Document:

<PAGE>

                                                                    EXHIBIT 10.4

                                                                       EXECUTION

                             SEVENTH AMENDMENT TO
                     DEBTOR-IN-POSSESSION CREDIT AGREEMENT
                                  AND CONSENT

                                April 26, 2000

          Reference is made to that certain Debtor-In-Possession Credit
Agreement dated as of September 13, 1999 (as heretofore amended, supplemented or
otherwise modified, the "DIP Credit Agreement"), by and among Vencor, Inc., a
Delaware corporation ("Vencor"), and Vencor Operating, Inc., a Delaware
corporation ("Vencor Opco"), each as debtor and debtor-in-possession, and each
of Vencor's subsidiaries listed on the signature pages thereof, each as debtor
and debtor-in-possession (each such subsidiary, Vencor and Vencor Opco
individually referred to herein as a "Borrower" and, collectively, on a joint
and several basis, as the "Borrowers"); the Lenders listed on the signature
pages thereof; and Morgan Guaranty Trust Company of New York, as arranger,
collateral agent and administrative agent (in such capacity, "Administrative
Agent") for the Lenders, and as an issuing bank for Letters of Credit
thereunder. Capitalized terms used herein without definition herein shall have
the meanings assigned to such terms in the DIP Credit Agreement and the
Borrowing Order.

          Borrowers have (i) requested that Lenders make certain amendments to
the DIP Credit Agreement, as more fully set forth below, and (ii) submitted to
Lenders an amendment and supplement to the Cash Plan, attached hereto as Annex A
                                                                         -------
(the "Cash Plan Supplement"), setting forth, for May 2000 and June 2000, a
consolidated cash forecast for the Borrowers.  Accordingly:

          1.  The Borrowers and the undersigned Lenders hereby agree that:

               (a)  Section 1.01 of the DIP Credit Agreement is hereby amended
          by inserting the following definition therein in alphabetical order:

                    "Surplus Property Sale Procedures Order" means the order of
               the Court entitled "Order Establishing Procedures for the
               Debtors' Sale of Certain Surplus Personal Property Pursuant to
               Sections 363(b) and (f) of the Bankruptcy Code Without Further
               Court Approval" entered in the Chapter 11 Cases on April 17,
               2000, as in effect on its date of entry.

               (b)  Section 5.10 of the DIP Credit Agreement is hereby amended
          by deleting the reference to "May 1, 2000" contained therein and
          substituting therefor "June 15, 2000";

                (c) Section 7.03(b) of the DIP Credit Agreement is hereby
          amended by deleting the first sentence therefrom in its entirety and
          substituting therefor the following:
<PAGE>

               "No Vencor Company (other than an Excluded Partnership) will make
               any Asset Sale without (i) prior written approval of Required
               Lenders and (ii) an appropriate approval of the Court, to the
               extent such Court approval is required pursuant to the Bankruptcy
               Code or any order of the Court; provided that (x) the foregoing
                                               --------
               shall not prohibit transactions permitted by Section 7.12; (y)
               clause (i) above shall not apply to any Asset Sale of any
               Properties Held For Sale so long as (A) the consideration
               received from such Asset Sale shall be in an amount at least
               equal to the fair market value thereof (or, in the case of the
               Cessna Plane, in an amount in excess of the amount expended for
               the purchase thereof), (B) the sole consideration received shall
               be cash, and (C) the Net Cash Proceeds of such Asset Sale shall
               be applied as required by Section 2.08(a)(ii); and (z) after the
               date of entry of the Surplus Property Sale Procedures Order,
               clause (i) above shall not apply to any sale of Surplus Property
               (as defined in the Surplus Property Sale Procedures Order)
               consummated in accordance with the Proposed Sale Procedures (as
               defined in the Surplus Property Sale Procedures Order), so long
               as (A) the gross proceeds of any such sale individually do not
               exceed $150,000, and the gross proceeds of all such sales in the
               aggregate do not exceed $3,000,000, (B) at the time of such sale,
               no Default shall have occurred and be continuing or would result
               therefrom, (C) the sole consideration received from any such sale
               which is an Asset Sale shall be cash in an amount no less than
               the fair market value of the assets sold, and (D) the Net Cash
               Proceeds of any such Asset Sale shall be applied to repay
               outstanding Loans, if any, and to reduce the Commitments in
               accordance with Section 2.08 of the DIP Credit Agreement; and

               provided, further, that nothing in this Section 7.03(b) shall
               --------  -------
               prohibit, after the Fifth Amendment Effective Date, (x) the sale
               at auction (or by any other manner approved by the Court) of
               approximately 70 vehicles associated with the Borrowers' Vencare
               business line and (y) the sale of two durable medical equipment
               storefronts (and the assumption and assignment of the related
               leases) previously associated with the Borrowers' Vencare
               business line to any Person other than a Subsidiary or an
               Affiliate of any Borrower, in each case so long as (1) at the
               time of such sale, no Default shall have occurred and be
               continuing or would result therefrom, (2) the consideration
               received by the Borrowers for such assets shall be in cash in an
               aggregate amount no less than the aggregate fair market value
               thereof, (3) such sale is approved by the Court to the extent
               such approvals are required pursuant to the Bankruptcy Code or an
               order of the Court, and (4) within five Business Days of
               Borrowers' receipt of the Net Cash Proceeds of such Asset Sale,
               said Net Cash Proceeds shall be applied to repay outstanding
               Loans, if any, and to reduce the Commitments in accordance with
               Section 2.08."

