (69,260)
Income tax expense 12,511 10,165 46,804 10,089 12,051
Reinstatement of discontinued
operations, net of tax -- -- -- -- 24,743
Income (loss) before extraordinary
charges and cumulative effect of
change in accounting for income
taxes $21,720 $19,266 $91,999 $68,976 ($56,568)
Income (loss) per share before
extraordinary charges and
cumulative effect of change in
accounting for income taxes
Primary $0.33 $0.30 $1.45 $1.20 ($1.08)
Fully diluted $0.31 $0.29 $1.34 -- --

Shares used in per share calculation
Primary 60,373 55,018 58,069 55,790 53,957
Fully diluted 72,585 63,333 70,480 -- --

EBITDA $70,588 $63,178 $280,719 $227,519 $162,812
EBIT 49,652 44,810 201,932 158,393 106,404

March 31,
1995

Balance Sheet Data:
Working capital $166,679
Total assets 1,746,463
Long-term debt, less current
portion 850,690
Shareholders' equity 579,386

See "Unaudited Pro Forma Condensed Combined Financial Information."

Comparison of Historical and Equivalent Per Share Data (unaudited)

The following table summarizes certain unaudited selected financial
information on a pro forma and pro forma equivalent per share basis and is
derived from, and should be read in conjunction with, the unaudited pro
forma condensed combined financial statements, including the notes thereto,
included elsewhere in this Joint Proxy Statement/Prospectus and the
historical financial statements of Vencor and Hillhaven which are
incorporated herein by reference. All per share amounts are adjusted to
reflect any stock splits during the periods presented. Neither Vencor nor
Hillhaven has paid any dividends on common stock during the periods
presented, and Vencor does not expect to pay dividends on Vencor Common
Stock for the foreseeable future. The information presented in this table
does not purport to present the financial position or results of operations
of the combined company had the Merger taken place on the dates specified,
nor is such information necessarily indicative of the results of operations
that may be achieved in the future.

Three months ended
March 31, Years ended December 31,
1995 1994 1994 1993 1992

Vencor
Historical net income before extraordinary items
per common share, fully diluted(1) $0.31 $0.23 $1.13 $0.85 $0.63
Pro forma combined income (loss) before
extraordinary items per common share,
fully diluted(1)(4) .31 .29 1.34 1.20 (1.08)
Historical book value per common share(2) 9.37 7.19
Pro forma combined book value per common share 9.12 10.28
Historical cash dividends per common share -- -- -- -- --

Three months ended Twelve months ended
February 28, November 30, Years ended May 31,
1995 1994(3) 1994(3) 1993(3) 1992(3)

Hillhaven

Historical net income (loss) before extraordinary
items per common share, fully diluted(4)(5) $0.31 $0.32 $1.53 $1.58 $(3.63)
Pro forma combined income (loss) before extraordinary
items per common share, fully diluted
(Hillhaven and Nationwide)(4)(5) .30 .32 1.46 1.49 (2.79)
Equivalent pro forma combined income (loss) before
extraordinary items per common share, fully
diluted(4)(6) .30 .28 1.31 1.17 (1.06)
Historical book value per common share(7) 14.13 13.73
Pro forma combined book value per common share
(Hillhaven and Nationwide)(5) 12.16 12.47
Equivalent pro forma combined book value per
common share(7) 8.91 10.04
<FN>
(1) Vencor reported only primary income per share in the three months
ended March 31, 1994 and the years ended 1993 and 1992.

(2) This calculation is based on the number of Vencor common shares
outstanding at the end of the period, excluding common stock held in
treasury.

(3) Prior year and interim period information has been restated to
reflect the October 1994 acquisitions of CPS and AIS which were each
accounted for as a pooling of interests.

(4) Hillhaven reported only primary income (loss) per share in 1993 and
1992.

<FN>
(5) This calculation is based on the weighted average number of Hillhaven
Common Shares outstanding for each period, excluding 4,179,520
Hillhaven Common Shares held in trust at February 28, 1995, but
including 5,000,000 Hillhaven Common Shares assumed issued in
connection with the Nationwide Share Exchange Agreement.

(6) Equivalent pro forma data were calculated by multiplying the pro
forma combined per share data of Vencor by an assumed Conversion
Number of 0.977 for each share of Hillhaven Common Stock.

(7) This calculation is based on the number of Hillhaven Common Shares
outstanding at the end of the period, excluding 4,179,520 Hillhaven
Common Shares held in trust at February 28, 1995, but including
5,000,000 Hillhaven Common Shares assumed issued in connection with
the Nationwide Share Exchange Agreement.
</FN>

CERTAIN CONSIDERATIONS

The following factors and the information provided elsewhere in this
Joint Proxy Statement/Prospectus should be considered carefully by the
stockholders of Vencor and Hillhaven in evaluating the Merger.

Healthcare Reform

In recent years, an increasing number of legislative proposals have
been introduced or proposed by Congress and in some state legislatures
which would effect major changes in the healthcare system. In October 1993,
the Clinton Administration submitted comprehensive healthcare reform
legislation to Congress designed to provide, among other things, for
universal access to healthcare. Neither the Clinton Administration's plan
nor any other healthcare reform legislation was enacted by Congress.

A number of legislative proposals have contained a moratorium on the
designation of additional long-term hospital facilities for Medicare
reimbursement purposes. However, neither Vencor nor Hillhaven can predict
the form of healthcare reform legislation which may be proposed in Congress
or in state legislatures in the future and whether and in what form such
legislation will be adopted. Accordingly, neither Vencor nor Hillhaven is
able to assess the effect of any such legislation on their respective
businesses or their combined business following consummation of the Merger.
There can be no assurance that any such legislation will not have a
material adverse impact on the future growth, net revenues and net income
of Vencor or Hillhaven or their combined operations following consummation
of the Merger.

Certain Financial Considerations

Among the factors considered by the Vencor Board and Hillhaven Board
in connection with their approval of the Merger Agreement were the
opportunities for increased revenues as well as economies of scale and
operating efficiencies that should result from the Merger. The managements
of Vencor and Hillhaven expect the Merger to result in increased revenues
of approximately $100 million per year by 1997 through the cross-marketing
of contract services as well as cross-referrals of long-term patients.
However, there can be no assurance that these increased revenues will be
realized. In addition, the managements of Vencor and Hillhaven expect to
achieve annual cost savings as a result of the Merger of approximately $15
million (before taxes) by 1997 through, among other things, elimination of
duplicate corporate services and functions, improved purchasing and reduced
financing costs. The managements of Vencor and Hillhaven expect to realize
additional annual cost savings of approximately $15 million (before taxes) by
1998 through implementation of Vencor's Ventech clinical information system in
the Hillhaven nursing centers. However, there can be no assurance that these
savings will be realized. See "Operations and Management After the
Merger--Post-Merger Operations." In addition, Hillhaven has substantially
greater leverage than Vencor, and, after the Merger, Vencor will have
significantly higher indebtedness, which could adversely affect Vencor's
ability to obtain additional financing for working capital and other
purposes.

Reimbursement by Third Party Payors

Vencor and Hillhaven derive substantial portions of their net
revenues from third party payors, including government reimbursement
programs such as Medicare and Medicaid, and non-government sources, such as
commercial insurance companies, HMOs, PPOs and contract services. For the
year ended December 31, 1994, Vencor received approximately 60% of its net
patient revenues from government sources and approximately 40% of its net
patient revenues from non-government sources. For the nine months ended
February 28, 1995, Hillhaven received approximately 73% of its net patient
revenues from government sources and approximately 27% of its net patient
revenues from non-government sources. Both government and non-government
payors have undertaken cost containment measures designed to limit payments
to healthcare providers such as Vencor and Hillhaven. Furthermore,
government reimbursement

programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions,
all of which may materially increase or decrease the rate of program
payments to Vencor and Hillhaven for their services. There can be no
assurance that payments under governmental and non-governmental payor
programs will be sufficient to cover the costs allocable to patients
eligible for reimbursement. There have been, and Vencor and Hillhaven
expect that there will continue to be, a number of proposals to further
limit Medicare and Medicaid reimbursement for healthcare services. Neither
Vencor nor Hillhaven can at this time predict whether or what proposals or
cost containment measures will be adopted or, if adopted and implemented
what effect, if any, such proposals might have on the operations of Vencor
or Hillhaven or their combined operations following consummation of the
Merger.

The net incomes of Vencor and Hillhaven are affected by changes in
sources of net revenues. Rates paid by commercial insurers, including those
which provide Medicare supplemental insurance, are generally based on
established charges, and are generally higher than Medicare reimbursement
rates. A change in the payor mix of Vencor's and Hillhaven's patients
resulting in a decrease in patients covered by commercial insurance could
have an adverse impact on the net revenues and income of Vencor or
Hillhaven or their combined net revenues and income following consummation
of the Merger.

Governmental Regulation

Vencor, Hillhaven and the healthcare industry are subject to
extensive federal, state and local regulations governing licensure, conduct
of operations at existing facilities, construction of new facilities,
purchase or lease of existing facilities, addition of new services, certain
capital expenditures, cost containment and reimbursement for services
rendered. It is not possible to predict the content or impact of future
regulations or legislation affecting the healthcare industry. The failure
to obtain or renew certain required regulatory approvals or licenses, the
delicensing of certain facilities owned, leased or operated by Vencor or
Hillhaven or the combined company following consummation of the Merger or
the disqualification of Vencor or Hillhaven or the combined company
following the consummation of the Merger from participation in certain
federal and state reimbursement programs could have a material adverse
effect upon the operations of Vencor or Hillhaven or their combined
operations following consummation of the Merger.

Competition

Organizations such as Vencor and Hillhaven operate in a highly
competitive industry. The long-term care hospitals and nursing centers
operated by Vencor and Hillhaven are in communities where other facilities
offer similar services. Some of these competing facilities are operated by
entities having greater financial and other resources and longer operating
histories than Vencor or Hillhaven. In addition, certain of these competing
facilities are operated by non-taxpaying or governmental agencies, which
can finance capital expenditures on a tax exempt basis, and which receive
funds and charitable contributions unavailable to Vencor's hospitals or
Hillhaven's nursing centers. There can be no assurance that the combined
company will not encounter increased competition in the future that would
adversely affect its results of operations.

Limited Availability of Labor

In the past, the long-term care industry has periodically experienced
shortages of nurses. Although Vencor and Hillhaven currently do not have a
staffing shortage, a shortage of nurses in geographic areas in which Vencor
and Hillhaven operate could adversely affect the ability of Vencor and
Hillhaven to attract and retain qualified nursing personnel and could
increase their operating costs. Vencor and Hillhaven compete with other
healthcare providers for the services of nurses and other professional and
non-professional employees. Vencor and Hillhaven expect that their labor
costs will increase in the future, and

there can be no assurance that such cost increases will be matched by
timely corresponding reimbursement rate increases.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial
statements are presented assuming the Merger will be accounted for as a
pooling of interests. For a description of pooling of interests accounting
with respect to the Merger, see "The Merger--Accounting Treatment."

The unaudited pro forma condensed combined income statements reflect
the combination of the historical operating results of Vencor for the years
ended December 31, 1994, 1993 and 1992, and for the three months ended
March 31, 1995 and 1994 with the restated historical operating results of
Hillhaven for the year ended November 30, 1994 and historical operating
results for the years ended May 31, 1993 and 1992 and for the three months
ended February 28, 1995 and 1994 and the historical operating results of
Nationwide for the years ended September 30, 1994, 1993 and 1992 and for
the three months ended December 31, 1994 and 1993, respectively. The
unaudited pro forma condensed combined balance sheet reflects the
combination of the historical balance sheets of Vencor at March 31, 1995
with the historical balance sheets of Hillhaven at February 28, 1995 and
Nationwide at December 31, 1994 which have been adjusted on a pro forma
basis.

For all applicable periods in the unaudited pro forma condensed
combined income statements, shares used in the computation of earnings per
common and common equivalent shares assume a Conversion Number of 0.977.

The unaudited pro forma condensed combined financial statements do
not reflect the restructuring charge expected to be incurred by Vencor and
Hillhaven in connection with the Merger. The restructuring charge will
include costs associated with the combination of Vencor and Hillhaven,
including severance, duplicative systems and other operations consolidation
expenses. Also, no provision has been reflected in the unaudited pro forma
condensed combined financial statements for the possible refinancing of
certain of Hillhaven's debt after the consummation of the Merger. The
unaudited pro forma condensed combined financial statements also do not
give effect to the revenue enhancements and cost savings expected to be
realized in connection with the Merger. The unaudited pro forma condensed
combined financial statements are not necessarily indicative of the results
or financial position that actually would have occurred had the Merger been
consummated on the dates indicated or that may be obtained in the future.
See "Certain Considerations" and "Operations and Management After the
Merger." These pro forma financial statements should be read in conjunction
with the related historical financial statements and notes thereto of Vencor
and Hillhaven incorporated by reference in this Joint Proxy Statement/
Prospectus.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Income Statements
For the Three Months Ended March 31, 1995

Vencor
Hillhaven Nationwide Three
Three months Three months months
ended ended ended
February 28, December 31, Pro Forma Hillhaven March 31, Pro Forma Pro Forma
1995 1994 Adjustments Pro Forma 1995 Adjustments Combined
(In Thousands Except Per Share Amounts)

Net revenues
Patient revenues $330,453 $31,410 $ -- $361,863 $119,614 $ (162)(d) $481,315
Other revenues 65,714 223 (51)(a) 65,886 817 66,703
Net revenues 396,167 31,633 (51) 427,749 120,431 (162) 548,018

Expenses
Salaries, wages and benefits 241,466 14,971 -- 256,437 61,994 -- 318,431
Supplies 26,256 3,239 -- 29,495 13,245 -- 42,740
Rent 13,445 1,812 -- 15,257 4,578 -- 19,835
Other operating expenses 71,417 7,417 (15)(a) 78,819 17,767 (162)(d) 96,424
Depreciation and amortization 14,452 783 -- 15,235 5,701 -- 20,936
Interest 12,108 1,202 (36)(a) 13,274 2,147 -- 15,421
Total expenses 379,144 29,424 (51) 408,517 105,432 (162) 513,787
Income before income taxes and
extraordinary charges 17,023 2,209 -- 19,232 14,999 -- 34,231
Income tax expense 5,635 1,025 -- 6,660 5,851 -- 12,511
Income before extraordinary
charges $ 11,388 $ 1,184 $ -- $ 12,572 $ 9,148 $ -- $ 21,720
Income before extraordinary
charges per share
Primary $ 0.33 $ 0.32 $ 0.34 $ 0.33
Fully diluted $ 0.31 $ 0.30 $ 0.31 $ 0.31

Shares used in per share
calculation
Primary 28,864 5,000 33,864 27,288 60,373
Fully diluted 36,836 5,000 41,836 31,711 72,585

See notes to unaudited pro forma condensed combined financial statements.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Income Statements
For the Three Months Ended March 31, 1994

Vencor
Hillhaven Nationwide Three
Three months Three months months
ended ended ended
February 28, December 31, Pro Forma Hillhaven March 31, Pro Forma Pro Forma
1994 1993 Adjustments Pro Forma 1994 Adjustments Combined
(In Thousands, Except Per Share Amounts)

Net revenues
Patient revenues $ 299,313 $ 29,299 $ -- $ 328,612 $ 86,305 $ -- $ 414,917
Other revenues 73,808 246 (51)(a) 74,003 658 -- 74,661
Net revenues 373,121 29,545 (51) 402,615 86,963 489,578

Expenses
Salaries, wages and benefits 218,519 14,243 -- 232,762 43,397 -- 276,159
Supplies 23,568 3,134 -- 26,702 10,781 -- 37,483
Rent 14,101 1,756 -- 15,857 4,038 -- 19,895
Other operating expenses 73,830 6,032 (12)(a) 79,850 13,013 -- 92,863
Depreciation and amortization 13,557 723 -- 14,280 4,088 -- 18,368
Interest 12,573 1,072 (39)(a) 13,606 1,773 -- 15,379
Total expenses 356,148 26,960 (51) 383,057 77,090 -- 460,147
Income before income taxes and
extraordinary charges 16,973 2,585 -- 19,558 9,873 -- 29,431
Income tax expense 5,029 1,183 -- 6,212 3,953 -- 10,165
Income before extraordinary
charges $ 11,944 $ 1,402 $ -- $ 13,346 $ 5,920 $ -- $ 19,266
Income before extraordinary
charges per share
Primary $ 0.37 $ 0.35 $ 0.23 $ 0.30
Fully diluted $ 0.32 $ 0.32 $ 0.23 $ 0.29

Shares used in per share
calculation
Primary 25,244 5,000 30,244 25,470 55,018
Fully diluted 33,754 5,000 38,754 25,470 63,333

See notes to unaudited pro forma condensed combined financial statements.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Income Statements
For the Year Ended December 31, 1994

Hillhaven Nationwide Vencor Year
Year ended Year ended ended
November 30, September 30, Pro Forma Hillhaven December Pro Forma Pro Forma
1994 1994 Adjustments Pro Forma 31, 1994 Adjustments Combined
(In Thousands, Except Per Share Amounts)

Net revenues
Patient revenues $1,242,531 $ 120,855 $ -- $1,363,386 $ 396,766 $(374)(d) $1,759,778
Other revenues 289,733 1,095 (207)(a) 290,621 3,252 -- 293,873
Net revenues 1,532,264 121,950 (207) 1,654,007 400,018 (374) 2,053,651

Expenses
Salaries, wages and benefits 907,354 56,363 -- 963,717 197,336 -- 1,161,053
Supplies 101,321 13,261 -- 114,582 46,662 -- 161,244
Rent 55,755 7,131 -- 62,886 16,757 -- 79,643
Other operating expenses 284,163 27,722 (54)(a) 311,831 59,535 (374)(d) 370,992
Depreciation and amortization 55,408 2,989 -- 58,397 20,390 -- 78,787
Interest 51,630 4,865 (153)(a) 56,342 6,787 -- 63,129
Total expenses 1,455,631 112,331 (207) 1,567,755 347,467 (374) 1,914,848
Income before income taxes and
extraordinary charges 76,633 9,619 -- 86,252 52,551 -- 138,803

Income tax expense 21,069 4,600 -- 25,669 21,135 -- 46,804
Income before extraordinary
charges $ 55,564 $ 5,019 $ -- $ 60,583 $ 31,416 $ -- $ 91,999
Income before extraordinary
charges per share
Primary $ 1.72 $ 1.61 $ 1.20 $ 1.45
Fully diluted $ 1.53 $ 1.46 $ 1.13 $ 1.34

Shares used in per share
calculation
Primary 27,830 5,000 32,830 25,994 58,069
Fully diluted 36,006 5,000 41,006 30,417 70,480

See notes to unaudited pro forma condensed combined financial statements.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Income Statements
For the Year Ended December 31, 1993

Hillhaven Nationwide Vencor Year
Year ended Year ended ended
May 31, September 30, Pro Forma Hillhaven December 31, Pro Forma Pro Forma
1993 1993 Adjustments Pro Forma 1993 Adjustments Combined
(In Thousands, Except Per Share Amounts)

Net revenues
Patient revenues $1,127,809 $ 63,926 $ -- $1,191,735 $ 276,587 $ -- $1,468,322
Other revenues 266,663 3,059 (200)(a) 269,522 5,648 -- 275,170
Net revenues 1,394,472 66,985 (200) 1,461,257 282,235 -- 1,743,492

Expenses
Salaries, wages and benefits 820,823 31,848 -- 852,671 132,492 -- 985,163
Supplies 88,637 4,816 -- 93,453 33,020 -- 126,473
Rent 56,687 2,706 -- 59,393 14,930 -- 74,323
Other operating expenses 271,514 14,206 (34)(a) 285,686 44,328 -- 330,014
Depreciation and amortization 53,651 2,770 -- 56,421 12,705 -- 69,126
Interest 63,600 3,750 (166)(a) 67,184 6,375 -- 73,559
Restructuring 5,769 -- -- 5,769 -- -- 5,769
Total expenses 1,360,681 60,096 (200) 1,420,577 243,850 -- 1,664,427
Income before income taxes,
extraordinary charges and
cumulative effect of change in
accounting for income taxes 33,791 6,889 -- 40,680 38,385 -- 79,065
Income tax expense (benefit) (7,116) 1,744 -- (5,372) 15,461 -- 10,089
Income before extraordinary
charges and cumulative effect
of change in accounting for
income taxes $ 40,907 $ 5,145 $ -- $ 46,052 $ 22,924 $ -- $ 68,976
Income before extraordinary
charges and cumulative effect
per share
Primary $ 1.58 $ 1.49 $ 0.85 $ 1.20

Shares used in per share
calculation
Primary 24,394 5,000 29,394 27,072 55,790

See notes to unaudited pro forma condensed combined financial statements.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 1992

Hillhaven Nationwide Vencor Year
Year ended Year ended ended
May 31, September 30, Pro Forma Hillhaven December 31, Pro Forma Pro Forma
1992 1992 Adjustments Pro Forma 1992 Adjustments Combined
(In Thousands, Except Per Share Amounts)

Net revenues
Patient revenues $1,097,304 $ 39,588 $ $1,136,892 $ 210,721 $ -- $1,347,613
Other revenues 232,703 3,939 (179)(a) 236,463 3,969 -- 240,432
Net revenues 1,330,007 43,527 (179) 1,373,355 214,690 -- 1,588,045

Expenses
Salaries, wages and
benefits 798,855 20,520 -- 819,375 102,133 -- 921,508
Supplies 86,772 4,769 -- 91,541 26,399 -- 117,940
Rent 71,665 1,379 -- 73,044 12,924 -- 85,968
Other operating expenses 258,763 5,907 -- 264,670 35,147 -- 299,817
Depreciation and
amortization 46,698 2,308 -- 49,006 7,402 -- 56,408
Interest 56,863 3,586 (179)(a) 60,270 2,129 -- 62,399
Restructuring 92,529 -- -- 92,529 -- -- 92,529
Adjustment to carrying
value of properties
previously reported as
discontinued operations 20,736 -- -- 20,736 -- -- 20,736
Total expenses 1,432,881 38,469 (179) 1,471,171 186,134 -- 1,657,305
Income (loss) before income taxes
and extraordinary charges (102,874) 5,058 -- (97,816) 28,556 -- (69,260)
Income tax expense 543 380 -- 923 11,128 -- 12,051
Reinstatement of discontinued
operations, net of tax 24,743 -- -- 24,743 -- -- 24,743

Income (loss) before
extraordinary
charges $ (78,674) $ 4,678 $ -- $ (73,996) $ 17,428 $ -- $ (56,568)
Income (loss) before
extraordinary charges per share
Primary $ (3.63) $ (2.79) $ 0.63 $ (1.08)

Shares used in per share
calculation
Primary 22,073 5,000 27,073 27,507 53,957

See notes to unaudited pro forma condensed combined financial statements.

Vencor, Inc. and The Hillhaven Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 1995

Hillhaven Nationwide Vencor
February 28, December 31, Pro Forma Hillhaven March 31, Pro Forma Pro Forma
1995 1994 Adjustments Pro Forma 1995 Adjustments Combined
(In Thousands, except per share amounts)

Assets
Current Assets
Cash and cash
equivalents $ 48,965 $ 4,893 $(3,000)(b) $ 50,858 $ 5,736 $ -- $ 56,594
Patient accounts
receivable, net 164,713 10,636 (151)(a) 175,198 108,045 -- 283,243
Inventories 17,163 -- -- 17,163 5,249 -- 22,412
Other current assets 33,849 2,351 -- 36,200 21,212 5,145(i) 62,557
Total Current Assets 264,690 17,880 (3,151) 279,419 140,242 5,145 424,806

Long-term notes receivable,
net 85,365 -- -- 85,365 -- -- 85,365
Property and equipment, net 811,559 49,895 -- 861,454 262,625 -- 1,124,079
Investments available for
acquisitions and general
corporate purposes -- -- -- -- 25,906 (21,600)(e) 4,306
Other assets 71,968 10,957 (1,386)(a)
(463)(b) 81,076 26,831 107,907
Total Assets $1,233,582 $78,732 $(5,000) $1,307,314 $455,604 $(16,455) $1,746,463

Liabilities and
Shareholders' Equity
Current Liabilities
Accounts payable $ 58,944 $ 2,885 $ -- $ 61,829 $ 18,870 $ -- $ 80,699
Accrued expenses 104,956 7,422 (276)(a) 112,102 22,340 -- 134,442
Income taxes payable 99 -- -- 99 12,008 (12,107)(i) --
Current portion of
long-term debt 38,765 3,973 (151)(a) 42,587 399 -- 42,986
Total Current
Liabilities 202,764 14,280 (427) 216,617 53,617 (12,107) 258,127

Deferred credits and other
liabilities 36,511 4,755 -- 41,266 16,994 -- 58,260

Long-term debt 589,619 43,470 (1,111)(a)
3,744(b)
4,500(c) 640,222 123,889 (2,895)(g) 850,690
89,474(h)
Stock warrants -- 5,918 (5,918)(b) -- -- --
Redeemable preferred stock -- 1,305 (1,305)(b) -- -- -- --

Shareholders' equity:
Retained earnings 49,718 3,990 (13,281)(b) (28,402)(f)
(4,500)(c) 35,927 96,764 9,942(h)
(21,600)(e)
2,961(i) 95,592
Other shareholders'
equity 354,970 5,014 13,298(b) 373,282 164,340 31,297(f)(g)
(99,416)(h)
14,291(i) 483,794
Net shareholders' equity 404,688 9,004 (4,483) 409,209 261,104 (90,927) 579,386
Total liabilities and
Equity $1,233,582 $78,732 $(5,000) $1,307,314 $455,604 $(16,455) $1,746,463

Common shares outstanding,
excluding shares held in 1,982(f)(g)
trust or treasury 28,645 5,000 33,645 27,870 (j) 63,497
Book value per common share $14.13 $12.16 $9.37 $9.12

See notes to unaudited pro forma condensed combined financial statements.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1 - Basis of Presentation

For accounting purposes, the Merger will be treated as a pooling of
interests. Accordingly, the accompanying unaudited pro forma condensed
combined financial statements give retroactive effect to the Merger and
include the combined operations of Vencor and Hillhaven for all periods
presented. Hillhaven net revenues of $726.9 million and net income of $33.4
million for the period June 1, 1993 to November 30, 1993 have been excluded
from the pro forma financial statements.

Vencor's annual financial reporting period ending on December 31
will be adopted by the combined entity.

Note 2 - Pro Forma Adjustments

The adjustments to the pro forma financial statements are discussed
below:

The Nationwide Transaction

(a) To eliminate management fees and capital lease transactions
between the Nationwide entities.

(b) To record (i) the redemption of redeemable preferred stock for
$3.0 million cash, (ii) the redemption of the Senior Subordinated Notes for
$12.0 million, including the write-off of $3.7 million of unamortized
discount, financed by borrowings, (iii) the write-off of related deferred
financing charges amounting to $449,000, (iv) the $7.4 million adjustment
to the fair market value of the stock warrants based on the Nationwide
Transaction, and (v) the exercise of the stock warrants.

(c) To record the business combination under pooling of interests
accounting and issuance of Hillhaven Common Stock in connection with the
Nationwide Transaction.

The Merger

(d) To eliminate service fees between Vencor and Hillhaven.

(e) To record transaction costs in connection with the Merger.

(f) To record approximately 1.1 million shares of Vencor Common
Stock issued in consideration of the required cancellation of options and
conversion of performance shares granted under the Hillhaven Option Plans
based on a Conversion Number of 0.977 and a transaction value of $31.00.

(g) To record approximately 1.7 million shares of Vencor Common
Stock issued in consideration of the required cancellation of the PIP
Options based on a Conversion Number of 0.977 and a transaction value of
$31.00.

(h) To record the redemption of Hillhaven Preferred Stock at a 10%
discount from liquidation value.

(i) To record net adjustment to income taxes payable and deferred
income taxes as a result of the pro forma adjustments described above.

(j) To adjust common shares outstanding to reflect the conversion of
Hillhaven Common Stock into Vencor Common Stock based on the Conversion
Number of .977.

Note 3 - Income Taxes

Estimated provision for income taxes related to pro forma
adjustments are based on an assumed combined federal and state income tax
rate of 40%, adjusted for certain nondeductible items.

Note 4 - Earnings per Common Share

Shares used in pro forma earnings per common and common equivalent
share are computed as follows (in thousands):

For the Three
Months Ended For the Years Ended
March 31, December 31,

1995 1994 1994 1993 1992

Vencor:
Weighted average common and common
equivalent shares, fully diluted 31,711 25,470 30,417 27,072 27,507

Hillhaven:
Weighted average common and common
equivalent shares, fully diluted 36,836 33,754 36,006 24,394 22,073

Common Stock to be issued in connection
with the Nationwide Transaction 5,000 5,000 5,000 5,000 5,000

Pro forma Hillhaven 41,836 38,754 41,006 29,394 27,073

Exchange Ratio .977 .977 .977 .977 .977
40,874 37,863 40,063 28,718 26,450

Shares used in earnings per common and
common share equivalent computations 72,585 63,333 70,480 55,790 53,957

Vencor reported only primary income per share in the three months
ended March 31, 1994 and the years ended December 31, 1993 and 1992.
Hillhaven reported only primary income (loss) per share in 1993 and 1992.

Note 5 - Transaction Costs and Expenses

No provision has been reflected in the unaudited pro forma
condensed combined income statements for expenses expected to be incurred
in connection with both the Nationwide Transaction and the Merger.
Estimated costs for each transaction are $8.7 million and $50.0 million,
respectively, including financial advisory, legal and accounting fees and
expenses, printing and mailing costs, and compensation expense incurred as
a result of the acceleration of vesting of certain employee benefits. The
unaudited pro forma condensed combined income statements do not give effect
to any revenue enhancements and cost savings which may be realized
following the Merger.

THE SPECIAL MEETINGS

General

This Joint Proxy Statement/Prospectus is being furnished to holders of
Vencor Common Stock in connection with the solicitation of proxies by the
Vencor Board for use at the Vencor Meeting, to be held on July __, 1995,
and any adjournments or postponements thereof, (a) to consider and vote
upon the approval and adoption of the Merger Agreement and to approve the
transactions contemplated by the Merger Agreement, including, among other
things, the issuance of Vencor Common Stock pursuant to the Merger
Agreement, (b) to consider and vote on the Charter Amendment, as set forth
in Appendix D to this Joint Proxy Statement/Prospectus and (c) to transact
such other business as may properly come before the Vencor Meeting or any
adjournments or postponements thereof. The Merger Agreement and the Charter
Amendment will be voted upon separately.

The Vencor Board has unanimously approved the Merger Agreement and
recommends that the Vencor stockholders vote FOR the approval and adoption
of the Merger Agreement (which approval and adoption shall constitute
approval of the issuance of shares of Vencor Common Stock in connection
with the Merger). The Vencor Board has also approved the Charter Amendment
and recommends a vote FOR the approval of the Charter Amendment.

This Joint Proxy Statement/Prospectus is being furnished to holders of
Hillhaven Stock in connection with the solicitation of proxies by the
Hillhaven Board for use at the Hillhaven Meeting, to be held on July __,
1995 and any adjournments or postponements thereof, to consider and vote
upon the approval and adoption of the Merger Agreement and the transactions
contemplated thereby and to transact such other business as may properly
come before the Hillhaven Meeting or any adjournments or postponements
thereof.

The Hillhaven Board has unanimously approved the Merger Agreement and
recommends that the Hillhaven stockholders vote FOR approval and adoption
of the Merger Agreement and the transactions contemplated thereby.

Each copy of this Joint Proxy Statement/Prospectus mailed to holders of
Hillhaven Stock is accompanied by a form of proxy for use at the Hillhaven
Meeting, and each copy of this Joint Proxy Statement/Prospectus mailed to
holders of Vencor Common Stock is accompanied by a form of proxy for use at
the Vencor Meeting.

This Joint Proxy Statement/Prospectus is also furnished to Hillhaven
stockholders as a prospectus in connection with the issuance by Vencor of
shares of Vencor Common Stock in connection with the Merger.

Date, Place and Time

The Vencor Meeting will be held at the [Hyatt Regency, 320 West
Jefferson Street, Louisville, Kentucky] on July __, 1995, at 1:00 p.m.,
local time.

The Hillhaven Meeting will be held at the corporate headquarters of
Hillhaven, 1148 Broadway Plaza, First Floor, Tacoma, Washington on July __,
1995 at 10:00 a.m., local time.

Record Dates

Vencor

The Vencor Board has fixed the close of business on ______________ __,
1995 as the record date (the "Vencor Record Date") for the determination of
the holders of Vencor Common Stock entitled to receive notice of and to
vote at the Vencor Meeting and at any adjournments or postponements
thereof.

Hillhaven

The Hillhaven Board has fixed the close of business on
__________________ __, 1995 as the record date (the "Hillhaven Record
Date") for the determination of the holders of Hillhaven Stock entitled to
receive notice of and to vote at the Hillhaven meeting and at any
adjournments or postponements thereof.

Votes Required

Vencor

As of _________, 1995, there were _________ shares of Vencor Common
Stock outstanding. Each share of Vencor Common Stock outstanding on the
Vencor Record Date is entitled to one vote upon each matter properly
submitted at the Vencor Meeting. The affirmative vote of a majority of the
shares of Vencor Common Stock voted at the Vencor Meeting is necessary,
under the rules of the NYSE, for the approval and adoption of the Merger
Agreement and the transactions contemplated thereby. The affirmative vote
of the holders of a majority of the outstanding shares of Vencor Common
Stock is necessary to approve the Charter Amendment.

The presence in person or by proxy at the Vencor Meeting of a majority
of the outstanding shares of Vencor Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business.
Abstentions will be counted as present for purposes of determining whether
a quorum is present. Any abstention with respect to the approval of the
Charter Amendment will have the effect of a negative vote for such
proposals. Under the rules of the NYSE, brokers who hold shares in street
name for customers will not have authority to vote on the Merger unless
they receive specific instructions from beneficial owners but are allowed
to vote on the Charter Amendment without such instructions.

As of ________________ __, 1995, directors and executive officers of
Vencor and their affiliates beneficially owned an aggregate of
________________ shares of Vencor Common Stock (including shares which may
be acquired within 60 days upon exercise of employee stock options or
conversion of notes) or approximately ___ percent of the shares of Vencor
Common Stock outstanding on such date. The directors and executive officers
of Vencor have indicated their intention to vote their shares of Vencor
Common Stock in favor of approval and adoption of the Merger Agreement and
the transactions contemplated thereby and in favor of approval of the
Charter Amendment.

As of __________________ __, 1995, the directors and executive officers
of Hillhaven owned no shares of Vencor Common Stock.

See "The Merger--Interests of Certain Persons in the Transactions."

Hillhaven

As of __________________ __, 1995, there were __________ shares of
Hillhaven Common Stock, _______ shares of Hillhaven Series C Preferred
Stock and _______ shares of Hillhaven Series D Preferred Stock outstanding.
Each share of Hillhaven Stock outstanding on the Hillhaven Record Date is
entitled to

one vote upon each matter properly submitted at the Hillhaven Meeting. The
affirmative vote of a majority of the outstanding shares of Hillhaven
Common Stock, voting as a class, and the affirmative vote of two thirds of
the outstanding shares of Hillhaven Series C Preferred Stock and Hillhaven
Series D Preferred Stock, each voting separately as a class, and the
affirmative vote of a majority of all votes entitled to be voted of
Hillhaven Stock is required to approve the matters to be considered and
voted on at the Hillhaven Meeting in connection with the Merger Agreement.

The presence in person or by proxy at the Hillhaven Meeting of the
holders entitled to vote a majority of the voting stock is necessary to
constitute a quorum for the transaction of business. Abstentions will be
counted as present for the purposes of determining whether a quorum is
present. Any abstention with respect to the proposal to approve and adopt
the Merger Agreement and the transactions contemplated thereby will have
the same effect as a negative vote. Under the rules of the NYSE, brokers
who hold shares in street name for customers will not have the authority to
vote on the Merger unless they receive specific instructions from
beneficial owners.

As of __________________ __, 1995, directors and executive officers of
Hillhaven and their affiliates owned beneficially an aggregate of
___________ shares of Hillhaven Common Stock (including shares which may be
acquired upon exercise of employee stock options), or approximately
__________ percent of the shares of Hillhaven Common Stock outstanding on
such date. Of such amount, _____ shares or _____ percent of the shares of
Hillhaven Common Stock is beneficially owned by Tenet. All of the
outstanding shares of Hillhaven Series C Preferred Stock and all of the
outstanding shares of Hillhaven Series D Preferred Stock are beneficially
owned by Tenet. The directors and executive officers of Hillhaven have
indicated their intention to vote their shares of Hillhaven Common Stock in
favor of the proposal to approve the Merger Agreement.

As of ___________________ __, 1995, directors and executive officers of
Vencor owned no shares of Hillhaven Stock.

See "The Merger--Interests of Certain Persons in the Transactions."

Voting and Revocation of Proxies

Shares of Vencor Common Stock and Hillhaven Stock represented by a
proxy properly signed and received at or prior to the appropriate Special
Meeting, unless subsequently revoked, will be voted in accordance with the
instructions thereon. If a proxy is signed and returned without indicating
any voting instructions, shares of Vencor Common Stock represented by the
proxy will be voted FOR the proposal to adopt and approve the Merger
Agreement and the transactions contemplated thereby and FOR the proposal to
approve the Charter Amendment, and shares of Hillhaven Stock represented by
the proxy will be voted FOR the proposal to adopt and approve the Merger
Agreement. Both Vencor and Hillhaven proxy holders may in their discretion
vote shares voted for the proposals to adjourn the Vencor Meeting or the
Hillhaven Meeting, respectively, to solicit additional proxies in favor of
such proposals. Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before the proxy is voted by
the filing of an instrument revoking it or of a duly executed proxy bearing
a later date with the Secretary of Vencor, for Vencor stockholders, or with
the Secretary of Hillhaven, for Hillhaven stockholders, prior to or at the
appropriate Special Meeting, or by voting in person at the appropriate
Special Meeting. All written notices of revocation and other communications
with respect to revocation of Vencor proxies should be addressed as
follows: Vencor, Inc., 3300 Providian Center, 400 West Market Street,
Louisville, Kentucky, 40202, Attention: Secretary. All written notices of
revocation and other communications with respect to revocation of Hillhaven
proxies should be addressed to: The Hillhaven Corporation, 1148 Broadway
Plaza, Tacoma, Washington, 98402, Attention: Secretary. Attendance at a
Special Meeting will not in and of itself constitute revocation of a proxy.

The Vencor and Hillhaven Boards are not currently aware of any business
to be acted upon at the Special Meeting of their respective stockholders
other than as described herein. If, however, other matters are properly
brought before either Special Meeting, or any adjournments or postponements
thereof, the persons appointed as proxies will have discretion to vote or
act thereon according to their best judgment.

Stockholders of Vencor and Hillhaven will not be entitled to present
any matter for consideration at either Special Meeting.

