ATRIA COMMUNITIES INC, S-1/A, 1996-07-29

ATRIA COMMUNITIES INC
S-1/A, 1996-07-29
OFFICES & CLINICS OF DOCTORS OF MEDICINE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996.

REGISTRATION NO. 333-06907

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ATRIA COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8361 61-1303738
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)

515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 596-7540
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

W. PATRICK MULLOY, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATRIA COMMUNITIES, INC.
515 WEST MARKET STREET
LOUISVILLE KENTUCKY 40202
(502) 596-7540
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:
IVAN M. DIAMOND, ESQ. J. VAUGHAN CURTIS, ESQ.
GREENEBAUM DOLL & MCDONALD PLLC ALSTON & BIRD
3300 NATIONAL CITY TOWER ONE ATLANTIC CENTER
LOUISVILLE, KENTUCKY 40202 1201 WEST PEACHTREE STREET
(502) 589-4200 ATLANTA, GEORGIA 30309-3424
(404) 881-7000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

ATRIA COMMUNITIES, INC.

CROSS-REFERENCE SHEET PURSUANT TO REGULATION S-K,
ITEM 501(B), SHOWING THE LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-1

<TABLE>
<CAPTION>
FORM S-1 LOCATION OR
ITEM NO. 1 CAPTION CAPTION IN PROSPECTUS
---------- ------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Page of
Prospectus......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside
Back Cover Pages;
Additional Information
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Prospectus Summary; Risk
Charges............................ Factors; Business
4. Use of Proceeds..................... Use of Proceeds
5. Determination of Offering Price..... Underwriting
6. Dilution............................ Dilution
7. Selling Security Holders............ Not Applicable
8. Plan of Distribution................ Outside Front Cover Page;
Underwriting
9. Description of Securities to be Description of Capital Stock
Registered.........................
10. Interests of Named Experts and Legal Matters; Experts
Counsel............................
11. Information with Respect to the Outside Front Cover Page;
Registrant......................... Prospectus Summary; Risk
Factors; The Company and
its Predecessors; Use of
Proceeds; Dividend Policy;
Capitalization; Dilution;
Selected Combined Financial
Data; Management's
Discussion and Analysis of
Financial Condition and
Results of Operations;
Business; Management;
Certain Transactions;
Principal Stockholders;
Description of Capital
Stock; and Shares Eligible
for Future Sale
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Not applicable
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

JULY 29, 1996

5,000,000 Shares

LOGO
Common Stock

--------

All of the 5,000,000 shares of Common Stock offered hereby are being sold by
Atria Communities, Inc. (the "Company" or "Atria"), a wholly owned subsidiary
of Vencor, Inc. ("Vencor"). Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $12.00 and $14.00 per share. See
"Underwriting" for the factors to be considered in determining the initial
offering price.

Upon completion of this offering, Vencor will own 66.2% of the Common Stock
(63.1% if the Underwriters' over-allotment option is exercised in full).
Accordingly, Vencor will be able to control the management and operations of
the Company. See "Risk Factors--Control by Principal Stockholder."

--------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.

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THESE SECURITIES 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 THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

--------

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
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<S> <C> <C> <C>
Per Share................................. $ $ $
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Total(2).................................. $ $ $
</TABLE>
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(1) Before deducting expenses of the offering estimated at $850,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to 750,000 additional shares of Common Stock to cover over-allotments, if
any. To the extent the option is exercised, the Underwriters will offer the
additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."

--------

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or
about August , 1996.

Alex. Brown & Sons
INCORPORATED
Morgan Stanley & Co.
INCORPORATED
J.C. Bradford & Co.

THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>

[Photograph of an Atria community [Photograph of an
with southwestern design and employee of Atria
palm trees.] with a resident.]

Atria communities feature unique Atria's higher-acuity model
architecture designed to blend allows residents to "age in
into the surrounding landscape place" by incorporating
with common internal layouts that rehabilitation and home
allow for construction efficiencies. health services.

[ATRIA LOGO APPEARS HERE]

[United States map indicating [Photograph of Atria
Vencor hospitals and Vencor residents - 4 women and
nursing facilities.] one man.]

Wherever feasible, Atria will Atria focuses on private
network with Vencor's long-term pay, middle- and
care hospitals and skilled upper-income residents.
nursing facilities to combine
available resources.

Our vision of assisted living is a residential community which recognizes,
enhances and celebrates the value of individuals by promoting their
independence and dignity while providing assistance with daily living.

Our mission is to be the leading provider of senior living services by
delivering consistent, high-quality, innovative services to our residents
and their community.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and combined financial statements and the notes thereto appearing
elsewhere in this Prospectus.

THE COMPANY

Atria Communities, Inc. is a national provider of assisted and independent
living communities for the elderly. The Company currently operates 22
communities in 13 states with a total of 3,022 units, including 650 assisted
living units and 2,372 independent living units. The Company owns 16 of these
communities, holds a majority interest in two communities, leases two
communities and manages two communities. The Company also has 13 assisted
living communities under development with a total of approximately 850 units.
For the year ended December 31, 1995, the Company had revenues and net income
of $48.0 million and $3.4 million, respectively, and had an average occupancy
rate of 94.5%. For the six-month period ended June 30, 1996, the Company had
revenues and net income of $25.4 million and $1.7 million, respectively, and
had an average occupancy rate of 95.6%. Substantially all of the Company's
revenues are from private pay sources.

The assisted and independent living industries are rapidly emerging
components of the non-acute health care system for the elderly. The assisted
living industry serves the long-term care needs of the elderly who do not
require the more extensive medical services available in skilled nursing
facilities, yet who are no longer capable of a totally independent lifestyle.
Assisted living residents typically require assistance with two to three
activities of daily living ("ADLs"), such as eating, grooming and bathing,
personal hygiene and toileting, dressing, transportation, walking and
medication reminders. The independent living industry serves the long-term care
needs of elderly individuals who require only occasional assistance with ADLs
and who no longer desire, or cannot maintain, a totally independent lifestyle.

According to industry estimates, the assisted and independent living
industries represented approximately $10 to $12 billion in revenue in 1995. The
Company believes that growth in these industries is being driven by the
continued aging of the population and the increase in demand for elder-care
services; cost-containment efforts that limit access to acute care hospitals
and skilled nursing facilities for the elderly with less intensive medical
needs; changing societal patterns that make it difficult for families to
provide in-home care to the elderly; and an increasing awareness among the
elderly that assisted and independent living communities afford a cost-
effective, secure and attractive lifestyle.

Atria's objective is to expand its position as a national provider of high-
quality assisted and independent living services. Key elements of the Company's
strategy are to: (i) develop or acquire 60 to 85 additional assisted living
communities by the year 2000 (including 13 communities currently being
developed) and to convert at least 750 of its existing independent living units
to assisted living units; (ii) network its operations with Vencor's health care
delivery system where appropriate; (iii) pursue a higher acuity model of care
enabling residents to "age in place;" and (iv) continue to focus on private
pay, middle- and upper-income residents.

Prior to completion of this offering, all of the Company's assisted and
independent living communities have been operated by Vencor. Vencor and its
predecessors have operated assisted and independent living communities for over
a decade. Vencor operates an integrated network of health care services
primarily focusing on the needs of the elderly. After completion of this
offering, Vencor will own 66.2% of the outstanding Common Stock (63.1% if the
Underwriters' over-allotment option is exercised in full). In order to
facilitate an orderly transition of the Company from a division of Vencor to a
separate publicly held entity, Vencor will initially provide certain
administrative and support services to the Company. As a separate public
company, management believes that it will be able to accelerate the development
and acquisition of assisted living facilities. Furthermore, Atria will have
independent access to capital, an enhanced ability to incentivize management
and a management team focused solely on the Company's business.

3
<PAGE>

THE OFFERING

Common Stock offered hereby............. 5,000,000 shares

Common Stock to be outstanding after 15,095,000 shares(1)
this offering..........................

Use of proceeds.........................
To finance the development and
acquisition of additional assisted
living communities, and for working
capital and other general corporate
purposes.

Proposed Nasdaq National Market ATRC
symbol.................................
- --------

(1) Excludes options to purchase 639,500 shares of Common Stock at the initial
public offering price per share and includes 95,000 restricted shares of
Common Stock that vest over a two-year period following this offering. See
"Management--Non-Employee Directors 1996 Stock Incentive Plan," "--Employee
Awards Granted," "--Vencor Employee Option Grants" and "--1996 Stock
Ownership Incentive Plan."

4
<PAGE>

SUMMARY COMBINED FINANCIAL AND STATISTICAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)

<TABLE>
<CAPTION>
YEARS ENDED YEARS ENDED SIX MONTHS ENDED
MAY 31, DECEMBER 31, JUNE 30,
---------------- ----------------------------- ------------------
1992(1) 1993(1) 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $31,664 $36,479 $35,870 $39,758 $47,976 $ 23,264 25,448
Operating income
(loss)................ (2,164) 2,843 4,156(2) 9,551(3) 10,100(4) 4,928 4,791(5)
Income (loss) before
income taxes and
extraordinary loss.... (7,874) (1,770) 1,003(2) 6,343(3) 5,925(4) 2,696 2,867(5)
Income (loss) before
extraordinary loss.... (4,764) (1,071) 607(2) 3,837(3) 3,584(4) 1,631 1,734(5)
Net income (loss)...... (4,764) (1,071) 504 3,837 3,438 1,631 1,734
Pro forma earnings per
common share before
extraordinary loss.... $ .24 $ .11
Shares used in
computing earnings per
common share.......... 15,095 15,095
STATISTICAL DATA:
Number of
communities(6):
Owned and leased....... 21 20 19 19 20 20 20
Managed................ 2 2 2 2 2 2 2
------- ------- ------- ------- ------- -------- -------
Total................. 23 22 21 21 22 22 22
======= ======= ======= ======= ======= ======== =======
Number of units(6):
Owned and leased....... 2,900 2,734 2,574 2,531 2,603 2,603 2,603
Managed................ 419 419 419 419 419 419 419
------- ------- ------- ------- ------- -------- -------
Total................. 3,319 3,153 2,993 2,950 3,022 3,022 3,022
======= ======= ======= ======= ======= ======== =======
Average occupancy(7)... 80.9% 87.1% 90.8% 93.8% 94.5% 93.2% 95.6%
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED(8)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 4,149 $ 63,749
Assets.................. 141,616 201,216
Long-term debt,
including amounts due
within one year........ 104,411 104,411
Stockholder's equity.... 27,544 87,144
</TABLE>
- --------
(1) For accounting purposes, the historical combined financial information of
Atria for years 1991 and 1992 are based upon the previous fiscal reporting
periods of such entities which most closely approximate the respective
calendar year. Accordingly, operating results for the five months ended May
31, 1993 are included in both May 31, 1993 and December 31, 1993
disclosures. Revenues and net income for such period approximated $15.6
million and $61,000, respectively.
(2) Includes $266,000 ($160,000 net of tax) of income related to settlement of
certain litigation.
(3) Includes $1.3 million of income ($750,000 net of tax) related to settlement
of certain litigation and a $425,000 ($255,000 net of tax) gain on the sale
of property.
(4) Includes a charge of $600,000 ($360,000 net of tax or $.02 per common share
on a pro forma basis) related to the writedown of undeveloped property to
net realizable value.

(5) Includes a charge of $1.1 million ($630,000 net of tax or $.04 per common
share on a pro forma basis) related to the settlement of certain
litigation.

(6) At end of period.

(7) Average occupancy is calculated by dividing the number of occupied units by
the total number of available units during the respective period.

(8) Adjusted to give effect for the sale by the Company of 5,000,000 shares of
Common Stock (assuming an initial public offering price of $13.00) and the
application of the net proceeds thereof.

At or before completion of this offering, Vencor will contribute to the
Company substantially all of its assisted and independent living communities in
exchange for shares of Common Stock and the Company will assume certain
liabilities related to such communities (the "Contribution Transaction").
Unless otherwise indicated, all share and financial information set forth
herein assumes (i) completion of the Contribution Transaction and the issuance
of 95,000 restricted shares of Common Stock upon completion of this offering
and (ii) no exercise of the Underwriters' over-allotment option. All references
in this Prospectus to the "Company" or "Atria" mean Atria Communities, Inc. and
its subsidiaries, or the assisted and independent living communities held by
Vencor prior to the Contribution Transaction.

5
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the Common Stock offered hereby.

FINANCIAL RISKS ASSOCIATED WITH EXPANSION PROGRAM

Newly developed assisted living communities are expected to incur operating
losses during the first twelve months of operations of between $150,000 and
$250,000 for a 90-unit community. Once opened, the Company estimates that it
will take an average of twelve months for its communities to achieve targeted
occupancy levels. The Company may incur additional operating losses if it
fails to achieve expected occupancy rates at newly developed communities or if
expenses related to the development, acquisition or operation of new
communities exceed expectations. The risks associated with the Company's
development of additional assisted living communities and uncertainties
regarding the profitability of such operations could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Development Program."

DEVELOPMENT AND CONSTRUCTION RISKS

The Company intends to develop or acquire 60 to 85 additional assisted
living communities by the year 2000 (including 13 communities currently being
developed). The Company's ability to expand at this pace will depend upon a
number of factors, including, but not limited to, the Company's ability to
acquire suitable properties or communities at reasonable prices; the Company's
success in obtaining necessary zoning, land use, building, occupancy,
licensing and other required governmental permits and authorizations; and the
Company's ability to control construction and renovation costs and project
completion schedules. In addition, the Company's development plan is subject
to numerous factors outside its control, including competition for
acquisitions, shortages of, or the inability to obtain, labor or materials,
changes in applicable laws or regulations or in the method of applying such
laws and regulations, the failure of general contractors or subcontractors to
perform under their contracts, strikes and adverse weather. The Company's
business, financial condition and results of operations could be materially
and adversely affected if the Company is unable to achieve its development
plan. See "Business--Development Program."

In addition, the Company will rely initially on Vencor for certain services
in connection with development projects pursuant to an Administrative Services
Agreement. The Administrative Services Agreement has an initial term of one
year and thereafter may be renewed on a month-to-month basis and terminated by
either party on 60 days' prior written notice. The Company does not currently
have a substantial internal development staff but it has retained third
parties to locate suitable sites for new assisted living communities and to
handle other aspects of the development process on a contract basis. Final
approval of all development sites will be made by officers of the Company. If
Vencor terminates the Administrative Services Agreement before the Company is
able to expand its development staff or if the Company is unable to continue
to retain third-party sources to assist in the development process, the
Company's ability to execute its development and growth plans and the
Company's business, financial condition and results of operations could be
materially and adversely affected. See "Business--Business Strategy," "--
Development Program" and "Certain Transactions."

ACQUISITION RISKS; DIFFICULTIES OF INTEGRATION

In addition to developing additional assisted living communities, the
Company currently plans to acquire additional assisted living facilities or
other properties that can be repositioned as Atria assisted living
communities. The Company has not entered into any agreements with respect to
any material acquisitions. There can be no assurance that the Company's
acquisition of assisted living facilities will be completed at the rate
currently expected, if at all. The success of the Company's acquisitions will
be determined by numerous factors, including the Company's ability to identify
suitable acquisition candidates, competition for such acquisitions, the
purchase price, the financial performance of the

6
<PAGE>

facilities after acquisition and the ability of the Company to integrate
effectively the operations of acquired facilities. Any failure by the Company
to identify suitable candidates for acquisition, or integrate or operate
acquired facilities effectively may have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Business Strategy" and "--Development Program."

ABSENCE OF HISTORY AS A STAND-ALONE COMPANY AND NEW MANAGEMENT

Although the Company's predecessors have operated assisted and independent
living communities for over a decade, the Company itself has never operated as
a stand-alone company. Certain officers, including the President and Chief
Executive Officer of the Company, do not have experience in the assisted and
independent living industry. After this offering, the Company will continue to
be a subsidiary of Vencor, but will operate as a separate public company.
Vencor will have no obligation to provide assistance to the Company except as
described in the Administrative Services Agreement and the Services
Agreements. There can be no assurance that upon termination of such agreements
the Company will have adequate staffing to perform the functions Vencor
performed for the Company. The Administrative Services Agreement and the
Services Agreements each have a one-year term and upon expiration may be
renewed on a month-to-month basis or terminated by either party on 60 days'
prior written notice. Termination of these agreements before the Company is
able to provide such services could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Certain Transactions."

CONTROL BY PRINCIPAL STOCKHOLDER

Upon completion of this offering, Vencor will own 66.2% of the outstanding
Common Stock (63.1% if the Underwriters' over-allotment option is exercised in
full) and, accordingly, will be in a position to elect all of the directors of
the Company and effectively control the management and operations of the
Company. Initially, four of the seven directors will be officers or directors
of Vencor and only two directors of the Company will be independent directors
who are not Vencor affiliates or employees of the Company. Upon completion of
this offering, Vencor will enter into a Voting Agreement pursuant to which it
will agree to vote all of its shares of Common Stock at any meeting at which
directors are elected in favor of the election of independent directors so
that after such election, if such persons are elected, there will be at least
two independent directors. The Voting Agreement will continue in effect for
five years from the date of this offering so long as Vencor beneficially owns
30% or more of the Common Stock. The concentration of ownership in Vencor may
have a limiting effect on the price and trading volume of the Common Stock and
may inhibit changes in control of the Company. See "Certain Transactions,"
"Principal Stockholders" and "Description of Capital Stock."

RELATIONSHIP WITH VENCOR; CONFLICTS OF INTEREST

Certain directors and officers of Vencor, who are also directors of the
Company, and Vencor, as the Company's controlling stockholder, have conflicts
of interest with respect to certain transactions concerning the Company. When
the interests of Vencor and the Company diverge, Vencor may exercise its
influence in its own best interests. The Company anticipates resolving
potential conflicts of interest on a case-by-case basis, which may include the
use of committees comprised of disinterested directors and the retention of
independent financial and other advisors. See "Management," "Certain
Transactions," and "Principal Stockholders."

The Company and Vencor have entered into certain agreements including an
Administrative Services Agreement, an Incorporation Agreement, a Tax Sharing
Agreement, a Registration Rights Agreement, a Guaranty Fee Agreement and
Services Agreements (the "Vencor Agreements") to resolve certain issues in
connection with the Contribution Transaction and to specify certain services
to be provided to the Company by Vencor. For example, under the Administrative
Services Agreement, Vencor will provide certain administrative services to the
Company, including finance and accounting, human resources, risk management,
legal support, market planning and information systems support. The annual fee
payable to Vencor under the Administrative Services Agreement is $660,000. The
Incorporation Agreement provides

7
<PAGE>

for the Company to pay Vencor $150,000 for its assistance in connection with
this offering. The maximum guaranty fee that the Company intends to pay Vencor
in connection with the Guaranty Fee Agreement is $1,500,000 per year. The
maximum amount that the Company expects to pay Vencor in connection with the
Services Agreements is $150,000 per year. These agreements were negotiated by
officers of Vencor and the Company while the Company was a wholly owned
subsidiary of Vencor. Accordingly, there is no assurance that (i) the terms
and conditions of these arrangements are as favorable to the Company as those
the Company could have obtained from unaffiliated third parties; or (ii) such
arrangements will not be terminated or modified in the future. Although Vencor
has advised the Company that it does not intend to compete with the Company,
the Vencor Agreements do not contain any covenant not to compete or similar
restrictions prohibiting Vencor from developing or acquiring and operating its
own assisted or independent living communities following completion of this
offering. See "Certain Transactions."

The Company intends to develop communities in close proximity to Vencor's
facilities, which may facilitate participating with Vencor in providing
services to HMOs and other managed care companies. The Company also expects
that the geographic proximity to Vencor's nursing and hospital facilities will
foster transfers between the Company's communities and Vencor's facilities.
There can be no assurance that any such networking potential will be realized.

NEED FOR ADDITIONAL FINANCING

To achieve its growth objectives, the Company will need to obtain
substantial additional financing to fund its development, construction and
acquisition activities. The estimated cost to complete 60 to 85 assisted
living communities targeted for development or acquisition by the year 2000
substantially exceeds the net proceeds from this offering. Accordingly, the
Company's future growth will depend on its ability to obtain additional
financing on acceptable terms. The Company currently estimates that the net
proceeds from this offering together with anticipated financing commitments
and financing expected to be available, will be sufficient to fund its
development and acquisition program for approximately 18 months following
completion of this offering. There can be no assurance, however, that the
Company will not be required to obtain additional capital at an earlier date.
The Company may from time to time seek additional financing through public or
private financing sources, including equity or debt financing. If additional
funds are raised by issuing equity securities, the Company's stockholders may
experience dilution. There can be no assurance that adequate funding will be
available as needed or on terms acceptable to the Company. Insufficient
financial resources may require the Company to delay or eliminate all or some
of its development projects and acquisition plans, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

RISKS OF INDEBTEDNESS

Leverage. At June 30, 1996, the Company had long-term debt, including
amounts due within one year, of $104.4 million. The amount of debt and debt-
related payments is expected to increase substantially as the Company pursues
its growth strategy. As a result, an increasing portion of the Company's cash
flow will be devoted to debt service and related payments and the Company will
be subject to risks normally associated with increased financial leverage.
There can be no assurance that the Company will generate sufficient cash flows
from operations to cover required interest, principal and any operating lease
payments. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

Risk of Rising Interest Rates. At June 30, 1996, $71.3 million in principal
amount of the Company's indebtedness bore interest at floating rates. In
addition, indebtedness that the Company may incur in the future may also bear
interest at a floating rate. Therefore, increases in prevailing interest rates
could increase the Company's interest payment obligations and could have a
material adverse effect on the Company's business, financial condition and
results of operations.

8
<PAGE>

Bond Financing and Income Qualified Residents. Eight of the Company's
assisted living and independent living communities have been financed in whole
or in part by industrial revenue bonds. Under the terms of such bonds, the
Company is required to rent approximately 250 assisted and independent living
units to individuals who have incomes which are 80% or less of the average
income levels in a designated market. In certain cases, the Company's ability
to increase prices in communities with such bond financing (in response to
higher operating costs or other inflationary factors) could be limited if it
affects the ability of the Company to attract and retain residents with
qualifying incomes. Failure to satisfy these requirements constitutes an event
of default under the bonds, thereby accelerating their maturity. At June 30,
1996, outstanding amounts under the bonds totaled $62.1 million. See
"Business--Funding for Assisted and Independent Living Care" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity Capital Resources."

Proposed Atria Credit Facility. At or shortly after consummation of this
offering, the Company expects to enter into a bank credit facility (the "Atria
Credit Facility") aggregating up to $200.0 million which will bear interest at
floating rates and which will be secured by its properties, the capital stock
of the Company's subsidiaries and intercompany indebtedness owed to the
Company by its subsidiaries. Any borrowings under the Atria Credit Facility
will increase the Company's leverage and will bear the risk of rising interest
rates. The terms of the Atria Credit Facility have not been finalized and
there can be no assurance that the Company will be successful in consummating
such financing. It is also contemplated that the Atria Credit Facility will
contain various affirmative, negative and financial covenants. The Atria
Credit Facility will be conditioned upon, among other things, completion of
this offering (the net proceeds from which must aggregate at least $50.0
million), the absence of a change in control of the Company, Vencor's
ownership of a stipulated amount of Common Stock upon the completion of this
offering and Vencor maintaining at least a 30% ownership interest thereafter.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" and Note 4 of Notes to
Combined Financial Statements.

Consequences of Default. There can be no assurance that the Company will
generate sufficient cash flows from operations to cover required interest,
principal and operating lease payments. Any payment or other default could
cause the lender to foreclose upon the communities securing such indebtedness,
with a consequent loss of income and asset value to the Company. In certain
cases, indebtedness secured by a community is also secured by a pledge of the
Company's interests in the community. In the event of a default with respect
to any such indebtedness, the lender could avoid the judicial procedures
required to foreclose on real property by foreclosing on the pledge instead,
thus accelerating the lender's acquisition of the community. Further, because
most of the Company's mortgages contain cross-default and cross-
collateralization provisions, a default by the Company on one of its payment
obligations could adversely affect a significant number of the Company's other
properties.

VARIATIONS IN OPERATING RESULTS

Although the Company was profitable in 1993, 1994, 1995 and the first six
months of 1996, there can be no assurance that revenue growth or profitability
will not fluctuate on a quarterly or annual basis in the future. The Company
may experience variations in quarterly and annual operating results. Quarterly
or annual variations may result from the timing of opening new communities and
the rate at which certain occupancy levels are achieved. The Company's
operating results for any particular quarter or year may not be indicative of
results for future periods. See "Risk Factors--Financial Risks Associated with
Expansion Program" and "Business--Development Program."

MANAGEMENT OF PLANNED RAPID GROWTH

The Company's success will depend, in part, on its ability to manage its
planned rapid growth. The Company does not presently have adequate staff to
manage its planned growth and will rely on Vencor to provide many internal
management functions. The Company will need to expand its operational,
financial and management information systems and continue to attract, motivate
and retain key employees. If the

9
<PAGE>

Company does not manage its growth effectively, its business, financial
condition and results of operations could be materially and adversely
affected. See "Risk Factors--Absence of History as a Stand-Alone Company and
New Management," "--Relationship with Vencor; Conflicts of Interest" and
"Certain Transactions."

DEPENDENCE ON PRIVATE PAY RESIDENTS

The Company currently relies, and in the foreseeable future expects to rely,
primarily on the ability of residents to pay for the Company's charges from
their own financial resources. Inflation or other circumstances which
adversely affect the ability of the elderly to pay for the Company's services
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Funding for Assisted and
Independent Living Care."

HIGHLY COMPETITIVE INDUSTRY

The assisted living industry is highly competitive. The Company faces
competition from numerous local, regional and national providers of assisted
living and long-term care. The Company also competes with companies providing
home-based health care. Some of the Company's competitors operate on a not-
for-profit basis or as charitable organizations. Also, many of the Company's
competitors are significantly larger and have greater financial resources than
the Company. The Company believes that the assisted living industry will
become even more competitive in the future. Regulatory barriers to entry into
the assisted living industry are generally not substantial. If the development
of new assisted living facilities surpasses the demand for such facilities in
particular markets, such markets may become saturated. The Company also
expects to compete for acquisitions of additional assisted living facilities
and properties. There can be no assurance that competition will not limit the
Company's ability to attract residents or expand its business or have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Competition."

GOVERNMENT REGULATION

The health care industry is subject to extensive regulation and frequent
regulatory change. At this time, no federal laws or regulations specifically
define or regulate assisted or independent living facilities. While a number
of states have not yet enacted specific assisted living regulations, the
Company's communities are subject to regulation, licensing, certificate of
need requirements and permitting by state and local health and social service
agencies and other regulatory authorities. Requirements vary from state to
state. Changes in existing laws and regulations, adoption of new laws and
regulations and new interpretations of existing laws and regulations could
have a material impact on the Company's operations. The Company believes that
such regulation will increase in the future. In addition, health care
providers are receiving increased scrutiny under anti-trust laws as the
integration and consolidation of health care delivery increases and affects
competition. Regulation of the assisted living industry is evolving. The
Company is unable to predict the content of new regulations and their effect
on its business. There can be no assurance that the Company's operations will
not be adversely affected by regulatory developments. Failure by the Company
to comply with applicable regulatory requirements could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Government Regulation."

10
<PAGE>

sources of patient referral. Similar state laws vary, are sometimes vague and
seldom have been interpreted by courts or regulatory agencies. Violation of
these laws can result in loss of licensure, civil and criminal penalties, and
exclusion of health care providers or suppliers from participation in the
Medicare and Medicaid programs. There can be no assurance that such laws will
be interpreted in a manner consistent with the practices of the Company. See
"Business--Government Regulation."

Under the Americans with Disabilities Act of 1990, all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. A number of additional federal, state and
local laws exist which also may require modifications to existing and planned
properties to create access to the properties by disabled persons. While the
Company believes that its properties are substantially in compliance with
present requirements or are exempt therefrom, if required changes involve a
greater expenditure than anticipated or must be made on a more accelerated
basis than anticipated, additional costs would be incurred by the Company.
Further legislation may impose additional burdens or restrictions with respect
to access by disabled persons, the costs of compliance with which could be
substantial.

LABOR COSTS

The Company competes with various health care providers and other employers
for qualified and skilled personnel. The Company's labor costs will increase
over time. The Company's business, financial condition and results of
operations could be adversely affected if the Company is unable to control its
labor costs. See "Business--Employees."

ENVIRONMENTAL RISKS

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
held liable for the cost of removal or remediation of certain hazardous or
toxic substances that may be located on, in or under the property. These laws
and regulations may impose liability regardless of whether the owner or
operator was responsible for, or knew of, the presence of the hazardous or
toxic substances. The liability of the owner or operator and the cost of any
required remediation or removal of hazardous or toxic substances could exceed
the property's value. In connection with the ownership or operation of its
communities, the Company could be liable for these costs. As a result, the
presence of hazardous or toxic substances at any property held or operated by
the Company or acquired or operated by the Company in the future could have a
material adverse effect on the Company's business, financial condition and
results of operations.

LIABILITY AND INSURANCE

In recent years, the long-term care industry has experienced an increase in
the number of lawsuits alleging negligence and other legal theories, many of
which involve significant legal costs and substantial claims. Vencor
maintains, and the Company intends to secure, by completion of this offering,
insurance policies in amounts and with such coverage as it deems appropriate
for its operations. There can be no assurance, however, that the Company will
be able to continue to obtain sufficient liability insurance coverage in the
future or that such coverage will be available on acceptable terms. A
successful claim in excess of the Company's coverage or not covered by the
Company's insurance could have a material adverse effect on the Company's
business, financial condition and results of operations. Claims against the
Company, regardless of their merit or outcome, may involve significant legal
costs and require management to devote considerable time which would otherwise
be utilized in the operation of the Company.

ANTI-TAKEOVER PROVISIONS

The Company's Restated Certificate of Incorporation and Amended and Restated
By-laws, as well as Delaware corporate law, contain certain provisions that
could have the effect of making it more difficult

11
<PAGE>

for a third party to acquire, or of discouraging a third party from attempting
to acquire or take control of the Company. These provisions could limit the
price that certain investors might be willing to pay in the future for shares
of Common Stock. Certain of these provisions allow the Company to issue,
without stockholder approval, preferred stock having voting rights senior to
those of the Common Stock. Other provisions impose various procedural and
other requirements that could make it more difficult for stockholders to
effect certain corporate actions. In addition, commencing with the 1997 Annual
Meeting of Stockholders, the Company's Board of Directors will be divided into
three classes, each of which will serve for a staggered three-year term, which
may make it more difficult for a third party to gain control of the Board of
Directors. As a Delaware corporation, the Company is subject to Section 203 of
the Delaware General Corporation Law which, in general, prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" for three years following the date such person became an
interested stockholder unless certain conditions are satisfied. As a result,
third parties may be discouraged from attempting to acquire or take control of
the Company. See "Risk Factors--Control by Principal Stockholder" and
"Description of Capital Stock--Certain Corporate Governance Matters."

SUBSTANTIAL AND IMMEDIATE DILUTION

Purchasers of the Common Stock in this offering will experience substantial
and immediate dilution in the net tangible book value per share of their
investment of $7.33 per share of Common Stock (assuming an initial public
offering price of $13.00 per share). See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 15,095,000 shares of
Common Stock outstanding (15,845,000 shares if the Underwriters' over-
allotment option is exercised in full). Of these shares, the 5,000,000 shares
sold in this offering will be freely transferable without restriction or
limitation under the Securities Act of 1933, as amended ("Securities Act"),
except for any shares purchased by "affiliates" of the Company, as such term
is defined in Rule 144 under the Securities Act. The remaining 10,095,000
shares constitute "restricted securities" within the meaning of Rule 144 such
that the sale of such securities would be restricted for two years (one year
if certain proposed amendments to Rule 144 are adopted). Vencor holds
10,000,000 of the restricted shares and nine officers and directors of the
Company will hold the remaining 95,000 restricted shares. Commencing 180 days
following completion of this offering, Vencor will be entitled to certain
demand and incidental registration rights with respect to such shares. If
Vencor, by exercising its demand registration rights, causes a large number of
shares to be registered and sold in the public market, such sales could have a
material adverse effect on the market price for the Common Stock. Further, the
Company intends to register within 180 days of the date of this offering,
1,250,000 shares of Common Stock reserved for issuance pursuant to the
Company's incentive compensation programs. At the date of this offering, the
Company anticipates that it will have outstanding options to purchase 639,500
shares of Common Stock. The options become exercisable in four equal
installments beginning one year from the date of grant. Sales of substantial
amounts of shares of Common Stock in the public market after this offering or
the perception that such sales could occur may materially and adversely affect
the market price of the Common Stock and the Company's ability to obtain
additional capital. See "Description of Capital Stock--Registration Rights
Agreement" and "Shares Eligible for Future Sale."

Subject to certain exceptions, Vencor, the Company and the Company's
directors and executive officers have agreed with the Underwriters not to sell
or otherwise dispose of any shares of Common Stock, any options to purchase
Common Stock or any securities convertible or exchangeable for shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Alex. Brown & Sons Incorporated. See
"Underwriting."

12
<PAGE>

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop
for the Common Stock after this offering. The trading volume of the Common
Stock following this offering is expected to be limited because Vencor will
hold 66.2% of the outstanding Common Stock (63.1% if the Underwriters' over-
allotment option is exercised in full). The initial public offering price of
the Common Stock will be based on negotiations between the Company and the
Underwriters and may bear no relationship to the price at which the Common
Stock will trade after completion of this offering. In addition, the stock
market in recent years has experienced broad price and volume fluctuations
that have frequently been unrelated to the performance of particular
companies. Such market fluctuations may materially and adversely affect the
market price of the Common Stock.

13
<PAGE>

THE COMPANY AND ITS PREDECESSORS

The Company was incorporated in Delaware on May 1, 1996, as a wholly owned
subsidiary of Vencor. Vencor operates an integrated network of health care
services primarily focusing on the needs of the elderly. At or prior to
completion of this offering, Vencor will contribute to the Company
substantially all of its assisted and independent living communities in
exchange for shares of Common Stock and the Company will assume certain
liabilities related to such communities.

On September 28, 1995, Vencor consummated a merger (the "Hillhaven Merger")
with The Hillhaven Corporation ("Hillhaven"). Prior to the Hillhaven Merger,
Hillhaven and its subsidiaries operated the communities now operated by the
Company. Also, prior to the Hillhaven Merger, Hillhaven consummated a share
exchange (the "Nationwide Exchange") with Nationwide Care, Inc. ("Nationwide")
on June 30, 1995. Four of the communities now operated by the Company were
operated by Nationwide until the effective date of the Nationwide Exchange,
and from that date until the consummation of the Hillhaven Merger, by
Hillhaven.

The Company's executive offices are located at 515 West Market Street,
Louisville, Kentucky 40202, and its telephone number is (502) 596-7540.

USE OF PROCEEDS

The net proceeds to the Company of this offering are estimated to be
approximately $59.6 million ($68.7 million if the Underwriters' over-allotment
option is exercised in full), assuming an initial offering price of $13.00 per
share and after deducting the estimated underwriting discounts and offering
expenses payable by the Company. The Company expects to use substantially all
of the net proceeds to finance the development and acquisition of additional
assisted living communities, and for working capital and other general
corporate purposes. Pending such uses, the Company intends to invest the net
proceeds in short-term investment grade, interest-bearing securities or
certificates of deposit. The Company does not have any current agreements or
understandings to acquire any additional facilities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Business--Business Strategy."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and currently plans to retain future earnings to finance the growth of
the Company's business rather than to pay cash dividends. Payment of any cash
dividends in the future will depend on the financial condition, results of
operations and capital requirements of the Company as well as other factors
deemed relevant by the Board of Directors. It is also anticipated that the
proposed Atria Credit Facility will prohibit the Company from paying cash
dividends. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

14
<PAGE>

CAPITALIZATION

The following table sets forth as of June 30, 1996, the pro forma
capitalization of the Company (i) after giving effect to the Contribution
Transaction but without giving effect to this offering, and (ii) as adjusted
to reflect the sale of the shares of Common Stock offered hereby (assuming an
initial public offering price of $13.00 per share) and the application of the
estimated net proceeds therefrom, all as if they occurred on June 30, 1996 (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
<S> <C> <C>
Long-term debt, including amounts due within one year.... $104,411 $104,411
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value, 5,000,000 shares au-
thorized;
none issued and outstanding........................... $ - $ -
Common stock, $.10 par value; 50,000,000 shares autho-
rized;
issued and outstanding, 10,095,000 shares (pro forma)
and 15,095,000 shares (pro forma as adjusted)(1)...... 1,010 1,510
Additional paid-in capital............................. 26,534 85,634
-------- --------
Total stockholders' equity............................. 27,544 87,144
-------- --------
Total capitalization................................. $131,955 $191,555
======== ========
</TABLE>
- --------

(1) Excludes options to purchase 639,500 shares of Common Stock at the initial
public offering price and includes 95,000 restricted shares of Common
Stock that vest over a two-year period following this offering. In
addition, 605,500 shares of Common Stock will be available under the
Company's incentive compensation plans for future grants. See
"Management--Non-Employee Directors 1996 Stock Incentive Plan," "--
Employee Awards Granted," "--Vencor Employee Option Grants" and "--1996
Stock Ownership Incentive Plan."

15
<PAGE>

DILUTION

The Company's pro forma net tangible book value at June 30, 1996 was
approximately $26.0 million or $2.57 per share of Common Stock. Net tangible
book value represents the Company's total tangible assets less total
liabilities divided by 10,095,000 shares of Common Stock outstanding. After
giving effect to the sale of 5,000,000 shares of Common Stock pursuant to this
offering (assuming an initial public offering price of $13.00 per share) and
the application by the Company of the estimated net proceeds therefrom, the
Company will have 15,095,000 shares of Common Stock outstanding with a pro
forma adjusted net tangible book value at June 30, 1996, of approximately
$85.6 million or $5.67 per share. This represents an immediate increase in net
tangible book value of $3.10 per share to existing investors and an immediate
dilution of $7.33 per share in net tangible book value per share to new
investors in this offering, as illustrated by the following:

<TABLE>
<S> <C> <C>
Assumed public offering price per share.......................... $13.00
Pro forma net tangible book value per share prior to this offer-
ing(1).......................................................... $2.57
Increase per share attributable to new investors................. 3.10
-----
Pro forma adjusted net tangible book value per share after this
offering........................................................ 5.67
------
Net tangible book value dilution per share to new investors(2)... $ 7.33
======
</TABLE>

The following table summarizes on a pro forma basis at June 30, 1996,
certain differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid by the
existing investors and by the new investors purchasing shares in this offering
(based upon an assumed initial public offering price of $13.00 per share)
(dollars in thousands, except per share amounts):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing investors(1)...... 10,095,000 66.9% $ 27,544 29.8% $ 2.73
New investors.............. 5,000,000 33.1 65,000 70.2 13.00
---------- ----- ----------- ---------
Total.................... 15,095,000 100.0% $92,544 100.0%
========== ===== =========== =========
</TABLE>
- --------

(1) Excludes options to purchase up to 639,500 shares of Common Stock at the
initial public offering price per share and includes 95,000 restricted
shares of Common Stock that vest over a two-year period following this
offering. See "Management--Non-Employee Directors 1996 Stock Incentive
Plan," "--Employee Awards Granted," "--Vencor Employee Option Grants" and
"--1996 Stock Ownership Incentive Plan."

(2) Dilution is determined, after giving effect to this offering, by
subtracting pro forma net tangible book value per share from the assumed
initial public offering price of $13.00 per share. Dilution to new
investors will be $7.03 per share if the Underwriters' over-allotment
option is exercised in full.

16
<PAGE>

SELECTED COMBINED FINANCIAL DATA

The following table sets forth selected combined financial and statistical
data of the Company which have been derived from the consolidated financial
statements of Vencor and is presented as if the Company had been operated as a
separate entity. The financial statements of the Company for the years ended
December 31, 1993, 1994 and 1995 have been audited by Ernst & Young LLP,
independent auditors. The selected financial data for the years ended May 31,
1992 and 1993 and the six months ended June 30, 1995 and 1996 were derived
from unaudited consolidated financial statements of Vencor and include all
adjustments which management considers necessary for a fair presentation of
financial position and results of operations for the respective periods. The
following data should be read in conjunction with the combined financial
statements of the Company included elsewhere in this Prospectus:
<TABLE>
<CAPTION>
YEARS ENDED YEARS ENDED SIX MONTHS ENDED
MAY 31, DECEMBER 31, JUNE 30,
------------------ ---------------------------- ------------------
1992(1) 1993(1) 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues............... $ 31,664 $ 36,479 $ 35,870 $ 39,758 $ 47,976 $ 23,264 $ 25,448
-------- -------- -------- -------- -------- -------- --------
Salaries, wages and
benefits.............. 13,898 14,620 14,735 14,638 17,455 8,515 9,404
Supplies............... 3,289 4,199 4,360 4,023 4,860 2,359 2,450
Rent................... 1,832 563 351 333 383 196 199
Depreciation and
amortization.......... 4,751 5,025 4,503 4,541 5,113 2,552 2,625
Non-recurring
transactions.......... - - (266) (1,675) 600 - 1,050
Other operating
expenses.............. 10,058 9,229 8,031 8,347 9,465 4,714 4,929
-------- -------- -------- -------- -------- -------- --------
33,828 33,636 31,714 30,207 37,876 18,336 20,657
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ (2,164) 2,843 4,156 9,551 10,100 4,928 4,791
Interest expense....... 5,718 5,058 3,499 3,538 4,322 2,286 2,033
Investment income...... (8) (445) (346) (330) (147) (54) (109)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary loss.... (7,874) (1,770) 1,003 6,343 5,925 2,696 2,867
Provision for income
taxes................. (3,110) (699) 396 2,506 2,341 1,065 1,133
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary loss.... (4,764) (1,071) 607 3,837 3,584 1,631 1,734
Extraordinary loss on
extinguishment of
debt, net of income
taxes................. - - (103) - (146) - -
-------- -------- -------- -------- -------- -------- --------
Net income (loss).... $ (4,764) $ (1,071) $ 504 $ 3,837 $ 3,438 $ 1,631 $ 1,734
======== ======== ======== ======== ======== ======== ========
Pro forma data:
Earnings per common
share before
extraordinary loss.... $ .24 $ .11
Shares used in
computing earnings
per common share...... 15,095 15,095
STATISTICAL DATA:
Number of
communities(2):
Owned and leased....... 21 20 19 19 20 20 20
Managed................ 2 2 2 2 2 2 2
-------- -------- -------- -------- -------- -------- --------
Total................ 23 22 21 21 22 22 22
======== ======== ======== ======== ======== ======== ========
Number of units(2):
Owned and leased....... 2,900 2,734 2,574 2,531 2,603 2,603 2,603
Managed................ 419 419 419 419 419 419 419
-------- -------- -------- -------- -------- -------- --------
Total................ 3,319 3,153 2,993 2,950 3,022 3,022 3,022
======== ======== ======== ======== ======== ======== ========
Average occupancy(3)... 80.9% 87.1% 90.8% 93.8% 94.5% 93.2% 95.6%
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 2,251 $ 2,473 $ 1,695 $ 1,497 $ 2,819 $ 2,535 $ 4,149
Assets................. 135,674 141,151 137,308 133,016 140,917 142,656 141,616
Long-term debt,
including amounts due
within one year....... 98,705 108,003 91,744 91,193 105,350 106,074 104,411
Stockholder's equity... 24,045 30,049 34,959 31,835 28,447 30,135 27,544
</TABLE>
- --------
(1) For accounting purposes, the combined financial information of Atria for
years 1991 and 1992 are based upon the previous fiscal reporting periods
of such entities which most closely approximate the respective calendar
year. Accordingly, operating results for the five months ended May 31,
1993 are included in both May 31, 1993 and December 31, 1993 disclosures.
Revenues and net income for such period approximated $15.6 million and
$61,000, respectively.
(2) At end of period.
(3) Average occupancy is calculated by dividing the number of occupied units
by the total number of available units during the respective period.

17
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The Selected Combined Financial Data and the Combined Financial Statements
of Atria included elsewhere in this Prospectus set forth certain information
with respect to Atria's financial position, results of operations and cash
flows which should be read in conjunction with the following discussion and
analysis.

COMPANY INFORMATION

Atria was incorporated in Delaware on May 1, 1996, as a wholly owned
subsidiary of Vencor. Vencor operates an integrated network of health care
services primarily focusing on the needs of the elderly. At or prior to
completion of this offering, Vencor will contribute to Atria substantially all
of its assisted and independent living communities in exchange for shares of
Common Stock and Atria will assume certain liabilities related to such
communities.

On September 28, 1995, Vencor consummated the Hillhaven Merger. For over a
decade prior to the Hillhaven Merger, Hillhaven and its subsidiaries operated
the assisted and independent living communities now operated by Atria. Prior
to the Hillhaven Merger, Hillhaven consummated the Nationwide Exchange on June
30, 1995. Four of the communities now operated by Atria were operated by
Nationwide until the effective date of the Nationwide Exchange, and from that
date until the consummation of the Hillhaven Merger, by Hillhaven.

Atria is a national provider of assisted and independent living communities
for the elderly and currently operates 22 communities in 13 states with a
total of 3,022 units, including 650 assisted living units and 2,372
independent living units. Atria has 13 assisted living communities containing
approximately 850 units under development, of which eleven communities with a
capacity of 693 units have obtained zoning approval (including one community
currently under construction).

Substantially all revenues are derived from private pay sources and are
earned from services provided to residents under both daily residence and
ancillary service agreements. Fees related to management contracts are not
significant.

PLANNED DEVELOPMENT AND EXPANSION

Atria intends to expand its business in the future through both construction
of additional communities and acquisition of existing facilities. The Company
plans to add 60 to 85 assisted and independent living communities by the year
2000 (including 13 communities currently being developed). The estimated cost
to construct, equip or otherwise acquire such communities could approximate
$350 to $500 million.

The estimated cost of Atria's planned development and expansion is
significantly in excess of: (i) estimated cash flows from operations; (ii)
expected proceeds from this offering; and (iii) borrowings to be available
under a planned bank credit facility. Management believes that substantial
additional financing will be required in approximately eighteen months
following completion of this offering to complete Atria's growth plans.
Available sources of future capital may include, among other things, equity,
public or private debt, and additional bank revolving credits. However, there
can be no assurance that such financing will be available on terms which are
acceptable to Atria, nor can there be any assurance that additional financing
will not be required or sought by Atria prior to eighteen months after
completion of this offering.

Newly opened communities are expected to incur operating losses until
sufficient occupancy levels and operating efficiencies are achieved. Based
upon historical experience, management believes that a typical community will
achieve its targeted occupancy levels one year from commencement of
operations. Accordingly, Atria will require substantial amounts of liquidity
to maintain the operation of

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<PAGE>

newly opened communities. In addition, if sufficient occupancy levels related
to newly opened communities are not achieved within a reasonable period, the
combined results of operations, financial position and liquidity of Atria could
be materially and adversely impacted.

Atria and Vencor have or will enter into certain agreements which will become
effective on or before the completion of this offering. These agreements are
intended to facilitate an orderly transition of Atria from a division of Vencor
to a separate publicly held entity which will be minimally disruptive to both
Atria and Vencor. See Note 6 of the Notes to Combined Financial Statements for
a description of these agreements.

RESULTS OF OPERATIONS

A summary of operations follows:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
---------------------------------------
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- ------------------
1993 1994 1995 1995 1996
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -------- --------
Salaries, wages and benefits........... 41.1 36.8 36.4 36.6 37.0
Supplies............................... 12.1 10.1 10.1 10.1 9.6
Rent................................... 1.0 0.9 0.8 0.8 0.7
Depreciation and amortization.......... 12.5 11.4 10.7 11.0 10.3
Non-recurring transactions............. (0.8) (4.2) 1.2 - 4.2
Other operating expenses............... 22.5 21.0 19.7 20.3 19.4
----- ----- ----- -------- --------
88.4 76.0 78.9 78.8 81.2
----- ----- ----- -------- --------
Operating income....................... 11.6 24.0 21.1 21.2 18.8
Interest expense....................... 9.8 8.9 9.0 9.8 7.9
Investment income...................... (1.0) (0.9) (0.2) (0.2) (0.4)
----- ----- ----- -------- --------
Income before income taxes and
extraordinary loss.................. 2.8 16.0 12.3 11.6 11.3
Provision for income taxes............. 1.1 6.3 4.8 4.6 4.5
----- ----- ----- -------- --------
Income before extraordinary loss..... 1.7% 9.7% 7.5% 7.0% 6.8%
===== ===== ===== ======== ========
</TABLE>

Six Months Ended June 30, 1996 and 1995

Revenues increased 9.4% to $25.4 million in the first six months of 1996
compared to $23.3 million in the same period last year. Excluding the effect of
a newly constructed community in February 1995, revenues increased 8.3%
primarily as a result of price increases (which approximated 5.0%), growth in
occupancy (95.6% in the first six months of 1996 compared to 93.2% a year ago)
and growth in ancillary services.

Compensation and supply costs as a percentage of revenues remained relatively
unchanged in the first six months of 1996 compared to the same period a year
ago, while other operating expenses declined to 19.4% of revenues from 20.3%
last year due primarily to operating efficiencies associated with the growth in
occupancy and the fixed nature of a significant portion of such costs.

Operating income declined 2.8% to $4.8 million in the first six months of
1996 compared to $4.9 million in the same period of 1995, and operating income
margins declined to 18.8% from 21.2%. Excluding the effect of non-recurring
transactions, operating income increased 18.5% to $5.8 million and operating
income margins improved to 23.0%. The improvement in operating income
(excluding non-recurring transactions) was primarily attributable to growth in
revenues, efficiencies associated with growth in occupancy levels and the
expansion of higher margin ancillary services.

19
<PAGE>

Net income increased 6.3% to $1.7 million in the first six months of 1996
compared to $1.6 million a year ago and net margins declined slightly to 6.8%
in 1996 from 7.0% in 1995. Excluding the effect of non-recurring transactions,
net income increased 44.9% to $2.4 million in the first six months of 1996.
The improvement in net income was primarily attributable to growth in
operating income and a decline in interest costs as a result of net reductions
in long-term debt and certain refinancings.

In anticipation of this offering, certain allocations and estimates have
been made by management in the combined financial statements to present the
historical financial position and results of operations of Atria as a separate
entity. The operating results of Atria include certain corporate costs and
expenses of Vencor (comprised principally of information systems and various
centralized management services) aggregating $300,000 in the first six months
of 1996 and 1995.

In June 1996, Atria recorded a non-recurring pretax charge of $1.1 million
($630,000 net of tax) in connection with the settlement of certain litigation
involving a minority partner at one of its communities.

Years Ended December 31, 1995, 1994 and 1993

Revenues increased 20.7% to $48.0 million in 1995 and 10.8% to $39.8 million
in 1994. Excluding the effect of newly constructed and sold communities, and
the purchase of controlling interest in two entities previously accounted for
under the equity method, revenues increased 5.9% in 1995 and 11.6% in 1994,
primarily as a result of price increases (which approximated 4% in 1995 and 6%
in 1994), growth in occupancy levels (94.5% in 1995 compared to 93.8% in 1994
and 90.8% in 1993) and growth in ancillary services. Subsequent to
consolidation, revenues recorded for two facilities previously accounted for
under the equity method totaled $6.0 million in 1995 and $1.6 million in 1994.

Compensation and supply costs as a percentage of revenues improved slightly
in 1995 compared to 1994, while other operating expenses declined to 19.7% of
revenues from 21.0% in 1994 due primarily to operating efficiencies associated
with growth in occupancy and the fixed nature of a significant portion of such
costs. Compensation, supply costs and other operating expenses declined
significantly as a percentage of revenues in 1994 compared to 1993 primarily
as a result of accelerated growth in occupancy.

Operating income increased 5.7% to $10.1 million in 1995 and 129.8% to $9.6
million in 1994, and operating income margins declined to 21.1% in 1995 from
24.0% in 1994 and improved from 11.6% in 1993. Excluding the effect of non-
recurring transactions, operating income increased 35.9% in 1995 to $10.7
million and 102.5% to $7.9 million in 1994 and operating income margins
improved to 22.3% in 1995 from 19.8% in 1994 and 10.8% in 1993. The
improvement in operating income (excluding non-recurring transactions) was
primarily attributable to growth in revenues, efficiencies associated with
growth in occupancy levels and the expansion of higher margin ancillary
services.

Income before extraordinary loss totaled $3.6 million, $3.8 million and
$607,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Excluding the effect of non-recurring transactions, income before
extraordinary loss increased 39.3% to $3.9 million in 1995 and 533.6% to $2.8
million in 1994. The increases were primarily attributable to growth in
operating income and, in 1994, to the sale of two unprofitable communities
(the net operating losses from which totaled approximately $200,000 in 1993).

Operating results during the past three years include certain non-recurring
transactions. Pretax income in 1995 includes a charge of $600,000 ($360,000
net of tax) related to a writedown of undeveloped property to its estimated
net realizable value. Pretax income in 1994 includes a gain on the sale of
property aggregating $425,000 ($255,000 net of tax). In addition, settlements
of certain litigation

20
<PAGE>

increased pretax earnings by approximately $1.3 million ($750,000 net of tax)
in 1994 and $266,000 ($160,000 net of tax) in 1993.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly financial data for
each of the most recent six quarters through the period ended June 30, 1996.
Management believes that such unaudited data reflects all adjustments necessary
to present fairly the results of operations for the periods presented (dollars
in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
JUNE
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $11,367 $11,897 $12,178 $12,534 $12,611 $12,837
Operating income........ 2,337 2,591 2,007(1) 3,165 2,861 1,930(2)
Income before income
taxes and extraordinary
loss................... 1,203 1,493 1,011(1) 2,218 1,927 940(2)
Income before
extraordinary loss..... 728 903 612(1) 1,341 1,166 568(2)
Net income.............. 728 903 466 1,341 1,166 568
</TABLE>
- --------

(1) Includes a charge of $600,000 ($360,000 net of tax) related to the
writedown of undeveloped property to net realizable value.

(2) Includes a charge of $1.1 million ($630,000 net of tax) related to the
settlement of certain litigation.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations totaled $6.4 million and $3.9 million for the six
months ended June 30, 1996 and 1995, respectively, and $8.5 million, $7.6
million and $5.7 million for each of the three years ended December 31, 1995,
1994 and 1993, respectively. The improvement in cash flows from operations in
all periods resulted primarily from growth in net income (excluding non-
recurring transactions) and, in the first six months of 1996, growth in
accounts payable and other accrued liabilities.

Current liabilities exceeded current assets by $1.8 million at June 30, 1996
and $776,000, $1.6 million and $386,000 at December 31, 1995, 1994 and 1993,
respectively, primarily as a result of the timing of cash settlements of
advances from Vencor (which are included in stockholder's equity). Cash and
cash equivalents totaled $4.1 million, $2.8 million, $1.5 million and $1.7
million at June 30, 1996 and December 31, 1995, 1994 and 1993, respectively.

Atria is currently developing 13 sites for new assisted living communities
(approximately 850 units) and has received zoning approvals for eleven of these
communities. The estimated aggregate cost of these projects will approximate
$55 to $60 million and such communities are expected to be in operation at
various dates through June 1998. Management believes that cash flows from
operations, the anticipated additional capitalization from this offering, and
expected consummation of a separate bank credit facility and promissory note
with Vencor on or about the completion of this offering will be sufficient to
meet liquidity needs for approximately 18 months following completion of this
offering.

Atria plans to retain future earnings to finance the growth of its business
rather than to pay cash dividends. Payment of cash dividends in the future will
depend on the financial condition, results of operations and capital
requirements of Atria as well as other factors deemed relevant by the Board of
Directors. It is also anticipated that the proposed Atria Credit Facility will
prohibit Atria from paying cash dividends.

21
<PAGE>

Net cash used in investing activities totaled $1.7 million and $505,000 for
the six months ended June 30, 1996 and 1995, respectively, and $2.9 million and
$4.0 million for the years ended December 31, 1995 and 1994, respectively. Net
cash provided by investing activities totaled $1.3 million for 1993,
principally due to the sale of certain assets. Atria's investing activities
included capital expenditures related to the development of new facilities and
expansion of existing operations totaling $1.8 million and $1.3 million for the
six months ended June 30, 1996 and 1995, respectively, and $4.0 million, $5.7
million and $1.7 million for the years ended December 31, 1995, 1994 and 1993,
respectively.

Net cash used in financing activities was $3.4 and $2.4 million for the six
months ended June 30, 1996 and 1995, respectively, and $4.3 million, $3.8
million and $4.9 million for the years ended December 31, 1995, 1994 and 1993,
respectively. In all periods, operating cash flows in excess of capital
expenditures were used primarily to repay advances from Vencor and, in 1993 and
the first six months of 1996, to reduce long-term debt.

Excluding acquisitions and development of new facilities, management believes
that capital expenditures related to the expansion and improvement of existing
communities could approximate $3.0 million in 1996. Management believes that
its capital expenditure program is adequate to expand, improve and equip
existing communities, and expects to finance such expenditures primarily
through cash flows from operations. At June 30, 1996, one project was under
construction, the additional cost of which to complete and equip could
approximate $3.4 million.

The combined financial statements of Atria reflect the anticipated assumption
of approximately $95.3 million of Vencor's long-term debt. In addition, Atria
intends to refinance all outstanding borrowings under the Vencor bank revolving
credit agreement (the balance of which approximated $9.1 million at June 30,
1996) upon completion of this offering from proceeds under a separate bank
credit agreement currently being negotiated by Atria. Although the terms have
not been finalized, the proposed Atria Credit Facility could aggregate up to
$200.0 million in revolving credits, including a letter of credit option not to
exceed $70.0 million. It is anticipated that loans under the proposed facility
will bear interest, at Atria's option, at either (i) a base rate based on PNC
Bank's prime rate of interest or the daily federal funds rate or (ii) a LIBOR
rate, plus an additional percentage based on the Company's leverage. It is
expected that the credit facility will be secured by all of Atria's property,
the capital stock of Atria's subsidiaries and intercompany indebtedness of
subsidiaries to Atria. It is also contemplated that the Atria Credit Facility
will (i) contain financial covenants and other restrictions that require Atria
to meet certain financial tests, (ii) require Vencor to maintain at least a 30%
ownership of the Common Stock, (iii) require that there be no change in control
of the Company, (iv) limit, among other things, the ability of Atria and
certain of its subsidiaries to borrow additional funds, dispose of assets and
engage in mergers or other business combinations and (v) prohibit distributions
to Atria's stockholders. See "Risk Factors--Need for Additional Financing" and
"--Risk of Indebtedness," "Certain Transactions" and Note 4 of Notes to
Combined Financial Statements.

Included in the Company's long-term debt, including amounts due within one
year, of approximately $104.4 million at June 30, 1996 is $62.1 million of
indebtedness under industrial revenue bonds which contain covenants requiring
certain numbers of income qualified residents. The Company does not presently
intend to enter into similar bond financing in the future. See "Risk Factors--
Risk of Indebtedness."

The combined financial statements included in this Prospectus are presented
as if Atria had been operated as a separate entity. Accordingly, stockholder's
equity (which represents Vencor's pre-offering 100% interest) comprises both
investments by and non-interest bearing advances from Vencor. Management
expects that in connection with this offering, such amounts will be included as
part of Atria's permanent equity capitalization.

22
<PAGE>

EFFECTS OF INFLATION AND CHANGING PRICES

Atria derives substantially all of its revenues from private pay sources
within its assisted and independent living business. The terms of most rental
agreements approximate one year, generally enabling Atria to increase prices
to maintain operating margins. However, management believes that a significant
number of competing assisted and independent living communities will be
developed in markets in which Atria operates, the effect of which may limit
Atria's ability to increase prices to maintain operating margins in the
future. In addition, other market conditions, including the effect of
unfavorable real estate zoning requirements and increased government
regulation, could adversely impact Atria's ability to increase prices or
control growth in operating expenses.

OTHER INFORMATION

In the event that all or part of the previously discussed assumption of
approximately $95.3 million of Vencor's long-term debt does not occur prior to
the offering, Vencor would remain primarily liable for such debt. Atria and
Vencor have agreed that Atria would pay all amounts and otherwise satisfy all
obligations related to such long-term debt. In the case of any Vencor long-
term debt proposed to be assumed by Atria in the offering, to the extent that
Atria and Vencor are unable to obtain consents from holders of such debt to
the assumption by Atria of primary liability for such debt, the amount of such
debt will be reflected as a liability of Vencor in its financial statements
(although Vencor's financial statements will also reflect as an asset a
receivable from Atria in an equal amount, which will accrue interest and will
be payable on the same terms as such Vencor long-term debt). Furthermore,
Vencor may be contingently liable as guarantor of certain long-term debt
assumed by Atria in the offering.

Certain long-term debt agreements contain customary covenants which include:
(i) limitations on additional debt and capital expenditures; (ii) limitations
on sales of assets, mergers and changes in ownership; and (iii) maintenance of
certain financial ratios. Atria was in material compliance with all such
covenants at June 30, 1996.

23
<PAGE>

BUSINESS

OVERVIEW

Atria Communities, Inc. is a national provider of assisted and independent
living communities for the elderly. The Company currently operates 22
communities in 13 states with a total of 3,022 units, including 650 assisted
living units and 2,372 independent living units. The Company owns 16 of these
communities, holds a majority interest in two communities, leases two
communities and manages two communities. The Company also has 13 assisted
living communities under development with a total of approximately 850 units.
To date, the Company has obtained zoning approval for 11 of 13 properties
under development. For the year ended December 31, 1995, the Company had
revenues and net income of $48.0 million and $3.4 million, respectively, and
had an average occupancy rate of 94.5%. For the six months ended June 30,
1996, the Company had revenues and net income of $25.4 million and $1.7
million, respectively, and had an average occupancy rate of 95.6%.
Substantially all of the Company's revenues are from private pay sources.

INDUSTRY BACKGROUND

The assisted and independent living industries are rapidly emerging
components of the non-acute health care system for the elderly. According to
industry estimates, the assisted and independent living industries represented
approximately $10 to $12 billion in revenue in 1995. The assisted living
industry serves the long-term needs of the elderly who do not require the more
extensive medical services available in skilled nursing facilities, yet who
are no longer capable of a totally independent lifestyle. It is estimated that
35% of the people over the age of 85 require assistance with at least one
activity of daily living ("ADL"), such as eating, grooming and bathing,
personal hygiene and toileting, dressing, transportation, walking and
medication reminders. The Company believes that assisted living residents
typically desire the comfort and security of having their own "home" yet
require help with two or more ADLs on a regular basis. The independent living
industry serves the long-term care needs of the elderly who require or prefer
only occasional assistance with ADLs and who no longer desire, or cannot
maintain, a totally independent lifestyle.

The Company believes that a number of significant trends will support the
continued growth of the assisted and independent living industries. These
trends include:

Favorable Demographic Trends. The Bureau of the Census estimates that the 85
and over age group is the fastest growing segment of the population and is
projected to increase approximately 42% from 1990 to 2000. The Company
believes that with a growing elderly population, the number of people who will
need or desire to reside in an assisted or independent living community will
also increase.

Cost-Containment Pressures. The Company believes its business will benefit
from the continuing efforts of the government, private insurers and managed
care organizations to contain health care costs by limiting lengths of stay,
services and reimbursement amounts in acute care hospitals. As a result of
these cost containment efforts, an increasing number of patients seek skilled
nursing facility care. Accordingly, many skilled nursing facilities are
devoting a greater portion of their capacity to residents with higher
reimbursement profiles who require more intensive nursing care. The Company
believes there will be opportunities for assisted and independent living
facilities to provide accommodations and services to residents who require
lower levels of care than may be generally provided to residents in skilled
nursing facilities.

Limited Supply of Long-Term Care Facilities. Most states have enacted
certificate of need or similar legislation which restricts the supply of
licensed nursing facility beds. These laws generally limit the construction of
new nursing facilities and the addition of beds or services to existing
nursing facilities. Construction costs, limitations on government
reimbursement for full costs of construction and start-up expenses also
constrain growth in the supply of nursing facility beds. According to a 1993
industry report,

24
<PAGE>

the average occupancy rate for nursing facilities in the United States was
approximately 95%. The Company believes that the limitations on the supply of
skilled nursing facility beds will increase the need for assisted living
communities, although the number of assisted living units has increased
substantially in recent years.

Price Advantages. A 1993 industry report indicated that the annual cost per
patient for nursing facility care averaged approximately $35,000 in 1993,
while the annual per resident cost for assisted living care averaged
approximately $24,000. Because rates paid by private pay patients in skilled
nursing facilities are higher than government reimbursement rates, the
comparable cost advantage of assisted living over a private pay skilled
nursing facility rate is even greater. The Company also believes that assisted
living compares favorably with home health care, particularly when the prices
associated with housing and meal preparation are added to the prices of home
health care.

Consumer Preference. The Company believes that assisted and independent
living communities provide prospective residents and their families with an
attractive alternative to skilled nursing facilities. Assisted and independent
living facilities allow residents to "age in place" and preserve their
independence in a more residential setting.

Changing Family Dynamics. As a result of the growing number of two-income
families, fewer children are able to care for elderly parents in their own
homes. Other factors such as the increase in single-parent households and the
increasing geographic dispersion of families also contribute to the inability
of many children to care for elderly parents in the home.

BUSINESS STRATEGY

The Company's predecessors have operated assisted and independent living
communities as part of a health care network for over a decade. The Company's
objective is to expand its position as a national provider of high-quality
assisted and independent living services. The Company is pursuing the
following strategies to meet this objective:

Rapid Development of Additional Assisted Living Communities and Units. The
Company intends to develop or acquire 60 to 85 additional assisted living
communities by the year 2000 (including 13 communities currently being
developed). The Company plans to expand its base of assisted living
communities on a national basis where Vencor has a presence and in other high
population density areas. The Company has acquired 13 sites for new assisted
living communities and has received zoning approvals for eleven of these
sites. The Company also plans to develop additional units for the memory-
impaired and convert at least 750 of its existing independent living units to
assisted living units by the year 2000. The Company believes that it can
accelerate its development efforts by outsourcing selected development
functions to third parties, such as preliminary site selection, zoning,
architecture and construction.

Network with Vencor. The Company intends to develop communities in close
proximity to Vencor's facilities, which may facilitate participating with
Vencor in providing services to HMOs and other managed care companies. The
Company believes that networking opportunities exist between assisted living
facilities and long-term care hospitals and skilled nursing facilities. The
Company also expects that the geographic proximity to Vencor's nursing and
hospital facilities will foster transfers between the Company's communities
and Vencor's facilities. Fifteen of the Company's communities are located on
or adjacent to a Vencor's facility and certain of the Company's future
development efforts will focus on sites near existing Vencor's facilities. It
is possible that conflicts of interest may arise between the Company and
Vencor. If such conflicts of interest do arise in its dealings with Vencor,
the Company anticipates resolving such conflicts on a case-by-case basis,
which may include the use of committees comprised of disinterested directors.
See "Risk Factors--Relationship with Vencor; Conflicts of Interest."

25
<PAGE>

Higher Acuity Service Model. The Company intends to pursue, as appropriate,
a higher acuity model of assisted living to enable the Company's residents to
"age in place." By making available such extended services as home health care
and rehabilitation to its residents, the Company believes that it will be
better able to meet the full range of its residents' needs and facilitate
longer lengths of stay. Residents will be able to continue to live in the
Company's communities unless they develop medical conditions requiring
institutional care in a skilled nursing facility or admission to an acute care
hospital. Residents currently obtain certain health care services from third
parties, including Vencor. The Company may elect to make available certain
health care services to its residents on a direct basis in the future.

Private Pay Focus. The Company intends to focus its development and
marketing efforts on private pay, middle- and upper-income residents. The
Company believes that this market represents the largest market opportunity
for assisted living services and that private pay residents are more
profitable than residents covered by government reimbursement programs.
Substantially all of the Company's revenues are derived from private pay
sources.

SERVICES PROVIDED

The Company's mission is to be the leading provider of senior living
services by delivering consistent, high-quality, innovative services to its
residents and their community. Services provided are designed to respond to
residents' individual needs, while promoting independence and dignity.
Residents live in private studios or apartments with access to basic services,
such as health screenings, blood pressure checks, security, utilities, meal
service, housekeeping and laundry services, dietary, exercise and fitness
classes, social and recreational programs, 24-hour emergency call systems and
local transportation on a van or minibus to physician offices, stores and
community events ("Basic Services").

In addition to Basic Services, assisted living residents are offered
additional services including an increased level of housekeeping, meal
services and assistance with one or more ADLs, such as eating, grooming and
bathing, personal hygiene and toileting, dressing, additional transportation,
walking and medication reminders ("Assisted Living Services"). Health-related
services, which are made available and provided according to the resident's
individual needs and in accordance with state regulatory requirements, may
include assistance with taking medication and injections, as well as health
care monitoring. The Company offers each of its residents a personalized
assisted living service plan that may include any combination of ADLs.

Residents pay a monthly fee for Basic Services and additional Assisted
Living Services are purchased based on hourly rates or in some communities are
purchased as part of an increased service package. Most residents rent units
through a one-year lease. If the resident dies or transfers to another
facility due to the need for a higher level of medical care the lease is no
longer binding on the resident.

The process of customizing services to meet the needs of residents begins
with the resident admission process, where the facility's management staff,
the resident and, if appropriate, the resident's family and physician, discuss
the resident's needs and develop an appropriate service plan. If recommended
by the resident's physician, additional health or medical services may be
provided at the facility by a third-party home health care agency or other
medical provider such as Vencor. In some states, the Company or one of its
subsidiaries is a licensed home health care provider. The service plan is
reviewed, monitored and modified on a regular basis.

In addition to Basic Services and Assisted Living Services, specially
trained staff provide other care and services specifically designed for
memory-impaired residents at two communities. These programs provide the
attention, care programs and services needed to help memory-impaired residents
maintain a higher quality of life.

The Company believes that quality care creates satisfied residents who,
along with their families, are important referral sources for the Company. The
Company has developed quality assurance programs to

26
<PAGE>

ensure that service quality is maintained in its communities. The Company
conducts periodic surveys of residents to monitor satisfaction with
accommodations and services. The Company has established operational standards
and performance goals for its communities addressing such matters as food
service, housekeeping, maintenance and administration.

THE COMPANY'S COMMUNITIES

The Company's communities vary in size from 28 to 356 units. Communities are
designed to maximize privacy in a home-like, non-institutional atmosphere. The
Company adapts its facilities to regional architectural styles and tastes
rather than replicate a "prototype" architectural design. Assisted living
units are typically studio or one bedroom units ranging in size from 375 to
525 square feet. Independent living units may range from a studio (375 to 425
square feet) to a three bedroom unit (700 to 1,000 square feet). The units
typically include a private bathroom, kitchenette, closet, living and sleeping
areas, as well as a lockable door, emergency call system, individual
temperature controls, fire alarm and sprinkler system, among other amenities.

Approximately 40% of a typical community is devoted to common areas and
amenities, including reading rooms, family or living rooms and other areas
(such as beauty salons, cafes and ice cream parlors) designed to promote
interaction among residents. The Company's communities are usually one, two or
three stories. Interior layouts are designed to promote a home-like
environment, efficient delivery of quality resident care and resident
independence.

27
<PAGE>

The table below sets forth certain information regarding communities
operated by the Company. Except as otherwise noted, the Company owns, directly
or indirectly, the following communities:

<TABLE>
<CAPTION>
AVERAGE
NUMBER OF UNITS OCCUPANCY FOR
--------------------------- THE SIX MONTHS
YEAR FIRST INDEPENDENT ASSISTED ENDED
COMMUNITY LOCATION(1) OPERATED(2) LIVING LIVING TOTAL JUNE 30, 1996(3)
- --------- ----------- ----------- ----------- -------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA
Valley Manor........... Tucson 1975 45 24 69 89.1%
Villa Campana.......... Tucson 1984 141 -- 141 96.1
Campana Del Rio(4)..... Tucson 1988 190 24 214 98.8
Kachina Point(4)....... Sedona 1986 102 -- 102 96.2
CALIFORNIA
Courtyard at San Mar-
cos(4)(5)............. San Marcos 1987 178 34 212 94.3
COLORADO
The Court at Castle
Gardens(4)............ Northglenn 1986 -- 99(6) 99 100.0
FLORIDA
Evergreen Woods........ Spring Hill 1979 161 55 216 91.4
The Heritage........... Brooksville 1992 -- 57(7) 57 84.5
Windsor Woods(4)....... Hudson 1988 127 53 180 99.2
Meridian House(4)(8)... Lantana 1986 140 33 173 95.0
IDAHO
Hillcrest.............. Boise 1984 115 -- 115 91.9
INDIANA
The Heritage at Wild-
wood.................. Wildwood 1995 -- 72 72 89.1
Colonial Oaks(9)....... Marion 1978 63 -- 63 92.3
KANSAS
The Hearthstone(4)..... Topeka 1987 115 40 155 98.7
MASSACHUSETTS
Foxhill Village(9)..... Westwood 1990 329 27 356 99.8
New Pond Village(10)... Walpole 1990 167 32 199
MISSOURI
Villa Ventura.......... Kansas City 1985 129 43 172 96.7
NEW HAMPSHIRE
The Greens............. Hanover 1984 28 -- 28 98.8
OHIO
McMillen(11)........... Newark 1986 80 -- 80 87.3
UTAH
The Crosslands(4)...... Sandy 1986 120 -- 120 95.1
WASHINGTON
The Narrows Glen....... Tacoma 1987 142 -- 142 98.4
Laurel House........... Tacoma 1994 -- 57 57 94.7
----- --- -----
Total........... 2,372 650 3,022 95.6%
===== === =====
</TABLE>
- --------
(1) All communities are within ten miles of a Vencor skilled nursing facility,
except for Meridian House, The Hearthstone and Villa Ventura.
(2) Represents the year in which the Company or a predecessor of the Company
opened or commenced operations.

(3) Average occupancy is calculated by dividing the number of occupied units
by the total number of available units during the respective period.

(4) The construction of these communities was financed through the issuance of
industrial revenue bonds. See "Risk Factors--Risks of Indebtedness."

(5) The Company owns a 65% interest in this community.

(6) Includes 22 units for the memory impaired.

(7) Includes 44 units for the memory impaired.

(8) The Company owns a 99% interest in this community.

(9) The Company manages these communities pursuant to management agreements
which expire September 30, 1996 (Colonial Oaks) and July 31, 2000 (Foxhill
Village). These communities are owned by unaffiliated entities.

(10) The Company leases this community from a partnership pursuant to a 99-
year lease agreement. The Company will acquire this community in exchange
for assuming certain indebtedness upon the satisfaction of certain
conditions.

(11) The Company leases this community from an unaffiliated entity under a
lease agreement expiring on October 31, 1996, at which time the Company
expects to renew such agreement.

28
<PAGE>

DEVELOPMENT PROGRAM

The Company is developing 13 sites for new assisted living communities and
has received zoning approvals for eleven of these communities. The table below
sets forth certain information regarding the Company's development properties:

<TABLE>
<CAPTION>
ESTIMATED NUMBER OF
DEVELOPMENT COMPLETION ASSISTED
LOCATION(1) PHASE DATE(2) LIVING UNITS
----------- ------------------ -------------- ------------
<S> <C> <C> <C>
Sedona, Arizona................. Zoned May 1997 60(3)
Tucson, Arizona................. Zoned(4) September 1997 40
Redding, California(5).......... Zoned April 1997 60
Northglenn, Colorado(6)......... Zoned October 1997 40(7)
Lantana, Florida(6)............. Zoned July 1997 60
Atlanta, Georgia................ Zoned August 1997 90
Topeka, Kansas(6)............... Zoned August 1997 60
Kennebunk, Maine................ Zoned September 1997 90
Dennis, Massachusetts........... Land acquired June 1998 60(3)
Charlotte, North Carolina....... Zoned December 1997 90
Sandy, Utah..................... Under construction February 1997 63
Virginia Beach, Virginia........ Land acquired November 1997 90
Tacoma, Washington.............. Zoned September 1997 40
---
Total......................... 843
===
</TABLE>
- --------

(1) All properties are located within ten miles of a Vencor skilled nursing
facility, except Lantana, Florida, Topeka, Kansas and Charlotte, North
Carolina.
(2) There can be no assurance that zoning or construction delays will not be
experienced. See "Risk Factors--Development and Construction Risks."
(3) Includes 20 units for the memory impaired.
(4) A special use permit is also required.

(5) This property is leased from Vencor pursuant to a 99-year lease, under
which the Company will acquire the property upon obtaining certain
approvals. All other properties in this table are owned by the Company.

(6) These communities are being developed adjacent to existing Company
communities.

(7) All units will be for the memory impaired.

The Company plans to focus on expanding its base of assisted living
communities where Vencor has a presence and in other high-density population
areas. The Company currently expects to develop or acquire 60 to 85 communities
by the year 2000, including communities set forth in the table above. In
addition, the Company plans to convert at least 750 of its existing independent
living units to assisted living units by the year 2000. The Company believes
that it can accelerate its development efforts by outsourcing selected
development functions to third parties, including Vencor. While it is expected
that most of its expansion will be as a result of development, the Company also
intends to acquire existing assisted living facilities or facilities it can
reposition as assisted living communities on a selective basis. See "Risk
Factors--Development and Construction Risks."

The Company is following a disciplined development strategy that begins with
site selection. When selecting new development sites, the Company considers the
local and regional economic environment, demographics, competition, the labor
market, the legislative and regulatory environment and other factors. After
targeting a market, the Company engages independent contractors to identify
suitable real estate. After the land is acquired, the Company typically
initiates the zoning, architectural and construction aspects of development.
The Company estimates that zoning and other site approvals may take
approximately six months after a site is acquired. Once such approvals are
obtained, the Company estimates that construction time will be six to ten
months and the cost of each unit will range from $65,000 to $70,000.

29
<PAGE>

Existing communities range in size from 28 to 356 units. The Company plans
in the future to develop communities typically with approximately 90 units.
The Company believes that this size offers marketing and operating advantages,
including economies of scale. However, the number of units in a community will
depend, among other things, on local market conditions, site availability and
site size. Although certain interior layouts will be relatively standard, the
Company intends to customize the exterior appearance of each community to
reflect local architectural styles and tastes.

Prior to the completion of construction, the Company initiates a marketing
campaign, emphasizing contacts with potential referral sources. Once opened,
the Company estimates that it will take an average of twelve months for
communities to achieve targeted occupancy levels. See "Risk Factors--
Development and Construction Risks."

The Company also plans to acquire additional assisted living facilities or
other properties that can be repositioned as Atria assisted living
communities. In evaluating possible acquisitions, the Company considers, among
other factors: (i) location, construction quality, condition and design of the
facility; (ii) current and projected cash flows; (iii) the ability to increase
revenues, occupancy and cash flows by providing a full range of assisted
living services; (iv) costs of repositioning (including renovations, if any);
and (v) the extent to which the acquisition will complement the Company's
development program. See "Risk Factors--Acquisition Risks; Difficulties of
Integration."

MANAGEMENT OF THE COMMUNITIES

An executive director typically manages the day-to-day operations at each
community, including oversight of the quality of care, marketing, coordination
of services and monitoring financial performance. The executive director is
responsible for all personnel, including management, security, staff and
independent contractors. Executive directors are compensated based on service
quality, as well as financial results. Service quality is assessed, in part,
through customer and employee satisfaction surveys.

In most cases, each community also has managers for environmental services,
care services, the business office, dietary services, activities, security,
transportation and sales and marketing. All assisted living communities employ
a licensed practical nurse. Some residents contract with third parties such as
home health agencies to provide additional services.

The Company actively recruits personnel to maintain adequate staffing levels
at its existing communities, as well as new staff for new or acquired
communities prior to opening. The Company maintains training sites in Tacoma,
Washington, and Hudson, Florida, for its executive directors and other key
personnel. The Company expects to open two new training sites by the end of
1996. Participants receive intensive training in all facets of community
management in three- to four-day sessions. Moreover, the Company offers two
different levels of training, such that participants who successfully complete
one level return subsequently for the next level of training.

Executive directors report to area executive directors. The Company has
three area executive directors, each with regional responsibility. Area
executive directors report to the Chief Operating Officer or to the Vice
President of Operations.

MARKETING

Each community employs a sales and marketing director. Before opening new
communities, the Company typically uses telemarketing, direct mail and
newspaper ads for developing awareness of such communities. Once communities
are open, the Company's marketing strategy focuses on enhancing the reputation
of the communities and creating an awareness of the Company's services among
potential referral sources, such as hospitals, rehabilitation hospitals, home
health care agencies and other health care providers located near the
Company's communities. The Company believes that satisfied residents

30
<PAGE>

and their families are the most important referral sources for its established
communities. Accordingly, the Company believes that its emphasis on high-
quality services and resident satisfaction will result in a strong referral
base for its existing communities. The Company also seeks to maintain
occupancy levels by retaining residents for longer periods of time by
expanding the services available to residents, thereby allowing residents to
"age in place."

A typical assisted living resident is a female over the age of 80 whose
residence was generally within five to ten miles of the community. The
decision to relocate to one of the Company's communities is usually made by
the resident and their family.

COMPETITION

The assisted living industry is highly competitive. The Company faces
competition from numerous local, regional and national providers of assisted
living and long-term care. The Company also competes with companies providing
home-based health care. Some of the Company's competitors operate on a not-
for-profit basis or as charitable organizations. Many of the Company's
competitors are significantly larger and have greater financial resources than
the Company. The Company believes that the assisted living industry will
become even more competitive in the future. Regulatory barriers to entry into
this industry are generally not substantial. If the development of new
assisted living communities surpasses the demand for such communities in
particular markets, such markets may become saturated. The Company expects to
face competition with respect to its acquisition of additional assisted living
communities and properties. There can be no assurance that competition will
not limit the Company's ability to attract residents and expand its business
and will not have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company believes that assisted and independent living communities
compete primarily on the basis of quality of service, services offered,
reputation, a facility's location and appearance and prices. The Company
believes its communities are distinguishable from assisted and independent
living facilities that do not cater primarily to private pay residents because
of the quality of services, amenities and physical facilities that the Company
is able to offer. In addition, a number of the Company's communities maintain
both assisted and independent living units. The Company believes that the
ability of these communities to continue to serve residents as their needs
increase may be attractive to potential residents. See "Risk Factors--Highly
Competitive Industry."

FUNDING FOR ASSISTED AND INDEPENDENT LIVING CARE

The Company currently, and for the foreseeable future, expects to rely
primarily on its residents' ability to pay the Company's charges from their
own resources. Inflation or other circumstances that adversely affect the
elderly's ability to pay for services could have an adverse effect on the
Company's business, financial condition and results of operations. Depending
on the nature of an individual's health insurance program or any long-term
care insurance policy, the resident may receive reimbursement for certain
costs under an "alternate care benefit."

Eight of the Company's communities were financed in part through the
issuance of tax-free industrial revenue bonds (the "Bonds"). At June 30, 1996,
there was $62.1 million principal amount of such Bonds outstanding with an
average interest rate of approximately 5.1%. Under the terms of the Bonds, the
Company is required to rent approximately 250 assisted and independent living
units to individuals who have incomes which are 80% or less of average income
levels in a designated market. In certain cases, the Company's ability to
increase prices in communities with such Bond financing (in response to higher
operating costs or other inflationary factors) could be limited if it affects
the ability of the Company to attract and retain residents with qualifying
incomes.

Government payments for assisted and independent living have been limited.
Some state or local governments offer subsidies for rent or services for low-
income elderly persons. Others may provide

31
<PAGE>

subsidies in the form of additional payments for those who receive
Supplemental Security Income. Medicaid provides insurance for certain
financially or medically needy persons, regardless of age, and is funded
jointly by federal, state and local governments. Payments for the services
provided by the Company are not permitted under the Medicaid program absent a
waiver. While there are various federal and state initiatives to provide
reimbursement for assisted and independent living programs, at this time the
Company believes that the level of reimbursement under such federal and state
programs would be insufficient to cover the cost of delivering the level of
service provided by the Company.

GOVERNMENT REGULATION

Changes in existing laws and regulations, adoption of new laws and
regulations and new interpretations of existing laws and regulations could
have a material impact on the Company's operations. Failure by the Company to
comply with applicable regulatory requirements could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Government Regulation."

The health care industry is subject to extensive regulation and frequent
regulatory change. At this time, no federal laws or regulations specifically
regulate assisted or independent living facilities. While a number of states
have not yet enacted specific assisted living regulations, the Company's
communities are subject to regulation, licensing, certificate of need
requirements and permitting by state and local health and social service
agencies and other regulatory authorities. While such requirements vary from
state to state, they typically relate to staffing, physical design, required
services and resident characteristics. The Company believes that such
regulation will increase in the future. In addition, health care providers are
receiving increased scrutiny under anti-trust laws as integration and
consolidation of health care delivery increases and affects competition. The
Company's communities are also subject to various zoning restrictions, local
building codes and other ordinances, such as fire safety codes. Failure by the
Company to comply with applicable regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. Regulation of the assisted living industry is evolving.
The Company is unable to predict the content of new regulations and their
effect on its business. There can be no assurance that the Company's
operations will not be adversely affected by regulatory developments.

Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients
to such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
health care items or services. Vencor provides certain services to residents
of the Company's communities. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between
health care providers and sources of patient referral. Similar state laws,
which vary from state to state, are sometimes vague and seldom have been
interpreted by courts or regulatory agencies. Violation of these laws can
result in loss of licensure, civil and criminal penalties, and exclusion of
health care providers or suppliers from participation in the Medicare and
Medicaid program. There can be no assurance that such laws will be interpreted
in a manner consistent with the practices of the Company.

The Company believes that its communities are in substantial compliance with
applicable regulatory requirements. However, in the ordinary course of
business, one or more of the Company's communities could be cited for
deficiencies. In such cases, the appropriate corrective action would be taken.
To the Company's knowledge, no material regulatory actions are currently
pending with respect to any of the Company's communities.

32
<PAGE>

federal, state and local laws exist which also may require modifications to
existing and planned properties to create access to the properties by disabled
persons. While the Company believes that its properties are substantially in
compliance with present requirements or are exempt therefrom, if required
changes involve a greater expenditure than anticipated or must be made on a
more accelerated basis than anticipated, additional costs would be incurred by
the Company. Further legislation may impose additional burdens or restrictions
with respect to access by disabled persons, the costs of compliance with which
could be substantial.

EMPLOYEES

The Company has approximately 1,150 employees of which 820 are full time and
330 are part time. Eight full-time employees are employed at the Company's
principal executive offices. None of the Company's employees are currently
represented by a labor union and the Company is not aware of any union
organizing activity among its employees. The Company believes that its
relationship with its employees is satisfactory.

LITIGATION

The Company is involved in various lawsuits and claims arising in the normal
course of business. In the opinion of management of the Company, although the
outcomes of these suits and claims are uncertain, in the aggregate they should
not have a material adverse effect on the Company's business, financial
condition and results of operations.

33
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of the
Company's directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
W. Bruce Lunsford(1)(2)............ 48 Chairman of the Board
W. Patrick Mulloy, II(1)........... 43 Chief Executive Officer, President and
Director
Ralph H. Bellande.................. 50 Chief Operating Officer
J. Timothy Wesley.................. 36 Chief Financial Officer, Vice President
of Development and Secretary
Sandra Harden Austin(3)(4)......... 48 Director
William C. Ballard Jr.(2)(4)....... 55 Director
Peter J. Grua(4)(5)................ 42 Director designee
Thomas T. Ladt(2)(3)(4)............ 45 Director
R. Gene Smith(1)(2)(3)............. 61 Director
</TABLE>
- --------
(1) Member of the Executive Committee of which Mr. Lunsford is Chairman.
(2) This person also serves as a Vencor director or officer.
(3) Member of the Executive Compensation Committee of which Mr. Smith is
Chairman.

(4) Member of the Audit Committee of which Mr. Ballard is Chairman. Mr. Grua
will become a member of the Audit Committee upon his appointment to the
Board of Directors.

(5) Prior to completion of this offering, Mr. Grua, who has agreed to serve as
a director, will be appointed as a director of the Company.

W. Bruce Lunsford has served as a director of the Company since May 1996. He
is a certified public accountant and an attorney. Mr. Lunsford is a founder of
Vencor and has served as Vencor's Chairman of the Board, President and Chief
Executive Officer since Vencor commenced operations in 1985. He is a director
of National City Corporation, a bank holding company; Churchill Downs
Incorporated; and Res-Care, Inc., a provider of residential training and
support services for persons with developmental disabilities and certain
vocational training services.

W. Patrick Mulloy, II has served as the Chief Executive Officer, President
and a director of the Company since May 1996. From 1994 to 1996, Mr. Mulloy
was a member and of counsel to the law firm of Greenebaum Doll & McDonald
PLLC. From 1992 to 1994, Mr. Mulloy served as the Secretary of the Finance and
Administration Cabinet for the Commonwealth of Kentucky. For over ten years
prior to 1992, Mr. Mulloy engaged in the private practice of law in
Louisville, Kentucky. Mr. Mulloy has also been actively involved in commercial
and multi-family real estate acquisitions and developments through a family
partnership.

Ralph H. Bellande has been the Chief Operating Officer of the Company since
May 1996. From November 1995 to May 1996, Mr. Bellande served as a Vice
President of Vencor and was responsible for managing the assisted living
operations of Vencor which are now owned by the Company. From 1987 to 1995,
Mr. Bellande was a Vice President of The Hillhaven Corporation and was
responsible for managing the assisted living operations which are now owned by
the Company.

J. Timothy Wesley has been the Chief Financial Officer, Vice President of
Development and Secretary of the Company since May 1996. From 1994 to May
1996, Mr. Wesley was Director and Manager of Development at Vencor. From 1992
to 1994, Mr. Wesley was Vice President of Strategic Planning for Home Care
Affiliates, Inc., and from 1986 to 1992, he was employed by Humana Inc., most
recently as Director of Acquisitions.

34
<PAGE>

Sandra Harden Austin has served as a director of the Company since May 1996.
Since 1994, Ms. Austin has been President of Physician Services for Caremark
International, a provider of health care products and services. Ms. Austin
served as President and Chief Operating Officer of University of Chicago
Hospitals from 1990 to 1993. Ms. Austin is a director of National City
Corporation and Ferro Corporation, a multi-specialty chemical manufacturer.

William C. Ballard Jr. has been a director of the Company since May 1996.
Mr. Ballard has been a director of Vencor since 1988. Since 1992, Mr. Ballard
has been of counsel to the law firm of Greenebaum Doll & McDonald PLLC. From
1981 to 1992, he served as Executive Vice President--Finance and
Administration of Humana Inc. Mr. Ballard is also a director of Mid-America
Bancorp, United Healthcare Corp., LG&E Energy Corp., Health Care REIT, Inc.
and American Safety Razor Inc.

Peter J. Grua has agreed to serve as a director and will be appointed as a
director prior to the completion of this offering. Since 1992, Mr. Grua has
been a principal of HLM Management, an investment management company
specializing in entrepreneurial and growth companies. Prior to joining HLM
Management, Mr. Grua was a Managing Director of Alex. Brown & Sons
Incorporated where he was a research analyst from 1986 to 1992.

Thomas T. Ladt has been a director of the Company since May 1996. Mr. Ladt
has served as Executive Vice President, Operations of Vencor since February
1996. From November 1995 to February 1996, he served as President of Vencor's
Hospital Division. Mr. Ladt was Vice President of Vencor's Hospital Division
from 1993 to November 1995. From 1989 to 1993, Mr. Ladt was a Regional
Director of Operations for Vencor.

R. Gene Smith has served as a director of the Company since May 1996. Mr.
Smith has been a director of Vencor since 1985 and Vice Chairman of the Board
of Vencor since 1987. From 1987 to 1995, Mr. Smith was President of New Jersey
Blockbuster, Ltd., which held the Blockbuster Video franchise for northern New
Jersey. 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 General Partner of Direct Programming Services, a marketer of
direct broadcast satellite television services.

COMMITTEES OF THE BOARD OF DIRECTORS

Executive Committee. The members of the Executive Committee are Messrs.
Mulloy, Smith and Lunsford. The Executive Committee has been delegated all of
the powers of the Board of Directors to the extent permitted under the
Delaware General Corporation Law.

Executive Compensation Committee. The members of the Executive Compensation
Committee are Messrs. Smith and Ladt, and Ms. Austin, all of whom are non-
employee directors. The Compensation Committee makes recommendations to the
full Board of Directors concerning compensation and benefits for executive
officers of the Company.

Audit Committee. The members of the Audit Committee are Messrs. Ballard and
Ladt, and Ms. Austin, all of whom are non-employee directors. Mr. Grua will
become a member of the Audit Committee upon his appointment to the Board of
Directors. The Audit Committee, among other things, makes recommendations
concerning the engagement of independent auditors, reviews the results and
scope of the annual audit and other services provided by the Company's
independent auditors, and reviews the adequacy of the Company's internal
accounting controls.

COMPENSATION OF DIRECTORS

Directors not employed by the Company receive $500 for each board meeting
they attend. Non-employee directors also receive $250 for each committee
meeting they personally attend. In addition, non-

35
<PAGE>

employee directors receive a $750 retainer for each calendar quarter they
serve as a director. Directors will be reimbursed for reasonable out-of-pocket
expenses incurred in attending Board meetings.

NON-EMPLOYEE DIRECTORS 1996 STOCK INCENTIVE PLAN

Directors not employed by the Company will receive restricted shares of the
Common Stock and options to purchase shares of the Common Stock pursuant to
the Non-Employee Directors 1996 Stock Incentive Plan (the "Directors Plan").
The Directors Plan provides for an initial, one-time grant of 5,000 restricted
shares of Common Stock as of the date of this offering (the "Initial Grant
Date"). However, the Chairman of the Board of Directors, Mr. Lunsford, will
receive 20,000 restricted shares of Common Stock. The restrictions on all such
shares of Common Stock lapse in two equal annual installments, beginning on
the first anniversary of the Initial Grant Date. The Directors Plan also
provides for an initial grant of options to purchase shares of Common Stock on
the Initial Grant Date at the initial public offering price. Each non-employee
director will receive an option to purchase 10,000 shares on the Initial Grant
Date at the initial public offering price, except the Chairman of the Board of
Directors, Mr. Lunsford, who will receive an option to purchase 80,000 shares
at the initial public offering price. Each new non-employee director will be
granted an option to purchase 10,000 shares of Common Stock on the date of his
or her election. The Company will thereafter annually issue, beginning on the
first anniversary of the Initial Grant Date, to each of the Company's non-
employee directors, an option to purchase 1,000 shares of Common Stock.
Subsequent to this offering, all options for directors will be granted at the
fair market value of the Common Stock on the date of grant. A total of 250,000
shares are reserved for issuance under the Directors Plan. All options granted
under the Directors Plan will become exercisable in four equal annual
installments, beginning on the first anniversary of such option's date of
grant.

COMPENSATION OF EXECUTIVE OFFICERS

The Company was organized in May 1996 and its operations since that time
have related primarily to its formation and to the Contribution Transaction.
During 1996, Messrs. Mulloy, Bellande and Wesley will earn annual salaries of
$180,000, $157,500 and $90,000, respectively, exclusive of performance bonuses
which will not exceed one-third of base salary for Mr. Mulloy and one-quarter
of base salary for Mr. Bellande and Mr. Wesley.

EMPLOYEE AWARDS GRANTED

Pursuant to the Company's 1996 Stock Ownership Incentive Plan (the "1996
Plan"), certain executive officers of the Company will receive restricted
shares and options upon completion of this offering. W. Patrick Mulloy, II,
Chief Executive Officer, President and Director, will be granted 30,000
restricted shares of Common Stock and an option to purchase 200,000 shares of
Common Stock at the initial public offering price. Ralph H. Bellande, Chief
Operating Officer, will receive 15,000 restricted shares of Common Stock and
an option to purchase 75,000 shares of Common Stock at the initial public
offering price. J. Timothy Wesley, Chief Financial Officer, Vice President of
Development and Secretary, will receive 5,000 restricted shares of Common
Stock and an option to purchase 35,000 shares of Common Stock at the initial
public offering price. Restrictions on all of these restricted shares of
Common Stock granted pursuant to the 1996 Plan lapse in two equal annual
installments, beginning on the first anniversary of the grant date. All
options to purchase Common Stock will be granted at an exercise price equal to
the fair market value of the Common Stock on the date the option is granted.
These initial option grants will become exercisable in four equal annual
installments, beginning on the first anniversary of the grant date.

VENCOR EMPLOYEE OPTION GRANTS

The Company expects to issue options for 90,000 shares of Common Stock to
certain Vencor employees with an exercise price equal to the initial offering
price. These options are being granted to

36
<PAGE>

incentivize and reward Vencor employees who have provided, and will provide,
support services to the Company. These options will become exercisable in four
equal annual installments, beginning on the first anniversary of the grant
date. See "Certain Transactions."

1996 STOCK OWNERSHIP INCENTIVE PLAN

The 1996 Plan provides for the granting of any of the following awards
("Employee Awards") to eligible employees of the Company and its subsidiaries:
(i) stock options which do not constitute "incentive stock options" within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended ("non-
qualified stock options"); (ii) incentive stock options; (iii) restricted
shares; and (iv) performance units. The 1996 Plan is intended to provide
incentives and rewards for employees to support the execution of the Company's
business plan and to associate the interests of employees with those of the
Company's stockholders.

The 1996 Plan will be administered by a committee composed of two or more
directors or by the entire board of directors (the "Committee"). In
administering the 1996 Plan, the Committee will determine, among other things:
(i) individuals to whom grants of Employee Awards will be made; (ii) the type
and size of Employee Awards; (iii) the terms of an Employee Award including,
but not limited to, a vesting schedule, exercise price, restriction or
performance criteria, and the length of any relevant performance, restriction
or option period. The Committee may also construe, interpret and correct
defects, omissions and inconsistencies in the 1996 Plan.

The Common Stock subject to the 1996 Plan will be authorized but unissued
shares or previously acquired shares. The 1996 Plan provides that 1,000,000
shares of Common Stock will be available for grant of Employee Awards and the
total number of shares of Common Stock with respect to which stock options may
be granted to any individual over the term of the Plan may not exceed 40% of
the total shares authorized for the 1996 Plan. The total number of shares of
Common Stock available for awards of restricted stock is 20% of the total
shares authorized under the 1996 Plan. Pursuant to the 1996 Plan, the number
and kind of shares to which Employee Awards are subject may be appropriately
adjusted in the event of certain changes in capitalization of the Company,
including stock dividends and splits, reclassification, recapitalization,
reorganizations, mergers, consolidations, spin-offs, split-ups, combinations
or exchange of shares, and certain distributions, and repurchases, of shares.

Stock Options. The Committee may grant stock options to eligible individuals
in the form of an incentive stock option or a non-qualified stock option. The
exercise period for any stock option will be determined by the Committee at
the time of grant but may not exceed ten years from the date of grant (five
years in the case of an Incentive Stock Option granted to a "Ten-Percent
Stockholder" as defined in the 1996 Plan). The exercise price per share of
Common Stock covered by a stock option may not be less than 100% of the fair
market value of a share of Common Stock on the date of grant (110% in the case
of an incentive stock option granted to a Ten-Percent Stockholder). The
exercise price is payable, at the Committee's discretion, in cash, in shares
of already owned Common Stock or in any combination of cash and shares. Stock
options will become exercisable in installments as determined by the Committee
and as set forth in the optionee's option agreement. Each option grant may be
exercised in whole, at any time, or in part, from time to time, after the
grant becomes exercisable.

If a participant's employment terminates by reason of death or disability,
any outstanding stock options will vest fully and be exercisable at any time
within two years following the date of death or disability (but in no event
beyond the stated term of the option). Upon an optionee's retirement, stock
options will be exercisable at any time prior to the end of the stated term of
the stock option or two years following the retirement date in the case of
non-qualified stock options and 90 days in the case of incentive stock
options, whichever is the shorter period, but only to the extent the stock
options are exercisable at retirement. Upon termination for any other reason
other than for cause, any previously vested stock options will be exercisable
for the lesser of 90 days or the balance of the stock option's stated term. In
the event of termination for cause, all options, whether or not exercisable,
will terminate.

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<PAGE>

Restricted Stock. Subject to the limitations of the 1996 Plan, the Committee
may grant restricted stock to eligible individuals. Restricted stock awards
are shares of Common Stock that are subject to restrictions on transfer or
other incidents of ownership where the restrictions lapse based solely on
continued employment with the Company for specified periods or based on the
attainment of specified performance standards in either case, as the Committee
may determine. The Committee will determine all terms and conditions pursuant
to which restrictions upon restricted stock will lapse. At the discretion of
the Committee, certificates representing shares of restricted stock will be
deposited with the Company until the restriction period ends. Grantees of
restricted stock will have all the rights of a stockholder with respect to the
restricted stock and may receive dividends, unless the Committee determines
otherwise. Dividends may, at the discretion of the Committee, be deferred
until the restriction period ends and may bear interest if the Committee so
determines.

If a grantee's employment terminates by reason of death or disability prior
to the expiration of the restriction period applicable to any restricted
shares then held by the grantee, all restrictions pertaining to such shares
immediately lapse. Upon termination for any other reason, all restricted
shares are forfeited.

Performance Units. The Committee may grant performance units to eligible
individuals. Each performance unit will specify the performance goals, the
performance period and the number of performance units granted. The
performance period will be not less than one year, nor more than five years,
as determined by the Committee. Performance goals are those objectives
established by the Committee which may be expressed in terms of earnings per
share, price of the Common Stock, pre-tax profit, net earnings, return on
equity or assets, revenues or any combination of the above. Performance goals
may relate to the performance of the Company, a subsidiary, a division or
other operating unit of the Company. Performance goals may be established as a
range of goals if the Committee so desires.

If the Committee determines that the performance goals have been met, the
grantee will be entitled to the appropriate payment with respect thereto. At
the option of the Committee, payment may be made solely in shares of Common
Stock, solely in cash, or a combination of cash and shares of Common Stock.

Change in Control. Generally, in the event of a "change in control" (as
defined in the 1996 Plan) of the Company, all outstanding stock options become
fully vested and immediately exercisable in their entirety. In addition, if
provided in an optionee's agreement, the optionee will be permitted to sell
the option to the Company generally for an amount equal to the excess of (x)
the fair market value over (y) the per share exercise price for such shares
under the stock option. In addition, all restrictions on restricted stock
lapse upon a change in control and outstanding performance units become fully
vested and payable in an amount equal to the greater of: (i) the maximum
amount payable under the performance unit multiplied by a percentage equal to
the percentage that would have been earned assuming the rate at which the
performance goals have been achieved as of the date of the change in control
would have continued until the end of the performance cycle; or (ii) the
maximum amount payable multiplied by the percentage of the performance cycle
completed at the time of the change in control.