Solicitation of Proxies

In addition to solicitation by mail, directors, officers and employees
of Vencor and Hillhaven, who will not be specifically compensated for such
services, may solicit proxies from the stockholders of Vencor and
Hillhaven, respectively, personally or by telephone, telecopy or telegram
or other forms of communication. Brokerage houses, nominees, fiduciaries
and other custodians will be requested to forward soliciting materials to
beneficial owners and will be reimbursed for their reasonable expenses
incurred in sending proxy materials to beneficial owners.

In addition, Vencor and Hillhaven have retained _______________________
and _________________, respectively, to assist in the solicitation of
proxies from their respective stockholders. The fees to be paid to such
firms for such services by each of Vencor and Hillhaven are not expected to
exceed _________________ and ________________, respectively, plus in each
case reasonable out-of-pocket costs and expenses. Vencor and Hillhaven each
will bear its own expenses in connection with the solicitation of proxies
for its Special Meeting, except that each will pay one-half of all
printing, filing and mailing costs for this Joint Proxy
Statement/Prospectus (and the related Vencor S-4 Registration Statement)
and all Commission and other regulatory filing fees.

Dissenters' Rights

Holders of Vencor Common Stock will not be entitled to any dissenters',
appraisal or preemptive rights as a result of the matters to be voted upon
at the Vencor Meeting. Holders of Hillhaven Common Stock will not be
entitled to any dissenters' or appraisal rights as a result of the matters
to be voted upon at the Hillhaven Meeting.

The holder of Hillhaven Preferred Stock will have certain dissenters'
rights as a result of the Merger pursuant to which it may demand payment of
the "fair value" of shares of Hillhaven Preferred Stock so long as it
timely objects to the Merger, does not vote for the approval and adoption
of the Merger Agreement and strictly complies with certain other
requirements. Failure to take any of the steps required on a timely basis
may result in the loss of dissenters' rights. The "fair value" obtainable
upon the valid exercise of dissenters' rights would be determined initially
by what Hillhaven estimates to be the "fair value" of the shares, plus
accrued interest, although the holder of Hillhaven Preferred Stock may
notify Hillhaven of its own estimate of the "fair value" of the shares and
the amount of interest due. If Hillhaven does not agree with such holder's
estimate, the "fair value" of the shares will be determined by judicial
proceedings, the result of which cannot be predicted. See "The
Merger--Dissenters' Rights."

OPERATIONS AND MANAGEMENT AFTER THE MERGER

Post-Merger Operations

Vencor and Hillhaven believe that the Merger presents a unique
strategic opportunity to form one of the nation's largest providers of
healthcare services primarily focusing on the needs of the elderly. After
the Merger, Vencor will have pro forma 1994 revenues of approximately $2.05
billion and pro forma 1994 earnings before interest, taxes, depreciation
and amortization ("EBITDA") of approximately $281 million. Because of the
resulting increase in size and range of services which Vencor and Hillhaven
will be able to provide, Vencor and Hillhaven managements believe the
combined companies will be able to recognize both revenue and cost-saving
synergies that will position them for a leadership position in the rapidly
changing U.S. healthcare industry.

After the Merger, Vencor will have operations in 38 states enabling it
to reach approximately 80% of the nation's population. Vencor's post-Merger
operations will include 36 long-term intensive care hospitals and 310
nursing centers with more than 42,000 beds, 58 retail and institutional
pharmacy outlets and 23 retirement housing communities with approximately
3,000 apartments. The healthcare services which will be provided through
this network of facilities will include long-term intensive hospital care,
long-term nursing care, acute cardiopulmonary care, subacute and post-
operative care, inpatient and outpatient rehabilitation therapy,
specialized care for Alzheimer's disease, hospice care, pharmacy services
and retirement and assisted living. In addition, through contracts with
approximately 1,322 non-affiliated nursing and subacute centers, the
combined companies will provide a broad array of respiratory, physical,
occupational and speech therapy and subacute services.

Projected Increased Revenues; Synergies

Vencor management believes that, as a result of the Merger, Vencor's
revenues will be increased by approximately $100 million annually by 1997.
These increased revenues are expected to be achieved through the cross-
marketing of a broad array of contract services to non-affiliated nursing
and subacute care centers as well as cross-referrals of long-term patients.

Of Hillhaven's 310 nursing centers, approximately 65% of such nursing
centers are in states where Vencor operates hospitals and approximately 25%
of such nursing centers are within 50 miles of a Vencor hospital. Having
both long-term care hospitals and nursing centers within such close
proximity will facilitate the referral of patients within the combined
Vencor-Hillhaven network. Many of Vencor's patients are discharged into
nursing centers when their condition has improved sufficiently to require a
continuous, but less acute, level of care. Conversely, patients in nursing
centers may be admitted to long-term care hospitals when their condition
requires a more acute level of care.

On May 1, 1995, Vencor's Vencare division had contracts to provide
respiratory care services and supplies to approximately 740 nursing centers
and subacute care services to approximately 32 nursing centers and
hospitals. The Merger will enable Vencare to provide physical, occupational
and speech therapy services to such nursing centers in addition to
respiratory therapy services. Hillhaven operates 310 nursing centers and
has contracts to provide rehabilitation therapy management services to an
additional 550 nursing centers. The Merger will enable Vencor to provide
respiratory care services and supplies to these 860 nursing centers in
addition to the services already provided by Hillhaven. This benefit may be
offset to some extent by concerns by non-Hillhaven nursing centers about
procuring services from Vencor after the Merger. Certain nursing centers
which currently obtain services from Vencor may choose not to obtain
services from a company which owns competing nursing centers.

Projected Cost Savings

After the Merger, Vencor expects to realize annual cost savings of
approximately $15 million (before taxes) by 1997. These cost savings would
be achieved through elimination of duplicate corporate services and
functions, improved purchasing and reduced financing costs. The managements
of Vencor and Hillhaven also expect to realize additional cost savings
through implementation of Vencor's Ventech clinical information system in
the Hillhaven nursing centers. This ProTouch(TM) system, which is now
operating in a majority of the Vencor hospitals, has resulted in increased
productivity and decreased labor costs. It is expected that similar results
can be realized when the system is installed in the Hillhaven nursing
centers. These additional savings related to the implementation of the
Ventech system are expected to reach approximately $15 million (before
taxes) annually by 1998.

It is expected that a one-time restructuring charge will be incurred in
connection with the Merger. Such restructuring charge is expected to exceed
the first year's cost savings.

Because the markets in which Vencor and Hillhaven operate are highly
competitive and because of the inherent uncertainties associated with
merging two large companies, there can be no assurance that the combined
entity will be able to realize fully the revenue synergies and cost savings
which Vencor and Hillhaven currently expect to realize as a result of the
Merger or that such revenue synergies and cost savings will be realized at
the times currently anticipated. Further, there can be no assurance that
cost savings which are realized will not be offset by losses in revenues or
other charges to earnings.

Directors After the Merger

As provided in the Merger Agreement, Vencor must take all actions
necessary to cause the number of directors comprising the full Vencor Board
at the Effective Time to be increased so that three persons selected prior
to the Effective Time by Hillhaven's Board can be appointed to the Vencor
Board to have terms expiring at the Vencor Annual Meeting of Stockholders
to be held in 1996. The three persons to be added to the Vencor Board will
be selected by the Hillhaven Board from among the present directors of
Hillhaven, two of whom will be neither officers of Hillhaven nor designees
of any affiliate of Hillhaven and the third of whom shall be Bruce L.
Busby, the Chairman and Chief Executive Officer of Hillhaven (the
"Hillhaven Designated Directors"). Vencor has also agreed to cause the
Hillhaven Designated Directors to be nominated for election to the Vencor
Board at the Vencor Annual Meeting of Stockholders to be held in 1996. In
addition to Mr. Busby, Hillhaven has advised Vencor that Walter F. Beran
and Jack O. Vance will be selected for service on the Vencor Board.
Biographical information with respect to the current directors of Vencor
and the Hillhaven Designated Directors is set forth below.

Vencor Board

William C. Ballard Jr. (age 54) has been a director of Vencor since
1988. From 1981 to 1992, he served as Executive Vice President--Finance and
Administration of Humana Inc., a provider of healthcare services. Since
1992, Mr. Ballard has been of counsel to the law firm of Greenebaum Doll &
McDonald. Mr. Ballard is a director of Mid-America Bancorp, United
Healthcare Corp., LG&E Energy Corp., American Safety Razor Inc., and Arjo
AB (a medical products manufacturer).

Michael R. Barr (age 46), a founder of Vencor, physical therapist and
certified respiratory therapist, has served as Vice President, Operations
and a director of Vencor since 1985. Mr. Barr is a director of Colorado
MEDtech, Inc., a medical products and equipment company.

Donna R. Ecton (age 48) has served as a director of Vencor since 1992.
She has been a business consultant since 1994. From 1991 to 1994, she was
President and Chief Executive Officer of Van Houten North America, Inc. and
Andes Candies Inc., a confectionery products business. From 1989 to 1991,
she

was Senior Vice President of Nutri/System, Inc., a weight loss business.
Ms. Ecton is a director of Barnes Group, Inc., a diversified manufacturing,
aerospace and distribution company, PETsMART, Inc., a pet supplies
retailer, and H&R Block, Inc.

Greg D. Hudson (age 46) has served as a director of Vencor since 1991.
He has been President of Hudson Chevrolet-Oldsmobile, Inc. since 1988.

William H. Lomicka (age 58) has served as a director of Vencor since
1987. Since 1989, he has served as President of Mayfair Capital Inc., a
private investment firm. Mr. Lomicka serves as a director of Regal Cinemas
Inc., a regional motion picture exhibitor, and Advocat, Inc., an operator
of nursing facilities and retirement centers.

W. Bruce Lunsford (age 47), a founder of Vencor, certified public
accountant and attorney, has served as Chairman of the Board, President and
Chief Executive Officer of Vencor since Vencor commenced operations in
1985. Mr. Lunsford is a director of Res-Care, Inc., a provider of
residential training and support services for persons with developmental
disabilities and certain vocational training services.

W. Earl Reed, III (age 43), a certified public accountant, has served
as a director and Vice President, Finance and Development of Vencor since
1987.

R. Gene Smith (age 60), a founder of Vencor, has served as a director
of Vencor since 1985 and Vice Chairman of the Board since 1987. From 1988
to 1994, Mr. Smith was Chairman of the Board and President of Commonwealth
Investment Group, Inc., a holding company for a broker-dealer firm and an
investment advisor firm. Since 1988, Mr. Smith has been Chairman of the
Board of Taco Tico, Inc., an operator of Mexican fast food restaurants.
Since 1993, Mr. Smith has been Managing and General Partner of Direct
Programming Services, a digital satellite system company.

Hillhaven Designated Directors

Bruce L. Busby (age 51) has served as a director and the Chief
Executive Officer of Hillhaven since 1991 and Chairman of Hillhaven since
September 1993. From 1988 to 1991, Mr. Busby was Chief Executive Officer
and President of the Venture Development Group of National Medical
Enterprises, Inc.

Walter F. Beran (age 69) has served as a director of Hillhaven since
December 1989. Since September 1986, Mr. Beran has served as Chairman of
the Pacific Alliance Group, a merger and acquisition services firm.
Previously, Mr. Beran served as Vice Chairman and Western Regional Managing
Partner of the accounting firm of Ernst & Whinney (now Ernst & Young) from
1971 until his retirement in September 1986. Mr. Beran also serves as a
director of the Federal Home Loan Bank of San Francisco, Arco Chemical
Company, Pacific Scientific Company and Fleetwood Enterprises, Inc.

Jack O. Vance (age 70) has served as a director of Hillhaven since
December 1989. From 1960 to 1990, Mr. Vance served as a director of
McKinsey & Company, Inc., a management consulting firm. In 1990, Mr. Vance
formed Management Research, Inc., where he has since served as managing
director. Mr. Vance is a director of ESCORP, F.C.G. Enterprises, Inc.,
International Rectifier Corp., International Technology Corporation, The
Olson Company, Nichols Institute and University Restaurant Group.

Executive Officers After the Merger

Each of the executive officers, including the chief executive officer
and the other senior executives of Vencor, is expected to continue as an
executive of Vencor after the Merger. In addition, Mr. Busby will serve as
President of the newly formed nursing center division of Vencor after the
Merger. The

management of Vencor also expects that after the Merger other Hillhaven
executives will assume significant executive roles in Vencor and its
subsidiaries. Each of Vencor's executive officers serves at the discretion
of the Vencor Board of Directors.

Post-Merger Dividend Policy

Vencor does not pay dividends on outstanding shares of Vencor Common
Stock and does not expect to pay dividends on outstanding shares of Vencor
Common Stock for the foreseeable future.

44
THE MERGER

This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. All stockholders are urged to read the
Merger Agreement in its entirety.

General

The Merger Agreement provides for a business combination between Vencor
and Hillhaven in which, subject to the satisfaction of the conditions
therein, Hillhaven will be merged with and into Vencor Sub and the holders
of Hillhaven Common Stock will be issued Vencor Common Stock in a
transaction intended to qualify as a pooling of interests for accounting
purposes and as a reorganization within the meaning of Section 368(a) of
the Code for federal income tax purposes. As a result of the Merger, the
successor to Hillhaven would become a wholly-owned subsidiary of Vencor and
such subsidiary will be renamed The Hillhaven Corporation. In the Merger,
each outstanding share of Hillhaven Common Stock will be converted into a
fraction of a share of Vencor Common Stock (the "Conversion Number")
determined by dividing $32.25 by the Vencor Average Price, except that the
Conversion Number will not be less than 0.768 or greater than 0.977 except
in certain limited circumstances described under "--Terms of the Merger"
and each share of Hillhaven Preferred Stock will be converted into the
right to receive $900 in cash, plus accrued and unpaid dividends to the
Effective Time. Each outstanding share of Vencor Common Stock will remain
outstanding and be unaffected by the Merger. As a result of the Merger,
except in certain limited circumstances described under "--Terms of the
Merger," holders of Hillhaven Common Stock immediately prior to the Merger
will own between approximately 49% and 55% of Vencor Common Stock on a
primary basis after the Merger, depending upon the Conversion Number.

Background of the Merger

In early December 1994, Mr. Busby and Jeffrey C. Barbakow, Chairman and
Chief Executive Officer of Tenet engaged in discussions in which it became
apparent that Tenet was in the process of evaluating whether its investment
in Hillhaven was consistent with its strategic plans. During these
discussions Hillhaven indicated a willingness to cooperate with Tenet in
transactions pursuant to which Tenet could realize immediate value for its
investment in Hillhaven so long as the transactions were consistent with
Hillhaven's business strategy of enhancing value for all Hillhaven
stockholders.

On December 20, 1994, Tenet filed an amendment to its Schedule 13D
which stated, among other things, that Tenet was reviewing alternatives for
its investment in Hillhaven, including possible transactions with Hillhaven
or the sale of all or a part of its investment to one or more third
parties. Following Tenet's filing of its amendment to its Schedule 13D,
Hillhaven publicly announced that it intended to discuss with Tenet the
Tenet investment in Hillhaven and would continue to analyze various
financial alternatives in order to preserve its flexibility to maximize
long-term value for all Hillhaven stockholders.

On January 12, 1995, Mr. Barbakow advised Mr. Busby that Mr. Barbakow
had engaged in discussions with Neal Elliott, Chairman and President of
Horizon Healthcare Corporation ("Horizon"), which had indicated a
willingness to propose to acquire Hillhaven in a transaction in which
holders of Hillhaven Common Stock would receive common stock of Horizon
valued by Horizon at $28 per share.

On January 16, 1995, a committee of the Hillhaven Board (the
"Shareholder Relationship Committee"), consisting of Jack Vance, Dinah
Jacobs and Walter Beran, which had been previously established to act on
matters including the relationship between Hillhaven and Tenet, met and
reviewed the status of discussions with Tenet and Horizon's expression of
interest in a possible transaction with Hillhaven. Following the meeting of
the Shareholder Relationship Committee, a meeting of the Hillhaven

Board was held on January 16, 1995. At this meeting, it was determined that
Hillhaven would not pursue a transaction with Horizon, but that the
Hillhaven Board would consider any communication directed to them by
Horizon. At this meeting, the directors affirmed their July 1994 action
authorizing the creation of a grantor trust to pre-fund future obligations
under existing Hillhaven employee benefit plans and authorized the issuance
of 4,200,000 shares of Hillhaven Common Stock to the trust. The Hillhaven
Board also adopted an amendment to Hillhaven's stockholder rights plan.
(Maris Andersons, who also serves as an executive officer of Tenet, voted
against the amendment and the grantor trust and Peter de Wetter, who is a
director and retired executive officer of Tenet, abstained.) Prior to the
amendment to Hillhaven's stockholder rights plan, all persons other than
Tenet were restricted from owning 30% or more of Hillhaven Common Stock
without approval of the Hillhaven Board. As a result of the amendment,
Tenet became subject to this limitation on ownership of Hillhaven Common
Stock.

At Mr. Elliott's initiation, Mr. Busby met with Mr. Elliott on January
17, 1995. At this meeting, Mr. Elliott proposed to Mr. Busby a transaction
in which Horizon would acquire Hillhaven and in which holders of Hillhaven
Common Stock would receive for each of their shares common stock of Horizon
valued by Horizon at $27.25, and in which the Hillhaven Preferred Stock,
all of which is owned by Tenet and at the time had a liquidation preference
of approximately $96.5 million, would be redeemed for $72.4 million in
cash. In response, Mr. Busby indicated that he would further discuss the
proposal with the Hillhaven Board.

On January 25, 1995, Horizon sent a letter to Hillhaven formally
proposing a business combination between Horizon and Hillhaven. Under the
terms of the proposal, each holder of Hillhaven Common Stock would receive
for each share a share of common stock of a newly formed holding company
valued by Horizon at $28 and the Hillhaven Preferred Stock, would be
redeemed at their full liquidation preference of $1,000 per share in cash.
On January 25, 1995, Tenet filed an amendment to its Schedule 13D relating
to Hillhaven in which Tenet reported that it had entered into a letter
agreement with Horizon prior to Horizon sending its January 25 letter to
Hillhaven. The agreement between Horizon and Tenet provides, among other
things, that, if within 12 months of the agreement, Tenet receives
consideration for any of its shares of Hillhaven Common Stock equal to or
greater than $27.50 per share in a merger, consolidation or other
transaction with any party other than Horizon, then Horizon shall be
entitled to receive from Tenet upon consummation of such transaction the
greater of $5,000,000 or 50% of the consideration received by Tenet in
excess of $29 per share of Hillhaven Common Stock.

On February 5, 1995, the Shareholder Relationship Committee met and
concluded that the Hillhaven Board had not authorized it to act with
respect to merger or acquisition proposals. It unanimously decided to
recommend to the Hillhaven Board that the Hillhaven Board create a new
committee, comprised of all directors other than those affiliated with
Tenet, with the power, among other things, to respond to merger and
acquisition proposals. Immediately following the meeting of the Shareholder
Relationship Committee, a meeting of the Hillhaven Board was held. The
Board established the Special Committee of the Hillhaven Board (the
"Special Committee"), comprised of all directors other than Messrs.
de Wetter and Andersons, with the authority, among other things, to respond
to proposals to merge with or acquire Hillhaven. At this meeting, Donald S.
Burns was added to the Hillhaven Board to serve in the class of directors
with a term expiring in 1997.

The Special Committee met on February 5, 1995 following the Hillhaven
Board meeting. The Special Committee reviewed the January 25 proposal from
Horizon with its financial and legal advisors. The Special Committee
unanimously rejected the Horizon proposal. In arriving at its conclusion,
the Special Committee considered a number of factors, including the opinion
of its financial advisor, Merrill Lynch, to the effect that, based upon the
assumptions made, matters considered and limits of review as set forth in
such opinion, the proposed consideration to be received by the holders of
Hillhaven Common Stock (other than Tenet) pursuant to the Horizon proposal
was inadequate to such stockholders from a financial point of view. Among
the concerns expressed by the Special Committee were that a $28 per share
price,

even if obtainable under the Horizon proposal, was not a sufficient price
for Hillhaven Common Stock; that the value of the Horizon proposal was
highly uncertain and did not by its terms even appear to guarantee the $28
per share of Hillhaven Common Stock determined to be inadequate; and that
the arrangements between Horizon and Tenet had caused Horizon to become the
"beneficial owner" of Tenet's Hillhaven Common Stock and, because Nevada
Law prohibits a merger for three years with any person acquiring beneficial
ownership of more than 10% of Hillhaven Common Stock without prior
Hillhaven approval, the Horizon proposal could not be consummated. The
Special Committee authorized Hillhaven to commence litigation seeking a
determination that Horizon could not effect a merger with Hillhaven in
compliance with Nevada Law.

Following the January 25 announcement by Horizon of its proposal to
acquire Hillhaven a number of companies contacted Mr. Busby regarding their
interest in pursuing transactions with Hillhaven. Among these expressions
of interest in late January and February, 1995 was an expression of
interest by Vencor in being invited to participate in any process Hillhaven
might initiate leading to an acquisition of Hillhaven. None of these
expressions of interest were pursued in light of the determination of the
Special Committee that Hillhaven should pursue its long-term business
strategy and not seek a sale or other extraordinary transaction.

On February 27, 1995, the Hillhaven Board approved the Nationwide
Transaction (with Mr. Andersons voting against).

On March 7, 1995, Horizon sent a letter to Hillhaven in which it
proposed to acquire Hillhaven in a transaction in which holders of
Hillhaven Common Stock would receive for each of their shares stock in a
newly formed holding company valued by Horizon at $31 and the Hillhaven
Preferred Stock owned by Tenet would be redeemed at $900 per share in cash.
The offer was conditioned upon completion of the Nationwide Transaction.
Following the announcement of the revised Horizon proposal, representatives
of a number of public companies, including Vencor, expressed interest in
exploring the possible acquisition of Hillhaven. Hillhaven and its
financial advisors had meetings or discussions with such parties.

On March 8, 1995, Tenet filed preliminary proxy materials with the
Commission relating to a solicitation of proxies in favor of a resolution
urging the Hillhaven Board to instruct its financial advisor to solicit
offers to acquire Hillhaven by sale or merger, to establish a committee of
directors who are not officers of Hillhaven to review any proposal and make
a recommendation to the Hillhaven Board, and to take all action necessary
to effectuate such sale or merger. In this filing, Tenet stated that it was
in favor of any merger or sale proposal that would maximize the value of
all stockholders' investment in Hillhaven. On March 31, 1995, Tenet filed
definitive proxy materials with the Commission with respect to its
solicitation of proxies relating to a stockholder resolution to be
presented at Hillhaven's 1995 Annual Meeting of Stockholders.

On March 20, 1995, the Special Committee reviewed the revised Horizon
proposal with its legal and financial advisors. The Special Committee
unanimously concluded that, in light of the revised Horizon proposal and
the expressions of interest by other parties desiring to explore an
acquisition of Hillhaven, Hillhaven should explore strategic alternatives,
including the possible sale of Hillhaven. The Special Committee further
concluded not to take a position with respect to the revised Horizon
proposal at that time. In the public announcement of its decision, the
Special Committee stated its intention to invite Horizon to participate in
the process of exploring alternatives. Following Hillhaven's public
announcement on March 20, 1995 of its intention to explore strategic
alternatives, Hillhaven's financial advisor contacted third parties,
including Horizon's financial advisor, regarding the possibility of their
exploring a transaction with Hillhaven. Hillhaven's financial advisor
contacted long-term care, hospital, insurance and other healthcare
companies to determine their interest in pursuing a business combination
with Hillhaven. In addition, Hillhaven and Merrill Lynch were contacted by
third parties. Each interested party was given the opportunity to examine
non-public information regarding Hillhaven following the execution of a
standard

form of confidentiality agreement, which included certain limitations on
the ability of parties to pursue transactions involving Hillhaven without
Hillhaven's consent. On March 22, 1995, a spokesman for Horizon publicly
announced that its offer for Hillhaven had expired and that Horizon "had
nothing on the table" for Hillhaven.

After March 20, 1995, representatives of each of Vencor and Hillhaven
began preliminary discussions regarding a possible acquisition of Hillhaven
by Vencor and Vencor indicated its preliminary valuation of Hillhaven was
in excess of $31 per share of Hillhaven Common Stock. On March 23, 1995,
Hillhaven and Vencor entered into a confidentiality agreement providing for
an exchange of information between the two companies and their advisors. On
April 4 and 5, 1995 representatives of Vencor visited Hillhaven's
headquarters in Tacoma, Washington, discussed Hillhaven's business and
prospects with Hillhaven's management and reviewed information regarding
Hillhaven. On April 6 and 7, 1995, representatives of Hillhaven visited
Vencor's headquarters in Louisville, Kentucky, discussed Vencor's business
and prospects with Vencor's management and reviewed information regarding
Vencor. During this time, representatives of Vencor and Hillhaven also
discussed the possible benefit of a combination of the two companies.

Hillhaven also engaged in discussions with other companies, certain of
which refused to execute Hillhaven's form of confidentiality agreement.

During the week of April 10, 1995, Mr. Lunsford and Mr. Busby and their
companies' respective financial advisors engaged in a number of discussions
regarding a possible acquisition of Hillhaven by Vencor. In addition, each
company and its respective representatives continued to exchange and
analyze relevant information. On April 17, 1995, Vencor's financial
advisors indicated to Hillhaven's financial advisors in general terms the
financial aspects of a proposal based upon Hillhaven committing to agree to
negotiate a mutually acceptable merger agreement as quickly as possible.

On April 19, 1995, Mr. Busby updated the Special Committee on the
status of the discussions with Vencor and the Special Committee authorized
Mr. Busby and the Special Committee's advisors to engage in negotiations
with Vencor in an effort to present and define the terms of a transaction
for consideration by the Special Committee.

From April 19 through April 21, 1995, Messrs. Lunsford and Busby and
their companies' respective financial advisors engaged in negotiations
regarding the financial terms of an acquisition of Hillhaven by Vencor. On
April 22 and April 23, representatives of and advisors to each of Vencor
and Hillhaven negotiated the provisions of a merger agreement. Issues
included in these negotiations were the value in Vencor Common Stock to be
received by holders of Hillhaven Common Stock in the acquisition, the time
at which the value of Vencor Common Stock would be determined, collar
provisions relating to the calculation of the amount of Vencor Common Stock
to be received by holders of Hillhaven Common Stock and the fees payable to
Vencor by Hillhaven if Vencor's acquisition of Hillhaven was not
consummated because a proposal to acquire Hillhaven was submitted by a
third party.

In the evening of April 23, 1995, the Special Committee met to consider
the transactions contemplated by the Merger Agreement and reviewed the
status of Hillhaven's process of exploring strategic alternatives. After
review with its legal and financial advisors, the Special Committee
unanimously recommended that (i) the Merger Agreement be submitted for
consideration by the entire Hillhaven Board and (ii) the Hillhaven Board
approve the Merger Agreement.

Following the meeting of the Special Committee, the Hillhaven Board
met. At this meeting, the status of Hillhaven's process of exploring
strategic alternatives and the terms of the Merger Agreement were reviewed
with legal and financial advisors. In addition, representatives of Merrill
Lynch reviewed financial analyses and delivered their opinion to the effect
that, as of April 23, 1995, and based upon the assumptions made, matters
considered and limits of review as set forth in such opinion, the
consideration

to be received by the holders of Hillhaven Common Stock (other than Tenet)
pursuant to the Merger Agreement is fair to such holders from a financial
point of view. See also "The Merger--Opinions of Financial
Advisors--Hillhaven." Members of Hillhaven management presented a business
review of Vencor and their analysis of potential synergies resulting from a
combination of Vencor and Hillhaven. At this meeting, the Hillhaven Board
stressed the need for Mr. Busby to assist in the integration of Hillhaven
and Vencor and the realization of synergies by the combined entity. After
considering these presentations, the Hillhaven Board unanimously approved
the Merger Agreement, determined that the Merger is fair to, and in the
best interests of, Hillhaven and its stockholders, and recommended approval
and adoption of the Merger Agreement by Hillhaven stockholders.

In the evening of April 23, 1995, the Vencor Board met. At this
meeting, counsel reviewed the terms of the Merger Agreement.
Representatives of First Boston reviewed financial analyses and delivered
its opinion, that, as of April 23, 1995, the consideration, taken as a
whole, to be paid by Vencor in the Merger was fair to Vencor from a
financial point of view. See "The Merger--Opinions of Financial
Advisors--Vencor". Management of Vencor also presented a business review of
Hillhaven and their analysis of potential synergies resulting from a
combination of Vencor and Hillhaven. After considering these presentations,
the Vencor Board unanimously approved the Merger Agreement, determined that
the Merger is fair to and in the best interests of Vencor and its
stockholders, and recommended approval and adoption of the Merger Agreement
by Vencor stockholders.

The Merger Agreement was signed following the conclusion of the
meetings of both the Vencor Board and the Hillhaven Board. On April 24,
1995, Vencor and Hillhaven jointly issued a press release announcing the
execution of the Merger Agreement.

Reasons for the Merger; Recommendations of the Boards of Directors

Vencor

The Vencor Board has determined that the terms of the Merger Agreement
and the transactions contemplated thereby are fair to, and in the best
interests of, Vencor and its stockholders. Accordingly, the Vencor Board
has unanimously approved the Merger Agreement and unanimously recommends
that the stockholders of Vencor vote to approve and adopt the Merger
Agreement and the transactions contemplated thereby and to approve the
Charter Amendment. The factors considered by the Vencor Board in reaching
its determination include those set forth below.

The Vencor Board believes that the Merger represents a unique strategic
opportunity for Vencor that will create one of the nation's largest
providers of healthcare services primarily focusing on the needs of the
elderly. After giving effect to the Merger, Vencor will have pro forma 1994
revenues of approximately $2.05 billion and pro forma EBITDA of
approximately $281 million. Because of the resulting increase in size and
range of services which Vencor will be able to provide, the Vencor Board
believes that the merged company will be able to realize revenue synergies
and cost savings, which neither company would enjoy on its own. The Vencor
Board also believes the increased diversification and resources of the
combined company will enhance Vencor's opportunities to negotiate contracts
with managed care providers. See "Operations and Management After the
Merger--Post-Merger Operations."

The Vencor Board believes the Merger offers the potential to realize a
number of significant strategic and operating benefits. In particular, the
Vencor Board considered that the Merger would significantly diversify
Vencor's businesses, enabling Vencor to provide through the combined
network of facilities of Vencor and Hillhaven, services including long-term
intensive hospital care, long-term nursing care, acute cardiopulmonary
care, subacute and post-operative care, inpatient and outpatient
rehabilitation, specialized care for Alzheimer's disease, hospice care,
pharmacy services and retirement and assisted living. The Vencor Board also
expects to realize operating synergies from combining the businesses of the
two

companies. These synergies are expected to result from the cross-marketing
of a broad array of contract services to non-affiliated nursing and
subacute care centers, patient referrals and from cost savings in the
combination of operations. In this regard, the Vencor Board considered that
Vencor management expects annual increased revenues of approximately $100
million per year by 1997, annual cost savings of approximately $15 million
(before taxes) by 1997, and additional savings related to the implementation
of the Ventech System of approximately $15 million (before taxes) annually
by 1998, subject to the inherent risks associated with the degree and timing
of these revenue enhancements and cost savings. For a discussion of certain
important matters with respect thereto, see "Operations and Management
After the Merger--Post-Merger Operations." As a result of all the foregoing,
the Vencor Board believed that the Merger would assist Vencor in achieving
its overall strategic growth plans.

In reaching its determination, the Vencor Board also considered and
evaluated information discussed with the Vencor Board by management of
Vencor and by First Boston, Vencor's financial advisor, with respect to the
Merger. In this regard, the Vencor Board concluded, among other things, that
(i) Hillhaven offered a large portfolio of high quality, well run nursing
centers which would enable Vencor to extend its continuum of long-term care
services, (ii) the complementary geographic locations of the Vencor and
Hillhaven facilities should provide opportunity for increased revenues due
to referrals between the two businesses, (iii) the Merger should enhance
Vencor's relationships with third party payors because the range of
services provided by the combined company will better enable it to compete
in the rapidly changing healthcare industry, (iv) the Merger will better
position Vencor to deal with uncertainties which may face the industry due
to healthcare reform, (v) excluding transaction costs related to the
Merger, the Merger should be accretive to Vencor's earnings per share in
1996 and thereafter, and (vi) the results of the due diligence review
conducted by members of Vencor's management with respect to Hillhaven's
business and operations were satisfactory.

The Vencor Board also recognized that there were inherent risks related
to the Merger. These risks included the risks associated with assuming
management responsibility for a corporation larger than Vencor, including
risks associated with retaining executives of Hillhaven, the risk that
Vencor and Hillhaven managements after the Merger would be unable to
increase Hillhaven's earnings at a rate as rapid as the Vencor Board
expected Vencor's stand-alone earnings to increase, the risks associated
with the increased leverage arising out of the assumption and/or
refinancing of Hillhaven indebtedness and the risk that the acquisition of
Hillhaven would reduce Vencor's ability to market its Vencare services to
nursing home companies that compete with Hillhaven.

The Vencor Board also considered (i) the terms of the Merger Agreement,
(ii) the structure of the Merger, (iii) the terms and manner in which the
Conversion Number would be determined, (iv) the tax-free nature of the
Merger, (v) the presentation by, and the opinion of, First Boston, as
described below, (vi) the regulatory approval requirements, (vii) the fact
that Vencor's stockholders would, assuming a Conversion Number of 0.977,
retain only approximately 45 percent of the equity of the combined company,
(viii) that the Merger would be accounted for as a pooling of interests and
(ix) the fact that the current directors of Vencor would constitute a
majority of the Vencor Board after the Merger.

Based on all of these matters, and such other matters as the members of
the Vencor Board deemed relevant, Vencor's Board unanimously approved the
Merger Agreement and the transactions contemplated thereby.

The foregoing discussion of the information and factors considered and
given weight by the Vencor Board is not intended to be exhaustive but is
believed to include all material factors considered by the Vencor Board. In
addition, in reaching the determination to approve and recommend the Merger
Agreement and the transactions contemplated thereby, the Vencor Board did
not assign any relative or specific weights to the foregoing factors which
were considered, and individual directors may have given differing weights
to different factors. The Vencor Board is, however, unanimous in its
recommendation

to the holders of Vencor Common Stock that the Merger Agreement and the
transactions contemplated thereby be approved and that the Charter
Amendment be approved.

VENCOR'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT VENCOR
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND THAT THEY VOTE FOR THE CHARTER
AMENDMENT.

Hillhaven

The Hillhaven Board has determined that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to, and in the
best interests of, Hillhaven and its stockholders. Accordingly, the
Hillhaven Board has unanimously approved the Merger Agreement and
unanimously recommends that the stockholders of Hillhaven vote FOR approval
and adoption of the Merger Agreement. In reaching its determination, the
Hillhaven Board consulted with Hillhaven's management, as well as its legal
counsel and financial advisor, and considered a number of factors,
including the following:

(i) The belief that the Merger will result in a strong combined entity
with complementary businesses, corporate goals and management philosophies
and the financial resources necessary to compete and pursue growth
opportunities in the changing healthcare environment and with significant
opportunities for revenue synergies and cost savings;

(ii) An assessment of Hillhaven's strategic alternatives, including
remaining a publicly owned company, acquisitions, and other arrangements
with third parties. In this regard, the terms of the Merger Agreement
provide the highest immediate value for holders of Hillhaven Common Stock
among the alternatives known and anticipated to be available to Hillhaven
and the Merger will provide holders of Hillhaven Common Stock with the
opportunity to continue to participate in the equity ownership of the
combined company in a transaction that should be nontaxable to stockholders
for federal income tax purposes;

(iii) Information relating to the financial performance, prospects and
business operations of each of Vencor and Hillhaven;

(iv) The terms and conditions of the Merger Agreement, including

(a) the provisions requiring that the determination of the
Conversion Number occur shortly before the Effective Time and the
collar provisions, which provide reasonable assurance as to the value
to be received by holders of Hillhaven Common Stock;

(b) the right of Hillhaven to terminate the Merger Agreement if the
value of Vencor Common Stock to be received in exchange for each share
of Hillhaven Common Stock in the Merger is less than $31; and

(c) the right of Hillhaven to negotiate and provide information to
third parties and terminate the Merger Agreement in the event of an
alternative proposal, if required by the fiduciary duties of the
Hillhaven Board and the fact that if, under certain circumstances
involving a competing transaction, the Merger Agreement is terminated,
Hillhaven would be obligated to pay Vencor $35 million or, if the
competing transaction is intended to be accounted for as a pooling of
interests for accounting purposes, $13.5 million. The Hillhaven Board
did not view these obligations as unreasonably precluding any third
party from proposing an alternative transaction and concluded that
entering into the Merger Agreement before completely exhausting its
exploration of all possible strategic alternatives was in the best
interests of Hillhaven;

(v) the presentation of Hillhaven's financial advisor, Merrill Lynch,
and its opinion to the effect that, as of April 23, 1995, and based upon
the assumptions made, matters considered and limits of review as set forth
in such opinion, the consideration to be received by the holders of shares
of Hillhaven Common Stock (other than Tenet) pursuant to the Merger
Agreement is fair to such holders from a financial point of view;

(vi) the amount of time which had transpired since the initial public
announcement of Horizon's interest in acquiring Hillhaven without Hillhaven
receiving an expression of interest from a third party regarding a
transaction in which Hillhaven stockholders would receive value similar to
that contemplated by the Merger Agreement; and

(vii) the fact that Vencor and Hillhaven each have very capable
management teams that have an established track record, and that, by
combining the expertise of these managements, the combined company should
be well positioned to take advantage of opportunities created by the Merger
and the changing healthcare environment.

In considering the fairness of the terms of the Merger Agreement to
Tenet, which owns all of the Hillhaven Preferred Stock and approximately
27% of the Hillhaven Common Stock, the Hillhaven Board also considered the
following additional factors:

(i) The terms of the Merger Agreement provide that Tenet will receive
the same consideration for its shares of Hillhaven Common Stock as all
other holders of Hillhaven Common Stock;

(ii) Tenet has previously supported a transaction proposed by Horizon
in which it would have received for each of its shares of Hillhaven Common
Stock consideration valued by Horizon at $31, whereas the terms of the
Merger Agreement are intended to provide per share value of $32.25 and
greater protection than that proposed by Horizon against possible declines
in the value of the stock consideration to be received in the proposed
transaction;

(iii) The terms of the Merger Agreement contemplate the payment of $900
per share in cash for each share of Hillhaven Preferred Stock owned by
Tenet, the same consideration proposed to be paid for such shares in the
transaction proposed by Horizon and supported by Tenet and, accordingly,
before taking into account Tenet's contractual arrangements with Horizon,
the Merger provides greater value to Tenet than proposals Tenet previously
supported;

(iv) Tenet will be entitled to vote its Hillhaven Preferred Stock as
separate classes in connection with consideration of the Merger Agreement
by Hillhaven's stockholders;

(v) The belief that Tenet's contractual arrangement with Horizon, which
might require Tenet to make a payment to Horizon upon consummation of the
Merger and thereby make a Horizon proposal to acquire Hillhaven at a value
per share of Hillhaven Common Stock less than that contemplated by the
Merger Agreement more attractive to Tenet than the Merger, should not be a
basis for depriving all other holders of Hillhaven Common Stock of the
benefits of a transaction which is in the best interests of Hillhaven and
provides the highest value for all of Hillhaven's equity; and

(vi) Immediately prior to the April 23, 1995 meeting of the Hillhaven
Board, Tenet indicated it would support the transactions contemplated by
the Merger Agreement.