Amendments and Termination. The Board may at any time terminate and, from
time to time, may amend or modify the 1996 Plan; provided, however, that no
amendment may impair the rights of a participant with respect to outstanding
Employee Awards without the participant's consent. Any such action of the
Board may be taken without the approval of the Company's stockholders, but
only to the extent that such stockholder approval is not required by
applicable law or regulation. The 1996 Plan will terminate ten years from its
effective date.

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<PAGE>

CERTAIN TRANSACTIONS

The following agreements were entered into between the Company and Vencor:

Incorporation Agreement. To effect the Contribution Transaction and pursuant
to the Incorporation Agreement, Vencor has transferred or agreed to transfer
to the Company, or to cause its respective subsidiaries or affiliates to
transfer to the Company, their respective interests in the communities. The
Company has assumed or agreed to assume all the communities' liabilities in
accordance with the Incorporation Agreement. Except as expressly set forth in
the Incorporation Agreement, no party is making any representation or warranty
as to the assets, businesses or liabilities transferred or assumed as part of
the separation, as to any consents or approvals required in connection
therewith, as to the value or freedom from counterclaim with respect to any
claim of any party, or as to the legal sufficiency of any assignment, document
or instrument delivered to convey title to any asset transferred. Except as
expressly set forth in the Incorporation Agreement, all assets are being
transferred on an "as is," "where is" basis, and the Company has agreed to
bear the economic and legal risks that the conveyance is insufficient to vest
in the Company good and marketable title, free and clear of any security
interest or adverse claim.

The Company will indemnify Vencor and its subsidiaries against certain
losses, claims, damages or liabilities including those arising out of: (i) any
inaccurate representation or breach of warranty under the Incorporation
Agreement; and (ii) any indebtedness, lease, contract or other obligation
referred to in the Incorporation Agreement. The Company will also indemnify
Vencor, as a controlling person, against any loss, claim, damage or liability
arising out of this offering, except for losses, claims, damages or
liabilities arising from information supplied in writing by Vencor for
inclusion in this Prospectus. Vencor will similarly indemnify the Company and
its subsidiaries with respect to any inaccurate representation or breach of
warranty under the Incorporation Agreement.

The Incorporation Agreement contains provisions governing the resolution of
disputes, controversies or claims (collectively, "Disputes") that may arise
between or among the parties. These provisions contemplate that efforts will
first be made to resolve such Disputes by referring the matter to senior
management or other mutually agreed representatives of the parties. If such
efforts are not successful, any party may submit such Dispute to mediation. If
such negotiations and mediation are not successful, any party may submit such
Dispute to mandatory, binding arbitration, subject to the provisions of the
Incorporation Agreement. The Incorporation Agreement contains procedures for
the selection of a sole arbitrator of such Dispute and for the conduct of the
arbitration hearing, including certain limitations on discovery rights of the
parties. These procedures are intended to produce an expeditious resolution of
any such Dispute.

In the event that any such Dispute is, or is reasonably likely to be, in
excess of $5.0 million, or in the event that an arbitration award in excess of
$10.0 million is issued in any arbitration proceeding commenced under the
Incorporation Agreement, subject to certain conditions, any party may submit
such Dispute to a court of competent jurisdiction and the arbitration
provisions contained in the Incorporation Agreement will not apply. In the
event that the parties do not agree that the amount in controversy is in
excess of $5.0 million, the Incorporation Agreement provides for arbitration
of such disagreement.

The Company will pay Vencor $150,000 for legal and accounting assistance
provided to the Company in connection with this offering.

Administrative Services Agreement. The Company and Vencor have entered into
an Administrative Services Agreement pursuant to which Vencor provides certain
administrative services to the Company. The Administrative Services Agreement
is a one-year agreement which may be terminated by the Company at any time
upon 30 days' written notice to Vencor. Some of the services which will be
provided to the Company by Vencor will be finance and accounting, human
resources, risk management, legal support,

39
<PAGE>

market planning and information systems support. The purpose of the
Administrative Services Agreement is to provide for the transition of the
Company from being a wholly owned subsidiary of Vencor to being a separate
company. The Company, however, may extend the Administrative Services
Agreement after the first year on a month-to-month basis or for up to one
additional year. In such case, Vencor or the Company may terminate the
Administrative Services Agreement upon 60 days' written notice. The Company
will pay Vencor approximately $660,000 per year for such services. The Company
or Vencor may agree to increase or decrease the services to be provided in
accordance with the Administrative Services Agreement, if needed.

Services Agreements and Sublease Agreement. The Company and subsidiaries of
Vencor have entered into Services Agreements relating to seven communities
which are contiguous to Vencor facilities. The Services Agreements pertain to
the sharing of costs relating to maintenance and lawn services, marketing,
food services, general office, housekeeping and emergency call system. These
Services Agreements may be cancelled by either party upon 90 days prior
written notice. The maximum amount that the Company expects to pay Vencor in
connection with The Services Agreements is $150,000 per year. The Company and
Vencor have also entered into a two-year Sublease Agreement covering
approximately 4,000 square feet of office space used for the Company's
headquarters located in Louisville, Kentucky at an annual rental of $48,300.

New Pond Lease. New Pond Village Associates, a partnership owned by
subsidiaries of Vencor ("New Pond"), will lease the New Pond Village
Retirement Center to Atria pursuant to the terms of a lease which is intended
to be categorized as a finance lease for financial and tax accounting
purposes. The lease has a term of 99 years, unless earlier terminated. Under
the lease, the Company pays no rent as such, but is obligated to pay all ad
valorem property taxes, insurance, utilities and all payments required to be
made on the indebtedness secured by the leased property. New Pond is obligated
to use its reasonable best efforts to obtain the requisite zoning and consent
of the holder of the mortgage on the leased property to the conveyance of the
leased property to the Company. At such time as such conveyance occurs, the
Company will assume the indebtedness secured by the mortgage on the leased
property.

Guaranty Fee Agreement. Vencor and the Company will enter into a Guaranty
Fee Agreement prior to completion of this offering. The Guaranty Fee Agreement
provides that the Company will pay to Vencor a fee equal to 1.5% of the
average outstanding sum of the principal balance of all debts, letters of
credit or obligations of the Company which are guaranteed by Vencor. In
connection with the proposed Atria Credit Facility, Vencor will guarantee up
to $100.0 million in the first year following this offering, declining to
$75.0 million, $50.0 million and $25.0 million in each respective year
thereafter. Vencor currently guarantees $62.1 million of industrial revenue
bonds and the Company intends to replace such Vencor guarantees with the Atria
Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

Redding Lease. The Company intends to lease certain real estate in Redding,
California from Vencor pursuant to a lease to be categorized as a finance
lease for financial and tax accounting purposes. This lease will have a term
of 99 years, unless earlier terminated. Under the lease, the Company will pay
$1.00 per year rent and will be obligated to pay all ad valorem property
taxes, insurance and utilities relating to the leased property. The lease will
also require Vencor to use its reasonable best efforts to obtain the requisite
approval for the subdivision of a larger parcel of which the leased property
is a part. If and when such approval is received, Vencor will convey the
property to the Company for $1.00.

Registration Rights Agreement. The Company has granted demand and incidental
registration rights to Vencor for the registration of shares of Common Stock
owned by Vencor under the Securities Act of 1933. See "Description of Capital
Stock--Registration Rights Agreement."

Voting Agreement. Upon completion of this offering, Vencor will enter into a
Voting Agreement pursuant to which it will agree to vote all of its shares of
Common Stock at any meeting at which directors are elected in favor of the
election of independent directors so that after such election, if such persons

40
<PAGE>

are elected, there will be at least two independent directors. The Voting
Agreement will continue in effect for five years from the date of this
offering so long as Vencor beneficially owns 30% or more of the Common Stock.

Tax Sharing Agreement. Vencor and the Company have entered into a Tax
Sharing Agreement which generally provides for the manner in which the parties
will bear taxes for the short period ending upon the sale by the Company of
the Common Stock pursuant to this offering, and income tax
deficiencies/refunds resulting from future audit adjustments. The Company will
be required to pay to Vencor an amount equal to the excess of the income tax
liability which the Company would have for the short period over the amount
which the Company has previously paid (or been charged with by Vencor) with
respect to such taxes.

If additional taxes must be paid by the Company or Vencor as a result of an
adjustment made by a tax regulatory authority and as a result of that
adjustment the other party would obtain an offsetting tax benefit, the party
obtaining the tax benefit pays an amount equal to the additional tax to the
party whose income tax liability was increased. Likewise, if income taxes are
reduced as a result of an adjustment made by a tax regulatory authority and as
a result of that adjustment the other party would suffer an offsetting tax
detriment, the party whose taxes were reduced pays that amount to the other
party. The Tax Sharing Agreement also contains provisions dealing with
challenging adjustments made by tax regulatory authorities, who will bear the
expenses of any such challenge and cooperation between the parties.

Borrowing From Vencor. A subsidiary of the Company will be indebted to
Vencor in the amount of $14.0 million. The indebtedness will be evidenced by a
promissory note in favor of Vencor, will bear interest at a rate equal to the
floating prime rate of National City Bank, Kentucky plus 1.0%, payable
quarterly, and the principal amount will be due one year after this offering.
The promissory note may be prepaid, without premium or penalty, at any time
after six months.

Other Transactions. SCM Partners, a Kentucky general partnership, leases a
parking lot next to Company's headquarters in Louisville, Kentucky to Vencor
pursuant to a two-year lease. Vencor pays SCM Partners approximately $50,000
per year in connection with such lease. Mr. Mulloy owns a 10.4% interest in
SCM Partners. Vencor believes that the terms of such lease are no less
favorable than terms which could be obtained from an unrelated third party.
William C. Ballard Jr., a director of the Company, is Of Counsel to the law
firm of Greenebaum Doll & McDonald PLLC, which is counsel to the Company.

In the future, transactions between the Company and its officers, directors,
principal stockholders and their affiliates will be on terms no less favorable
to the Company than could be obtained from unrelated third parties and any
such transactions will be approved by a majority of the disinterested members
of the Board of Directors. Although the Company was a wholly owned subsidiary
of Vencor at the time it entered into the above described transactions, the
Company believes that the terms of such agreements are no less favorable than
terms which could be obtained from an unrelated third party.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth at June 15, 1996 certain information with
respect to beneficial ownership of the Common Stock (assuming completion of
the Contribution Transaction and the issuance of the restricted shares of
Common Stock), and the common stock of Vencor, by: (i) each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock; (ii) each director and executive officer of the
Company; and (iii) all directors and executive officers of the Company as a
group. Information is provided with respect to beneficial ownership of Vencor
common stock because Vencor may be deemed to be a "parent" of the Company as
such term is defined in the rules promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act").

<TABLE>
<CAPTION>
COMPANY VENCOR
-------------------------------- ---------------------
PERCENTAGE OF
NUMBER OF COMMON STOCK NUMBER OF
SHARES ----------------- SHARES
BENEFICIALLY BEFORE AFTER BENEFICIALLY % OF
NAME OWNED(1) OFFERING OFFERING OWNED(1) CLASS
---- -------------- -------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sandra Harden Austin..... 5,000(2) * * - -
William C. Ballard Jr.... 5,000(2) * * 28,907(3) *
Ralph H. Bellande........ 15,000(2) * * 592(4) *
Peter J. Grua(5)......... 5,000(2) * * - -
Thomas T. Ladt........... 5,000(2) * * 83,715(6) *
W. Bruce Lunsford........ 10,020,000(7) 99.3% 66.4% 2,251,882(8) 3.2%
W. Patrick Mulloy, II.... 30,000(2) * * 1,445(9) *
R. Gene Smith............ 5,000(2) * * 1,537,117(10) 2.2%
J. Timothy Wesley........ 5,000(2) * * 938(11) *
Vencor, Inc.............. 10,000,000(12) 99.1% 66.2% - -
All executive officers
and directors
as a group (9 persons).. 10,095,000(13) 100.0% 66.9% 3,904,596 5.6%
</TABLE>
- --------
* Less than one percent.

(1) In accordance with Securities and Exchange Commission rules, a person is
deemed to have beneficial ownership of any securities as to which such
person, directly or indirectly, has or shares voting power or investment
power and of any securities with respect to which such person has the
right to acquire such voting or investment power within 60 days. Ownership
information includes the restricted shares to be awarded upon completion
of this offering. Except as otherwise noted in the accompanying footnotes,
the named persons have sole voting and investment power.
(2) Represents restricted shares of Common Stock. The restrictions lapse in
two equal annual installments beginning on the first anniversary of the
grant date.
(3) Includes an aggregate of 3,000 shares held by charitable remainder trusts
for the benefit of family members. Also includes 23,907 shares which may
be acquired by Mr. Ballard through the exercise of options.
(4) Includes 396 shares held jointly with his spouse. Mr. Bellande shares
voting and investment power with his spouse.

(5) Prior to completion of this offering, Mr. Grua, who has agreed to serve as
a director, will be appointed as a director of the Company.
(6) Includes 7,029 shares held by his spouse as custodian for his children and
20,058 shares held by his spouse. With respect to these 27,087 shares, Mr.
Ladt shares voting and investment power with his spouse. Includes 24,188
shares which may be acquired by Mr. Ladt through the exercise of options.
Excludes 738 shares held in the Vencor, Inc. Retirement Savings Plan for
his benefit.

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<PAGE>

(7) Includes 10,000,000 shares held by Vencor. Mr. Lunsford is Chairman of the
Board, President and Chief Executive Officer of Vencor. Because Mr.
Lunsford has authority to direct the voting and disposition of such shares,
he may be deemed to beneficially own these shares. Mr. Lunsford disclaims
beneficial ownership of these shares. Includes 20,000 restricted shares of
Common Stock. Restrictions on restricted shares lapse in two equal annual
installments beginning on the first anniversary of the grant date.
(8) Includes 71,412 shares held by a private foundation with respect to which
Mr. Lunsford has sole voting power and shared investment power. Also
includes 179,159 shares which may be acquired by Mr. Lunsford through the
exercise of options. Excludes 15,465 shares held in trust for the benefit
of his children and 6,908 shares held in the Vencor, Inc. Retirement
Savings Plan for his benefit.
(9) Includes 345 shares held by his spouse. Mr. Mulloy shares voting and
investment power with his spouse.
(10) Includes 36,250 shares held by a private foundation with respect to which
Mr. Smith shares sole voting and investment power, and 140,625 shares held
by a limited partnership with respect to which he has sole voting and
investment power. Also includes 23,907 shares which may be acquired by Mr.
Smith through the exercise of options.
(11) Represents 938 shares which may be acquired by Mr. Wesley upon exercise of
options exercisable as of the day on which he ceased employment with
Vencor and became an executive officer of Atria.
(12) The address of Vencor, Inc. is 3300 Providian Center, 400 W. Market
Street, Louisville, Kentucky 40202.
(13) Includes 95,000 restricted shares of Common Stock. The restrictions lapse
in two equal annual installments beginning on the first anniversary of the
grant date.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's Restated Certificate of Incorporation provides that the
authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $.10 per share, and 5,000,000 shares of Preferred
Stock, par value $1.00 per share. Upon completion of this offering, 15,095,000
shares of Common Stock will be issued and outstanding (15,845,000 shares if
the Underwriters' over-allotment option is exercised in full), and no shares
of Preferred Stock will be issued or outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share owned of
record on all matters voted upon by stockholders. Subject to the requirements
(including preferential rights) of any Preferred Stock outstanding, holders of
Common Stock are entitled to receive dividends if, as and when declared by the
Board out of funds legally available therefor. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all liabilities of the Company
and the liquidation preferences of any outstanding Preferred Stock. Holders of
the Common Stock have no preemptive rights, no cumulative voting rights and no
rights to convert their Common Stock into any other securities, and there are
no redemption or sinking fund provisions with respect to the Common Stock.

National City Bank will act as the transfer agent and registrar for the
Common Stock.

PREFERRED STOCK

The Board has the authority to issue the authorized shares of Preferred
Stock in one or more series and to fix the designations, powers, preferences,
rights, qualifications, limitations and restrictions of all shares of each
such series, including, without limitation, dividend rates, conversion rights,
voting rights, redemption and sinking fund provisions, liquidation preferences
and the number of shares constituting each such series, without any further
vote or action by the stockholders. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to
holders of Common Stock or adversely affect the rights and powers, including
voting rights, of the holders of Common Stock. The issuance of Preferred Stock
also could have the effect of delaying, deterring or preventing a change in
control of the Company without further action by the stockholders.

CERTAIN CORPORATE GOVERNANCE MATTERS

The Company's Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that, commencing with the 1997 annual meeting of
stockholders, the Board will be divided into three classes. Following
completion of this offering, there will be seven directors. Unless the number
of directors is increased prior to the 1997 annual meeting of stockholders,
two classes of directors will consist of two directors each and one class will
consist of three directors, with the term of office of the first class to
expire at the 1998 annual meeting of stockholders, the term of office of the
second class to expire at the 1999 annual meeting of stockholders, and the
term of office of the third class to expire at the 2000 annual meeting of
stockholders. At each succeeding annual meeting of stockholders, directors
will be elected to a three-year term of office.

The Company's Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that: (i) the number of directors of the Company will
be fixed by resolution of the Board, but in no event will be less than three
nor more than 15 directors; (ii) the directors of the Company in office from
time to time will fill any vacancy or newly created directorship on the Board,
with any new director to serve in the class of directors to which he or she is
so elected; (iii) directors of the Company may be removed only for cause by
the holders of at least a majority of the Company's voting stock, provided,
however,

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<PAGE>

that prior to the date that Vencor and its affiliates cease owning at least a
majority of the Company's Common Stock (the "Trigger Date"), cause is not
required for removal of directors; (iv) after the Trigger Date, stockholder
action can be taken only at an annual or special meeting of stockholders and
not by written consent in lieu of a meeting; and (v) except as described
below, special meetings of stockholders may be called only by the Chairman of
the Board, the President of the Company or by a majority of the total number
of directors of the Company and, prior to the Trigger Date, by Vencor, and the
business permitted to be conducted at any such meeting is limited to that
stated in the notice of the special meeting. The Amended and Restated By-laws
also require that stockholders desiring to bring any business before an annual
meeting of stockholders deliver written notice thereof to the Secretary of the
Company not fewer than 60 days nor more than 90 days in advance of the annual
meeting of stockholders; provided, however, if the date of the meeting is not
furnished to stockholders in a notice, or is not publicly disclosed by the
Company, more than 70 days prior to the meeting, notice by the stockholder, to
be timely, must be delivered to the President or Secretary of the Company not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made.

The Amended and Restated By-laws also provide that stockholders desiring to
nominate persons for election as directors must make their nominations in
writing to the President of the Company not fewer than 60 days nor more than
90 days prior to the scheduled date for the annual meeting; provided, however,
if fewer than 70 days notice or prior public disclosure of the scheduled date
for the annual meeting is given or made, notice by the stockholders, to be
timely, must be delivered to the President or Secretary of the Company not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made. Prior to the Trigger Date, Vencor may nominate persons for election
as directors without following the notice pending nomination procedures
required of all other stockholders.

Under applicable provisions of the Delaware General Corporation Law, the
approval of a Delaware corporation's board of directors, in addition to
stockholder approval, is required to adopt any amendment to the corporation's
certificate of incorporation, but a corporation's by-laws may be amended
either by action of its stockholders or, if the corporation's certificate of
incorporation so provides, its board of directors. The Restated Certificate of
Incorporation and Amended and Restated By-laws provide that the provisions
summarized above may not be amended by the stockholders, nor may any provision
inconsistent therewith be adopted by the stockholders, without the affirmative
vote of the holders of at least 80% of the Company's voting stock, voting
together as a single class.

The foregoing provisions of the Restated Certificate of Incorporation and
Amended and Restated By-laws may discourage or make more difficult the
acquisition of control of the Company by means of a tender offer, open market
purchase, proxy contest or otherwise. These provisions may have the effect of
discouraging certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the
Company first to negotiate with the Company. The Company's management believes
that the foregoing measures provide benefits to the Company and its
stockholders by enhancing the Company's ability to negotiate with the
proponent of any unfriendly or unsolicited proposal to take over or
restructure the Company and that such benefits outweigh the disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals could result in an improvement of their terms.

The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
the corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(i) before such person became an interested stockholder, the board of
directors of the corporation approved either the transaction in which the
interested stockholder became an interested stockholder or the business
combination; (ii) upon

45
<PAGE>

consummation of the transaction that 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 such transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and authorized at a meeting of stockholders by the affirmative vote of the
holders of at least two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder. Under Section 203, the
restrictions described above also do not apply to certain business
combinations proposed by an interested stockholder following the public
announcement or notification (as required by Section 203) of a transaction
which is one of certain extraordinary transactions involving the corporation,
is with or by a person who either has not been an interested stockholder
during the previous three years or who became an interested stockholder with
the approval of a majority of the corporation's directors, and is approved or
not opposed by a majority of the board of directors then in office. As a
result of its initial ownership of all of the outstanding Common Stock, Vencor
is not subject to the restrictions imposed upon an interested stockholder
under Section 203.

REGISTRATION RIGHTS AGREEMENT

The Company has granted demand and incidental registration rights to Vencor
for the registration of shares of Common Stock owned by Vencor under the
Securities Act of 1933. Four demand registrations are permitted. The Company
will pay the fees and expenses of two demand registrations and the incidental
registrations, while Vencor will pay all underwriting discounts and
commissions. These registration rights expire five years from the completion
of this offering and are subject to certain conditions and limitations,
including the right of underwriters to limit the number of shares owned by
Vencor included in such registration.

46
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
15,095,000 shares of Common Stock (15,845,000 shares if the Underwriters'
over-allotment option is exercised in full). The 5,000,000 shares sold in this
offering (or a maximum of 5,750,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
further registration under the Securities Act, unless held by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act. The
remaining 10,095,000 shares outstanding are "restricted securities" as that
term is defined under Rule 144 and were issued by the Company in private
transactions in reliance upon one or more exemptions under the Securities Act.
Such restricted securities may be resold in a public distribution only if
registered under the Securities Act (which registration is contemplated with
respect to all of such restricted securities as described below) or pursuant
to an exemption therefrom, including Rule 144. Vencor, the Company and
executive officers and directors of the Company have agreed that they will not
sell any shares of Common Stock prior to the expiration of 180 days from the
date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated.

In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has beneficially owned
restricted securities for at least two years is entitled to sell within any
three-month period a number of shares that does not exceed the greater of the
average weekly trading volume during the four calendar weeks preceding such
sale or one percent of the then outstanding shares of the Common Stock,
provided certain manner of sale and notice requirements and requirements as to
the availability of current public information about the Company are
satisfied. In addition, affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the holding period, to
sell shares of Common Stock. A person who is deemed not to have been an
"affiliate" of the Company at any time during the 90 days preceding a sale by
such person, and who has beneficially owned such shares for at least three
years, would be entitled to sell such shares without regard to the volume
limitations described above.

The Commission has proposed to amend the holding period required by Rule 144
to permit sales of "restricted securities" after one year rather than two
years (and two years rather than three years for "non-affiliates" under Rule
144(k)). If such proposed amendment is adopted, restricted securities would
become freely tradable (subject to any applicable contractual restrictions) at
correspondingly earlier dates.

Subject to certain exceptions, Vencor, the Company and the Company's
executive officers and directors have agreed with the Underwriters not to sell
or otherwise dispose of any shares of Common Stock, any Common Stock issuable
upon exercise of options to purchase Common Stock or any securities
convertible into or exchangeable for shares of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent
of Alex. Brown & Sons Incorporated.

After completion of this offering, Vencor will be entitled to certain rights
with respect to the registration of 10,000,000 shares of Common Stock for sale
under the Securities Act. See "Description of Capital Stock--Registration
Rights Agreement."

47
<PAGE>

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement,
the underwriters named below (the "Underwriters") through their
Representatives, Alex. Brown & Sons Incorporated, Morgan Stanley & Co.
Incorporated and J.C. Bradford & Co. have severally agreed to purchase from
the Company, the following respective numbers of shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated......................................
Morgan Stanley & Co. Incorporated....................................
J.C. Bradford & Co...................................................
---------
Total.............................................................. 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.

The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 750,000
additional shares of Common Stock at the initial public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to 5,000,000, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of Common Stock offered hereby. If
purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 5,000,000 shares are being offered.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.

Stockholders of the Company, holding in the aggregate 10,095,000 shares of
Common Stock and restricted shares, have agreed not to offer, sell or
otherwise dispose of any of such Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated. See "Shares Eligible for Future Sale."

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation among the Company and the
Representatives of the Underwriters. Among the factors considered in such

48
<PAGE>

negotiations are prevailing market conditions, the results of operations of
the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives of
the Underwriters believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.

At the request of the Company, up to 500,000 shares of Common Stock offered
hereby have been reserved for sale to certain individuals, including directors
and employees of Vencor, the Company and other entities with whom directors of
the Company are affiliated, and members of their families. The price of such
shares to such persons will be the initial public offering price set forth on
the cover of this Prospectus. The number of shares available to the general
public will be reduced to the extent those persons purchase reserved shares.
Any shares not so purchased will be offered hereby at the initial public
offering price set forth on the cover of this Prospectus.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company by Greenebaum Doll & McDonald PLLC, Louisville, Kentucky. William C.
Ballard Jr., a director of the Company, is Of Counsel to Greenebaum Doll &
McDonald PLLC and as of the date of this Prospectus he beneficially owns 5,000
shares of Common Stock. Alston & Bird, Atlanta, Georgia, is acting as counsel
for the Underwriters in connection with certain legal matters relating to the
sale of the Common Stock offered hereby.

EXPERTS

The audited combined financial statements of Atria Communities, Inc.
included in this Prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and are included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

AVAILABLE INFORMATION

The Company has filed through the Electronic Data Gathering, Analysis and
Retrieval system with the Securities and Exchange Commission (the "SEC") in
Washington, D.C., a Registration Statement on Form S-1 (the "Registration
Statement," which includes all amendments, exhibits and schedules thereto),
pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder, with respect to this offering. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted from this Prospectus in accordance with the rules
and regulations of the SEC, and to which reference is hereby made.

As a result of this offering, the Company will become subject to the
informational and reporting requirements of the Securities Exchange Act of
1934, as amended, and, in accordance therewith, will be required to file proxy
statements, reports and other information with the SEC. The Registration
Statement, as well as any such report, proxy statement and other information
filed by the Company with the SEC, may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the SEC: Northeast Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Midwest Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such filings
may also be obtained from the SEC through the Internet at http://www.sec.gov.

49
<PAGE>

Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC, reference is made to such exhibit or other
filing for a more complete description of the matter involved and each such
statement is qualified in its entirety by such reference.

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent accounting firm. The Company
also intends to furnish such other reports as it may determine or as may be
required by law.

50
<PAGE>

ATRIA COMMUNITIES, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Combined Financial Statements:
Combined Statement of Income for the years ended December 31, 1993, 1994
and 1995............................................................... F-3
Combined Balance Sheet, December 31, 1994 and 1995...................... F-4
Combined Statement of Changes in Investments by and Advances from
Vencor, Inc. for
the years ended December 31, 1993, 1994 and 1995....................... F-5
Combined Statement of Cash Flows for the years ended December 31, 1993,
1994
and 1995............................................................... F-6
Notes to Combined Financial Statements.................................. F-7
Condensed Combined Financial Statements (unaudited):
Condensed Combined Statement of Income for the six months ended June 30,
1995
and 1996............................................................... F-14
Condensed Combined Balance Sheet, December 31, 1995 and June 30, 1996... F-15
Condensed Combined Statement of Cash Flows for the six months ended
June 30, 1995 and 1996................................................. F-16
Notes to Condensed Combined Financial Statements........................ F-17
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The following report is in the form that will be signed upon the completion
of the reorganization described in Note 1 to the accompanying combined
financial statements.

Ernst & Young LLP

To the Board of Directors and Stockholders
Atria Communities, Inc.

We have audited the accompanying combined balance sheet of Atria
Communities, Inc. (formerly the assisted and independent living businesses of
Vencor, Inc.--see Note 1) as of December 31, 1994 and 1995, and the related
combined statements of income, investments by and advances from Vencor, Inc.
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Atria
Communities, Inc. at December 31, 1994 and 1995, and the combined results of
their operations and cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

Louisville, Kentucky
June 14, 1996, except for Notes 1 and 7 as to which the date is , 1996

F-2
<PAGE>

ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Revenues............................................ $35,870 $39,758 $47,976
------- ------- -------
Salaries, wages and benefits........................ 14,735 14,638 17,455
Supplies............................................ 4,360 4,023 4,860
Rent................................................ 351 333 383
Depreciation and amortization....................... 4,503 4,541 5,113
Non-recurring transactions.......................... (266) (1,675) 600
Other operating expenses (including amounts paid to
Vencor, Inc. of $525 in 1993, $570 in 1994 and $600
in 1995)........................................... 8,031 8,347 9,465
------- ------- -------
31,714 30,207 37,876
------- ------- -------
Operating income.................................... 4,156 9,551 10,100
Interest expense.................................... 3,499 3,538 4,322
Investment income................................... (346) (330) (147)
------- ------- -------
Income before income taxes and extraordinary loss... 1,003 6,343 5,925
Provision for income taxes.......................... 396 2,506 2,341
------- ------- -------
Income before extraordinary loss.................... 607 3,837 3,584
Extraordinary loss on extinguishment of debt, net of
income tax benefit of $69 in 1993 and $93 in 1995.. (103) - (146)
------- ------- -------
Net income........................................ $ 504 $ 3,837 $ 3,438
======= ======= =======
Unaudited pro forma data:
Earnings per common share:
Income before extraordinary loss................... $ .24
Extraordinary loss on extinguishment of debt....... (.01)
-------
Net income........................................ $ .23
=======
Shares used in computing earnings per common
share............................................. 15,095
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-3
<PAGE>

ATRIA COMMUNITIES, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,497 $ 2,819
Accounts receivable less allowance for loss of $46--1994
and $89--1995............................................ 522 561
Other..................................................... 510 366
-------- --------
2,529 3,746
Property and equipment, at cost:
Land...................................................... 19,679 20,668
Buildings................................................. 111,553 122,986
Equipment................................................. 8,820 10,510
Construction in progress.................................. 1,540 73
-------- --------
141,592 154,237
Accumulated depreciation.................................. (18,637) (23,027)
-------- --------
122,955 131,210
Notes receivable........................................... 4,552 -
Intangible assets less accumulated amortization of $2,641--
1994 and
$3,294--1995.............................................. 2,114 2,173
Other...................................................... 866 3,788
-------- --------
$133,016 $140,917
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,853 $ 1,875
Salaries, wages and other compensation.................... 970 1,019
Other accrued liabilities................................. 750 784
Long-term debt due within one year........................ 594 844
-------- --------
4,167 4,522
Long-term debt............................................. 90,599 104,506
Deferred credits and other liabilities..................... 6,415 3,442
Contingencies
Stockholder's equity:
Investments by and advances from Vencor, Inc.............. 31,835 28,447
-------- --------
$133,016 $140,917
======== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-4
<PAGE>

ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF CHANGES IN INVESTMENTS BY
AND ADVANCES FROM VENCOR, INC.
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period....................... $27,219 $34,959 $31,835
Net income.......................................... 504 3,837 3,438
Net cash advances by (payments to) Vencor, Inc...... 3,899 (6,811) (6,350)
Non-cash transfers from (to) Vencor, Inc.
(principally property and equipment, at cost)...... 3,337 (150) (476)
------- ------- -------
Balance at end of period............................. $34,959 $31,835 $28,447
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-5
<PAGE>

ATRIA COMMUNITIES, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 504 $ 3,837 $ 3,438
Adjustments to reconcile net income to net cash
provided
by operating activities:
Depreciation and amortization................... 4,503 4,541 5,113
Provision for doubtful accounts................. 18 7 79
Deferred income taxes........................... 748 169 (63)
Extraordinary loss on extinguishment of debt.... 172 - 239
Non-recurring transactions...................... - (425) 600
Other........................................... (104) (745) (261)
Change in operating assets and liabilities:
Accounts receivable............................ 913 (212) (240)
Other assets................................... 111 18 234
Accounts payable............................... 436 572 53
Other accrued liabilities...................... (1,633) (179) (661)
-------- ------- -------
Net cash provided by operating activities..... 5,668 7,583 8,531
Cash flows from investing activities:
Purchase of property and equipment................ (1,716) (5,714) (4,025)
Sale of assets.................................... 3,078 672 -
Collection of notes receivable.................... 35 1,800 -
Net change in partnership investments............. 107 (814) 716
Other............................................. (179) 54 437
-------- ------- -------
Net cash provided by (used in) investing
activities................................... 1,325 (4,002) (2,872)
Cash flows from financing activities:
Issuance of long-term debt........................ 12,950 6,450 6,806
Repayment of long-term debt....................... (21,337) (3,348) (4,659)
Net advances from (payments to) Vencor, Inc....... 3,899 (6,811) (6,350)
Other............................................. (412) (70) (134)
-------- ------- -------
Net cash used in financing activities......... (4,900) (3,779) (4,337)
-------- ------- -------
Change in cash and cash equivalents................ 2,093 (198) 1,322
Cash and cash equivalents at beginning of period... (398) 1,695 1,497
-------- ------- -------
Cash and cash equivalents at end of period......... $ 1,695 $ 1,497 $ 2,819
======== ======= =======
Supplemental information:
Interest payments................................. $ 3,352 $ 3,667 $ 4,397
Income tax payments (refunds)..................... (366) 2,336 2,310
Non-cash transactions:
Exchange of note receivable for additional
partnership interest............................ - - 4,552
Exchange of long-term debt in lieu of cash in
connection
with sale of a facility......................... 6,471 - -
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-6
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1--ACCOUNTING POLICIES

Basis of Presentation

In May 1996, the Board of Directors of Vencor, Inc. ("Vencor") authorized
management to establish a wholly owned subsidiary, Atria Communities, Inc.
("Atria") to operate Vencor's assisted and independent living business. As
part of that transaction, management intends to consummate an initial public
offering (the "IPO") of 5,000,000 shares of Atria's common stock. Upon
completion of the IPO, it is expected that Vencor will own 10,000,000 shares
of Atria common stock.

The accompanying combined historical financial statements reflect the
operations of the assisted and independent living business of Vencor which are
to be transferred to Atria at or prior to completion of the IPO. These
financial statements have been derived from the consolidated financial
statements of Vencor and are presented as if Atria had been operated as a
separate entity.

The combined financial statements have been prepared in accordance with
generally accepted accounting principles and include amounts based upon the
estimates and judgments of management. Actual amounts may differ from these
estimates.

Revenues

Revenues are recognized when services are rendered and consist of daily
resident fees and fees for other ancillary services. Agreements with residents
are generally for a term of one year. Revenues from management contracts are
recognized in the period earned in accordance with the terms of the management
agreement.

Substantially all revenues are derived from private pay sources. A summary
of revenues follows (dollars in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Owned and leased facilities............................ $35,515 $39,340 $47,635
Managed facilities..................................... 355 418 341
------- ------- -------
$35,870 $39,758 $47,976
======= ======= =======
</TABLE>

The terms of resident agreements at one community require the resident to
forfeit a certain percentage of the face amount of a resident mortgage bond
(purchased by the resident at the inception of the residency agreement) to
Atria upon termination of the residency agreement. These amounts are recorded
as deferred revenue at the inception of the residency agreement and recognized
as income on a straight-line basis over the estimated stay of a resident. See
Note 4.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less. Carrying values of cash and cash equivalents
approximate fair value due to the short-term nature of these instruments.

Allowance for Doubtful Accounts

A summary of the allowance for doubtful accounts follows (dollars in
thousands):

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period.............................. $29 $47 $ 46
Provision for doubtful accounts............................ 18 7 79
Accounts written off....................................... - (8) (36)
--- --- ----
Balance at end of period.................................... $47 $46 $ 89
=== === ====
</TABLE>

F-7
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment are recorded at cost and include interest capitalized
on significant construction projects during the construction period as well as
other costs directly related to the development and construction of
communities.

Depreciation expense, computed by the straight-line method, was $3.7 million
in 1993, $3.8 million in 1994 and $4.4 million in 1995. Depreciable lives for
buildings range generally from 20 to 45 years. Estimated useful lives of
equipment vary from 5 to 10 years.

The Financial Accounting Standards Board (the "FASB") issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," effective for fiscal years beginning after December
15, 1995. The provisions of this statement, which will be adopted in 1996, are
not expected to have a material impact on the combined financial statements.

Intangible Assets

Intangible assets consist primarily of debt issuance costs and are amortized
by the straight-line method based upon the lives of the respective loans.

Income Taxes

Vencor and its wholly owned subsidiaries (including such entities comprising
the operations of Atria) file federal and certain state income tax returns on
a consolidated basis. Accordingly, provision for income taxes recorded in the
consolidated financial statements of Vencor have been apportioned to Atria on
a divisional basis. However, for purposes of the accompanying combined
financial statements, provision for income taxes has been recorded as if Atria
were filing separate income tax returns.

Upon completion of the IPO, Atria and its subsidiaries will file separate
income tax returns and will not be eligible for inclusion in the consolidated
income tax returns of Vencor.

Minority Interest in Consolidated Entities

The combined financial statements include all assets, liabilities, revenues
and expenses of partnerships controlled by Atria. Minority interests in the
earnings and equity of these entities are not significant.

Earnings per Common Share

The operations of Atria are included in the consolidated financial
statements of Vencor on a divisional basis. Accordingly, historical
stockholder's equity accounts and related earnings per common share data are
not presented in the accompanying combined financial statements.

Pro forma earnings per common share are based upon the expected number of
common shares outstanding as a result of the IPO and include the issuance of
95,000 shares of restricted stock. See
Note 7.

NOTE 2--NON-RECURRING TRANSACTIONS

Results of operations for 1995 include a charge of $600,000 related to the
writedown of undeveloped property to its estimated net realizable value.
Operating results in 1994 include a gain on the sale of property aggregating
$425,000.

Settlements of certain litigation increased income before income taxes by
approximately $1.3 million in 1994 and $266,000 in 1993.

F-8
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--INCOME TAXES

A summary of provision for income taxes follows (dollars in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
----- ------ ------
<S> <C> <C> <C>
Current:
Federal............................................ $(348) $1,965 $2,021
State.............................................. (4) 372 383
----- ------ ------
(352) 2,337 2,404
Deferred............................................ 748 169 (63)
----- ------ ------
$ 396 $2,506 $2,341
===== ====== ======

Reconciliation of federal statutory rate to effective income tax rate
follows:

<CAPTION>
1993 1994 1995
----- ------ ------
<S> <C> <C> <C>
Federal statutory rate.............................. 35.0% 35.0% 35.0%
State income taxes, net of federal income tax bene-
fit................................................ 2.6 4.1 4.0
Other items, net.................................... 1.9 0.4 0.5
----- ------ ------
Effective income tax rate.......................... 39.5% 39.5% 39.5%
===== ====== ======
</TABLE>

Effective January 1, 1993, Atria adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires, among other things, recognition of deferred income taxes using the
liability method rather than the deferred method. The effect of this change
had no material effect on net income.

A summary of deferred income taxes by source included in the combined
balance sheet at December 31 follows (dollars in thousands):

<TABLE>
<CAPTION>
1994 1995
------------------ ------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Depreciation........................... $ - $2,441 $ - $2,954
Partnerships........................... 1,645 - 1,908 -
Compensation........................... 118 - 187 -
Other.................................. - 92 152 -
------ ------ ------ ------
$1,763 $2,533 $2,247 $2,954
====== ====== ====== ======
</TABLE>

Deferred income taxes totaling $62,000 and $79,000 at December 31, 1994 and
1995, respectively, are included in other current assets. Non-current deferred
income taxes, included principally in deferred credits and other liabilities,
totaled $832,000 and $786,000 at December 31, 1994 and 1995, respectively.

F-9
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--LONG-TERM DEBT

A summary of long-term debt at December 31 follows (dollars in thousands):

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Industrial revenue bonds, 3.2% to 9.9% (rates, generally
floating, average 5.5%) payable in periodic installments
through 2025............................................ $55,305 $ 66,456
Non-interest bearing residential mortgage bonds, payable
in periodic installments through 2039................... 32,583 33,344
Collateralized borrowings under Vencor bank revolving
credit agreement (floating rates averaging 6.9%)........ - 5,550
Subordinated debentures due 2008 (floating rates averag-
ing 7%)................................................. 3,305 -
------- --------
Total debt, average life of 24 years (rates averaging
3.9%)................................................. 91,193 105,350
Amounts due within one year.............................. 594 844
------- --------
Long-term debt......................................... $90,599 $104,506
======= ========
</TABLE>

Under the terms of a residency agreement at one community, residents are
required to purchase a residential mortgage bond which entitles them to occupy
a residential unit and to receive services and use the community as described
in the agreement. The face amount of each bond is equal to the market value of
the residential unit to be occupied by the resident. The bonds represent non-
interest bearing loans to the Company and are non-transferrable. The first
maturity date of each bond is January 1, 2040; however, the Company is
required to redeem a bond within 180 days of the termination of a residency
agreement, at which time Atria is required to repay the residential mortgage
bond to the resident less a fee of up to 20% of the face amount of the bond.

Maturities of long-term debt in years 1997 through 2000 are $849,000,
$852,000, $854,000 and $857,000, respectively.

Certain long-term debt agreements contain customary covenants which include
(i) limitations on additional debt and capital expenditures, (ii) limitations
on sales of assets, mergers and changes in ownership and (iii) maintenance of
certain financial ratios.

The estimated fair value of Atria's long-term debt was $78.0 million and
$91.8 million at December 31, 1994 and 1995, respectively, compared to
carrying amounts aggregating $91.2 million and $105.4 million. The estimate of
fair value is based upon the quoted market prices for the same or similar
issues of long-term debt, or on rates available to Atria for debt of the same
remaining maturities.

Concurrently with the consummation of the IPO, Atria expects to enter into a
bank credit facility (the "Atria Credit Facility"), which will have a maturity
of four years and may be extended at the option of the banks for an additional
year. Although the terms of the Atria Credit Facility have not yet been
finalized, it is presently expected to aggregate up to $200.0 million in
revolving credits, including a letter of credit option not to exceed $70.0
million. It is anticipated that loans under the Atria Credit Facility will
bear interest, at Atria's option, at either (i) a base rate based on PNC
Bank's prime rate or the daily federal funds rate or (ii) a LIBOR rate, plus
an additional percentage based on Atria's leverage. It is expected that
obligations under the Atria Credit Facility will be secured by all of Atria's
property, the capital stock of Atria's present and future principal
subsidiaries and all intercompany indebtedness owed to Atria by its
subsidiaries. It is also contemplated that the Atria Credit Facility will
contain various affirmative, negative and financial covenants. The Atria
Credit Facility will be conditioned upon, among other things, consummation of
the IPO (the net proceeds from which must aggregate at least $50.0 million),
the absence of a change in control of Atria, and Vencor's ownership of a
stipulated percentage of the Common Stock upon consummation of the IPO and at
least a 30% ownership interest thereafter.

F-10
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--LONG-TERM DEBT (CONTINUED)

Upon consummation of the IPO, Atria intends to refinance all outstanding
borrowings under the Vencor bank revolving credit agreement in the table above
through proceeds under the Atria Credit Facility.

NOTE 5--CONTINGENCIES

Management continually evaluates contingencies based upon the best available
evidence. In addition, allowances for loss are provided currently for disputed
items that have continuing significance, such as deductions that continue to
be claimed on tax returns.

Management believes that allowances for loss have been provided to the
extent necessary and that its assessment of contingencies is reasonable.
Management believes that resolution of contingencies will not materially
affect Atria's liquidity, financial position or results of operations.

Principal contingencies are described below:

Atria is a party to certain litigation involving a minority partner at one
of its communities. In June 1996, Atria agreed to settle such litigation and
acquire all remaining partnership interests in exchange for cash payments
approximating $1.1 million ($630,000 net of tax) payable over three years. The
amounts related to this settlement will be charged to earnings upon execution
of final settlement agreements.

The combined financial statements of Atria reflect the anticipated
assumption of approximately $95.3 million of Vencor's long-term debt. In the
event that all or part of the assumption does not occur prior to the IPO,
Vencor would remain primarily liable for such debt. Atria and Vencor have
agreed that Atria would pay all amounts and otherwise satisfy all obligations
related to such long-term debt. In the case of any Vencor long-term debt
proposed to be assumed by Atria in the IPO, to the extent that Atria and
Vencor are unable to obtain consents from holders of such debt to the
assumption by Atria of primary liability for such debt, the amount of such
debt will be reflected as a liability of Vencor in its financial statements
(although Vencor's financial statements will also reflect as an asset a
receivable from Atria in an equal amount, which will accrue interest and will
be payable on the same terms as such Vencor long-term debt). Furthermore,
Vencor may be contingently liable as guarantor of certain long-term debt
assumed by Atria in the IPO.

NOTE 6--TRANSACTIONS WITH VENCOR

Atria and Vencor or its subsidiaries have or will enter into certain
arrangements which will become effective on or before the completion of the
IPO. The agreements are intended to facilitate an orderly transition of Atria
from a division of Vencor to a separate publicly held entity which will be
minimally disruptive to both Atria and Vencor. A summary of such arrangements
follows:

Administrative Services--Vencor will provide to Atria for a period of one
year various administrative services in such areas as finance and accounting,
human resources, risk management, legal support, market planning and
information systems support. Atria may extend the Administrative Services
Agreement for up to one additional year, subject to termination by either
party upon 60 days prior written notice. Atria will pay Vencor approximately
$660,000 per year for such services.

Shared Services--Atria and subsidiaries of Vencor will share certain costs
at seven communities relating to marketing and certain administrative
services. These agreements may be cancelled by either party upon 90 days prior
written notice. Atria will pay a maximum of $150,000 per year for such
services.

F-11
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--TRANSACTIONS WITH VENCOR (CONTINUED)

Guarantees--Vencor will guarantee for four years certain borrowings by Atria
under the Atria Credit Facility in amounts up to $100.0 million in the first
year following the IPO, declining to $75.0 million, $50.0 million and $25.0
million in each respective year thereafter. Atria will pay to Vencor a fee
equal to 1.5% of any guaranteed amounts.

Leases--Atria will lease certain properties from Vencor, including its
headquarters office space.

Borrowing From Vencor--A subsidiary of Atria is indebted to Vencor in the
amount of $14.0 million. The indebtedness will be evidenced by a promissory
note in favor of Vencor, will bear interest at a rate equal to the floating
prime rate of National City Bank, Kentucky plus 1.0%, payable quarterly, and
the principal amount will be due one year after the IPO. The promissory note
may be prepaid, without premium or penalty, at any time after six months.

Income Taxes--A tax sharing agreement will provide for risk-sharing
arrangements in connection with various income tax related issues.

Registration Rights--Atria has granted demand and piggyback registration
rights to Vencor with respect to registration under the Securities Act of 1933
of Atria Common Stock owned by Vencor. Four demand registrations are
permitted. Atria will pay the fees and expenses of two demand registrations
and the piggyback registrations, while Vencor will pay all underwriting
discounts and commissions. The registration rights expire five years from the
completion of the IPO and are subject to certain conditions and limitations,
including the right of underwriters of an offering to limit the number of
shares owned by Vencor included in such registration.

Registration Expenses--Atria will pay Vencor $150,000 for Vencor's
assistance provided to Atria in connection with the IPO.

Liabilities and Indemnifications--Atria will assume all contractual
liabilities relating to the assets transferred by Vencor to Atria.

In anticipation of the IPO, certain allocations and estimates have been made
by management in the combined financial statements to present the historical
financial position and results of operations of Atria as a separate entity.
The operating results of Atria include certain corporate costs and expenses of
Vencor (comprised principally of information systems and various centralized
management services) aggregating $525,000 in 1993, $570,000 in 1994 and
$600,000 in 1995.

NOTE 7--CAPITAL STOCK

Atria's Restated Certificate of Incorporation authorizes 50,000,000 shares
of common stock (par value $.10 per share) and 5,000,000 shares of preferred
stock (par value $1.00 per share). Upon consummation of the IPO, 15,095,000
shares of common stock are expected to be issued and outstanding. No shares of
preferred stock will be issued in connection with the IPO.

The accompanying combined financial statements are presented as if Atria had
been operated as a separate entity. Accordingly, stockholder's equity (which
represents Vencor's pre-IPO 100% interest) comprises both investments by and
non-interest bearing advances from Vencor. Management expects that in
connection with the IPO, such amounts will be included as part of Atria's
permanent equity capitalization.

Atria has established certain stock compensation plans under which options
to purchase common stock may be granted to officers, key employees and
directors who are not employees of Atria. Options may be granted at not less
than market price on the date of grant, and the initial options to be granted
will become exercisable as to one-fourth of the shares annually over a four-
year period and are exercisable for a period ending ten years after grant. The
plans also provide that awards of restricted stock may be

F-12
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--CAPITAL STOCK (CONTINUED)

distributed to officers, key employees and certain directors. The initial
restricted stock to be granted will vest one-half annually over a two-year
period. No options have been granted and no restricted shares have been awarded
under the plans.

Upon consummation of the IPO, the Board of Directors of Atria intends to
grant approximately 639,500 stock options (to be granted at a value equal to
the IPO price) and award approximately 95,000 restricted shares.

Atria will account for stock option grants in accordance with APB Opinion No.
25 ("APB 25"), "Accounting for Stock Issued to Employees". In October 1995, the
FASB issued Statement No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which provides an alternative to APB 25 and allows for a fair
value-based method of accounting for employee stock options and similar equity
instruments. However, for companies that continue to account for stock-based
compensation arrangements under APB 25, SFAS 123 requires disclosure of the pro
forma effect on net income and earnings per share of the fair value-based
accounting for these arrangements. These disclosure requirements are effective
for Atria beginning in 1996.

NOTE 8--EMPLOYEE BENEFIT PLANS

Atria participates in Vencor's defined contribution retirement plans covering
employees who meet certain minimum eligibility requirements. Benefits are
determined as a percentage of a participant's contributions and are generally
vested based upon length of service. Retirement plan expense was $58,000 for
1993, $66,000 for 1994 and $77,000 for 1995. Amounts equal to retirement plan
expense are funded annually.

Upon consummation of the IPO, Atria will continue to participate in a
substantial number of Vencor employee benefit plans.