In view of the wide variety of factors considered in connection with
its evaluation of the proposed Merger, the Hillhaven Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination, each of which was

viewed as supportive of its conclusion that the terms of the Merger
Agreement are fair to, and in the best interests of, Hillhaven and its
stockholders.

THE HILLHAVEN BOARD UNANIMOUSLY RECOMMENDS THAT HILLHAVEN STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.

Opinions of Financial Advisors

Vencor

First Boston has delivered its written opinions to the Vencor Board,
dated April 23, 1995 and the date of this Joint Proxy Statement/Prospectus,
to the effect that, as of such dates, the consideration, taken as a whole,
to be paid by Vencor in the Merger is fair to Vencor from a financial point
of view. No limitations were imposed by the Vencor Board with respect to
the investigations made or the procedures followed by First Boston in
rendering its opinion. First Boston's opinions were delivered for the
information of the Vencor Board and are not a recommendation to any Vencor
stockholder as to how such stockholder should vote at the Vencor Meeting or
any other meeting of Vencor stockholders called to consider matters
relating to the Merger.

In arriving at its opinions, First Boston reviewed certain publicly
available business and financial information relating to Hillhaven and
Vencor and reviewed the Merger Agreement. First Boston also reviewed
certain other information, including financial forecasts provided to it by
Hillhaven and Vencor, and met with Hillhaven's and Vencor's management to
discuss the businesses and prospects of Hillhaven and Vencor.

First Boston also considered certain financial and stock market data of
Hillhaven and compared that data with similar data for other publicly held
companies in businesses similar to those of Hillhaven, considered the
financial terms of certain other business combinations and other
transactions which have recently been effected and have considered the
financial effects of the Merger on Vencor. In addition, First Boston
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which it deemed
relevant.

In connection with its review, First Boston did not assume any
responsibility for independent verification of any of the foregoing
information and relied on its being complete and accurate in all material
respects. With respect to the financial forecasts (including without
limitation projected operational benefits and cost savings arising from the
Merger), First Boston assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
Hillhaven's and Vencor's management as to the future financial performance
of Hillhaven and Vencor. First Boston expressed no view as to such
forecasts or the assumptions on which they are based and there cannot be
any assurance that actual results of Hillhaven or Vencor will not differ
materially from those reflected in the forecasts. In addition, First Boston
did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Hillhaven or Vencor, nor was First
Boston furnished with any such evaluations or appraisals.

The full text of the written opinion of First Boston, dated the date
hereof, which sets forth the assumptions made, procedures followed, matters
considered, limitations on and the scope of the review by First Boston in
rendering its opinion, is attached hereto as Appendix B. Vencor
stockholders are urged to read First Boston's opinion in its entirety. The
summary of the opinion of First Boston is qualified in its entirety by
reference to the full text of such opinion.

Vencor has retained First Boston as its financial advisor in connection
with the Merger. Pursuant to an engagement letter dated April 4, 1995,
between Vencor and First Boston (i) Vencor has paid First

Boston (a) a fee of $200,000 upon execution of the engagement letter and
(b) a fee of $1,500,000 upon execution of the Merger Agreement and the
delivery of the opinion dated April 23, 1995 and (ii) Vencor has agreed to
pay First Boston a fee of $7,500,000 (less the fees described in (i)) upon
the acquisition by Vencor of a majority of the voting power of Hillhaven's
outstanding voting securities, upon the acquisition of a majority of
Hillhaven's assets or upon the closing of a merger or other form of
business combination transaction. Vencor also agreed to reimburse First
Boston for its out-of-pocket expenses, including reasonable fees and
disbursements of counsel. Vencor has also agreed to indemnify First Boston
and its affiliates, their respective directors, officers, partners, agents
and employees and each person, if any, controlling First Boston or any of
its affiliates against certain liabilities, including certain liabilities
under the federal securities laws, relating to or arising out of its
engagement.

First Boston is an internationally recognized investment banking firm
and regularly engages in the valuation of businesses and their securities
in connection with mergers and acquisitions and for other purposes. The
Vencor Board selected First Boston to act as its financial advisor on the
basis of First Boston's reputation and First Boston's prior work with
Vencor. In the past, First Boston has provided investment banking services
for Vencor and Hillhaven for which First Boston received customary
compensation. First Boston actively trades the debt and equity securities
of both Vencor and Hillhaven for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short
position in such securities.

Hillhaven

Merrill Lynch has delivered its written opinions dated April 23, 1995
and the date of this Joint Proxy Statement/Prospectus to the Hillhaven
Board to the effect that, as of the date hereof, and based upon the
assumptions made, matters considered and limits of review as set forth in
such opinion, the consideration to be received by the holders of shares of
Hillhaven Common Stock (other than Tenet) pursuant to the Merger Agreement
is fair to such holders from a financial point of view (the "Merrill Lynch
Opinion").

A copy of the Merrill Lynch Opinion, which sets forth the assumptions
made, matters considered and certain limitations on the scope of review
undertaken by Merrill Lynch, is attached as Appendix C to this Joint Proxy
Statement/Prospectus. Holders of shares of Hillhaven Common Stock are urged
to, and should, read the Merrill Lynch Opinion in its entirety. The Merrill
Lynch Opinion is directed only to the fairness from a financial point of
view of the consideration to be received by holders of Hillhaven Common
Stock (other than Tenet) pursuant to the Merger Agreement and does not
constitute a recommendation to any Hillhaven stockholder as to how such
stockholder should vote at the Hillhaven Meeting. The summary of the
Merrill Lynch Opinion set forth in this Joint Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of the Merrill
Lynch Opinion attached as Appendix C hereto.

In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things, (i) reviewed Hillhaven's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended May 31, 1994 and
Hillhaven's Forms 10-Q and the related unaudited financial information for
the quarterly periods ended August 31, 1994, November 30, 1994 and
February 28, 1995; (ii) reviewed Vencor's Annual Reports, Forms 10-K and
related financial information for the three fiscal years ended December 31,
1994; (iii) reviewed certain other filings with the Commission made by
Hillhaven and Vencor, including proxy statements and registration
statements, during the last three years; (iv) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash
flow, assets and prospects of Hillhaven and Vencor, furnished to Merrill
Lynch by Hillhaven and Vencor, respectively; (v) conducted discussions with
members of senior management of Hillhaven and Vencor concerning their
respective businesses and prospects and potential synergies which might be
realized following the Merger; (vi) reviewed the historical market prices
and trading activity for the Hillhaven Common Stock and Vencor Common Stock
and compared them with that of certain publicly traded companies which
Merrill Lynch deemed to be

reasonably similar to Hillhaven and Vencor, respectively; (vii) compared
the results of operations of Hillhaven and Vencor with those of certain
companies which Merrill Lynch deemed to be reasonably similar to Hillhaven
and Vencor, respectively; (viii) compared the proposed financial terms of
the transactions contemplated by the Merger Agreement with the financial
terms of certain other merger and acquisitions which Merrill Lynch deemed
to be relevant; (ix) analyzed the pro forma effect of the Merger on the
combined company earnings per share; (x) reviewed a draft of the Merger
Agreement; and (xi) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other
matters as Merrill Lynch deemed necessary, including its assessment of
general economic, market and monetary conditions.

In preparing the Merrill Lynch Opinion, Merrill Lynch relied on the
accuracy and completeness of all information supplied or otherwise made
available to it by Hillhaven and Vencor, and Merrill Lynch did not
independently verify such information or undertake or obtain an independent
appraisal of the assets or liabilities of Hillhaven or Vencor or conduct a
physical inspection of Hillhaven's or Vencor's properties or facilities.
With respect to the financial forecasts and estimates of potential
synergies furnished by Hillhaven and Vencor, Merrill Lynch assumed that
they were reasonably prepared and reflected the best currently available
estimates and judgment of Hillhaven's or Vencor's management as to the
expected future financial performance of Hillhaven or Vencor, as the case
may be. The Merrill Lynch Opinion is necessarily based upon market,
economic and other conditions as they existed on, and could be evaluated as
of, the date of the Merrill Lynch Opinion. The matters considered by
Merrill Lynch in arriving at the Merrill Lynch Opinion that, as of the date
of the Merrill Lynch Opinion, the consideration to be received by the
holders of shares of Hillhaven Common Stock pursuant to the Merger
Agreement is fair to such holders from a financial point of view, are
based on numerous macroeconomic, operating and financial assumptions with
respect to industry performance, general business and economic conditions
and other matters, many of which are beyond Hillhaven's or Vencor's control.

The Hillhaven Board selected Merrill Lynch to render a fairness opinion
because Merrill Lynch is an internationally recognized investment banking
firm with substantial expertise in transactions similar to the Merger and
because it is familiar with Hillhaven and its business. As part of its
investment banking business, Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions. Merrill Lynch has provided, from time to time, various
investment banking, financial advisory and financial services to Hillhaven,
Tenet and Vencor, for which it has received customary compensation,
including serving as financial advisor to Hillhaven in connection with
(i) the Nationwide Transaction, for which it will receive aggregate
compensation of $850,000, and (ii) Hillhaven's review and approval of a
grantor trust, for which it will receive a fee of $100,000.

With respect to Merrill Lynch's services as financial advisor in
connection with the Merger, Hillhaven has agreed to pay Merrill Lynch a
retainer of $250,000, and a quarterly advisory fee of $500,000 on June 1,
1995 and quarterly advisory fees of $750,000 on each of September 30, 1995,
December 31, 1995, and March 31, 1996, and, upon consummation of the
Merger, will pay a transaction fee of .45% of equity and debt
(approximately $8.62 million, assuming a Transaction Value of $31.00),
against which the retainer fee and quarterly advisory fees will be
credited.

In addition, Hillhaven also has agreed to reimburse Merrill Lynch for
its reasonable out-of-pocket expenses (including reasonable fees and
expenses of its legal counsel) and to indemnify Merrill Lynch and certain
related persons against certain liabilities, including liabilities under
the federal securities laws, arising out of its engagement.

In the ordinary course of Merrill Lynch's business, Merrill Lynch may
actively trade the securities of Vencor, Hillhaven and Tenet for its own
account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.

Terms of the Merger

At the Effective Time, Vencor and Hillhaven will consummate the Merger
in which Hillhaven will be merged with and into Vencor Sub, a wholly-owned
subsidiary of Vencor created for the purpose of carrying out the Merger,
and the separate corporate existence of Hillhaven will thereupon cease.
Vencor Sub will be the Surviving Corporation in the Merger operating under
the name of The Hillhaven Corporation and will continue to be governed by
the laws of the State of Delaware. The Merger Agreement provides that the
Certificate of Incorporation of Vencor Sub will be amended as contemplated
by the Merger Agreement, and such Certificate of Incorporation, as so
amended, will be the Certificate of Incorporation of the Surviving
Corporation (the "Amended Certificate of Incorporation"). The Merger
Agreement provides that the Bylaws of Vencor Sub in effect at the Effective
Time will continue as the Bylaws of the Surviving Corporation.

Pursuant to the Merger Agreement, at the Effective Time, each share of
Hillhaven Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares held by Hillhaven as treasury stock or
owned by any Vencor Company immediately prior to the Effective Time) will
be converted into the right to receive that number of duly authorized,
validly issued, fully paid and nonassessable shares of Vencor Common Stock
equal to the Conversion Number. The Conversion Number will not be less than
0.768 nor more than 0.977; provided, however, that if the product of the
Vencor Average Price times the Conversion Number is less than $31.00 per
share, Hillhaven can terminate the Merger Agreement unless Vencor has
advised Hillhaven in writing that the Conversion Number will be determined
by dividing $31.00 by the Vencor Average Price and will not be subject to a
maximum.

The Merger Agreement provides that at the Effective Time each share of
Hillhaven Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares held by Hillhaven as treasury stock or
owned by any Vencor Company immediately prior to the Effective Time) will
be converted into the right to receive $900 in cash per share, plus accrued
and unpaid dividends to the Effective Time.

If at any time during the period between the date of the Merger
Agreement and the Effective Time any change in the outstanding shares of
Vencor Common Stock shall occur, such as any reclassification,
recapitalization, stock split or combination, exchange or readjustment or
stock dividend with a record date during such period, the Conversion Number
will be appropriately adjusted.

No fractional shares of Vencor Common Stock will be issued in the
Merger and fractional share interests will not entitle the owner thereof to
vote or to any other rights of a Vencor stockholder. All fractional shares
of Vencor Common Stock that a holder of Hillhaven Common Stock, Hillhaven
Options or PIP Options would otherwise be entitled to receive as a result
of the Merger will be aggregated. If a fractional share results, such
holder will be entitled to receive cash equal to the Vencor Average Price
multiplied by the fraction of a share of Vencor Common Stock to which such
holder would otherwise have been entitled.

Effective Time; Closing

The Merger will become effective at the Effective Time, which will
occur on the date and at such time as both the Certificate of Merger is
filed with the Secretary of State of the State of Delaware and the Articles
of Merger are filed with the Secretary of State of the State of Nevada. The
Merger Agreement provides that the closing (the "Closing") will take place
on the first business day on which the conditions specified in the Merger
Agreement are fulfilled or, to the extent permitted, waived, or on such
other date as Vencor and Hillhaven may agree. The date upon which the
Closing will occur is herein called the "Closing Date."

Conduct of Business Prior to Effective Time; Certain Covenants; No
Solicitations of Transactions

Operational Covenants

Furthermore, from the date of the Merger Agreement until the Effective
Time, neither Vencor nor its subsidiaries will, except as provided in the
Merger Agreement, (i) merge or consolidate (other than with a subsidiary)
or, acquire a material amount of stock or assets of any other person or
entity; provided that Vencor and its subsidiaries may merge or consolidate
with, or acquire the stock or assets of a person or entity primarily
engaged in a business in which Vencor or any of its subsidiaries is
presently engaged, provided that such transaction would not require the
preparation of pro forma financial statements in accordance with applicable
rules and regulations of the Commission or might reasonably be expected to
delay the transaction contemplated by the Merger Agreement; (ii) sell,
lease, license, mortgage, pledge or otherwise dispose of any material
assets or property except (a) pursuant to existing contracts or
commitments, (b) in the ordinary course consistent with past practice or
(c) transfers between Vencor and/or its wholly-owned subsidiaries;
(iii) (a) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any capital stock of Vencor or its subsidiaries, other
than to carry out the Merger and as otherwise provided in the Merger
Agreement, (b) split, combine or reclassify any capital stock of Vencor or
its subsidiaries or (c) repurchase, redeem or otherwise acquire any capital
stock of Vencor or its subsidiaries; or (iv) take or agree or commit to
take any action that would make any representation and warranty of Vencor
under the Merger Agreement materially inaccurate at, or as of any time
prior to, the Effective Time or which is reasonably likely to result in a
delay in consummation of the Merger.

In addition, Vencor and Vencor Sub will not adopt or propose any change
to their respective certificate of incorporation or bylaws and Vencor will
not declare or pay any dividends or make any distributions on Vencor Common
Stock. Furthermore, Vencor will not, except to the extent required by law,
voluntarily accelerate the vesting of any compensation or benefit or take
any action with respect to any Vencor employee plan or benefit arrangement
which could prevent the Merger from being treated as a pooling of
interests. Vencor will also use its best efforts to cause its shares of
common stock to be issued in the Merger to be approved for listing on the
NYSE prior to the Effective Time. In addition, Vencor will take all action
necessary to ensure that Vencor Sub performs its obligations set forth in
the Merger Agreement and to ensure that Vencor Sub will not conduct any
business, make any investments, or have any assets other than as
specifically contemplated by the Merger Agreement.

From the date of the Merger Agreement until the Effective Time, neither
Hillhaven nor its subsidiaries will (i) merge, consolidate or enter into a
share exchange or acquire any stock or any material amount of assets of any
other person or entity or sell, lease, license, mortgage, pledge or
otherwise dispose of any material assets or property except (a) pursuant to
existing contracts or commitments, (b) in the ordinary course consistent
with past practice or (c) transfers between Hillhaven and/or its wholly-
owned subsidiaries; (ii) (a) issue, deliver, sell, encumber or authorize or
propose the issuance, delivery, sale or encumbrance of, any capital stock
or other securities of Hillhaven or its subsidiaries, other than issuing
shares of Hillhaven Common Stock upon the exercise of Hillhaven Options, to
fulfill existing obligations or the vesting of performance share awards
prior to the Effective Time, (b) split, combine or reclassify any Hillhaven
Stock or securities of its subsidiaries or (c), except pursuant to the
Merger Agreement, repurchase, redeem or otherwise acquire any Hillhaven
Stock or securities of its subsidiaries; or (iii) take any action that
would make any representation and warranty of Hillhaven under the Merger
Agreement

materially inaccurate at, or as of any time prior to, the Effective Time or
which is reasonably likely to result in a delay in consummation of the
Merger.

In addition, Hillhaven will not (i) adopt or propose any change or
amendment in its Articles of Incorporation or Bylaws or Rights Agreement
dated January 31, 1990 between Hillhaven and Manufacturers Hanover Trust
Company (the "Hillhaven Rights Agreement"); (ii) declare, set aside, or pay
any dividends or make any distributions on Hillhaven Common Stock or pay
any dividends on Hillhaven Preferred Stock, except in accordance with the
terms thereof and in a form of consideration consistent with past practice;
or (iii) enter into any contract or agreement material to Hillhaven and its
subsidiaries taken as a whole, except in the ordinary course of business
consistent with past practice and will consult with Vencor before making or
committing to make any capital expenditure of $500,000 or more.

Hillhaven also will not increase the compensation or fringe benefits of
its directors, officers and other key employees or pay any pension or
retirement allowance not required by any existing plan or agreement to such
employees, or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employ-
ment agreement with or for the benefit of any employee, other than general
increases in the compensation of key employees (other than officers of
Hillhaven) in the ordinary course of business consistent with past
practice, and Hillhaven will not voluntarily accelerate the vesting of any
compensation or benefit or take any action with respect to any employee
plan or benefit arrangement which could prevent the Merger from being
treated as a pooling of interests, provided that Hillhaven's bonus payments
typically paid as of May 31 may be paid consistent with past practice and
Hillhaven can increase the compensation of one individual previously
identified to Vencor. Hillhaven will also ensure that executing the Merger
Agreement and the transactions contemplated thereby will not result in the
grant of any rights, or the exercise of any rights outstanding, to any
person under the Hillhaven Rights Agreement. Finally, Hillhaven will not
amend or waive any provision of the agreement relating to the Nationwide
Transaction.

No Solicitations

The Merger Agreement provides that each of Vencor and Hillhaven agrees
that from the date of the Merger Agreement until the termination of the
Merger Agreement, it and its subsidiaries will not, and will use its
respective reasonable best efforts to cause its officers, directors,
employees or other agents not to, directly or indirectly, (i) take any
action to solicit or initiate any Acquisition Proposal or (ii) engage in
negotiations with, or disclose any non-public information relating to it or
any of its subsidiaries or afford access to the properties, books or
records of it or any of its subsidiaries to any person or entity, unless
with respect to the actions referred to in (ii) it is otherwise required to
in accordance with the fiduciary duties of the Board of Directors under
applicable law as advised by independent legal counsel, in response to a
person or entity that has made an Acquisition Proposal in writing.
Hillhaven, however, is not prohibited from amending or waiving the
provisions of confidentiality agreements it has entered into with third
persons in respect of the ability of such persons to submit an Acquisition
Proposal to Hillhaven or its stockholders, and Hillhaven has already done
so. Each of Vencor and Hillhaven will, as promptly as reasonably
practicable, notify the other after receipt of any Acquisition Proposal or
any indication that any person or entity is considering making an
Acquisition Proposal and identify the party with whom it has negotiated or
to whom it has disclosed confidential information. An "Acquisition
Proposal" is defined in the Merger Agreement as any good faith offer or
proposal for a merger or other business combination involving Vencor or
Hillhaven, as the case may be, or any of their respective subsidiaries or
the acquisition of any equity interest in, or a substantial portion of the
assets of, it or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.

Certain Regulatory Matters

Under the HSR Act and the rules promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. Vencor and Hillhaven will
each file a Notification and Report Form pursuant to the HSR Act with the
DOJ and the FTC. The required waiting period under the HSR Act will expire
11:59 p.m. on the date which is 30 days following the filing of such
Notification and Report Form, unless extended by a request for additional
information or documentary material or unless earlier termination of the
waiting period is granted. Vencor and Hillhaven expect to make the required
filings under the HSR Act prior to June 1, 1995. At any time before or
after the Effective Time, the FTC, the DOJ or others could take action
under the antitrust laws with respect to the Merger, including seeking to
enjoin the consummation of the Merger, to rescind the Merger or to require
divestiture of substantial assets of Vencor, Hillhaven or the Surviving
Corporation. There can be no assurance that a challenge to the Merger on
antitrust grounds will not be made or, if such a challenge is made, that it
would not be successful.

The Merger Agreement provides that each of Vencor and Hillhaven will
cooperate with one another in determining whether any action by or in
respect of, or filing with, any government body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by the
Merger Agreement. Vencor and Hillhaven will also cooperate with one another
in seeking any such actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith and
seeking to obtain timely any such actions, consents, approvals or waivers.
Such actions include filing notices with, and in some jurisdictions
obtaining approvals or consents from, various state agencies responsible
for the licensure or certification of healthcare facilities in states where
Hillhaven and Vencor conduct their respective businesses. Each of Vencor
and Hillhaven also agrees to use its best reasonable efforts to respond as
promptly as practicable to all inquiries received from the DOJ or the FTC
for additional information or documentation in connection with the HSR
filing. Vencor and Hillhaven each will consult with the other in connection
with the foregoing and each will use its best reasonable efforts to take
any steps as may be necessary in order to obtain any consents, approvals,
permits or authorizations required in connection with the Merger, including
negotiating a resolution of disputes with governmental or regulatory
authorities and performing the resolution as negotiated.

Employee Benefits

Hillhaven officers and employees hold outstanding stock awards in the
form of stock option grants, restricted stock grants and performance share
grants under the Stock Incentive Plan. Hillhaven outside directors hold
outstanding stock option grants under the Directors' Stock Plan. Under the
Directors' Stock Plan, the Merger constitutes an event pursuant to which
all outstanding options will become exercisable and vested. The Merger
Agreement does not provide for continuation of stock option grants and
restricted stock grants under the Stock Incentive Plan and, accordingly,
all stock option awards will become exercisable and vested and all
restrictions on restricted stock grants will lapse in accordance with the
terms of the Stock Incentive Plan. Vencor will deliver in respect of each
stock option granted under the Directors' Stock Plan and the Stock
Incentive Plan the number of shares of Vencor Common Stock equal to the
product of (x) the result of multiplying the Conversion Number by a
fraction, the numerator of which is the excess, if any, of the Transaction
Value over the exercise or strike price of such Hillhaven Option and the
denominator of which is the Transaction Value and (y) the number of shares
of Hillhaven Common Stock subject to such Hillhaven Option. The Merger
Agreement provides that Vencor will continue the performance share grants
under the Stock Incentive Plan and, immediately after the Merger, satisfy
its obligations under such performance share grants by the delivery to
holders of such grants a number of shares of Vencor Common Stock equal to
the product of (x).75 multiplied by the Conversion Number and (y) the
number of shares of Hillhaven Common Stock subject to such award.

Hillhaven officers and employees hold PIP Options granted pursuant to
Hillhaven's Performance Investment Plan. As a result of the Merger these
PIP Options, whether or not exercisable, and whether or not vested, will
become fully exercisable and vested. Each PIP Option which is then
outstanding will be canceled and in consideration of such cancellation,
Vencor will deliver for each PIP Option the number of shares of Vencor
Common Stock having a value equal to the value which a PIP Optionholder
would realize had such person exercised an option immediately prior to the
Effective Time, which is equal to the product of (x) the result of
multiplying the Conversion Number by a fraction, the numerator of which is
the excess, if any, of the Transaction Value over $15.7105 (which
represents the exercise price of $16.5375 less the amount attributable to
the participant's original capital contribution of $.8270) and the
denominator of which is the Transaction Value and (y) the number of shares
of Hillhaven Common Stock subject to such PIP Option upon the conversion of
the underlying PIP Convertible Debentures and Hillhaven Series B Preferred
Stock.

The Merger Agreement states that Vencor intends, following the
Effective Time through December 31, 1995, to continue, to the extent
practicable and appropriate, the existing level of employee benefits
provided by Hillhaven and its subsidiaries (other than employee benefit
plans based on Hillhaven capital stock) and thereafter to provide to
officers and employees of Hillhaven and its subsidiaries benefits
comparable to those provided to similarly situated employees of Vencor and
its subsidiaries under Vencor's employee benefit plans. Vencor has agreed
to honor and perform, and to cause the Surviving Corporation to honor and
perform, all severance, indemnification and similar agreements of Hillhaven
identified in the Merger Agreement. Hillhaven, however, will use its best
efforts to amend all severance agreements to eliminate, as a basis upon
which severance benefits may be paid, all references to changes in title.
For the purposes of Hillhaven's Supplemental Executive Retirement Plan, the
Effective Time will be deemed to be a change in control.

Indemnification and Insurance

Pursuant to the Merger Agreement, from and after the Effective Time,
each of Vencor and the Surviving Corporation will indemnify, defend and
hold harmless the present and former officers and directors of Hillhaven
and its subsidiaries against all losses, claims, damages and liability for
acts or omissions occurring at or prior to the Effective Time to the
fullest extent that Hillhaven and its subsidiaries would have been
permitted under applicable law and under the Articles of Incorporation and
Bylaws of Hillhaven or such subsidiary. Vencor will cause the Surviving
Corporation (and its successors) to establish and maintain provisions in
its certificate of incorporation and bylaws concerning the indemnification
and exoneration of Hillhaven's former and present officers, directors,
employees and agents that are no less favorable to those persons than the
provisions of Hillhaven's Articles of Incorporation and Bylaws in effect on
the date of the Merger Agreement. For at least six years after the
Effective Time, Vencor will use its best efforts to, without any lapse in
coverage, provide directors' and officers' liability insurance for acts or
omissions occurring prior to the Effective Time covering those persons
currently covered by Hillhaven's directors' and officers' liability
insurance policy on terms, coverage and limits no less favorable than the
policy in effect on the date of the Merger Agreement. In no event, however,
will Vencor be required to pay annually more than 200% of the premium paid
by Hillhaven in its most recently ended fiscal year. Vencor will cause the
Surviving Corporation to reimburse all expenses including reasonable
attorney's fees, incurred by any person to enforce successfully the indem-
nification and insurance obligations of Vencor and the Surviving
Corporation under the Merger Agreement.

Conditions

Charter Amendment, (c) expiration or termination of the waiting period
applicable to the Merger under the HSR Act, (d) receipt of all material
consents, authorizations, orders, and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory
body, (e) there being in effect no provision of any applicable domestic law
or regulation and no judgment, injunction, order or decree of a court or
governmental agency or authority of competent jurisdiction which has the
effect of making the Merger illegal or would otherwise restrain or prohibit
the consummation of the Merger, (f) the declaration of effectiveness by the
Commission under the Securities Act of the Vencor S-4 Registration
Statement, of which this Joint Proxy Statement/Prospectus is a part, and no
stop order suspending such effectiveness being in effect and no proceedings
for such purpose having been initiated or threatened by the Commission, (g)
approval for listing on the NYSE, subject to official notice of issuance,
of Vencor's Common Stock to be issued in the Merger, (h) receipt by Vencor
and Hillhaven of an opinion from Ernst & Young LLP and KPMG Peat Marwick
LLP, respectively, to the effect that the Merger will qualify as a pooling
of interests under generally accepted accounting principles and the
Commission will not have objected to such accounting treatment, and (i)
receipt of all material third party consents.

In addition, the obligation of Vencor to consummate the Merger is
subject to the satisfaction of the following conditions: (a) Hillhaven has
materially performed its obligations under the Merger Agreement by the
Effective Time and Hillhaven's representations and warranties contained in
the Merger Agreement are materially true at the Effective Time, except for
representations and warranties made as of a specified date, and Vencor will
have received a certificate signed by an executive officer and the chief
financial officer of Hillhaven to the foregoing effect, (b) Hillhaven has
provided Vencor with "cold comfort" letters of KPMG Peat Marwick LLP as
contemplated by the Statement of Auditing Standards with respect to Letters
to Underwriters promulgated by the American Institute of Certified Public
Accountants with respect to procedures undertaken by them relating to
Hillhaven and its subsidiaries' financial statements contained in the
Vencor S-4 Registration Statement, of which this Joint Proxy
Statement/Prospectus is a part, and such other matters customarily included
in such comfort letters relating to transactions similar to the Merger, and
(c) receipt by Vencor of opinions from Sullivan & Cromwell (or such other
counsel selected by Vencor), based on relevant assumptions and
representations, that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Code.

In addition, the obligation of Hillhaven to consummate the Merger is
subject to the satisfaction of the following conditions: (a) Vencor and
Vencor Sub have materially performed their obligations under the Merger
Agreement by the Effective Time and Vencor and Vencor Sub's representations
and warranties contained in the Merger Agreement are materially true at the
Effective Time, and Hillhaven will have received a certificate signed by
the chief financial officer of Vencor to the foregoing effect, (b) Vencor
has provided Hillhaven with "cold comfort" letters of Ernst & Young LLP as
contemplated by the Statement of Auditing Standards with respect to Letters
to Underwriters promulgated by the American Institute of Certified Public
Accountants with respect to procedures undertaken by them relating to
Vencor and its subsidiaries' financial statements contained in the Vencor
S-4 Registration Statement, of which this Joint Proxy Statement/Prospectus
is a part, and such other matters customarily included in such comfort
letters relating to transactions similar to the Merger, (c) receipt by
Hillhaven of opinions from Fried, Frank, Harris, Shriver & Jacobson (or
such other counsel selected by Hillhaven), based on relevant assumptions
and representations, that the Merger should qualify for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Code
and (d) the three Hillhaven Designated Directors selected by Hillhaven's
Board to be appointed to Vencor's Board have been so elected to Vencor's
Board.

Waiver and Amendment

The Merger Agreement provides that, subject to the applicable
provisions of Delaware Law and Nevada Law, any provision of the Merger
Agreement may be amended or waived prior to the Effective Time, if such
amendment or waiver is in writing and signed, in the case of an amendment
by Hillhaven, Vencor and Vencor Sub or, in the case of a waiver, by the
party against whom the waiver is to be

effective; provided that any waiver shall be effective against a party if
the Board of Directors of such party approves such waiver or amendment. The
failure or delay by any party in exercising any right, power or privilege,
however, does not operate as a waiver of such right, power or privilege.

Termination

The Merger Agreement states that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
any requisite stockholder approval, (i) by mutual consent of Vencor and
Hillhaven by action of their respective Boards or (ii) by action of either
the Vencor or Hillhaven Board if (a) the Merger has not been consummated by
December 31, 1995, (b) if any of the stockholder approvals required
pursuant to the Merger Agreement have not been obtained due to the failure
to obtain the requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof, (c) there has
been a material breach of any (x) representation or warranty contained in
the Merger Agreement on the part of the other party which cannot be cured
prior to the Effective Time or (y) covenants or agreements set forth in the
Merger Agreement on the part of the other party which breach by its nature
cannot be cured or, if curable, is not cured within 30 days after written
notice is given by the terminating party, or (d) there is any applicable
domestic law, rule or regulation that makes the consummation of the Merger
illegal or if any judgment, injunction, order or decree of a court or
governmental agency or authority of competent jurisdiction restrains or
prohibits the consummation of the Merger, and such judgment, injunction,
order or decree is final and nonappealable.

In addition, the Merger Agreement states that it may be terminated and
the Merger abandoned at any time prior to the Effective Time, (i) by action
of the Vencor Board, if the Hillhaven Board does not publicly recommend in
the Joint Proxy Statement/Prospectus that Hillhaven's stockholders approve
and adopt the Merger Agreement and the Merger, or if the Hillhaven Board
withdraws, changes or modifies its recommendation in any manner adverse to
Vencor, or (ii) by action of the Hillhaven Board, if the Vencor Board does
not publicly recommend in the Joint Proxy Statement/Prospectus that
Vencor's stockholders approve the issuance of Vencor Common Stock in
connection with the Merger.

Furthermore, the Merger Agreement states that it may be terminated and
the Merger abandoned at any time prior to the Effective Time by Hillhaven
if the product of the Vencor Average Price (defined to be the average
closing price on the NYSE of Vencor Common Stock for the ten consecutive
trading days ending with the second trading day immediately preceding the
Effective Time) times the Conversion Number is less than $31.00 per share.
Hillhaven, however, may not terminate the Merger Agreement if Vencor
advises it in writing that the Conversion Number will be determined by
dividing $31.00 by the Vencor Average Price without regard to any maximum
imposed on the Conversion Number by the Merger Agreement. Hillhaven may
also terminate the Merger Agreement and abandon the Merger at any time
prior to the Effective Time if Hillhaven receives an unsolicited written
Acquisition Proposal that Hillhaven's Board determines in good faith, after
consultation with its legal and financial advisors, is reasonably likely to
lead to a transaction that is more favorable to its stockholders than the
Merger and that failing to take such action would be a breach of the
Hillhaven Board's fiduciary duties. Hillhaven, however, may not terminate
the Merger Agreement and abandon the Merger unless it has provided Vencor
and Vencor Sub with five business days prior written notice of its intent
to terminate the Merger Agreement due to such an Acquisition Proposal. The
written notice must include a detailed summary of the terms and conditions
of the Acquisition Proposal. If Hillhaven elects to terminate the Merger
Agreement and abandon the Merger due to such Acquisition Proposal,
Hillhaven will pay a termination fee (as described below) to Vencor.

Except as set forth in the Merger Agreement, in the event of
termination of the Merger Agreement, no party to the Merger Agreement or
any of its directors or officers will have any liability or further
obligation to any other party, except that nothing in the Merger Agreement
will relieve any party from liability for any breach of the covenants
respecting confidential information in the possession of the other

party and nothing in the Merger Agreement will relieve any party of liabil-
ity under certain termination fees, as described below.

Certain Termination Fees

If the Merger Agreement is terminated (a) by Hillhaven (i) as a result
of an Acquisition Proposal for Hillhaven, as described above, or (ii) when
an Acquisition Proposal for Hillhaven has been made and thereafter the
Merger Agreement is terminated because the Merger has not been consummated
by December 31, 1995 or the requisite Hillhaven stockholder approval has
not been obtained or (iii) when an Acquisition Proposal for Hillhaven has
been made and the Merger Agreement is terminated because the Hillhaven
Board did not publicly recommend that Hillhaven stockholders approve and
adopt the Merger Agreement or the Hillhaven Board withdrew, modified or
changed such recommendation in a manner adverse to Vencor or (b) by Vencor
(i) when an Acquisition Proposal for Vencor has been made and thereafter
the Merger Agreement is terminated because the Merger has not been
consummated by December 31, 1995 or the requisite Vencor stockholder
approval has not been obtained or (ii) when an Acquisition Proposal for
Vencor has been made and the Merger Agreement is terminated because the
Vencor Board did not publicly recommend that Vencor stockholders approve
and adopt the transactions contemplated by the Merger Agreement or the
Vencor Board withdrew, modified or changed such recommendation in a manner
adverse to Hillhaven, then, in the case of clause (a) above, Hillhaven will
pay Vencor and, in the case of clause (b) above, Vencor will pay Hillhaven,
a cash fee of $35,000,000. If the proposed Acquisition Proposal in either
(a) or (b) above is to be accounted for as a pooling of interests, then the
amount of the cash fee will be reduced to $13,500,000.

Hillhaven will reimburse Vencor and Vencor Sub for all of their out-of-
pocket expenses and fees (subject to a maximum reimbursement obligation of
$5,000,000) related to the Merger incurred prior to the termination of the
Merger Agreement (including fees and expenses of Vencor's counsel,
financial advisors, accountants, environmental experts and consultants, and
all printing and advertising expenses) if the Merger Agreement is
terminated because the stockholders of Hillhaven fail to approve the Merger
Agreement and no Acquisition Proposal involving Hillhaven is outstanding at
the time of such vote.

Vencor will reimburse Hillhaven for all of its out-of-pocket expenses
and fees (subject to a maximum reimbursement obligation of $5,000,000)
related to the Merger incurred prior to the termination of the Merger
Agreement (including fees and expenses of Hillhaven's counsel, financial
advisors, accountants, environmental experts and consultants, and all
printing and advertising expenses) if the Merger Agreement is terminated
because the stockholders of Vencor fail to approve the Merger Agreement and
no Acquisition Proposal involving Vencor or its subsidiaries is outstanding
at the time of such vote.

Expenses

Except as provided above under "--Certain Termination Fees," pursuant
to the Merger Agreement, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement will be
paid by the party incurring such cost or expense, except that Vencor and
Hillhaven will each pay one-half of all printing, filing and mailing costs
for the Vencor S-4 Registration Statement and this Joint Proxy
Statement/Prospectus and all Commission and other regulatory filing fees.

Accounting Treatment

Vencor and Hillhaven believe that the Merger will qualify as a pooling
of interests for accounting and financial reporting purposes, and have been
so advised by their respective independent public accountants. Under this
method of accounting, Vencor will restate its consolidated financial
statements to include the assets, liabilities, shareholders' equity and
results of operations of Hillhaven. It is anticipated that upon
consummation of the Merger, the fiscal year of the combined company will be
the calendar year.

Consummation of the Merger is conditioned upon the receipt by each of
Vencor and Hillhaven of a letter from their respective independent public
accountants stating that the Merger, in their respective opinions, will
qualify as a pooling of interests for accounting purposes. See
"--Conditions" and "Unaudited Pro Forma Condensed Combined Financial
Information."

Resale of Vencor Capital Stock

The shares of Vencor Common Stock issuable to stockholders of Hillhaven
in connection with the Merger have been registered under the Securities
Act. Such shares may be traded freely and without restriction by those
stockholders not deemed to be "affiliates" of Vencor or Hillhaven as that
term is defined in the rules under the Securities Act. "Affiliates" are
generally defined as persons who control, are controlled by or are under
common control with Hillhaven at the time of the Hillhaven Meeting. Shares
of Vencor Common Stock received by those stockholders of Hillhaven who are
deemed to be "affiliates" of Hillhaven may be resold without registration
as provided for by Rules 144 or 145, or as otherwise permitted, under the
Securities Act. This Joint Proxy Statement/Prospectus does not cover any
resales of Vencor Common Stock received by affiliates of Hillhaven, or by
certain of their family members or related interests.

Pursuant to the Merger Agreement, Hillhaven has agreed to use its best
efforts to cause each holder of Hillhaven's capital stock deemed to be an
affiliate of such company to enter into a written agreement providing that
such affiliate will not sell, pledge, transfer or otherwise dispose of the
shares of Vencor Common Stock to be received by such person in the Merger
except in compliance with the applicable provisions of the Securities Act
and the rules and regulations thereunder.

Hillhaven Litigation

A number of actions have resulted from Horizon's January and March
proposals to acquire Hillhaven.

On February 6, 1995, Hillhaven filed a complaint against Horizon in the
United States District Court for the District of Nevada seeking injunctive
and declaratory relief that a business combination between Horizon and
Hillhaven is prohibited by the Nevada statute regarding business
combinations with interested stockholders (NRS Sections 78.411 through
78.444) by reason of Horizon's arrangements with Tenet. On February 27,
1995, Horizon filed an answer and a counterclaim alleging that, among other
things, Hillhaven and all of its directors (other than Messrs. de Wetter
and Andersons) have breached their fiduciary duties to Hillhaven's
stockholders in connection with their consideration of Horizon's
acquisition proposal and certain actions taken by Hillhaven, including the
formation of a grantor trust, the amendment of Hillhaven's stockholder
rights plan and the filing of a shelf registration statement with the
Commission. The counterclaim seeks injunctive and declaratory relief and
compensatory and punitive damages in unspecified amounts. Hillhaven has
answered the counterclaim and believes Horizon's claims are without merit.

Hillhaven and its directors are named as defendants in a number of
putative class action complaints filed on behalf of Hillhaven's
stockholders in Nevada state court and California state court. These
complaints raise allegations that Hillhaven and its directors have breached
their fiduciary duties to Hillhaven's stockholders in connection with the
consideration of Horizon's acquisition proposal and certain corporate
actions also cited in Horizon's counterclaim. These actions seek
declaratory and injunctive relief and money damages in unspecified amounts.
Hillhaven is seeking to remove to the California federal courts the actions
filed in the California state courts. The Service Employees International
Union (AFL-CIO), and Joann Sforza, a Hillhaven employee and union member,
are seeking to intervene as party plaintiffs in one of the putative class
actions brought on behalf of Hillhaven's stockholders, alleging that their
interests as stockholders and employees of Hillhaven are not adequately
represented. Hillhaven has opposed this intervention. In addition, Tenet
filed a complaint against Hillhaven and two of its directors, Mr. Busby and

Mr. Marker, in state court in California seeking declaratory and injunctive
relief and alleging, among other things that they have breached their
fiduciary duties to Tenet and Hillhaven's other stockholders in connection
with their consideration of Horizon's acquisition proposal and certain of
the other corporate actions cited in the Horizon and putative class action
complaints. Hillhaven believes these actions are without merit.

By stipulation of the parties, all proceedings in these actions have
been stayed until various future dates.

Interests of Certain Persons in the Transactions

Hillhaven Option Plans and Other Awards

As described above under "The Merger--Employee Benefits", the Merger
will result in the acceleration of exercisability and vesting of stock
options granted under the Hillhaven Option Plans, the lapse of restrictions
on restricted stock awards and the continuation, and subsequent payments of
Vencor stock in satisfaction of performance share award grants outstanding
under the Hillhaven Option Plans. The Merger will also result in the
acceleration of exercisability and vesting of PIP Options granted pursuant
to Hillhaven's Performance Investment Plan and the cancellation of PIP
Options in exchange for Vencor Common Stock in an amount calculated as
described in "The Merger--Employee Benefits".

Pursuant to the foregoing treatment of awards under the Hillhaven
Option Plans and PIP Options, and assuming a Conversion Number of 0.977 and
a Transaction Value of $31.00, Messrs. Busby and Marker would each receive
an aggregate of _______ and _______ shares of Vencor Common Stock,
respectively, the other seven executive officers of Hillhaven would receive
an aggregate of _______ shares of Vencor Common Stock and other officers
and employees of Hillhaven would receive an aggregate of _______ shares of
Vencor Common Stock.

Approval of the Merger Agreement and the transactions related thereto
by the stockholders of Vencor and Hillhaven will constitute stockholder
approval of the treatment of the Hillhaven Options, PIP Options, restricted
shares and performance share described above at the Effective Time.

Severance Agreements

Preexisting severance agreements with certain Hillhaven officers,
including each of Hillhaven's executive officers, provide for the payment
of severance compensation, consisting of a lump-sum payment of one or two
years' base salary, upon certain terminations of employment in the event of
a change in control as defined in the agreements. The Merger will result in
a change in control under the agreements as a result of a change in the
majority of the Hillhaven Board. Payments are made under the severance
agreements following a termination by Hillhaven without cause or a
termination by the executive following (i) a reduction in salary, (ii) a
reduction in fringe benefits (other than a reduction applicable to
substantially all employees), (iii) a requirement for the executive to
relocate to a location beyond a thirty-mile radius from the executive's
current place of employment or (iv) a material reduction in title or
responsibilities; provided, however, that Hillhaven has agreed in the
Merger Agreement to use its best efforts to eliminate all references to
change in title in the severance agreements. In the event any severance
payments are subject to an excise tax under Section 4999 of the Code, the
officers will receive a gross-up payment to enable them to retain an amount
of severance payments as if such excise tax had not been applied.

Directors' Retirement Plan and Directors' Stock Option Plan

Director and Officer Indemnification and Insurance

Board of Directors

Pursuant to the Merger Agreement, Vencor has agreed to take all actions
as shall be necessary to cause the number of directors comprising the full
Vencor Board at the Effective Time to be increased so that the three
Hillhaven Designated Directors can be appointed to the Vencor Board to have
terms expiring at the Vencor Annual Meeting of Stockholders to be held in
1996. The following three members of the Hillhaven Board will be the
Hillhaven Designated Directors: Bruce L. Busby, Walter F. Beran and
Jack O. Vance. In addition, Vencor has agreed to cause the Hillhaven
Designated Directors to be nominated for election to the Vencor Board at
the Vencor Annual Meeting of Stockholders to be held in 1996. See
"Operations and Management After the Merger--Directors After the Merger."

Proposed Amendments to Vencor's Certificate of Incorporation

Pursuant to the Merger Agreement, the Vencor Board is unanimously
proposing to amend Vencor's Certificate of Incorporation to increase the
total number of authorized shares of Vencor Common Stock from 60,000,000
shares to 180,000,000 shares. See "Amendment to the Vencor Certificate of
Incorporation."

Dissenters' Rights

Holders of Vencor Common Stock will not be entitled to any dissenters',
appraisal or preemptive rights as a result of the matters to be voted upon
at the Vencor Meeting.

Holders of Hillhaven Common Stock will not be entitled to any
dissenters' or appraisal rights as a result of the matters to be voted upon
at the Hillhaven Meeting.

Under Nevada Law, the holder of Hillhaven Preferred Stock will have
certain dissenters' rights as a result of the Merger to demand payment of
the "fair value" of its shares of Hillhaven Preferred Stock. The following
summary of the applicable provisions of Nevada Law is not intended to be a
complete statement of such provisions and is qualified in its entirety by
reference to the full sections of Nevada Law, copies of which are attached
to this Joint Proxy Statement/ Prospectus as Appendix E. A person having a
beneficial interest in Hillhaven Preferred Stock that is held of record in
the name of another person, such as a broker or nominee, must act promptly
to cause the record holder to follow the steps summarized below properly
and in a timely manner to perfect whatever dissenters' rights the
beneficial owner may have.

THIS DISCUSSION AND APPENDIX E SHOULD BE REVIEWED CAREFULLY BY ANY
HOLDER OF HILLHAVEN PREFERRED STOCK WHO WISHES TO EXERCISE STATUTORY
DISSENTERS' RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO BECAUSE
FAILURE TO STRICTLY COMPLY WITH ANY OF THE PROCEDURAL REQUIREMENTS OF
NEVADA LAW MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS
UNDER NEVADA LAW.

A holder of Hillhaven Preferred Stock as of the record date for the
Hillhaven Meeting who elects to dissent from the approval and adoption of
the Merger Agreement and who has not voted in favor thereof is entitled
under NRS Section 78.497 of Nevada Law, as an alternative to receiving the
applicable Merger consideration for such Hillhaven Preferred Stock, to
receive the amount that Hillhaven estimates to be the fair value of the
shares, plus accrued interest. The obligation of Hillhaven under this
section may be judicially enforced.

Any holder of Hillhaven Preferred Stock who elects to exercise such
holder's dissenters' rights with respect to the Merger Agreement must (i)
deliver to Hillhaven, before the vote is taken, a written notice of intent
to demand payment if the proposed action is effectuated and (ii) not vote
in favor of the proposed action. A stockholder who does not comply with
these provisions is not entitled to payment under the statutory dissenters'
rights provisions of Nevada Law.

If the Merger is approved at the Hillhaven Meeting, Hillhaven will
deliver a written dissenters' notice to holders of Hillhaven Preferred
Stock who satisfied the notice requirements to assert dissenters' rights.
Hillhaven's dissenters' notice will be sent no later than ten days after
approval of the Merger and will (i) state where the demand for payment must
be sent and where and when certificates for certificated shares must be
deposited, (ii) inform the holders of uncertificated shares as to what
extent the transfer of the shares will be restricted after the demand for
payment is received, (iii) supply a form for demanding payment that
includes the date of the first announcement of the news media or to the
stockholders of the terms of the Merger so that the person asserting
dissenters' rights can certify whether or not the beneficial ownership was
acquired before that date, (iv) set a date for Hillhaven to receive the
demand for payment, which may not be less than thirty nor more than sixty
days after the date the notice is delivered, and (v) include copies of the
relevant statutory provision on dissenters' rights of Nevada Law.

A holder of Hillhaven Preferred Stock to whom a dissenters' notice was
sent must (i) demand payment, (ii) certify whether beneficial ownership of
the shares was acquired before the date set forth in Hillhaven's dis-
senters' notice and (iii) deposit the certificates in accordance with the
terms of the dissenters' notice. A stockholder who demands payment and
deposits the certificates will retain all other rights of a stockholder
until those rights are canceled or modified by the Merger. A stockholder
who does not demand payment or deposit the certificates where required is
not entitled to payment for the shares under the dissenters' rights
provisions of the Nevada Law.

Within thirty days after receiving a demand for payment, Hillhaven will
pay each dissenter the amount that Hillhaven estimates to be the fair
value, plus accrued interest. This obligation under Nevada Law may be
judicially enforced.

A dissenter may elect to notify Hillhaven of the stockholder's own
estimate of the fair value and the amount of interest due, and demand
payment for this estimate, less any payment already made as described
above. A dissenter, however, cannot so elect unless the stockholder
notifies Hillhaven of this demand in writing within thirty days after
Hillhaven made or offered to pay for his shares, as described above.

Hillhaven may elect to withhold payment to a dissenter who was not a
beneficial owner prior to the date set forth in the dissenter's notice. If
Hillhaven so elects, after the Merger Hillhaven will estimate the fair
value plus interest and will offer to make such payment in full
satisfaction of such dissenter's demand.

If a demand for payment remains unsettled, Hillhaven will commence a
proceeding within sixty days after receiving the demand and will petition
the court to determine the fair value of the shares and accrued interest.
If Hillhaven does not commence the proceeding within sixty days, it will
pay each dissenter whose demand remains unsettled the amount demanded.
Hillhaven will make all dissenters whose demand remains unsettled parties
to the action.

The court in such a proceeding will assess the costs and expenses of
the proceeding against Hillhaven, except the court may assess the
dissenters with costs if the court finds that the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment. Each
dissenter who is a party to the proceeding is entitled to judgment for (i)
the amount, if any, by which the court finds the fair value plus interest
exceeds the amount paid to the dissenter by Hillhaven or (ii) the fair
value plus interest of after-acquired shares for which Hillhaven elected to
withhold payment.

Surrender of Certificates

The Merger Agreement provides that Vencor will appoint an exchange
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing shares of Hillhaven Stock. Vencor will deposit with the
Exchange Agent for the benefit of the holders of Hillhaven Stock (other
than Hillhaven, Vencor or any subsidiary of Vencor) for exchange as of the
Effective Time, (i) certificates representing shares of Vencor Common Stock
to be issued in exchange for shares of Hillhaven Common Stock, (ii) cash in
an amount equal to the aggregate merger consideration to be paid to the
holders of Hillhaven Preferred Stock and (iii), from time to time as
necessary to make payments, cash to be paid in lieu of fractional shares
(collectively, the "Exchange Fund"). The Exchange Agent will deliver Vencor
Common Stock and/or cash in exchange for surrendered certificates
representing Hillhaven Stock out of the Exchange Fund, which is to be used
for no other purpose.

Promptly after the Effective Time, Vencor will send, or will cause the
Exchange Agent to send, to each holder of a certificate that immediately
prior to the Effective Time represented outstanding shares of Hillhaven
Stock ("Certificates") a letter of transmittal and instructions for use in
effecting such exchange of Certificates for Vencor Common Stock and/or
cash. Provision will also be made for holders of Certificates to procure a
letter of transmittal and instructions and deliver such letter of
transmittal and

Certificates in exchange for Vencor Common Stock and/or cash in person
immediately after the Effective Time. After the Effective Time,
Certificates will represent the right, upon surrender thereof to the
Exchange Agent, together with a duly executed and properly completed letter
of transmittal relating thereto, to receive in exchange therefor that
number of whole shares of Vencor Common Stock and/or cash which such holder
has the right to receive under the Merger Agreement, after giving effect to
any required tax withholding, and the Certificates so surrendered will be
canceled. No interest will be paid or will accrue on any cash amount
payable upon the surrender of any such Certificates.

If any shares of Vencor Common Stock are to be issued and/or cash paid
to a person other than a registered holder of the Certificate surrendered,
it will be a condition to such issuance that the Certificate so surrendered
be properly endorsed or be in otherwise proper form for transfer. A person
requesting such an issuance will pay the Exchange Agent any appropriate
transfer or other taxes required as a result of such issuance to a person
other than the registered holder or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.

At and after the Effective Time, Hillhaven's stock transfer books will
be closed and there will be no further registration of transfers of
Hillhaven Stock outstanding prior to the Effective Time. If, at or after
the Effective Time, Certificates are presented to the Surviving
Corporation, they will be canceled and exchanged as provided for in the
Merger Agreement.

Any share of Vencor Common Stock and/or cash in the Exchange Fund that
remain unclaimed by the holders of Hillhaven Stock six months after the
Effective Time shall be returned to Vencor. Any such holders of Hillhaven
Stock who have not exchanged their shares of Hillhaven Stock will
thereafter look to Vencor, as a general creditor thereof, to exchange such
shares or amounts to which they are entitled. If outstanding Certificates
are not surrendered within six years from the Effective Time, to the extent
permitted by applicable law, the Vencor Common Stock issuable in respect of
such certificates will become the property of the Surviving Corporation.

The Merger Agreement provides that no dividends or distributions on
Vencor Common Stock will be paid to the holder of any unsurrendered
Certificates with respect to shares of Vencor Common Stock represented
thereby until such Certificates are surrendered. Following such surrender,
there shall be paid, without interest to the person in whose name the
certificates representing the shares of Vencor Common Stock issued in
exchange therefor are registered, (i) all dividends and distributions paid
in respect of Vencor Common Stock with a record date on or after the
Effective Time and theretofore paid and (ii) at the appropriate date, all
dividends or other distributions in respect of Vencor Common Stock with a
record date after the Effective Time but prior to surrender and a payment
date occurring after surrender.

Pursuant to the Merger Agreement, if any Certificate has been lost,
stolen or destroyed, upon submitting an affidavit to that effect by the
person claiming such Certificate to be lost, stolen or destroyed, and, if
required by the Surviving Corporation, the posting of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for lost, stolen or
destroyed Certificate the shares of Vencor Common Stock and/or cash and
unpaid dividends and other distributions on shares of Vencor Common Stock
deliverable under the Merger Agreement.

New York Stock Exchange Listing

Pursuant to the Merger Agreement, Vencor agrees to use its best efforts
to cause the shares of Vencor Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance,
prior to the Effective Time.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following summary discusses the material federal income tax
consequences of the Merger. The summary is based upon the Code, applicable
Treasury Regulations thereunder and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to
change, and any such change could affect the continuing validity of the
discussion. The discussion assumes that holders of shares of Hillhaven
Common Stock hold such shares as a capital asset. Further, the discussion
does not address the tax consequences that may be relevant to a particular
stockholder subject to special treatment under certain federal income tax
laws, such as dealers in securities, banks, insurance companies, tax-exempt
organizations, non-United States persons, the holder of Hillhaven Preferred
Stock which also owns Hillhaven Common Stock, stockholders who acquired
shares of Hillhaven Common Stock pursuant to the Nationwide Share Exchange
Agreement or through the exercise of options or otherwise as compensation
or through a tax-qualified retirement plan, and holders of options and
performance shares granted under Hillhaven's benefit plans. This discussion
does not address any consequences arising under the laws of any state,
locality or foreign jurisdiction.

Neither Hillhaven nor Vencor has requested a ruling from the Internal
Revenue Service ("IRS") with regard to any of the federal income tax
consequences of the Merger, and the opinions of counsel as to such federal
income tax consequences set forth below will not be binding on the IRS.

Tax Opinion

Fried, Frank, Harris, Shriver & Jacobson ("Fried Frank"), special
counsel to Hillhaven, and Sullivan & Cromwell, special counsel to Vencor,
are of the opinion that the Merger should constitute a reorganization
pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. The
foregoing opinions are based upon (i) representations of Hillhaven, Vencor,
and certain stockholders of Hillhaven customarily given in transactions of
this type, and (ii) the assumption that the Merger will be consummated in
accordance with its terms. The consummation of the Merger is conditioned on
(i) the receipt by Vencor of an opinion of Sullivan & Cromwell confirming
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, and (ii) the receipt by Hillhaven of an opinion
of Fried Frank confirming that the Merger should qualify as a
reorganization within the meaning of Section 368(a) of the Code.

The discussion below summarizes certain federal income tax consequences
of the Merger, assuming that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code.

Consequences to Hillhaven Stockholders

Under the reorganization provisions of the Code, no gain or loss will
be recognized by holders of Hillhaven Common Stock with respect thereto as
a result of the conversion of their shares of Hillhaven Common Stock into
shares of Vencor Common Stock pursuant to the Merger (except to the extent
cash is received in lieu of fractional shares). The tax basis of the shares
of Vencor Common Stock received in the Merger will be the same as the tax
basis of the shares of Hillhaven Common Stock exchanged therefor in the
Merger (including any fractional shares of Vencor Common Stock deemed
received). The holding period of the shares of Vencor Common Stock received
will include the holding period of shares of Hillhaven Common Stock
exchanged therefor.

Fractional Shares

If a holder of shares of Hillhaven Common Stock receives cash in lieu
of a fractional share of Vencor Common Stock in the Merger, such cash
amount will be treated as received in redemption of the fractional share of
Vencor Common Stock. Gain or loss recognized as a result of that exchange
will be equal to the cash amount received for the fractional share of
Vencor Common Stock reduced by the proportion of the holder's tax basis in
shares of Hillhaven Common Stock exchanged and allocable to the fractional
share of Vencor Common Stock.

Consequences to Hillhaven, Vencor and Vencor Sub

None of Hillhaven, Vencor, Vencor Sub, or the holders of Vencor Common
Stock will recognize gain or loss as a result of the Merger.

THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT
THERETO. THUS, HILLHAVEN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF
ANY PROPOSED CHANGES IN THE TAX LAWS.

SECURITY OWNERSHIP

The following table sets forth certain information with respect to all
stockholders known by Vencor and Hillhaven, based upon filings publicly
available as of June __, 1995, who would have been beneficial owners of
more than 5% of the outstanding Vencor Common Stock if the Merger had
occurred on that date.

Estimated Number of
Name and Address Shares Beneficially Percent
of Beneficial Owner Owned After the Merger Of Class

Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, CA 90404 ___ ___

Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 ___ ___

Wellington Management
Company
75 State Street
Boston, MA 02109 ___ ___

DESCRIPTION OF VENCOR CAPITAL STOCK

The following description of certain terms of the capital stock of
Vencor does not purport to be complete and is qualified in its entirety by
reference to Vencor's Certificate of Incorporation incorporated herein by
reference and to the Relative Rights, Preferences and Limitations of the
Series A Participating Preferred Stock which are incorporated herein by
reference.

The authorized capital stock of Vencor currently consists of 60,000,000
shares of Vencor Common Stock, par value $.25 per share, and 1,000,000
shares of preferred stock, par value $1.00 per share, of which 65,000
shares are designated Series A Preferred Stock ("Vencor Series A Preferred
Stock") and 300,000 shares are designated Series A Participating Preferred
Stock ("Vencor Series A Participating Preferred Stock" and, together with
the Vencor Series A Preferred Stock, the "Vencor Preferred Stock"). Each
share of Vencor Common Stock trades with an associated participating
preferred stock purchase right. See "Vencor Preferred Stock--Description of
Vencor Rights." As of March 31, 1995, there were outstanding 27,869,980
shares of Vencor Common Stock, with an additional 2,137,352 shares issued
and held in treasury. In addition, as of April 21, 1995, an aggregate of
2,370,305 shares of Vencor Common Stock were reserved for issuance pursuant
to various option plans. There are no shares of Vencor Preferred Stock
outstanding. The Charter Amendment would, if approved, increase the number
of authorized shares of Vencor Common Stock from 60,000,000 shares to
180,000,000 shares.

Vencor Common Stock

The holders of Vencor Common Stock are entitled to one vote per share
for each share held of record on all matters submitted to a vote of
stockholders and are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
As a Delaware corporation, Vencor is subject to statutory limitations on
the declaration and payment of dividends. In the event of a liquidation,
dissolution or winding up of Vencor, holders of Vencor Common Stock have
the right to a ratable portion of assets remaining after payment of all
liabilities and the aggregate liquidation preferences of any outstanding
shares of Vencor Preferred Stock. The holders of Vencor Common Stock have
no preemptive rights. All outstanding shares of Vencor Common Stock are,
and the shares of Vencor Common Stock to be issued in the Merger will be,
fully paid and non-assessable. As of April 30, 1995, there were 1,129
holders of record of Vencor Common Stock.

Vencor Preferred Stock

The Vencor Board may, without further action by the stockholders of
Vencor, designate and issue preferred stock in one or more series and fix
the rights and preferences thereof, including the voting rights, dividend
rights and rates, redemption rights (including sinking fund provisions),
conversion rights, liquidation rights, priority as to other series of
preferred stock and any other powers, preferences, privileges and relative
participating, optional or other special rights of the series and the
qualifications, limitations or restrictions thereof.

The rights of the holders of Vencor Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any shares
of preferred stock that may be issued in the future. Issuance of shares of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding
voting stock of Vencor. See "--Description of Vencor Rights." Vencor has no
present plans to issue any shares of preferred stock.

Description of Vencor Rights

On July 20, 1993, the Vencor Board declared a dividend of one right to
purchase Vencor Series A Participating Preferred Stock (a "Vencor Right")
(currently 0.667 of a Vencor Right as adjusted for Vencor's three-for-two
stock split effected October 25, 1994) for each outstanding share of Vencor
Common Stock. Each Vencor Right entitles the holder to purchase from Vencor
one-hundredth of a share of Vencor Series A Participating Preferred Stock
at a purchase price of $73.33, subject to future adjustment (currently and
as so adjusted, the "Vencor Purchase Price"). The dividend was paid to
holders of record as of August 1, 1993 (the "Vencor Record Date"). Vencor
Rights are also issued with shares of Vencor Common Stock issued after the
initial dividend distribution and before the occurrence of certain
specified events (which have not occurred as of the date hereof). Until a
Vencor Right is exercised, the holder thereof, as such, has no rights as a
stockholder of Vencor, including, without limitation, the right to vote or
to receive dividends.

The description and terms of the Vencor Rights are set forth in a
Rights Agreement dated as of July 20, 1993 (the "Vencor Rights Agreement"),
between Vencor and National City Bank of Cleveland, Ohio, as Rights Agent.
The Vencor Rights Agreement has been filed with the Commission as an
exhibit to Vencor's Registration Statement on Form 8-A filed on July 21,
1993. The existence of the Vencor Rights may have the effect of making it
more difficult for a third party to acquire, or of discouraging a third
party from acquiring, a majority of the outstanding voting stock of Vencor.
The following summary description of the Vencor Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.

The Vencor Rights are currently attached to all Vencor Common Stock
certificates representing outstanding shares and no separate Vencor Rights
certificates have been distributed. Until the earlier to occur of (i) the
first date (the "Vencor Stock Acquisition Date") of a public announcement
that, without the prior approval of Vencor (which approval is prohibited
under certain circumstances as described below), a person or group of
affiliated or associated persons (a "Vencor Acquiring Person") has
acquired, or obtained the right to acquire beneficial ownership of
securities having 15% or more of the voting power of all outstanding voting
securities of Vencor or (ii) ten days (unless such date is extended by the
Vencor Board) following the commencement of (or a public announcement of an
intention to make) a tender offer or exchange offer which would result in
any person or group of related persons becoming a Vencor Acquiring Person
(the earlier of such dates being called the "Vencor Rights Distribution
Date"), the Vencor Rights will continue to be evidenced by the Vencor
Common Stock certificates. Until the Vencor Rights Distribution Date, the
Vencor Rights will be transferred only with Vencor Common Stock
certificates. New Vencor Common Stock certificates issued after the Vencor
Record Date upon transfer or new issuance of the Vencor Common Stock
contain a notation incorporating the Vencor Rights Agreement by reference.
Until the Vencor Rights Distribution Date (or earlier redemption, exchange,
or expiration of the Vencor Rights), the surrender for transfer of any
certificates for Vencor Common Stock will also constitute the transfer of
the Vencor Rights associated with the Vencor Common Stock represented by
such certificate. As soon as practicable following the Vencor Rights
Distribution Date, separate certificates evidencing the Vencor Rights
("Vencor Rights Certificates") will be mailed to holders of record of the
Vencor Common Stock as of the close of business on the Vencor Rights
Distribution Date, and the separate Vencor Rights Certificates alone will
evidence the Vencor Rights.

The Vencor Rights will not be exercisable until the Vencor Rights
Distribution Date. The Vencor Rights will expire on the earliest of (i) the
close of business on July 19, 2003; (ii) consummation of a merger
transaction with a person or group who acquired Vencor Common Stock
pursuant to a Vencor Permitted Offer (as defined below), and is offering in
the merger the same form of consideration, and not less than the price per
share, paid pursuant to the Vencor Permitted Offer; (iii) redemption by
Vencor as described below; or (iv) or exchange by Vencor as described
below.

The Vencor Purchase Price payable, and the number of shares of Vencor
Series A Participating Preferred Stock or other securities issuable, upon
exercise of the Vencor Rights will be subject to an adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Vencor Series A
Participating Preferred Stock, (ii) upon the grant to holders of the Vencor
Series A Participating Preferred Stock, certain convertible securities or
securities having rights, privileges and preferences the same as, or more
favorable than, the Vencor Series A Participating Preferred Stock at less
than the current market price of the Vencor Series A Participating
Preferred Stock or (iii) upon the distribution to holders of the Vencor
Series A Participating Preferred Stock of evidences of indebtedness, cash
(excluding regular quarterly cash dividends out of earnings or retained
earnings), assets (other than a dividend payable in Vencor Series A
Participating Preferred Stock) or of subscription rights or warrants (other
than those referred to above).

In the event that, after the first date of public announcement by
Vencor or a Vencor Acquiring Person that a Vencor Acquiring Person has
become such, Vencor is involved in a merger or other business combination
transaction in which the Vencor Common Stock is exchanged or changed (other
than a merger with a person or group who acquired Vencor Common Stock
pursuant to a Vencor Permitted Offer and is offering in the merger not less
than the price paid pursuant to the Vencor Permitted Offer and the same
form of consideration paid in the Vencor Permitted Offer), or 50% or more
of Vencor's assets or earning power are sold (in one transaction or a
series of transactions), proper provision shall be made so that each holder
of a Vencor Right (other than such Vencor Acquiring Person) shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Vencor Right, that number of shares of common
stock of the acquiring company (or, in the event that there is more than
one acquiring company, the acquiring company receiving the greatest portion
of the assets or earning power transferred) which at the time of such
transaction would have a market value of two times the exercise price of
the Vencor Right (such right being called the "Flip-over Right"). "Vencor
Permitted Offer" means a tender offer or exchange offer for all outstanding
shares of Vencor Common Stock at a price and on terms determined, prior to
the purchase of shares under such tender offer or exchange offer, by at
least a majority of the members of the Vencor Board who are not officers of
Vencor to be both adequate and otherwise in the best interests of Vencor,
its stockholders (other than the person on whose behalf the offer is being
made) and other relevant constituencies.

In the event that a Vencor Acquiring Person becomes such, proper
provision shall be made so that each holder of a Vencor Right will for a
60 day period thereafter have the right to receive upon exercise that
number of shares of Vencor Common Stock having a market value of two times
the exercise price of the Vencor Right, to the extent available, and then
(after all authorized and unreserved shares of Vencor Common Stock have
been issued) a common stock equivalent (such as Vencor Series A
Participating Preferred Stock or another equity security with at least the
same economic value as the Vencor Common Stock) having a market value of
two times the exercise price of the Vencor Right, with Vencor Common Stock
to the extent available being issued first (such right being called the
"Flip-in Right").

The holder of a Vencor Right will continue to have the Flip-over Right
whether or not such holder exercises the Flip-in Right. Upon the occurrence
of any of the events giving rise to the exercisability of the Flip-over
Right or the Flip-in Right, any Vencor Rights that are or were at any time
owned by an Acquiring Person shall become void insofar as they relate to
the Flip-over Right or the Flip-in Right.

With certain exceptions, no adjustments in the Vencor Purchase Price
will be required until cumulative adjustments require an adjustment of at
least 1% in such Vencor Purchase Price. No fractions of shares will be
issued and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Vencor Common Stock on the last trading date prior
to the date of exercise.

At any time prior to the earlier to occur of (i) a person becoming a
Vencor Acquiring Person or (ii) the expiration of the Vencor Rights, Vencor
may redeem the Vencor Rights in whole, but not in part,

at a price of $.0067 in cash per Vencor Right (the "Vencor Rights
Redemption Price"), which redemption shall be effective upon the action of
the Vencor Board in the exercise of its sole discretion. Additionally,
Vencor may, following the Stock Acquisition Date, redeem the then
outstanding Rights in whole, but not in part, at the Vencor Rights
Redemption Price, following an event giving rise to, and the expiration of
the exercise period for, the Flip-in Right, provided that redemption is
(i) in connection with a merger or other business combination transaction
or series of transactions involving Vencor in which all holders of Vencor
Common Stock are treated alike but not involving a Vencor Acquiring Person
or any person who was a Vencor Acquiring Person or (ii) if and for as long
as no person beneficially owns securities representing 15% or more of the
voting power of Vencor's voting securities. Upon the effective date of the
redemption of the Vencor Rights, the right to exercise the Vencor Rights
will terminate and the only right of the holders of Vencor Rights will be
to receive the Vencor Rights Redemption Price.

The Vencor Board may, at its option, at any time after any person
become a Vencor Acquiring Person, exchange all or part of the then
outstanding and exercisable Vencor Rights for shares of Vencor Common Stock
at an exchange ratio of one share of Vencor Common Stock per Vencor Right,
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Vencor Rights Record Date.
Notwithstanding the foregoing, the Vencor Board is not empowered to effect
such exchange at any time after any person (other than Vencor, any
subsidiary of Vencor, any employee benefit plan of Vencor or any such
subsidiary, or any entity holding Vencor Common Stock for or pursuant to
the terms of any such plan), together with all affiliates and associates of
such person, becomes the beneficial owner of 50% or more of the Vencor
Common Stock then outstanding. Immediately upon the action of the Vencor
Board ordering the exchange of any Vencor Rights, and without any further
action and without any notice, the right to exercise such Vencor Rights
shall terminate and the only right thereafter of a holder of such Vencor
Rights shall be to receive that number of shares of Vencor Common Stock
equal to the number of such Vencor Rights held by such holder.

Any of the provisions of the Vencor Rights Agreement may be amended by
the Vencor Board prior to a person becoming a Vencor Acquiring Person.
After such time, the provisions of the Vencor Rights Agreement may only be
amended by the Vencor Board to make changes which do not adversely affect
the interests of holders of Vencor Rights.

The Vencor Series A Participating Preferred Stock purchasable upon
exercise of the Vencor Rights will be nonredeemable and junior to any other
series of preferred stock Vencor may issue (unless otherwise provided in
the terms of such stock). Each share of Vencor Series A Participating
Preferred Stock will have a preferential quarterly dividend in an amount
equal to 100 times the dividend declared on each share of Vencor Common
Stock, but in no event less than $1.00. In the event of liquidation, the
holders of Vencor Series A Participating Preferred Stock will receive a
preferred liquidation payment equal to $100 per share, plus an amount equal
to accrued and unpaid dividends thereon to the date of such payment. Each
share of Vencor Series A Participating Preferred Stock will have 100 votes,
voting together with the shares of Vencor Common Stock. In the event of any
merger, consolidation or other transaction in which shares of Vencor Common
Stock are exchanged, each share of Vencor Series A Participating Preferred
Stock will be entitled to receive 100 times the amount and type of
consideration received per share of Vencor Common Stock. Vencor shall not
be required to issue fractions of a share of Vencor Series A Participating
Preferred Stock.

Until a Vencor Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of Vencor, including, without limitation,
the right to vote or to receive dividends. Vencor shall not be required to
issue fractions of Vencor Rights.

The Vencor Rights may have certain anti-takeover effects. The Vencor
Rights will cause substantial dilution to a person or group that attempts
to acquire Vencor without conditioning the offer on the Vencor Rights being
redeemed or a substantial number of Vencor Rights being acquired. However,
the Vencor

Rights should not interfere with any tender offer or merger approved by
Vencor (other than with a Vencor Acquiring Person) because the Vencor
Rights (i) do not become exercisable in the event of a Vencor Permitted
Offer and expire automatically upon the consummation of a merger in which
the form of consideration is the same as, and the price is not less than
the price paid in, the Vencor Permitted Offer and (ii) are redeemable and
exchangeable in connection with an approved merger in which all holders of
Vencor Common Stock are treated alike.

Delaware Anti-Takeover Law and Certain Bylaw Provisions

Vencor is a Delaware corporation and consequently is subject to certain
anti-takeover provisions of Delaware Law. The business combination
provision contained in Section 203 of Delaware Law ("Section 203") defines
an interested stockholder of a corporation as any person that (i) owns,
directly or indirectly, or has the right to acquire, 15% or more of the
outstanding voting stock of the corporation or (ii) is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-
year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder; and the
affiliates and the associates of such person. Under Section 203, a Delaware
corporation may not engage in any business combination with any interested
stockholder for a period of three years following the date such stockholder
became an interested stockholder, unless (i) prior to such date the board
of directors of the corporation approved either the business combination or
the transaction which resulted in the stockholder becoming an interested
stockholder, or (ii) upon consummation of the transaction which resulted in
the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding, for
determining the number of shares outstanding, (a) shares owned by persons
who are directors and officers and (b) employee stock plans, in certain
instances), or (iii) on or subsequent to such date the business combination
is approved by the board of directors and authorized at an annual or
special meeting of the stockholders by at least 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder. The
restrictions imposed by Section 203 will not apply to a corporation if (i)
the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by this section or (ii) the
corporation, by the action of its stockholders holding a majority or
outstanding stock, adopts an amendment to its certificate of incorporation
or bylaws expressly electing not to be governed by Section 203 (such
amendment will not be effective until 12 months after adoption and shall
not apply to any business combination between such corporation and any
person who became an interested stockholder of such corporation on or prior
to such adoption).

Vencor has not elected out of Section 203, and the restrictions imposed
by Section 203 apply to Vencor. Section 203 could, under certain
circumstances, make it more difficult for a third party to gain control of
Vencor.

Vencor's Restated Bylaws include several provisions which may deter an
unsolicited acquisition of control of Vencor. These provisions require:
(a) special meetings of stockholders be called by the Chairman of the
Vencor Board; (b) advance notice of stockholder proposals; (c) consent of
80% of stockholders to take written action (which is also included in the
Vencor Certificate); (d) record dates be set by the Vencor Board for the
purpose of determining stockholders entitled to consent to corporate action
in writing without a meeting; and (e) approval of bylaw amendments by the
Vencor Board or the holders of two-thirds of the Vencor's Common Stock.

Transfer Agent

The transfer agent and registrar for Vencor Common Stock is National
City Bank, Cleveland, Ohio.

COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
OF VENCOR AND HILLHAVEN

General

As a result of the Merger, holders of Hillhaven Common Stock will
become holders of Vencor Common Stock and the rights of all such former
holders of Hillhaven Common Stock will thereafter be governed by the Vencor
Certificate of Incorporation (the "Vencor Certificate"), the Vencor Bylaws
and Delaware Law. The rights of the holders of Hillhaven Common Stock are
presently governed by the Articles of Incorporation of Hillhaven (the
"Hillhaven Articles"), the Hillhaven Bylaws and Nevada Law. The following
summary, which does not purport to be a complete statement of the general
differences among the rights of the stockholders of Vencor and Hillhaven,
sets forth certain differences between Delaware Law and Nevada Law, between
the Vencor Certificate and the Hillhaven Articles and between the Vencor
Bylaws and the Hillhaven Bylaws. This summary is qualified in its entirety
by reference to the full text of each of such documents, Delaware Law and
Nevada Law. For information as to how such documents may be obtained, see
"Available Information."

Size and Classification of Board of Directors; Hillhaven Designated
Directors

Vencor

The Vencor Bylaws provide that the number of directors of Vencor will
be determined from time to time by a majority of the Vencor Board, but in
no event can there be less than three or more than eleven. Pursuant to the
Merger Agreement, at the Effective Time, Vencor must take all actions
necessary to cause the number of directors comprising the full Vencor Board
to be increased so that the three Hillhaven Designated Directors can be
appointed to the Vencor Board to have terms expiring at the Vencor Annual
Meeting to be held in 1996. In addition to Bruce L. Busby, the Chairman and
Chief Executive Officer of Hillhaven, Hillhaven has advised Vencor that
Walter F. Beran and Jack O. Vance will be selected for service on the
Vencor Board. Under the Merger Agreement, Vencor also agreed to cause the
Hillhaven Designated Directors to be nominated for election to the Vencor
Board at the Vencor Annual Meeting of Stockholders to be held in 1996. See
"Operations and Management After the Merger -- Directors After the Merger."

Although the Delaware Law allows directors to be divided into three
separate classes with staggered terms of office, neither the Vencor
Certificate nor the Vencor Bylaws provide for the classification of
directors.