NOTE 9--ACCRUED LIABILITIES

A summary of other accrued liabilities at December 31 follows (dollars in
thousands):

<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Taxes other than income........................................... $579 $697
Interest.......................................................... 145 70
Other............................................................. 26 17
---- ----
$750 $784
==== ====
</TABLE>

NOTE 10--FAIR VALUE DATA

A summary of fair value data at December 31 follows (dollars in thousands):

<TABLE>
<CAPTION>
1994 1995
---------------- ----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash and cash equivalents (Note 1)......... $ 1,497 $ 1,497 $ 2,819 $ 2,819
Notes receivable........................... 4,552 4,249 - -
Long-term debt, including amounts due
within one year (Note 4).................. 91,193 78,028 105,350 91,822
</TABLE>

F-13
<PAGE>

ATRIA COMMUNITIES, INC.
CONDENSED COMBINED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Revenues..................................................... $23,264 $25,448
------- -------
Salaries, wages and benefits................................. 8,515 9,404
Supplies..................................................... 2,359 2,450
Rent......................................................... 196 199
Depreciation and amortization................................ 2,552 2,625
Non-recurring transactions................................... - 1,050
Other operating expenses (including amounts paid to Vencor,
Inc. of
$300 in 1996 and 1995)...................................... 4,714 4,929
------- -------
18,336 20,657
------- -------
Operating income............................................. 4,928 4,791
Interest expense............................................. 2,286 2,033
Investment income............................................ (54) (109)
------- -------
Income before income taxes................................... 2,696 2,867
Provision for income taxes................................... 1,065 1,133
------- -------
Net income................................................. $ 1,631 $ 1,734
======= =======
Pro forma data:
Earnings per common share................................... $ .11
Shares used in computing earnings per common share.......... 15,095
</TABLE>

The accompanying notes are an integral part of the condensed combined financial
statements.

F-14
<PAGE>

ATRIA COMMUNITIES, INC.
CONDENSED COMBINED BALANCE SHEET

DECEMBER 31, 1995 AND JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 2,819 $ 4,149
Accounts receivable less allowance for loss of $89--
1995
and $99--1996......................................... 561 794
Other.................................................. 366 323
-------- --------
3,746 5,266
Property and equipment, at cost:
Land................................................... 20,668 20,672
Buildings.............................................. 122,986 123,227
Equipment.............................................. 10,510 10,950
Construction in progress............................... 73 1,195
-------- --------
154,237 156,044
Accumulated depreciation............................... (23,027) (25,319)
-------- --------
131,210 130,725
Intangible assets less accumulated amortization of
$3,294--1995 and
$3,456--1996........................................... 2,173 1,586
Other................................................... 3,788 4,039
-------- --------
$140,917 $141,616
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable....................................... $ 1,875 $ 3,553
Salaries, wages and other compensation................. 1,019 1,212
Other accrued liabilities.............................. 784 1,440
Long-term debt due within one year..................... 844 825
-------- --------
4,522 7,030
Long-term debt.......................................... 104,506 103,586
Deferred credits and other liabilities.................. 3,442 3,456
Contingencies
Stockholder's equity:
Investments by and advances from Vencor, Inc........... 28,447 27,544
-------- --------
$140,917 $141,616
======== ========
</TABLE>

The accompanying notes are an integral part of the condensed combined financial
statements.

F-15
<PAGE>

ATRIA COMMUNITIES, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 1,631 $ 1,734
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 2,552 2,625
Deferred income taxes...................................... (29) 35
Non-recurring transactions................................. - 1,050
Other...................................................... 127 (13)
Change in operating assets and liabilities:
Accounts receivable....................................... (494) (246)
Other assets.............................................. 256 (151)
Accounts payable.......................................... (627) 896
Other accrued liabilities................................. 494 506
------- -------
Net cash provided by operating activities................ 3,910 6,436
Cash flows from investing activities:
Purchase of property and equipment.......................... (1,252) (1,753)
Net change in partnership investments....................... 722 18
Other....................................................... 25 (10)
------- -------
Net cash used in investing activities.................... (505) (1,745)
Cash flows from financing activities:
Issuance of long-term debt.................................. 2,904 5,178
Repayment of long-term debt................................. (2,623) (6,020)
Net payments to Vencor, Inc................................. (2,560) (2,422)
Other....................................................... (88) (97)
------- -------
Net cash used in financing activities.................... (2,367) (3,361)
------- -------
Change in cash and cash equivalents.......................... 1,038 1,330
Cash and cash equivalents at beginning of period............. 1,497 2,819
------- -------
Cash and cash equivalents at end of period................... $ 2,535 $ 4,149
======= =======
Supplemental information:
Interest payments........................................... $ 1,961 $ 1,278
Income tax payments......................................... 1,155 1,133
Non-cash transactions:
Exchange of note receivable for additional partnership
interest.................................................. 4,552 -
</TABLE>

The accompanying notes are an integral part of the condensed combined financial
statements.

F-16
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

The accompanying combined financial statements are presented in a condensed
format and consequently do not include all of the disclosures normally
required by generally accepted accounting principles or those normally made in
Atria's annual financial statements. Accordingly, the reader of these
financial statements may wish to refer to Atria's audited combined financial
statements for the year ended December 31, 1995 contained elsewhere in this
Prospectus for further information.

The financial information has been prepared in accordance with Atria's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature.

NOTE 2--EARNINGS PER COMMON SHARE

Pro forma earnings per common share are based upon the expected number of
common shares outstanding as a result of the IPO and include the issuance of
95,000 shares of restricted stock.

NOTE 3--NON-RECURRING TRANSACTIONS

In June 1996, Atria recorded a non-recurring pretax charge of $1.1 million
in connection with the settlement of certain litigation involving a minority
partner at one of its communities.

NOTE 4--CONTINGENCIES

F-17
<PAGE>

ATRIA COMMUNITIES, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 5--TRANSACTIONS WITH VENCOR

F-18
<PAGE>

Atria's Assisted and Independent Living
Communities

[PHOTOGRAPH OF AN ATRIA [PHOTOGRAPH OF AN ATRIA [PHOTOGRAPH OF AN ATRIA
COMMUNITY IN SEDONA COMMUNITY IN TOPEKA, COMMUNITY IN WALPOLE,
ARIZONA] KANSAS] MASSACHUSETTS]

[PHOTOGRAPH OF
UNITED STATES MAP
INDICATING
EXISTING AND
DEVELOPMENT
COMMUNITIES]

[PHOTOGRAPH OF AN ATRIA [PHOTOGRAPH OF AN [PHOTOGRAPH OF
COMMUNITY IN TACOMA, ATRIA COMMUNITY AN ATRIA
WASHINGTON] IN SPRING HILL, COMMUNITY IN
FLORIDA] TUCSON,
ARIZONA]

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

Atria currently operates 22 communities in 13 states with a total of 3,022
units, including 650 assisted living units and 2,372 independent living units.
The Company plans to develop 60 to 85 assisted living communities over the next
three to four years. Currently, there are 13 assisted living communities under
development with a total of approximately 850 units.

- --------------------------------------------------------------------------------
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURIS-
DICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company and its Predecessors......................................... 14
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Combined Financial Data......................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 24
Management............................................................... 34
Certain Transactions..................................................... 39
Principal Stockholders................................................... 42
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 48
Legal Matters............................................................ 49
Experts.................................................................. 49
Available Information.................................................... 49
Index to Combined Financial Statements................................... F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

5,000,000 Shares

LOGO

Common Stock

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

PROSPECTUS

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

Alex. Brown & Sons
INCORPORATED

Morgan Stanley & Co.
INCORPORATED

J.C. Bradford & Co.

, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated costs and expenses to be borne
by the Company in connection with the offering described in the Registration
Statement:

<TABLE>
<S> <C>
Registration Fee.................................................. $ 29,742
Legal Fees and Expenses........................................... 300,000*
Accounting Fees and Expenses...................................... 250,000*
Printing and Engraving Expenses................................... 150,000*
Blue Sky Registration Fees and Expenses........................... 35,000*
Transfer Agent's Fees............................................. 10,000*
NASD Listing Fees................................................. 9,125
Miscellaneous Expenses............................................ 66,133*
--------
Total........................................................... $850,000*
========
</TABLE>
*Estimated

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

A. Elimination of Certain Liability. Pursuant to Article IX of the
registrant's Restated Certificate of Incorporation ("Article IX"), 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 any breach of the 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 the General registrant Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to permit further elimination or limitation of
the personal liability of directors, then the liability of a director of the
registrant shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended. Any
repeal or modification of Section A of Article IX shall not adversely effect
any right or protection of a director of the registrant existing at the time
of such repeal or modification.

B. Right to Indemnification. Subject to Section C of Article XI of the
registrant's Restated Certificate of Incorporation, 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 (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, 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 or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless
by the registrant to the fullest extent authorized by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the registrant to provide broader indemnification rights
than said law permitted the registrant to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, excise taxes under the Employee Retirement Income Security Act of 1974,
as in effect from time to time ("ERISA"), penalties and amounts to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. The registrant may, by action of its Board of Directors, provide
indemnification to other employees or agents of the registrant with the same
scope and effect as the indemnification of directors and officers pursuant to
Article IX.

C. Procedure for Indemnification. Any indemnification under Article IX
(unless ordered by a court) shall be made by the registrant only as authorized
in the specific case upon a determination that

II-1
<PAGE>

indemnification is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware, as the same exists or hereafter may be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the registrant to provide broader indemnification rights then said law
permitted the registrant to provide prior to such amendment). Such
determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who are not parties to such action, suit
or proceeding (the "Disinterested Directors"), or (ii) if such a quorum of
Disinterested Directors is not obtainable, or, even if obtainable, a quorum of
Disinterested Directors so directs, by independent legal counsel and a written
opinion, or (iii) by the stockholders. The majority of Disinterested Directors
may, as they deem appropriate, elect to have the registrant indemnify any
other employee, agent or other person acting for or on behalf of the
registrant.

D. Advances for Expenses. Costs, charges and expenses (including attorneys'
fees) incurred by a director or officer of the registrant, or such other
person acting on behalf of the registrant as determined in accordance with
Section C of Article IX, in defending a civil or criminal action, suit or
proceeding shall be paid by the registrant in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer or other person to repay all amounts so
advanced in the event that it shall ultimately be determined that such
director, officer or other person is not entitled to be indemnified by the
registrant as authorized in Article IX or otherwise.

E. Right of Claimant to Bring Suit. If a claim under Sections of Article IX
is not paid in full by the registrant within 30 days after a written claim has
been received by the registrant, the claimant may at any time thereafter bring
suit against the registrant to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the registrant)
that the claimant has not met the standard of conduct which make it
permissible under the General Corporation Law of the State of Delaware for the
registrant to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the registrant. Neither the failure of the
registrant (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the
circumstances because the claimant has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the registrant (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

F. Other Rights; Continuation of Right to Indemnification. The
indemnification and advancement of expenses provided by Article IX shall not
be deemed exclusive of any other rights to which a claimant may be entitled
under any law (common or statutory) by-law, agreement, vote of stockholders or
Disinterested Directors or otherwise, both as to action in his or her official
capacity and as to any action in another capacity while holding office or
while employed by or acting as agent for the registrant, and shall inure to
the benefit of the estate, heirs, executors and administrators of such person.
All rights to indemnification under Article IX shall be deemed to be a
contract between the registrant and each director and officer of the
registrant who serves or served in such capacity at any time while Article IX
is in effect. Any repeal or modification of Article IX or any repeal or
modification of relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable law shall not in any way diminish
any rights to indemnification of such director, officer or the obligations of
the registrant arising hereunder with respect to any action, suit or
proceeding arising out of, or relating to, any actions, transactions or facts
occurring prior to the final adoption of such modification or repeal. For the
purposes of Article IX, references to "the registrant" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation, so that any person who is or was a director or officer
of such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article IX of the
registrant's

II-2
<PAGE>

Restated Certificate of Incorporation, with respect to the resulting or
surviving corporation, as such person would if such person had served the
resulting or surviving corporation in the same capacity.

G. Insurance. The registrant may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the registrant
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the registrant
would have the power to indemnify such person against such expense, liability
or loss under the General Corporation Law of the State of Delaware.

H. Severability. If any provision or provisions of Article IX shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of Article
IX (including, without limitation, each portion of any paragraph of Article IX
containing any such provision held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent
possible, the provisions of Article IX of the registrant's Restated
Certificate of Incorporation (including, without limitation, each such portion
of any paragraph of Article IX containing any such provision held to be
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEMS 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to and Description of Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- --------
<S> <C> <C>
1 Form of Underwriting Agreement............................................
3.1+ Restated Certificate of Incorporation.....................................
3.2 Amended and Restated By-laws..............................................
4 Specimen Common Stock Certificate.........................................
5.1 Opinion of Greenebaum Doll & McDonald PLLC as to legality of the
securities being registered..............................................
10.1 Form of Registration Rights Agreement.....................................
10.2 Form of Incorporation Agreement...........................................
10.3 Form of Administrative Services Agreement.................................
10.4+ Form of Tax Sharing Agreement.............................................
10.5 Form of 1996 Stock Ownership Incentive Plan...............................
10.6 Form of Non-Employee Directors 1996 Stock Incentive Plan..................
10.7+ Mortgage and Trust Indenture dated as of November 1, 1990, by and between
New Pond Village Associates and The First National Bank of Boston, as
Trustee..................................................................
10.8+ Indenture of Trust and Agreement dated as of December 1, 1985, by and
among The Redevelopment Agency of the City of San Marcos, San Marcos
Retirement Village, The First National Bank of Boston, as Trustee, and
Security Pacific National Bank...........................................
10.9 Form of Services Agreements relating to Kachina Point, San Marcos,
McMillen, Valley Manor, The Greens, Heritage at Wildwood and Villa
Campana..................................................................
10.10 Form of Sublease Agreement................................................
10.11 Form of Voting Agreement..................................................
10.12 Form of Redding Lease.....................................................
10.13+ Form of New Pond Village Associates Lease.................................
10.14 Form of Term Promissory Note to Vencor....................................
10.15 Foxhill Village Management Agreement......................................
10.16 Form of Guaranty Fee Agreement............................................
21+ Subsidiaries of the Registrant............................................
23.1 Consent of Greenebaum Doll & McDonald PLLC (included in Exhibit 5.1)......
23.2 Consent of Ernst & Young LLP..............................................
23.3 Consent of Peter J. Grua..................................................
24+ Power of Attorney (included on Signature Page of the Registration
Statement)................................................................
27* Financial Data Schedule...................................................
</TABLE>
- --------

+Previously filed.

*Included only in the EDGAR version.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes:

(1) For the purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(b) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be the initial bona fide offering thereof.

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 Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, in the City of Louisville, Commonwealth of
Kentucky, on July 29, 1996.

Atria Communities, Inc.

/s/ J. Timothy Wesley
By: _________________________________

J. TIMOTHY WESLEY

CHIEF FINANCIAL OFFICER, VICE
PRESIDENT OF DEVELOPMENT AND
SECRETARY

In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

* Chairman of the Board
_________________________________ July 29,
W. BRUCE LUNSFORD 1996

* Chief Executive Officer,
_________________________________ President and Director July 29,
W. PATRICK MULLOY, II 1996

* Chief Financial Officer,
_________________________________ Vice President of July 29,
J. TIMOTHY WESLEY Development and 1996
Secretary (Chief
Financial and
Accounting Officer)

* Director
_________________________________ July 29,
SANDRA HARDEN AUSTIN 1996

* Director
_________________________________ July 29,
WILLIAM C. BALLARD JR. 1996

* Director
_________________________________ July 29,
THOMAS T. LADT 1996

* Director
_________________________________ July 29,
R. GENE SMITH 1996

/s/ June N. King
*By: ____________________________
JUNE N. KING July 29,
ATTORNEY-IN-FACT 1996

II-5

<PAGE>

Exhibit 1

5,750,000 Shares

ATRIA COMMUNITIES, INC.

Common Stock

($.10 Par Value)

UNDERWRITING AGREEMENT
----------------------

__________, 1996

Alex. Brown & Sons Incorporated
Morgan Stanley & Co. Incorporated
J.C. Bradford & Co.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202

Gentlemen:

Atria Communities, Inc., a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as representatives (the "Representatives") an
aggregate of 5,000,000 shares of the Company's Common Stock, $.10 par value (the
"Firm Shares"). The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto. The Company also proposes to sell at the Underwriters' option an
aggregate of up to 750,000 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below.

As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
<PAGE>

In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

1. Representations and Warranties of the Company.
---------------------------------------------

The Company represents and warrants to each of the Underwriters as follows:

(a) A registration statement on Form S-1 (File No. 333-06907) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and
has been filed with the Commission. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the
exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by
the Company pursuant to Rule 462 (b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of
the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior
to the time it becomes effective or filed pursuant to Rule 424(a) under the
Act that is delivered by the Company to the Underwriters for delivery to
purchasers of the Shares, together with the term sheet, if any, or
abbreviated term sheet filed with the Commission pursuant to Rule 424(b)(7)
under the Act. Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."

(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. Each of the
corporate subsidiaries of the Company as listed in Exhibit 21 to Item 16(a)
of the Registration Statement (collectively, the "Corporate Subsidiaries")
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with the
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. The Corporate
Subsidiaries are the only corporate subsidiaries, direct or indirect, of
the Company. The Company and each of the Corporate Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification except for jurisdictions where
failure to so qualify, together with all other such failures, would not
have a material adverse effect upon the business, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole. The outstanding shares

2
<PAGE>

of capital stock of each of the Corporate Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are
owned by the Company or another Corporate Subsidiary free and clear of all
liens, encumbrances and equities and claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Corporate Subsidiaries are outstanding.

(c) Each general partnership and each limited partnership of which a
Corporate Subsidiary is general partner, as listed in Exhibit 21 to Item
16(a) of the Registration Statement (collectively, the "Partnerships," and
together with the Corporate Subsidiaries, the "Subsidiaries") has been duly
organized and is an existing general partnership or limited partnership, as
the case may be, in good standing under the laws of the jurisdiction of its
organization, with the power and authority to own or lease its properties
and conduct its business as described in the Registration Statement. Each
of the Partnerships is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such
qualification; except for jurisdictions in which the failure to so qualify,
together with all such other failures, would not have a material adverse
effect upon the business, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries
taken as a whole. The capital contributions with respect to the outstanding
units of each of the Partnerships have been made to the Partnerships. To
the knowledge of the Company, all outstanding limited partnership interests
in the Partnerships were issued and sold in compliance with all applicable
Federal and state securities laws. The general and limited partnership
interests therein held directly or indirectly by the Company are owned free
and clear of all liens, encumbrances and equities and claims, except (i)
for encumbrances disclosed in the Prospectus, and (ii) for encumbrances
relating to any indebtedness disclosed in the Prospectus. To the knowledge
of the Company, each partnership agreement pursuant to which the Company or
a Subsidiary holds an interest in a Partnership is in full force and effect
and constitutes the legal, valid and binding agreement of the parties
thereto, enforceable against such parties in accordance with the terms
thereof. There has been no material breach of or default under, and no
event which with notice or lapse of time would constitute a material breach
of or default under, such agreements by the Company or any Subsidiary or,
to the Company's knowledge, any other party to such agreements. Except to
the extent disclosed in the Prospectus, each of the assisted and
independent living facilities, and each of the properties held for
development, described in the Prospectus as owned by the Company is owned
and operated either by a Corporate Subsidiary or by a Partnership in which
a Corporate Subsidiary owns at least 50% of the outstanding partnership
interests.

(d) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
the Shares to be issued and sold by the Company have been duly authorized
and when issued and paid for as contemplated herein will be validly issued,
fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof.
Neither the filing of the Registration Statement nor the offering or sale
of
3
<PAGE>

the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to
the registration of any shares of Common Stock.

(e) Except as disclosed in the Prospectus, and with respect to any
Limited Partnership, as contained in the applicable partnership agreement,
there are no outstanding warrants, options, convertible securities or other
commitments of sale related to or entitling any person to purchase or
otherwise acquire any securities or interest in any Subsidiary. Except as
disclosed in the Prospectus and, with respect to any Limited Partnership,
as contained in the applicable partnership agreement, there are no
consensual encumbrances or restrictions on the ability of any Subsidiary
(i) to pay any dividends or make any distributions on such Corporate
Subsidiary's capital stock or such Partnership's partnership interests or
to pay any indebtedness owed to the Company or any other Subsidiary, (ii)
to make any loans or advances to, or investments in, the Company or any
other Subsidiary, or (iii) except as contained in certain long-term
agreements, to transfer any of its properties or assets to the Company or
any other Subsidiary.

(f) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.

(g) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and
will conform, to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not omit,
and will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus
and any amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and will
not omit, to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained
in or omitted from the Registration Statement or the Prospectus, or any
such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.

(h) The combined financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the
results of operations and cash flows of the Company and the consolidated
Subsidiaries, at the indicated dates and for the indicated

4
<PAGE>

periods. Such financial statements and related schedules have been prepared
in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
therein, and all adjustments necessary for a fair presentation of results
for such periods have been made. The summary financial and statistical data
included in the Registration Statement presents fairly the information
shown therein and such data has been compiled on a basis consistent with
the financial statements presented therein and the books and records of the
Company.

(i) Ernst & Young LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement,
are independent public accountants as required by the Act and the Rules and
Regulations.

(j) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which
if determined adversely to the Company or any of its Subsidiaries might
result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a
whole or to prevent the consummation of the transactions contemplated
hereby, except as set forth in the Registration Statement.

(k) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount. The Company
and the Subsidiaries occupy their leased properties under valid and binding
leases conforming in all material respects to the description thereof set
forth in the Registration Statement.

(l) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become
due and are not being contested in good faith. All tax liabilities have
been adequately provided for in the financial statements of the Company.

(m) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a
whole, whether or not occurring in the ordinary course of business, and
there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company or the
Subsidiaries,

5
<PAGE>

other than transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be amended
or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.

(n) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws, partnership agreement or under any
agreement, lease, contract, indenture or other instrument or obligation to
which it is a party or by which it, or any of its properties, is bound and
which default is of material significance in respect of the condition,
financial or otherwise of the Company and its Subsidiaries taken as a whole
or the business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole. The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a material
default under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party, or of the
Charter or By-Laws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.

(o) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.

(p) The Company and each of the Subsidiaries holds all material
licenses, certificates, permits and other approvals from governmental
authorities (collectively, "Permits") which are necessary to own their
properties and to conduct their businesses, including, without limitation,
such Permits as are required (i) under such federal and state health care
laws as are applicable to the Company and the Subsidiaries and (ii) with
respect to those facilities operated by the Company or any Subsidiary that
participate in Medicare and/or Medicaid, to receive reimbursement
thereunder, except where such failure to have or hold such Permits,
together with all other such failures, would not have a material adverse
effect upon the business, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries
taken as a whole; the Company and each of the Subsidiaries have fulfilled
and performed all of their material obligations with respect to such
Permits, and no event or change in condition has occurred which allows, or
after notice or lapse of time would allow,

6
<PAGE>

revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each
case to such qualifications as may be set forth in the Prospectus. During
the period for which financial statements are included in the Prospectus,
denials by third-party payers of claims for reimbursement for services
rendered by the Company have not had a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth
or results of operations of the Company and the Subsidiaries taken as a
whole, and any such denials are either under appeal or the Company has
ceased seeking reimbursement for the services or supplies to which they
relate.

(q) Neither the Company nor any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the
Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks
or copyrights owned by or licensed to the Company.

(r) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
the Shares.

(s) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.

(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

(u) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in similar
industries.

(v) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) (including, but not limited to, the filing of Form 5500s for prior
periods, if required) has occurred with respect to any "pension plan"

7
<PAGE>

(as defined in ERISA) for which the Company would have any liability; the
Company has not incurred and does not expect to incur liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the
loss of such qualification.

(w) The property, assets and operations of the Company and the
Subsidiaries comply in all material respects with all applicable federal,
state or local law, common law, doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters
(the "Environmental Laws"), except to the extent that failure to comply
with such Environmental Laws would not have a material adverse effect on
the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as
a whole. None of the property, assets or operations of the Company and the
Subsidiaries is the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release
into the environment of any substance regulated by, or form the basis of
liability under, any Environmental Laws (a "Hazardous Material"), or is in
contravention of any Environmental Law that would have a material adverse
effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and
Subsidiaries taken as a whole. Neither the Company nor any Subsidiary has
received any notice or claim, nor are there pending, reasonably anticipated
or, or to the Company's knowledge, threatened lawsuits against them with
respect to violations of an Environmental Law or in connection with the
release of any Hazardous Material into the environment, in each case which,
individually or in the aggregate, would have a material adverse effect on
the condition (financial or other), business, properties, prospects, net
worth or results of operations of the Company and the Subsidiaries taken as
a whole. Neither the Company nor any Subsidiary has any material contingent
liability in connection with any release of Hazardous Material into the
environment.

(x) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located in
Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to
the Department.

8
<PAGE>

(y) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act, to register the Common Stock, has filed
an application to list the Shares on the Nasdaq National Market System, and
has received notification that the listing has been approved, subject to
official notice of issuance.

(z) To the best of the Company's knowledge, no officer, director or
security holder of the Company has an "association" or "affiliation" with
any member of the NASD, within the meaning of Article III, Section 44 of
the Rules of Fair Practice of the NASD. The Company does not have an
"association" or "affiliation" with any member of the NASD, within the
meaning of Article III, Section 44 of the Rules of Fair Practice of the
NASD.

2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------

(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Company agrees and the Underwriters and each Underwriter agrees, severally
and not jointly, to purchase, at a price of $_____ per share, the number of
Firm Shares set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.

(b) Payment for the Firm Shares to be sold hereunder is to be made by
wire transfer of immediately available funds to the order of the Company
against delivery of certificates therefor to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be
made at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore
Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third
business day after the date of this Agreement or at such other time, date,
and location not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to as
the "Closing Date." (As used herein, "business day" means a day on which
the New York Stock Exchange is open for trading and on which banks in New
York are open for business and not permitted by law or executive order to
be closed.) The certificates for the Firm Shares will be delivered in such
denominations and in such registrations as the Representatives request in
writing not later than the second full business day prior to the Closing
Date, and will be made available for inspection by the Representatives at
least one business day prior to the Closing Date.

(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company hereby grants an option to the several Underwriters to purchase
the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the
Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by you,

9
<PAGE>

as Representatives of the several Underwriters, to the Company setting
forth the number of Option Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Option
Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which certificates
for Option Shares are to be delivered shall be determined by the
Representatives but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to
the Closing Date (such time and date being herein referred to as the
"Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as the number of Firm Shares being
purchased by such Underwriter bears to the total number of Firm Shares,
adjusted by you in such manner as to avoid fractional shares. The option
with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the
Underwriters. You, as Representatives of the several Underwriters, may
cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the
Option Closing Date in New York Clearing House funds by certified or bank
cashier's check drawn to the order of the Company against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated,
135 East Baltimore Street, Baltimore, Maryland.

3. Offering by the Underwriters.
----------------------------

It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the
public at the initial public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.

It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with
a Master Agreement Among Underwriters entered into by you and the several
other Underwriters.

4. Covenants of the Company.
------------------------

The Company covenants and agrees with the several Underwriters that:

(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing

10
<PAGE>

information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, (B) not file any amendment to the Registration Statement or
supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not
in compliance with the Rules and Regulations.

(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution of any proceedings for that purpose.
The Company will use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain
as soon as possible the lifting thereof, if issued.

(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and
other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably
request for distribution of the Shares. In addition, the Company agrees to
comply with (i) the undertakings set forth in its "Application for
Exemption Under Sections 352-g(2) and 359-f(2) of the New York general
Business Law for a Real Estate Syndication Offering Registered with the
Securities and Exchange Commission Under the Federal Securities Act of
1933," dated March ___, 1996, as amended to date and as may be amended
hereafter, and (ii) any applicable provisions of Section 352-e of the New
York General Business Law or the rules and regulations promulgated
thereunder.

(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period
when delivery of a Prospectus is required under the Act, as many copies of
the Prospectus in final form, or as thereafter amended or supplemented, as
the Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits
filed therewith, and will deliver to the Representatives such number of
copies of the Registration

11
<PAGE>

Statement (including such number of copies of the exhibits filed therewith
that may reasonably be requested), and of all amendments thereto, as the
Representatives may reasonably request.

(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event
shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.

(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations and will advise you in writing when such
statement has been so made available.

(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or
the Securities Exchange Act of 1934, as amended. The Company will deliver
to the Representatives similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which
are not consolidated or combined in the Company's financial statements.

(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 180 days
after the date of this Agreement, directly or indirectly, by the Company
otherwise than hereunder, pursuant to employee benefit plans, in connection
with the acquisition of property or assets [for up to ______ shares], or
with the prior written consent of Alex. Brown & Sons Incorporated.

12
<PAGE>

(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on The Nasdaq National Market System.

(j) The Company has caused each officer and director of the Company
and Vencor, Inc. to furnish to you, on or prior to the date of this
agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Shares or derivative of
Common Shares owned by such person or request the registration for the
offer or sale of any of the foregoing (or as to which such person has the
right to direct the disposition of) for a period of 180 days after the date
of this Agreement, directly or indirectly, except with the prior written
consent of Alex. Brown & Sons Incorporated (the "Lockup Agreements").

(k) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of
the proceeds therefrom as may be required in accordance with Rule 463 under
the Act.

(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").

(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.

(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company.

5. Costs and Expenses.
------------------

The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for
the Company; the cost of printing and delivering to, or as requested by,
the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling
Memorandum, the Underwriters' Invitation Letter, the Listing Application,
the Blue Sky Survey and any supplements or amendments thereto; the filing
fees of the Commission; the filing fees and expenses (including legal fees
and disbursements) incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the
sale of the Shares; the Listing Fee of the Nasdaq Stock Market; and the

13
<PAGE>

expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Shares
under State securities or Blue Sky laws or in connection with the
qualification or exemption of the Shares under the laws of any Canadian
province. The Company agrees to pay all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, incident to the offer and sale of directed shares of the
Common Stock by the Underwriters to employees and persons having business
relationships with the Company and its Subsidiaries. The Company shall not,
however, be required to pay for any of the Underwriters' expenses (other
than those related to qualification under NASD regulations and State
securities or Blue Sky laws), except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied,
or because this Agreement is terminated by the Representatives pursuant to
Section 11 hereof, or by reason of any failure, refusal or inability on the
part of the Company to perform any undertaking or satisfy any condition of
this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure to satisfy said condition or to comply with
said terms is due to the default or omission of any Underwriter, then the
Company shall reimburse the several Underwriters for reasonable out-of-
pocket expenses, including fees and disbursements of counsel, reasonably
incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations
hereunder; but the Company shall not in any event be liable to any of the
several Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.

6. Conditions of Obligations of the Underwriters.
---------------------------------------------

The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the
Option Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by the
Company of its covenants and obligations hereunder and to the following
additional conditions:

(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing
Date which would prevent the issuance of the Shares.

14
<PAGE>

(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinions of Greenebaum
Doll & McDonald, PLLC, counsel for the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters
(and stating that it may be relied upon by counsel to the Underwriters) to
the effect that:

(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; each of the Subsidiaries is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; the Company and each of the Subsidiaries are duly qualified
to transact business in all jurisdictions in which the conduct of
their business requires such qualification, or in which the failure to
qualify would have a material adverse effect upon the business of the
Company and the Subsidiaries taken as a whole; and the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable
and are owned by the Company or a Subsidiary; and, to the best of such
counsel's knowledge, the outstanding shares of capital stock of each
of the Subsidiaries is owned free and clear of all liens, encumbrances
and equities and claims, and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding.

(ii) Each of the Partnerships is a validly existing
partnership under the laws of the jurisdiction of its organization,
with the power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and Prospectus, and is duly qualified to conduct its business and is
in good standing in each jurisdiction in which the nature of its
properties or the conduct of its business requires such qualification,
except where the failure so to qualify does not have a material
adverse effect upon the business of the Company and the Subsidiaries
taken as a whole; the partnership interests in the Partnerships held
directly or indirectly by the Company are, to such counsel's
knowledge, free and clear of all liens, encumbrances and equities and
claims, except (a) for those encumbrances disclosed in the Prospectus,
(b) for encumbrances relating to indebtedness disclosed in the
Registration Statement or Prospectus and (c) to the extent provided in
the applicable partnership agreement; each partnership agreement
pursuant to which the Company or a Subsidiary holds a general
partnership interest in a limited partnership is in full force and
effect and constitutes the legal, valid and binding agreement of the
parties thereto, enforceable against such parties in accordance with
the terms thereof, except as enforcement thereof may be limited by
equitable principles or by bankruptcy,

15
<PAGE>

insolvency or other similar laws affecting creditors' rights
generally. To such counsel's knowledge, there has been no material
breach of or default under, and no event which with notice or lapse of
time would constitute a material breach of or default under, such
agreements by the Company or any Subsidiary or any other party to such
agreements.

(iii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly
authorized; the outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and non-
assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares, assuming
they are in the form filed with the Commission, are in due and proper
form; the shares of Common Stock, including the Option Shares, if any,
to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and no
preemptive rights of stockholders exist with respect to any of the
Shares or the issue or sale thereof.

(iv) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company
or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell
or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Shares or the right to have any Common Shares or other
securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration Statement, to
require registration under the Act of any shares of Common Stock or
other securities of the Company.

(v) Except (a) as described in or contemplated by the
Prospectus, and (b) with respect to any Partnership, as contained in
the applicable partnership agreement, to such counsel's knowledge,
there are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities or commitments of sale related to or
entitling any person to purchase or otherwise acquire any shares of
capital stock, or partnership or other ownership interest in, any
Subsidiary.

(vi) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings

16
<PAGE>

with respect thereto have been instituted or are pending or threatened
under the Act.

(vii) The Registration Statement (including any Registration
Statement filed under Rule 462(b) of the Act, if any), the Prospectus
and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the applicable
rules and regulations thereunder (except that such counsel need
express no opinion as to the combined financial statements and related
schedules).

(viii) The statements under the captions "Risk Factors --
Relationship with Vencor; Conflicts of Interest," "--risks of
Indebtedness -- Bond Financing," "The Company and its Predecessors,"
"Business -- Funding for Assisted and Independent Care," "--Government
Regulation," "Management," "Certain Transactions," and "Description of
Capital Stock" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called
for with respect to such documents and matters.

(ix) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are
not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the
Prospectus are fairly summarized in all material respects.

(x) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or bylaws, or
other organizational documents or, to the knowledge of such counsel,
(a) is in default in the performance of any material obligation,
agreement or condition contained in any evidence of indebtedness,
except as may be contained in the Prospectus, or (b) in material breach
of any applicable statute, rule or regulation or any order, writ or
decree of any court or governmental agency or body having jurisdiction
over the Company or any of the Subsidiaries or their respective
property.

(xi) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, except as set forth in the Prospectus.

(xii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will
not (a) conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the Charter or articles
or by-laws of the Company or any of the Subsidiaries, (b) or any
agreement or instrument known to such counsel to which the Company or
any of the Subsidiaries is a party or by which the

17
<PAGE>

Company or any of the Subsidiaries may be bound, or (c) violate or
conflict with any applicable law, rule or regulation or any order,
writ or decree of any court or governmental agency or body having
jurisdiction over the Company or any Subsidiary or their respective
properties.

(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.

(xiv) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the
NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been
obtained or made, specifying the same.

(xv) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.

(xvi) Except as disclosed in the Prospectus, such counsel is not
aware of any holder of any security of the Company or any other person
who has the right, contractual or otherwise, to have any securities of
the Company included in the Registration Statement, except for any
such rights as shall have been waived.

(xvii) To such counsel's knowledge, the Company and each of the
Subsidiaries will, upon consummation of the Contribution Transaction,
have all necessary Permits (except where the failure to have such
Permits, individually or in the aggregate, would not have a material
adverse effect on the business, operations or financial condition of
the Company and the Subsidiaries taken as a whole), to own their
respective properties and to conduct their respective businesses as
now being conducted, and as described in the Registration Statement
and Prospectus, including, without limitation, such Permits as are
required (a) under such federal and state health care laws as are
applicable to the Company and the Subsidiaries and (y) with respect to
those facilities owned or operated by the Company or any Subsidiary
that participate in Medicare and/or Medicaid, to receive reimbursement
thereunder, and no event has occurred (or will occur as a result of
the Contribution Transaction, as such term is defined in the
Prospectus) which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the

18
<PAGE>

Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of the Subsidiaries.

(xviii) The Contribution Transaction (as such term is defined in
the Prospectus) and each of the documents and agreements executed and
delivered by the Company, the Subsidiaries and Vencor, Inc. have been
duly authorized, executed and delivered by the parties thereto; no
approval, consent, order, authorization, designation, declaration or
filing by or with any regulatory, administrative or other governmental
body is necessary in connection with the execution and delivery of the
documents and agreements executed and delivered in connection with the
Contribution Transaction, except such as have been obtained or made,
specifying the same.

In rendering such opinion Greenebaum Doll & McDonald, PLLC may rely as
to matters governed by the laws of states other than Kentucky and Delaware
or Federal laws on local counsel licensed to practice in such
jurisdictions, provided that in each case Greenebaum Doll & McDonald, PLLC
shall state that they believe that they and the Underwriters are justified
in relying on such other counsel. In rendering such opinion, such counsel
may also rely, as to matters of fact, on certificates of officers of the
Company and of governmental officials, in which case their opinion shall
state that they are so doing. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, at the time it became effective under the Act
(but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Greenebaum Doll & McDonald, PLLC may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.

(c) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Jill L. Force,
Esq., Vice President and General Counsel of Vencor, Inc., dated the Closing
Date or the Option Closing Date, as the case may be, addressed to the
Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that: to such counsel's knowledge, the Company
and each of the Subsidiaries will, upon consummation of the Contribution
Transaction, have all necessary Permits (except where the failure to have
such Permits, individually or in the aggregate, would not have a material
adverse effect on the business, operations or financial condition of the
Company and the Subsidiaries taken as a whole), to own their

19
<PAGE>

respective properties and to conduct their respective businesses as now
being conducted, and as described in the Registration Statement and
Prospectus, including, without limitation, such Permits as are required (a)
under such federal and state health care laws as are applicable to the
Company and the Subsidiaries and (y) with respect to those facilities owned
or operated by the Company or any Subsidiary that participate in Medicare
and/or Medicaid, to receive reimbursement thereunder, and no event has
occurred (or will occur as a result of the Contribution Transaction, as
such term is defined in the Prospectus) which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be set forth in
the Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company or
any of the Subsidiaries.

(d) The Representatives shall have received from Alston & Bird,
counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (iii), (iv), (v), (xii) and (xiv) of Paragraph
(b) of this Section 6, and that the Company is a duly organized and validly
existing corporation under the laws of the State of Delaware. In rendering
such opinion may rely as to all matters governed other than by the laws of
the States of Georgia or Federal laws on the opinion of Greenebaum Doll &
McDonald PLLC or the opinion of counsel referred to in Paragraph (b) of
this Section 6. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the
Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (ii) the Prospectus, or any supplement thereto, on the date
it was filed pursuant to the Rules and Regulations and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary
in order to make the statements, in the light of the circumstances under
which they are made, not misleading (except that such counsel need express
no view as to financial statements, schedules and statistical information
therein). With respect to such statement, Alston & Bird may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.

(e) The Representatives shall have received at or prior to the
Closing Date a memorandum or summary, in form and substance satisfactory to
the Representatives, with respect to the qualification for offering and
sale by the Underwriters of the Shares under the State securities or Blue
Sky laws of such jurisdictions as the Representatives may reasonably have
designated to the Company.

(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing

20
<PAGE>

Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to you, of Ernst & Young, LLP confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.

(g) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates
of the Chief Executive Officer and the Chief Financial Officer of the
Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:

(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been taken or are, to his knowledge, contemplated by the
Commission;

(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;

(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration
Statement and Prospectus did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and

(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or

21
<PAGE>

prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.

(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters
as the Representatives may reasonably have requested.

(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market System.

(j) The Lockup Agreements described in Section 4(j) are in full
force and effect.

The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in
all material respects satisfactory to the Representatives and to Alston &
Bird, counsel for the Underwriters.

If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company of such termination in
writing or by telegram at or prior to the Closing Date or the Option
Closing Date, as the case may be.

In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).

7. Conditions of the Obligations of the Company.
--------------------------------------------

The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.

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

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities
to which such Underwriter or any such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii)
the omission or alleged omission to state therein a material fact required
to be stated

22
<PAGE>

therein or necessary to make the statements therein not misleading; and
will reimburse each Underwriter and each such controlling person upon
demand for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or proceeding
or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling
person is a party to any action or proceeding; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made
in the Registration Statement, any Preliminary Prospectus, the Prospectus,
or such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have.

(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with investigating
or defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that each Underwriter will be liable in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.

(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No

23
<PAGE>

indemnification provided for in Section 8(a) or (b) shall be available to
any party who shall fail to give notice as provided in this Section 8(c) if
the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than
on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention
of such counsel, (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them or (iii) the indemnifying party shall have failed to assume
the defense and employ counsel acceptable to the indemnified party within a
reasonable period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all
such indemnified parties. Such firm shall be designated in writing by you
in the case of parties indemnified pursuant to Section 8(a) and by the
Company in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment. In addition, the indemnifying
party will not, without the prior written consent of the indemnified party,
settle or compromise or consent to the entry of any judgment in any pending
or threatened claim, action or proceeding of which indemnification may be
sought hereunder (whether or not any indemnified party is an actual or
potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is

24
<PAGE>

appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, (or actions or proceedings
in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

The Company, and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased
by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.

(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may

25
<PAGE>

join him or it as an additional defendant in any such proceeding in which
such other contributing party is a party.

(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.

9. Default by Underwriters.
-----------------------

If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the Company,
you, as Representatives of the Underwriters, shall use your reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as
may be agreed upon and upon the terms set forth herein, the Firm Shares or
Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representatives, shall not have procured such other Underwriters, or any
others, to purchase the Firm Shares or Option Shares, as the case may be,
agreed to be purchased by the defaulting Underwriter or Underwriters, then
(a) if the aggregate number of shares with respect to which such default
shall occur does not exceed 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Shares or Option
Shares, as the case may be, which they are obligated to purchase hereunder,
to purchase the Firm Shares or Option Shares, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case
may be, with respect to which such default shall occur exceeds 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the
Company or you as the Representatives of the Underwriters will have the
right, by written notice given within the next 36-hour period to the
parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or of the Company except to the
extent provided in Section 8 hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Section 9, the Closing
Date or Option Closing Date, as the case may be, may be postponed for such
period, not exceeding seven days, as you, as Representatives, may determine
in order that

26
<PAGE>

the required changes in the Registration Statement or in the Prospectus or
in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter
under this Agreement.

10. Notices.
-------

All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Alex.
Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland
21202, Attention: Mr. Steven Schuh; with a copy to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202.
Attention: General Counsel; if to the Company, to

Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attn: W. Patrick Mulloy, II

11. Termination.
-----------

This Agreement may be terminated by you by notice to the Company as
follows:

(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;

(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change
in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets
of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of
the Shares, or (iii) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree
or other promulgation of any statute, regulation, rule or order of any
court or other governmental

27
<PAGE>

authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Exchange Act); (vii) the
suspension of trading of the Company's common stock by the Commission on
the Nasdaq Stock Market or (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs
which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or

12. Successors.
----------

This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any
right or obligation hereunder. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign merely because of such
purchase.

13. Information Provided by Underwriters.
------------------------------------

The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company
for inclusion in any Prospectus or the Registration Statement consists of
the information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), legends required
by Item 502(d) of Regulation S-K under the Act and the information under
the caption "Underwriting" in the Prospectus.

14. Miscellaneous.
-------------

The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation
made by or on behalf of any Underwriter or controlling person thereof, or
by or on behalf of the Company or its directors or officers, and (c)
delivery of and payment for the Shares under this Agreement.

This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.

28
<PAGE>

If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.

Very truly yours,

ATRIA COMMUNITIES, INC.

By:
------------------------
Chief Executive Officer

The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.

ALEX. BROWN & SONS INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
J.C. BRADFORD & CO.

As Representatives of the several
Underwriters listed on Schedule I

By: Alex. Brown & Sons Incorporated

By:
----------------------------------
Authorized Officer

29
<PAGE>

SCHEDULE I

Schedule of Underwriters

Number of Firm Shares
Underwriter to be Purchased
- ----------- ----------------------

Alex. Brown & Sons Incorporated
Morgan Stanley & Co. Incorporated
J.C. Bradford & Co.

__________

Total __________

<PAGE>

Exhibit 3.2

AMENDED AND RESTATED
BY-LAWS
OF
ATRIA COMMUNITIES, INC.

ARTICLE 1

OFFICES
-------

1.1 REGISTERED OFFICE. The registered office of the Corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware.

1.2 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.

ARTICLE 2

STOCKHOLDERS
------------

2.1 ANNUAL MEETING. The annual meeting of the stockholders of the
Corporation, for the election of directors, the consideration of financial
statements and other reports, and the transaction of such other business as may
properly be brought before such meeting, shall be held no later than six months
following the end of the Corporation's fiscal year. The meeting shall be held
at such time and on such date as may be designated by the Board of Directors of
the Corporation. In the event the annual meeting is not held or if directors
are not elected at the annual meeting, a special meeting may be called and held
for that purpose.

2.2 SPECIAL MEETINGS. Except as otherwise required by law and subject to
the rights of the holders of any class or series of Preferred Stock, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by (i) the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof approved by a majority of the total number of
Directors which the Corporation would have if there were no vacancies (the
"Whole Board"), (ii) by the Chairman of the Board of Directors of the
Corporation, or (iii) by the President of the Corporation. In addition, prior
to the Trigger Date (as defined in the Certificate of Incorporation), the
Corporation will call a special meeting of stockholders promptly upon request by
Vencor, Inc., a Delaware corporation ("Vencor"), or any of its affiliates, in
each case, if such entity is a stockholder of the Corporation. No business
other than that stated in the notice of the Special Meeting shall be transacted
at any special meeting.
<PAGE>

2.3 PLACE OF MEETING. All meetings of the stockholders for the election
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place either within or without the State of
Delaware as shall be stated in the notice of such meeting.

2.4 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written notice of the
annual meeting or a special meeting stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at such person's address as it appears on the stock transfer books
of the Corporation. Such further notice shall be given as may be required by
law. When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. Only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Any previously scheduled
meeting of the stockholders may be postponed, and any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
stockholders.

2.5 STOCKHOLDERS LIST. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city, town or
village where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.

2.6 QUORUM; ADJOURNMENTS. At any meeting of stockholders, the holders of
a majority of the issued and outstanding shares of stock entitled to vote at the
meeting of stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at all meetings of
stockholders, except as otherwise provided by statute or by the Corporation's
Restated Certificate of Incorporation as the same may be

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amended from time to time ("Certificate of Incorporation"). If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the chairman of the meeting or a majority of the stockholders entitled to vote
at the meeting, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented by proxy.

2.7 VOTING. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the shares of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-laws a different vote is required, in which case such
express provision shall govern and control the decision of such question.

2.8 PROXIES. At each meeting of the stockholders, each stockholder shall
be entitled to vote in person or by proxy the shares of capital stock having
voting power held by such stockholder, but no proxy shall be voted after three
years from its date, unless the proxy provides for a longer period.

2.9 INTRODUCTION OF BUSINESS AT A MEETING OF STOCKHOLDERS. At an annual
or special meeting of stockholders, only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before an annual or special meeting of stockholders. To be properly brought
before a special meeting of stockholders and acted upon at the meeting, business
must be specified in the notice of the special meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, the Chairman of
the Board or the President , or if prior to the Trigger Date given at the
direction of Vencor, pursuant to Section 2.2 of these By-laws. At an annual
meeting of stockholders, only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought before the
annual meeting of stockholders (a) by, or at the direction of, the Board of
Directors, (b) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice of the annual meeting, who is entitled to
vote at the annual meeting and who otherwise complies with all procedures and
requirements set forth in this By-law, or (c) prior to the Trigger Date only, by
Vencor or any of its affiliates that is a stockholder of the Corporation. For
business to be properly brought before an annual meeting of stockholders by a
stockholder, the stockholder must have given timely notice thereof in writing to
the President or Secretary of the Corporation. To be timely, a stockholder's
notice must be received at the principal executive offices of the Corporation
not fewer than 60 days nor more than 90 days prior to the scheduled date of the
annual meeting regardless of any postponement, deferral or adjournment of that
meeting to a later date; provided, however, that if fewer than 70 days notice or
prior public disclosure of the date of the annual meeting is made or given to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the earlier of (1) the day
on which such notice of the date of the meeting was mailed or (2) the day on
which such public disclosure was made.

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A stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before an annual meeting of stockholders (1) a brief
description of the business desired to be brought before the annual meeting, (2)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal, (3) the class and number of shares
of the Corporation which are beneficially owned by such stockholder on the date
of such stockholder's notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder's
notice, and (4) any material interest of the stockholder in such proposal.

Notwithstanding anything in the By-laws to the contrary, no business shall
be conducted at a meeting of stockholders except in accordance with the
procedure set forth in this Section 2.9. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that the business was
not properly brought before the meeting in accordance with the procedures
described by the By-laws, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be considered.

2.10 NOMINATION OF DIRECTORS. Only persons nominated in accordance with
the procedures set forth in this section shall be eligible for election as
directors. Nominations of persons for election to the board may be made at a
meeting of stockholders (1) by or at the direction of the Board of Directors,
(2) prior to the Trigger Date, by Vencor or any of its affiliates that is a
stockholder of the Corporation, or (3) by any stockholder of the Corporation
entitled to vote for the election of directors at such meeting who complies with
the notice procedures set forth in this Section 2.10. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the President or Secretary of the
Corporation. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation not fewer than 60 days nor more
than 90 days prior to the scheduled date of a meeting, regardless of any
postponement, deferral or adjournment of that meeting to a later date; provided,
however, that if fewer than 70 days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the tenth day following the earlier of (1) the day on which such
notice of the date of such meeting was mailed or (2) the day on which such
public disclosure was made.

A stockholder's notice shall set forth (1) as to each person whom the
stockholder proposes to nominate for election or reelection as a director (a)
the name, age, business address and residence address of such person, (b) the
principal occupation or employment of such person, (c) the class and number of
shares of the Corporation which are beneficially owned by such person on the
date of such stockholder's notice and (d) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (2) as to the
stockholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such

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nominees and (b) the class and number of shares of the Corporation which are
beneficially owned by such stockholder on the date of such stockholder's notice
and by any other stockholders known by such stockholder to be supporting such
nominees on the date of such stockholder's notice.

No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with procedures set forth in this section. The
chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by the By-laws, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.

This Section 2.10 shall not apply to the election of a director to a
directorship which may be filled by the Board of Directors under the General
Corporation Law of the State of Delaware.

2.11 PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by ballot, and, subject to the rights of the holders of any
series of Preferred Stock to elect directors under an applicable preferred stock
designation, a plurality of the votes cast thereat shall elect directors.
Except as otherwise provided by law, the Certificate of Incorporation, these By-
Laws, or in the designation of rights of holders of any series of Preferred
Stock in all matters other than the election of directors, the affirmative vote
of a majority of the voting power of the shares present in person or represented
by proxy at the meeting and entitled to vote on the matter shall be the act of
the stockholders.

2.12 INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS. The Board of
Directors by resolution shall appoint, or shall authorize an officer of the
Corporation to appoint, one or more inspectors, which inspector or inspectors
may include individuals who serve the Corporation in other capacities,
including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspector(s)
to replace any inspector who fails to act. If no inspector or alternate has
been appointed to act or is able to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging such person's duties, shall take
and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of such person's ability. The
inspector(s) shall have the duties prescribed by law. The Chairman of the
meeting shall fix and announce at the meeting the date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting.

2.13 NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Effective as of the
Trigger Date, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders.

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ARTICLE 3

BOARD OF DIRECTORS
------------------

3.1 GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors. The Board of
Directors may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute, by the Certificate of Incorporation or by
these By-Laws required or directed to be exercised or done by the stockholders.

3.2 NUMBER, CLASSIFICATION AND TERM OF OFFICE. Except as otherwise
fixed by or pursuant to the provisions of Article IV of the Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the number of
the Directors of the Corporation shall be fixed from time to time exclusively
pursuant to a resolution adopted by a majority of the Whole Board (as defined in
the Certificate of Incorporation), but in no event shall be less than three nor
more than fifteen. Commencing with the 1997 annual meeting of stockholders, the
directors shall be divided into three classes, which shall be as nearly equal in
number as possible with the term of office of the first class elected to expire
at the annual meeting of stockholders to be held in 1998, the term of office of
the second class to expire at the annual meeting of stockholders to be held in
1999, and the term of office of the third class to expire at the annual meeting
of stockholders to be held in 2000, with each class to hold office until its
successor is duly elected and qualified. At each succeeding annual meeting of
stockholders after the 1997 annual meeting of stockholders, directors elected to
succeed those directors whose terms then expire shall be elected for a full term
of office to expire at the third succeeding annual meeting of stockholders after
their election or thereafter when their respective successors in each case are
duly elected and qualified. Any director elected to a particular class by the
stockholders or directors shall be eligible, upon resignation or expiration of
their term, to be elected to a different class.

3.3 PLACE OF MEETING. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware.

3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held, within or without the State of Delaware, without other notice
than this By-Law immediately after, and at the same place as, the annual meeting
of stockholders. The Board of Directors may, by resolution, provide the time
and place, within or without the State of Delaware, for the holding of
additional regular meetings without other notice than such resolution.

3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be called at the request of the Chairman of the Board, the President or a
majority of the Board of Directors then in office. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings. Notice of each special meeting shall be given to each
director, at least three days before the day on which the meeting is to be held,
in accordance with Article IV of these By-laws. Each such notice

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shall state the time and place either within or without the State of Delaware of
the meeting but need not state the purpose thereof, except as otherwise provided
by the General Corporation Law of the State of Delaware or by these By-laws.
Notice of any meeting of the Board need not be given to any director who is
present at such meetings; and any meeting of the Board of Directors shall be a
legal meeting without any notice thereof having been given if all of the
directors then in office are present at the meeting unless a director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meetings is not lawfully called
or convened.

3.6 ACTION BY CONSENT OF BOARD OF DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all members of the Board of Directors
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee .

3.7 CONFERENCE TELEPHONE MEETINGS. Members of the Board of Directors or
any committee thereof may participate in a meeting of the Board of Directors or
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at such meeting.

3.8 QUORUM. At all meetings of the Board of Directors, a majority of
directors then in office shall constitute a quorum for the transaction of
business, and the act of the majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors, except as
may be otherwise specifically provided by the General Corporation Law of the
State of Delaware or by the Certificate of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, a majority of the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting until a quorum shall be present. The directors
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough directors to leave less
than a quorum.

3.9 VACANCIES. Except as otherwise provided for or fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock to elect
directors under specified circumstances, newly created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of Directors constituting the Board of Directors shall shorten the
term of any incumbent Director.

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3.10 COMMITTEES.
----------

a. The Board of Directors may, by resolution adopted by a majority of
the whole Board of Directors, designate one or more committees, each committee
to consist of one or more directors of the Corporation. The Board of Directors
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
In addition, in the absence or disqualification of the member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers over business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under Sections 251 and 252 of the General Corporation Law of the
State of Delaware, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
recommending to the stockholders the dissolution of the Corporation or
revocation of a dissolution, or amending the By-laws of the Corporation; and,
unless the Resolution so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership or merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.

b. A majority of any committee may determine its action and fix the
time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Section 3.5 of these By-Laws. The Board shall have power
at any time to fill vacancies in, to change the membership of, or to dissolve
any such committee.

3.11 REMOVAL. Subject to the rights of any series of Preferred Stock
to elect Directors under specified circumstances, any Director may be removed
from office only for cause by the affirmative vote of the holders of at least a
majority of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock") then outstanding,
voting together as a single class; provided, however, that prior to the Trigger
Date, any director or directors may be removed from office, with or without
cause, by the affirmative vote of the holders of at least a majority of the
voting power of all Voting Stock then outstanding, voting as a single class.

3.12 RECORDS. The Board of Directors shall cause to be kept a record
containing the minutes of the proceedings of the meetings of the Board and of
the stockholders, appropriate stock books and registers and such books of
records and accounts as may be necessary for the proper conduct of the business
of the Corporation.

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3.13 COMPENSATION. The Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.

ARTICLE 4

NOTICES
-------

4.1. NOTICES. Whenever, under the provisions of the General Corporation
Law of the State of Delaware or of the Certificate of Incorporation or of these
By-laws, notice is required to be given to any director or stockholder, such
notice shall be in writing, and shall be hand-delivered or sent by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given orally, in person or by
telephone, or by telegram or telex, and such notice shall be deemed to be given
upon transmission, in the case of a notice by telegram, or upon receipt of the
answer back of the telex machine of the receiving party, in the case of a notice
by telex.

4.2. WAIVER OF NOTICE. Whenever any notice is required to be given under
the provisions of the General Corporation Law of the State of Delaware, the
Certificate of Incorporation or these By-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. Neither the
business to be transacted at, nor the purpose of, any annual or special meeting
of the stockholders or the Board of Directors or committee thereof need be
specified in any waiver of notice of such meeting.

ARTICLE 5

OFFICERS
--------

5.1. OFFICERS. The Corporation may have such officers as the Board of
Directors may determine from time to time, including a Chairman of the Board,
Vice-Chairman, Chief Executive Officer, President, one or more Vice Presidents,
a Secretary, a Treasurer, and, if the Board shall so determine, an Assistant
Secretary and an Assistant Treasurer. Any two or more offices may be held by
the same person. Such other officers and agents shall be appointed in such
manner, have such duties and hold their offices for such terms, as may be
determined by resolution of the Board of Directors.

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5.2. ELECTION OF OFFICERS. The officers shall be elected by the Board of
Directors at the first meeting of the Board of Directors after each annual
meeting of stockholders. Each officer shall hold office at the pleasure of the
Board of Directors until his or her successor shall have been duly elected and
qualified, or until his or her death, or until he or she shall have resigned or
shall have been removed or disqualified in the manner hereinafter provided.

5.3. RESIGNATION. Any officer may resign at any time by giving written
notice of his resignation to the Board of Directors or to the Chairman of the
Board of the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon receipt by the Board of Directors or
Chairman of the Board. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.

5.4. REMOVAL. Any officer may be removed, either with or without cause,
at any time, by action of the Board of Directors or the Chairman of the Board.

5.5. CHAIRMAN OF THE BOARD. If the Board of Directors designates a
Chairman of the Board, he shall preside at all meetings of the stockholders and
of the Board of Directors. Unless the Board of Directors designates otherwise,
the Chairman shall be the Chief Executive Officer of the Corporation. He may
sign certificates for shares of stock of the Corporation, any deeds, mortgages,
bonds, contracts or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these By-
laws to some other officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed. The Chairman of the Board shall, in
general, perform all duties incident to the office of chairman of the board and
such other duties as may be set forth in the By-laws or may be prescribed by the
Board of Directors from time to time.

5.6. PRESIDENT. The President shall perform all duties instant to the
office of President and such other duties as may from time to time be assigned
to him or her by the Board of Directors or the Chairman of the Board. At the
request of the Chairman of the Board or in his or her absence, or in the event
of the Chairman of the Board's inability or refusal to act, the President shall
perform the duties of the Chairman of the Board, and, when so acting, shall have
the powers of and be subject to the restrictions placed upon the Chairman of the
Board in respect of the performance of such duties, unless the Board of
Directors otherwise designates.

5.7. CHIEF EXECUTIVE OFFICER. If the Board appoints a Chief Executive
Officer, he or she shall have direct charge of the business of the Corporation,
subject to the general control of the Board of Directors, and shall be the chief
executive officer of the Corporation unless otherwise determined by the Board of
Directors. The Chief Executive Officer shall have direct charge of the daily
operational aspects of the Corporation's business, unless otherwise determined
by the Board of Directors, and shall have such other duties as may be assigned
to him or her from time to time by the Board of Directors or its Chairman.

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5.8. VICE-PRESIDENT. Each Vice President shall perform all such duties as
from time to time may be assigned to him or her by the Board of Directors, the
Chairman of the Board, the President or the Chief Executive Officer. At the
request of the President, or in the absence of the President, or in the event of
his or her inability or refusal to act, the Vice-President (or, in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election), shall perform all the duties of the
President and, when so acting, shall have the power of and be subject to the
restrictions placed on the President in respect of the performance of such
duties.

5.9. TREASURER. The Treasurer shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation; deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such banks, trust
companies and other depositories as shall be designated by the Board of
Directors or pursuant to its direction; and, in general, perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him or her by the Chairman of the Board, the President, the
Chief Executive Officer or the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall supervise the investments of
the Corporation's funds. The Treasurer shall render to the President and to the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation.

5.10. SECRETARY. The Secretary shall (a) attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record and
keep, or cause to be recorded and kept, the minutes of the corporate meetings in
one or more books provided for that purpose, and shall perform like duties for
the standing committees when required; (b) see that all notices are duly given
in accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of the seal, if any, of the Corporation;
(d) keep a register of the mailing address of each stockholder; (e) sign with
the Chairman of the Board, President or Vice-President certificates for shares
of stock of the Corporation; (f) have general charge of the stock transfer books
of the Corporation; and (g) in general, perform all duties as from time to time
may be assigned to him or her by the Chairman of the Board, the President, the
Chief Executive Officer or the Board of Directors.

5.11 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there shall be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as from time to time
may be assigned by the Board of Directors.

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5.12 ASSISTANT SECRETARY. The Assistant Secretary, or if there shall be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there shall be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as from time to time
may be assigned by the Board of Directors.

5.13. POWERS AND DUTIES. In the absence of any officer of the
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate for the time being, the powers or duties of
such officer, or any of them, to any other officer or to any director. The
Board of Directors may from time to time delegate to any officer authority to
appoint and remove subordinate officers and to prescribe their authority and
duties.

5.14 OFFICERS' BOND OR OTHER SECURITY. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of such officer's duties, in such amount and with
such surety as the Board of Directors may require.

5.15. COMPENSATION. The compensation of the officers shall be fixed from
time to time by the Board of Directors. Nothing contained herein shall preclude
any officer from serving the Corporation in any other capacity, including that
of director, or from serving any of its stockholders, subsidiaries or affiliated
corporations in any capacity, and receiving proper compensation therefor.

ARTICLE 6

CERTIFICATES OF STOCK
---------------------

6.1. STOCK CERTIFICATES. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the Chairman of the Board, the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares of stock owned by the holder
in the Corporation. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the General Corporation Law of the State of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, preferences
and relative,

-12-
<PAGE>

participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.

6.2 FACSIMILE SIGNATURES. Where a certificate of stock is countersigned
(a) by a transfer agent other than the Corporation or its employee, (b) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.

6.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.

6.4 TRANSFER OF STOCK. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its records;
provided, however, that the Corporation shall be entitled to recognize and
enforce any lawful restriction on transfer. Whenever any transfer of stock
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of transfer if, when the certificates are presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.

6.5 TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint,
or authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars.

6.6 REGULATIONS. The Board of Directors may make such additional rules
and regulations, not inconsistent with these By-laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.

6.7 FIXING THE RECORD DATE. In order that the Corporation may determine
the holders of stock of the Corporation entitled to notice of or to vote at any
meeting of stockholders or any adjournments thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action,

-13-
<PAGE>

the Board of Directors may fix a record date which shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date, as applicable, shall not be more than sixty nor less than ten days before
the date of the meeting of stockholders, nor more than sixty days prior to any
other action. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders, or
entitled to the benefit of any such other action, shall be determined pursuant
to Section 213 of the General Corporation Law of the State of Delaware. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

6.8 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares of stock to receive dividends and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares of stock, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.

ARTICLE 7

GENERAL PROVISIONS
------------------

7.1 AUDITS. The accounts, books and records of the Corporation shall be
audited upon the conclusion of each fiscal year by an independent certified
public accountant selected by the Board of Directors, and it shall be the duty
of the Board of Directors to cause such audit to be done annually.

7.2 BOOKS AND RECORDS. The books and records of the Corporation may be
kept outside the State of Delaware at such place or places as may from time to
time be designated by the Board of Directors.

7.3 CHECKS, NOTES, DRAFTS, ETC.. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.

7.4 DIVIDENDS. Subject to the provisions of statute and the Certificate
of Incorporation, dividends upon the shares of capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.

-14-
<PAGE>

7.5 EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all contracts,
deeds, bonds, mortgages and other obligations or instruments, and such authority
may be general or confined to specific instances.

7.6 FISCAL YEAR. The Board of Directors of the Corporation shall have the
power to fix, and from time to time change, the fiscal year of the Corporation.

7.7 RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors may, from time to time, in its absolute discretion, determine
to be proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors may deem to be conducive to the
interests of the Corporation. The Board of Directors may modify or abolish any
such reserve in the manner in which it was created.

7.8 SEAL. The seal of the Corporation shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.

7.9 VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board or the
President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose shares of
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of the Board or the President
may instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may,
or may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation or under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.

ARTICLE 8

AMENDMENTS
----------

These By-laws may be amended or repealed or new by-laws adopted as provided
by the Certificate of Incorporation.

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<PAGE>

The foregoing By-laws are a true and correct
copy of the By-laws, as amended, as of June
13, 1996.

--------------------------------------------
J. Timothy Wesley, Secretary

-16-

<PAGE>

EXHIBIT 4

[LOGO] SHARES
Atria
Communities, Inc.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK CUSIP 049905 10 2

THIS CERTIFICATE IS SEE REVERSE FOR
TRANSFERABLE IN CLEVELAND, CERTAIN DEFINITIONS
OHIO AND NEW YORK, NY
ATRIA COMMUNITIES, INC.

This
Certifies
that

is the
owner of

fully paid and non-assessable shares of the par value of $.10 each of the common
stock of Atria Communities, Inc. transferable on the books of the Corporation in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.

Dated

COUNTERSIGNED AND REGISTERED:
NATIONAL CITY BANK
(CLEVELAND)
TRANSFER AGENT AND REGISTRAR. PRESIDENT

AUTHORIZED SIGNATURE SECRETARY

[SEAL]
<PAGE>
<TABLE>
<CAPTION>
ATRIA COMMUNITIES, INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS A FULL STATEMENT OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SUCH REQUEST MAY BE MADE TO THE
OFFICE OF THE SECRETARY OF THE CORPORATION.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
<S> <C> <C>

TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the entireties ----------------------------
JT TEN -- as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act _______________________________
(State)

Additional abbreviations may also be used though not in the above list.

For Value Received, ___________________________________________________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OR ASSIGNEE
- ------------------------------------------

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

- ------------------------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

- ------------------------------------------------------------------------------------------------------------------------------------
Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

__________________________________________________________________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Partnership with full power of substitution in the premises.

Dated
------------------------

--------------------------------------------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
NOTICE: UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.

</TABLE>

<PAGE>

LOGO
EXHIBIT 5.1

July 29, 1996

ATRIA COMMUNITIES, INC.
Providian Center
515 West Market Street
Louisville, KY 40202

Ladies and Gentlemen:

We have acted as legal counsel in connection with the preparation of a
Registration Statement on Form S-1 under the Securities Act of 1933, as amended
(the "Registration Statement"), covering an aggregate of 5,750,000 shares
(including 750,000 shares subject to an over-allotment option granted to the
Underwriters) of Common Stock, par value $.10 per share (the "Common Stock"),
of Atria Communities, Inc., a Delaware corporation (the "Company"), which are
being offered by the Company.

We have examined and are familiar with the Restated Certificate of
Incorporation and Restated By-Laws of the Company, and the various corporate
records and proceedings relating to the organization of the Company and the
proposed issuance of the Common Stock. We have also examined such other
documents and proceedings as we have considered necessary for the purpose of
this opinion.

Based on the foregoing, it is our opinion that the Common Stock has been duly
authorized and, when issued and paid for in accordance with the terms of the
Registration Statement, will be validly issued, fully paid and non-assessable.

We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement, and with such state securities administrators as may
require such opinion of counsel for the registration of the Common Stock, and
to the reference to this firm under the heading "Legal Matters" in the
Prospectus. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the Rules and Regulations of the
Securities and Exchange Commission thereunder.

Very truly yours,

/s/ Greenebaum Doll & McDonald PLLC

<PAGE>

Exhibit 10.1

ATRIA COMMUNITIES, INC.

REGISTRATION RIGHTS AGREEMENT

___________, 1996
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Certain Definitions.................................................... 1
1.1 Affiliates..................................................... 1
1.2 Common Shares.................................................. 1
1.3 Person......................................................... 1
1.4 Register; Registered; Registration............................. 2
1.5 Registrable Shares............................................. 2
1.6 Registration Expenses.......................................... 2
1.7 Rule 144....................................................... 2
1.8 Securities Act................................................. 2
1.9 Selling Expenses............................................... 2

2. Transferability........................................................ 2
2.1 Restrictions on Transferability................................ 2
2.2 Restrictive Legend............................................. 2
2.3 Notice of Proposed Transfers................................... 3

3. Registration Rights.................................................... 3
3.1 Requested Registration......................................... 3
3.2 Atria Registration............................................. 6
3.3 Holdback Agreement............................................. 7
3.4 Expenses of Registration....................................... 7
3.5 Registration Procedures........................................ 8
3.6 Indemnification................................................ 9
3.7 Information by Vencor.......................................... 11
3.8 Rule 144 Reporting............................................. 11
3.9 Termination of Atria's Obligations............................. 12

4. No Transfer of Registration Rights..................................... 12

5. Dispute Resolution..................................................... 12

6. Miscellaneous.......................................................... 12
6.1 Governing Law.................................................. 12
6.2 Counsel........................................................ 12
6.3 Delays or Omissions............................................ 12
6.4 Entire Agreement............................................... 12
6.5 Binding Effect................................................. 13
6.6 Notices........................................................ 13
6.7 Headings....................................................... 13
6.8 Counterparts................................................... 14
</TABLE>

-i-

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
6.9 Severability of Provisions..................................... 14
6.10 Exhibits....................................................... 14
6.11 Number; Gender................................................. 14
6.12 Amendment...................................................... 14
</TABLE>

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<PAGE>

REGISTRATION RIGHTS AGREEMENT
-----------------------------

THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
this ____ day of ____, 1996, by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria"), and VENCOR, INC., a Delaware corporation ("Vencor").

RECITALS:
--------

A. Pursuant to the terms of that certain Incorporation Agreement dated
June __, 1996, Atria issued ______________ shares of its Common Stock, $.10 par
value per share, to Vencor and certain Affiliates (defined in Section 1.1) of
Vencor.

B. Atria has filed a Registration Statement of Form S-1 with the
Securities and Exchange Commission (the "Commission") in connection with the
initial public offering of its Common Shares (the "IPO").

C. Atria and Vencor desire to set forth in a single agreement the
registration rights to be granted to Vencor incident to Vencor's and its
Affiliates acquiring the Common Shares.

AGREEMENT:
---------

NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:

1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:

1.1 AFFILIATES. "Affiliates" shall mean, with respect to Vencor, any
other person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, Vencor,
including, without limitation, any subsidiary of Vencor. With respect to any
other specified person herein, Affiliate shall mean any other person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or under common control with, such specified person.

1.2 COMMON SHARES. "Common Shares" shall mean the shares of Atria's
Common Stock issued to Vencor and its Affiliates pursuant to the Incorporation
Agreement.

1.3 PERSON. "Person" shall mean any individual, partnership,
corporation, trust or other entity.

1.4 REGISTER; REGISTERED; REGISTRATION. "Register," "registered" and
"registration" shall refer to a registration effected by preparing and filing a
registration
<PAGE>

statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement by the Commission.

1.5 REGISTRABLE SHARES. "Registrable Shares" shall mean (i) the
Common Shares, and (ii) all shares of Atria's Common Stock issued as a dividend
on, or other distribution with respect to, or in exchange or in replacement of,
the Common Shares, excluding in all cases, however (including exclusion from the
calculation of the number of outstanding Registrable Shares), any Registrable
Shares sold or otherwise disposed of by Vencor or any of its Affiliates (except
any sale, distribution or other distribution by such Affiliates to Vencor),
including, without limitation, any sale or other disposition in a registration
pursuant to this Agreement or in any transaction pursuant to Rule 144 (as
defined herein).

1.6 REGISTRATION EXPENSES. "Registration Expenses" shall mean all
expenses incurred by Atria in complying with Sections 3.1 and 3.2, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for Atria, blue sky fees and expenses, and the
expense of any special consents, advice or similar audit services of independent
auditors incident to or required by any such registration (but excluding the
compensation of regular employees of Atria which shall be paid in any event by
Atria).

1.7 RULE 144. "Rule 144" shall mean 17 CFR (S) 230.144 as
promulgated by the Commission pursuant to the Securities Act.

1.8 SECURITIES ACT. The "Securities Act" shall mean the Securities
Act of 1933, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.

1.9 SELLING EXPENSES. "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of shares of Atria's
Common Stock, including Registrable Shares, in any sale pursuant to a
Registration by Atria pursuant to this Agreement.

2. TRANSFERABILITY.

2.1 RESTRICTIONS ON TRANSFERABILITY. The Common Shares shall not be
transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act, or, in the case of Section 3.8 hereof, to assist in an orderly
distribution.

2.2 RESTRICTIVE LEGEND. Each certificate representing the Common
Shares or securities issued in respect of the Common Shares, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,

-2-
<PAGE>

AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES ARE "RESTRICTED SECURITIES" AS DEFINED IN THE RULE 144
PROMULGATED UNDER THE ACT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, (ii) IN COMPLIANCE WITH RULE 144 AND AN
EXEMPTION UNDER APPLICABLE STATE SECURITIES LAWS, OR (iii) PURSUANT TO
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR
DISTRIBUTION.

2.3 NOTICE OF PROPOSED TRANSFERS. Prior to any proposed transfer of
any Common Shares, unless there is an effective registration statement under the
Securities Act covering the proposed transfer, Vencor shall give written notice
to Atria of its intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall be accompanied (except that the requirements set forth in the
balance of this sentence need not be complied with where the proposed
transaction complies with Rule 144 so long as Atria is furnished with evidence
of compliance with such rule) by either (i) an unqualified written opinion of
legal counsel which shall be reasonably satisfactory to Atria addressed to
Atria's counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration of the Securities Act, (ii) a
"no action" letter from the Commission to the effect that the distribution of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, or (iii) such
other showing that may be reasonably satisfactory to legal counsel to Atria,
whereupon Vencor shall be entitled to transfer such Restricted Securities in
accordance with the terms of a notice delivered to Atria. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 2.2., except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for Atria such legend is not required in order to establish compliance with any
provisions of the Securities Act or applicable state securities laws.

3. REGISTRATION RIGHTS.

3.1 REQUESTED REGISTRATION.

a. GRANT OF REGISTRATION RIGHTS. If Vencor shall, at any time
and from time to time, request Atria in writing to register under the Securities
Act any Registrable Shares, Atria shall use its reasonable best efforts to cause
the prompt registration of all Registrable Shares specified in such request, and
in connection therewith shall prepare and file on such appropriate form as
Atria, in its reasonable discretion, shall determine, a registration statement
under the Securities Act to effect such registration (including, without
limitation, the execution of an undertaking to file post-effective amendments,

-3-
<PAGE>

appropriate qualification under applicable Blue Sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act).

b. Condition to Exercise of Requested Registration Rights
Notwithstanding anything in Section 3.1 to the contrary, Atria shall not be
obligated to effect any such registration, or take other specified actions with
respect to, or cooperate in any offering of, Registrable Shares upon the request
of Vencor pursuant to Section 3.1:

i. in any particular jurisdiction in which Atria would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless Atria is already subject to
service in such jurisdiction and except as may be required by the Securities
Act;

ii. within 180 days immediately following the effective date
of the registration statement pertaining to the IPO of Atria;

iii. after Atria has effected four registrations pursuant to
this Section 3.1 that have been declared or ordered effective; or

iv. unless the number of Registrable Shares included in
Vencor's request shall be at least 1,000,000 Registrable Shares or the aggregate
value (as defined herein) of the Registrable Shares included in Vencor's request
shall be at least $15,000,000. For purposes hereof, the term "value" shall mean,
as applicable, (a) the average of the closing bid prices for the Common Stock of
Atria as listed on the NASDAQ system or such other system on which the Common
Stock of Atria is traded for the five trading days immediately preceding the
date of Vencor's request, or (b) the average of the closing prices listed for
the Common Stock of Atria on the exchange on which the Common Stock of Atria is
listed for the five trading days immediately preceding the date of Vencor's
request.

c. Written Notice. Any requests by Vencor for registration of
Registrable Shares pursuant to Section 3.1 shall (i) specify the number of
Registrable Shares which it intends to offer and sell, (ii) express the
intention of Vencor to offer or cause the offering of such Registrable Shares,
(iii) describe the nature or method of the proposed offer and sale thereof, (iv)
contain the undertaking of Vencor to provide all such information regarding its
holdings and the proposed manner of distribution thereof as may be required (A)
to permit Atria to comply with all applicable laws and regulations, all
requirements of the Commission and any other regulatory or self-regulatory body,
any other body having jurisdiction, and any securities exchange on which the
Registrable Shares are to be listed, and (B) to obtain acceleration of the
effective date of any registration statement filed in connection therewith, and
(v) in the case of an underwritten public offering, specify the managing
underwriter or underwriters of such Registrable Shares, which shall be selected
by Atria.

-4-
<PAGE>

d. Delay of Registration. If at the time of the request to
register the Registrable Shares Atria notifies Vencor, within five days of
Vencor's request, that Atria is engaged or has fixed plans to engage within 30
days of the time of the request in an underwritten public offering of securities
for Atria's own account and Atria determines in good faith that such offering
would be materially adversely affected by the registration so requested, Atria
may delay filing a registration statement and may withhold efforts to cause the
registration statement to become effective; provided, however, that Atria shall
only be entitled to postpone for a reasonable period of time, not to exceed 90
days, the filing of any registration statement otherwise required to be prepared
and filed by Atria pursuant to Section 3.1. In addition, notwithstanding
anything herein to the contrary, Atria may delay filing a registration statement
and may withhold efforts to cause the registration statement to become
effective, if Atria determines in good faith that such registration might (i)
interfere with or affect the negotiation or completion of any transaction that
is being contemplated by Atria at the time the right to delay is exercised, or
(ii) involve initial or continuing disclosure obligations that might not be in
the best interests of Atria stockholders. If, after a registration statement
becomes effective, Atria advises Vencor that Atria considers it appropriate for
the registration statement to be amended, Vencor shall suspend any further sales
of its registered shares until Atria advises it that the registration statement
has been amended. The 270 day time period referred to in Section 3.5, during
which the registration statement must be kept current after its effective date,
shall be extended for an additional number of days equal to the number of days
during which the right to sell registered shares was suspended pursuant to the
preceding sentence, but in no event will Atria be required to update the
registration statement subsequent to 545 days after the effective date of the
registration statement.

e. Underwriting. If Vencor intends to distribute the
Registrable Shares, which are covered by its request for registration pursuant
to Section 3.1, by means of an underwriting, Vencor shall so advise Atria as a
part of its request. Atria shall, together with Vencor, enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Atria. Notwithstanding any other provision of
this Section 3.1., if the managing underwriter or underwriters determine that
the underwriting would be materially adversely affected by inclusion in such
underwriting of all of the Registrable Shares requested by Vencor and so advises
Vencor in writing, then Vencor shall reduce accordingly the number of
Registrable Shares that will be included in the registration and underwriting.
No Registrable Shares excluded from the underwriting by reason of the managing
underwriter's or underwriters' marketing or other limitations shall be included
in such registration. Should Vencor disapprove of the terms of the
underwriting, Vencor may elect to withdraw therefrom by written notice to Atria
and the managing underwriter or underwriters.

If the managing underwriter or underwriters have not limited the number of
Registrable Shares to be underwritten, Atria may include securities for its own
account in such registration if the managing underwriter or underwriters so
agree and if the number of Registrable Shares which would otherwise have been
included in such registration and underwriting will not thereby be limited.

-5-
<PAGE>

3.2 ATRIA REGISTRATION.
------------------

a. Grant of Piggyback Registration Right. If Atria shall, at
any time and from time to time, propose to register any of its Common Shares for
its own account, in connection with an underwritten public offering of Common
Shares solely for cash (other than a registration statement filed on Form S-4 or
any other form filed in connection with any acquisition, merger, consolidation
or stock exchange, a registration statement filed solely in connection with
director or employee benefit plans of Atria, or Atria's IPO) Atria shall:

i. give 10 days advance written notice of the proposed
registration (which shall include a list of the jurisdictions in which Atria
intends to attempt to qualify such Common Shares under the applicable Blue Sky
or other state securities laws); and

ii. include in such registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Shares specified in a written request
or requests by Vencor, made within 10 days after receipt of such written notice
from Atria.

Notwithstanding anything herein to the contrary, Atria may at any time
prior to the effectiveness of any such registration statement, in its sole
discretion and without the consent of Vencor, abandon the proposed registration
in which Vencor had requested to participate.

b. Underwriting. If the registration of which Atria gives
notices is for a registered public offering involving an underwriting, Atria
shall so advise Vencor as a part of the written notice given pursuant to section
3.2.a.i.). In such event the right of Vencor to register its Registrable Shares
pursuant to Section 3.2 shall be conditioned upon Vencor's participation in such
underwriting and the inclusion of Vencor's Registrable Shares in the
underwriting to the extent provided herein. Vencor shall (together with Atria
and any other stockholders (hereinafter, the "Additional Selling Stockholders")
proposing to offer and sell their shares of Atria Common Stock through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Atria.
Notwithstanding any other provision of this Section 3.2, if the managing
underwriter or underwriters determine that such offering would be materially
adversely affected by inclusion in such underwriting of all of the Registrable
Shares requested by Vencor, the managing underwriter or underwriters may exclude
a portion of such Registrable Shares from such registration and underwriting.
Atria shall so advise Vencor of the managing underwriter's or underwriters'
determination to exclude a portion of the Registrable Shares from such
registration and underwriting within five days after Vencor delivers its request
pursuant to Section 3.2.b., and the number of shares of Common Stock of Atria
that may be included in the registration and underwriting shall be allocated
among Vencor and the Additional Selling Stockholders in proportion, as nearly as
practicable, to the respective amounts of shares of Common Stock of Atria owned
by Vencor and each of the Additional Selling Stockholders at the time of filing
the registration statement. No Registrable Shares excluded from the underwriting
by reason of the managing underwriter's or underwriters' determination shall be
included in
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<PAGE>

such registration. If Vencor disapproves of the terms of any such underwriting,
Vencor may elect to withdraw therefrom all or a portion of the Registrable
Shares included in its request for registration by written notice to Atria and
the managing underwriter or underwriters, and the Registrable Shares so
withdrawn from such registration. If, however, one or more Additional Selling
Stockholders withdraw shares of Common Stock from the underwriting and
registration, and by virtue of such withdrawal of such shares and Vencor's
withdrawal of Registrable Shares from such registration, a greater number of
shares of Common Stock may be included in such registration (up to the maximum
of any limitation imposed by the managing underwriter or underwriters), then
Atria shall offer to Vencor and the Additional Selling Stockholders who have
elected to include their shares of Common Stock in the registration the right to
include additional shares of Common Stock, as applicable, in the registration in
the same proportions as were used above in determining the underwriter
limitation.

3.3 Holdback Agreement. Vencor agrees, that upon request of Atria
or the managing underwriter or underwriters in any underwritten offering of any
such Registrable Shares, not to make or cause any offering, sale or other
disposition, directly or indirectly, of any Common Shares (or any other
securities of Atria) without the prior approval of the underwriters for such
period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by Atria or the managing underwriter or
underwriters. In addition, Vencor agrees, that upon request of Atria or the
managing underwriter or underwriters in any underwritten offering and
registration of shares of Common Stock (or other securities of Atria) in which
Vencor (having been given notice and the opportunity as required by Section 3.2)
declines to participate, not to make or cause any offering, sale or other
disposition, directly or indirectly, of any Common Shares (or other securities
of Atria) held by it (other than any Such Common shares sold or otherwise
disposed of pursuant to a previously registered and underwritten offering)
without the prior approval of the managing underwriter or underwriters (but not
to exceed a period of time from the effective date of such registration as the
managing underwriter or underwriters shall have requested of all "affiliates"
(as defined in Rule 144) of Atria).

3.4 Expenses of Registration. All Registration Expenses incurred in
connection with two registrations under Section 3.1 and all registrations under
Section 3.2 shall be borne by Atria. All Registration Expenses incurred in
connection with registrations under Section 3.1 that are subsequent to the
second such registration shall be borne by Vencor. All Selling Expenses incurred
in connection with any underwritten registration under Sections 3.1 shall be
borne exclusively by Vencor unless Atria, pursuant to Section 3.1.e, includes
shares of Common Stock for its own account in such registration, in which event
the selling expenses incurred in connection with such underwritten registration
shall be borne by Vencor and Atria pro rata on the basis of the number of shares
of Common Stock registered by each of Vencor and Atria. All Selling Expenses
incurred in connection with any registration under Section 3.2 shall be borne by
Vencor and each Additional Selling Stockholder that participates in the
registration, pro rata on the basis of the number of shares of Common Stock
registered by each of Vencor and the Additional Selling Stockholders. Vencor
shall pay the fees and expenses of its legal counsel, but if and only to the
extent that such legal counsel is in addition to counsel as may be retained to

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<PAGE>

represent both parties in connection with any registration or other matter
relating to this Agreement.

3.5 Registration Procedures. In each registration effected by
Atria pursuant to this Section 3, Atria will keep Vencor advised in writing as
to the initiation of each such registration and as to the completion thereof. At
its expense, Atria will:

i. keep such registration effective for a period of 270
days or until Vencor has completed the distribution described in the
Registration Statement relating thereto, whichever first occurs; provided,
however, the 270 day time period shall be extended for an additional number of
business days equal to the number of business days during which the right to
sell registered shares was suspended or delayed by Atria pursuant to Section
3.1.d. or Section 3.3 of this Agreement, but in no event will Atria be required
to update the registration statement subsequent to 545 days after the effective
date of the registration statement;

ii. prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

iii. furnish to Vencor such numbers of copies of a
prospectus, including a preliminary prospectus, that conforms to the
requirements of the Securities Act, the registration statement, and such other
documents (including any exhibits thereto or documents referred to therein) as
Vencor may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by it;

iv. use its reasonable best efforts to register and
qualify the Registrable Shares covered by such registration statement under such
other securities or state securities laws of such jurisdictions as shall be
reasonably requested by Vencor; provided, that Atria shall not be required in
connection therewith or as a condition thereto to qualify to do business,
subject itself to taxation, or to file a general consent to service of process
in any such states or jurisdictions;

v. in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter or underwriter of such
offering; provided, that the form of underwriting agreement must be reasonably
acceptable to Atria and Vencor with respect to secondary distributions. Vencor
shall also enter into and perform its obligations under such an agreement;

vi. at the closing, furnish unlegended certificates
representing ownership of the Registrable Shares being sold in such
denominations as Vencor or the managing underwriter or underwriters shall
request;

vii. instruct the transfer agent and registrar to
release any stop transfer order with respect to the Registrable Shares being
sold;

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<PAGE>

viii. promptly notify Vencor of the happening of any
event as a result of which any registration statement or any preliminary
prospectus or the prospectus included in such registration statement, as then in
effect, or any other offering document, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and prepare and furnish to Vencor as many copies of
a supplement to or an amendment of such offering document which shall correct
such untrue statement or eliminate such omission, as Vencor shall request; and

ix. take such actions and execute and deliver such other
documents as may be necessary to give full effect to the rights of Vencor under
this Agreement.

3.6 INDEMNIFICATION.
---------------

A. Atria Indemnity. In the case of each registration
contemplated by this Agreement, Atria will indemnify Vencor, each of its
officers and directors, each underwriter and each person who controls any
underwriter, and each person, if any, who controls Vencor or any such
underwriter within the meaning of Section 15 of the Securities Act, and each
person affiliated with or retained by Vencor and who may be subject to liability
under any applicable securities laws, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, to which they
may become subject under the Securities Act or other federal or state law,
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other similar document (including any related
registration statement, notification or the like) incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, or (ii) any violation by Atria of any federal, state or common law made or
regulation applicable to Atria in connection with any such registration,
qualification or compliance, and will reimburse Vencor, each of its officers and
directors, the underwriter, and each person controlling Vencor, for any legal
and any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as incurred;
provided, that Atria will not be liable, and shall have no indemnification
obligation hereunder, in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission, made in reliance on and in conformity with written information
furnished to Atria by an instrument duly executed by Vencor, and stated to be
specifically for use therein.

b. Indemnity by Vencor. Vencor will, if Registrable Shares
held by Vencor are included in the securities as to which such registration is
being effected, indemnify Atria, each of its officers and directors, each
underwriter and each person who controls any underwriter, and each person, if
any, who controls Atria or any such underwriter within the meaning of Section 15
of the Securities Act, and each person affiliated with or retained by Atria and
who may be subject to liability under any

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<PAGE>

applicable securities laws, against all claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to which they may become
subject under the Securities Act or other federal or state law, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other similar document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and will reimburse Atria, such directors, officers, persons,
underwriters or control persons, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to Atria by an instrument duly
executed by Vencor and stated to be specifically for use therein.

C. PROCEDURE FOR INDEMNIFICATION.
-----------------------------

i. The party seeking indemnification ("Indemnitee")
shall promptly (within 20 days if a third party has commenced actual litigation
against the Indemnitee) give notice to the party from which indemnification is
sought ("Indemnitor") after the Indemnitee has knowledge of any claim against
the Indemnitor as to which recovery may be sought against the Indemnitee
pursuant to this Section 3.6, or of the commencement of any legal proceedings
against the Indemnitee as to such claim after the Indemnitee has knowledge of
such proceedings, whichever shall first occur, and shall permit the Indemnitor,
at the Indemnitor's cost, to assume the defense of any such claim or any
litigation resulting from such claim; provided, Indemnitee shall have the right
to consent to the counsel selected by Indemnitor to defend any such claim (which
consent shall not be unreasonably withheld by Indemnitee). Such notice shall
specify in reasonable detail the facts known to the Indemnitee giving rise to
such indemnification rights and, if possible, an estimate of the amount of
liability which could result therefrom. The right of the Indemnitee to
indemnification hereunder shall be deemed agreed to unless, within ten days
after the receipt of such notice, the Indemnitee is notified in writing by the
Indemnitor that it disputes the right to indemnification as set forth in such
notice. Failure by the Indemnitor to notify the Indemnitee of the Indemnitor's
election to defend such action within ten days after notice thereof shall have
been given to the Indemnitor, or notification to the Indemnitee by the
Indemnitor that the Indemnitee's right to indemnification is being disputed,
shall be deemed a waiver by the Indemnitor of its right to defend such action.
If the Indemnitee shall be so notified of such dispute of such right to
indemnification, the dispute resolution procedures of Section 8 of the
Incorporation Agreement shall apply. The failure of the Indemnitee to give
notice as provided herein shall relieve the Indemnitor of its obligations under
this Section 3.6.c. only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnitor in the defense of any such claim
or any such litigation, but in no event shall such failure relieve the
Indemnitor from any other liability which the Indemnitor may then have or may
subsequently have to the Indemnitee. The Indemnitor shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of any
judgment (except with the consent of the Indemnitee)

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<PAGE>

or enter into any settlement (except with the consent of the Indemnitee) which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnitee of a release from all liability in respect of
such claim or litigation.

ii. If the Indemnitor shall not assume the defense of any
such claim or litigation resulting therefrom, the Indemnitee may defend against
such claim or litigation in such manner as it may deem appropriate. The
Indemnitee may settle such claim or litigation on such terms as it may deem
appropriate and the Indemnitor shall promptly reimburse the Indemnitee for the
amount of such settlement, and all expenses, legal or otherwise, incurred by the
Indemnitee in connection with the defense against, or settlement of, such claim
or litigation. If no settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for the amount of any
judgment rendered with respect to such claim or in such litigation, and of all
expenses, legal or otherwise, incurred by the Indemnitee in the defense against
such claim or litigation. Notwithstanding the foregoing, if the Indemnitor has
disputed the Indemnitee's right to indemnification in accordance with the
provisions of Section 3.6.c.i., the Indemnitor shall not be obligated to pay the
Indemnitee the amounts provided for in this Section 3.6.c.ii. until such dispute
has been resolved and it has been determined that the Indemnitor is required to
make such indemnification.

3.7 INFORMATION BY VENCOR. VENCOR SHALL FURNISH TO ATRIA SUCH
INFORMATION REGARDING VENCOR AND, AS NECESSARY, ITS AFFILIATES AND THE
DISTRIBUTION PROPOSED BY VENCOR AS ATRIA MAY REQUEST IN WRITING AND AS SHALL BE
REQUIRED IN CONNECTION WITH ANY REGISTRATION, QUALIFICATION OR COMPLIANCE
REFERRED TO IN THIS SECTION 3.7.

3.8 RULE 144 REPORTING. WITH A VIEW TO MAKING AVAILABLE THE
BENEFITS OF CERTAIN RULES AND REGULATIONS OF THE COMMISSION WHICH MAY AT ANY
TIME PERMIT THE SALE OF THE RESTRICTED SECURITIES TO THE PUBLIC WITHOUT
REGISTRATION, AFTER SUCH TIME AS A PUBLIC MARKET EXISTS FOR THE COMMON STOCK OF
ATRIA, ATRIA AGREES TO:

a. use its reasonable best efforts to facilitate the sale of
the Restricted Securities to the public, without registration under the
Securities Act, pursuant to Rule 144, provided that this shall not require Atria
to file reports under the Securities Act and the Securities and Exchange Act of
1934, as amended ("Exchange Act") at anytime prior to Atria's being otherwise
required to file such reports;

b. make and keep public information available, as those terms
are understood and defined in Rule 144 at all times after 90 days after the
effective date of the first registration under the Securities Act filed by Atria
for an offering of its securities to the general public;

c. use its reasonable best efforts to then file with the
Commission in a timely manner all reports and other documents required of Atria
under the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements);

d. so long as Vencor owns any Restricted Securities to
furnish to Vencor forthwith upon request a written statement by Atria as to the
compliance with the

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<PAGE>

reporting requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by Atria for an
offering of its securities to the general public), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of Atria,
and such other reports and documents so filed by Atria as Vencor may reasonably
request in availing itself of any rule or regulation of the Commission allowing
Vencor to sell any such securities without registration.

3.9 Termination of Atria's Obligations. The obligation of Atria to
register the Registrable Shares pursuant to Section 3.1 or 3.2 of this Agreement
shall expire on the earlier of (i) the date when Vencor ceases beneficially to
own any Registrable Shares, or (ii) the date which is the fifth anniversary of
the date the registration statement for the IPO is declared effective by the
Commission.

4. No Transfer of Registration Rights. The registration rights granted
under Sections 3.1 and 3.2 of this Agreement may not be assigned or otherwise
conveyed by Vencor.

5. Dispute Resolution. If any dispute arises between Vencor and Atria
with respect to their rights or obligations under the terms of this Agreement,
Vencor and Atria agree to follow the dispute resolution procedure set forth in
Section 8 of the Incorporation Agreement.

6. Miscellaneous.
-------------

6.1 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky.

6.2 Counsel. Atria shall select and employ legal counsel to
represent the parties in the registration of shares of Common Stock under this
Agreement. If, in the judgment of Vencor, it would be appropriate to do so,
Vencor may select counsel to represent it in connection with the
registration. Vencor shall be solely responsible for the fees and expenses of
any separate counsel so selected, and Atria shall have no responsibility or
liability whatsoever with respect thereto.

6.3 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to Vencor, upon any breach or default by Atria
under this Agreement, shall impair any such right, power or remedy of Vencor nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Vencor or any breach or default under this Agreement, or any waiver on the part
of Vencor of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies,

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<PAGE>

either under this Agreement, or by law or otherwise afforded to Vencor, shall be
cumulative and not alternative.

6.4 Entire Agreement. This Agreement constitutes the entire
Agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements, correspondence, arrangements
and understandings relating to the subject matter hereof.

6.5 Binding Effect. All of the terms, provisions and conditions
hereof shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto, and their respective heirs, personal
representatives, successors and assigns. Nothing in this Agreement shall entitle
any person to any claim, cause of action, remedy or right of any kind.

6.6 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered against a written receipt, if delivered to a reputable express
messenger service (such as Federal Express, UPS or DHL Carrier) for overnight
delivery, when transmitted by confirmed telephone facsimile (fax) or sent by
registered, express or certified U.S. mail, postage prepaid, addressed as
follows:

To Atria: Atria Communities, Inc.
515 W. Market Street
Louisville, Kentucky 40202
Attention: W. Patrick Mulloy, II, President
and Chief Executive Officer

If to Vencor: Vencor, Inc.
3300 Providian Center
500 W. Market Street
Louisville, Kentucky 40202
Attention: Jill L. Force, Esq., Vice
President and General Counsel

or to such other address as either party hereto shall furnish to the other in
writing. Notices shall be deemed given when personally delivered, when delivered
to an express messenger service, when transmitted by confirmed fax or when
deposited in the U.S. mail in accordance with the foregoing provisions. However,
the time period in which a response to any such notice, demand or request must
be given shall commence to run from the date of personal delivery, the date of
delivery by a reputable messenger service, the date on the confirmation of a
fax, or the date on the return receipt, as applicable.

6.7 Headings. The headings in this Agreement are included for
purposes of convenience only and shall not be considered a part of the Agreement
in construing or interpreting any provision hereof.

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<PAGE>

6.8 Counterparts. This Agreement may be executed in counterparts
and each such executed counterpart shall be deemed an original instrument. It
shall not be necessary in making proof of this Agreement or the terms of this
Agreement to produce or account for more than one of such counterparts.

6.9 Severability of Provisions. If any provision of this Agreement
or the application thereof to any person or entity or circumstance shall to any
extent be held in any proceeding to be invalid or unenforceable, the remainder
of this Agreement, or the application of such provision to persons or entities
or circumstances other than those to which it was held to be invalid or
unenforceable, shall not be affected thereby, and shall be valid and enforceable
to the fullest extent permitted by law, but only if and to the extent such
enforcement would not materially and adversely frustrate the parties' essential
objectives as expressed herein.

6.10 Exhibits. All Exhibits to this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set out in full
herein.

6.11 Number; Gender. Unless the context clearly states otherwise,
the use of the singular or plural in this Agreement shall include the other and
the use of any gender shall include all others.

6.12 Amendment. This Agreement may be amended, modified, superseded,
or canceled only by a written instrument signed by all of the parties hereto and
any of the terms, provisions and conditions hereof may be waived, only by a
written instrument signed by the waiving party.

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

ATRIA COMMUNITIES, INC.

By:_____________________________________
W. Patrick Mulloy, II, President and
Chief Executive Officer

VENCOR, INC.

By:_____________________________________

Title:__________________________________

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<PAGE>

Exhibit 10.2

INCORPORATION AGREEMENT
-----------------------

THIS INCORPORATION AGREEMENT ("AGREEMENT") is made and entered into as of
the _____ day of June, 1996 by and among (i) ATRIA COMMUNITIES, INC., a Delaware
corporation ("CORPORATION"), (ii) VENCOR, INC., a Delaware corporation
("VENCOR"), (iii) FIRST HEALTHCARE CORPORATION, a Delaware corporation ("FHC"),
(iv) NATIONWIDE CARE, INC., an Indiana corporation ("NATIONWIDE"), and (v) NEW
POND VILLAGE ASSOCIATES, a Massachusetts general partnership ("NEW POND").

RECITALS:
- --------

A. The Corporation is a newly formed corporation formed for the purpose
of acquiring substantially all of the assisted living and independent living
communities of Vencor and its affiliates ("DIVISION").

B. The parties desire to convey the Division to the Corporation in
connection with an initial public offering of shares of the Corporation's common
stock, par value $.10 per share ("COMMON STOCK").

C. The parties desire to enter into this Agreement to set forth their
understanding with respect to the manner in which the Corporation will acquire
the Division in exchange for shares of Common Stock and the assumption of
certain liabilities related thereto.

AGREEMENT:
- ---------

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

1. TRANSFER OF RETIREMENT HOUSING DIVISION. As part of a single plan, on
the Closing Date (as hereinafter defined) Vencor, FHC, Nationwide and New Pond
(collectively, the "TRANSFERORS") will convey the assets referred to below,
which constitute substantially all of the assets of the Division, to the
Corporation in connection with the Corporation's initial public offering, in
consideration for the issuance by the Corporation of its Common Stock to the
Transferors as provided in Section 3, and the assumption by the Corporation of
the liabilities associated with the Division referred to in Section 4, all in a
transaction designed to meet the requirements of section 351(a) of the
<PAGE>

Internal Revenue Code of 1986, as amended ("CODE"). Such transfers shall be as
follows:

(a) Vencor shall do the following:

(i) Transfer to the Corporation a 98% limited partner interest in
Lantana Partners Limited Partnership, a Florida limited partnership.

(ii) Transfer to the Corporation 2,000 shares of Common Stock of
Phillippe Enterprises, Inc., an Indiana corporation, being all of the issued and
outstanding shares of Phillippe Enterprises, Inc.

(iii) Cancel, and cause all of its affiliated entities to cancel, all
intercompany receivables of such entities which relate to the Division, except
for a $14 million receivable from HPL (as hereinafter defined). On the Closing
Date, HPL shall execute a promissory note in favor of Vencor in such amount,
such note to bear interest at the announced prime rate of National City Bank of
Kentucky as the same shall exist from time to time, plus one percentage point
and shall be payable one year from the Closing Date.

(iv) Transfer to the Corporation all of Vencor's right, title and
interest in that certain Lease Agreement dated November 1, 1991, by and among
The Newark Company, Vencor and FHC relating to the McMillan Center (as
hereinafter defined) ("MCMILLAN LEASE").

(b) FHC shall transfer to the Corporation the following:

(i) 1,000 shares of Common Stock of Hillhaven Properties, Ltd., an
Oregon corporation ("HPL"), being all of the issued and outstanding shares of
HPL.

(ii) A 98% general partner interest in Castle Gardens Retirement
Center Partnership, a Colorado general partnership ("CASTLE GARDENS").

(iii) A 68.6% limited partner interest in Hillcrest Retirement
Center, Ltd., an Oregon limited partnership ("HILLCREST RETIREMENT").

2
<PAGE>

(iv) A 98% limited partner interest in Sandy Retirement Center Limited
Partnership, an Oregon limited partnership ("SANDY RETIREMENT").

(v) A 10% limited partner interest in Topeka Retirement Center, Ltd.,
a Missouri limited partnership ("TOPEKA RETIREMENT").

(vi) A 99% limited partner interest in
Twenty-Nine Hundred Associates Limited Partnership, a Florida limited
partnership ("TWENTY-NINE HUNDRED").

(vii) All of the real property and personal property which
constitutes the Valley Manor Retirement Apartments in Tucson, Arizona ("VALLEY
MANOR").