Hillhaven

Nevada Law provides that a corporation's board of directors shall
consist of at least one member and the authorized number of directors may
be fixed or variable within a fixed minimum or maximum as provided in
either the corporation's articles of incorporation or in the bylaws. The
Hillhaven Articles provide that the authorized number of directors
constituting the Hillhaven Board shall not be less than three or more than
twenty-one, as fixed from time to time exclusively by the Hillhaven Board
pursuant to a resolution adopted by a majority of the total number of
authorized directors. The Hillhaven Board has fixed the number of directors
comprising the Hillhaven Board at eight.

The Hillhaven Articles also provide that the Hillhaven Board will be
divided into three classes, and each class will generally serve for a term
of three years. Each year the term of one class of directors expires, so it
is only possible to elect one class of the Hillhaven Board of Directors
(approximately one-third) in any one year.

Removal of Directors; Filling Vacancies on the Board of Directors

Vencor

Pursuant to the Vencor Bylaws, any director or the entire Vencor Board
may be removed with or without cause, at any time, by the affirmative vote
of the holders of record of a majority of the outstanding shares of Vencor
stock entitled to vote in the election of directors at a special meeting of
the stockholders held for that purpose. The Vencor Bylaws provide that any
vacancy occurring on the Vencor Board for any reason, including the
resignation, removal or death of a director or an increase in the number of
directors within the limits set forth above, may be filled by the vote of a
majority of the directors remaining in office at such time although less
than a quorum, with such successor to serve for the unexpired term and
until his successor is elected and qualified.

Hillhaven

Under Nevada Law, a director may be removed by the vote of the holders
of not less than two-thirds of the voting power of the voting stock,
subject to certain restrictions concerning cumulative voting. However, a
Nevada corporation may include in its articles of incorporation a provision
requiring the approval of a larger percentage of the voting power to remove
a director. Under Nevada Law, any vacancy in the board of directors may be
filled by a majority of the remaining directors, though less than a quorum.
The Hillhaven Articles provide that any director may be removed from office
at any time, upon the vote of the stockholders representing not less than
two-thirds of the outstanding voting stock of Hillhaven. The Hillhaven
Articles further provide that the Hillhaven Board will fill all vacancies,
including a vacancy created by an increase in the number of directors, by
election of the Hillhaven Board with the director so elected to serve for
the remainder of the term of the class to which the director has been
assigned. All directors will continue in office until the election and
qualification of their respective successors in office. The Hillhaven
Bylaws provide that the affirmative vote of a majority of the remaining
directors is required to fill a vacancy on the Hillhaven Board.

Action by Written Consent

Vencor

Under Delaware Law, unless otherwise provided in the certificate of
incorporation, stockholders may take action without a meeting, without
prior notice and without a vote, upon the written consent of stockholders
having not less than the minimum number of votes that would be necessary to
authorize the proposed action at a meting at which all shares entitled to
vote were present and voted. However, the Vencor Certificate provides that
action can be taken by stockholders without a meeting, without prior notice
and without a vote only if a consent in writing, setting forth the actions
so taken, is signed by the holders of at least 80% of all the issued and
outstanding shares of stock of Vencor entitled to vote.

Hillhaven

Under Nevada Law, unless otherwise provided in the articles of
incorporation or the bylaws, stockholders may take action without a
meeting, without prior notice and without a vote, upon the written consent
of stockholders having at least a majority of the voting power, except that
if a different proportion of voting power is required for such an action at
a meeting, then that proportion of written consent is required. The
Hillhaven Articles provide, however, that all action required or permitted
to be taken by stockholders must be taken at an annual or special meeting
of the stockholders except for actions taken by unanimous written consent.

Meetings of Stockholders

Vencor

Pursuant to Vencor's Bylaws, a special meeting of stockholders, unless
otherwise prescribed by statute, may be called at any time only by the
Vencor Board or the chairman of the Vencor Board.

The Vencor Bylaws provide that the presence in person or representation
by proxy of a majority of the issued and outstanding shares of Vencor stock
entitled to vote will constitute a quorum. When a quorum is present or
represented at a meeting of Vencor stockholders, the vote of the holders of
a majority of shares of stock having voting power present in person or
represented by proxy will decide any question brought before the meeting,
unless the question is one upon which by express provision of Delaware Law,
Vencor's Certificate or Vencor's Bylaws a different vote is required, in
which case such express provision will govern and control the decision of
such question brought before the meeting. Delaware Law provides that quorum
and voting requirements may be increased or decreased by amendment of the
Vencor Certificate and the Vencor Bylaws (which bylaw amendment may be
effected by the Vencor Board), so long as the requirement for a quorum does
not fall below one-third of the shares entitled to vote and subject to
provisions of Delaware Law setting forth voting requirements for certain
specified actions, such as mergers.

Hillhaven

Under Hillhaven's Bylaws, except as otherwise required by law, a
special meeting of stockholders may be called only by the Hillhaven Board
pursuant to a resolution adopted by a majority of the total number of
directors.

Under Nevada Law, unless the articles of incorporation or the bylaws
provide otherwise, stockholders holding at least a majority of the voting
power are necessary to constitute a quorum for the transaction of business.
The Hillhaven Bylaws provide that the presence in person or by proxy of a
majority of the voting stock entitled to vote constitutes a quorum for the
transaction of business.

Stockholder Proposals

Vencor

The Vencor Bylaws establish procedures that must be followed for a
stockholder to submit a proposal for a vote of the stockholders of Vencor
at the annual meeting of stockholders. No business may be proposed by a
stockholder at the annual meeting of stockholders without giving written
notice to the Secretary of Vencor not less than 60 days nor more than 90
days prior to the scheduled date of the annual meeting. In the event,
however, that less than 70 days' notice or prior public disclosure of the
date of the annual meeting is given to stockholders, notice by the
stockholder to be timely must be received not later than the close of
business on the 10th day following the earlier of (i) the day on which such
notice of the date of the meeting was mailed or (ii) the day on which such
public disclosure was made. The stockholder's notice must set forth (i) a
description, in 500 words or less, of the business desired to be brought
before the annual meeting and the reasons for conducting the business at
the annual meeting, (ii) the name and address of the stockholder making, as
well as those stockholders known to be supporting, the proposal, (iii) the
class and number of shares beneficially owned by the stockholder, (iv) a
description, in 500 words or less, of any interest the stockholder has in
the proposal and (v) a representation that the stockholder is a holder of
record of stock of Vencor and intends to appear in person or by proxy to
present the proposal at the meeting. If the chairman of an annual meeting
determines that any such proposal was not made in accordance with these
procedures or is otherwise not in accordance with law, the Chairman may so
declare at the meeting and such defective proposal will be disregarded.

Hillhaven

The Hillhaven Bylaws also establish procedures that must by followed
for a stockholder to submit a proposal to a vote of the stockholders of
Hillhaven at the annual meeting of stockholders. For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given notice to the Secretary of Hillhaven not less than 90 days
in advance of the annual meeting. The stockholder's notice must state (i) a
brief description of the proposal and the reasons for considering the
proposal at the annual meeting, (ii) the name and address of the
stockholder, (iii) the class and number of shares of capital stock
beneficially owned by the stockholder and (iv) any material interest the
stockholder has in the proposal. If the officer presiding over the annual
meeting determines that the proposal was not properly brought before the
meeting in accordance with these procedures, the officer will so declare at
the meeting and the proposal will not be considered.

Required Vote for Authorization of Certain Actions

Vencor

Under Delaware Law, the recommendation of the Vencor Board and the
approval of a majority of the outstanding shares of Vencor entitled to vote
thereon are required to effect a merger or consolidation or to sell, lease
or exchange substantially all of Vencor's assets. Subject to the provisions
of Section 203 of Delaware Law described below under "--State Antitakeover
Statutes," no vote of the stockholders of Vencor would be required if
Vencor were the surviving corporation and (i) the merger agreement did not
amend the Vencor Certificate, (ii) each share of stock of Vencor
outstanding immediately before the merger was an identical outstanding or
treasury share of Vencor after the Merger and (iii) the number of shares of
Vencor Common Stock to be issued in the merger (or to be issuable upon
conversion of any convertible instruments to be issued in the merger) did
not exceed twenty percent of the shares of Vencor Common Stock outstanding
immediately before the merger.

Hillhaven

Under Nevada Law, the recommendation of the Hillhaven Board and, unless
Nevada Law, the Hillhaven Articles or the Hillhaven Board requires a
greater vote or a vote by class of stockholders, approval of a majority of
the voting power is required to approve a plan of merger or exchange.
Subject to the provisions of Hillhaven's Articles described below under
"--Fair Price and Anti-Greenmail Provisions" and NRS Section 78.454 of
Nevada Law, no vote of the stockholders of Hillhaven is required if
Hillhaven will be the surviving corporation and (i) the articles of
incorporation of the surviving corporation will not differ from its
articles before the merger, (ii) each stockholder of the surviving
corporation whose shares were outstanding immediately before the merger
will hold the same number of shares, with identical designations,
preferences, limitations, and relative rights immediately after the merger
and (iii) the number of shares of Hillhaven Common Stock to be issued in
the merger (or to be issuable upon conversion of any convertible
instruments to be issued in the merger) will not exceed twenty percent of
the shares of Hillhaven Common Stock outstanding immediately before the
merger.

Amendment of Corporate Charter and Bylaws

Vencor

Under Delaware Law, an amendment to the certificate of incorporation
generally requires the recommendation of the Board of Directors, the
approval of a majority of all shares entitled to vote thereon, voting
together as a single class, and the majority of the outstanding stock of
each class entitled to vote thereon.

Under Delaware Law, the Board of Directors may amend the bylaws if the
certificate of incorporation contains a provision entitling the directors
to amend the bylaws. Even if the certificate of incorporation contains such
a provision, the stockholders also have the power to amend the bylaws. The
Vencor Certificate states that the Board of Directors is expressly
authorized to adopt, amend or repeal the Vencor Bylaws without the consent
or vote of the stockholders.

Hillhaven

Under Nevada Law, the articles of incorporation may be amended by the
vote of stockholders holding at least a majority of the voting power,
unless a greater proportion of the voting power is required in the articles
of incorporation. The Hillhaven Articles require the affirmative vote of
the holders of at least two-thirds of the voting power of all of the then-
outstanding shares of the voting stock voting together as a single class to
alter, amend or repeal the articles relating to: (i) the composition,
classification and number of directors, (ii) directors' and officers'
liability, (iii) Related Persons Transactions as described below under
"--Fair Price and Anti-Greenmail Provisions," (iv) unanimous written
consent for stockholder action without a meeting, (v) advance notice of
stockholder nominations for directors, (vi) controlling interest
acquisitions, (vii) bylaw amendments that reflect any of the foregoing and
(viii) the vote required under the Hillhaven Articles to amend any of the
foregoing.

Nevada Law further provides that the board of directors may amend the
bylaws if the bylaws so provide. Even if the bylaws confer such power on
the board of directors, the stockholders also have the power to amend the
bylaws. The Hillhaven Bylaws provide that the Hillhaven Board shall have
the power to adopt, amend or repeal any of the bylaws by the affirmative
vote of a majority of the directors present, except as otherwise required
by the Hillhaven Articles as described above.

Appraisal and Dissenters' Rights

Vencor

Delaware Law provides appraisal rights for certain mergers and
consolidations. Appraisal rights are not available to holders of (i) shares
listed on a national securities exchange or held of record by more than
2,000 stockholders or (ii) shares of the surviving corporation of the
merger, if the merger did not require the approval of the stockholders of
such corporation, unless in either case, the holders of such stock are
required pursuant to the merger to accept anything other than (A) shares of
stock of the surviving corporation, (B) shares of stock of another
corporation which are also listed on a national securities exchange or held
by more than 2,000 holders or (C) cash in lieu of fractional shares of such
stock. Appraisal rights are not available for a sale of assets or an
amendment to the certificate of incorporation.

Hillhaven

Under Nevada Law, a stockholder is entitled to dissent from, and
receive the fair value of shares owned in the event of a plan of merger or
exchange, if the stockholder is entitled to vote on the transaction.
However, there is no right to dissent to a plan or merger or exchange in
favor of the holders of shares of any class or series which were either
listed on a national securities exchange, designated as a national market
security of an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held by at least 2,000 stockholders of record,
unless the articles of incorporation provide otherwise or the holders are
required to receive anything other than cash, shares or shares and cash of
the surviving or acquiring corporation.

Fair Price and Anti-Greenmail Provisions

Vencor

The Vencor Certificate does not contain any such "Fair Price" or "Anti-
Greenmail" provisions.

Hillhaven

Under the Hillhaven Articles, certain transactions, including a merger
or consolidation, a sale, lease or exchange of a substantial portion of
assets, issuing voting securities, voluntary dissolution, or
reclassification or recapitalization of securities ("Transactions")
involving "Related Persons" (defined generally to be holders of five
percent or more of Hillhaven Common Stock, except for Hillhaven or its
subsidiaries, Tenet or its subsidiaries, any successor to Tenet, any
affiliates of Hillhaven or Tenet or any employee stock or benefit plan each
of Hillhaven or Tenet or its subsidiaries), require approval by the
affirmative vote of the holders of at least two-thirds of the voting power
of all of the then outstanding shares of voting stock voting together as a
single class, unless the Transaction is approved by a majority of the
Hillhaven Board and by a majority of the disinterested directors.

State Antitakeover Statutes

Vencor

Section 203 of the DGCL would prohibit a "business combination" (as
defined in Section 203, generally including mergers, sales and leases of
assets, issuances of securities and similar transactions) by Vencor or a
subsidiary with an "interested stockholder" (as defined in Section 203,
generally the beneficial owner of 15 percent or more of Vencor's voting
stock) within three years after the person or entity becomes an interested
stockholder, unless (i) prior to the person or entity becoming an
interested stockholder, the business combination or the transaction
pursuant to which such person or entity became an interested stockholder
shall have been approved by the Vencor Board, (ii) upon the consummation of
the transaction in which the person or entity became an interested
stockholder, the interested stockholder holds at least 85 percent of the
voting stock of Vencor (excluding for purposes of determining the number of
shares outstanding, shares held by persons who are both officers and
directors of Vencor and shares held by certain employee benefit plans) or
(iii) the business combination is approved by the Vencor Board and by the
holders of at least two-thirds of the outstanding voting stock of Vencor,
excluding shares held by the interested stockholder.

Hillhaven

Control Share Acquisition Provision. Under Nevada Law, once a person
has acquired or offers to acquire twenty percent, one-third or fifty
percent of the stock of a corporation, a stockholders meeting must be held
after delivery of the "offeror's statement," at the acquiror's expense, so
the stockholders can vote on whether the control shares may exercise voting
rights. Except as otherwise provided in the articles of incorporation, the
approval of a majority of the outstanding stock not held by the acquiror is
required for the stock held by the acquiror to receive voting rights. The
Control Share Acquisition Provisions are applicable to any acquisition of a
controlling interest unless the articles of incorporation or bylaws of the
corporation in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that the Control Share
Acquisition Provisions do not apply.

The Hillhaven Articles, however, state that any resolution of the
stockholders granting voting rights to any or all Control Shares of an
acquiring person must be approved by the holders of two-thirds of the
outstanding shares of Hillhaven, excluding those shares held by any
interested shareholder. The Hillhaven Articles further provide that all
Control Shares are to be subject to redemption by Hillhaven at the average

price paid for the Control Shares if an offeror's statement, as permitted
by Section 3789 of Nevada Law, is not delivered within ten days of the
acquisition of the controlling interest or if the Control Shares are not
accorded full voting rights by the stockholders of Hillhaven. The Hillhaven
Articles exclude from these rules regarding the acquisition of a
controlling interest (i) Hillhaven or any of its subsidiaries, (ii) Tenet
or any of its subsidiaries, (iii) any affiliate or associate of Hillhaven
or Tenet and (iv) any employee stock or benefit plan of Hillhaven, Tenet,
or any subsidiary of Hillhaven or Tenet.

Combination Moratorium Provision. Nevada Law provides that a resident
domestic corporation may not engage in any "combination" (broadly defined
to include a wide range of transactions with an interested stockholder or
an affiliate or associate of an interested stockholder) with an interested
stockholder (defined as the beneficial owner of ten percent or more of the
outstanding voting power) for three years after the interested
stockholder's date of acquiring shares, unless the combination or the
purchase of shares made by the interested stockholder on the interested
stockholder's date of acquiring shares is approved by the board of
directors before that date or if the consideration to be paid by the
interested stockholder is at least equal to the highest of: (i) the
highest price per share paid by the interested stockholder within the three
years immediately preceding the date of the announcement of the combination
or in the transaction in which he became an interested stockholder,
whichever is higher, (ii) the market value per common share on the date of
announcement of the combination or the date the interested stockholder
acquired the shares, whichever is higher, or (iii) if higher for the
holders of preferred stock, the highest liquidation value of the preferred
stock.

Other Provisions. Under Nevada Law, the selection of a period for the
achievement of corporate goals is the responsibility of the directors. In
addition, the directors and officers, in exercising their respective powers
with a view to the interests of the corporation, may consider (i) the
interests of the corporation's employees, suppliers, creditors and
customers, (ii) the economy of the state and nation, (iii) the interests of
the community and of society and (iv) the long-term as well as short-term
interests of the corporation and its stockholders, including the
possibility that these interests may be best served by the continued
independence of the corporation. The directors also may resist a change or
potential change in control of the corporation if the directors by a
majority vote of a quorum determine that the change or potential change is
opposed to or not in the best interests of the corporation "upon
consideration of the interests of the corporation's stockholders" or for
one of the other reasons described above. Finally, the directors may take
action to protect the interests of the corporation and its stockholders by
adopting or executing plans that deny rights, privileges, power or
authority to a holder of a specified number of shares or percentage of
share ownership or voting power.

Rights Plans

Vencor

On July 20, 1993, the Board of Directors of Vencor declared a dividend
of one Vencor Right to purchase Vencor Participating Preferred Stock (0.667
of a Vencor Right as adjusted for Vencor's three-for-two stock split
effected October 25, 1994) for each outstanding share of Vencor Common
Stock. The Vencor Rights may have certain anti-takeover effects. See
"Description of Vencor Capital Stock--Vencor Preferred Stock--Description
of Vencor Rights".

Hillhaven

On January 31, 1990, the Board of Directors of Hillhaven made a
dividend distribution of one right (a "Hillhaven Right") for each share of
Hillhaven Common Stock then outstanding and authorized the issuance of
additional Hillhaven Rights for Hillhaven Common Stock issued after that
date. Hillhaven may redeem the Hillhaven Rights at $.01 per Hillhaven Right
at any time until they become exercisable. With certain exceptions, the
Hillhaven Rights become exercisable ten business days, which may be
extended

under certain conditions to twenty business days by the Hillhaven Board,
after an investor (a "Hillhaven Acquiring Person") has (i) commenced a
tender or exchange offer for thirty percent or more of the general voting
power of Hillhaven stock or (ii) made or is the subject of a public
announcement that the investor has acquired twenty percent or more of the
general voting power of Hillhaven stock. Upon the occurrence of such
events, the Hillhaven Rights may be exchanged for one one-hundredth of a
share of Hillhaven's Series A Preferred Stock at an exercise price of
$10.00 per share, subject to certain adjustments. The Hillhaven Right
holder as such will have no rights as a stockholder of Hillhaven, including
no right to vote or to receive dividends or distributions.

The Hillhaven Series A Preferred Stock is non-redeemable and ranks
junior in preference as to dividends and distributions of assets to all
other classes or series of Hillhaven Preferred Stock, unless the terms
thereof provide otherwise. Each share of Series A Preferred Stock will have
a minimum preferential quarterly dividend rate of $5.00 per share but will
be entitled to an aggregate of 100 times the cash and non-cash (payable in
kind) dividends and distributions (other than dividends and distributions
payable in Hillhaven Common Stock) declared on Hillhaven Common Stock. Each
share of Hillhaven Series A Preferred Stock has a liquidation preference
equal to the greater of $1,000 per share or 100 times the payment made per
share on the Hillhaven Common Stock, plus the amount of accrued and unpaid
dividends and distributions. Each share of Hillhaven Series A Preferred
Stock will have 100 votes.

In the event that, on or after the date the Hillhaven Rights become
exercisable, Hillhaven is acquired or merged, or more than 50% of the
assets or earning power of Hillhaven and its subsidiaries, taken as a
whole, are sold, each Hillhaven Right holder, excluding those Hillhaven
Rights owned by a Hillhaven Acquiring Person, will be entitled to purchase,
for the then-current exercise price of each Hillhaven Right, common stock
of the surviving company having a market value equal to two times the
exercise price of each Hillhaven Right. In the event that, on or after the
date the Hillhaven Rights become exercisable, Hillhaven is the survivor of
a merger or other business combination, a Hillhaven Acquiring Person
engages in certain self-dealing transactions, a person becomes the
beneficial owner of thirty percent or more of the general voting power of
Hillhaven stock, or certain events occur which cause a Hillhaven Acquiring
Person's ownership interest being increased by more than one percent, then
each Hillhaven Right holder, excluding Hillhaven Rights beneficially held
by a Hillhaven Acquiring Person, will be entitled to purchase, for the
then-current exercise price of each Hillhaven Right, that number of shares
of Series A Preferred Stock having a market value equal to two times the
exercise price of each Hillhaven Right.

The Hillhaven Rights could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control
of Hillhaven, even though such an attempt might be beneficial to Hillhaven
and its stockholders. In addition, because the Hillhaven Rights may
discourage accumulations of large blocks of Hillhaven Common Stock by
purchasers whose objective is to take control of Hillhaven, the Hillhaven
Rights could tend to reduce the likelihood of fluctuations in the market
price of the Hillhaven Common Stock that might result from accumulations of
large blocks of stock. Accordingly, stockholders could be deprived of
certain opportunities to sell their shares of Hillhaven Commons Stock at a
higher market price than otherwise might be the case.

Limitation on Directors' Liability

Vencor

Section 102 of Delaware Law allows a corporation to limit or eliminate
the personal liability of directors to the corporation and its stockholders
for monetary damages for breach of fiduciary duty as a director. However,
this provision excludes any limitation on liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for intentional or
negligent payment of unlawful dividends or stock purchase or redemption or
(iv) for any transaction from which the director

derived an improper personal benefit. The Vencor Certificate provides for
the limitation on directors' liability as permitted by this statute.

Hillhaven

As permitted under Nevada Law, the Hillhaven Articles provide that a
director or officer shall not be personally liable to Hillhaven or its
stockholders for damages for breach of fiduciary duty as a director or
officer, except for liability for acts or omissions which involve
intentional misconduct, fraud, or a knowing violation of the law or for the
unlawful payment of dividends.

Indemnification of Officers and Directors

Vencor

Section 145 of Delaware Law provides that a corporation may indemnify
its officers and directors who were or are a party to any action, suit or
proceeding by reason of the fact that he or she was a director, officer, or
employee of the corporation by, among other things, a majority vote of a
quorum consisting of directors who were not parties to such action, suit,
or proceeding; provided that such officers and directors acted in good
faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation. The Vencor Certificate provides for
indemnification of officers and directors as permitted by Delaware Law. The
Vencor Certificate also provides for the payment of expenses incurred by
directors and officers in defending a proceeding in advance of the final
disposition of such proceeding as authorized by the Vencor Board upon
receipt of an undertaking by or on behalf of that person to repay such
amounts unless it is ultimately determined that that person is entitled to
be indemnified under Delaware Law.

Hillhaven

Under Nevada Law, a corporation may, and in certain circumstances must,
indemnify its officers, directors, employees or agents for expenses,
judgments or settlements, actually and reasonably incurred by them in
connection with suits and other legal proceedings, if they acted in good
faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and with respect to criminal
proceedings, had no reasonable cause to believe that their conduct was
unlawful. A corporation may adopt procedures for advancing expenses to
directors and officers prior to final adjudication, as long as they
undertake to repay the amounts advanced if it is ultimately determined that
they were not entitled to be indemnified. While the Hillhaven Articles are
silent as to indemnification, the Hillhaven Bylaws mandate indemnification
and, pursuant to certain procedures, mandate advancement of expenses to the
fullest extent permitted by Nevada Law, unless the person seeking
indemnification initiated the proceeding without the approval of the
Hillhaven Board.

No Cumulative Voting

Neither Vencor nor Hillhaven permits cumulative voting.

Conflict-of-Interest Transactions

Vencor

Delaware Law generally permits transactions involving a Delaware
corporation and an interested director or officer of that corporation if
(i) the material facts are disclosed and a majority of disinterested
directors consents, (ii) the material facts are disclosed and a majority of
shares entitled to vote thereon

consents or (iii) the transaction is fair to the corporation at the time it
is authorized by the board of directors, a committee, or the stockholders.

Hillhaven

Similar to Delaware Law, Nevada Law generally permits transactions
involving a Nevada corporation and an interested director or officer of
that corporation if (i) the fact of the common directorship, office or
financial interest is known or disclosed to the board of directors and a
majority of disinterested directors consents, (ii) the fact of the common
directorship, office or financial interest is known or disclosed to the
stockholders and a majority of shares entitled to vote thereon consents,
(iii) the fact of the common directorship, office or financial interest is
not disclosed or known to the director or officer at the time the trans-
action is brought before the board of directors for action or (iv) the
contract or transaction is fair to the corporation at the time it is
authorized or approved.

Dividends and Other Distributions

Vencor

Delaware Law generally allows dividends to be paid out of surplus of
the corporation or, in case there is no surplus, out of the net profits of
the corporation for the current fiscal year and/or the prior fiscal year.
No dividends may be paid if it would result in the capital of the corporation
being less than the capital represented by the preferred stock of the
corporation.

Hillhaven

Under Nevada Law, a corporation may pay dividends or make other
distributions with respect to its stock unless, after giving effect to the
dividend or distribution, either the corporation would not be able to pay
its debts as they become due in the usual course of business or, except as
otherwise specifically allowed by its articles of incorporation, the
corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were
to be dissolved at that time, to satisfy the preferential rights of
stockholders whose rights are superior to those stockholders receiving the
dividend or distribution.

Duties of Directors

Vencor

Delaware Law does not contain a specific provision elaborating on the
duties of a board of directors with respect to the best interests of the
corporation. Delaware courts have permitted directors to consider various
constituencies provided that there be some rationally related benefit to
the stockholders.

Hillhaven

Nevada Law permits a board of directors to consider, including in
connection with a change or potential change in control of the corporation,
(i) the interests of the corporation's employees, suppliers, creditors and
customers, (ii) the economy of the state and nation, (iii) the interests of
the community and of society and (iv) the long-term as well as short-term
interests of the corporation and its stockholders, including the
possibility that these interests may be best served by the continued
independence of the corporation.

Issuance of Rights or Options to Purchase Shares to Directors, Officers and
Employees

Neither Delaware Law nor Nevada Law contains any provision requiring
the issuance of rights or options to officers, directors and employees to
be approved by a stockholder vote.

Loans to Directors

Both Delaware Law and Nevada Law allow loans to and guarantees of
obligations of officers and directors without any stockholder approval.

AMENDMENT TO THE VENCOR CERTIFICATE OF INCORPORATION

At the Vencor Meeting, the holders of Vencor Common Stock will consider
and vote upon a proposal of the Vencor Board to amend Vencor's Certificate
of Incorporation as set forth in Appendix D to this Joint Proxy
Statement/Prospectus (the "Charter Amendment"). If adopted, the Charter
Amendment will increase the number of authorized shares of Vencor Common
Stock from 60,000,000 shares to 180,000,000 shares. See "The Special
Meeting." The Charter Amendment will not be effected unless the Merger is
consummated. Likewise, the Merger cannot be effected absent shareholder
approval of the Charter Amendment.

As of March 31, 1995, there were 27,869,980 shares of Vencor Common
Stock outstanding. The number of shares of Vencor Common Stock issuable in
exchange for the outstanding Hillhaven Common Stock shall be determined
pursuant to the Merger Agreement. See "The Merger--Terms of the Merger."

Purpose and Effect of the Charter Amendment

Vencor's primary purpose for the Charter Amendment is to provide enough
authorized shares of Vencor Common Stock to effect the exchange of Vencor
Common Stock for Hillhaven Common Stock in the Merger and to make available
additional authorized and unissued shares for future use. Without an
increase in the number of authorized shares of Vencor Common Stock, Vencor
would not have sufficient authorized shares to effect the Merger. See "The
Merger--Terms of the Merger."

Vencor intends to use the remaining authorized and unissued shares of
Vencor Common Stock for various corporate purposes, including, but not
limited to, possible future financing and acquisition transactions, stock
dividends, stock splits and other corporate purposes. Authorized and
unissued shares of Vencor Common Stock may be issued for the foregoing
purposes by the Vencor Board without further Vencor stockholder action
unless the issuance is in connection with a transaction for which
stockholder approval is otherwise required under applicable law or for
compliance with any agreement with any stock exchange on which Vencor
Common Stock is listed. In addition, under certain circumstances the Vencor
Board may, at its option, exchange all or part of the then-outstanding
Rights for Vencor Common Stock. See "Description of Vencor Capital
Stock--Vencor Preferred Stock--Description of Vencor Rights."

The proposed increase in the number of authorized shares of Vencor
Common Stock will not alter the rights of the holders of Vencor Common
Stock. Neither the presently authorized shares of Vencor Common Stock nor
additional shares of Vencor Common Stock that may be authorized pursuant to
the Charter Amendment carry preemptive rights.

The Vencor Board is required to make any determination to issue shares
of Vencor Common Stock based on its judgment as to the best interests of
Vencor and its stockholders. Although the Vencor Board has no present
intention of doing so, the authorized but unissued shares of Vencor Common
Stock could be used to make it more difficult to effect a change in control
of Vencor. Under such circumstances the availability of authorized and
unissued shares of Vencor Common Stock may make it more difficult for
stockholders to obtain an acquisition premium for their shares. Such shares
could be used to create voting or other impediments or to frustrate persons
seeking to gain control of Vencor by means of a merger, tender offer, proxy
contest or other means. Such shares could be privately placed with
purchasers who might cooperate with the Vencor Board in opposing such an
attempt by a third party to gain control of Vencor. The issuance of new
shares of Vencor Common Stock could be used to dilute the stock ownership
of a person or entity seeking to obtain control of Vencor.

EXPERTS

The consolidated financial statements of Vencor as of December 31, 1994
and 1993 and for each of the three years in the period ended December 31,
1994 incorporated by reference in this Joint Proxy Statement/Prospectus
have been audited by Ernst & Young LLP, independent auditors, as stated in
their reports thereon. The financial statements audited by Ernst & Young
LLP have been incorporated herein by reference in reliance upon their
report given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Hillhaven as of May 31, 1994
and 1993 and for each of the three years in the period ended May 31, 1994
incorporated by reference in this Joint Proxy Statement/Prospectus have
been audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements audited by KPMG Peat Marwick LLP have been incorporated herein
by reference in reliance upon their report given upon their authority as
experts in accounting and auditing.

The report of KPMG Peat Marwick LLP covering the May 31, 1994
consolidated financial statements refers to a change in the methodology of
providing income taxes by adopting Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."

VALIDITY OF SHARES

The validity of the Vencor Common Stock to be issued pursuant to the
Merger will be passed upon for Vencor by Greenebaum Doll & McDonald PLLC,
Louisville, Kentucky. William C. Ballard Jr., a director of Vencor, is of
counsel to such firm and at May 5, 1995 beneficially owned 26,094 shares of
Vencor Common Stock. In addition, at May 5, 1995 an attorney with
Greenebaum Doll & McDonald who participated in the preparation of this
Joint Proxy Statement/Prospectus beneficially owned approximately 5,700
shares of Vencor Common Stock.

SUBMISSION OF STOCKHOLDER PROPOSALS

Stockholders of Vencor may submit proposals to be considered for
stockholder action at the Vencor Annual Meeting of Stockholders to be held
in 1996 if they do so in accordance with the Vencor Certificate, the Vencor
Bylaws and applicable regulations of the Commission. Any such proposals
must be submitted to the Secretary of Vencor no later than November 30,
1995, in order to be considered for inclusion in Vencor's 1996 proxy
materials.

Hillhaven will hold a 1996 Annual Meeting of Stockholders only if the
Merger is not consummated before the time of such meeting. The last date
for the submission of stockholder proposals to Hillhaven for consideration
for inclusion in Hillhaven's 1996 proxy materials was April 26, 1995.

A-1
APPENDIX A

[Conformed Copy]

AGREEMENT AND PLAN OF MERGER

dated as of

April 23, 1995

among

THE HILLHAVEN CORPORATION,

VENCOR, INC.

and

VERITAS HOLDINGS CORP.

TABLE OF CONTENTS

PAGE

ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . 1

SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Conversion of Shares . . . . . . . . . . . . . 2
SECTION 1.03. Surrender and Payment. . . . . . . . . . . . . 3
SECTION 1.04. Stock Options. . . . . . . . . . . . . . . . . 6
SECTION 1.05. Adjustments. . . . . . . . . . . . . . . . . . 7
SECTION 1.06. Fractional Shares. . . . . . . . . . . . . . . 7

ARTICLE II THE SURVIVING CORPORATION;
PARENT DIRECTORS . . . . . . . . . . . . . . . . . 8

SECTION 2.01. Certificate of Incorporation . . . . . . . . . 8
SECTION 2.02. Bylaws . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.03. Directors and Officers . . . . . . . . . . . . 8
SECTION 2.04. Parent Directors . . . . . . . . . . . . . . . 8

ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . 9

SECTION 3.01. Corporate Existence and Power. . . . . . . . . 9
SECTION 3.02. Corporate Authorization. . . . . . . . . . . . 9
SECTION 3.03. Governmental Authorization . . . . . . . . . . 9
SECTION 3.04. Non-Contravention. . . . . . . . . . . . . . . 10
SECTION 3.05. Capitalization . . . . . . . . . . . . . . . . 11
SECTION 3.06. Subsidiaries . . . . . . . . . . . . . . . . . 12
SECTION 3.07. Reports. . . . . . . . . . . . . . . . . . . . 13
SECTION 3.08. Financial Statements; No
Undisclosed Liabilities. . . . . . . . . . . 14
SECTION 3.09. Joint Proxy Statement/Prospectus;
Registration Statement . . . . . . . . . . . 14
SECTION 3.10. Absence of Certain Changes . . . . . . . . . . 15
SECTION 3.11. Litigation . . . . . . . . . . . . . . . . . . 16
SECTION 3.12. Articles of Incorporation and
Bylaws . . . . . . . . . . . . . . . . . . . 16
SECTION 3.13. ERISA. . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.14. Taxes. . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.15. Tax Matters; Pooling . . . . . . . . . . . . . 19
SECTION 3.16. Finders and Investment Bankers . . . . . . . . 19
SECTION 3.17. Opinion of Financial Advisor . . . . . . . . . 19
SECTION 3.18. Vote Required. . . . . . . . . . . . . . . . . 19
SECTION 3.19. Acquiring Person . . . . . . . . . . . . . . . 19
SECTION 3.20. Medicare and Medicaid. . . . . . . . . . . . . 20
SECTION 3.21. Takeover Statutes. . . . . . . . . . . . . . . 20

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.01. Corporate Existence and Power. . . . . . . . . 21
SECTION 4.02. Corporate Authorization. . . . . . . . . . . . 21
SECTION 4.03. Governmental Authorization . . . . . . . . . . 22
SECTION 4.04. Non-Contravention. . . . . . . . . . . . . . . 22
SECTION 4.05. Capitalization . . . . . . . . . . . . . . . . 22
SECTION 4.06. Subsidiaries . . . . . . . . . . . . . . . . . 24
SECTION 4.07. Reports. . . . . . . . . . . . . . . . . . . . 25
SECTION 4.08. Financial Statements; No
Undisclosed Liabilities. . . . . . . . . . . 25
SECTION 4.09. Joint Proxy Statement/Pros-
pectus; Registration Statement . . . . . . . 26
SECTION 4.10. Absence of Certain Changes . . . . . . . . . . 26
SECTION 4.11. Litigation . . . . . . . . . . . . . . . . . . 27
SECTION 4.12. Articles of Incorporation
and Bylaws . . . . . . . . . . . . . . . . . 27
SECTION 4.13. ERISA. . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.14. Taxes. . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.15. Tax Matters; Pooling . . . . . . . . . . . . . 28
SECTION 4.16. Finders and Investment Bankers . . . . . . . . 28
SECTION 4.17. Opinion of Financial Advisor . . . . . . . . . 29
SECTION 4.18. Vote Required. . . . . . . . . . . . . . . . . 29
SECTION 4.19. No Change of Control . . . . . . . . . . . . . 29
SECTION 4.20. Medicare and Medicaid. . . . . . . . . . . . . 29
SECTION 4.21. Acquiring Person . . . . . . . . . . . . . . . 30

ARTICLE V COVENANTS OF THE COMPANY . . . . . . . . . . . . . . 30

SECTION 5.01. Conduct of the Company . . . . . . . . . . . . 30
SECTION 5.02. Access to Information. . . . . . . . . . . . . 32
SECTION 5.03. Other Offers . . . . . . . . . . . . . . . . . 33
SECTION 5.04. Notices of Certain Events. . . . . . . . . . . 33
SECTION 5.05. Tax Letters. . . . . . . . . . . . . . . . . . 34
SECTION 5.06. Rights Agreement . . . . . . . . . . . . . . . 34
SECTION 5.07. Financial Statements . . . . . . . . . . . . . 34

ARTICLE VI COVENANTS OF PARENT. . . . . . . . . . . . . . . . . . . . 35

SECTION 6.01. Conduct of Parent. . . . . . . . . . . . . . . 35
SECTION 6.02. Access to Information. . . . . . . . . . . . . 36
SECTION 6.03. Merger Subsidiary. . . . . . . . . . . . . . . 37
SECTION 6.04. Director and Officer Liability . . . . . . . . 37
SECTION 6.05. Stock Exchange Listing . . . . . . . . . . . . 38
SECTION 6.06. Parent Acquisition Proposals . . . . . . . . . 38
SECTION 6.07. Notice of Certain Events . . . . . . . . . . . 38
SECTION 6.08. Employee Benefits. . . . . . . . . . . . . . . 39

iii

ARTICLE VII COVENANTS OF PARENT AND THE COMPANY. . . . . . . . . . . . 40

SECTION 7.01. Best Reasonable Efforts. . . . . . . . . . . . 40
SECTION 7.02. Certain Filings. . . . . . . . . . . . . . . . 40
SECTION 7.03. Public Announcements . . . . . . . . . . . . . 40
SECTION 7.04. Further Assurances . . . . . . . . . . . . . . 41
SECTION 7.05. Stockholders Meetings. . . . . . . . . . . . . 41
SECTION 7.06. Preparation of the Joint Proxy
Statement/Prospectus and
Registration Statement . . . . . . . . . . . 41
SECTION 7.07. State Takeover Laws. . . . . . . . . . . . . . 42
SECTION 7.08. Pooling. . . . . . . . . . . . . . . . . . . . 42
SECTION 7.09. Consents . . . . . . . . . . . . . . . . . . . 42
SECTION 7.10. Affiliates . . . . . . . . . . . . . . . . . . 43
SECTION 7.11. Restructuring the Merger . . . . . . . . . . . 43

ARTICLE VIII CONDITIONS TO THE MERGER . . . . . . . . . . . . . . 44

SECTION 8.01. Conditions to the Obligations
of Each Party. . . . . . . . . . . . . . . . 44
SECTION 8.02. Conditions to the Obligations
of Parent and
Merger Subsidiary. . . . . . . . . . . . . . 45
SECTION 8.03. Conditions to the Obligations
of the Company . . . . . . . . . . . . . . . 46

ARTICLE IX TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . 47

SECTION 9.01. Termination. . . . . . . . . . . . . . . . . . 47
SECTION 9.02. Effect of Termination. . . . . . . . . . . . . 49

ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 49

SECTION 10.01. Notices. . . . . . . . . . . . . . . . . . . . 49
SECTION 10.02. Survival . . . . . . . . . . . . . . . . . . . 50
SECTION 10.03. Amendments; No Waivers . . . . . . . . . . . . 50
SECTION 10.04. Fees and Expenses. . . . . . . . . . . . . . . 51
SECTION 10.05. Successors and Assigns . . . . . . . . . . . . 52
SECTION 10.06. Governing Law. . . . . . . . . . . . . . . . . 52
SECTION 10.07. Counterparts; Effectiveness. . . . . . . . . . 53
SECTION 10.08. Entire Agreement . . . . . . . . . . . . . . . 53
SECTION 10.09. Headings . . . . . . . . . . . . . . . . . . . 53
SECTION 10.10. Severability . . . . . . . . . . . . . . . . . 53
SECTION 10.11. Specific Performance . . . . . . . . . . . . . 53

EXHIBITS

Exhibit A Form of Company Affiliate Agreement. . . . . . . . .
Exhibit B Form of Parent Affiliate Agreement . . . . . . . . .

SCHEDULES

Schedule 3.03 Company Governmental Authorization . . . . . . . . .
Schedule 3.04 Company Non-Contravention. . . . . . . . . . . . . .
Schedule 3.05 Company Capitalization . . . . . . . . . . . . . . .
Schedule 3.06 Company Subsidiaries . . . . . . . . . . . . . . . .
Schedule 3.10 Absence of Certain Changes to Company. . . . . . . .
Schedule 3.11 Company Litigation . . . . . . . . . . . . . . . . .
Schedule 3.13 Company ERISA. . . . . . . . . . . . . . . . . . . .
Schedule 3.20 Company Medicare and Medicaid. . . . . . . . . . . .
Schedule 4.03 Parent Governmental Authorization. . . . . . . . . .
Schedule 4.05 Parent Capitalization. . . . . . . . . . . . . . . .
Schedule 4.06 Parent Subsidiaries. . . . . . . . . . . . . . . . .
Schedule 4.10 Absence of Certain Changes to Parent . . . . . . . .
Schedule 4.11 Parent Litigation. . . . . . . . . . . . . . . . . .
Schedule 4.19 No Change of Control . . . . . . . . . . . . . . . .
Schedule 5.01 Conduct of the Company . . . . . . . . . . . . . . .
Schedule 6.01 Conduct of Parent. . . . . . . . . . . . . . . . . .
Schedule 6.09 Employee Benefits. . . . . . . . . . . . . . . . . .

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER dated as of April 23, 1995, among
THE HILLHAVEN CORPORATION, a Nevada corporation (the "Company"), VENCOR,
INC., a Delaware corporation ("Parent"), and VERITAS HOLDINGS CORP., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary").

WHEREAS, the Boards of Directors of Parent, Merger Subsidiary
and the Company deem it advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which the Company would
merge with and into Merger Subsidiary, which would remain a wholly owned
subsidiary of Parent (the "Merger");

NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:

ARTICLE I

THE MERGER

SECTION 1.01. The Merger.

(a) Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.01(b)), the
Company shall be merged with and into Merger Subsidiary in accordance with
(i) the General Corporation Law of the State of Delaware ("Delaware Law")
and (ii) the corporation law of the State of Nevada ("Nevada Law"). As a
result of the Merger, the separate existence of the Company shall cease and
Merger Subsidiary shall be the surviving corporation (the "Surviving
Corporation"). The name of the Surviving Corporation will be "The
Hillhaven Corporation."

(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions set forth in Article VIII to
the Merger, the parties hereto shall cause (i) a certificate of merger in
such form as is required by, and executed in accordance with, Delaware Law
to be duly filed with the Secretary of State of the State of Delaware and
(ii) articles of merger in such form as is required by, and executed in
accordance with, Nevada Law to be duly filed with the Secretary of State of
the State of Nevada. The Merger shall become effective at such time as
both the certificate of merger is duly filed with the Secretary of State of
the State of
2

Delaware and the articles of merger are duly filed with the Secretary of
State of the State of Nevada (the "Effective Time").

(d) The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the first business day on which all conditions set forth
in Article VIII are satisfied or, to the extent permitted hereunder, waived
at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, NY 10004, or on such other date or at such other place as
the parties may agree.

SECTION 1.02. Conversion of Shares.

At the Effective Time:

(a) each share of common stock of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding and be unchanged by the Merger and shall
constitute the only outstanding shares of capital stock of the
Surviving Corporation;

(b) each share of common stock, $.75 par value per share, of
the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time shall, except as otherwise
provided in Section 1.02(e) and Section 1.06, be converted into the
right to receive that number of fully paid and nonassessable shares
of the common stock, par value $0.25 per share, of Parent (the
"Parent Common Stock") equal to the "Conversion Number" (as defined
below). The "Conversion Number" shall be determined by dividing
$32.25 by the "Parent Average Price" (as defined below), rounded to
three decimal places; provided that the Conversion Number shall not
be less than .768 nor more than .977 (subject to Section 9.01(vii)
hereof). The "Parent Average Price" means the average closing price
on the New York Stock Exchange (the "NYSE") of Parent Common Stock
(as reported in the New York Stock Exchange Composite Transactions
reporting system as published in The Wall Street Journal or, if not
published therein, in another authoritative source) for the 10
consecutive trading days ending with the second trading day
immediately preceding the Effective Time;

(c) each share of Series C Preferred Stock, par value $.15 per
share, of the Company (the "Series C Preferred Stock") issued and
outstanding immediately prior to the Effective Time shall, except as
otherwise provided in Section 1.02(e), be converted into the right to
receive in
3

cash $900 per share, plus accrued and unpaid dividends to the
Effective Time (the "Series C Merger Consideration");

(d) each share of Series D Preferred Stock, par value $.15 per
share, of the Company (the "Series D Preferred Stock") issued and
outstanding prior to the Effective Time shall, except as otherwise
provided in Section 1.02(e), be converted into the right to receive
in cash $900 per share, plus accrued and unpaid dividends to the
Effective Time (the "Series D Merger Consideration"); and

(e) each outstanding share of the Company Common Stock, the
Series C Preferred Stock and the Series D Preferred Stock
(collectively, the "Company Stock") held by the Company as treasury
stock or owned by Parent or any subsidiary of Parent immediately
prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto.

SECTION 1.03. Surrender and Payment.

(a) Prior to the Effective Time, Parent shall appoint an agent
reasonably acceptable to the Company (the "Exchange Agent") for the purpose
of exchanging certificates representing shares of Company Stock. Parent
shall deposit with the Exchange Agent for the benefit of the holders of
Company Stock (other than the Company, Parent or any Subsidiary of Parent),
for exchange in accordance with this Section 1.03 through the Exchange
Agent, (i) as of the Effective Time, (x) certificates representing the
shares of Parent Common Stock to be issued pursuant to Section 1.02 in
exchange for outstanding shares of Company Common Stock and (y) cash in an
amount equal to the sum of (A) the aggregate Series C Merger Consideration
to be paid to the holders of the Series C Preferred Stock (including the
aggregate amount of any accrued and unpaid dividends) and (B) the aggregate
Series D Merger Consideration to be paid to the holders of the Series D
Preferred Stock (including the aggregate amount of any accrued and unpaid
dividends), and (ii) from time to time as necessary to make payments, cash
to be paid in lieu of fractional shares pursuant to Section 1.06 (such
certificates for shares of Parent Common Stock and such cash being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver Parent Common Stock (and any
dividends or distributions related thereto) and/or cash in exchange for
surrendered certificates representing Company Shares pursuant to Section
1.02 out of the Exchange Fund. Except as contemplated by Section 1.03(f),
the Exchange Fund shall not be used for any other purpose.

(b) Promptly after the Effective Time, Parent will send, or
will cause the Exchange Agent to send, to each holder of
4

a certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Stock ("Certificates") a letter
of transmittal and instructions for use in effecting such exchange of the
Certificates for Parent Common Stock and/or cash. Provision also shall be
made for holders of Certificates to procure a letter of transmittal and
instructions and deliver such letter of transmittal and Certificates in
exchange for Parent Common Stock and/or cash in person immediately after
the Effective Time.

(c) After the Effective Time, Certificates shall represent the
right, upon surrender thereof to the Exchange Agent, together with a duly
executed and properly completed letter of transmittal relating thereto, to
receive in exchange therefor that number of whole shares of Parent Common
Stock and/or cash which such holder has the right to receive pursuant to
Sections 1.02 and 1.06 after giving effect to any required tax withholding,
and the Certificate or Certificates so surrendered shall be canceled. No
interest will be paid or will accrue on any cash amount payable upon the
surrender of any such Certificates. Until so surrendered, each such
Certificate shall, after the Effective Time, represent for all purposes
only the right to receive upon such surrender the shares of Parent Common
Stock and/or cash as contemplated by this Article I.

(d) If any shares of Parent Common Stock are to be issued
and/or cash to be paid to a Person other than the registered holder of the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such issuance that the Certificate or Certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
issuance to a Person other than the registered holder or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. For purposes of this Agreement, "Person" means an individual,
a corporation, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or any
agency or instrumentality thereof.

(e) At and after the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration
of transfers of Company Stock outstanding prior to the Effective Time. If,
at or after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided for, and in
accordance with the procedures set forth, in this Article I.

(f) Any shares of Parent Common Stock and/or cash in the
Exchange Fund that remain unclaimed by the holders of Company
5

Stock six months after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged his shares of Company
Stock in accordance with this Section 1.03 prior to that time shall
thereafter look only to Parent, as general creditors thereof, to exchange
such shares or amounts to which they are entitled pursuant to Section 1.02.
If outstanding Certificates are not surrendered prior to six years after
the Effective Time (or, in any particular case, prior to such earlier date
on which shares of Parent Common Stock issuable in respect of such
Certificates or the dividends and other distributions, if any, described
below would otherwise escheat to or become the property of any governmental
unit or agency), the shares of Parent Common Stock issuable in respect of
such Certificates, and the amount of dividends and other distributions, if
any, which have become payable and which thereafter become payable on
Parent Common Stock evidenced by such Certificates as provided herein
shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation (and, to the extent not in its possession, shall
be paid over to it by Parent), free and clear of all claims or interest of
any Person previously entitled thereto. Notwithstanding the foregoing,
Parent shall not be liable to any holder of Company Stock for any amount
paid, or any shares of Parent Common Stock, cash or dividends delivered, to
a public official pursuant to applicable abandoned property, escheat or
similar laws.

(g) No dividends or other distributions on shares of Parent
Common Stock shall be paid to the holder of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until
such Certificates are surrendered as provided in this Section 1.03.
Following such surrender, there shall be paid, without interest, to the
Person in whose name the certificates representing the shares of Parent
Common Stock issued in exchange therefor are registered, (i) promptly all
dividends and other distributions paid in respect of such Parent Common
Stock with a record date on or after the Effective Time and theretofore
paid, and (ii) at the appropriate date, all dividends or other
distributions in respect of such Parent Common Stock with a record date
after the Effective Time but prior to surrender and a payment date
occurring after surrender.

(h) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Common Stock and/or
cash and
6

unpaid dividends and other distributions on shares of Parent Common Stock
deliverable in respect thereof pursuant to this Agreement.

SECTION 1.04. Stock Options.

(a) At the Effective Time, (i) each outstanding option to
purchase Company Common Stock, stock appreciation right or other similar
right (each an "Option") granted under the Company's 1990 Stock Incentive
Plan and the Company's Directors' Stock Option Plan (the "Company Option
Plans"), whether or not exercisable, and whether or not vested, shall
become fully exercisable and vested, (ii) each Option which is then
outstanding shall be canceled and (iii) in consideration of such
cancellation, Parent shall deliver to each Optionholder in respect of each
Option held by such holder the number of shares of Parent Common Stock
equal to the product of (x) the result of multiplying (A) the Conversion
Number by (B) a fraction, the numerator of which is the excess, if any, of
the Transaction Value (as defined below) over the exercise or strike price
of such Option and the denominator of which is the Transaction Value and
(y) the number of shares of Company Common Stock subject to such Option.
"Transaction Value" means the product of the Conversion Number and the
Parent Average Price.

(b) At the Effective Time, (i) each investment option to
purchase PIP Convertible Debentures (as defined in Section 3.05) (the "PIP
Options") granted pursuant to the Company's Performance Incentive Plan,
whether or not exercisable, and whether or not vested, shall become fully
exercisable and vested, (ii) each PIP Option which is then outstanding will
be canceled and (iii) in consideration of such cancellation, Parent shall
deliver to each PIP Optionholder the number of shares of Parent Common
Stock having a value equal to the value which a PIP Optionholder would
realize had he exercised an option immediately prior to the Effective Time,
which is equal to the number of shares of Parent Common Stock equal to the
product of (x) the result of multiplying (A) the Conversion Number by (B) a
fraction, the numerator of which is the excess, if any, of the Transaction
Value over $15.7105 and the denominator of which is the Transaction Value
and (y) the number of shares of Company Common Stock subject to such PIP
Option (upon conversion of the underlying PIP Convertible Debentures (as
defined below) and Series B Preferred Stock).

(c) At the Effective Time, each restricted share representing a
share of Company Common Stock granted under the Company Option Plans,
whether or not vested, shall become fully vested and shall be entitled to
receive the consideration in the Merger for shares of Company Common Stock
specified in Section 1.02(b).
7

(d) Each performance share award under the Company Option Plans
shall at the Effective Time vest and be converted into a performance share
award with respect to the number of full shares of Parent Common Stock
equal to the product of (i) .75 times the Conversion Number, multiplied by
(ii) the number of shares of Company Common Stock subject to such award
(which represents the fair value of such awards as of the Effective Time).

(e) Notwithstanding the foregoing, payments to award and
Optionholders contemplated by this Section 1.04 may be withheld in respect
of any award or Option until any necessary consent or release is obtained
or any necessary amendment to any Option Plan has been made. Parent shall
take all necessary action in order to effect the provisions of this Section
1.04 as of the Effective Time, including, if necessary, obtaining
stockholder approval by the stockholders of Parent and amending existing
stock option plans of Parent.

(f) Any action taken by the Company to effect this Secton 1.04
shall provide that such action shall be ineffective to the extent it would
interfere with accounting for the Merger or the acquisition of Nationwide
Care, Inc. and related entities as a "pooling of interests". The parties
shall cooperate to restructure any of the actions taken pursuant to this
Section 1.04 if the effect of such actions would prevent the Merger from
qualifying as a "pooling of interests" for financial reporting purposes,
provided that the parties will endeavor to ensure that such restructuring
shall have substantially the same economic effect to the former
Optionholders or holders of restricted or performance shares.

SECTION 1.05. Adjustments.

If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
Parent Common Stock shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date
during such period, the Conversion Number shall be appropriately adjusted.

SECTION 1.06. Fractional Shares.

No fractional shares of Parent Common Stock shall be issued in
the Merger and fractional share interests shall not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. All
fractional shares of Parent Common Stock that a holder of Company Common
Stock or a holder of Options or PIP Options would otherwise be entitled to
receive as a result of the Merger shall be aggregated and if a fractional

share results from such aggregation, such holder shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying the
Parent Average Price by the fraction of a share of Parent Common Stock to
which such holder would otherwise have been entitled.

ARTICLE II

THE SURVIVING CORPORATION; PARENT DIRECTORS

SECTION 2.01. Certificate of Incorporation.

The certificate of incorporation of Merger Subsidiary in effect
at the Effective Time shall be the certificate of incorporation of the
Surviving Corporation until amended in accordance with applicable law.

SECTION 2.02. Bylaws.

The bylaws of Merger Subsidiary in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.

SECTION 2.03. Directors and Officers.

From and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with applicable law,
(i) the directors of Merger Subsidiary at the Effective Time shall be the
directors of the Surviving Corporation, and (ii) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.

SECTION 2.04. Parent Directors.

Parent shall take such action as shall be necessary so that, at
the Effective Time, the number of directors comprising the full Board of
Directors of Parent shall be increased so that 3 persons shall be selected
prior to the Effective Time by the Company's Board of Directors from among
the present directors of the Company two of whom are neither officers of
the Company nor designees of any affiliate of the Company and the third of
whom shall be Bruce L. Busby (the "Designated Directors") to be appointed
to the Board of Directors of Parent to fill the vacancies created by such
newly created directorships to have terms expiring at the Company's annual
meeting of stockholders to be held in 1996. Parent hereby agrees to cause
the Designated Directors to be nominated for election to the Board of
Directors of Parent at the 1996 annual meeting.

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

The Company represents and warrants to Parent that:

SECTION 3.01. Corporate Existence and Power.

The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada, and
has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business substantially as now conducted,
except where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), business, assets or results of
operations of the Company and its Subsidiaries (as defined in
Section 3.06(a) hereof) taken as a whole (a "Company Material Adverse
Effect"). The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not have,
individually or in the aggregate, a Company Material Adverse Effect.

SECTION 3.02. Corporate Authorization.

The execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger and the transactions
contemplated hereby by the Company, but excluding any amendments to any
existing agreements with directors, officers and other employees of the
Company required by this Agreement which require the consent of such
persons, by the Company are within the Company's corporate power and
authority and, except for any required approval by the Company's
stockholders in connection with the consummation of the Merger, have been
duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery thereof
by Parent and Merger Subsidiary, constitutes a legal, valid and binding
agreement of the Company.

SECTION 3.03. Governmental Authorization.

The execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger and the transactions
contemplated hereby by the Company do not require any consent, approval,
authorization or permit of or other action by, or filing with, any
governmental body, agency, official or
10

authority other than (i) as set forth on Schedule 3.03, (ii) the filing of
appropriate merger documents in accordance with Delaware Law and Nevada Law
and (iii) compliance with applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), the Securities Act of
1933 and the rules and regulations promulgated thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder (the "Exchange Act"), and any applicable state
securities or "blue sky" laws, except where the failure of any such action
to be taken or filing to be made would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect or
prevent or delay consummation of the Merger.

SECTION 3.04. Non-Contravention.

The execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger and the transactions
contemplated hereby by the Company do not and will not (i) contravene or
conflict with the Articles of Incorporation or By-Laws of the Company,
(ii) assuming compliance with the matters referred to in Section 3.03,
contravene or conflict with or constitute a violation of any provision of
any law, rule, regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or any of its Subsidiaries,
(iii) constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or
any of its Subsidiaries or to a loss of any benefit to which the Company or
any of its Subsidiaries is entitled under any provision of any material
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit or other similar
authorization held by the Company or any of its Subsidiaries, or
(iv) result in the creation or imposition of any Lien on any material asset
of the Company or any of its Subsidiaries, except as set forth in
Schedule 3.04 and except for any occurrences or results referred to in
clauses (ii), (iii), and (iv) which would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect or
prevent or delay consummation of the Merger. For purposes of this
Agreement, "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance or right of another to or
adverse claim of any kind in respect of such asset. Notwithstanding the
foregoing, no representation is made with respect to any agreement or
instrument individually relating to $5,000,000 or less in indebtedness or
value ("Third Party Agreement") or assets individually having a value of
$5,000,000 or less.

SECTION 3.05. Capitalization.

(a) The authorized capital stock of the Company consists of
(i) 60,000,000 shares of Company Common Stock, of which, as of February 28,
1995: (A) 32,848,463 were issued and outstanding (of which up to 4,200,000
were held by the grantor trust established by the Company on January 16,
1995), (B) 472,356 were reserved for future issuance pursuant to
outstanding Options granted pursuant to the Company Option Plans,
(C) 1,067,325 shares were reserved for future issuance pursuant to
performance shares awarded pursuant to the 1990 Stock Incentive Plan,
(D) 3,500,750 shares were reserved for issuance upon conversion of the
Company's Series B Preferred Stock pursuant to the terms of the Company's
Performance Investment Plan, (E) 4,450,730 shares were reserved for
issuance upon conversion of the Company's 73/4% Convertible Subordinated
Debentures due 2002 (the "73/4% Convertible Debentures"), (F) 5,500,000
shares were reserved for issuance in connection with the proposed merger
with Nationwide Care, Inc. and (G) except for 500,000 shares of Company
Common Stock held in the COLI Trust none was issued and held in treasury,
and (ii) 25,000,000 shares of preferred stock, par value $.15 per share, of
which, as of February 28, 1995, the following series had been designated:
(A) 3,000,000 shares of Series A Junior Participating Preferred Stock, of
which no shares are issued and outstanding; (B) 950 shares of Series B
Preferred Stock, of which no shares are issued or outstanding and of which
618 shares have been designated as Subseries 1 and are reserved for
issuance upon the conversion of the Company's Convertible Debentures due
May 29, 1999 (the "PIP Convertible Debentures") pursuant to the terms of
the Company's Performance Investment Plan; (C) 35,000 shares of Series C
Preferred Stock, all of which are issued and outstanding; and (D) 300,000
shares of Series D Preferred Stock, of which 61,467 are issued and
outstanding. Except as described in this Section 3.05 or in Schedule 3.05,
as of the date of this Agreement, no shares of capital stock of the Company
are reserved for issuance for any other purpose. Since February 28, 1995,
no shares of capital stock have been issued by the Company except pursuant
to agreements for which shares are adequately reserved under subclause (B),
(C), (D) or (E) of clause (i) of this paragraph (a). Since February 28,
1995 the Company has not granted any options for, or other rights to
purchase, any shares of capital stock of the Company except for the award
of options to purchase 12,000 shares of Company Common Stock and awards of
24,000 restricted shares pursuant to the 1990 Stock Incentive Plan and the
Directors' Option Plan. Each of the issued shares of capital stock of the
Company is duly authorized, validly issued and fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock subject to) any preemptive or similar
rights created by statute, the Articles of Incorporation or Bylaws of the
Company or any
12

agreement to which the Company is a party or is bound. The Company has no
outstanding bonds, notes or other obligations the holders of which have the
right to vote with the stockholders of the Company on any matter.

(b) Except (i) as set forth in paragraph (a) above or as set
forth on Schedule 3.05, (ii) and the Company's obligations under a Purchase
and Sale Agreements relating to Windsor Estates L.P. and Westfield
Partnership L.P. or (iii) pursuant to the terms of that certain Rights
Agreement dated as of January 31, 1990 by and between the Company and
Manufacturers Hanover Trust Company of California (the "Company Rights
Agreement"), there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any
character to which the Company is a party relating to the issued or
unissued capital stock of the Company or obligating the Company to grant,
issue or sell any shares of the capital stock of the Company. Except in
accordance with the terms of the Series C and Series D Preferred Stock and
as set forth in Schedule 3.05, there are no obligations, contingent or
otherwise, of the Company to (i) repurchase, redeem or otherwise acquire
any shares of Company Common Stock or other capital stock of the Company,
or the capital stock or other equity interests of any Subsidiary of the
Company; or (ii) (other than advances to Subsidiaries in the ordinary
course of business) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution or otherwise),
or provide any guarantee with respect to the obligations of, any Subsidiary
of the Company or any other Person.

(c) The Company has delivered to Parent complete and correct
copies of (i) the form of PIP Options to purchase PIP Convertible
Debentures and (ii) the Company Option Plans and all forms of Options
issued pursuant to the Company Option Plans, including all amendments
thereto. The Company has previously delivered to Parent a complete and
correct list setting forth as of the date set forth on such list, (i) the
number of Options outstanding, and (ii) the exercise price of each
outstanding Option.

SECTION 3.06. Subsidiaries.

(a) Each Subsidiary of the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation or is a partnership duly constituted under
its governing law, has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to carry on its
business substantially as now conducted and is duly qualified to do
business as a foreign corporation or partnership and is in good standing in
each jurisdiction where the character of the property owned or
13

leased by it or the nature of its activities makes such qualification
necessary, except where failure to be so would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
For purposes of this Agreement, "Subsidiary" of any Person means (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 directly or
indirectly owned by such Person, and (ii) any partnership of which such
Person is a general partner.

(b) Except for certain partnerships of which the Company is the
general partner disclosed in the Company SEC Reports and except as set
forth on Schedule 3.06, each Subsidiary of the Company is wholly-owned by
the Company, directly or indirectly, free and clear of any Lien and free
and clear of any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or
other ownership interests). Except as set forth in the Company SEC Reports
or on Schedule 3.06, there are no outstanding (i) securities of the Company
or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any such
Subsidiary of the Company, or (ii) options or other rights to acquire from
the Company or any of its Subsidiaries, and no other obligation of the
Company or any of its Subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any such Subsidiary of the Company (the items in clauses (i)
and (ii) being referred to collectively as the "Company Subsidiary
Securities"). There are no outstanding obligations of the Company or any
of such Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Company Subsidiary Securities.

SECTION 3.07. Reports.

Since May 31, 1992, the Company and its Subsidiaries have filed
(i) all forms, reports, statements and other documents required to be filed
with (A) the Securities and Exchange Commission (the "SEC"), including
without limitation (1) all Annual Reports on Form 10-K, (2) all Quarterly
Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders (whether annual or special), (4) all Current Reports on Form
8-K and (5) all other reports, schedules, registration statements or other
documents (collectively referred to as the "Company SEC Reports"), and
(B) any other applicable state securities authorities and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities, including, without
limitation, state insurance and health regulatory
14

authorities, except where the failure to file any such forms, reports,
statements or other documents would not be reasonably likely to have a
Company Material Adverse Effect (all such forms, reports, statements and
other documents in clauses (i) and (ii) of this Section 3.07 being referred
to herein, collectively, as the "Company Reports"). The Company Reports
(i) were prepared in all material respects in accordance with the
requirements of applicable law (including, with respect to the Company SEC
Reports, the Securities Act or the Exchange Act, as the case may be) and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

SECTION 3.08. Financial Statements; No Undisclosed Liabilities.

The audited consolidated financial statements and unaudited
consolidated interim financial statements (including the related notes and
schedules) of the Company and its consolidated Subsidiaries included or
incorporated by reference in the Company SEC Reports, including reports on
Forms 10-K and 10-Q, (the "Company Financial Statements") were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), and
fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject,
in the case of any unaudited interim financial statements, to normal year-
end adjustments, none of which would, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect). Neither the
Company nor its Subsidiaries has any liabilities, whether or not accrued,
contingent or otherwise, that individually or in the aggregate, are
reasonably likely to have a Company Material Adverse Effect other than
liabilities disclosed in the Schedules hereto or in the Company SEC
Reports, or for which the Company has made adequate reserves as reflected
in the Company Financial Statements.

SECTION 3.09. Joint Proxy Statement/Prospectus; Registration Statement.

None of the information to be supplied by the Company for
inclusion in (a) the joint proxy statement relating to the meetings of the
Company's and Parent's stockholders to be held in connection with the
Merger (also constituting the prospectus in respect of Parent Common Stock
to be exchanged for shares of Company Common Stock in the Merger) (the
"Joint Proxy Statement/Prospectus"), to be filed by the Company and Parent
with the SEC, and any amendments or supplements thereto, or
15

(b) the Registration Statement on Form S-4 (the "Registration Statement")
to be filed by Parent with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, at the respective times such
documents are filed, and, in the case of the Joint Proxy
Statement/Prospectus, at the time the Joint Proxy Statement/Prospectus or
any amendment or supplement thereto is first mailed to stockholders of the
Company, at the time such stockholders vote on approval and adoption of
this Agreement and at the Effective Time, and, in the case of the
Registration Statement, when it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.

SECTION 3.10. Absence of Certain Changes.

Except as contemplated hereby or as described in any Company
SEC Report filed prior to the date hereof or as disclosed in Schedule 3.10
or any other Schedule to this Agreement, since May 31, 1994 (a) the Company
and its Subsidiaries have conducted their business in all material respects
in the ordinary course consistent with past practices (other than in
connection with the proposal of Horizon Healthcare Corp. to acquire the
Company, litigation relating thereto, and the Company's process of
exploring strategic alternatives), (b) there has not been any change or
development, or combination of changes or developments which, individually
or in the aggregate, are reasonably likely to have a Company Material
Adverse Effect, (c) there has not been any declaration, setting aside or
payment of any dividend or other distribution with respect to any shares of
capital stock of the Company (other than any dividends on the Series C or
Series D Preferred Stock in accordance with the terms thereof), or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any of its
Subsidiaries, (d) there has not been any amendment of any term of any
outstanding security of the Company or any of its Subsidiaries, (e) there
has not been any incurrence, assumption or guarantee by the Company or any
of its Subsidiaries of any indebtedness for borrowed money other than in
the ordinary course of business and in amounts and on terms consistent with
past practices; (f) there has not been any creation or assumption by the
Company or any of its Subsidiaries of any Lien on any material asset other
than in the ordinary course of business consistent with past practices
(including the sale, pledging or assignment of receivables); (g) there has
not been any change in any method of accounting or accounting practice by
the Company or any of its Subsidiaries, except for any such change required
by reason of a concurrent change in generally accepted accounting
principles or to conform a Subsidiary's accounting policies and
16

practices to those of the Company; and (h) except for contractual
obligations disclosed in any Company SEC Report filed prior to the date
hereof or in any Schedule to this Agreement there has not been any
(i) grant of any severance or termination pay to any director, executive
officer or key employee of the Company or any of its Subsidiaries,
(ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any director, executive officer or key employee of the Company or any of
its Subsidiaries, except in the ordinary course of business consistent with
past practice and except for commitments to make loans to assist such
persons in making tax payments in connection with stock-based compensation,
which loans shall be on terms consistent with similar loans made in the
past; provided that the maturity of any such loan shall be six months after
the date on which Parent publishes financial results covering at least 30
days of combined operations of Parent and the Company, (iii) increase in
benefits payable under any existing severance or termination pay policies
or employment agreements with any director, executive officer or key
employee of the Company or any of its Subsidiaries or (iv) increase in
compensation, bonus or other benefits payable to directors, executive,
officers or key employees of the Company or any of its Subsidiaries.

SECTION 3.11. Litigation.

Except as disclosed in Schedule 3.11, there are no actions,
suits, investigations or proceedings pending against the Company or any of
its Subsidiaries or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which, individually
or in the aggregate, are reasonably likely to have a Company Material
Adverse Effect.

SECTION 3.12. Articles of Incorporation and Bylaws.

The Company has heretofore furnished to Parent complete and
correct copies of the Articles of Incorporation and the Bylaws or the
equivalent organizational documents, in each case as amended or restated,
of the Company and each of its Subsidiaries.

SECTION 3.13. ERISA.

(a) "Employee Plans" shall mean each "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), which (i) is subject to any provision of ERISA and
(ii) is maintained, administered or contributed to by the Company or any
affiliate (as defined below) and covers any employee or former employee of
the Company or any affiliate or under which the Company or any affiliate
has any liability. Copies of such plans (and, if applicable, related
17

trust agreements) and all amendments thereto and written interpretations
thereof and the most recent Forms 5500 required to be filed with respect
thereto will be promptly furnished to Parent after the date of this
Agreement. For purposes of this Section and Section 4.13, "affiliate" of
any Person means any other Person which, together with such Person, would
be treated as a single employer under Section 414 of the United States
Internal Revenue Code of 1986, as amended (the "Code"). Except for the
Supplemental Executive Retirement Plan, no Employee Plan individually or
collectively constitutes a "defined benefit plan" as defined in
Section 3(35) of ERISA.

(b) No Employee Plan constitutes a "multiemployer plan," as
defined in Section 3(37) of ERISA, and no Employee Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code except
for The Hillhaven Corporation Voluntary Participation Benefit Trust.
Except as set forth on Schedule 3.13, or in respect of no more than 5
individuals, no Employee Plan provides retiree medical or life insurance
benefits. No Employee Plan is subject to Title IV of ERISA. Neither the
Company nor any of its affiliates has incurred, nor has reason to expect to
incur, any liability under Title IV of ERISA arising in connection with the
termination of, or complete or partial withdrawal from, any plan previously
covered by Title IV of ERISA that would have, individually or in the
aggregate, a Company Material Adverse Effect. Nothing done or omitted to
be done and no transaction or holding of any asset under or in connection
with any Employee Plan has or will make the Company or any of its
Subsidiaries or any officer or director of the Company or any of its
Subsidiaries subject to any liability under Title I of ERISA or liable for
any tax pursuant to Section 4975 of the Code that would have, individually
or in the aggregate, a Company Material Adverse Effect.

(c) Except to the extent it would not have, individually or in
the aggregate, a Company Material Adverse Effect, (i) each Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501 (a) of the Code, and (ii) each Employee Plan has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, final rules and final
regulations, including but not limited to ERISA and the Code, which are
applicable to such Employee Plan.

(d) "Benefit Arrangement" shall mean each employment, severance
or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for compensation, bonus, profit-
sharing, stock option, or other stock related rights or other forms of
incentive or deferred
18

compensation, which (i) is not an Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by the Company or any of
its affiliates, and (iii) covers any employee or former employee or
director or former director of the Company or any of its affiliates.
Schedule 3.13 lists each Benefit Arrangement currently in effect (other
than any immaterial arrangement available to employees or groups of
employees generally or as disclosed in any Company SEC Report filed prior
to the date hereof) provided to any director or executive officer of the
Company or any former director or executive officer of the Company and sets
forth each Benefit Arrangement with respect to which benefits will be
accelerated or paid as a result of the transactions contemplated by this
Agreement. Copies of all such Benefit Arrangements and all amendments
thereto will be promptly furnished to Parent after the date of this
Agreement. Except to the extent that it would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect,
each Benefit Arrangement has been maintained in compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules
and regulations that are applicable to such Benefit Arrangement.

SECTION 3.14. Taxes.

Except for such matters that would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect,
(a) the Company and its Subsidiaries have timely filed all returns and
reports required to be filed by them with any taxing authority with respect
to taxes for all periods heretofore ended, taking into account any
extension of time to file granted to or obtained on behalf of the Company
and its Subsidiaries, (b) all taxes required to be paid with respect to the
periods covered by such returns or reports that are due prior to the
Effective Time have been paid or will be paid by the Effective Time, (c) as
of the date hereof, no deficiency for any amount of tax has been asserted
or assessed by a taxing authority against the Company or any of its
Subsidiaries, except for amounts for which the Company has made an adequate
reserve as reflected in the Company Financial Statements, (d) all liability
for taxes of the Company or any of its Subsidiaries that are or will become
due or payable with respect to periods covered by the financial statements
referred to in Section 3.08 have been paid or adequately reserved for on
such financial statements to the extent required by generally accepted
accounting principles, and (e) the Company and its Subsidiaries are not
liable for any taxes arising out of membership or participation in any
consolidated, affiliated, combined or unitary group in which it or any of
its Subsidiaries was at any time a member, other than such group the parent
of which is the Company or for which the Company and its Subsidiaries have
a right of indemnification pursuant to a Tax
19

Sharing Agreement with National Medical Enterprises, Inc. entered into in
1990.

SECTION 3.15. Tax Matters; Pooling.

Neither the Company nor, to the knowledge of the Company, any
of its affiliates has taken or agreed to take any action that would prevent
(a) the Merger from constituting a reorganization qualifying under the
provisions of Section 368 of the Code or (b) the Merger from being treated
for financial accounting purposes as a "pooling of interests" in accordance
with generally accepted accounting principals and the rules, regulations
and interpretations of the SEC (a "Pooling Transaction").

SECTION 3.16. Finders and Investment Bankers.

Except for Merrill Lynch & Co. ("Merrill Lynch"), whose fees
will be paid by the Company, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company or any of its Subsidiaries who might be entitled to
any fee or commission in connection with the transactions contemplated by
this Agreement.

SECTION 3.17. Opinion of Financial Advisor.

The Company has received the opinion of Merrill Lynch to the
effect that, as of the date of such opinion, the consideration to be
received in the Merger by the holders of Company Common Stock is fair to
such stockholders from a financial point of view.

SECTION 3.18. Vote Required.

The only votes of the holders of any class or series of Company
capital stock necessary to approve the Merger are the affirmative votes on
a class-by-class basis of the holders of a majority of the outstanding
shares of the Company Common Stock and of 66 2/3% of the outstanding shares
of each of the Series C Preferred Stock and the Series D Preferred Stock.

SECTION 3.19. Acquiring Person.

Neither Parent nor Merger Sub is an "Acquiring Person" (as
defined in the Company Rights Plan) or will become an "Acquiring Person" as
a result of any of the transactions contemplated by this Agreement. The
Company has taken all necessary actions to ensure that, for the purposes of
the Company Rights Plan, the execution of this Agreement does not, and the
consummation of the Merger and the other transactions contemplated hereby
will not, result in the grant of any rights
20

to any person under the Company Rights Agreement or enable or require any
outstanding rights to be exercised, distributed or triggered, and that the
Rights (as defined in the Company Rights Plan) will expire without any
further force or effect as of the Effective Time.

SECTION 3.20. Medicare and Medicaid.

The Company and its Subsidiaries have complied with all
Medicare and Medicaid laws, rules and regulations and have filed all
returns, cost reports and other filings in any manner prescribed, except
where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. All
returns, cost reports and other filings made by the Company and its
Subsidiaries to Medicare, Medicaid or any other governmental health or
welfare related entity or third party payor are true and complete except
where the failure to be so true and complete would not be reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect. No deficiency in any such returns, cost reports and other
filings, including deficiencies for late filings, has been asserted or to
the best of the Company's knowledge, after reasonable investigation,
threatened by any Federal or state agency or instrumentality or other
provider reimbursement entities relating to Medicare or Medicaid or third
party payor claims, except as disclosed on Schedule 3.20, and to the best
of the Company's knowledge, after reasonable investigation, there is no
basis for any successful claims or requests for reimbursement from any such
agency, instrumentality, entity or third party payor except for any
deficiencies which would not be reasonably expected to have, individually
or in the aggregate, a Company Material Adverse Effect. Except as
disclosed on Schedule 3.20, neither the Company nor any of its Subsidiaries
has been subject to any audit relating to fraudulent Medicare or Medicaid
procedure or practices and except audits which would not be reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect.

SECTION 3.21. Takeover Statutes.