(viii) All of the real property and personal property which
constitutes the Villa Ventura Retirement in Kansas City, Missouri ("VILLA
VENTURA").

(ix) All of the real property and personal property owned by FHC which
constitutes The Greens in Hanover, New Hampshire ("THE GREENS").

(x) All of the real property and personal property owned by FHC which
constitutes a part of the McMillan Center in Newark, Ohio ("MCMILLAN CENTER").

(xi) All of FHC's right, title and interest in the McMillan
Lease.

(xii) All of the real property more particularly described in Exhibit
A attached hereto and made a part hereof ("REAL PROPERTY").

(xiii) Enter into a Lease with the Corporation in the form of Exhibit
B attached hereto and made a part hereof pursuant to which FHC leases to the
Corporation certain real property located in Redding, California.

(i) A 99% general partner interest in Evergreen Woods, Ltd., a
Florida limited partnership ("EVERGREEN WOODS").

3
<PAGE>

(ii) All of the real property and personal property which constitutes
the Heritage at Wildwood in Wildwood, Indiana.

(iii) All of its right, title and interest in and to that certain
Management Agreement dated September 1, 1989 between Nationwide Management, Inc.
and Wesleyan Retirement Center, Inc. with respect to Colonial Oaks in Marion,
Indiana ("MANAGEMENT AGREEMENT").

(iv) $4,500,000.

(d) New Pond shall do the following:

(i) Transfer to the Corporation $9,500,000.

(ii) Transfer to the Corporation all of the assets constituting New
Pond Retirement Center ("NEW POND CENTER") other than those assets which are
secured by that certain Mortgage and Trust Indenture by and between New Pond and
First National Bank of Boston, as Trustee, dated November 1, 1990, Securing
Resident Mortgage Bonds (New Pond Village Project) Series A ("NEW POND
MORTGAGE").

(iii) Enter into a Lease with the Corporation in the form of Exhibit
C attached hereto and made a part hereof pursuant to which New Pond leases to
the Corporation all of the assets secured by the New Pond Mortgage.

2. OTHER TRANSFERS.
----------------

(a) In addition to the transfers provided for in Section 1(b), on the
Closing Date, FHC shall transfer to HPL the following:

(i) A 1% limited partner interest in Evergreen Woods.

(ii) All of the real property and personal property which constitutes
Villa Campana Retirement in Tucson, Arizona ("VILLA CAMPANA").

(b) FHC shall cause the following to occur on the Closing Date:

4
<PAGE>

(i) HPL to transfer to Nationwide the following:

(A) A 2% general partner interest in St. George Nursing Home
Limited Partnership, an Oregon limited partnership.

(B) A 1% general partner interest in Stockton Healthcare Center
Limited Partnership, an Oregon limited partnership.

(D) A 1% general partner interest in Hillhaven/Westfield
Partnership, a Washington general partnership, upon receipt of consent from the
United States Department of Housing and Urban Development (which is not expected
to be received prior to the Closing Date).

(E) A 1% general partner interest in New Pond.

(ii) HPL to transfer to FHC the real property located in Tulsa,
Oklahoma more particularly described in Exhibit D attached hereto and made a
part hereof.

(iii) Evergreen Woods to transfer all of the assets and liabilities
relating to the skilled nursing home facility owned by it to Nationwide.

(c) On the Closing Date, the Corporation shall pay to Vencor $150,000
in consideration for the assistance provided to the Corporation by Vencor in
connection with the Corporation's initial public offering.

3. ISSUANCE OF COMMON STOCK. In consideration of the transfer of the
assets by the Transferors provided for in Section 1, on the Closing Date the
Corporation shall issue an aggregate of 9,999,900 shares of its Common Stock to
the Transferors, such shares to be allocated among them as they shall agree on
or before the Closing Date. All such shares of Common Stock shall be fully paid
and nonassessable.

4. ASSUMPTION OF LIABILITIES. In part consideration for the transfer of
the assets by the Transferors to the Corporation as provided for in Section 1,
on the Closing Date the Corporation

5
<PAGE>

will enter into appropriate assumption agreements with each of the Transferors
with respect to the following:

(a) With respect to Vencor, any and all liabilities which Vencor may
have had as a partner of Lantana.

(b) With respect to FHC, all of FHC's liabilities with respect to the
following:

(i) All of its liability as a partner of Castle Gardens,
Hillcrest Retirement, Sandy Retirement, Topeka Retirement, Twenty-Nine Hundred,
San Marcos, Evergreen Woods and New Pond.

(ii) All of its liabilities and obligations with respect to
Valley Manor, Villa Ventura, The Greens, McMillan Center and Villa Campana.

(iii) All of its liabilities and obligations with respect to the
Real Property.

(i) All of its liabilities as a partner of Evergreen Woods.

(ii) All of its liabilities and obligations with respect to
Heritage at Wildwood.

(iii) All of its liabilities and obligations with respect to
the Management Agreement.

(d) With respect to New Pond, all of its liabilities and obligations
with respect to New Pond Center.

The liabilities and obligations to be assumed by the Corporation pursuant to the
provisions of this Section 4 shall include all of the liabilities referred to
therein, whether or not reflected on the books and records of the Transferor or
the entity whose ownership is being transferred, and whether known or unknown,
accrued or unaccrued, absolute, contingent or otherwise.

5. CLOSING DATE. The closing of the transactions contemplated by this
Agreement shall occur on the day immediately following the day that all of the
conditions precedent of the

6
<PAGE>

Transferors and the Corporation have been met or waived by the party entitled to
the benefit thereof, but in all events no later than the date the Registration
Statement with respect to the Corporation's initial public offering becomes
effective.

6. REPRESENTATIONS AND WARRANTIES.
------------------------------

(a) Each of the Transferors hereby represent to Atria with respect to
themselves as follows:

(i) It is a corporation or partnership, as applicable, duly
organized and validly existing.

(ii) It has the full corporate or partnership power and
authority, as applicable, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.

(iii) This Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.

(iv) It owns the stock and partnership interests to be
transferred by it to the Corporation pursuant to the terms of this Agreement
free and clear of all liens and encumbrances, other than restrictions contained
in the partnership agreement with respect to a particular partnership.

(v) All of the partnerships whose interests are to be
transferred pursuant to terms of this Agreement are duly organized and validly
existing.

Except as specifically warranted in this Section 6(a), the Transferors make no
representations and warranties to the Corporation whatsoever regarding the
assets transferred, or the assets of the entities whose ownership is being
transferred, including, but not limited to, the warranty of merchantability or
fitness for a particular use, which is specifically disclaimed. The Corporation
acknowledges that all of the assets to be conveyed by the Transferors to the
Corporation will be conveyed "as is, where is."

(b) The Corporation hereby represents, warrants and covenants with and
to the Transferors as follows:

(i) The Corporation is a corporation duly organized and
validly existing.

7
<PAGE>

(ii) The Corporation has the full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.

(iii) This Agreement constitutes the valid and legally binding
obligation of the Corporation, enforceable in accordance with its terms.

(iv) The Common Stock to be issued by the Corporation to the
Transferors pursuant to the terms of this Agreement will be duly authorized,
fully paid and nonassessable.

(v) As of the Closing Date, the Corporation will have 100 shares
of Common Stock issued and outstanding, all of which will be owned by Vencor.

(vi) The Corporation will not take any action which would cause
the transfers provided for in Section 1 not to qualify for tax-free treatment
under section 351 of the Code.

(vii) On the Closing Date, it will hire all of the employees of
the Transferors associated with the Division transferred.

(c) All of the representations and warranties provided for in this
Section 6 shall survive the Closing Date and the delivery of the closing
documents on the Closing Date.

7. CONDITIONS PRECEDENT.
--------------------

(a) The obligation of the Transferors to consummate the transactions
contemplated hereby is subject to the satisfaction of the following conditions
(any of which may be waived by the Transferors in writing):

(i) All the terms, covenants and conditions of this Agreement to
be complied with and performed by the Corporation on or before the Closing Date
shall have been fully complied with and performed in all respects.

(ii) All the representations and warranties made by the
Corporation herein shall be true and correct in all respects on and as of the
Closing Date.

(iii) All consents required for the valid and effective transfer
of the assets to be transferred in accordance

8
<PAGE>

with Sections 1 and 2 shall have been obtained and the consent to the assumption
by the Corporation of the debts to be assumed by the Corporation pursuant to
Section 4 shall have been obtained.

(iv) There shall be no pending or threatened litigation against
any of the parties hereto concerning or relating to the transactions
contemplated hereby.

(v) The approval of all administrative agencies, if any, whose
approval of the transactions contemplated hereby is necessary or desirable shall
have been obtained.

(vi) The Corporation and Vencor shall have entered into a
Registration Rights Agreement in the form of Exhibit E attached hereto and made
a part hereof.

(b) The obligation of the Corporation to consummate the transactions
contemplated hereby is subject to the satisfaction of the following conditions
(any of which may be waived by the Corporation in writing):

(i) All the terms, covenants and conditions of this Agreement to
be complied with and performed by the Transferors on or before the Closing Date
shall have been fully complied with and performed in all respects.

(ii) All the representations and warranties made by the
Transferors herein shall be true and correct in all respects on and as of the
Closing Date.

(iii) All required consents necessary for the valid and effective
transfer of the assets to be transferred to the Corporation in accordance with
the provisions of Section 1 shall have been obtained.

(iv) The Corporation shall have obtained title insurance (or
endorsed commitment) insuring that all the real property to be transferred to
the Corporation pursuant to the provisions of Section 1, and all real property
owned by the entities interests in which are to be transferred to the
Corporation in accordance with Section 1, are vested in the Corporation or such
entities, respectively, free and clear of all mortgages, liens and encumbrances
except those reasonably acceptable to the Corporation.

9
<PAGE>

(v) The conditions referred to in Sections 7(a)(iv) and 7(a)(v)
shall have been complied with.

(vi) Vencor and the Corporation shall have entered into a Tax
Sharing Agreement substantially in the form of Exhibit F attached hereto and
made a part hereof.

(vii) The Corporation and Vencor shall have entered into an
Administrative Services Agreement substantially in the form of Exhibit G
attached hereto and made a part hereof.

(viii) The Corporation and Vencor shall have entered into a
Guaranty Agreement substantially in the form of Exhibit H attached hereto and
made a part hereof.

8. DISPUTE RESOLUTION.
-------------------

(a) In the event that any dispute arises among the parties with
respect to their rights and obligations under the terms of this Agreement or any
agreement entered into as a result of this Agreement ("DISPUTE"), the parties
agree that the provisions of this Section 8 shall be their sole and exclusive
remedy. The parties shall first attempt to settle such Dispute by having senior
management or other mutually agreed upon representatives of the parties address
the issue. Such shall occur within 20 days of the giving of notice by a party
that a Dispute exists and that such party desires the Dispute to be resolved by
senior management in accordance with the provisions of this Section 8(a).

(b) If the above referred to parties are unable to resolve the Dispute
within 60 days of the giving of the notice referred to in Section 8(a), then
either of the parties shall have the right to submit the Dispute to mediation.
Such mediation shall be conducted in accordance with the Center for Public
Resources Model Procedure for Mediation of Business Disputes. If mediation
proves unsuccessful in resolving the Dispute within 60 days of the initiation of
the mediation procedure, then either party may require that the Dispute be
resolved by binding arbitration if the Dispute involves less than $5 million. If
the parties disagree as to whether the Dispute involves less than $5 million,
such issue may be resolved by binding arbitration. All arbitrations provided for
herein shall be conducted under the commercial rules of the American Arbitration
Association using a single arbitrator mutually agreed to by the parties or, if
the parties cannot agree on the

10
<PAGE>

arbitrator, then the arbitrator shall be selected by the American Arbitration
Association. It is intended that the arbitrator actively manage the arbitration
with a view to achieving a just, speedy and cost effective resolution of the
Dispute. Except as provided in Section 8 (d), the decision of the arbitrator
shall be final and binding upon the parties and the prevailing party in such
arbitration shall be entitled to a judgment on such award in any court of
competent jurisdiction. The parties hereby acknowledge that except as provided
in Section 8(d), this provision constitutes a waiver of their right to commence
a lawsuit with respect to any Dispute.

(c) Any party involved in the arbitration may request limited document
production from the other party or parties of specific and expressly relevant
documents, with the reasonable expenses of the producing party incurred in such
production paid by the requesting party. Any such discovery (which rights to
documents shall be substantially less than document discovery rights prevailing
under the Federal Rules of Civil Procedure) shall be conducted expeditiously and
shall not cause the arbitration hearing to be adjourned except upon consent of
all parties involved in the arbitration or upon an extraordinary showing of
cause demonstrating that such adjournment is necessary to permit discovery
essential to a party to the proceeding. Depositions, interrogatories or other
forms of discovery (other than the document production set forth above) shall
not occur except by consent of all of the parties to the arbitration. Disputes
concerning the scope of document production and enforcement of the document
production requests will be determined by written agreement of the parties
involved or, failing such agreement, will be referred to the arbitrator for
resolution. All discovery requests will be subject to the parties' rights to
claim any applicable privilege. The arbitrator will adopt procedures to protect
the proprietary rights of the parties and to maintain the confidential treatment
of the arbitration proceedings (except as may be required by law). Subject to
the foregoing, the arbitrator shall have the power to issue subpoenas to compel
the production of documents relevant to the Dispute.

(d) Notwithstanding the provisions of Section 8(b), if any arbitration
award, exclusive of interest, exceeds $10 million, then such award shall not be
final and binding upon the parties unless the party in whose favor the award was
rendered agrees to accept $10 million in full settlement within 15 days after
the rendering of the decision by the arbitrator. If the

11
<PAGE>

party in whose favor the award was rendered does not so agree within such 15-day
period, then the party against which such award was rendered shall have a period
of 60 days following the end of the 15-day period referred to above in which to
commence a legal proceeding in a court of competent jurisdiction with respect to
the Dispute which was the subject of such arbitration award. If no legal
proceedings are commenced within such 60 day period, then the arbitration award
shall become final and binding upon the parties.

(e) Each party shall bear its own attorneys' fees and other costs and
expenses involved in resolving a Dispute. The costs of mediation and arbitration
shall be borne equally by the parties to the mediation or arbitration.

9. INDEMNIFICATION
---------------

(a) Each Transferor hereby agrees to indemnify the Corporation for,
and to hold the Corporation harmless from the following:

(i) Any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty or nonfulfillment of any agreement or
covenant on the part of that Transferor, whether contained in this Agreement or
in any document furnished in connection with the transactions contemplated
hereby; and

(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to the foregoing, including
attorney's fees.

(b) The Corporation hereby agrees to indemnify each Transferor for,
and to hold each Transferor harmless from, the following:

(i) Any and all liabilities and obligations assumed, or to be
assumed, by the Corporation in accordance with the terms hereof;

(ii) Any and all damages or deficiencies resulting from any
misrepresentations, breach of any warranty or nonfulfillment of any agreement or
covenant on the part of the Corporation, whether contained in this Agreement or
in any document furnished in connection with the transactions contemplated
hereby; and

12
<PAGE>

(iii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to any of the foregoing,
including attorneys' fees.

(c) The party seeking indemnification ("INDEMNITEE") shall promptly
(within 20 days if a third party has commenced actual litigation against the
Indemnitee) give notice to the party from which indemnification is sought
("INDEMNITOR") after the Indemnitee has knowledge of any claim against the
Indemnitor as to which recovery may be sought against the Indemnitee pursuant to
this Section 9, or of the commencement of any legal proceedings against the
Indemnitee as to such claim after the Indemnitee has knowledge of such
proceedings, whichever shall first occur, and shall permit the Indemnitor to
assume the defense of any such claim or any litigation resulting from such
claim. Such notice shall specify in reasonable detail the facts known to the
Indemnitee giving rise to such indemnification rights and, if possible, an
estimate of the amount of liability which could result therefrom. The right of
the Indemnitee to indemnification hereunder shall be deemed agreed to unless,
within ten days after the receipt of such notice, the Indemnitee is notified in
writing by the Indemnitor that it disputes the right to indemnification as set
forth in such notice. Failure by the Indemnitor to notify the Indemnitee of the
Indemnitor's election to defend such action within ten days after notice thereof
shall have been given to the Indemnitor, or notification to the Indemnitee by
the Indemnitor that the Indemnitee's right to indemnification is being disputed,
shall be deemed a waiver by the Indemnitor of its right to defend such action.
If the Indemnitee shall be so notified of such dispute of such right to
indemnification, the dispute resolution procedures of Section 8 shall apply. The
Indemnitor shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (except with the consent of the
Indemnitee) or enter into any settlement (except with the consent of the
Indemnitee) which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnitee of a release from all
liability in respect of such claim or litigation.

(d) If the Indemnitor shall not assume the defense of any such claim
or litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate. The Indemnitee may
settle such claim or litigation on such terms as it may deem appropriate and the
Indemnitor shall promptly reimburse the Indemnitee for the amount

13
<PAGE>

of such settlement, and all expenses, legal or otherwise, incurred by the
Indemnitee in connection with the defense against, or settlement of, such claim
or litigation. If no settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for the amount of any
judgment rendered with respect to such claim or in such litigation, and of all
expenses, legal or otherwise, incurred by the Indemnitee in the defense against
such claim or litigation. Notwithstanding the foregoing, if the Indemnitor has
disputed the Indemnitee's right to indemnification in accordance with the
provisions of Section 9(c), the Indemnitor shall not be obligated to pay the
Indemnitee the amount provided for in this Section 9(d) until such dispute has
been resolved and it has been determined that the Indemnitor is required to make
such indemnification.

10. MISCELLANEOUS.
-------------

(a) Each of the Transferors hereby covenants and agrees that
subsequent to the Closing Date they will, at any time, and from time to time,
upon the request and at the expense of the Corporation, do, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required to fully effectuate the transfers
contemplated in Section 1. Each of the Transferors hereby constitutes and
appoints the Corporation as its true and lawful attorney-in-fact, with full
power of substitution, to collect for the account of the Corporation any
receivables and other items conveyed to the Corporation pursuant to the
provisions of Section 1, to endorse in the name of the Transferor or the
Corporation, or both, any check received on account of any receivable, claim or
other item, to institute and prosecute in the name of a Transferor or otherwise,
any and all proceedings which the Corporation may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in and to any
of such transferred assets.

(b) (i) Notwithstanding anything to the contrary in this Agreement,
neither the Corporation nor Vencor shall have any obligation to refer any
resident or patients, as the case may be, of either of them or any other person
to the Corporation or Vencor for the provision of any service or item of any
kind. The Corporation and Vencor hereby acknowledge that the compensation for
services provided for in this Agreement are set in advance, are consistent with
the fair market value in arm's-length commercial transactions and are not
determined in a manner that takes into account in any way any volume or value of
referrals or business generated between the parties.

(ii) If Vencor or the Corporation shall determine upon advice of
counsel that this Agreement will likely be deemed to be a violation of any
applicable Federal or state law regarding fraus and abuse, referral prohibitions
or any similar matter, either party, upon receiving such advice of counsel, may
at any time give the other party written notice of such advice and if, after
consultation the parties have not determined to their reasonable satisfaction
that no such violation exists and the parties have not amended this Agreement to
remove that risk to the other party's reasonable satisfaction, then either party
may terminate this Agreement effective as of the date 60 days after its initial
written notice to the other party.

(c) All notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and be personally delivered
against a written receipt, delivered to a reputable messenger service (such as
Federal Express, DHL Courier, United Parcel Service, etc.) for overnight
delivery, transmitted by confirmed telephonic facsimile (fax) or transmitted by
mail, registered, express or certified, return receipt requested, postage
prepaid, addressed as follows:

14
<PAGE>

If to Vencor: 3300 Providian Center
400 West Market Street
Louisville, Kentucky 40202
Fax: (502) 596-1104
Attention: Chief Financial Officer

If to Atria: 515 West Market Street
Louisville, Kentucky 40202
Fax: (502) 596-4160
Attention: Chief Financial Officer

All notices, demands and requests shall be effective upon being properly
personally delivered, upon being delivered to a reputable messenger service,
upon transmission of a confirmed fax, or upon being deposited in the United
States mail in the manner provided in this Section ?. However, the time period
in which a response to any such notice, demand or request must be given shall
commence to run from the date of personal delivery, the date of delivery by a
reputable messenger service, the date on the confirmation of a fax, or the date
on the return receipt, as applicable. If any party refuses delivery, the notice,
demand or request shall be deemed received two days after the notice, demand or
request was delivered to a reputable messenger service or deposited in the
United States mail.

(c) This Agreement may be modified or amended from time to time only
by a written instrument executed by all of the parties hereto.

(d) Captions contained in this Agreement are inserted only as a matter
of convenience and reference, and in no way define, limit, extend or describe
the scope of this Agreement, or the intent of any provision hereof. All
references to Sections herein shall refer to Sections of this Agreement unless
the context clearly requires otherwise.

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

(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky without regard to its conflicts
of laws rule.

(g) This Agreement represents the entire agreement of the parties
hereto with respect to the subject matter hereof.

15
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

CORPORATION:

ATRIA COMMUNITIES, INC.

By:___________________________

Title:________________________

TRANSFERORS:

VENCOR, INC.

By:___________________________

Title:________________________

FIRST HEALTHCARE CORPORATION

By:___________________________

Title:________________________

NATIONWIDE CARE, INC.

By:___________________________

Title:________________________

NEW POND VILLAGE ASSOCIATES
By: First Healthcare
Corporation, General Partner

By:___________________________

16
<PAGE>

Title:________________________

<PAGE>
EXHIBIT 10.3

ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------

THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and entered
into as of the _____ day of __________, 1996, by and between ATRIA COMMUNITIES,
INC., a Delaware corporation ("Atria"), and VENCOR, INC., a Delaware corporation
("Vencor").

RECITALS:
--------

A. Atria is a newly-formed corporation formed for the purpose of acquiring
substantially all of the assisted and independent living communities of Vencor
(the "Communities").

B. The parties will convey the Communities to Atria in connection with an
initial public offering of shares of Atria's common stock (the "Common Stock").

C. Atria desires to receive certain services from Vencor to smooth the
transition of Atria from being a wholly-owned subsidiary of Vencor to being a
separate company.

D. The parties desire to enter into this Agreement to set forth their
understanding with respect to such services which shall be provided by Vencor to
Atria in exchange for cash based on the fair market value of the services
provided by Vencor to Atria.

AGREEMENT:
---------

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

1. Services. Vencor shall provide those services set forth in Exhibit 1
to this Agreement to Atria. Atria and Vencor may agree to add additional
services, if necessary; provided, that, such arrangement is made in writing and
executed by both Atria and Vencor. The amount of time that Atria will receive
for each such services from Vencor is set forth in Exhibit 1 as full-time
equivalents ("FTEs"). If Atria needs more than the amount of FTE's set forth in
Exhibit 1, Atria and Vencor will negotiate in good faith a modification to this
Agreement. Notwithstanding the provisions of this Section, Vencor shall not be
required to make available any such services to the extent that doing so would
unreasonably interfere with the performance by any employee of such employee's
duties for such employee's employer or otherwise cause unreasonable burden to
such employee's employer. The services to be provided in accordance with this
Agreement are based on past utilization of such services and if such usage
during the term of this Agreement materially change, the parties to this
Agreement will make appropriate modifications to this Agreement.

<PAGE>

2. Payments. Atria shall pay $54,577.08 to Vencor for each month of
services to be rendered in the next month by Vencor to Atria on the first of
each month. For any period for which such services would be provided to Atria on
less than a full-month basis, Atria shall pay the appropriate pro rata amount to
Vencor.

3. Representations and Warranties.

a. Vencor hereby represents to Atria with respect to itself that:

(1) it is a corporation duly organized and validly existing;

(2) it has the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby;

(3) this Agreement constitutes a valid and legally binding
obligation, enforceable with its terms.

b. Atria hereby represents and warrants to Vencor as follows:

(1) Atria is a corporation duly organized and validly existing;

(2) Atria has the full corporate power and authority to execute
and deliver this Agreement and to consummate the
transactions contemplated hereby;

(3) this Agreement constitutes a valid and legally binding
obligation of Atria, enforceable in accordance with its
terms.

4. Term. The Term of this Agreement shall be for one year from the date
of this Agreement; provided, however, that Atria shall have the right to
terminate this Agreement upon thirty (30) days' written notice to Vencor at any
time. Thirty (30) days prior to the expiration of this Agreement, Atria may give
written notice to Vencor that this Agreement shall be extended for an additional
one year period; provided, however, that, Atria or Vencor may give sixty (60)
days' written notice to the other terminating this Agreement at any time after
the first year of this Agreement.

5. Miscellaneous.

a. This Agreement may be modified or amended from time to time only
by a written instrument executed by the parties hereto.

b. Neither Atria nor Vencor shall have any obligation to refer any
resident or patients, as the case may be, of either of them or any
other person to Atria or Vencor for the provision of any
service or item of any kind. Atria and Vencor hereby acknowledge
that the
<PAGE>
compensation for services provided for in this Agreement
are set in advance, are consistent with the fair market value in
arms-length commercial transactions and are not determined in a
manner that takes into account in any way any volume or value of
referrals or business generated between the parties.

c. If Vencor or Atria shall determine upon advice of counsel that
the continuation of this Agreement will likely be deemed to be a
violation of any applicable federal or state law regarding fraud
and abuse, referral prohibitions, or any similar matter, either
party upon receiving such advice of counsel may at any time give
the other party written notice of such advice and if, after
consultation, the parties have not determined to their reasonable
satisfaction that no such violation exists and the parties have
not amended this Agreement to remove that risk to the other
party's reasonable satisfaction, then either party may terminate
this Agreement effective as of the date sixty (60) days after its
initial written notice to the other party.

d. Captions contained in this Agreement are inserted only as a
matter of convenience and reference, and in no way define, limit,
extend or describe the scope of this Agreement, or the intent of
any provision hereof. All references to sections herein shall
refer to sections of this Agreement unless the context clearly
requires otherwise.

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

f. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky, without regard to
its conflicts of law rule.

g. This Agreement embodies the entire understanding between the
parties hereto with respect to subject matters covered hereby and
supersedes any prior agreement or understanding between the
parties with respect to such matters.

<PAGE>
h. This Agreement may be executed in multiple counterpart copies,
each of which shall be considered an original and all of which
shall constitute one and the same instrument.

g. This Agreement is not assignable.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

ATRIA COMMUNITIES, INC.
A Delaware Corporation

By:
-------------------------------------

Title:
----------------------------------

VENCOR, INC.
A Delaware Corporation

By:
-------------------------------------

Title:
----------------------------------

<PAGE>
EXHIBIT 1

Services To Be Provided By Vencor To Atria
------------------------------------------

<TABLE>
<CAPTION>
Full Time Avg. Comp. Cost of
Services Equivalents and Benefits Services
- -------- ----------- ------------ --------

<S> <C> <C> <C>
Staff Accounting 2.00 $48,000 $96,000
Accounts Payable 0.50 30,000 15,000
Payroll 0.25 30,000 7,500
H/R and Benefits 0.50 60,000 30,000
Risk Management/Insurance 0.25 84,000 21,000
Tax 1.00 78,000 78,000
Legal 0.50 96,000 48,000
SEC Reporting 0.25 84,000 21,000
Treasury Support 0.50 84,000 42,000
Market Planning 1.25 60,000 75,000
MIS Personnel 0.50 72,000 36,000
MIS System 100,000
---- ---- ----

Total before overhead and Profit $569,500

Overhead and Profit (@15%) 85,425
--------

Total Cost $654,925
========
</TABLE>

<PAGE>

Exhibit 10.5

ATRIA COMMUNITIES, INC.
1996 STOCK OWNERSHIP INCENTIVE PLAN

ARTICLE 1. PURPOSE

The purpose of this 1996 Stock Ownership Incentive Plan ("Plan") is to
advance the interest of Atria Communities, Inc., a Delaware corporation
("Company"), and its subsidiaries by encouraging employees who will largely be
responsible for the long-term success and development of the Company to acquire
and retain an ownership interest in the Company. The Plan is also intended to
provide flexibility to the Company in attracting and retaining such employees
and stimulating their efforts on behalf of the Company.

ARTICLE 2. DEFINITIONS AND CONSTRUCTION

2.1 Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by such
definitions, and the terms set forth below shall have the following meanings (in
either case, such terms shall apply equally to both the singular and plural
forms of the terms defined):

(a) "Award" shall mean, individually or collectively, a grant under the
Plan of Options, Restricted Stock or Performance Units.

(b) "Board" shall mean the Board of Directors of the Company.

(c) "Cause" shall mean, unless otherwise defined in an agreement evidencing
an Award, a felony conviction of a Participant or the failure of a Participant
to contest prosecution for a felony, or a Participant's willful misconduct or
dishonesty, any of which is determined by the Committee to be directly and
materially harmful to the business or reputation of the Company or its
Subsidiaries.

(d) A "Change in Control" shall mean any of the following events:

(1) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any Person immediately
after which such Person has Beneficial Ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than 25% of the combined
voting power of the Company's then outstanding Voting Securities if Vencor, Inc.
then beneficially owns less than 25% of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii)
an employee benefit plan (or a trust forming a part thereof) maintained by the
Company or any Subsidiary, (iii) Vencor, Inc. or any Subsidiary or (iv) any
Person in connection with a Non-Control Transaction (as hereinafter defined).

(2) The individuals who, as of December 31, 1996, are members of the
Board ("Incumbent Board"), cease for any reason to constitute at least a
majority of the Board; provided, however, that if the election, or nomination
for election by the Company's stockholders, of any new
<PAGE>

director was approved by a vote of at least a majority of the Incumbent Board,
such new director shall, for purposes of the Plan, be considered as a member of
the Incumbent Board; provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened Election Contest (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board ("Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or

(3) Approval by stockholders of the Company of:

(A) A merger, consolidation or reorganization involving the
Company, unless such is a Non-Control Transaction. For purposes of the Plan, the
term "Non-Control Transaction" shall mean a merger consolidation or
reorganization of the Corporation in which:

(i) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least a
majority of the combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation or reorganization
("Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization;

(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least a majority of the
members of the board of directors of the Surviving Corporation; and

(iii) no Person (other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or reorganization had Beneficial
Ownership of 20% or more of the then outstanding Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities;

(B) A complete liquidation or dissolution of the Company; or

(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person ("Subject Person") acquired Beneficial Ownership of
more than the permitted amount of the outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Person; provided, however, that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial Owner
of any additional Voting Securities which increases the percentage of the then

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<PAGE>

outstanding Voting Securities Beneficially Owner by the Subject Person, then a
Change in Control shall occur.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.

(f) "Committee" shall mean the committee described in Section 3.1.

(g) "Disability" shall mean the total disability as determined by the
Committee in accordance with standards and procedures similar to those under the
Company's long-term disability plan, or, if none, a physical or mental infirmity
which the Committee determines impairs the Participant's ability to perform
substantially his or her duties for a period of 180 consecutive days.

(h) "Employee" shall mean an individual who is a full-time employee of the
Company or a Subsidiary.

(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

(j) "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the Nasdaq National Market System
or any national or regional stock exchange in which the Shares are traded, or if
no such reported sale of the Shares shall have occurred on such date, on the
next preceding date on which there was such a reported sale. If there shall be
any material alteration in the present system of reporting sale prices of the
Shares, or if the Shares shall no longer be listed on the Nasdaq National Market
System or a national or regional stock exchange, the fair market value of the
Shares as of a particular date shall be determined by such method as shall be
determined by the Committee.

(k) "ISOs" shall have the meaning given such term in Section 6.1.

(l) "NQSOs" shall have the meaning given such term in Section 6.1.

(m) "Option" shall mean an option to purchase Shares granted pursuant to
Article 6.

(n) "Option Agreement" shall mean an agreement evidencing the grant of an
Option as described in Section 6.2.

(o) "Option Exercise Price" shall mean the purchase price per Share
subject to an Option, which shall not be less than the Fair Market Value of the
Share on the date of grant (110% of Fair Market Value in the case of an ISO
granted to a Ten Percent Shareholder).

(p) "Participant" shall mean any Employee selected by the Committee to
receive an Award under the Plan.

(q) "Performance Goals" shall have the meaning given such term in Section
8.4.

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<PAGE>

(r) "Performance Period" shall have the meaning given such term in Section
8.3.

(s) "Performance Unit" shall mean the right to receive a payment from the
Company upon the achievement of specified Performance Goals as set forth in a
Performance Unit Agreement.

(t) "Performance Unit Agreement" shall mean an agreement evidencing a
Performance Unit Award, as described in Section 8.2.

(u) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).

(v) "Plan" shall mean this Atria Communities, Inc. 1996 Stock Ownership
Incentive Plan as the same may be amended from time to time.

(w) "Restriction Period" shall mean the period determined by the Committee
during which the transfer of Shares is limited in some way or Shares are
otherwise restricted or subject to forfeiture as provided in Article 7.

(x) "Restricted Stock" shall mean Shares granted pursuant to Article 7 as
to which the restrictions have not expired.

(y) "Restricted Stock Agreement" shall mean an agreement evidencing a
Restricted Stock Award, as described in Section 7.2.

(z) "Retirement" shall mean retirement by a Participant in accordance with
the terms of the Company's retirement or pension plans.

(aa) "Shares" shall mean the shares of the Company's common stock, par
value $.10 per share.

(bb) "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of which a majority of its voting power, equity securities, or
equity interest is owned directly or indirectly by such company.

(cc) "Ten Percent Shareholder" shall mean an Employee who, at the time an
ISO is granted, owns (within the meaning of section 422(b)(6) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company.

2.2 Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.

2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

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<PAGE>

ARTICLE 3. ADMINISTRATION

3.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board consisting of two or more directors of the Company or the
entire Board of the Company. The Committee shall meet at such times and places
as it determines and may meet through a telephone conference call. The members
of the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board.

3.2 Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have full authority to:

(a) select Participants to whom Awards are granted;

(b) determine the size, types and frequency of Awards granted under the
Plan;

(c) determine the terms and conditions of Awards, including any
restrictions or conditions to the Award, which need not be identical;

(d) cancel or modify, with the consent of the Participant, outstanding
Awards and to grant new Awards in substitution therefor;

(e) accelerate the exercisability of any Award, for any reason;

(f) construe and interpret the Plan and any agreement or instrument
entered into under the Plan;

(g) establish, amend and rescind rules and regulations for the Plan's
administration; and

(h) amend the terms and conditions of any outstanding Award to the extent
such terms and conditions are within the discretion of the Committee as provided
in the Plan. The Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. To the extent
permitted by law and Rule 16b-3 promulgated under the Exchange Act, the
Committee may delegate its authority as identified hereunder.

3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding upon all
persons, including the Company, its stockholders, Employees, Participants and
their estates and beneficiaries.

3.4 Section 16 Compliance; Bifurcation of Plan. It is the intention of
the Company that the Plan and the administration of the Plan comply in all
respects with Section 16(b) of the Exchange Act and the rules and regulations
promulgated thereunder. If any Plan provision, or any aspect of the
administration of the Plan, is found not to be in compliance with Section 16(b)
of the Exchange Act, the provision or administration shall be deemed null and
void, and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3 promulgated under the Exchange Act. Notwithstanding
anything in the Plan to the contrary, the Board or the Committee, in its

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<PAGE>

discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other Participants.

ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN

4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the number of Shares reserved for issuance upon the exercise of Awards and the
payment of benefits in connection with Awards is 1,000,000 Shares. Any Shares
issued under the Plan may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares. If and to the extent an Award shall expire
or terminate for any reason without having been exercised in full (including a
cancellation and regrant of an Option), or shall be forfeited, without, in
either case, the Participant having realized any of the economic benefits of a
shareholder (such as the receipt of dividends or other distributions paid on
shares of Restricted Stock), the Shares (including Restricted Stock) associated
with such Awards shall again become available for Awards under the Plan.

4.2 Shares of Restricted Stock Available Under the Plan. Subject to
adjustment as provided in Section 4.3, the number of Shares which may be the
subject of Awards granted in the form of Restricted Stock is limited to 20% of
the Shares subject to the Plan.

4.3 Adjustments in Authorized Shares and Outstanding Awards. In the event
of a merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, cash dividend, property dividend, share repurchase, share
combination, share exchange, issuance of warrants, rights or debentures, or
other change in the corporate structure of the Company affecting the
Shares, the Committee may substitute or adjust the total number and class of
Shares or other stock or securities which may be issued under the Plan, and the
number, class and/or price of Shares subject to outstanding Awards, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of Participants and to preserve, without exceeding, the value of any
outstanding Awards; and further provided, that the number of Shares subject to
any Award shall always be a whole number. In the case of ISOs, such adjustments
shall be made in such a manner so as not to constitute a "modification" within
the meaning of section 424(h)(3) of the Code and only to the extent otherwise
permitted by sections 422 and 424 of the Code.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

All Employees of the Company and its Subsidiaries are eligible to receive
Awards under the Plan. In selecting Employees to receive Awards under the Plan,
as well as in determining the number of Shares subject to, and the other terms
and conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of the
Plan, including the duties of the Employees, their present and potential
contribution to the success of the Company and their anticipated number of years
of active service remaining with the Company or a Subsidiary.

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<PAGE>

ARTICLE 6. STOCK OPTIONS

6.1 Grant of Options. Subject to the terms and provisions of the Plan,
the Committee may grant Options to Participants at any time and from time to
time, in the form of options which are intended to qualify as incentive stock
options within the meaning of section 422 of the Code ("ISOs"), Options which
are not intended to so qualify ("NQSOs") or a combination thereof. The maximum
number of Shares with respect to which Options may be granted to any Participant
under the Plan shall not exceed 40% of the Shares subject to the Plan.

6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of the
Option, the number of Shares to which the Option relates and such other
provisions as the Committee may determine or which are required by the Plan.
The Option Agreement shall also specify whether the Option is intended to be an
ISO or a NQSO and shall include such provisions applicable to the particular
type of Option granted.

6.3 Duration of Options. Each Option shall expire at such time as is
determined by the Committee at the time of grant; provided, however, that no
Option shall be exercised later than the tenth anniversary of its grant (fifth
anniversary in the case of an ISO granted to a Ten Percent Shareholder).

6.4 Exercise of Options. Options shall be exercisable at such times and
be subject to such restrictions and conditions as the Committee shall approve at
the time of grant, which need not be the same for each grant or for each
Participant. Except as provided in Section 6.6, however, in no event may any
Option become exercisable within six months of the date of grant in the case of
any Participant subject to Section 16(b) of the Exchange Act. Options shall be
exercised by delivery to the Company of a written notice of exercise, setting
forth the number of Shares with respect to which the Option is to be exercised
and accompanied by full payment of the Option Exercise Price and all applicable
withholding taxes.

6.5 Payment of Option Exercise Price. The Option Exercise Price for
Shares as to which an Option is exercised shall be paid to the Company in full
at the time of exercise either (a) in cash in the form of currency or other cash
equivalent acceptable to the Company, (b) by tendering Shares having a Fair
Market Value (determined as of the close of the business day immediately
preceding the day on which the Option is exercised) equal to the Option Exercise
Price (provided, however, that in the case of a Participant subject to Section
16(b) of the Exchange Act, such Shares have been held by the Participant for at
least six months prior to their tender), (c) any other reasonable consideration
that the Committee may deem appropriate or (d) by a combination of the forms of
consideration described in (a), (b) and (c) of this Section 6.5. The Committee
may permit the cashless exercise of Options as described in Regulation T
promulgated by the Federal Reserve Board, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.

6.6 Vesting Upon Change in Control. Upon a Change in Control, any then
outstanding Options held by Participants shall become fully vested and
immediately exercisable. Furthermore, if provided in an Option Agreement, the
Participant shall have the right to sell the Option back to

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<PAGE>

the Company for an amount generally equal to the excess of the Fair Market Value
of the Shares subject to the Option over the Option Price.

6.7 Termination of Employment. If the employment of a Participant is
terminated for Cause, all then outstanding Options of such Participant, whether
or not exercisable, shall terminate immediately. If the employment of a
Participant is terminated for any reason other than for Cause, death, Disability
or Retirement, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by such Participant or such
Participant's personal representative at any time prior to the expiration date
of the Options or within 90 days after the date of such termination of
employment, whichever is shorter. In the event of the Retirement of a
Participant, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by the Participant (a) in the case of
NQSOs, within two years after the date of Retirement and (b) in the case of
ISOs, within 90 days after Retirement; provided, however, that no such Options
may be exercised on a date subsequent to their expiration. In the event of the
death or Disability of a Participant while employed by the Company or a
Subsidiary, all then outstanding Options of such Participant shall become fully
vested and immediately exercisable, and may be exercised at any time (c) in the
case of NQSOs, within two years after the date of death or determination of
Disability and (d) in the case of ISOs, within one year after the date of death
or determination of Disability; provided however that no such Options may be
exercised on a date subsequent to their expiration. In the event of the death of
a Participant, the Option may be exercised by the person or persons to whom
rights pass by will or by the laws of descent and distribution, or if
appropriate, the legal representative of the deceased Participant's estate. In
the event of the Disability of a Participant, Options may be exercised by the
Participant, or if such Participant is incapable of exercising the Options, by
such Participant's legal representative.

ARTICLE 7. RESTRICTED STOCK

7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Restricted Stock to Participants at any
time and from time to time and upon such terms and conditions as it may
determine.

7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement which shall specify the Restriction
Period, the number of shares of Restricted Stock granted and such other
provisions as the Committee may determine and which are required by the Plan.

7.3 Non-Transferability of Restricted Stock. Except as provided in this
Article 7, shares of Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated until the end of the applicable
Restriction Period as specified in the Restricted Stock Agreement, or upon
earlier satisfaction of any other conditions determined at the time of grant
specified in the Restricted Stock Agreement. Except as provided in Section 7.9,
however, in no event may any Restricted Stock become vested in a Participant
subject to Section 16(b) of the Exchange Act prior to six months following the
date of its grant.

7.4 Other Restrictions. The Committee may impose such other restrictions
on any shares of Restricted Stock as it may deem advisable, including, without
limitation, restrictions based upon

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<PAGE>

the achievement of Performance Goals, years of service and/or restrictions under
applicable Federal or state securities laws. The Committee may provide that any
share of Restricted Stock shall be held (together with a stock power executed in
blank by the Participant) in custody by the Company until any or all
restrictions thereon shall have lapsed.

7.5 Forfeiture. The Committee shall determine and set forth in a
Participant's Restricted Stock Agreement such events upon which a Participant's
shares of Restricted Stock shall be forfeitable, which may include, without
limitation, the termination of a Participant's employment during the Restriction
Period or the nonachievement of Performance Goals. Any such forfeited shares of
Restricted Stock shall be immediately returned to the Company by the
Participant, and the Participant shall only receive the amount, if any, paid by
the Participant for such Restricted Stock.

7.6 Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 7.4, each certificate representing shares of Restricted
Stock shall bear the following legend:

"The sale or other transfer of the shares represented by this
Certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in the 1996
Atria Communities, Inc. Stock Ownership Incentive Plan, and in the
related Restricted Stock Agreement. A copy of the Plan and such
Restricted Stock Agreement may be obtained from the Secretary of Atria
Communities, Inc."

7.7 Lapse of Restrictions Generally. Except as otherwise provided in this
Article 7, shares of Restricted Stock shall become freely transferable by the
Participant and no longer subject to forfeiture after the last day of the
Restriction Period; provided however, that if the restriction relates to the
achievement of a Performance Goal, the Restriction Period shall not end until
the Committee has certified in writing that the Performance Goal has been met.
Once the shares of Restricted Stock are released from their restrictions, the
Participant shall be entitled to have the legend required by Section 7.6 removed
from the Participant's share certificate, which certificate shall thereafter
represent freely transferable and nonforfeitable Shares free from any and all
restrictions under the Plan.

7.8 Lapse of Restrictions Upon Change in Control. Upon a Change in
Control, any restrictions and other conditions pertaining to then outstanding
shares of Restricted Stock held by Participants, including, but not limited to,
vesting requirements, shall lapse and such Shares shall thereafter be
immediately transferable and nonforfeitable.

7.9 Voting Rights; Dividends and Other Distributions. Unless the
Committee exercises its discretion as provided in Section 7.10, during the
Restriction Period, Participants holding shares of Restricted Stock may exercise
full voting rights, and shall be entitled to receive all dividends and other
distributions paid, with respect to such Restricted Stock. If any dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions as the shares of Restricted Stock with respect to which they were
paid.

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<PAGE>

7.10 Treatment of Dividends. At the time shares of Restricted Stock are
granted to a Participant, the Committee may, in its discretion, determine that
the payment of dividends, or a specified portion thereof, declared or paid on
such shares shall be deferred until the lapse of the restrictions with respect
to such shares, in which event such deferred dividends shall be held by the
Company for the account of the Participant. In the event of such deferral,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account during the year at a rate per annum as the Committee,
in its discretion, may determine. Deferred dividends, together with interest
accrued thereon, if any, shall be (a) paid to the Participant upon the lapse of
restrictions on the shares of Restricted Stock as to which the dividends related
or (ii) forfeited to the Company upon the forfeiture of such shares by the
Participant.

7.11 Termination of Employment. If the employment of a Participant is
terminated for any reason other than death or Disability prior to the expiration
of the Restriction Period applicable to any shares of Restricted Stock then held
by the Participant, such shares shall thereupon be forfeited immediately by the
Participant and returned to the Company, and the Participant shall only receive
the amount, if any, paid by the Participant for such Restricted Stock. If the
employment of a Participant is terminated as a result of death or Disability
prior to the expiration of the Restriction Period applicable to any shares of
Restricted Stock then held by the Participant, any restrictions and other
conditions pertaining to such shares then held by the Participant, including,
but not limited to, vesting requirements, shall immediately lapse and such
Shares shall thereafter be immediately transferable and nonforfeitable.
Notwithstanding anything in the Plan to the contrary, except in the case of
Restricted Stock for which a Performance Goal must be achieved, the Committee
may determine, in its sole discretion, in the case of any termination of a
Participant's employment other than for Cause, that the restrictions on some or
all of the shares of Restricted Stock awarded to a Participant shall immediately
lapse and such Shares shall thereafter be immediately transferable and
nonforfeitable.

ARTICLE 8. PERFORMANCE UNITS

8.1 Grant of Performance Units. The Committee may, from time to time and
upon such terms and conditions as it may determine, grant Performance Units
which will become payable to a Participant upon certification in writing by the
Committee that the Performance Goals related thereto have been achieved.

8.2 Performance Unit Agreement. Each Performance Unit grant shall be
evidenced by a Performance Unit Agreement that shall specify the Performance
Goals, the Performance Period and the number of Performance Units to which it
pertains.

8.3 Performance Period. The period of performance ("Performance Period")
with respect to each Performance Unit shall be such period of time, which shall
not be less than one year, nor more than five years, as determined by the
Committee, for the measurement of the extent to which Performance Goals are
attained.

8.4 Performance Goals. The goals ("Performance Goals") that are to be
achieved with respect to each Performance Unit, or Restricted Stock subject to a
requirement that Performance Goals be achieved, shall be those objectives
established by the Committee as it deems appropriate,

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<PAGE>

and which may be expressed in terms of (a) earnings per Share, (b) Share price,
(c) pre-tax profit, (d) net earnings, (e) return on equity or assets, (f)
revenues or (g) any combination of the foregoing. Performance Goals may be in
respect of the performance of the Company and its Subsidiaries (which may be on
a consolidated basis), a Subsidiary, a Division or other operating unit of the
Company. Performance Goals may be absolute or relative and may be expressed in
terms of a progression within a specified range. The Performance Goals with
respect to a Performance Period shall be established by the Committee in order
to comply with Rule 16b-3 under the Exchange Act and section 162(m) of the Code,
as applicable.

8.5 Termination of Employment. If the employment of a Participant shall
terminate prior to the expiration of the Performance Period for any reason other
than for death, Disability or Retirement, the Performance Units then held by the
Participant shall terminate. In the case of termination of employment by reason
of death, Disability or Retirement of a Participant prior to the expiration of
the Performance Period, any then outstanding Performance Units of such
Participant shall be payable in an amount equal to the maximum amount payable
under the Performance Unit multiplied by a percentage equal to the percentage
that would have been earned under the terms of the Performance Unit Agreement
assuming that the rate at which the Performance Goals have been achieved as of
the date of such termination of employment would have continued until the end of
the Performance Period; provided, however, that if no maximum amount payable is
specified in the Performance Unit Agreement, the amount payable shall be such
amount as the Committee shall determine is reasonable.

8.6 Payment Upon Change in Control. Upon a Change in Control, any then
outstanding Performance Units shall become fully vested and immediately payable
in an amount which is equal to the greater of (a) the maximum amount payable
under the Performance Unit multiplied by a percentage equal to the percentage
that would have been earned under the terms of the Performance Unit Agreement
assuming that the rate at which the Performance Goals have been achieved as of
the date of such Change in Control would have continued until the end of the
Performance Period or (b) the maximum amount payable under the Performance Unit
multiplied by the percentage of the Performance Period completed by the
Participant at the time of the Change in Control; provided, however, that if no
maximum amount payable is specified in the Performance Unit Agreement, the
amount payable shall be such amount as the Committee shall determine is
reasonable.

8.7 Payment of Performance Units. Subject to such terms and conditions as
the Committee may impose, and unless otherwise provided in the Performance Unit
Agreement, Performance Units shall be payable within 90 days following the end
of the Performance Period during which the Participant attained at least the
minimum acceptable level of achievement under the Performance Goals, or 90 days
following a Change in Control, as applicable. The Committee, in its discretion,
may determine at the time of payment required in connection with a Performance
Unit whether such payment shall be made (a) solely in cash, (b) solely in Shares
(valued at the Fair Market Value of the Shares on the date of payment) or (c) a
combination of cash and Shares; provided, however, that if a Performance Unit
becomes payable upon a Change in Control, the Performance Unit shall be paid
solely in cash.

8.8 Designation of Beneficiary. Each Participant may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom the right to

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receive payments under a Performance Unit is to be paid in case of the
Participant's death before receiving any or all such payments. Each such
designation shall revoke all prior designations by the Participant, shall be in
a form prescribed by the Company and shall be effective only when filed by the
Participant in writing with the Committee during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.

ARTICLE 9. AMENDMENT, MODIFICATION AND TERMINATION

9.1 Effective Date. The Plan shall become effective upon adoption by the
Board. The Plan shall be rescinded and all Options and shares of Restricted
Stock granted hereunder shall be null and void unless within 12 months from the
date of the adoption of the Plan by the Board it shall have been approved by the
holders of a majority of the outstanding Shares present or represented and
entitled to vote on the Plan at a stockholders' meeting.

9.2 Termination Date. The Plan shall terminate on the earliest to occur
of (a) the tenth anniversary of the adoption of the Plan by the Board, (b) the
date when all Shares available under the Plan shall have been acquired pursuant
to the exercise of Awards and the payment of all benefits in connection with
Performance Unit Awards has been made or (c) such other date as the Board may
determine in accordance with Section 9.2.

9.3 Amendment, Modification and Termination. The Board may, at any time,
amend, modify or terminate the Plan. Without the approval of the stockholders
of the Company (as may be required by the Code, Section 16 of the Exchange Act
and the rules promulgated thereunder, any national securities exchange or system
on which the Shares are then listed or reported or a regulatory body having
jurisdiction with respect hereto), however, no such amendment, modification or
termination may:

(a) materially increase the benefits accruing to Participants under the
Plan;

(b) increase the total amount of Shares which may be issued under the Plan,
except as provided in Section 4.3; or

9.4 Awards Previously Granted. No amendment, modification or termination
of the Plan shall in any manner adversely affect any outstanding Award without
the written consent of the Participant holding such Award.