No "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws in the United States applicable to the Company (including,
without limitation, the Nevada Control Share Acquisition Act) is applicable
to the Merger or the other transactions contemplated hereby. The Board of
Directors of the Company has taken all appropriate action to exempt the
transactions contemplated in this Agreement, from the Nevada Combination
Moratorium Statute and Articles Twelfth and Fifteenth of the Company's
Certificate of Incorporation.
21

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company that:

SECTION 4.01. Corporate Existence and Power.

Each of Parent and Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business
substantially as now conducted, except where the failure to do so would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise),
business, assets or results of operations of Parent and its Subsidiaries
taken as a whole (a "Parent Material Adverse Effect"). Parent is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by
it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would
not have, individually or in the aggregate, a Parent Material Adverse
Effect. Merger Subsidiary has not engaged and will not engage in any
activities other than in connection with or as contemplated by this
Agreement and the transactions contemplated hereby.

SECTION 4.02. Corporate Authorization.

The execution, delivery and performance by each of Parent and
Merger Subsidiary of this Agreement and the consummation of the Merger by
Merger Subsidiary and the transactions contemplated hereby are within the
corporate powers and authority of each of Parent and Merger Subsidiary and
have been duly authorized by all necessary corporate action on the part of
each of Parent and Merger Subsidiary, except for any required approval by
Parent's stockholders of the issuance of Parent Common Stock in connection
with the Merger. Parent, as sole stockholder of Merger Subsidiary has
approved the Merger and no further corporate or stockholder action is
required on the part of Merger Subsidiary in connection with the
consummation of the Merger other than the filing of a certificate of merger
as contemplated by this Agreement. This Agreement has been duly executed
and delivered by Parent and Merger Subsidiary and, assuming the due
authorization, execution and delivery thereof by the Company, constitutes a
legal, valid and binding agreement of each of Parent and Merger Subsidiary.

SECTION 4.03. Governmental Authorization.

The execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement and the consummation of the Merger by Merger
Subsidiary and the transactions contemplated hereby do not require any
consent, approval, authorization or permit of or other action by or filing
with, any governmental body, agency, official or authority other than
(i) as set forth on Schedule 4.03, (ii) the filing of appropriate merger
documents in accordance with Delaware Law and Nevada Law and
(iii) compliance with any applicable requirements of the HSR Act, the
Exchange Act, the Securities Act, any applicable state securities or "blue
sky" laws, except where the failure of any such action to be taken or
filing to be made would not be reasonably likely to have, individually or
in the aggregate, a Parent Material Adverse Effect or prevent or delay
consummation of the Merger.

SECTION 4.04. Non-Contravention.

The execution, delivery and performance by each of Parent and
Merger Subsidiary of this Agreement and the consummation of the Merger by
Merger Subsidiary and the transactions contemplated hereby do not and will
not (i) contravene or conflict with the certificate of incorporation or
bylaws of each of Parent or Merger Subsidiary, (ii) assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with
or constitute a violation of any provision of law, rule, regulation,
judgment, injunction, order or decree binding upon or applicable to Parent
or any of its Subsidiaries, (iii) constitute a default under or give rise
to any right of termination, cancellation or acceleration of any right or
obligation of Parent or any of its Subsidiaries or to a loss of any benefit
to which Parent or any of its Subsidiaries is entitled under any provision
of any material agreement or other instrument binding upon Parent or any of
its Subsidiaries or any license, franchise, permit or other similar
authorization held by Parent or any of its Subsidiaries, or (iv) result in
the creation or imposition of any Lien on any material asset of Parent or
any of its Subsidiaries, except for any occurrences or results referred to
in clauses (ii), (iii) and (iv) which would not be reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect or
prevent or delay consummation of the Merger.

SECTION 4.05. Capitalization.

(a) The authorized capital stock of Parent consists of (i)
60,000,000 shares of Parent Common Stock, of which, as of March 31, 1995,
(A) 27,869,980 shares were issued and outstanding and (B) 2,137,352 shares
were issued and held in treasury and, as
23

of April 21, 1995, (C) 2,228,884 shares were reserved for future issuance
pursuant to Parent's Non-Qualified Incentive Compensation Plan and ISO
Incentive Compensation Plan and (D) 139,921 shares were reserved for future
issuance pursuant to Parent's Non-Employee Directors Plan and (E) 1,500
shares were reserved for issuance pursuant to options outside the plans and
(ii) 1,000,000 shares of Preferred Stock, of which, as of March 31, 1995,
(A) no shares were issued and outstanding and (B) 300,000 shares had been
designated as Series A Participation Preferred Stock with respect to the
Parent Rights Agreement (as defined below). Except as described in this
Section 4.05 or in Schedule 4.05, as of the date of this Agreement, no
shares of capital stock of Parent are reserved for issuance for any other
purpose. Since March 31, 1995, no shares of capital stock have been issued
by Parent except shares that are adequately reserved as described under
subclauses (C), (D) and (E) of clause (i) of this paragraph (a). Since
March 31, 1995, Parent has not granted any options for, or other rights to
purchase, any shares of capital stock of Parent. Each of the issued shares
of capital stock of Parent is duly authorized, validly issued and fully
paid and nonassessable, and has not been issued in violation of (nor are
any of the authorized shares of capital stock subject to) any preemptive or
similar rights created by statute, the Certificate of Incorporation or
Bylaws of Parent, or any agreement to which Parent is a party or is bound.
Parent has no outstanding bonds, notes or other obligations the holders of
which have the right to vote with the stockholders of the Parent on any
matter.

(b) Except (i) as set forth in paragraph (a) above, (ii) as set
forth in Schedule 4.05 or (iii) pursuant to the terms of that certain
Rights Agreement dated as of July 20, 1993 by and between Parent and
National City Bank, as Rights Agent (the "Parent Rights Agreement"), there
are no options, warrants or other rights (including registration rights),
agreements, arrangements or commitments of any character to which Parent is
a party relating to the issued or unissued capital stock of Parent or
obligating Parent to grant, issue or sell any shares of its capital stock.
Except as set forth in Schedule 4.05, there are no obligations, contingent
or otherwise, of Parent to (i) repurchase, redeem or otherwise acquire any
shares of Parent Common Stock or other capital stock of Parent, or the
capital stock or other equity interests of any Subsidiary of Parent; or
(ii) (other than advances to Subsidiaries in the ordinary course of
business) provide material funds to, or make any material investment in (in
the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any Subsidiary of Parent or
any other Person.

(c) Parent will deliver to the Company complete and correct
copies of Parent's stock option plans and all forms of options issued
pursuant thereto, including all amendments
24

thereto. Parent has previously delivered to the Company a complete and
correct list setting forth as of April 21, 1995, (i) the number of options
outstanding, (ii) the exercise price of each outstanding option, and (iii)
the number of options exercisable.

(d) The shares of Parent Common Stock to be exchanged for
shares of Company Common Stock in the Merger have been duly authorized,
except for any required approval by Parent's stockholders of the increase
in the authorized Parent Common Stock and the issuance of Parent Common
Stock in connection with the Merger, and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and nonassessable and the issuance thereof is not
subject to any preemptive or other similar right.

SECTION 4.06. Subsidiaries.

(a) Each Subsidiary of Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation or is a partnership duly constituted under
its governing law, has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to carry on its
business substantially as now conducted and is duly qualified to do
business as a foreign corporation or partnership and is in good standing in
each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except
where failure to be would not, individually or in the aggregate, be
reasonably likely to have a Parent Material Adverse Effect.

(b) Except as set forth on Schedule 4.06, all of the
outstanding capital stock of, or other ownership interests in, each
Subsidiary of Parent is owned by Parent, directly or indirectly, free and
clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests). Except as set forth
in any Parent SEC Report or on Schedule 4.06, there are no outstanding
(i) securities of Parent or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of Parent, or (ii) options or other
rights to acquire from Parent or any of its Subsidiaries, and no other
obligation of Parent or any of its Subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities
or ownership interests in, any Subsidiary of Parent (the items in clauses
(i) and (ii) being referred to collectively as the "Parent Subsidiary
Securities"). There are no outstanding
25

obligations of Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Parent Subsidiary Securities.

SECTION 4.07. Reports.

Since December 31, 1992, Parent and its Subsidiaries have filed
(i) all forms, reports, statements and other documents required to be filed
with (A) the SEC, including without limitation (1) all Annual Reports on
Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all proxy statements
relating to meetings of stockholders (whether annual or special), (4) all
Current Reports on Form 8-K and (5) all other reports, schedules,
registration statements or other documents (collectively referred to as the
"Parent SEC Reports"), and (B) any other applicable state securities
authorities and (ii) all forms, reports, statements and other documents
required to be filed with any other applicable federal or state regulatory
authorities, including, without limitation, state insurance and health
regulatory authorities, except where the failure to file any such forms,
reports, statements or other documents would not be reasonably likely to
have a Parent Material Adverse Effect (all such forms, reports, statements
and other documents in clauses (i) and (ii) of this Section 4.07 being
referred to herein, collectively, as the "Parent Reports"). The Parent
Reports (i) were prepared in all material respects in accordance with the
requirements of applicable law (including, with respect to the Parent SEC
Reports, the Securities Act or the Exchange Act, as the case may be) and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

SECTION 4.08. Financial Statements; No Undisclosed Liabilities.

The audited consolidated financial statements and unaudited
consolidated interim financial statements (including the related notes and
schedules) of Parent and its consolidated Subsidiaries included or
incorporated by reference in the Parent SEC Reports, including reports on
Forms 10-K and 10-Q (the "Parent Financial Statements"), were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), and
fairly present the consolidated financial position of Parent and its
consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods
then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments, none of which would
individually or in the aggregate, be reasonably likely to have a Parent
Material Adverse
26

Effect). Except as disclosed in the Schedules hereto or in the Parent SEC
Reports neither Parent nor its Subsidiaries has any liabilities, whether or
not accrued, contingent or otherwise, that individually or in the aggregate
are reasonably likely to have a Parent Material Adverse Effect.

SECTION 4.09. Joint Proxy Statement/Prospectus; Registration Statement.

None of the information to be supplied by Parent for inclusion
in (a) the Joint Proxy Statement/Prospectus to be filed by the Company and
Parent with the SEC and any amendments or supplements thereto, or (b) the
Registration Statement to be filed by Parent with the SEC and any
amendments or supplements thereto, will, at the respective times when such
documents are filed, and, in the case of the Joint Proxy
Statement/Prospectus, at the time the Joint Proxy Statement/Prospectus or
any amendment or supplement thereto is first mailed to stockholders of
Parent, at the time such stockholders vote on approval and adoption of the
proposals contained in the Joint Proxy Statement/Prospectus and at the
Effective Time, and, in the case of the Registration Statement, when it
becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading.

SECTION 4.10. Absence of Certain Changes.

Except as contemplated hereby or as described in any Parent SEC
Report filed prior to the date hereof or as disclosed in Schedule 4.10 or
any other Schedule to this Agreement, since December 31, 1994, (a) Parent
and its Subsidiaries have conducted their business in all material respects
in the ordinary course consistent with past practices, (b) there has not
been any change or development, or combination of changes or developments
which, individually or in the aggregate, are reasonably likely to have a
Parent Material Adverse Effect, (c) there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect
to any shares of capital stock of Parent, or any repurchase, redemption or
other acquisition by Parent or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership
interests in, Parent or any of its Subsidiaries, (d) there has not been any
amendment of any term of any outstanding security of Parent or any of its
Subsidiaries, (e) there has not been any incurrence, assumption or
guarantee by Parent or any of its Subsidiaries of any indebtedness for
borrowed money other than in the ordinary course of business and in amounts
and on terms consistent with past practices; (f) there has not been any
creation or assumption by Parent or any of its Subsidiaries of
27

any Lien on any material asset other than in the ordinary course of
business consistent with past practices (including the sale, pledging or
assignment of receivables); and (g) there has not been any change in any
method of accounting or accounting practice by Parent or any of its
Subsidiaries, except for any such change required by reason of a concurrent
change in generally accepted accounting principles or to conform a
Subsidiary's accounting policies and practices to those of Parent.

SECTION 4.11. Litigation.

Except as described in Schedule 4.11, there are no actions,
suits, investigations or proceedings pending against Parent or any of its
Subsidiaries or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which, individually
or in the aggregate are reasonably likely to have a Parent Material Adverse
Effect.

SECTION 4.12. Articles of Incorporation and Bylaws.

Parent has heretofore furnished to the Company complete and
correct copies of the Articles of Incorporation and the Bylaws of Parent
and each of its Subsidiaries.

SECTION 4.13. ERISA.

(a) "Parent Employee Plans" shall mean each "employee benefit
plan," as defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA and (ii) is maintained, administered or contributed to
by Parent or any affiliate (as defined in Section 3.13) and covers any
employee or former employee of Parent or any affiliate or under which
Parent or any affiliate has any liability. No Parent Employee Plan
individually or collectively constitutes a "defined benefit plan" as
defined in Section 3(35) of ERISA.

(b) No Parent Employee Plan constitutes a multiemployer plan.

(c) Except to the extent it would not have, individually or in
the aggregate, a Parent Material Adverse Effect, (i) each Parent Employee
Plan which is intended to be qualified under Section 401(a) of the Code is
so qualified and has been so qualified during the period from its adoption
to date, and each trust forming a part thereof is exempt from tax pursuant
to Section 501(a) of the Code, and (ii) each Parent Employee Plan has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, final rules and final
regulations, including but not
28

limited to ERISA and the Code, which are applicable to such Parent Employee
Plan.

SECTION 4.14. Taxes.

Except for such matters that would not have, individually or in
the aggregate, a Parent Material Adverse Effect, (a) Parent and its
Subsidiaries have timely filed all returns and reports required to be filed
by them with any taxing authority with respect to taxes for all periods
heretofore ended, taking into account any extension of time to file granted
to or obtained on behalf of Parent and it Subsidiaries, (b) all taxes
required to be paid with respect to the periods covered by such returns or
reports that are due prior to the Effective Time have been paid or will be
paid by the Effective Date, (c) as of the date hereof, no deficiency for
any amount of tax has been asserted or assessed by a taxing authority
against Parent or any of its Subsidiaries except for amounts for which the
Parent has made an adequate reserve as reflected in the Parent Financial
Statements, (d) all liability for taxes of Parent or any of its
Subsidiaries that are or will become due or payable with respect to periods
covered by the financial statements referred to in Section 4.08 of this
Agreement have been paid or adequately reserved for on such financial
statements to the extent required by generally accepted accounting
principals, and (e) Parent and its Subsidiaries are not liable for any
taxes arising out of membership or participation in any consolidated,
affiliated, combined or unitary group in which it or any of its Subsidiary
was at any time a member, other than such group the parent of which is
Parent.

SECTION 4.15. Tax Matters; Pooling.

Neither Parent nor, to the knowledge of Parent, any of its
affiliates has taken or agreed to take any action that would prevent (a)
the Merger from constituting a reorganization qualifying under the
provisions of Section 368 of the Code or (b) the Merger from being treated
for financial accounting purposes as a Pooling Transaction.

SECTION 4.16. Finders and Investment Bankers.

Except for CS First Boston Corporation ("First Boston") whose
fees will be paid by Parent, there is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Parent or any of its Subsidiaries who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.

SECTION 4.17. Opinion of Financial Advisor.

Parent has received the opinion of First Boston to the effect
that, as of the date of such opinion, the consideration to be paid by
Parent in the Merger is fair to Parent from a financial point of view.

SECTION 4.18. Vote Required.

The increase in the authorized Parent Common Stock requires the
affirmative vote of the holders of a majority of the shares of Parent
Common Stock entitled to vote at a meeting of stockholders and the
affirmative vote of a majority of the shares of Parent Common Stock voted
at a meeting of stockholders is necessary pursuant to applicable rules of
the NYSE to approve the issuance of Parent Common Stock pursuant to the
Agreement and the increase in the number of shares authorized for issuance
under, and any necessary amendment to the Parent's stock option plans to
effect the transactions contemplated by this Agreement (the "Option Plan
Amendment").

SECTION 4.19. No Change of Control.

Except as set forth on Schedule 4.19, the consummation of the
Merger and the transactions contemplated by this Agreement will not
constitute a change of control under any severance, employment or similar
agreements of Parent or any of its Subsidiaries which will result in the
acceleration of or payment of any benefits to participants under such
agreements.

SECTION 4.20. Medicare and Medicaid.

Parent and its Subsidiaries have complied with all Medicare and
Medicaid laws, rules and regulations and have filed all returns, cost
reports and other filings in any manner prescribed, except where the
failure to do so would not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect. All returns, cost
reports and other filings made by Parent and its Subsidiaries to Medicare,
Medicaid or any other governmental health or welfare related entity or
third party payor are true and complete except where the failure to be so
true and complete would not be reasonably expected to have, individually or
in the aggregate, a Parent Material Adverse Effect. No deficiency in any
such returns, cost reports and other filings, including deficiencies for
late filings, has been asserted or to the best of Parent's knowledge, after
reasonable investigation, threatened by any Federal or state agency or
instrumentality or other provider reimbursement entities relating to
Medicare or Medicaid or third party payor claims, and to the best of
Parent's knowledge, after reasonable investigation, there is no basis for
any successful claims or
30

requests for reimbursement from any such agency, instrumentality, entity or
third party payor except for any deficiencies which would not be reasonably
expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.

SECTION 4.21. Acquiring Person.

Neither the Company nor any stockholder of the Company is an
"Acquiring Person" (as defined in the Parent Rights Plan) or will become an
"Acquiring Person" as a result of any of the transactions contemplated by
this Agreement. Parent has taken all necessary actions to ensure that, for
the purposes of the Parent Rights Plan, the execution of this Agreement
does not, and the consummation of the Merger and the other transactions
contemplated hereby will not, result in the grant of any rights to any
person under the Parent Rights Agreement or enable or require any
outstanding rights to be exercised, distributed or triggered.

ARTICLE V

COVENANTS OF THE COMPANY

The Company agrees that:

SECTION 5.01. Conduct of the Company.

Except as expressly contemplated by this Agreement or, as
disclosed on Schedule 5.01 hereto or on the other Schedules hereto, from
the date hereof until the Effective Time, the Company and its Subsidiaries
shall conduct their business in the ordinary course consistent with past
practice and shall use their reasonable best efforts to preserve intact
their business organizations and relationships with third parties and to
keep available the services of their present officers and key employees.
Except as otherwise approved in writing by Parent or as expressly
contemplated by this Agreement, and without limiting the generality of the
foregoing, from the date hereof until the Effective Time:

(a) the Company will not adopt or propose any change or
amendment in its Articles of Incorporation or Bylaws or the Company
Rights Agreement;

(b) the Company will not, and will not permit any of its
Subsidiaries to, merge, consolidate or enter into a share exchange
with any other Person or acquire any stock or any material amount of
assets of any other Person or sell, lease, license, mortgage, pledge
or otherwise dispose of any material assets or property except
(i) pursuant to existing
31

contracts or commitments, (ii) in the ordinary course consistent with
past practice or (iii) transfers between the Company and/or its
wholly-owned Subsidiaries;

(c) the Company will not declare, set aside, or pay any
dividends or make any distributions on Company Common Stock or pay
any dividends on Series C Preferred Stock or Series D Preferred Stock
except in accordance with the terms thereof and in a form of
consideration consistent with past practice;

(d) the Company will not, and will not permit any of its
Subsidiaries to, (i) issue, deliver, sell, encumber or authorize or
propose the issuance, delivery, sale or encumbrance of, any capital
stock or other securities of the Company or any Company Subsidiary
Securities, other than the issuance of shares of Company Common Stock
either upon the exercise of Options or to fulfill existing
obligations to issue such shares in each case as described in
Section 3.05 or in respect of performance share awards scheduled to
vest prior to the Effective Time, (ii) split, combine or reclassify
any Company Stock or Company Subsidiary Securities or (iii) except as
required or permitted by this Agreement or as disclosed in Section
3.05, repurchase, redeem or otherwise acquire any Company Stock or
any Company Subsidiary Securities;

(e) except as otherwise expressly permitted hereby, the Company
will not make any commitment or enter into any contract or agreement
material to the Company and its Subsidiaries taken as a whole except
in the ordinary course of business consistent with past practice and
shall consult with Parent before making or committing to make any
capital expenditure of $500,000 or more;

(f) the Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing;

(g) the Company will not, and will not permit any of its
Subsidiaries to, take or agree to commit to take any action that
would make any representation and warranty of the Company hereunder
inaccurate in any material respect at, or as of any time prior to,
the Effective Time or which is reasonably likely to result in a delay
in consummation of the Merger, including delaying the effectiveness
of the Joint Proxy Statement/Prospectus and the mailing thereof;

(h) except to the extent required by law, the Company will not
increase in any manner the compensation or fringe benefits of any of
its directors, officers and other key
32

employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees, or become a
party to, amend or commit itself to any pension, retirement, profit-
sharing or welfare benefit plan or agreement or employment agreement
with or for the benefit or any employee, other than general increases
in the compensation of key employees (excluding any officers of the
Company) in the ordinary course of business consistent with past
practice, or voluntarily accelerate the vesting of any compensation
or benefit or take any action with respect to any Employee Plan or
Benefit Arrangement which could prevent the Merger from being treated
for financial accounting purposes as a Pooling Transaction; provided,
however, that (i) the Company bonus payments typically paid as of
May 31 may be paid consistent with past practice and (ii) the Company
can increase the compensation of the one individual previously
identified to Parent; or

(i) the Company will not amend or waive any provision of the
agreement relating to the acquisition of Nationwide Care, Inc., and
related entities.

SECTION 5.02. Access to Information.

From the date hereof until the Effective Time, the Company
will, upon reasonable notice, give Parent, its counsel, financial advisors,
auditors and other authorized representatives access to the offices,
properties, books and records of the Company and its Subsidiaries, will
furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct the
Company's employees, counsel and financial advisors to cooperate with
Parent in its investigation of the business of the Company and its
Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given by the Company to Parent
hereunder. All nonpublic information provided to, or obtained by, Parent
in connection with the transactions contemplated hereby shall be
"Information" for purposes of the Confidentiality Agreement dated March 23,
1995 between Parent and the Company. Notwithstanding the foregoing, the
Company shall not be required to provide any information which it
reasonably believes it may not provide to Parent by reason of applicable
law, rules or regulations, which constitutes information protected by
attorney/client privilege, or which the Company or any Subsidiary is
required to keep confidential by reason of contract or, agreement with
third parties.

SECTION 5.03. Other Offers.

From the date hereof until the termination of this Agreement,
the Company and its Subsidiaries will not, and will use their reasonable
best efforts to cause their officers, directors, employees or other agents
not to, directly or indirectly, (i) take any action to solicit or initiate
any Company Acquisition Proposal (as defined below) or (ii) engage in
negotiations with, or disclose any nonpublic information relating to the
Company or any of its Subsidiaries or afford access to the properties,
books or records of the Company or any of its Subsidiaries to any Person,
unless with respect to the actions referred to in this clause (ii)
otherwise required in accordance with the fiduciary duties of the Board of
Directors under applicable law as advised by independent legal counsel to
the Company, in response to a Person that has made a Company Acquisition
Proposal in writing. (Nothing herein shall prohibit the Company from
amending or waiving the provisions of confidentiality agreements it has
entered into with third persons in respect of the ability of such persons
to submit a Company Acquisition Proposal to the Company or its stockholders
and the Company has done so.) The Company will promptly as reasonably
practicable notify Parent after receipt of any Company Acquisition Proposal
or any indication that any Person is considering making a Company
Acquisition Proposal and identify the party with whom it has negotiated or
to whom it has disclosed confidential information. For purposes of this
Agreement, "Company Acquisition Proposal" means any good faith offer or
proposal for a merger or other business combination involving the Company
or any of its Subsidiaries or the acquisition of any equity interest in, or
a substantial portion of the assets of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.

SECTION 5.04. Notices of Certain Events.

The Company shall promptly as reasonably practicable notify
Parent of:

(i) any notice or other communication from any Person alleging
that the consent of such Person (or another Person) is or may be
required in connection with the transactions contemplated by this
Agreement;

(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement;

(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise
34

affecting the Company or any of its Subsidiaries which, if pending on
the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.11 or which relate to the
consummation of the transactions contemplated by this Agreement;

(iv) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would
become a default, received by the Company or any of its Subsidiaries
subsequent to the date of this Agreement, under any material
agreement; and

(v) any Company Material Adverse Effect or the occurrence of
any event which is reasonably likely to result in a Company Material
Adverse Effect.

SECTION 5.05. Tax Letters.

If the parties hereto reasonably believe it appropriate, the
Company will cooperate with Parent in requesting of its directors and
officers and such other persons as Parent may reasonably request, at or
before the Effective Time, a representation letter stating that such person
has no present plan or intention to sell any of the shares of Parent Common
Stock which such stockholder receives in the Merger. The refusal of any
such person who is not a director or employee of the Company or one of its
Subsidiaries to provide such a letter shall not be a breach by the Company
of its obligations hereunder.

SECTION 5.06. Rights Agreement.

The Company shall take all action (including, if necessary,
amending or terminating the Company Rights Agreement) so that the execution
of this Agreement and any agreements between the Company and Parent or
Merger Subsidiary and the consummation of the Merger and the other
transactions contemplated hereby and do not and will not result in the
grant of any rights to any person under the Company Rights Agreement or
enable or require any outstanding rights to be exercised, distributed or
triggered.

SECTION 5.07. Financial Statements.

The Company agrees to prepare, and to cause KPMG Peat Marwick
to take appropriate action with respect to such consolidated financial
statements of the Company and its Subsidiaries as are required to be
included in or necessary for the preparation of the Joint Proxy
Statement/Prospectus.

ARTICLE VI

COVENANTS OF PARENT

Parent agrees that:

SECTION 6.01. Conduct of Parent.

Except as expressly contemplated by this Agreement or as
described on Schedule 6.01 hereto, from the date hereof until the Effective
Time, Parent and its Subsidiaries shall conduct their business in the
ordinary course consistent with past practice and shall use their
reasonable best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of
their present officers and key employees. Except as otherwise approved in
writing by the Company or as expressly contemplated by this Agreement, and
without limiting the generality of the foregoing, from the date hereof
until the Effective Time:

(a) Parent and Merger Subsidiary will not adopt or propose any
change in its certificate of incorporation or bylaws;

(b) Parent will not, and will not permit any of its
Subsidiaries to, merge or consolidate with any other Person (other
than another Subsidiary) or, acquire a material amount of stock or
assets of any other Person; provided that Parent and its Subsidiaries
may merge or consolidate with, or acquire the stock or assets of a
Person primarily engaged in a business in which Parent or any of its
Subsidiaries is presently engaged, provided that such transaction may
not be undertaken if it would require the preparation of pro forma
financial statements in accordance with applicable rules and
regulations of the SEC or might reasonably be expected to delay the
transactions contemplated by this Agreement;

(c) Parent will not, and will not permit any of its
Subsidiaries to sell, lease, license, mortgage, pledge or otherwise
dispose of any material assets or property except (i) pursuant to
existing contracts or commitments, (ii) in the ordinary course
consistent with past practice or (iii) transfers between Parent
and/or its wholly-owned Subsidiaries;

(d) Parent will not declare or pay any dividends or make any
distributions on Parent Common Stock;

(e) Parent will not, and will not permit any of its
Subsidiaries to (i) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any capital stock
36

of Parent or Parent Subsidiary Securities, other than to increase the
total number of authorized shares of Parent Common Stock up to
200,000,000 (the "Charter Amendment"), the Option Plan Amendment or
the issuance of Parent Common Stock upon the exercise of employee
stock options or convertible securities or to fulfill obligations to
issue shares of Parent Common Stock in each case as described in
Section 4.05, or to consummate a transaction permitted by
Section 6.01(b) above or to the Vencor Foundation in accordance with
past practice, (ii) split, combine or reclassify any capital stock of
Parent or Parent Subsidiary Securities or (iii) repurchase, redeem or
otherwise acquire any capital stock of Parent or Parent Subsidiary
Securities;

(f) Parent will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing;

(g) Parent will not, and will not permit any of its
Subsidiaries to, take or agree or commit to take any action that
would make any representation and warranty of Parent hereunder
inaccurate in any material respect at, or as of any time prior to,
the Effective Time or which is reasonably likely to result in a delay
in consummation of the Merger, including delaying the effectiveness
of the Joint Proxy Statement/Prospectus and the mailing thereof; or

(h) except to the extent required by law, Parent will not
voluntarily accelerate the vesting of any compensation or benefit or
take any action with respect to any Parent Employee Plan or Benefit
Arrangement which could prevent the Merger from being treated for
financial accounting purposes as a Pooling Transaction.

SECTION 6.02. Access to Information.

From the date hereof until the Effective Time, Parent will,
upon reasonable notice, give the Company, its counsel, financial advisors,
auditors and other authorized representatives access to the offices,
properties, books and records of Parent and its Subsidiaries, will furnish
to the Company, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct
Parent's employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of Parent and its
Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given by Parent to the Company
hereunder. All nonpublic information provided to, or obtained by, the
Company in connection with the transactions contemplated hereby shall be
"Information" for purposes of the Confidentiality Agreement dated March 23,
1995
37

between Parent and the Company. Notwithstanding the foregoing, Parent
shall not be required to provide any information which it reasonably
believes it may not provide to the Company by reason of applicable law,
rules or regulations, which constitutes information protected by
attorney/client privilege, or which Parent or any Subsidiary is required to
keep confidential by reason of contract or agreement with third parties.

SECTION 6.03. Merger Subsidiary.

Parent will take all action necessary (a) to cause Merger
Subsidiary to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this
Agreement and (b) to ensure that, prior to the Effective Time, Merger
Subsidiary shall not conduct any business or make any investments other
than as specifically contemplated by this Agreement and will not have any
assets (other than a de minimus amount of cash paid to Merger Subsidiary
for the issuance of its stock to Parent).

SECTION 6.04. Director and Officer Liability.

From and after the Effective Time, (a) Parent shall indemnify,
defend and hold harmless the present and former officers and directors of
the Company and its Subsidiaries against all losses, claims, damages and
liability in respect of acts or omissions occurring at or prior to the
Effective Time to the fullest extent that the Company or such Subsidiary
would have been permitted under applicable law and the certificate of
incorporation and by-laws of the Company or such Subsidiary in effect on
the date hereof to indemnify such person and (b) the Surviving Corporation
shall indemnify, defend and hold harmless the present and former officers
and directors of the Company and its Subsidiaries against all losses,
claims, damages and liability in respect of acts or omissions occurring at
or prior to the Effective Time to the fullest extent that the Company or
such Subsidiary would have been permitted under applicable law and the
certificate of incorporation and by-laws of the Company or such Subsidiary
in effect on the date hereof to indemnify such person. Parent shall cause
the Surviving Corporation (and its successors) to establish and maintain
provisions in its Certificate of Incorporation and Bylaws concerning the
indemnification and exoneration of the Company's former and present
officers, directors, employees and agents that are no less favorable to
those persons than the provisions of the Company's Articles of
Incorporation and Bylaws in effect on the date hereof. For at least six
years after the Effective Time, Parent will use its best efforts to,
without any lapse in coverage, provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective
Time covering each such Person currently covered by the Company's
38

officers' and directors' liability insurance policy on terms with respect
to coverage and amount no less favorable than those of such policy in
effect on the date hereof; provided, that in no event shall Parent be
required to pay more than 200% of the premium paid by the Company in its
most recently ended fiscal year. Parent shall cause the Surviving
Corporation to reimburse all expenses including reasonable attorney's fees,
incurred by any person to enforce successfully the obligations of Parent
and Surviving Corporation under this Section 6.04.

SECTION 6.05. Stock Exchange Listing.

Parent shall use its best efforts to cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the
New York Stock Exchange, subject to official notice of issuance, prior to
the Effective Time.

SECTION 6.06. Parent Acquisition Proposals.

From the date hereof until the termination of this Agreement,
Parent and its Subsidiaries will not, and will use their best efforts to
cause their officers, directors, employees or the agents not to, directly
or indirectly, (i) take any action to solicit or initiate any Parent
Acquisition Proposal (as defined below) or (ii) engage in negotiations
with, or disclose any nonpublic information relating to Parent or any of
its Subsidiaries or afford access to the properties, books or records of
Parent or any of its Subsidiaries to, any Person unless with respect to the
actions referred to in this clause (ii) otherwise required in accordance
with the fiduciary duties of the Board of Directors under applicable law as
advised by independent legal counsel to Parent, in response to a Person
that has made a Parent Acquisition Proposal in writing. Parent will
promptly as reasonably practicable notify the Company after receipt of any
Parent Acquisition Proposal and identify the party with whom it has
negotiated and to whom it has disclosed confidential information. For
purposes of this Agreement, "Parent Acquisition Proposal" means any good
faith offer or proposal for a merger or proposal for, or combination
involving Parent or any of its Subsidiaries or the acquisition of any
equity interest in, or a substantial portion of the assets of Parent and
its Subsidiaries taken as a whole, other than the transactions contemplated
by this Agreement.

SECTION 6.07. Notice of Certain Events.

Each of Parent and Merger Subsidiary shall promptly as
reasonably practicable notify the Company of:

(i) any notice or other communication from any Person alleging
that the consent of such Person (or other Person)
39

is or may be required in connection with the transactions
contemplated by this Agreement;

(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;

(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting it or any of its
Subsidiaries which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.12 or
which relate to the consummation of the transactions contemplated by
this Agreement;

(iv) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would
become a default, received by the Parent or any of its Subsidiaries
subsequent to the date of this Agreement, under any material
agreement; and

(v) any Parent Material Adverse Effect or the occurrence of
any event which is reasonably likely to result in a Parent Material
Adverse Effect.

SECTION 6.08. Employee Benefits.

(a) It is the intention of Parent that, following the Effective
Time through December 31, 1995, Parent will continue, to the extent
practicable and appropriate, the existing level of employee benefits
provided by the Company and its Subsidiaries (other than employee benefit
plans based on Company capital stock) and thereafter to provide to officers
and employees of the Company and its Subsidiaries benefits comparable to
those provided to similarly situated employees of Parent and its
Subsidiaries under the Parent's employee benefit plans; (b) Parent agrees
to honor and perform, and to cause Merger Subsidiary to honor and perform,
all severance, indemnification and similar agreements of the Company
disclosed in Schedule 6.09 hereof (including the Directors' Retirement Plan
with respect to the directors of the Company whether or not they continue
as Designated Directors); provided that the Company shall use its best
efforts to amend all severance agreements to eliminate, as a basis upon
which severance benefits may be paid, all references to title; (c) For
purposes of the Company's Supplemental Executive Retirement Plan, the
Effective Time shall be deemed to be a change in control.

ARTICLE VII

COVENANTS OF PARENT AND THE COMPANY

The parties hereto agree that:

SECTION 7.01. Best Reasonable Efforts.

Subject to the terms and conditions of this Agreement, each
party will use its best reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement.

SECTION 7.02. Certain Filings.

The Company and Parent shall cooperate with one another (a) in
connection with the preparation of the Registration Statement and Joint
Proxy Statement/Prospectus, (b) in determining whether any action by or in
respect of, or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Registration Statement and Joint Proxy
Statement/Prospectus and seeking timely to obtain any such actions,
consents, approvals or waivers. Parent and the Company shall each promptly
file Notification and Report Forms under the HSR Act and each of Parent and
the Company agrees to use its best reasonable efforts to respond as
promptly as practicable to all inquiries received from the Antitrust
Division of the United States Department of Justice or the Federal Trade
Commission for additional information or documentation. Parent and the
Company each shall consult with the other in connection with the foregoing
and each shall use its best reasonable efforts to take any steps as may be
necessary in order to obtain any consents, approvals, permits or
authorizations required in connection with the Merger, including
negotiating a resolution of disputes with governmental or regulatory
authorities and performing the resolution as negotiated.

SECTION 7.03. Public Announcements.

Parent and the Company will consult with each other before
issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may
be required by applicable law or any
41

listing agreement with the NYSE, will not issue any such press release or
make any such public statement prior to such consultation.

SECTION 7.04. Further Assurances.

At and after the Effective Time, the officers and directors of
the Surviving Corporation will be authorized to execute and deliver, in the
name and on behalf of the Company or Merger Subsidiary, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Merger Subsidiary, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of
the rights, properties or assets of the Company acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the
Merger. None of Parent, Merger Subsidiary or the Company will knowingly
take or agree to take any action that would prevent Parent from accounting
for the business combination to be effected by the Merger as a pooling of
interests.

SECTION 7.05. Stockholders Meetings.

Each of Parent and the Company shall cause a meeting of its
stockholders (each, a "Stockholder Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on the approval
and adoption of this Agreement and the Merger, in the case of the Company,
or the issuance of Parent Common Stock, the Charter Amendment and the
Option Plan Amendment. The Directors of Parent and the Directors of the
Company shall, unless otherwise required in accordance with their fiduciary
duties as advised by outside counsel, recommend such approval and adoption
or issuance. In connection with such meetings, each of Parent and the
Company will, subject to the foregoing, use its best efforts to obtain the
necessary approvals by its stockholders of this Agreement, the transactions
contemplated hereby and such other matters as are contemplated by the terms
of this Agreement or required by Delaware Law or Nevada Law, as the case
may be, and will otherwise comply with all legal requirements applicable to
such meetings.

SECTION 7.06. Preparation of the Joint Proxy Statement/Prospectus and
Registration Statement.

Parent and the Company shall promptly prepare and file with the
SEC a preliminary version of the Joint Proxy Statement/ Prospectus and will
use their best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare the definitive
Joint Proxy Statement/Prospectus. After receiving comments from the SEC,

Parent shall promptly file with the SEC the Registration Statement
containing the Joint Proxy Statement/Prospectus. Each of Parent and the
Company shall use its best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable
after such filing. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process in any
jurisdiction) required to be taken under any applicable state securities
laws in connection with the issuance of Parent Common Stock in the Merger
and the Company shall furnish all information concerning the Company and
the holders of shares of Company Stock as may be reasonably requested in
connection with any such action. Promptly after the effectiveness of the
Registration Statement, each party will cause the Joint Proxy
Statement/Prospectus to be mailed to its stockholders, and if necessary,
after the definitive Joint Proxy Statement/Prospectus shall have been
mailed, promptly circulate amended, supplemented or supplemental proxy
materials and, if required in connection therewith, resolicit proxies.

SECTION 7.07. State Takeover Laws.

If any "fair price" or "control share acquisition" statute or
other similar statute or regulation shall become applicable to the
transactions contemplated by this Agreement, the Company, Parent and
Acquisition and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of such statute or regulation on the
transactions contemplated hereby.

SECTION 7.08. Pooling.

If it is determined at any time prior to the Effective Time
that any action or inaction by any party hereto or one of its respective
affiliates has had the effect of causing the condition set forth in
Section 8.01(vii) to be unable to be satisfied, such party shall,
consistent with the terms and conditions of this Agreement, use its best
efforts to cause the condition set forth in Section 8.01(vii) to be
satisfied.

SECTION 7.09. Consents.