ARTICLE 10. NON-TRANSFERABILITY

A Participant's rights under the Plan may not be assigned, pledged or
otherwise transferred other than by will or the laws of descent and
distribution, except that upon a Participant's death, the Participant's rights
to payment pursuant to a Performance Unit may be transferred to a beneficiary
designated in accordance with Section 8.8; provided, however, that in the case
of NQSOs, the Participant may, subject to any restrictions under Section 16(b)
of the Exchange Act, if applicable,

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transfer the Options to the Participant's spouse, lineal descendants, trusts for
their benefit or a charitable remainder trust of which Participant or such
family members referred to above are a beneficiary.

ARTICLE 11. NO GRANTING OF EMPLOYMENT RIGHTS

Neither the Plan, nor any action taken under the Plan, shall be construed
as giving any Employee the right to become a Participant, nor shall an Award
under the Plan be construed as giving a Participant any right with respect to
continuance of employment by the Company. The Company expressly reserves the
right to terminate, whether by dismissal, discharge or otherwise, a
Participant's employment at any time, with or without Cause, except as may
otherwise be provided by any written agreement between the Company and the
Participant.

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<PAGE>

ARTICLE 12. WITHHOLDING

12.1 Tax Withholding. A Participant shall remit to the Company an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA and Medicare obligation) required by law to be withheld with
respect to any grant, exercise or payment made under or as a result of the Plan.

12.2 Share Withholding. If the Company has a withholding obligation upon
the issuance of Shares under the Plan, a Participant may, subject to the
discretion of the Committee, elect to satisfy the withholding requirement, in
whole or in part, by having the Company withhold Shares having a Fair Market
Value on the date the withholding tax is to be determined equal to the amount
required to be withheld under applicable law. Notwithstanding the foregoing,
the Committee may, by the adoption of rules or otherwise, modify the provisions
of this Section 12.2 or impose such other restrictions or limitations on such
elections as may be necessary to ensure that such elections will be exempt
transactions under Section 16(b) of the Exchange Act.

ARTICLE 13. INDEMNIFICATION

No member of the Board or the Committee, nor any officer or Employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or Employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.

ARTICLE 14. SUCCESSORS

All obligations of the Company with respect to Awards granted under the
Plan shall be binding on any successor to the Company, whether the existence of
such successor is a result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.

ARTICLE 15. GOVERNING LAW

To the extent not preempted by Federal law, the Plan, and all agreements
under the Plan, shall be governed by, and construed in accordance with, the laws
of the State of Delaware without regard to its conflict of laws rules.
Furthermore, all the Plan and all Option Agreements relating to ISOs shall be
interpreted so as to qualify as incentive stock options under the Code.

IN WITNESS WHEREOF, this 1996 Stock Ownership Incentive Plan has been
executed by the Company as of the ______ day of _____________, 1996, being the
date the

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<PAGE>

Plan was adopted by the Board.

ATRIA COMMUNITIES, INC.

By: ________________________________
________________________________

ATTEST:

_______________________________
Secretary

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<PAGE>

Exhibit 10.6

ATRIA COMMUNITIES, INC.
NON-EMPLOYEE DIRECTORS
1996 STOCK INCENTIVE PLAN
-------------------------

ARTICLE 1. PURPOSE

The purpose of this 1996 Non-Employee Directors Stock Incentive Plan is to
promote the interests of Atria Communities, Inc., its subsidiaries and
stockholders, by having non-employee directors of the Company acquire a
proprietary interest in the Company. Such investments should increase the
personal interest and the special effort of such persons in providing for the
continued success and progress of the business of the Company and should enhance
the Company's efforts to attract and retain competent non-employee directors.

ARTICLE 2. DEFINITIONS AND CONSTRUCTION

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Cause" shall mean, unless otherwise defined in an Option Agreement or
Restricted Stock Agreement, a felony conviction of a Non-Employee Director or
the failure of a Non-Employee Director to contest prosecution for a felony, or a
Non-Employee Director's willful misconduct or dishonesty, any of which is
determined by the Committee to be directly and materially harmful to the
business or reputation of the Company or its Subsidiaries.

(2) The individuals who, as of December 31, 1996, are members of the
Board ("Incumbent Board"), cease for any reason to constitute at least a
majority of the

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<PAGE>

Board; provided, however, that if the election, or nomination for election by
the Company's stockholders, of any new director was approved by a vote of at
least a majority of the Incumbent Board, such new director shall, for purposes
of the Plan, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened Election Contest (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board ("Proxy
Contest") including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or

(3) Approval by stockholders of the Company of:

(A) A merger, consolidation or reorganization involving the Company,
unless such is a Non-Control Transaction. For purposes of the Plan, the term
"Non-Control Transaction" shall mean a merger consolidation or reorganization of
the Corporation in which:

(i) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or indirectly immediately
following such merger, consolidation or reorganization, at least a majority of
the combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or reorganization
("Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization;

(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least a majority of the members of
the board of directors of the Surviving Corporation; and

(iii) no Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof) maintained by the
Company, the Surviving Corporation or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation or reorganization had Beneficial
Ownership of 20% or more of the then outstanding Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities;

(B) A complete liquidation or dissolution of the Company; or

(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person ("Subject Person") acquired Beneficial Ownership of
more than the

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<PAGE>

permitted amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the number of
Voting Securities outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person; provided, however, that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

(e) "Committee" shall mean the Committee provided for in Section 7.1.

(f) "Company" shall mean Atria Communities, Inc., a Delaware corporation.

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

(i) "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the Nasdaq National Market System
or any national or regional stock exchange in which the Shares are traded, or if
no such reported sale of the Shares shall have occurred on such date, on the
next preceding date on which there was such a reported sale. If there shall be
any material alteration in the present system of reporting sale prices of the
Shares, or if the Shares shall no longer be listed on the Nasdaq National Market
System or a national or regional stock exchange, the fair market value of the
Shares as of a particular date shall be determined by such method as shall be
determined by the Committee.

(j) "Initial Grant Date" shall mean the date the Registration Statement
with respect to the Company's initial public offering becomes effective.

(k) "Non-Employee Director" shall mean a member of the Board who is not an
employee of the Company or any of its subsidiaries.

(l) "Option" shall mean an option granted to an Optionee pursuant to the
Plan.

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<PAGE>

(m) "Option Agreement" shall mean a written agreement between the Company
and an Optionee evidencing the grant of an Option and containing terms and
conditions concerning the exercise of the Option.

(n) "Option Price" shall mean the price to be paid for Shares to be
purchased pursuant to the exercise of an Option.

(o) "Optionee" shall mean a Non-Employee Director who has been granted an
Option or the personal representative, heir or legatee of an Optionee who has
the right to exercise the Option upon the death of the Optionee.

(p) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).

(q) "Plan" shall mean this 1996 Non-Employee Directors Stock Incentive
Plan, as the same may be amended from time to time.

(r) "Restriction Period" shall mean the period during which the transfer of
Shares is limited in some way or Shares are otherwise restricted or subject to
forfeiture as provided in Article 6.

(s) "Restricted Stock" shall mean Shares granted pursuant to Article 6 as
to which the restrictions have not expired.

(t) "Restricted Stock Agreement" shall mean an agreement evidencing a
Restricted Stock award, as described in Section 6.2.

(u) "Shares" shall mean the shares of the Company's common stock, par value
$.10 per share.

(v) "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of which a majority of its voting power, equity securities or
equity interest is owned directly or indirectly by such company.

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<PAGE>

ARTICLE 3. GRANTING OF OPTIONS

3.1 Initial Grants. Each Non-Employee Director on the Initial Grant Date,
other than the Chairman of the Board of the Company, shall be granted on the
Initial Grant Date an Option to purchase 10,000 Shares. On the Initial Grant
Date, the Chairman of the Board of the Company shall be granted an Option to
purchase 80,000 Shares.

3.2 New Non-Employee Directors Grants. Each new Non-Employee Director who
is elected subsequent to the Initial Grant Date shall automatically be granted
an Option to purchase 10,000 Shares upon the initial date of election to the
Board, provided that the number of Shares available for grant under the Plan is
sufficient to permit such automatic grant.

3.3 Additional Option Grants. On each anniversary of the date of the
grant of an Option to a Non-Employee Director pursuant to the terms of the Plan,
such Non-Employee Director shall automatically be granted an Option to purchase
1,000 Shares provided that (i) such Non-Employee Director shall have continually
served as a director of the Company since the date of such prior Option grant
and (ii) the number of Shares available for grant under the Plan is sufficient
to permit such automatic grant.

3.4 Proportionate Reduction. If as of any date on which there is to be a
grant of Options hereunder there are an insufficient number of Shares available
pursuant to Section 4 to make all of the grants then to be made, each Non-
Employee Director then entitled to be granted an Option shall receive an Option
to purchase a proportionately lesser number of Shares.

ARTICLE 4. SHARES SUBJECT TO THE PLAN

The stock to be offered under the Plan shall be the Shares, which Shares
may be unissued Shares or treasury Shares. Subject to the adjustments provided
for in Section 8, the aggregate number of Shares to be delivered upon exercise
of all Options granted under the Plan plus shares of Restricted Stock issued
under the Plan shall not exceed 250,000 Shares. Shares subject to, but not
delivered under, an Option terminating or expiring for any reason prior to its
exercise in full, and shares of Restricted Stock which are forfeited pursuant to
the terms of the Plan, shall be deemed available for Options to be granted
thereafter during the term of the Plan.

ARTICLE 5. TERMS AND CONDITIONS OF OPTIONS

All Options granted hereunder shall be subject to the following terms and
conditions which shall be set forth in the Option Agreement for all Options to
the extent applicable:

5.1. To Whom Options May Be Granted. Options shall be granted only to Non-
Employee Directors.

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<PAGE>

5.2 Non-Transferability of Option. The Option shall not be transferable
by the Optionee otherwise than by bequest or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee; provided, however, that the Optionee may, subject to any
restrictions under Section 16(b) of the Exchange Act, transfer the Options to
the Optionee's spouse, lineal descendants, trusts for their benefit or a
charitable remainder trust of which Optionee or such family members are a
beneficiary.

5.3 Termination of Option.

(a) If the Optionee ceases to be a director of the Company for any
reason other than death, Disability or removal for Cause, the Option shall
terminate three months after the Optionee ceases to be director of the Company
(unless the Optionee dies during such period), or on the Option's expiration
date, if earlier, and shall be exercisable during such period after the Optionee
ceases to be a director of the Company only with respect to the number of Shares
which the Optionee was entitled to purchase on the day preceding the day on
which the Optionee ceased to be a director.

(b) If the Optionee ceases to be a director of the Company because of
removal for Cause, the Option shall terminate on the date of the Optionee's
removal.

(c) In the event of the Optionee's death or Disability while a
director of the Company, or the Optionee's death within three months after the
Optionee ceases to be a director (other than by reason of removal for Cause),
the Option shall terminate upon the earlier to occur of (A) 12 months after the
date of the Optionee's death or Disability, or (B) the Option's expiration date.
The Option shall be exercisable during such period after the Optionee's death or
Disability with respect to the number of Shares as to which the Option shall
have been exercisable on the date preceding the Optionee's death or Disability,
as the case may be.

5.4 Number of Shares of Common Stock. The number of Shares to which the
Option pertains.

5.5 Exercise Price. The exercise price of the Option, which shall be
equal to 100% of the Fair Market Value of the Shares at the time of the grant of
the Option.

5.6 The Term of Option. The term of the Option, which shall be 10 years.

5.7 Exercisability. The time at which the Option becomes exercisable.
The Option shall be exercisable as follows:

(a) From the date the Option is granted until the first anniversary
thereof, the Option may not be exercised.

(b) Beginning on the day following the first anniversary of the date
the Option is granted, the Option may be exercised with respect to one-fourth of
the Shares subject to the Option.

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<PAGE>

(c) Beginning on the day following the second anniversary of the date
the Option is granted, the Option may be exercised with respect to an additional
one-fourth of the Shares subject to the Option.

(d) Beginning on the day following the third anniversary of the date
the Option is granted, the Option may be exercised with respect to an additional
one-fourth of the Shares subject to the Option.

(e) Beginning on the day following the fourth anniversary of the date
the Option is granted, the Option may be exercised with respect to all of the
Shares subject to the Option.

Notwithstanding the provisions of this Section 5.7, upon a Change in Control,
the Optionee shall have the right to exercise the Option in full as to all
Shares subject to the Option.

5.8 Payment of Exercise Price. The Option Price shall be paid in cash at
the time of exercise, except that in lieu of all or part of the cash, the
Optionee may tender to the Company Shares owned by the Optionee having a Fair
Market Value equal to the exercise price, less any cash paid. The Fair Market
Value of such tendered Shares shall be determined as of the close of the
business day immediately preceding the day on which the Option is exercised.

ARTICLE 6. RESTRICTED STOCK

6.1 Grant of Restricted Stock. Each Non-Employee Director on the Initial
Grant Date, other than the Chairman of the Board of the Company, shall be
granted on the Initial Grant Date 5,000 shares of Restricted Stock. On the
Initial Grant Date, the Chairman of the Board of the Company shall be granted
20,000 shares of Restricted Stock.

6.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement which shall specify the Restriction
Period, the number of shares of Restricted Stock granted and such other
provisions as the Committee may determine and which are required by the Plan.

6.3 Restriction Period. Shares of Restricted Stock shall vest one-half on
the first anniversary of the Initial Grant Date, and the remaining one-half on
the second anniversary of the Initial Grant Date.

6.4 Non-Transferability of Restricted Stock. Except as provided in this
Article 6, shares of Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated until the end of the applicable
Restriction Period with respect to such shares.

6.5 Forfeiture. Shares of Restricted Stock which do not vest prior to the
date the Non-Employee Director ceases to be a director of the Company shall be
forfeited. Any such forfeited shares of Restricted Stock shall be immediately
returned to the Company by

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<PAGE>

the Non-Employee Director, and the Non-Employee Director shall not receive any
amount with respect to such Restricted Stock upon such forfeiture.

6.6 Certificate Legend. Each certificate representing shares of
Restricted Stock shall bear the following legend:

"The sale or other transfer of the shares represented by this
Certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in the Atria
Communities, Inc. Non-Employee Directors 1996 Stock Incentive Plan,
and in the related Restricted Stock Agreement. A copy of the Plan and
such Restricted Stock Agreement may be obtained from the Secretary of
Atria Communities, Inc."

6.7 Lapse of Restrictions Generally. Except as otherwise provided in this
Article 6, shares of Restricted Stock shall become freely transferable by the
Participant and no longer subject to forfeiture after the last day of the
Restriction Period. Once the shares of Restricted Stock are released from their
restrictions, the Non-Employee Director shall be entitled to have the legend
required by Section 6.6 removed from the Non-Employee Director's Share
certificate, which certificate shall thereafter represent freely transferable
and nonforfeitable Shares free from any and all restrictions under the Plan.

6.8 Lapse of Restrictions Upon Change in Control. Upon a Change in
Control, any restrictions and other conditions pertaining to then outstanding
shares of Restricted Stock held by Non-Employee Directors shall lapse and such
Shares shall thereafter be immediately transferable and nonforfeitable.

6.9 Voting Rights; Dividends and Other Distributions. During the
Restriction Period, Non-Employee Directors holding shares of Restricted Stock
may exercise full voting rights, and shall be entitled to receive all dividends
and other distributions paid, with respect to such Restricted Stock. If any
dividends or distributions are paid in Shares, the Shares shall be subject to
the same restrictions as the shares of Restricted Stock with respect to which
they were paid.

6.10 Termination as Director. If a Non-Employee Director ceases to be a
director of the Company for any reason other than death or Disability prior to
the expiration of the Restriction Period applicable to any shares of Restricted
Stock then held by the Non-Employee Director, such shares shall thereupon be
forfeited immediately by the Non-Employee Director and returned to the Company,
and the Non-Employee Director shall not receive any amount with respect to such
Restricted Stock. If a Non-Employee Director ceases to be a director of the
Company as a result of death or Disability prior to the expiration of the
Restriction Period applicable to any shares of Restricted Stock then held by the
Non-Employee Director, all restrictions and other conditions pertaining to such
shares of Restricted Stock shall immediately lapse and such shares of Restricted
Stock shall thereafter be immediately transferable and nonforfeitable.

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<PAGE>

ARTICLE 7. ADMINISTRATION

7.1. The Committee. The Plan is designed to operate automatically and not
require any significant administration. To the extent administration is
required, the Plan shall be administered by a Committee appointed by the Board
which shall include two or more directors of the Company or the entire Board of
the Company. The Committee shall meet at such times and places as it determines
and may meet through a telephone conference call. A majority of its members
shall constitute a quorum, and the decision of the majority of those present at
any meeting at which a quorum is present shall constitute the decision of the
Committee. Any decision reduced to writing and signed by a majority of the
members of the Committee shall be fully effective as if it had been made by a
majority at a meeting duly held. No discretion concerning decisions under the
Plan shall be afforded to a person who is not a "disinterested person." All
decisions, determinations and selections made by the Committee pursuant to the
provisions of the Plan shall be final. To the extent required by law and Rule
16b-3 promulgated under the Exchange Act, the Committee may delegate its
authority hereunder.

7.2 Section 16 Compliance. It is the intention of the Company that the
Plan and the administration of the Plan comply in all respects with Section
16(b) of the Exchange Act and the rules and regulations promulgated thereunder.
If any Plan provision, or any aspect of the administration of the Plan, is found
not to be in compliance with Section 16(b) of the Exchange Act, the provision or
administration shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3 promulgated
under the Exchange Act.

ARTICLE 8. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION

Notwithstanding the limitations set forth in Section 4, in the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, property divided, share repurchase, share combination,
share exchange, issuance of warrants, rights or debentures or other change in
corporate structure of the Company affecting the Shares, the Committee shall
make an appropriate and equitable adjustment in the maximum number of Shares
available under the Plan or to any one individual and in the number, kind and
Option Price of Shares subject to Options granted under the Plan to prevent
dilution or enlargement of the rights of Non-Employee Directors under the Plan
and outstanding Options.

ARTICLE 9. AMENDMENTS AND DISCONTINUANCE

9.1 In General. Except as provided in Section 9.2, the Board may
discontinue, amend, modify or terminate the Plan at any time.

9.2 Section 16(b) Compliance. To the extent required to meet the
conditions for exemption from Section 16(b) of the Exchange Act or the
requirements of any national securities exchange or system on which the Shares
are then listed or reported or a regulatory

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<PAGE>

body having jurisdiction with respect thereto, without the approval of the
stockholders of the Company, no amendment, modification or termination may:

(a) materially increase the benefits accruing to Non-Employee
Directors under the Plan;

(b) materially increase the total number of Shares which may be issued
under the Plan, except as provided in Section 8; or

Furthermore, to the extent required to meet the conditions for exemption from
Section 16(b) of the Exchange Act, no amendment which would change the amount,
price or timing of Option grants, other than to comply with changes in the Code
or the Employee Retirement Income Security Act of 1974, as amended (to which the
Plan is not currently subject), or the rules and regulations promulgated
thereunder, shall be made more than once every six months.

9.3 No Effect on Outstanding Options. Any Option which is outstanding
under the Plan at the time of its amendment or termination shall remain in
effect in accordance with its terms and conditions and those of the Plan as in
effect when the Option was granted.

ARTICLE 10. MERGER, CONSOLIDATION, ETC.

10.1 Conversion on Certain Mergers. In the event the Company merges or
consolidates with another corporation, or all or substantially all of the
Company's capital stock or assets are acquired by another corporation, and the
surviving or acquiring corporation issues shares of its stock to the Company's
shareholders in connection with the merger, consolidation or acquisition, the
surviving or acquiring corporation shall adopt the Plan and the following shall
apply:

(a) Upon the exercise of an Option, the Optionee shall, at no
additional cost (other than the Option Price), be entitled to receive, in lieu
of the number of Shares to which such Option is then exercisable, the number and
class of stock or other securities to which the Optionee would have been
entitled pursuant to the terms of the merger, consolidation or acquisition if
immediately prior thereto the Optionee had been the holder of record of a number
of Shares equal to the number of Shares as to which the Option shall then be
exercisable; and

(b) The shares of the surviving or acquiring corporation received in
exchange for shares of Restricted Stock shall be subject to the same restriction
as applied to such Restricted Stock.

10.2 No Conversion on Other Mergers. In the event that the Company
merges or consolidates with another corporation, or all or substantially all of
the Company's capital

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<PAGE>

stock or assets are acquired by another corporation, and the surviving or
acquiring corporation does not issue shares of its stock to the Company's
shareholders in connection with the merger, consolidation or acquisition, then,
notwithstanding any other provision of the Plan to the contrary, no Option may
be exercised after the effective date of the merger, consolidation or
acquisition.

ARTICLE 11. EFFECTIVENESS AND TERMINATION OF THE PLAN

11.1 Effective Date. The Plan shall become effective upon adoption by
the Board. The Plan shall be rescinded and all Options and shares of Restricted
Stock granted hereunder shall be null and void unless within 12 months from the
date of the adoption of the Plan by the Board it shall have been approved by the
holders of a majority of the outstanding Shares present or represented and
entitled to vote on the Plan at a stockholders' meeting.

11.2 Termination Date. The Plan shall terminate on the earliest to occur
of (i) the date when all of the Shares available under the Plan shall have been
acquired through the exercise of Options granted under the Plan and the issuance
of Restricted Stock; (ii) 10 years after the date of adoption of the Plan by the
Board; or (iii) such other date as the Board may determine.

ARTICLE 12. NO RIGHT OF REELECTION

Neither the Plan, nor any action taken under the Plan, shall be construed
as conferring upon a Non-Employee Director any right to continue as a director
of the Company, to be renominated by the Board or reelected by the stockholders
of the Company.

ARTICLE 13. INDEMNIFICATION

No member of the Board or the Committee, nor any officer or employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.

ARTICLE 14. GOVERNING LAW

The provisions of the Plan shall be construed, administered and enforced
according to the laws of the State of Delaware without regard to its conflict of
laws rules.

IN WITNESS WHEREOF, this Non-Employee Directors 1996 Stock Incentive Plan
has been executed by the Company as of the ______ day of ______________, 1996,
being the

-11-
<PAGE>

date the Plan was adopted by the Board.

ATRIA COMMUNITIES, INC.

By: ____________________________________

Title: ________________________________

-12-

<PAGE>
KACHINA POINT Exhibit 10.9
#7105

SERVICES AGREEMENT
------------------

This Services Agreement (this "Agreement") is made and entered into this __
of ___________, 1996 by and between HILLHAVEN PROPERTIES, LTD., an Oregon
corporation ("HPL") and FIRST HEALTHCARE CORPORATION, a Delaware corporation
(the "FHC").

RECITALS:

A. HPL is the owner and operator of the retirement community known as
Kachina Point located in Sedona, Arizona (the "Community").

B. FHC is the owner and operator of the skilled nursing home facility
known as Kachina Point Health Care Center located in Sedona, Arizona.

C. FHC provides certain services to HPL in connection with the operation
of the Community.

D. HPL and FHC now desire to set forth their agreement with respect to the
services provided by FHC to HPL and the Community.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. SERVICES. FHC agrees to provide to HPL the services of a maintenance
supervisor. HPL. HPL agrees to pay an amount equal to the salary, wages and/or
benefits, based on a 20 hour work week, of such maintenance supervisor. FHC
shall send an invoice to HPL each month for the services of the maintenance
supervisor for the prior month. HPL agrees to pay any such invoice within 10
days of its receipt of such invoice.

2. TERM. This Agreement may be canceled by either party upon 90 days
prior written notice to the other party. Upon such cancellation this Agreement
shall terminate and the parties shall have no further obligations or duties
hereunder except for HPL's obligation to pay for all services provided by FHC
through and including the date of termination of this Agreement.

3. NOTICES. All notices, mailings and communications relative to this
Agreement shall be in writing and shall be personally delivered and receipted,
telecopied or sent by facsimile, sent by a nationally recognized overnight
courier service, or delivered by registered U.S. mail, proper postage prepaid,
return receipt requested, and in any such event delivered and addressed to the
parties as follows:

If to FHC: First Healthcare Corporation
3300 Providian Center
Louisville, Kentucky 40202
Attention:
-------------------

If to HPL: Hillhaven Properties, Ltd.
515 West Market Street
Louisville, Kentucky 40202
Attention:
-------------------
<PAGE>
KACHINA POINT
#7105

Any notice which is personally delivered shall be effective when delivered and
any notice which is delivered by any other means shall be effective when
received. Any party may change its address for receiving notices and
communications by giving the other appropriate written notice thereof.

4. BINDING EFFECT. All of the terms, conditions, covenants, stipulations
and agreements to be performed by any of the parties hereto shall be binding
upon their respective successors, legal representatives and assigns.

5. VIOLATION OF LAW. The parties hereto hereby agree that should it ever
be determined that this Agreement violates any law, rule, regulation or order,
this Agreement shall immediately be deemed null and void and neither party shall
have any further obligations hereunder whatsoever.

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

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

("FHC")

HILLHAVEN PROPERTIES, LTD.

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

("HPL")

2
<PAGE>
SAN MARCOS
#7112

SERVICES AGREEMENT
------------------

RECITALS:

A. HPL is the operator of the assisted living\retirement community known
as Courtyard at San Marcos located in San Marcos, California (the "ALF").

B. FHC is the operator of the skilled nursing home facility known as
Village Square Nursing and Rehabilitation Center located in San Marcos,
California (the "SNF").

C. HPL provides certain services to FHC in connection with the operation
of the SNF.

D. HPL and FHC now desire to set forth their agreement with respect to the
services provided by HPL to FHC.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. SERVICES. HPL agrees to provide to FHC lawn services consistent with
the lawn services provided by HPL in the past. FHC agrees to pay a proportionate
part of the salary, wages and/or benefits of each employee of HPL that provides
lawn services to FHC. HPL shall send an invoice to FHC each month for the
services for the prior month. FHC agrees to pay any such invoice within 10 days
of its receipt of such invoice.

2. TERM. This Agreement may be canceled by either party upon 90 days prior
written notice to the other party. Upon such cancellation this Agreement shall
terminate and the parties shall have no further obligations or duties hereunder
except for FHC's obligation to pay for all services provided by HPL through and
including the date of termination of this Agreement.

If to FHC: First Healthcare
Corporation 3300 Providian Center
Louisville, Kentucky 40202
Attention:
--------------------

If to HPL: Hillhaven Properties, Ltd.
515 West Market Street
Louisville, Kentucky 40202
Attention:
--------------------

3
<PAGE>
SAN MARCOS
#7112

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

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

("FHC")

HILLHAVEN PROPERTIES, LTD.

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

("HPL")

4
<PAGE>
McMillen SENIOR VILLAGE
#238

SERVICES AGREEMENT
------------------

This Services Agreement (this "Agreement") is made and entered into this __
of ___________, 1996 by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria") and FIRST HEALTHCARE CORPORATION, a Delaware corporation
(the "FHC").

RECITALS:

A. Atria is the operator of the retirement community known as McMillen
Senior Village located at 85 McMillen Drive, Newark, Ohio (the "Community").

B. FHC is the operator of the skilled nursing home facility known as
Newark Healthcare Centre located at 75 McMillen Drive, Newark, Ohio (the "SNF").

C. FHC provides certain services to Atria in connection with the operation
of the Community.

D. Atria and FHC now desire to set forth their agreement with respect to
the services provided by FHC to Atria and the Community.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. MEALS. FHC agrees to prepare and provide all meals to be served by
Atria at the Community. The menu and the schedule for the preparation and
delivery of such meals shall be mutually agreed to from time to time by FHC and
Atria. Atria shall be responsible for notifying FHC on timely basis before each
meal of the number of residents to be served at the next meal to be served.
Atria agrees to pay to FHC for all costs and expenses for the preparation of
such meals, including, without limitation, the costs and expense of all products
consumed in the preparation of such meals and the labor costs for the
preparation of each such meal. FHC shall send an invoice to Atria each month for
the meal costs for the prior month. Atria agrees to pay any such invoice within
10 days of its receipt of such invoice.

2. MISCELLANEOUS SERVICES. FHC agrees to provide to Atria, as required
and requested from time to time by Atria (the "Miscellaneous Services") (a)
services and support to maintain and repair the Community, (b) general
administration services and support, (c) general office services and support,
(d) dietary consultation services, and (e) and housekeeping services and
support. Atria shall pay for or supply all materials consumed or used in the
rendition of the Miscellaneous Services. Atria agrees to pay a proportionate
share of the salary, wages and/or benefits of each employee of FHC that provides
Miscellaneous Services to Atria. All Miscellaneous Services shall be provided at
times and upon such schedules as mutually agreed to from time to time by Atria
and FHC. FHC shall send an invoice to Atria each month for the Miscellaneous
Services for the prior month. Atria agrees to pay any such invoice within 10
days of its receipt of such invoice.

3. TERM. This Agreement may be canceled by either party upon 90 days
prior written notice to the other party. Upon such cancellation this Agreement
shall terminate and the parties shall have no further obligations or duties
hereunder except for Atria's obligation to pay for all services provided by FHC
through and including the date of termination of this Agreement.

5
<PAGE>

4. NOTICES. All notices, mailings and communications relative to this
Agreement shall be in writing and shall be personally delivered and receipted,
telecopied or sent by facsimile, sent by a nationally recognized overnight
courier service, or delivered by registered U.S. mail, proper postage prepaid,
return receipt requested, and in any such event delivered and addressed to the
parties as follows:

If to FHC: First Healthcare Corporation
3300 Providian Center
Louisville, Kentucky 40202
Attention:
----------------------

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention:
----------------------

5. BINDING EFFECT. All of the terms, conditions, covenants, stipulations
and agreements to be performed by any of the parties hereto shall be binding
upon their respective successors, legal representatives and assigns.

6. VIOLATION OF LAW. The parties hereto hereby agree that should it ever
be determined that this Agreement violates any law, rule, regulation or order,
this Agreement shall immediately be deemed null and void and neither party shall
have any further obligations hereunder whatsoever.

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

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

("FHC")

ATRIA COMMUNITIES, INC.

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

("Atria")

6
<PAGE>
VALLEY MANOR APARTMENTS
#437

SERVICES AGREEMENT
------------------

RECITALS:

A. Atria is the owner and operator of the assisted living\retirement
community known as Valley Manor Apartments located at 5545 East Lee Street,
Tucson, Arizona (the "ALF").

B. FHC is the owner and operator of the skilled nursing home facility
known as Valley House Care and Rehabilitation Center located at 5545 East Lee
Street, Tucson, Arizona (the "SNF").

C. FHC provides certain services to Atria in connection with the operation
of the ALF.

D. Atria and FHC now desire to set forth their agreement with respect to
the services provided by FHC to Atria and the ALF.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. EMERGENCY CALL SYSTEM. FHC agrees to permit Atria to use the emergency
call system maintained by FHC with respect to the SNF. Atria agrees to pay to
FHC $200.00 per month in consideration for Atria's use of FHC's emergency call
system.

2. TERM. This Agreement may be canceled by either party upon 90 days
prior written notice to the other party. Upon such cancellation this Agreement
shall terminate and the parties shall have no further obligations or duties
hereunder except for Atria's obligation to pay for all services provided by FHC
through and including the date of termination of this Agreement.

If to FHC: First Healthcare Corporation
3300 Providian Center
Louisville, Kentucky 40202
Attention:
--------------------

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention:
-------------------

7
<PAGE>
VALLEY MANOR APARTMENTS
#437

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

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

("FHC")

ATRIA COMMUNITIES, INC.

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

("Atria")

8
<PAGE>

THE GREENS
#589

SERVICES AGREEMENT
------------------

This Services Agreement (this "Agreement") is made and entered into
this __ of ___________, 1996 by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria") and FIRST HEALTHCARE CORPORATION, a Delaware corporation
(the "FHC").

RECITALS:

A. Atria is the owner and operator of the retirement community known as
The Greens located at Route 10 Lyme Road, Hanover, New Hampshire (the
"Community").

B. FHC is the owner and operator of the skilled nursing home facility
known as Hanover Terrace Healthcare located at Lyme Road, Hanover, New Hampshire
(the "SNF").

C. FHC provides certain services to Atria in connection with the operation
of the Community.

D. Atria and FHC now desire to set forth their agreement with respect to
the services provided by FHC to Atria and the Community.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

2. MISCELLANEOUS SERVICES. FHC agrees to provide to Atria, as required and
requested from time to time by Atria (the "Miscellaneous Services") (a) services
and support to maintain and repair the Community, (b) marketing services and
support, (c) general offices services and support, and (d) and housekeeping
services and support. Atria shall pay for or supply all materials consumed or
used in the rendition of the Miscellaneous Services. Atria agrees to pay a
proportionate part of the salary, wages and/or benefits of each employee of FHC
that provides Miscellaneous Services to Atria. All Miscellaneous Services shall
be provided at times and upon such schedules as mutually agreed to from time to
time by Atria and FHC. FHC shall send an invoice to Atria each month for the
Miscellaneous Services for the prior month. Atria agrees to pay any such invoice
within 10 days of its receipt of such invoice.

3. TERM. This Agreement may be canceled by either party upon 90 days prior
written notice to the other party. Upon such cancellation this Agreement shall
terminate and the parties shall have no further obligations or duties hereunder
except for Atria's obligation to pay for all services provided by FHC through
and including the date of termination of this Agreement.

<PAGE>

THE GREENS
#589

If to FHC: First Healthcare Corporation
3300 Providian Center
Louisville, Kentucky 40202
Attention: ____________________

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention: ______________

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

By:__________________________

Title:____________________

("FHC")

ATRIA COMMUNITIES, INC.

By:__________________________

Title:____________________

("Atria")

<PAGE>

HERITAGE AT WILDWOOD
#616

SERVICES AGREEMENT
------------------

This Services Agreement (this "Agreement") is made and entered into this __
of ___________, 1996 by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria") and NATIONWIDE CARE, INC., an Indiana corporation (the
"Nationwide").

RECITALS:

A. Atria is the owner and operator of the assisted living\retirement
facility known as Heritage at Wildwood located at 7301 East 16th Street,
Indianapolis, Indiana (the "ALF").

B. Nationwide is the owner and operator of the skilled nursing home
facility known as Wildwood Health Care Center located at 7301 East 16th Street,
Indianapolis, Indiana (the "SNF").

C. Nationwide provides certain services to Atria in connection with the
operation of the ALF.

D. Atria and Nationwide now desire to set forth their agreement with
respect to the services provided by Nationwide to Atria and the ALF.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. MEALS. Nationwide agrees to prepare and provide all meals to be
served by Atria at the ALF. The menu and the schedule for the preparation and
delivery of such meals shall be mutually agreed to from time to time by
Nationwide and Atria. Atria shall be responsible for notifying Nationwide on
timely basis before each meal of the number of residents to be served at the
next meal to be served. Atria agrees to pay to Nationwide for all costs and
expenses for the preparation of such meals, including, without limitation, the
costs and expense of all products consumed in the preparation of such meals and
the labor costs for the preparation of each such meal. Nationwide shall send an
invoice to Atria each month for the meal costs for the prior month. Atria
agrees to pay any such invoice within 10 days of its receipt of such invoice.

2. MISCELLANEOUS SERVICES. Nationwide agrees to provide to Atria, as
required and requested from time to time by Atria (the "Miscellaneous Services")
(a) services and support to maintain and repair the ALF, and (b) general
offices services and support. Atria shall pay for or supply all materials
consumed or used in the rendition of the Miscellaneous Services. Atria agrees
to pay a proportionate part of the salary, wages and/or benefits of each
employee of Nationwide that provides Miscellaneous Services to Atria. All
Miscellaneous Services shall be provided at times and upon such schedules as
mutually agreed to from time to time by Atria and Nationwide. Nationwide shall
send an invoice to Atria each month for the Miscellaneous Services for the prior
month. Atria agrees to pay any such invoice within 10 days of its receipt of
such invoice.

3. TERM. This Agreement may be canceled by either party upon 90 days
prior written notice to the other party. Upon such cancellation this Agreement
shall terminate and the parties shall have no further obligations or duties
hereunder except for Atria's obligation to pay for all services provided by
Nationwide through and including the date of termination of this Agreement.

4. NOTICES. All notices, mailings and communications relative to this
Agreement shall be in writing and shall be personally delivered and receipted,
telecopied or sent by facsimile, sent by a

<PAGE>

HERITAGE AT WILDWOOD
#616

nationally recognized overnight courier service, or delivered by registered U.S.
mail, proper postage prepaid, return receipt requested, and in any such event
delivered and addressed to the parties as follows:

If to Nationwide: Nationwide Care, Inc.
3300 Providian Center
Louisville, Kentucky 40202
Attention: ____________________

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention: ______________

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

NATIONWIDE CARE, INC.

By:__________________________

Title:____________________

("Nationwide")

ATRIA COMMUNITIES, INC.

By:__________________________

Title:____________________

("Atria")

<PAGE>

VILLA CAMPANA
#852

SERVICES AGREEMENT
------------------

This Services Agreement (this "Agreement") is made and entered into
this __ of ___________, 1996 by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria") and FIRST HEALTHCARE CORPORATION, a Delaware corporation
(the "FHC").

RECITALS:

A. Atria is the owner and operator of the retirement communitey known as
Villa Campana Retirement Apartments located in Tucson Arizona (the "Community").

B. FHC is the owner and operator of the skilled nursing home facility known
as Villa Campana Health Care Center located in Tucson, Arizona (the "SNF").

C. FHC provides certain services to Atria in connection with the operation
of the Community.

D. Atria and FHC now desire to set forth their agreement with respect to
the services provided by FHC to Atria and the Community.

NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

2. MISCELLANEOUS SERVICES. FHC agrees to provide to Atria, as required and
requested from time to time by Atria, dishwashing services and support. Atria
agrees to pay a proportionate part of the salary, wages and/or benefits of each
employee of FHC that provides dishwashing services to Atria. FHC shall send an
invoice to Atria each month for the dishwashing services for the prior month.
Atria agrees to pay any such invoice within 10 days of its receipt of such
invoice.

3. TELEPHONE SYSTEM. FHC and Atria both acknowledge agree that the SNF and
the Community both utilize the same telephone system. Both parties agree to
continue to jointly use and enjoy the same telephone system. FHC agrees to pay
40% of the bills for such telephone system and Atria shall pay 60% of such
bills. FHC shall pay its percentage of the telephone bills to Atria and Atria
shall be responsible for paying the telephone provider. Both parties agree to
pay their portion of the telephone bills on a timely basis.

4. TERM. This Agreement may be canceled by either party upon 90 days prior
written notice to the other party. Upon such cancellation this Agreement shall
terminate and the parties shall
13
<PAGE>

VILLA CAMPANA
#852

have no further obligations or duties hereunder except for Atria's obligation to
pay for all services provided by FHC through and including the date of
termination of this Agreement.

5. NOTICES. All notices, mailings and communications relative to this
Agreement shall be in writing and shall be personally delivered and receipted,
telecopied or sent by facsimile, sent by a nationally recognized overnight
courier service, or delivered by registered U.S. mail, proper postage prepaid,
return receipt requested, and in any such event delivered and addressed to the
parties as follows:

If to FHC: First Healthcare Corporation
3300 Providian Center
Louisville, Kentucky 40202
Attention: ____________________

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention: ______________

6. BINDING EFFECT. All of the terms, conditions, covenants, stipulations
and agreements to be performed by any of the parties hereto shall be binding
upon their respective successors, legal representatives and assigns.

7. VIOLATION OF LAW. The parties hereto hereby agree that should it ever
be determined that this Agreement violates any law, rule, regulation or order,
this Agreement shall immediately be deemed null and void and neither party shall
have any further obligations hereunder whatsoever.

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

FIRST HEALTHCARE CORPORATION

By:__________________________

Title:_______________________

("FHC")

ATRIA COMMUNITIES, INC.

By:__________________________

Title:_______________________

("Atria")

<PAGE>

EXHIBIT 10.10

SUBLEASE AGREEMENT
------------------

THIS SUBLEASE AGREEMENT (this "Agreement") is made and entered into as of
the ____ day of _______, 1996, by and between ATRIA COMMUNITIES, INC., a
Delaware corporation with principal office and place of business in Louisville,
Kentucky ("Atria") and VENCOR, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("Vencor").

PRELIMINARY STATEMENT:
----------------------

A. Pursuant to that certain Lease dated March 13, 1996, by and between
Northwestern National Life Insurance Company, a Minnesota corporation, as
Lessor (the "Lessor"), and Vencor, as lessor (the "Lease"), the Lessor leased to
Vencor the second and third floors of the building commonly known as the 515
Building located at 515 West Market Street, Louisville, Kentucky.

B. Vencor has agreed to sublease to Atria 4,000 square feet of the
Premises.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the parties hereto agree as follows:

1. DEMISE. Vencor hereby sublets to Atria, and Atria hereby sublets from
Vencor, 4,000 square feet on the second floor of the Premises (the "Subleased
Premises"). Except for such terms and conditions as are specifically set forth
in this agreement, the subletting of the Premises by Vencor to Atria shall be on
the same terms and conditions as are contained in the Lease, all of which terms
and conditions are hereby incorporated by reference herein and made a part
hereof. All capitalized terms used herein which are not defined herein shall
have the meaning assigned thereto in the Lease.

2. Term; Renewals. The term of this Agreement shall be coterminous with
the term of the Lease; provided that Atria or Vencor may terminate this
Agreement at any time upon 60 days prior written notice to the other party
hereunder. In the event Vencor shall exercise its option to terminate the Lease
under Section 33

<PAGE>

thereof, this Sublease shall terminate and Atria shall pay its prorata share of
the Termination Fee payable to the Landlord under Section 33.

3. RENT. During the term of this Agreement, Atria shall pay to Vencor as
monthly rent for the Subleased Premises 1/12th of the product of (i) the rental
rate per square foot of Rentable Area of the Subleased premises per year as set
forth in the Lease, times (ii) the number of square feet of Rentable area of the
Subleased Premises (4,000). The Rent shall be paid in advance on the first (1st)
day of each month during the term of this Agreement. If this Agreement commences
or terminates on a day other than the first (1st) day of the calendar month,
Rent shall be prorated on a daily basis. Atria further agrees to pay its pro
rata share of Operating Costs Increases and all other amounts payable to Lessor
by Vencor under the Lease. Atria's pro rata share of such Operating Costs
Increases and other amounts shall be paid by Atria to Vencor as and when due
under the terms of the Lease. Atria's pro rata share shall be determined by
dividing the square footage of the Sublease Premises by the total square footage
of the Premises.

4. ASSUMPTION OF OBLIGATIONS BY ATRIA.

(a) ASSUMPTION. Atria hereby assumes and agrees to perform when
due, all of the duties, obligations, liabilities and covenants with respect to
the Subleased Premises binding upon Vencor under the Lease from and after the
date of this Agreement, including, but not limited to, the payment of Base Rent

(b) INCORPORATION OF LEASE. Insofar as the provisions of the Lease
do not conflict with specific provisions herein contained, they and each of them
are incorporated into this Agreement as fully as if completely rewritten herein,
and Atria agrees to be bound by all of the terms of the Lease (to the extent of
this Agreement) and to assume and perform all of the obligations and
responsibilities that Vencor is to perform under the Lease with respect to the
Subleased Premises, and to indemnify and hold harmless Vencor from any claim or
liability under the Lease with respect to Atria's use, occupancy and enjoyment
of the Subleased Premises.

<PAGE>

5. LIABILITY AND INDEMNITY. Atria agrees that it will indemnify and hold
harmless Vencor from and against all suits, claims, and actions of every kind by
reason of any breach, violation, or nonperformance of any term or condition on
the part of Atria. Additionally, Atria agrees to indemnify and hold Vencor
harmless from and against all claims, actions, damages, liabilities and
expenses asserted against Vencor on account of injuries to persons (including
death) or damage to property when and to the extent that any such damage or
injury is not attributable to the negligence of Vencor or Lessor, and which may
be caused by an act or omission of Atria or any of its agents, employees,
contractors, invitees (while such invitees are on the Premises or the Subleased
Premises), or of any other persons entering upon the Premises or the Subleased
Premises under or with the express or implied invitation of Atria, or if any
such injury or damage may in any other way arise from or out of the occupancy or
use by Atria, its agents, employees and invitees of the Subleased Premises.

6. NO RELEASE OF VENCOR. Notwithstanding the subletting to Atria or the
assumption described in this Agreement, nothing contained herein shall be
construed to release or discharge Vencor in any way from the performance of any
of its duties, obligations, liabilities and covenants to Lessor under the Lease.

7. REPRESENTATIONS AND WARRANTIES OF VENCOR. Vencor hereby represents
and warrants to Atria as follows:

(a) To its knowledge, the copy of the Lease attached hereto and
made a part hereof by this reference as EXHIBIT A constitutes the entire written
agreement between Lessor and Vencor with respect to the Premises, and there are
no other written riders, amendments, modifications or supplements thereto
presently in effect;

(b) The Lease is in full force and effect in accordance with its
terms; and

(c) The execution and delivery of this Agreement by Vencor has been
duly authorized and approved by all requisite corporate action.

<PAGE>

8. Assignment and Subletting. No assignment of this Agreement or subletting
of the Subleased Premises or any part thereof shall be made by Atria without the
prior written consent of Vencor and Lessor. In the event of any such assignment
or sublease, Atria shall always remain primarily liable as a principal and not
as a guarantor for the payment of all obligations and liabilities due Vencor,
under the Lease and for compliance with and performance of all of the covenants
and conditions of this Agreement and the Lease, on the part of Atria to be
performed.

9. Representations and Warranties of Atria. Atria hereby represents and
warrants to Vencor that the execution and delivery of this Agreement by Atria
has been duly authorized and approved by all requisite corporate action.

10. Defaults; Remedies.

(a) Defaults by Atria. Each of the following shall constitute an
"Event of Default" hereunder.

(i) if Atria fails to pay any rental payment within five (5) days
of its due date; or

(ii) if Atria shall fail to observe or perform any other
liability or obligation to be performed by Atria hereunder or under the
Lease; or

(iii) if Atria performs or fails to perform any event which
constitutes a "default" by Vencor under the Lease.

(b) Remedies. Upon the occurrence of an Event of Default hereunder,
Vencor shall have the same rights and remedies under this Agreement as Lessor
has under the Lease in the event of a default by Vencor under the Lease.

11. Notices. All notices, mailings and communications relative to this
Agreement shall be in writing and shall be personally delivered and receipted,
telecopied or sent by facsimile, sent by a nationally recognized overnight
courier service, or delivered by registered U.S. mail, proper postage prepaid,
return receipt requested, and in any such event delivered and addressed to the
parties as follows:

4
<PAGE>

If to Vencor: Vencor, Inc.
3300 Providian Center
Suite 200
Louisville, Kentucky 40202
Attention: Director of Finance

If to Atria: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
Attention: Timothy Wesley

12. Binding Effect. All of the terms, conditions, covenants, stipulations
and agreements to be performed by any of the parties hereto shall be binding
upon their respective successors, legal representatives and assigns.

IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first above written.

VENCOR, INC.

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

("Vencor")

ATRIA COMMUNITIES, INC.

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

5
<PAGE>

("Atria")

<PAGE>
Exhibit 10.11

VOTING AGREEMENT
----------------

This Voting Agreement ("Agreement") is made and entered into as of this __
day of _____, 1996, by and between ATRIA COMMUNITIES, INC., a Delaware
corporation ("Atria"), and VENCOR, INC., a Delaware corporation ("Vencor").

RECITALS:
--------

WHEREAS, Atria has filed with the Securities Exchange Commission a Form S-1
Registration Statement (the "Offering");

WHEREAS, following the completion of the Offering, Vencor will own 66.2% of
the outstanding Common Stock, par value $.10 per share of Vencor (63.1% if the
Underwriters' over-allotment option is exercised in full); and

WHEREAS, in connection with the Offering, Vencor and Atria have agreed to
enter into this Agreement.

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

1. After the completion of the Offering, Vencor agrees that it will vote
all of its shares of Common Stock at any meeting at which directors are elected
in favor of that number of independent directors who are not affiliates of
Vencor or employees of Vencor ("Independent Directors") so that if such
directors were elected there would be at least two Independent Directors who are
members of the Board of Directors of Atria.

2. This Agreement will automatically terminate upon the earlier of (i)
that date upon which Vencor beneficially owns less than 30% of the Common Stock
of Atria or (ii) five years from the date of this Agreement.

3. Miscellaneous:

a. This Agreement may be modified or amended from time to time
only by a written instrument executed by the parties hereto.

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

c. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky,
without regard to its conflicts of law rule.
<PAGE>

d. This Agreement embodies the entire understanding between the
parties hereto with respect to subject matters covered
hereby and supersedes any prior agreement or understanding
between the parties with respect to such matters.

e. This Agreement may be executed in multiple counterpart
copies, each of which shall be considered an original and
all of which shall constitute one and the same instrument.

f. This Agreement is not assignable.

* * * * * *

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

ATRIA COMMUNITIES, INC.
A Delaware Corporation

By:__________________________________
Title:_______________________________

VENCOR, INC.
A Delaware Corporation

By:___________________________________
Title:________________________________

Re: Voting Agreement

<PAGE>

Exhibit 10.12

LEASE
-----

THIS LEASE ("LEASE") is made and entered into as of the ____ day of
__________, 1996, by and between (i) FIRST HEALTHCARE CORPORATION, a Delaware
corporation ("LESSOR"), and (ii) ATRIA COMMUNITIES, INC., a Delaware corporation
("LESSEE").

RECITALS:

A. Lessor owns the real property located in Redding, California,
more particularly described on EXHIBIT A attached hereto and made a part hereof
("REAL PROPERTY").

B. Lessor desires to lease and ultimately convey the Real Property
to Lessee, and Lessee desires to lease and ultimately acquire the Real Property
from Lessor.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:

1. LEASE OF REAL PROPERTY. For the term, at the rent and
otherwise upon the terms, conditions and provisions hereinafter contained,
Lessor hereby leases unto Lessee, and Lessee hereby leases from Lessor, the Real
Property.

2. TERM. This Lease shall be for a term of 99 years
commencing as of the date hereof and ending on the ninety-ninth anniversary of
the date hereof, unless sooner terminated as hereinafter provided.

3. RENT. Lessee hereby covenants and agrees to pay to
Lessor as rent for the Real Property during the Term hereof an amount equal to
One Dollar ($1.00) per year.

4. DELIVERY AND ACCEPTANCE. Lessee hereby acknowledges
that Lessor has delivered the Real Property to Lessee and that Lessee accepts
the Real Property in its current condition. The Real Property leased hereby is
being leased "AS IS" and Lessor specifically disclaims any warranties with
respect to the Real Property including, but not by way of limitation, all
express or implied warranties of quality, merchantability or fitness for a
particular purpose.

5. QUIET ENJOYMENT. Lessor hereby covenants and agrees to
and with Lessee that if Lessee shall not
<PAGE>

be in default hereunder, Lessee shall have, at all times during the Term hereof,
the peaceable and quiet enjoyment and possession of the Real Property without
any manner of hinderance from Lessor or any person or persons lawfully claiming
the Real Property.