The Company and Parent shall use their best efforts to obtain
any approval, consent or waiver with respect to any Third Party Agreements
or to refinance such agreements in order to facilitate consummation of the
Merger ("Third Party Consents")
43

necessary to consummate the transactions contemplated by the Merger prior
to the Effective Time.

SECTION 7.10. Affiliates.

Prior to the Effective Time, the Company shall cause to be
delivered to Parent a list identifying each person who might at the time of
the meeting of the Company's stockholders be deemed to be an "affiliate" of
the Company for purposes of (i) Rule 145 under the Securities Act or (ii)
for purposes of the SEC's Accounting Series Releases concerning "pooling of
interests" treatment for business combinations (each, a "Company
Affiliate"). The Company shall use its best efforts to obtain from each
person who is identified as a possible Company Affiliate prior to the
Effective Time an agreement (a "Company Affiliate Agreement") in the form
attached hereto as Exhibit A. Parent shall cause to be delivered to the
Company a list identifying each person who might at the time of the meeting
of the stockholders of the Parent be deemed an "affiliate" (each, a "Parent
Affiliate"). Parent shall use its best efforts to obtain from each person
who is identified as a possible Parent Affiliate from the Parent prior to
the Effective Time an agreement (a "Parent Affiliate Agreement") in the
form attached hereto as Exhibit B.

SECTION 7.11. Restructuring the Merger.

If requested by Parent within 30 days of the date of this
Agreement, the parties hereto shall amend this Agreement in form reasonably
satisfactory to both to provide for a transaction resulting in a newly
formed holding company owning each of the Company and Parent as wholly
owned subsidiaries and qualifying under the provisions of Section 351 of
the Code and treated as a pooling of interests for financial accounting
purposes. In such transactions, each share of Parent Common Stock shall be
converted into one share of common stock of the holding company and each
share of Company Common Stock shall be converted into the product of the
Conversion Number and one share of common stock of the holding company.
Notwithstanding the foregoing, the Agreement shall not be amended as
aforesaid if such amendment would have a Parent Material Adverse Effect or
Company Material Adverse Effect.

ARTICLE VIII

CONDITIONS TO THE MERGER

SECTION 8.01. Conditions to the Obligations of Each Party.

The obligations of the Company, Parent and Merger Subsidiary to
consummate the Merger are subject to the satisfaction of the following
conditions:

(i) this Agreement and the Merger shall have been approved by
the requisite vote of the stockholders of the Company in accordance
with Nevada Law;

(ii) the waiting period under the HSR Act relating to the Merger
shall have expired or been terminated;

(iii) no provision of any applicable domestic law or regulation
and no judgment, injunction, order or decree of a court or
governmental agency or authority of competent jurisdiction which has
the effect of making the Merger illegal or shall otherwise restrain
or prohibit the consummation of the Merger is in effect (each party
agreeing to use its best reasonable efforts, including appeals to
higher courts, to have any judgment, injunction, order or decree
lifted);

(iv) there shall have been approved, by the requisite vote of
Parent's stockholders, the issuance of Parent Common Stock in
connection with the Merger in accordance with the rules of the NYSE
and the Charter Amendment and the Option Plan Amendment;

(v) the Registration Statement shall have been declared
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose shall have been initiated or threatened
by the SEC;

(vi) the shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance;

(vii) receipt by Parent and the Company of an opinion, in form
and substance reasonably satisfactory to Parent and the Company,
dated the effective date of the Merger, from KPMG Peat Marwick and
Ernst & Young to the effect that the Merger will qualify as a
"pooling of interests" transaction under the relevant Accounting
Principles Board guidelines and the SEC shall not have objected to
such accounting treatment; and
45

(viii) all consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or
other regulatory body required in connection with the execution,
delivery and performance of this Agreement shall have been obtained
or made, except for the filings in connection with the Merger
contemplated by Section 1.01(b) and any other documents required to
be filed after the Effective Time and except where the failure to
have obtained or made any such consent, authorization, order,
approval, filing or registration would not be reasonably likely to
have a Company Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be, following the Effective Time or would
render the Merger illegal or provide a reasonable basis to conclude
that the parties hereto or their affiliates or any of their
respective directors or officers will be subject to the risk of
criminal liability.

(ix) all Third Party Consents shall have been obtained except
where the failure of the Company to obtain any Third Party Consents,
individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect.

SECTION 8.02. Conditions to the Obligations of Parent and Merger
Subsidiary.

The obligations of Parent and Merger Subsidiary to consummate
the Merger are subject to the satisfaction of the further conditions:

(i) that the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, the representations and
warranties of the Company contained in this Agreement shall be true
in all material respects at and as of the Effective Time as if made
at and as of such time except to the extent that any representation
or warranty is made as of a specified date, in which case such
representation or warranty shall be true as of such date, and Parent
shall have received a certificate signed by an executive officer and
by the chief financial officer of the Company to the foregoing
effect;

(ii) Parent shall have received from the Company "cold comfort"
letters of KPMG Peat Marwick of the kind contemplated by the
Statement of Auditing Standards with respect to Letters to
Underwriters promulgated by the American Institute of Certified
Public Accountants (the "AICPA Statement") dated the date on which
the Registration Statement shall become effective and the Effective
Time,
46

respectively, and addressed to Parent, in form and substance
reasonably satisfactory to Parent, in connection with the procedures
undertaken by them with respect to the financial statements of the
Company and its Subsidiaries contained in the Registration Statement
and the other matters contemplated by the AICPA Statement and
customarily included in comfort letters relating to transactions
similar to the Merger; and

(iii) the Parent shall have received two opinions of Sullivan &
Cromwell (or such other counsel selected by the Parent) in form and
substance reasonably satisfactory to it, based, in each case, upon
representation letters dated on or about the date of such opinions
from persons reasonably requested to provide such letters, and such
other assumptions and representations as counsel may reasonably deem
relevant, to the effect that the Merger would qualify for federal
income tax purposes as a reorganization within the meaning of
Section 368 of the Code, the first of which shall be dated on or
about the date that is two business days prior to the date of the
Joint Proxy Statement/Prospectus and the second of which shall be
dated as of the Effective Time.

SECTION 8.03. Conditions to the Obligations of the Company.

The obligations of the Company to consummate the Merger are
subject to the satisfaction of the following further conditions:

(i) Parent and Merger Subsidiary shall have performed in all
material respects all of their respective obligations hereunder
required to be performed by them at or prior to the Effective Time,
the representations and warranties of Parent and Merger Subsidiary
contained in this Agreement shall be true in all material respects at
and as of the Effective Time as if made at and as of such time, and
the Company shall have received a certificate signed by the chief
financial officer of Parent to the foregoing effect;

(ii) the Company shall have received two opinions of Fried,
Frank, Harris, Shriver & Jacobson (or such other counsel selected by
the Company) in form and substance reasonably satisfactory to it,
based, in each case, upon representation letters dated on or about
the dates of such opinions from persons reasonably requested to
provide such letters and such other facts and representations as
counsel may reasonably deem relevant, to the effect that the Merger
should be treated for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368 of the Code, the first
of which shall be dated
47

on or about the date that is two business days prior to the date of
the Joint Proxy Statement/Prospectus and the second of which shall be
dated as of the Effective Time;

(iii) the Designated Directors shall have been elected to the
Board of Directors of Parent effective as of the Effective Time;

(iv) the Company shall have received from Parent "cold comfort"
letters of Ernst & Young of the kind contemplated by the AICPA
Statement dated the date on which the Registration Statement shall
become effective and the Effective Time, respectively, and addressed
to the Company, in form and substance reasonably satisfactory to the
Company, in connection with the procedures undertaken by them with
respect to the financial statements of Parent and the Parent
Subsidiaries contained in the Registration Statement and the other
matters contemplated by the AICPA Statement and customarily included
in comfort letters relating to transactions similar to the Merger.

ARTICLE IX

TERMINATION

SECTION 9.01. Termination.

This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company or Parent):

(i) by mutual written consent of the Company and Parent, by
action of their respective Boards of Directors;

(ii) by action of the Board of Directors of either the Company
or Parent, if the Merger has not been consummated by December 31,
1995 (provided that the right to terminate this Agreement under this
clause (ii) shall not be available to any party who at such time is
in material breach of any of its obligations under this Agreement);

(iii) by action of the Board of Directors of either the Company
or Parent, if there shall be any applicable domestic law, rule or
regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree of a court or governmental
agency or authority of competent jurisdiction shall restrain or
prohibit the consummation of the Merger, and such judgment,
injunction, order or decree shall become final and nonappealable;

(iv) by action of the Board of Directors of either the Company
or Parent, if any of the stockholder approvals referred to in Section
8.01(i) or (iv) shall not have been obtained by reason of the failure
to obtain the requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof;

(v) by action of the Board of Directors of either the Company
or Parent, if (x) there shall have been a material breach of any
representation or warranty contained in this Agreement on the part of
the other party which breach by its nature cannot be cured prior to
the Effective Time and which breach is reasonably likely to have a
Parent Material Adverse Effect or Company Material Adverse Effect, as
the case may be, or (y) there shall have been a material breach of
any of the covenants or agreements set forth in this Agreement on the
part of the other party, which breach by its nature cannot be cured
or, if curable, is not cured within 30 days after written notice of
such breach is given by the terminating party to the other party;

(vi) (A) by action of the Board of Directors of Parent, if the
Board of Directors of the Company does not publicly recommend in the
Joint Proxy Statement/Prospectus that the Company's stockholders
approve and adopt this Agreement and the Merger, or if it shall have
withdrawn, modified or changed such recommendation in any manner
adverse to Parent, or (B) by action of the Board of Directors of the
Company, if the Board of Directors of Parent does not publicly
recommend in the Joint Proxy Statement/Prospectus that Parent's
stockholders approve the issuance of Parent Common Stock in
connection with the Merger;

(vii) by the Company, if the product of the Parent Average Price
times the Conversion Number is less than $31.00 per share, provided,
however, that the Company may not terminate this Agreement if it has
been advised in writing by Parent that the Conversion Number shall be
determined by dividing $31.00 by the Parent Average Price (without
regard to any maximum imposed on the Conversion Number absent this
clause by Section 1.02(b) hereof); or

(viii) by the Company, if the Company receives an unsolicited
written proposal with respect to a Company Acquisition Proposal that
the Board of Directors of the Company determines in good faith, after
consultation with its legal and financial advisors is reasonably
likely to lead to a merger, acquisition, consolidation or similar
transaction that is more favorable to the stockholders of the Company
than this Agreement and the Merger and that failure to take such
action would constitute a breach of the
49

fiduciary duties of the Board of Directors of the Company and the Company
accepts such Company Acquisition Proposal; provided, however, that the
Company shall not be permitted to terminate this Agreement pursuant to this
Section 9.01(viii) unless it has provided Parent and Merger Subsidiary with
five business days prior written notice of its intent to so terminate this
Agreement together with a detailed summary of the terms and conditions of
such Company Acquisition Proposal; provided, further, that Purchaser shall
receive the fees set forth in Section 10.04 immediately prior to any
termination pursuant to this Section 9.01(viii) by wire transfer in same
day funds.

SECTION 9.02. Effect of Termination.

If this Agreement is terminated and the Merger is abandoned
pursuant to Section 9.01, no party hereto (or any of its directors or
officers) shall have any liability or further obligation to any other party
hereto except (a) as provided in Section 10.04, (b) that the agreements
contained in Section 10.04 in the last sentence of Section 5.02 and the
last sentence of Section 6.02 shall survive the termination hereof and (c)
that nothing herein will relieve any party from liability for any breaches
hereof.

ARTICLE X

MISCELLANEOUS

SECTION 10.01. Notices.

All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy, telex or similar
writing) and shall be given,

if to Parent or Merger Subsidiary, to:

Vencor, Inc.
3300 Providian Center
4000 West Market Street
Louisville, KY 40202
Telephone: (502) 569-7300
Telecopy: (502) 569-1104
Attention: Jill L. Force
General Counsel

with a copy to:

Joseph Frumkin, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-4101
Telecopy: (212) 558-3588

if to the Company, to:

1148 Broadway Plaza
Tacoma, WA 98402
Telephone: (206) 572-4901
Telecopy: (206) 756-4845
Attention: Richard P. Adcock
Senior Vice President
and General Counsel

with a copy to:

Peter Golden, Esq.
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, NY 10004
Telephone: (212) 859-8112
Telecopy: (212) 859-4000

or such other address or telex or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties hereto.
Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telex is transmitted to the telex number
specified in this Section and the appropriate answerback is received or
(ii) if given by any other means, when delivered at the address specified
in this Section.

SECTION 10.02. Survival.

The representations and warranties and agreements contained
herein and in any certificate or other writing delivered pursuant hereto
shall not survive the Effective Time, except Sections 6.04, 6.08, 6.09,
7.04 and Article I.

SECTION 10.03. Amendments; No Waivers.

(a) Subject to the applicable provisions of Delaware Law and
Nevada Law any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Parent and
Merger Subsidiary or, in the case of a waiver, by the party against whom
the waiver is to
51

be effective; provided that any waiver or amendment shall be effective
against a party only if the Board of Directors of such party approves such
waiver or amendment.

(b) No failure or delay by any party in exercising any right,
power or privilege hereunder 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 herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

SECTION 10.04. Fees and Expenses.

(a) Subject to paragraphs (b) and (c) of this Section, all
costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense, except that Parent and the
Company shall each pay one-half of all printing, filing and mailing costs
for the Registration Statement and the Joint Proxy Statement/Prospectus and
all SEC and other regulatory filing fees.

(b) If this Agreement is terminated (i) by the Company pursuant
to Section 9.01(viii) or a Company Acquisition Proposal shall have been
made and thereafter this Agreement is terminated pursuant to
Section 9.01(ii) or 9.01(iv) because the stockholders of the Company shall
have failed to approve this Agreement or a Company Acquisition Proposal
shall have been made and thereafter this Agreement is terminated pursuant
to Section 9.01(vi)(A) or (ii) a bona-fide Parent Acquisition Proposal
shall have been made and thereafter this Agreement is terminated pursuant
to Section 9.01(ii) or 9.01(iv) because the stockholders of Parent shall
have failed to approve the issuance of Parent Common Stock pursuant to this
Agreement or a Company Acquisition Proposal shall have been made and
thereafter this Agreement is terminated pursuant to Section 9.01(vi)(B),
then, in the case of clause (i) above, the Company shall pay Parent and, in
the case of clause (ii) above, Parent shall pay the Company, a cash fee of
$35,000,000; provided, that, if the proposed Company Acquisition
Transaction or Parent Acquisition Transaction, respectively, is intended to
be accounted for as a "pooling of interests" for accounting purposes, then
the amount of the cash fee shall be reduced to $13,500,000.

The Company shall reimburse Parent for all of its out-of-pocket
expenses and fees (subject to a maximum reimbursement obligation of
$5,000,000) actually incurred by Parent or Merger Subsidiary in connection
with the Transactions contemplated by this Agreement prior to the
termination of this Agreement (including, without limitation, all fees and
expenses of counsel, financial advisors, accountants, environmental and
other experts
52

and consultants to Parent and its affiliates, and all printing and
advertising expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the structuring
of the transactions contemplated by this Agreement, any agreements relating
thereto and any filings to be made in connection therewith if this
Agreement is terminated pursuant to Section 9.01(iv) because the
stockholders of the Company shall have failed to approve this Agreement and
no Business Combination Transaction Proposal involving the Company shall be
outstanding at the time of such vote.

Parent shall reimburse the Company for all of its out-of-pocket
expenses and fees (subject to a maximum reimbursement obligation of
$5,000,000) actually incurred by the Company in connection with the
Transactions contemplated by this Agreement prior to the termination of
this Agreement (including, without limitation, all fees and expenses of
counsel, financial advisors, accountants, environmental and other experts
and consultants to the Company and its affiliates, and all printing and
advertising expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the structuring
of the transactions contemplated by this Agreement, any agreements relating
thereto and any filings to be made in connection therewith if this
Agreement is terminated pursuant to Section 9.01(iv) because the
stockholders of Parent shall have failed to approve this Agreement and no
Parent Acquisition Proposal shall be outstanding at the time of such vote.

SECTION 10.05. Successors and Assigns.

The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.

SECTION 10.06. Governing Law.

This Agreement shall be construed in accordance with and
governed by the law of the State of Nevada without regard to principles of
conflict of laws.

SECTION 10.07. Counterparts; Effectiveness.

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 and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
53

SECTION 10.08. Entire Agreement.

This Agreement and the Confidentiality Agreement dated March
23, 1995 between Parent and the Company constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede
all prior agreements, understandings and negotiations, both written and
oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder except for the provisions of Section 6.04, which are
intended for the benefit of the Company's former and present officers,
directors, employees and agents and the provisions of Article I, which is
intended for the benefit of the Company's stockholders, including holders
of Company Options.

SECTION 10.09. Headings.

The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.

SECTION 10.10. Severability.

If any term or other provision of this Agreement is invalid,
illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.

SECTION 10.11. Specific Performance.

The parties hereto agree that irreparable damage would occur in
the event any of the provisions of this Agreement were not to be performed
in accordance with the terms hereof and that the parties shall be entitled
to specific performance of the terms hereof in addition to any other
remedies at law or in equity.

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.

THE HILLHAVEN CORPORATION

By: /s/ Bruce L. Busby
Title: Chief Executive Officer

VENCOR, INC.

By: /s/ W. Earl Reed III
Title: Vice President -
Finance and Development

VERITAS HOLDINGS CORP.

By: /s/ W. Earl Reed III
Title: Vice President - Finance
and Development
B-1
Appendix B

Opinion of CS First Boston Corporation

[TO COME]

C-1

Appendix C

Opinion of Merrill, Lynch, Pierce, Fenner & Smith Incorporated

[TO COME]

D-1
Appendix D

Amendment to Vencor's Certificate of Incorporation

[TO COME]

E-1
APPENDIX E

[Rights of Dissenting Stockholders]

78.471 [DEFINITIONS AS USED IN NRS 78.472 TO 78.479]. -- As used
in NRS 78.471 to 78.502, inclusive, the words and terms defined in NRS
78.472 to 78.479, inclusive, have the meanings ascribed to them in those
sections. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.472 ["BENEFICIAL STOCKHOLDER" DEFINED]. -- "Beneficial
stockholder" means the person who is a beneficial owner of shares held in a
voting trust or by a nominee as the stockholder of record. (Added by Ch.
442, L. '91, eff. 10-1-91.)

78.473 ["CORPORATION" DEFINED]. -- "Corporation" means the
issuer of the shares held by a dissenter before the corporate action, or
the surviving or acquiring corporation of that issuer by merger or exchange
of shares. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.474 ["DISSENTER" DEFINED]. -- "Dissenter" means a stockholder
who is entitled to dissent from corporate action under NRS 78.481 and who
exercises that right when and in the manner required by NRS 78.491 to
78.499. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.476 ["FAIR VALUE" DEFINED]. -- "Fair value," with respect to
a dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. (Added by Ch. 422, L. '91, eff. 10-1-91.)

78.477 ["INTEREST" DEFINED]. -- "Interest" means interest from
the effective date of the corporate action until the date of payment, at
the average rate currently paid by the corporation on its principal bank
loans, or, if none, at a rate that is fair and equitable under all of the
circumstances. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.478 ["STOCKHOLDER" DEFINED]. -- "Stockholder" means the
stockholder of record or the beneficial stockholder. (Added by Ch. 442,
L. '91, eff. 10-1-91.)

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78.479 ["STOCKHOLDER OF RECORD" DEFINED]. -- "Stockholder of
record" means the person in whose name shares are registered in the records
of a corporation or the beneficial owner of shares to the extent of the
rights granted by a nominee's certificate on file with the corporation.
(Added by Ch. 442, L. '91, eff. 10-1-91.)

78.481 [STOCKHOLDER'S RIGHT TO DISSENT AND OBTAIN PAYMENT:
CONDITIONS; CHALLENGE OF ACTION]. -- 1. Except as otherwise provided in
NRS 78.482, a stockholder is entitled to dissent from, and obtain payment
of the fair value of his shares in the event of, any of the following
corporate actions:

(a) Consummation of a plan of merger to which the corporation is a
party:

(1) If approval by the stockholders is required for the
merger by section 11 of this act or the articles of incorporation and
the stockholder is entitled to vote on the merger; or

(2) If the corporation is a subsidiary and is merged with its
parent under NRS 78.457.

(b) Consummation of a plan of exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
stockholder is entitled to vote on the plan.

(c) Any corporate action taken pursuant to a vote of the
stockholders to the extent that the articles of incorporation, bylaws or a
resolution of the board of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment for their shares.

2. A stockholder who is entitled to dissent and obtain payment
under NRS 78.471 to 78.502 may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect to
the stockholder or the corporation. (Added by Ch. 442, L. '91, eff. 10-1-
91.)

78.482 [RIGHT TO DISSENT WITH RESPECT TO PLAN OF MERGER OR SHARE
EXCHANGE]. -- There is no right of dissent with respect to a plan of merger
or exchange in favor of holders of shares of any class or series which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting at which the

E-3

plan of merger or exchange is to be acted on, were either listed on a
national securities exchange, designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or held by at least 2,000 stockholders of record,
unless:

1. The articles of incorporation of the corporation issuing the
shares provide otherwise; or

2. The holders of the class or series are required under the plan
of merger or exchange to accept for such shares anything except:

(a) Cash, shares or shares and cash in lieu of fraction
shares of:

(1) The surviving or acquiring corporation; or

(2) Any other corporation which, at the effective date
of the plan of merger or exchange, were either listed on a
national securities exchange, designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or held of
record by at least 2,000 stockholders of record; or

(b) A combination of cash and shares of the kind described in
subparagraphs (1) and (2) of paragraph (a). (Last amended by Ch.
337, L. '93, eff. 10-1-93.)

78.483 [ASSERTING DISSENTER'S RIGHTS]. -- 1. A stockholder of
record may assert dissenter's rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he dissents and his
other shares were registered in the names of different stockholders.

2. A beneficial stockholder may assert dissenter's rights as to
shares held on his behalf only if:

(a) He submits to the corporation the written consent of the
stockholder of record to the dissent not

E-4

later than the time the beneficial stockholder asserts dissenter's
rights; and

(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.
(Added by Ch. 442, L. '91, eff. 10-1-91.)

78.491 [DISSENTERS' RIGHTS: NOTICE OF STOCKHOLDERS' MEETING;
PROPOSED CORPORATE ACTION TO CREATE RIGHTS]. -- 1. If the proposed
corporate action creating dissenters' rights is submitted to a vote at a
stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under
NRS 78.471 to 78.502, inclusive, and be accompanied by a copy of those
sections.

2. If the corporate action creating dissenters' rights is taken
without a vote of the stockholders, the corporation shall notify in writing
all stockholders entitled to assert dissenters' rights that the action was
taken and send them the dissenter's notice described in NRS 78.493. (Added
by Ch. 422, L. '91, eff. 10-1-91.)

78.492 [DISSENTERS' RIGHTS: NOTICE OF STOCKHOLDER'S MEETING;
WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT OF SHARES]. -- 1. If the
proposed corporate action creating dissenters' rights is submitted to a
vote at a stockholders' meeting, a stockholder who wishes to assert
dissenters' rights:

(a) Must deliver to the corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and

(b) Must not vote his shares in favor of the proposed action.

2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this chapter.
(Added by Ch. 422, L. '91, eff. 10-1-91.)

78.493 [DISSENTERS' NOTICE: STOCKHOLDERS WHO SATISFIED
REQUIREMENTS TO ASSERT RIGHTS]. -- 1. If the proposed corporate action
creating dissenters' rights is authorized at a stockholders' meeting, the
corporation shall deliver a

E-5

written dissenter's notice to all stockholders who satisfied the
requirements to assert those rights.

2. The dissenter's notice must be sent no later than 10 days after
the effectuation of the corporate action, and must:

(a) State where the demand for payment must be sent and where
and when certificates for certificated shares must be deposited;

(b) Inform the holders of uncertificated shares as to what
extent the transfer of the shares will be restricted after the demand
for payment is received;

(c) Supply a form for demanding payment that includes the date
of the first announcement to the news media or to the stockholders of
the terms of the proposed corporate action requires that the person
asserting dissenter's rights certify whether or not he acquired
beneficial ownership of the shares before that date;

(d) Set a date by which the corporation must receive the
demand for payment, which may not be less than 30 nor more than 60
days after the date the notice is delivered; and

(e) Be accompanied by a copy of NRS 78.471 to 78.502,
inclusive. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.494 [DISSENTERS' NOTICE; DEMAND PAYMENT; DEPOSIT OF
DISSENTER'S CERTIFICATES]. -- 1. A stockholder to whom a dissenter's
notice was sent must:

(a) Demand payment;

(b) Certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenter's
notice for this certification; and

2. The stockholder who demands payment and deposits his certificates
retains all other rights of a stockholder until those rights are canceled
or modified by the taking of the proposed corporate action.

E-6

3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under NRS 78.471 to
78.502, inclusive. (Added by Ch. 442, L. '01, eff. 10-1-91.)

78.496 [RESTRICTION ON TRANSFER OF UNCERTIFICATED SHARES]. -- 1.
The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received.

2. The person for whom dissenter's rights are asserted as to
uncertificated rights retains all other rights of a stockholder until those
rights are canceled or modified by the taking of the proposed corporate
action. (Added by Ch. 422, L. '91, eff. 10-1-91.)

78.497 [PAYMENT TO DISSENTER AFTER RECEIPT OF DEMAND FOR PAYMENT
OF AMOUNT ESTIMATED TO BE FAIR VALUE OF SHARES]. -- 1. Except as otherwise
provided in NRS 78.498, within 30 days after receipt of a demand for
payment, the corporation shall pay each dissenter who complied with NRS
78.494 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the corporation under
this subsection may be enforced by the district court:

(a) Of the county where the corporation's registered office is
located; or

(b) At the election of any dissenter residing or having its
registered office in Nevada, of the county where the dissenter
resides or has its registered office.

The Court shall dispose of the complaint promptly.

2. The payment must be accompanied by:

(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in the
stockholders' equity for that year, and the latest available interim
financial statements, if any;

(b) A statement of the corporation's estimate of the fair
value of the shares;

E-7

(d) A statement of the dissenter's rights to demand payment
under NRS 78.499; and

(e) A copy of NRS 78.471 to 78.502, inclusive. (Last amended
by Ch. 337, L. '93, eff. 10-1-93.)

78.498 [ELECTION BY CORPORATION TO WITHHOLD PAYMENT FROM A
DISSENTER]. -- 1. A corporation may elect to withhold payment from a
dissenter unless he was the beneficial owner of the shares before the date
set forth in the dissenter's notice as the date of the first announcement
to the news media or to the stockholders of the terms of the proposed
corporate action.

2. To the extent the corporation elects to withhold payment, after
taking the proposed corporate action, it shall estimate the fair value of
the shares, plus accrued interest, and shall offer to pay this amount to
each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment
pursuant to NRS 78.499. (Added by. Ch. 442, L. '91, eff. 10-1-91.)

78.499 [WRITTEN NOTIFICATION OF DISSENTER TO CORPORATION OF
DISSENTER'S ESTIMATE OF FAIR VALUE OF HIS SHARES; WAIVER OF RIGHT TO DEMAND
PAYMENT]. -- 1. A dissenter may notify the corporation in writing of his
own estimate of the fair value of his shares and the amount of interest
due, and demand payment of his estimate, less any payment pursuant to
NRS 78.497, or reject the corporation's offer pursuant to NRS 78.498 and
demand payment of the fair value of his shares and interest due, if he
believes that the amount paid pursuant to NRS 78.497 or offered pursuant to
NRS 78.498 is less than the fair value of his shares or that the interest
due is incorrectly calculated.

2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the corporation of his demand in writing within
30 days after the corporation made or offered payment for his shares.
(Added by Ch. 442, L. '91, eff. 10-1-91.)

E-8

78.501 [DEMAND FOR PAYMENT; PROCEEDING; VENUE; PARTIES TO
PROCEEDING; JUDGMENT]. -- 1. If a demand for payment remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving
the demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

2. A corporation shall commence the proceeding in the district court
of the county where a corporation's registered office is located. If the
corporation is a foreign corporation without a resident agent in the state,
it shall commence the proceeding in the county where the registered office
of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.

3. The corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the
proceeding as in an action against their shares. All parties must be
served with a copy of the petition. Nonresidents may be served by
registered or certified mail or by publication as provided by law.

4. The jurisdiction of the court in which the proceeding is
commenced under subsection 2 is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
a decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or any amendment thereto. The
dissenters are entitled to the same discovery rights as parties in other
civil proceedings.

5. Each dissenter who is made a party to the proceeding is entitled
to a judgment:

(a) For the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation; or

(b) For the fair value, plus accrued interest, of his after-
acquired shares for which the corporation elected to withhold payment
pursuant to NRS 78.498. (Added by Ch. 442, L. '91, eff. 10-1-91.)

78.502 [PROCEEDING TO DETERMINE FAIR VALUE; ASSESSMENT OF COSTS,
FEES AND EXPENSES; EXCEPTIONS]. -- 1. The court in a proceeding to
determine fair value shall determine all of the costs of the proceeding,
including the

E-9

reasonable compensation and expenses of any appraisers appointed by the
court. The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment.

2. The court may also assess the fees and expenses of the counsel
and experts for the respective parties, in amounts the court finds
equitable:

(a) Against the corporation and in favor of all dissenters if
the court finds the corporation did not substantially comply with the
requirements of NRS 78.491 to 78.499, inclusive; or

(b) Against either the corporation or a dissenter in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not
in good faith with respect to the rights provided by NRS 78.471 to
78.502, inclusive.

3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to those counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefited.

4. In a proceeding commenced pursuant to subsection 1 of NRS 78.497,
the court may assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters who are
parties to the proceeding, in amounts the court finds equitable, to the
extent the court finds that such parties did not act in good faith in
instituting the proceeding.

5. This section does not preclude any party in a proceeding
commenced pursuant to NRS 78.501 or subsection 1 of NRS 78.497 from
applying the provisions of N.R.C.P. 68 or NRS 17.115. (Added by Ch. 442,
L. '91 eff. 10-1-91.)

II-1
Part II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 20. Indemnification of Directors and Officers.

The Registrant's Certificate of Incorporation provides that, to the
fullest extent authorized by the Delaware General Corporation Law
("Delaware Law"), the Registrant shall indemnify each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") because he is or was a director or officer
of the Registrant, or is or was serving at the request of the Registrant as
a director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all
expenses, liabilities and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) actually and reasonably incurred or suffered by him in
connection with such Proceeding.

Under Section 145 of Delaware Law, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed Proceeding (other than an action by or in
the right of the corporation) if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. In the case of
an action brought by or in the right of the corporation, the corporation
may indemnify a director, officer, employee or agent of the corporation
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of any
threatened, pending or completed action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that a court determines upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.

The Registrant's Certificate of Incorporation also provide that
expenses incurred by a person in his capacity as director of the Registrant
in defending a Proceeding may be paid by the Registrant in advance of the
final disposition of such Proceeding as authorized by the Board of
Directors of the Registrant upon receipt of an undertaking by or on behalf
of such person to repay such amounts unless it is ultimately determined
that such person is entitled to be indemnified by the Registrant pursuant
to Delaware Law. Under Section 145 of Delaware Law, a corporation must
indemnify a director, officer, employee or agent of the corporation against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense of a Proceeding if he has been
successful on the merits or otherwise in the defense thereof.

The Registrant's Certificate of Incorporation provides that a director
of the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for breach of a director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Delaware Law for the willful
or negligent unlawful payment of dividends, stock purchase or stock
redemption or (iv) for any transaction from which a director derived an
improper personal benefit.

The Registrant maintains directors' and officers' liability insurance
which insures against liabilities that directors and officers of the
Registrant may incur in such capacities.

II-2

If the proposed merger is consummated, the Registrant would continue to
be governed by Delaware Law and the Registrant's Certificate of
Incorporation.

Item 21. Exhibits and Financial Statement Schedules.

(a) Exhibits

2 Agreement and Plan of Merger (attached as Appendix A to the Joint Proxy
Statement/Prospectus).

3.1 Certificate of Incorporation, as amended, of the Registrant (filed
as Exhibit 3.1 to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-51372), and incorporated herein by reference).

3.2 Certificate of Ownership and Merger (amending the Registrant's
Certificate of Incorporation in connection with its corporate name
change) filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, dated September 10, 1993 (Commission File No. 1-10989),
and incorporated herein by reference).

3.3 Amended and Restated Bylaws of the Registrant (filed as Exhibit 4.2
to the Registrant's Form 8-K dated July 21, 1993 (Commission File
No. 1-10989), and incorporated herein by reference).

4.1 Specimen Common Stock Certificate (filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-
71910), and incorporated herein by reference).

4.2 Article IV of the Certificate of Incorporation of the Registrant
(included in Exhibit 3.1).

4.3 Indenture relating to the Registrant's 6% Convertible Subordinated
Notes Due 2002 (including form of Note) (filed as Exhibit 4(a) to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 (Commission File No. 1-10989), and
incorporated herein by reference).

4.4 Fourth Amended and Restated Loan Agreement dated as of January 20,
1995 by and between National City Bank, Kentucky, NBD Bank, PNC
Bank Kentucky, Inc., Bank One Columbus, N.A., Nationsbank of
Georgia, First Union National Bank of North Carolina, Mellon Bank,
N.A., Wachovia Bank of Georgia, N.A. and the Registrant (filed as
Exhibit 4.4 to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994 (Commission File No. 1-10989), and incorporated
herein by reference).

4.5 Other Debt Instruments - Copies of debt instruments for which the
related debt is less than 10% of total assets will be furnished to
the Commission upon request.

4.6 Rights Agreement, dated July 20, 1993, between the Registrant and
National City Bank of Cleveland, Ohio, as Rights Agent (filed as
Exhibit 4.4 to the Registrant's Current Report on Form 8-K, dated
July 20, 1993 (Commission File No. 1-10989), and incorporated
herein by reference).

5 Opinion of Greenebaum Doll & McDonald PLLC, regarding legality.*

8.1 Opinion of Sullivan & Cromwell regarding tax matters.*

8.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson regarding tax
matters.*

23.1 Consent of Ernst & Young LLP.

23.2 Consent of KPMG Peat Marwick.

II-3

23.3 Consent of Greenebaum Doll & McDonald PLLC (included in Exhibit 5).

23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1).

23.5 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 8.2).

23.6 Consent of CS First Boston Corporation.*

23.7 Consent of Merrill, Lynch, Pierce, Fenner & Smith Incorporated.*

23.8 Consent of Bruce L. Busby.*

23.9 Consent of Walter F. Beran.*

23.10 Consent of Jack O. Vance.*

24 Power of Attorney (See page II-5).

_____________________

* To be filed by amendment.

Item 22. Undertakings.

The undersigned Registrant hereby undertakes:

(1) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(2) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the Registrant undertakes
that such reoffering prospectus will contain the information called for by
Form S-4 with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of Form S-4.

(3) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant

II-4

of expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.

(6) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Louisville, State of Kentucky, on the 15th day of May, 1995.

VENCOR, INC.

By: /s/ W. Bruce Lunsford
W. Bruce Lunsford
Chairman of the Board,
President and Chief
Executive Officer

Each person whose signature appears below appoints W. Bruce Lunsford,
W. Earl Reed, III, Jill L. Force and June N. King and each of them, any of
whom may act without the joinder of the other, as his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign any and all amendments (including post-
effective amendments) to this Registration Statement and to file the same,
with all exhibits thereto and all other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

Chairman of the Board,
/s/ W. Bruce Lunsford President, Chief
W. Bruce Lunsford Executive Officer and May 16, 1995
Director (Principal
Executive Officer)

/s/ R. Gene Smith Vice Chairman of the Board May 16, 1995
R. Gene Smith and Director

/s/ Michael R. Barr Vice President, Operations May 16, 1995
Michael R. Barr and Director

II-6

Vice President, Finance and
/s/ W. Earl Reed, III Development and Director May 16, 1995
W. Earl Reed, III (Principal Financial and
Accounting Officer)

/s/ William H. Lomicka Director May 16, 1995
William H. Lomicka

/s/ William C. Ballard, Jr. Director May 16, 1995
William C. Ballard Jr.

/s/ Greg D. Hudson Director May 16, 1995
Greg D. Hudson

/s/ Donna R. Ecton Director May 16, 1995
Donna R. Ecton

II-7

INDEX TO EXHIBITS

Exhibits Description Page

2 Agreement and Plan of Merger (attached as Appendix A to the
Joint Proxy Statement/Prospectus).

3.1 Certificate of Incorporation, as amended, of the Registrant
(filed as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1 (Reg. No. 33-51372), and incorporated
herein by reference).

3.2 Certificate of Ownership and Merger (amending the Registrant's
Certificate of Incorporation in connection with its corporate
name change) filed as Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated September 10, 1993 (Commission File
No. 1-10989), and incorporated herein by reference).

3.3 Amended and Restated Bylaws of the Registrant (filed as Exhibit
4.2 to the Registrant's Form 8-K dated July 21, 1993
(Commission File No. 1-10989), and incorporated herein by
reference).

4.1 Specimen Common Stock Certificate (filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (Reg. No. 33-
71910), and incorporated herein by reference).

4.2 Article IV of the Certificate of Incorporation of the
Registrant (included in Exhibit 3.1).

4.3 Indenture relating to the Registrant's 6% Convertible
Subordinated Notes Due 2002 (including form of Note) (filed as
Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992 (Commission File No.
1-10989), and incorporated herein by reference).

4.4 Fourth Amended and Restated Loan Agreement dated as of January
20, 1995 by and between National City Bank, Kentucky, NBD Bank,
PNC Bank Kentucky, Inc., Bank One Columbus, N.A., Nationsbank
of Georgia, First Union National Bank of North Carolina, Mellon
Bank, N.A., Wachovia Bank of Georgia, N.A. and the Registrant
(filed as Exhibit 4.4 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 (Commission File No. 1-
10989), and incorporated herein by reference).

4.5 Other Debt Instruments - Copies of debt instruments for which
the related debt is less than 10% of total assets will be
furnished to the Commission upon request.

5 Opinion of Greenebaum Doll & McDonald PLLC, regarding
legality.*

8.1 Opinion of Sullivan & Cromwell regarding tax matters.*

8.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson regarding
tax matters.*

23.1 Consent of Ernst & Young LLP.

II-8

23.2 Consent of KPMG Peat Marwick.

23.3 Consent of Greenebaum Doll & McDonald PLLC (included in Exhibit 5).

23.4 Consent of Sullivan & Cromwell (included in Exhibit 8.1).

23.5 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 8.2).

23.6 Consent of CS First Boston Corporation.*

23.7 Consent of Merrill, Lynch, Pierce, Fenner & Smith Incorporated.*

23.8 Consent of Bruce L. Busby.*

23.9 Consent of Walter F. Beran.*

23.10 Consent of Jack O. Vance.*

24 Power of Attorney (See page II-5).

_______________________

* To be filed by amendment.