6. IMPROVEMENTS. Lessee shall be entitled to construct
such improvements on the Real Property as Lessee, in its sole discretion, shall
deem appropriate.

7. INSURANCE

(a) In addition to the rent specified herein, Lessee will also
carry and maintain, at all times, at its sole cost and expense, public liability
insurance with respect to the Real Property and the improvements thereon, in
such reasonable amount as Lessor shall require. Lessor shall be named a party
insured by such policy.

(b) At the request of Lessor, Lessee shall deliver to Lessor a
certificate of insurance by or on behalf of each insurer stating the coverage,
named insurers and limits of each such policy.

(c) If Lessee fails to maintain any of the insurance required to
be maintained by it for the benefit of Lessor, Lessor shall have the right, in
addition to all other rights available to it, but not the obligation, to
purchase such insurance for its own benefit and the same shall be immediately
due and owing as additional rental hereunder by Lessee to Lessor, together with
interest thereon at the rate of 18% per annum.

8. RISK OF LOSS. All risk of loss or damage to the Real Property
shall be borne by Lessee.

9. TAXES. In addition to the rent specified herein, Lessee agrees to
pay when due, at its sole cost and expense, all taxes and assessments now or
hereafter imposed by any Federal, state or local governmental authority or
agency upon the Real Property, upon this Lease or upon the use or operation of
the Real Property, regardless of whether assessed to Lessor or Lessee. If it is
not possible to obtain a separate tax assessment with respect to the Real
Property, Lessor and Lessee shall equitably determine the taxes attributable to
the Real Property and Lessee shall pay such amount to Lessor which shall pay the
tax to the appropriate taxing authority. Upon written demand of

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<PAGE>

Lessor, will deliver written receipt evidencing payment of such taxes to Lessor.
If Lessee fails to pay any of said taxes when due, such failure shall be a
default hereunder and Lessor shall have the right, in addition to all other
rights and remedies available to it, to pay such taxes on behalf of Lessee and
the same shall be immediately due and owing as additional rental hereunder by
Lessee to Lessor, together with interest thereon at the rate of 18% per annum.

10. UTILITIES. In addition to the rent provided for herein, Lessee
hereby agrees to pay for all heat, water, sewer service charges, gas,
electricity and other public utilities used in or about the Real Property, and
all such utilities shall be metered to the Real Property in Lessee's name.
Lessee has inspected the Real Property with respect to the availability of all
such utilities and is satisfied with the same. Lessee shall be solely
responsible for running any additional utility lines, if necessary, to the Real
Property and shall bear all costs related thereto without reimbursement from
Lessor.

11. NO LIABILITY. Lessor shall not be liable to Lessee for loss of
use of the Real Property or interruption of Lessee's business for any causes
whatsoever, and any such loss of use shall not relieve Lessee from the
obligation to pay the rental provided for herein at the time specified herein.

12. OPERATION IN CONFORMITY WITH LAWS. Lessee shall use and operate
the Real Property in strict conformity with all of the laws, rules, orders,
ordinances and regulations of the United States and all applicable Federal,
state and local agencies and authorities, regarding the use, operation and
possession of the Real Property. Lessee hereby agrees to indemnify Lessor for,
and hold Lessor harmless from, any and all liabilities, claims, suits, actions,
damages, demands, penalties, fines and forfeitures which may be asserted against
Lessor or the Real Property arising out of, or resulting from, any violation of
any of the aforesaid laws, rules, orders, ordinances and regulations, or out of
Lessee's use or operation of the Real Property.

13. ASSIGNMENT OR SUBLETTING. Lessee may assign this Lease or sublet
or rent out the Real Property, only with the prior written consent of Lessor,
which consent will not be unreasonably withheld.

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<PAGE>

14. LIENS. Lessee hereby agrees that it will not place, or permit
the placement of, any liens or encumbrances on the Real Property except with the
prior written consent of Lessor, which consent will not be unreasonably
withheld.

15. ACQUISITION OF REAL PROPERTY. Lessor hereby agrees to convey to
Lessee, and Lessee hereby agrees to acquire from Lessor, the Real Property at
such time as Lessor is legally permitted to convey the Real Property to Lessee
under all applicable zoning laws and ordinances. In exchange for the conveyance
of the Real Property to Lessee, Lessee shall pay to Lessor the sum of One Dollar
($1.00). Lessor hereby agrees to use its best efforts to obtain the requisite
zoning to permit the conveyance provided for above.

16. FINANCIAL REPORTING AND TAX CHARACTERIZATION. Lessor and Lessee
intend that this Lease be treated for financial reporting and Federal income tax
purposes as a transfer by Lessor to Lessee of the Real Property and agree that
they will not take any position which is inconsistent with the foregoing.

17. DEFAULT. In the event: (i) Lessee defaults in the performance of
any of the terms, conditions, covenants or agreements herein contained and such
default is not cured within 30 days after the giving of notice by Lessor to
Lessee of such default, (ii) of (a) the entry of a decree or order for relief by
a court having jurisdiction in the premises in respect of Lessee in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, or appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessor or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days, or (b) the commencement by Lessee of
a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the appointment of, or
taking possession by, a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Lessee or for any substantial part
of its property, or the making by it of any assignment for the benefit of
creditors, or the failure of Lessee generally to pay its debts as such debts
become due, or the taking of corporate action by Lessee in furtherance

-4-
<PAGE>

of any of the foregoing, or (iii) any execution, attachment or other writ shall
be levied upon the Real Property, then, in such event, all of which acts or
events shall be considered as defaults hereunder, Lessor, in addition to all
other rights available to it at law or in equity, shall have the following
remedies:

(a) Lessor may institute a suit to collect any and all sums due
Lessor by virtue of the provisions of this Lease, or for any and all damages
that may accrue by virtue of Lessee's breach of this Lease, or both.

(b) Lessor may sue to restrain by injunction any violation or
threatened violation of the terms, covenants, conditions or provisions of this
Lease.

(c) Lessor may, upon notice to Lessee, terminate this Lease and
obtain possession of the Real Property with or without process of law. Lessee
shall be responsible for and pay all costs of Lessor in connection with
obtaining possession of the Real Property. Lessee hereby waives any claim for
damages arising out of the taking of the Real Property by Lessor in such event.

All remedies of Lessor provided for herein shall be cumulative and shall be in
addition to those remedies provided by law or at equity.

18. COMPLIANCE WITH LAW.

(a) Neither Lessee nor Lessor shall have any obligation to refer
any resident or patients, as the case may be, of either of them or any other
person to Lessee or Lessor for the provision of any service or item of any kind.

(b) If Lessee or Lessor shall determine upon advice of counsel
that the continuation of this Lease will likely be deemed to be a violation of
any applicable Federal or state law regarding fraud and abuse, referral
prohibitions or any similar matter, either party, upon receiving such advice of
counsel, may at any time give the other party written notice of such advice and
if, after consultation, the parties have not determined to their reasonable
satisfaction that no such violation exists and the parties have not amended this
Lease to remove that risk to the other party's reasonable satisfaction, then

-5-
<PAGE>

either party may terminate this Lease effective as of the date 60 days after its
initial written notice to the other party.

19. NOTICES. All notices and other communications required or
permitted hereunder shall be sufficiently given if in writing and personally
delivered against a written receipt, if delivered to a reputable express
messenger service (such as Federal Express, UPS or DHL Carrier) for overnight
delivered, when transmitted by confirmed telephone facsimile (fax) or sent by
registered, express or certified U.S. mail, postage prepaid, addressed as
follows:

IF TO LESSOR: First Healthcare Corporation
c/o Vencor, Inc.
3300 Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
(Fax) 502-596-4075
Attention: General Counsel

IF TO LESSEE: Atria Communities, Inc.
515 West Market Street
Louisville, Kentucky 40202
(Fax) 502-596-4160
Attention: General Counsel

or to such other address as either party hereto shall furnish to the other in
writing. Notices shall be deemed given when personally delivered, when
delivered to an express messenger service, when transmitted by confirmed fax or
when deposited in the U.S. mail in accordance with the foregoing provisions.
However, the time period in which a response to any such notice, demand or
request must be given shall commence to run from the date of personal delivery,
the date of delivery by a reputable messenger service, the date on the
confirmation of a fax, or the date on the return receipt, as applicable.

20. BINDING AGREEMENT. This Lease shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.

21. CAPTIONS; SECTION REFERENCES. The captions and section headings
used herein are for convenience only, shall not be deemed part of this Lease and
shall not in any way restrict or modify the context or substance of any
paragraph hereof. All

-6-
<PAGE>

references herein to Sections shall refer to Sections of this Lease unless the
context clearly requires otherwise.

22. ENTIRE AGREEMENT. This Lease contains the entire understanding
between Lessor and Lessee with respect to the Real Property, and supersedes all
prior and contemporaneous understandings, both oral and written, between and
among them respecting the subject matter hereof.

23. WAIVER. The failure on the part of either party to insist in any
instance upon the strict observance by the other of any provision of this Lease
shall not be construed as a waiver of that or any other provision of this Lease.

24. APPLICABLE LAW. This Lease shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts without regard
to its conflict of laws rules.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first above written.

LESSOR:

FIRST HEALTHCARE CORPORATION

By:________________________________

Title:_____________________________

LESSEE:

ATRIA COMMUNITIES, INC.

By:________________________________

Title:_____________________________

-7-
<PAGE>

EXHIBIT 'A'

All that portion of Parcel 1 of LS 58-84 as shown on the Map for Humboldt
Financial Services filed in Book 24 of Parcel Maps at Page 129, Shasta County
Records, in the City of Redding, Shasta County California, described as follows:

Beginning at the southwest corner of Parcel 2 as shown on said map, thence,
along the northerly right-of-way line of Quartz Hill Road, north
71(degrees) 18'29" West 19.67 feet; thence, northerly, along the arc of a
tangent, 252.00 foot radius curve to the right, having a central angle of
90 (degrees) 44'25", an arc distance of 399.10 feet; thence, North
19(degrees) 25'26" East 308.44 feet; thence, leaving said right-of-way
line, South 86(degrees) 23'25" East 179.42 feet; thence, South 3(degrees)
45'24" West 190.65 feet; thence South 78(degrees) 29'51" East 45.65 feet;
thence, South 18(degrees) 41'31" West 67.85 feet, to the northwest corner
of said Parcel 2; thence, along the line common to said Parcels 1 and 2,
South 18(degrees) 41'31" West 364.00 feet, to the point of beginning.

Containing 3.09 acres, more or less.

-8-

<PAGE>
Exhibit 10.14

TERM PROMISSORY NOTE
--------------------

$14,000,000.00 AUGUST __, 1996
LOUISVILLE, KENTUCKY

FOR VALUE RECEIVED, HILLHAVEN PROPERTIES, LTD., an Oregon corporation
("Maker"), promises to pay, on or before the final maturity date stated below,
to the order of VENCOR, INC., a Delaware corporation ("Payee"), its successors
and assigns, at 3300 Providian Center, Louisville, Kentucky 40202 or at such
other place as the holder hereof may from time to time designate in writing, the
principal sum of $14,000,000.00, in lawful money of the United States, together
with interest on the outstanding principal balance thereof at the rate described
below (from time to time the "Interest Rate"). If an "Event of Default" (as
described below) shall exist, the rate of interest payable upon the outstanding
principal balance of this Note shall, at the option of Payee, increase to a rate
("Default Rate") equal to two percent (2%) in excess of the Interest Rate and
shall continue at such rate during the period that such Event of Default shall
exist.

1. INTEREST RATE. The principal balance of this Note shall bear interest
at a rate per annum equal to one percent (1%) over the Prime Rate from time to
time in effect. The "Prime Rate" as used herein, on any day, shall mean the
interest rate per annum most recently designated and announced by National City
Bank of Kentucky ("Bank") from time to time as its Prime Rate in effect at its
principal office. The Prime Rate is not necessarily the best or lowest rate
offered by Bank. The interest rate which the principal balance of this Note
bears shall be adjusted from time to time on the same day the Prime Rate is
changed by Bank. All interest upon sums owing under this Note shall be computed
over an assumed year of three hundred sixty (360) days and over the actual
number of days elapsed.

2. PAYMENT OF INTEREST. Interest shall be payable in quarterly
installments, the first of which being due and payable on the first day of the
first of January, April, June or September following the date of this Note and
subsequent installments being due and payable on the first day of each calendar
quarter (based upon the months just named) thereafter until this Note is paid in
full.

3. PAYMENT OF PRINCIPAL; APPLICATION OF PAYMENTS . The principal balance
of this Note, if not sooner paid, shall be repaid to Payee in its entirety on
the first anniversary of the date of this Note unless the maturity date of this
Note shall be extended by Payee in its sole discretion. This Note may be not be
prepaid in whole or in part at any time prior to the expiration of six months
from the date of its execution. Thereafter, this Note may be prepaid in whole or
in part without premium or penalty.

Payments received by Payee in respect of this Note shall be applied first to
expenses incurred by Payee in collecting this Note, then to accrued delinquency
or other charges hereof, then to accrued interest due on the principal balance
of this Note and then to the principal balance of this Note.

4. LATE PAYMENT CHARGE. In the event interest on this Note is not paid on
or before the 10th of the month in which it is due, a late charge of 5% of the
amount of such payment so overdue may be charged by the holder hereof.

5. EVENTS OF DEFAULT. Upon the occurrence of any of the events described
below ("Event of Default"), Payee may elect to declare this Note and all other
obligations of Maker to Payee hereunder to be in default and require the
immediate payment of the entire unpaid principal balance of this Note and all
other such obligations plus accrued interest and any delinquency or other
charges. The Events of Default are:
<PAGE>

1) The failure to pay any installment or payment due in respect of this
Note when due and the expiration of ten days thereafter; or

2) A default by Maker under the terms of any loan or other financing
arrangement to which Maker is a party pursuant to the terms of which Maker is
directly, immediately or contingently liable for the payment of any sum in
excess of $5,000,000.00; or

3) The dissolution or winding-up of the business of Maker; or

4) The failure of Maker at any time prior to the maturity date of this
Note or any extension thereof to maintain a net worth (based upon generally
accepted accounting principles consistently applied) of at least $50,000,000.00.

5) The failure to pay any other obligation to Payee under other
indebtedness of Maker to Payee; or

6) The filing of any future petition by or against Maker under any
bankruptcy, receivership, insolvency or similar laws relating to relief for
debtors.

Maker and all persons now or hereafter liable, whether primarily or
secondarily, for the whole or any part of the indebtedness evidenced by this
Note jointly and severally:

(a) agree to remain and continue bound for the payment of the
principal of, and interest on, this Note notwithstanding any extensions of the
time of the payment of said principal or interest, or any changes in the amounts
to be paid under and by virtue of the obligation to pay provided for in this
Note, or any changes by way of release or surrender of any collateral, real or
personal, held as security for the payment of this Note, and waive all and every
kind of notice of such extensions or changes, and agree that same may be made
without the joinder of any such persons;

(b) waive presentment, notice of dishonor, protest, notice of protest
and diligence in collection, and all exemptions, whether homestead or otherwise,
to which they or any of them may now or hereafter be entitled under the laws of
the Commonwealth of Kentucky or of any other state;

(c) agree, upon default, to pay all costs of collecting, securing or
attempting to collect or secure this Note, including a reasonable attorney's
fee, whether same be collected or secured by suit or otherwise, providing the
collection of such costs and fees are permitted by applicable law.

6. SAVINGS CLAUSE. None of the terms and provisions contained in this
Note, or any other document or instrument now or hereafter securing the
indebtedness evidenced hereby or related hereto shall ever be construed to
create a contract for the use, forbearance or detention of money requiring
payment of interest at a rate in excess of the maximum interest rate permitted
to be charged by the laws of the Commonwealth of Kentucky. Neither the Maker nor
any other party now or hereafter becoming liable for the payment of this Note
shall be liable for the payment of interest at a rate in excess of the maximum
interest rate that may be lawfully charged under the laws of the Commonwealth of
Kentucky, and the provisions of this paragraph shall control over all other
provisions hereof and of any other instrument executed in connection herewith or
executed to secure the indebtedness evidenced hereby which may be in apparent
conflict with this paragraph. In the event the holder shall collect monies which
are deemed to constitute payments in the nature of interest which would
otherwise increase the effective interest rate on this Note to a rate in excess
of that permitted to be charged by the laws of the Commonwealth of Kentucky, all
such sums deemed

-2-
<PAGE>

to constitute interest in excess of the maximum rate shall be refunded to the
undersigned in cash and the undersigned hereby agrees to accept such refund.

7. CERTAIN WAIVERS. Payee shall have the right, without notice, to deal
in any way and at any time with Maker, and to grant Maker an extension of time
for payment of this Note or any other indulgence or forbearance whatsoever, and
may release any collateral for the payment of this Note and/or modify the terms
of any agreement securing or relating hereto, and may release Maker, any
guarantor or accommodation party from liability for payment of this Note, in
every instance without the consent of Maker or any guarantor or accommodation
party, and without in any way affecting the liability of Maker hereunder or of
any guarantor or accommodation party, and without waiving any rights which Payee
may have under this Note, any agreements securing or relating hereto, or by law.

8. MISCELLANEOUS. If any provision, or portion thereof, of this Note, or
the application thereof to any persons or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Note, or the application of such
provision, or portion thereof, to any other person or circumstances, shall not
be affected thereby, and each provision of this Note shall be valid and
enforceable to the fullest extent permitted by law. In the event of any
inconsistency between the terms hereof and those of any instrument securing
payment hereof, the holder hereof shall have the sole option to elect which of
such provisions shall govern.

9. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky without regard to its
conflict of laws rules.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be
effective as of the date first above written.

HILLHAVEN PROPERTIES, LTD.,
an Oregon corporation

BY:_________________

ITS:________________

("Maker")

-3-

<PAGE>

Exhibit 10.15

MANAGEMENT AGREEMENT

This MANAGEMENT AGREEMENT (the "Agreement") dated March 30, 1995, between
Hillhaven Properties, Ltd., and Oregon corporation having a place of business in
Tacoma, Washington ("Manager"), and Fox Hill Village Homeowners Corporation, a
Massachusetts corporation having a place of business in Westwood, Massachusetts
("Owner")

WITNESSETH:

WHEREAS, Owner owns and operates a 356 unit retirement housing project
known as FOX HILL VILLAGE (the "Facility"); and

WHEREAS, Manager is a wholly-owned subsidiary of The Hillhaven
Corporation, a Nevada corporation ("Hillhaven") and is an experienced and
qualified manager in the field of retirement housing marketing and management;
and
WHEREAS, Owner desires to engage Manager, and Manager is willing, to
manage the Facility, pursuant to the terms and conditions set forth herein.

NOW THEREFORE, for and in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1. RETENTION OF MANAGER. Owner hereby retains Manager to provide
management services in connection with the Facility under the terms and
conditions set forth herein.

2. RESPONSIBILITIES OF MANAGER. During the Term, as defined below,
Manager shall provide the following management, consulting and advisory services
to Owner to connection with the operation of the Facility:

A. PERSONNEL.

1. FACILITY DIRECTOR. Subject to Owner's right of approval over
selection and retention, Manager shall select, employ and direct the performance
of the Facility Director, who shall be responsible for the operation of the
Facility and execution on a daily basis of policies established by Manager and
Owner in
<PAGE>

accordance with this Agreement. The Facility Director shall be an employee of
Manager but shall be paid out of the revenues of the Facility. Owner shall be
entitled to require Manager to remove the Facility Director from his position at
the Facility.

2. OTHER PERSONNEL. In accordance with the Facility's employee manual,
which has been approved by Owner, Manager shall recruit, select, train, promote,
direct and terminate the employment of all Facility personnel; establish the
salary levels, personnel policies and employee benefits with respect thereto;
and establish employee performance standards as needed during the Term to ensure
the efficient operation of all departments within and services offered by the
Facility. With the exception of the Facility Director, who shall be an employee
of Manager, the facility personnel shall be the employees of Owner.
Notwithstanding the foregoing, Manager shall be responsible for the payment of
employee payroll and payroll taxes out of Facility funds and the distribution of
employee income tax withholding forms at year end. Owner shall be entitled to
require Manager to remove any or all Facility personnel from their position(s)
at the Facility in accordance with applicable law.

B. OPERATIONAL POLICIES. Operational policies and procedures for the
Facility are in place and the Manager shall recommend changes therein from time
to time to Owner for approval.

C. REGULATORY COMPLIANCE. Manager shall obtain and maintain in the name
of Owner or Manager, as appropriate under applicable state law, and at the
expense of Owner, all operating licenses, permits, qualifications and approvals
from any applicable governmental or regulatory authority necessary for the
lawful operation of the Facility as a retirement housing project; provided,
however, that Manager shall not be obligated to obtain any license, permit,
qualification or approval to be obtained by The MGH Health Services Corporation,
a Massachusetts corporation ("MGH Services"), pursuant to that certain Agreement
dated as of January 1, 1995 between Owner and MGH Services, as amended from time
to time. Manager shall manage the operations of the Facility in compliance with
all applicable laws and regulations, and Manager shall notify Owner of any new
laws or regulations applicable to the Facility promptly upon Manager learning of
the same; provided, however, that Manager shall not be liable to Owner or any
other person or entity for any damage, cost, loss or expense resulting from
Owner's failure to comply with any law or regulation after notice thereof by
Manager.

D. QUALITY CONTROL. Manager shall evaluate all aspects of the Facility
operation, and shall implement and maintain quality

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<PAGE>

control programs designed to meet standards imposed by the Owner and appropriate
certifying, licensing and other regulatory agencies and to maintain a standard
of living in accordance with Owner's policies and resources available to the
Facility.

E. COMPLIANCE WITH GROUND LEASE. Manager shall take all necessary steps
to ensure that in the performance of its duties under this Agreement it complies
with the provisions of that certain Ground Lease between Fox Hill Realty Trust,
as Landlord, and Owner, as Tenant, as amended from time to time (the "Ground
Lease").

F. COORDINATION WITH WELLNESS CENTER TEAM. Manager shall coordinate its
services under this Agreement with those to be provided to the Facility and
Owner by the Wellness Center Team pursuant to that certain Wellness Center Team
Consulting Agreement dated as of January 1, 1995, by and between Owner and MGH
Services, as amended from time to time.

G. CAPITAL EQUIPMENT AND IMPROVEMENTS. Manager shall advise Owner as to
capital equipment and Facility improvements which are needed to maintain or
upgrade the quality of the Facility and said capital equipment, or to replace
obsolete or run-down capital equipment. Owner shall review and respond to
Manager's recommendations as expeditiously as possible. Manager shall not be
liable for any cost or liability which Owner may incur in the event Owner
disregards Manager's recommendations. Manager shall make all approved repairs,
replacements and maintenance within the budgetary limits set forth in the annual
capital budget prepared by the Facility Director and Owner's Finance Committee.
Notwithstanding any contrary provisions in this Section 2(G). Manager shall be
entitled, without Owner's consent, to make or commit Owner to make unbudgeted
expenditures and/or expenditures in excess of the Budget Threshold for the
purposes of emergency repairs involving manifest danger to persons or property
or required to avoid suspension of any necessary service at the Facility.
Manager shall notify Owner's President or any Board member of such emergency
repairs within 24 hours thereof.

H. MAINTENANCE AND REPAIR. Manager shall maintain the Facility in good
repair in accordance with the annual operating budget and local codes, in a
condition at all times acceptable to Owner, and shall arrange for such cleaning,
painting, decorating, plumbing, carpentry, grounds care and such other
maintenance and repair work as may be necessary to so maintain the Facility,

-3-
<PAGE>

subject to any limitations imposed by Owner in addition to those contained
herein.

I. SUPPLIES AND EQUIPMENT. Manager shall purchase supplies and equipment
needed to operate the Facility within the budgetary limits set forth in the
annual operating budget prepared by the Facility Director and Owner's Finance
Committee.

J. FINANCIAL SERVICES. Manager shall perform, direct, or cause the
performance of the following services subject to the review, approval and
direction of the Owner:

1. BOOKKEEPING AND ACCOUNTING. Manager shall provide bookkeeping and
accounting procedures necessary for the operation of the Facility and the
preparation of proper financial records. Bookkeeping and accounting procedures
and systems shall be in accordance with the operating capital and cash programs
approved by Owner's Finance Committee, which programs shall conform to generally
accepted accounting principles, consistently applied, and shall not materially
distort income or loss.

2. REPORTS. Manager shall prepare and provide to Owner any reasonable
operational information which may from time to time be specifically requested by
Owner, including any information needed to assist Owner in completing its tax
returns and in complying with any reporting obligations imposed by any parties
who may have security interests in the Facility. In addition, (i) within
twenty (20) days after the end of each calendar month, Manager shall provide
Owner with an unaudited statement of income and expenses for such month relating
to the operation of the Facility and (ii) Manager shall assist Owner's
independent certified public accountants with the preparation of audited
financial statements including a balance sheet, dated the last day of said
fiscal year, and a statement of income and expense for the year then ended. All
costs associated with the audit of the Facility's financial statements shall be
Facility operating expenses, which shall be payable out to the Facility funds.

3. BANK ACCOUNTS; PAYABLE OF FACILITY EXPENSES; DISTRIBUTION OF FACILITY
NET CASH FLOW. Manager shall open and maintain a checking account(s) in the
name of Owner and/or the Facility, as appropriate, for the benefit and account
of Owner in a federally insured bank selected by Manager and approved by Owner
and shall promptly deposit therein all money received in the course of the
operation of the Facility. Manager shall pay on a timely basis, so not past
due, for the benefit of Owner all expenses incurred in the operation of the
Facility, including, but not limited to, Facility debt service payments, payroll
and

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<PAGE>

employee benefits, repayment of working capital loans and the interest thereon,
and payment of Manager's fees and expenses hereunder, all of which shall be paid
by check drawn on such accounts, in the following order:

i. Payment of items which, if unpaid, would constitute
automatic liens on the Facility, unless such liens are
contested in good faith and do not create a substantial risk
of forfeiture of the Facility.

ii. Payment of Facility operating expenses (which shall include
any and all costs, expenses or fees associated with the
operation of the Facility but shall exclude Manager's basic
management fee) other than lease payments, debt service and
management fees. All payroll and employee benefit expenses
incurred by Manager in connection with salary or benefits
for the Facility Director shall be deemed to be Facility
operating expenses.

iii. Payment of Facility debt service expenses, including working
capital loans, if any, and land lease payments,

iv. Payment of Manager's fees and reimbursable expenses set
forth in Section 4.

v. The balance of the cash to Owner's reserve accounts subject
to the limitations set forth in Section 7.

4. BUDGETS. The fiscal year for the facility shall be a calendar year.
At least sixty (60) days prior to the start of each calendar year, the Facility
Director and Owner's Finance Committee shall prepare and submit to Owner for its
review and approval, annual operating, capital expenditure and cash flow budgets
for the following year (collectively, the "Budgets"). Upon approval of the
Budgets by Owner, Manager shall be entitled to make or commit Owner to make
expenditures which are reflected in the Budgets, as well as expenditures which
individually do not exceed 10% of the amounts set forth therein for the
applicable expense item and which in the aggregate do not exceed 20% of the
amount set aside in the most recent financial statements as the reserve for
contingencies (the "Budget Threshold"). Except for emergency repairs referred to
in Section 2 (G), any unbudgeted expenditures and/or expenditures in excess of
the Budget Threshold shall be subject to Owner's approval.

-5-
<PAGE>

5. FEES AND CHARGES FOR ANCILLARY SERVICES. Schedules of recommended
fees and charges for ancillary services rendered to the residents of the
Facility are in place and Manager shall recommend changes therein from time to
time to Owner for approval. Owner shall have and charges as it deems necessary.

6. COLLECTION OF ACCOUNTS. Manager shall issue bills and collect
accounts and monies owed for services and materials furnished by the Facility,
and shall be entitled to enforce the rights of Owner as creditor under any
contract or in connection with the rendering of any services and shall do so
upon Owner's request; provided, however, that any expenses incurred by Manager
in so doing shall be treated as Facility operating expenses, which shall be
payable out of Facility funds.

K. INSURANCE. On a yearly basis, the Owner and Manager shall prepare a
mutually acceptable list of insurance coverage necessary for the operation of
the Facility. Thereafter, Manager, on behalf and at the expense of Owner, shall
obtain and maintain all such insurance coverage, which shall include insurance
coverage required by the Ground Lease, and if not so required shall nevertheless
include property damage insurance covering the Facility and the furniture,
fixtures and equipment situated therein, a fidelity bond or similar device
insuring against employee theft, employee health and worker's compensation
insurance, directors and officers liability insurance and comprehensive general
liability and professional liability insurance, for the protection of Owner,
Manager, Facility employees (including the Facility Director) and volunteers of
the Facility.

L. INFORMATION. Manager shall assist Owner in developing any necessary
informational material, mass media releases and other related publicity
materials. No such materials which contain the name of any of the general
partners of Fox Hill Village Partnership, or their affiliates, or the Manager
shall be published, disseminated or used in any way without the prior written
consent of such general partner or the Manager.

M. MARKETING. The Manager shall supervise all activities related to the
remarketing of units for resales occurring after such units have been initially
occupied. Such activities shall be conducted in compliance with applicable laws
and shall include, but not be limited to, preparation of documentation necessary
to effect such sales and maintaining a 'wait list' of individual

-6-
<PAGE>

interested in purchasing units, all according to the Bylaws of Owner and
procedures established by Owner's Board of Directors.

N. ANCILLARY SERVICES. Manager shall negotiate for the provision of
necessary ancillary services through qualified contractors and on an ongoing
basis shall review and analyze the performance of said ancillary services
contractors and, if necessary, shall negotiate additional or alternative
contractual arrangements therefor.

O. LEGAL PROCEEDINGS. With respect to actions brought against both Owner
and Manager, the parties shall meet in an effort to select mutually acceptable
counsel. If Owner and Manager are unable to agree on counsel, both parties are
free at any time to select their own counsel. In the case of any action brought
against Manager, either alone or together with any other person or entity,
involving a matter as to which Manager is entitled to idemnification pursuant to
Section 10(b), if Manager succeeds on the merits of such action, Owner shall pay
Manager's legal fees in defending such action and if Manager loses on the merits
of such action, Manager shall pay its own legal fees in defending such action.

3. TERM. The initial term of this Agreement (the "Term") shall commence
on July 6, 1995 (the "Commencement Date") and shall continue until July 31,
2000, unless earlier terminated as provided in this Agreement. Manager shall
notify Owner at least 180 days prior to expiration of the Term of its desire to
renew this Agreement. In the event Manager desires to renew this Agreement and
Owner concurs or does not notify Manager in writing of a contrary intention at
least 90 days prior to expiration of the Term, the Term shall renew for an
additional period of three years. Thereafter, the Term shall be extended for
similar three-year periods according to the foregoing procedure. Notwithstanding
anything to the contrary contained herein, either party shall be entitled to
terminate this Agreement effective at any time after July 4, 1997 upon six
months' prior written notice to the other; provided that in the event that Owner
terminates this Agreement pursuant to this Section 3, then Owner shall pay to
Manager as the same become due all payments which become due pursuant to this
Agreement between the giving of such notice of termination and the effective
date of termination. In the event that either party elects to terminate this
Agreement, Manager shall assist Owner with an orderly transition of the
Facility's operations to a new manager.

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<PAGE>

4. MANAGEMENT FEES. For services performed hereunder, Owner shall pay to
Manager the following:

A. MANAGEMENT FEES. Commencing with the Commencement Date, Owner shall
pay to Manager a basic monthly management fee as follows:

<S> <C> <C>
Period Annual Fee Monthly Fee
------ ---------- -----------

July 6, 1995 to $250,000.00 $20,833.33
June 30, 1996

July 1, 1996 to $259,375.00 $21,614.58
June 30, 1997

July 1, 1997 to $269,102.00 $22,425.17
June 30, 1998

July 1, 1998 to $279,193.00 $23,266.08
June 30, 1999

July 1, 1999 to $289,663.00 $24,138.58
July 31, 2000
</TABLE>

With respect to the month of July, 1995 and upon any termination other than on
the last day of a month, the compensation set forth in this Section 4(A) shall
be prorated for the number of days for which services are actually rendered.

B. EXPENSE REIMBURSEMENT. Owner shall reimburse Manager for the
following items:

(i) Salary and related benefits payable with respect to the Facility
Director; and

(ii) Reasonable out-of-pocket travel and other expenses incurred by
the Facility Director and other Facility employees in connection
with the performance of its obligations hereunder, in amounts
set forth in the Budgets. Such amounts shall include reasonable
amounts related to training and seminars including out-of-state
training and seminars.

C. METHOD OF PAYMENT. Owner shall pay the amounts set forth in Sections
4(A) and (B) monthly, in arrears, and Manager

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<PAGE>

shall be entitled to disburse such amounts to itself out of the accounts
provided for in Section 2(J).

5. PROPRIETARY INTEREST. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager, but only to the
extent that they were Manager's standard systems brought in at Commencement Date
(or by Brim & Associates, Inc. prior to the Commencement Date) or developed
thereafter at Manager's sole expense. Owner shall not, at any time, sell,
distribute, copy or otherwise acquire same, except with Manager's prior written
consent, which Manager may withhold in its sole discretion. Notwithstanding the
foregoing, nothing herein shall preclude Owner from using any or all of such
systems, methods, procedures and controls, and any written materials and
brochures developed by Manager to document the same, only in connection with the
operation of the Facility, both before and after termination of this Agreement.

6. BUSINESS PLAN. With each annual budget submission, Manager shall
present to Owner for its approval, an annual Business Plan detailing Manager's
strategic and operating goals and objectives for the next twelve-month period,
along with a statement of the resources required for accomplishing each goal
or objective, for the Facility. For each year, Manager agrees that, in carrying
out the Business Plan, it shall use its best efforts to make available to the
Facility such support, resources, programs, systems, staff consultants and
materials as may be reasonably necessary to achieve the goals and objectives of
the Business Plan.

7. MAINTENANCE OF MINIMUM BANK BALANCE. Owner shall maintain a minimum
of cash balance in the account(s) referred to in Section 2(J) or in other
investments or investments accounts held by Owner greater than or equal to the
greater of:

A. The sum of all current and unpaid invoices (both those received and
those pending), note or installment payments, payrolls, rents, expenses,
management fees and other charges incident to the operation of the Facility
which will become due and payable within the next succeeding thirty (30) days;
or

B. Such amount as may be reflected in the most recent cash flow budget as
a reserve item.

8. DEFAULT. Either party may terminate this Agreement in the event of
any of the following events ("Event of Default") by the other party:

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<PAGE>

(A) BY MANAGER. With respect to Manager, the following shall constitute
Events of Default hereunder:

(i) Manager shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement, and such default
shall continue for a period of 30 days after written notice
thereof shall have been given to Manager by Owner, which notice
shall specify the event or events constituting the default;

(ii) Manager shall be dissolved or shall file an application for, or
consent to, the appointment of a receiver, trustee or liquidator
of Manager or of all or a substantial part of its assets, file a
voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general
assignment for the benefit of creditors, file a petition or an
answer seeking reorganization or an arrangement with creditors
or taking advantage of any insolvency law; or if such an
application or petition filed against Manager is not dismissed
within 90 days or an order, judgment, or decree shall be
entered by a court of competent jurisdiction, on the application
of a creditor, adjudicating Manager a bankrupt or insolvent or
approving a petition seeking reorganization of Manager, or
appointing a receiver, trustee or liquidator of Manager or of
all or a substantial part of its assets;

(iii) Manager shall consolidate with or merge into any other
corporation or convey, transfer or leave substantially all of
its assets to any person or entity without the prior written
consent of Owner, which consent may be withheld for any reason,
except: (a) in the case of a consolidation or a merger, Manager
is the surviving corporation; (b) in the case that such other
person or entity is a member of the same consolidated group for
tax purposes as Manager ("Affiliates") and a sufficient number
of trained personnel continue to be responsible or fulfilling
the obligations of the Manager hereunder; or (c) in the event
that the surviving corporation assumes all of the Manager's
obligations under this Agreement and the surviving corporation
has a net worth equal or greater than Hillhaven; or

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<PAGE>

(iv) without the prior written consent of the Owner, which consent
may be withheld for any reason, in excess of 50% of Manager's
capital stock outstanding as of the date hereof shall be
transferred to person other than manager's shareholder as of the
date hereof or to Affiliates of such shareholder.

(B) BY OWNER. With respect to Owner, the following shall constitute
Events of Default hereunder;

(i) Owner shall fail to make or cause to be made any payment to
Manager required to be made hereunder, and such failure shall
continue for a period of 30 days after written notice thereof
shall have been given to Owner;

(ii) Owner shall fail to maintain sufficient cash in the account
established pursuant to section 2 and/or to deposit therein
additional funds as needed pursuant to Section 7;

(iii) Owner shall breach the provisions of Section 10(E) or sell the
Facility or all or substantially all of its other assets without
the prior written consent of Manager, which consent may be
withheld by Manager for any reason;

(iv) Owner shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement and such default
shall continue for a period of 30 days after written notice
thereof shall have been given to Owner by Manager, which notice
shall specify the event or events constituting the default;

(v) Owner shall fail to make payments, or keep any covenants, owing
to any third party which are beyond the control of Manager to
make or keep, and the effect of which failure is to cause, or to
permit such third party to cause, in Manager's reasonable
opinion, a substantial risk that Owner will lose possession of
the Facility building or major equipment or property essential
to the overall operation of the Facility;

(vi) Owner shall be dissolved or shall file an application for, or
consent to, the appointment of

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<PAGE>

a receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts
as they become due, make a general assignment for the benefit of
creditors, file, or have filed against it, a petition or an
answer seeking reorganization or an arrangement with creditors
or taking advantage of any insolvency law; or if such an
application or petition filed against Owner is not dismissed
within 90 days or an order, judgment, or decree shall be entered
by a court of competent jurisdiction, on the application of a
creditor, adjudicating Owner a bankrupt or insolvent or
approving a petition seeking reorganization of Owner, or
appointing a receiver, trustee or liquidator of Owner or of all
or a substantial part of its assets; or

(vii) Owner shall cause the Facility to violate any law, the violation
of which materially affects the operation of the Facility, and
such violation continues beyond a period for correction allowed
by law.

9. REMEDIES UPON DEFAULT.

A. REMEDIES OF MANAGER. Upon the occurrence of an Event of Default by
Owner and at any time thereafter, Manager may, in its discretion, do any one or
more of the following:

(i) Terminate this Agreement, remove the Facility Director from the
Facility and declare all sums earned but unpaid to the date of
termination to be immediately due and payable; or

(ii) Exercise any other right or remedy available to it under
applicable law, including without limitation the right to
recover damages for the breach hereof.

B. REMEDIES OF OWNER. Upon the occurrence of any Event of Default by
Manager and at any time thereafter, Owner may, in its discretion do any one or
more of the following: (i) terminate this Agreement, whereupon Manager shall
remove the Facility Director from the Facility, and neither party shall have any
further obligation whatsoever under this Agreement except for obligations to
indemnify pursuant to Section 10(B); or (ii) exercise any other right or remedy
available to it under

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<PAGE>

applicable law, including without limitation the right to recover damages for
the breach hereof; provided, however, that Owner shall immediately pay to
Manager all amounts due and owing to Manager through the date of termination
(net of any damages suffered or incurred by Owner, if any, arising from the
events giving rise to such termination, which Owner may offset in paying such
fees).

C. RIGHTS CUMULATIVE; NO WAIVER. No right or remedy herein conferred
upon or reserved to either of the parties hereto is intended to be exclusive of
any other right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy given hereunder, or now
or hereafter legally existing. The failure of either party hereto to insist at
any time upon the strict observance or performance of any of the provisions of
this Agreement or to exercise any right or remedy as provided in this Agreement
shall not impair any such right or remedy or be construed as a waiver or
relinquishment thereof with respect to subsequent defaults. Every right and
remedy given by this Agreement to the parties hereof may be exercised from time
to time and as often as may be deemed expedient by the parties hereto, as the
case may be.

10. MISCELLANEOUS.

A. DISCLAIMER OF EMPLOYMENT OF FACILITY EMPLOYEES. Except for the
Facility Director, no person employed by the Owner will be an employee of
Manager, and Manager shall have no liability for payment of their wages, payroll
taxes and other expenses of employment, provided, however, that Manager shall
have the obligation to exercise reasonable care in its management of the
Facility and to apply available funds to the payment of such wage and payroll
taxes, and in the event that Manager fails to apply such funds, Manager shall be
liable to pay all interest, penalties and fines resulting from such failure. All
such person other than the Facility Director will be employees of the Owner,
independent contractors or the employees of independent contractors.

B. RELATIONSHIP OF THE PARTIES; WAIVER, INDEMNITY. The relationship of
Manager to Owner shall be that of an independent contractor, and all acts
performed by Manager pursuant to this Agreement during the Term shall be deemed
to be performed in its capacity as an independent contractor. To that end,
neither Manager nor Owner will be liable in the performance of its duties for
any loss incurred by or damage to the other, unless such loss or damage results
from the negligence or willful misconduct of the first party. Owner shall
indemnify and hold Manager harmless from and against any and all loss, expense,
cost or liability incurred

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<PAGE>

by or asserted against Manager in connection with the Facility unless such loss,
expense, cost or liability results from Manager's negligence or willful
misconduct. Manager shall indemnify and hold Owner harmless from and against any
and all loss, expense, cost or liability incurred by or asserted against Owner
which results from (X) Manager's negligence or willful misconduct in the
selection, training, supervision, employment or termination of any Facility
employee, unless such loss, expense, cost of liability is otherwise
indemnifiable by Owner pursuant to the immediately preceding sentence, or (Y)
Manager's negligence or willful misconduct. The indemnity obligations set forth
in this Section 10(B) shall survive the termination of the Agreement.

C. EMPLOYEE NON-SOLICITATION. Recognizing the unique services provided
by employees of Manager and the unique relationship of Owner and Manager, during
the term of this Agreement and for a period of two (2) years after termination
of this Agreement: (1) Owner shall not, without Manager's prior written consent,
(a) directly solicit or employ the Facility Director or any regional corporate
support staff member of Manager providing services with respect to the Facility,
or (b) directly solicit any employees of Manager to become employees of Owner;
and (2) Manager shall not, without Owner's prior written consent, (a) directly
solicit or employ the Facility's employees (other than Facility Director, who is
Manager's employee) or (b) directly solicit any Facility employees (other than
Facility Director, who is Manager's employee) to become employees of Manager.

D. WAIVER. The waiver of any of the terms hereof by either Owner or
Manger, or the failure of Owner or Manager to require the strict performance of
any of the terms hereof shall not be deemed to be a waiver or modification of
any such term or terms and shall not affect the right of either party to enforce
such term(s) or to demand strict performance thereof at any future time.

E. ASSIGNMENT. This Agreement shall not be assigned by either party
without the prior written consent of the other party. Notwithstanding the
foregoing, Manager may assign its rights and obligations hereunder in accordance
with the provisions of Section 8(A)(iii) of this Agreement. This Agreement shall
be binding upon and inure to the benefit of the permitted successors and assigns
of the parties.

F. NOTICES. All notices required or permitted hereunder shall be given
in writing and shall be personally delivered or be sent by registered or
certified mail, postage prepaid, to the following addresses or at such other
places as either party shall designate in writing:

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<PAGE>

If to Manager: HILLHAVEN PROPERTIES, LTD.
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Vice President,
Retirement Housing

With Copies to: THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Attention: General Counsel

If to Owner: FOX HILL VILLAGE HOMEOWNERS CORPORATION
10 Longwood Drive
Westwood, Massachusetts 02090
Attention: The President

Notices shall be deemed effective upon receipt.

G. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior understandings, agreements or arrangements, oral or written,
between the parties.

H. AMENDMENT. This Agreement shall not be modified or amended except by
written instrument signed by both of the parties.

I. CAPTIONS. The captions and headings used herein are for convenience
of reference only and shall not be construed in any manner to limit or modify
any of the terms hereof.

J. ATTORNEYS FEES. In the event either party brings an action to enforce
this Agreement, the prevailing party in such action shall be entitled to recover
from the other all costs incurred in connection therewith, including reasonable
attorney's fees.

K. SEVERABILITY. In the event one or more of the provisions of this
Agreement is deemed to be invalid, illegal or unenforceable in any respect under
applicable law, the validity, legality and enforceability of the remaining
provision hereof shall not in any way be impaired thereby.

L. AUTHORIZATION FOR AGREEMENT. Each of the parties hereby represents
and warrants to the other that the execution, delivery and performance of this
Agreement is within the corporate powers of the respective parties and have been
duly authorized by all necessary corporate action, and do not and will not

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<PAGE>

(i) require any consent or approval by stockholders or partners or (ii) violate
any provision of any law, rule, regulation, order, writ, judgment, decree or
award presently in effect having applicability to the parties or the articles of
incorporation, bylaws, or other agreements of the parties. This Agreement
constitutes the valid and binding obligations of Owner and Manager, enforceable
in accordance with its terms.

M. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute but one
and the same instrument.

N. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.

O. APPROVALS. Each party agrees that it will act promptly whenever the
other requests its review or approval of any matter pursuant to the terms of
this Agreement.

IN WITNESS WHEREOF, the parties have each caused this Agreement to be duly
executed by its duly authorized officer or officers, as of the date first above
written.

OWNER: FOX HILL VILLAGE HOMEOWNERS CORPORATION

By: /s/
------------------------------------
ITS: Vice President
-----------------------------------

and

By: /s/
------------------------------------
Its: Vice President
-----------------------------------

MANAGER: HILLHAVEN PROPERTIES, LTD.

By: /s/
------------------------------------
Its: Vice President
-----------------------------------

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<PAGE>
EXHIBIT 10.16

GUARANTY FEE AGREEMENT
----------------------

THIS GUARANTY FEE AGREEMENT (this "Agreement") is entered into as of the
____ day of ________, 1996, by and between VENCOR, INC. ("Vencor") and ATRIA
COMMUNITIES, INC. ("Atria").

RECITALS:

A. Atria intends to enter into loan and credit agreements to provide
financing to Atria including, but not limited to, a certain Revolving Credit
Facility between Atria and National City Bank of Kentucky and PNC Bank, National
Association as agents for the lending banks (the "Banks") providing for
revolving credit up to a maximum amount of $200,000.00 (the "Atria Facility").

B. As a condition to the making of loans under the Atria Facility, the
Banks have required a partial guaranty of the Atria Facility by Vencor, which
guaranty Vencor is willing to provide.

C. Vencor and Atria anticipate that other lenders and lending institutions
may likewise from time to time require guarantys of debt or obligations of Atria
by Vencor.

D. Vencor considers its partial guaranty of the Atria Facility to be in
its best interest and to be of value to Vencor.

E. Vencor shall make any determination of future or additional guarantees
from time to time in its sole discretion.

OPERATIVE PROVISIONS

For and in consideration of the recitals and other good and valuable
consideration, the receipt of which is acknowledged, Vencor and Atria agree as
follows:

1. Guaranty Fee. Atria shall pay to Vencor a fee equal to one and one-
half percent (1 1/2%) of the average outstanding sum of (i) the outstanding
principal balance of all debts or obligations of Atria which are guaranteed by
Vencor plus (ii) the aggregate outstanding principal amount of all issued and
outstanding letters of credit issued pursuant to any portion of any loan or
credit facility of Atria which has been guaranteed by Vencor (collectively, the
"Guaranteed Obligations"). The term "average" as used herein shall mean the
quotient derived by dividing (II) the total of all Guaranteed Obligations as of
the first day of each calendar quarter plus (ii) the total of such Guaranteed
Obligations on the last day of that calendar quarter by (iii) two.

2. Due Date Of Fee. The fee provided for herein shall be payable
quarterly in arrears, the first of such payments being due on the first day of
the first of January, April, July or October following the date of this
Agreement and subsequent payments being due and payable on the first day of each
calendar quarter (based upon the months just named) thereafter as long as there
shall be any Guaranteed Obligations outstanding.

3. Binding Effect. This Agreement shall bind and inure to the benefit of
Vencor and Atria and their respective successors and assigns.

4. Partial Invalidity. No invalidity, irregularity or unenforceability of
any portion of the Guaranteed Obligations shall affect, impair or be a defense
to the obligations of Atria under this Agreement until such time as such
invalidity, irregularity or unenforceability shall have been finally and
unappealably determined by a court of competent jurisdiction.

5. Representations and Warranties. Each party hereto represents and
warrants to the other that it is duly organized and existing under the laws of
the state of its incorporation, that the execution, delivery
<PAGE>

and performance of this Agreement are within its corporate powers, have been
duly authorized, are not in contravention of law or the terms of its charter or
bylaws or of any indenture agreement or undertaking to which it is a party or by
which it is bound and that the execution of this Agreement is in furtherance of
the business purposes of such party.

6. Governing Laws. This Agreement and all rights and obligations
hereunder including matters of construction, validity and performance shall be
governed by the internal laws of the Commonwealth of Kentucky.

IN WITNESS WHEREOF, Vencor and Atria have executed this Agreement as of the
____ day of August, 1996.

VENCOR, INC.

By:
-------------------------------

Title:
----------------------------

ATRIA COMMUNITIES, INC.

By:
-------------------------------

Title:
----------------------------

<PAGE>

EXHIBIT 23.2

The following consent is in the form that will be signed upon the completion
of the reorganization described in Note 1 to the combined financial statements
of the Company.

/s/ Ernst & Young LLP

We consent to the reference to our firm under the caption "Experts" and
"Selected Combined Financial Data" and to the use of our report dated June 14,
1996, except for Notes 1 and 7 as to which the date is , 1996, in
Amendment No. 2 to the Registration Statement (Form S-1 No. 333-06907) and
related Prospectus of Atria Communities, Inc. for the registration of
5,000,000 shares of its Common Stock.

Louisville, Kentucky
July , 1996

<PAGE>

EXHIBIT 23.3

Atria Communities, Inc.
515 West Market Street
Louisville, KY 40202

Ladies and Gentlemen:

I hereby consent to the inclusion of my name as a person about to become
a director of Atria Communities, Inc. (the "Company") in the Company's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission.

Very truly yours,

/s/ Peter J. Grua
-----------------
Peter J. Grua

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Atria's
combined financial statements for the six months ended June 30, 1996 and for the
year ended December 31, 1995 and is qualified in its entirety by reference to
such statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 4,149 2,819
<SECURITIES> 0 0
<RECEIVABLES> 893 650
<ALLOWANCES> (99) (89)
<INVENTORY> 124 123
<CURRENT-ASSETS> 5,266 3,746
<PP&E> 156,044 154,237
<DEPRECIATION> (25,319) (23,027)
<TOTAL-ASSETS> 141,616 140,917
<CURRENT-LIABILITIES> 7,030 4,522
<BONDS> 103,586 104,506
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 27,544 28,447
<TOTAL-LIABILITY-AND-EQUITY> 141,616 140,917
<SALES> 0 0
<TOTAL-REVENUES> 25,448 47,976
<CGS> 0 0
<TOTAL-COSTS> 12,053 22,698
<OTHER-EXPENSES> 4,915 9,386
<LOSS-PROVISION> 14 79
<INTEREST-EXPENSE> 2,033 4,322
<INCOME-PRETAX> 2,867 5,925
<INCOME-TAX> 1,133 2,341
<INCOME-CONTINUING> 1,734 3,584
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (146)
<CHANGES> 0 0
<NET-INCOME> 1,734 3,438
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>