               (d) Section 2.13 of the DIP Credit Agreement is hereby amended by
          deleting clause (v) in its entirety therefrom and substituting
          therefor the following:

                                       2
<PAGE>

                    "(v)  the prior written consent of Required Lenders (except
               in the case of Asset Sales permitted to be consummated under
               Section 7.03(b) without the prior written approval of Required
               Lenders) and the approval of the Court (to the extent such Court
               approval is required pursuant to the Bankruptcy Code or an order
               of the Court) with respect to such Asset Sale shall have been
               obtained."

          2.   Each of the undersigned Lenders hereby (i) acknowledges that the
     substance of the Cash Plan Supplement is satisfactory to such Lender and
     (ii) consents to supplementing the Cash Plan with the forecast for May 2000
     and June 2000 contained in the Cash Plan Supplement.

          On and after the Seventh Amendment Effective Date (as defined below),
each reference in the DIP Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the DIP Credit
Agreement, and each reference in the other Financing Documents to the "DIP
Credit Agreement", "thereunder", "thereof" or words of like import referring to
the DIP Credit Agreement, shall mean and be a reference to the DIP Credit
Agreement as amended by this Seventh Amendment to Debtor-In-Possession Credit
Agreement and Consent (this "Seventh Amendment"; the DIP Credit Agreement, as so
amended, being the "Amended Agreement").

          Without limiting the generality of the provisions of Section 11.05 of
the DIP Credit Agreement, the amendment and the consent set forth in paragraphs
1 and 2 above shall be limited precisely as written, and nothing in this Seventh
Amendment shall be deemed to (a) constitute a consent to any other supplement to
the Cash Plan or any other document, transaction, occurrence, event or condition
under Section 5.01(m) of the DIP Credit Agreement or any other term, provision
or condition of the DIP Credit Agreement or any of such other Financing
Documents, or (b) prejudice any right or remedy that the Administrative Agent or
any Lender may now have or may have in the future under or in connection with
the DIP Credit Agreement or any of such other Financing Documents.  Except as
specifically amended by this Seventh Amendment, the DIP Credit Agreement and
such other Financing Documents shall remain in full force and effect and are
hereby ratified and confirmed.

          In order to induce Lenders to enter into this Seventh Amendment, each
Borrower, by its execution of a counterpart of this Seventh Amendment,
represents and warrants that (a) such Borrower has the corporate or other power
and authority and all material Governmental Approvals required to enter into
this Seventh Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Amended Agreement, (b) the execution and
delivery of this Seventh Amendment and the performance of the Amended Agreement
have been duly authorized by all necessary corporate or other action on the part
of such Borrower, (c) the execution and delivery by such Borrower of this
Seventh Amendment and the performance by such Borrower of the Amended Agreement
do not and will not contravene, or constitute a default under, any Applicable
Laws (including an applicable order of the Court) or any provision of its
Organizational Documents, or of any agreement or other instrument binding upon
it or result in or require the imposition of any Liens (other than the Liens
created by the Collateral Documents) on any of its assets, (d) the execution and
delivery by such Borrower of this Seventh Amendment and the performance by such
Borrower of the Amended Agreement do not and will

                                       3
<PAGE>

not require any action by or in respect of, or filing with, any governmental
body, agency or official, (e) this Seventh Amendment and the Amended Agreement
have been duly executed and delivered by such Borrower and constitute the valid
and binding obligations of such Borrower, enforceable in accordance with their
respective terms, except as may be limited by general principles of equity, (f)
for purposes of the Borrowing Order (i) this Seventh Amendment constitutes a
non-material modification of the DIP Credit Agreement and the Financing
Documents, and (ii) notice of this Seventh Amendment has been given to and
received by counsel to the Committee (as defined in the Borrowing Order), and
(g) after giving effect to this Seventh Amendment, no event has occurred and is
continuing or will result from the consummation of the transactions contemplated
by this Seventh Amendment that would constitute a Default.

          This Seventh Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.  This Seventh
Amendment shall become effective (the date of such effectiveness being the
"Seventh Amendment Effective Date") on April 30, 2000; provided that (a) the
                                                       --------
Borrowers and Required Lenders shall have executed counterparts of this Seventh
Amendment and the Borrowers and the Administrative Agent shall have received
written or telephonic notification of such execution and authorization of
delivery thereof; (b) the Administrative Agent shall have received evidence
satisfactory to it that all outstanding statements of O'Melveny & Myers LLP,
Davis Polk & Wardwell and Policano & Manzo that are received by Vencor prior to
12:00 Noon (New York City time) on April 26, 2000 have been paid in full; and
(c) no objections to this Seventh Amendment shall have been served on the
Administrative Agent by the Committee.

          Pursuant to paragraph 3 of the Borrowing Order, this Seventh Amendment
shall become effective upon the Seventh Amendment Effective Date without the
need for any further order of the Court and upon compliance with the notice
requirement of paragraph 3 of the Borrowing Order and the Committee having
submitted no objection thereto.

          THIS SEVENTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

                 [Remainder of page intentionally left blank]

                                       4
<PAGE>

BORROWERS:
                         Advanced Infusion Systems, Inc.
                         American X-Rays, Inc.
                         C.P.C. of Louisiana, Inc.
                         Community Behavioral Health System, Inc.
                         Community Psychiatric Centers of Arkansas, Inc.
                         Community Psychiatric Centers of California
                         Community Psychiatric Centers of Florida, Inc.
                         Community Psychiatric Centers of Idaho, Inc.
                         Community Psychiatric Centers of Indiana, Inc.
                         Community Psychiatric Centers of Kansas, Inc.
                         Community Psychiatric Centers of Mississippi, Inc.
                         Community Psychiatric Centers of Missouri, Inc.
                         Community Psychiatric Centers of North Carolina, Inc.
                         Community Psychiatric Centers of Oklahoma, Inc.
                         Community Psychiatric Centers of Utah, Inc.
                         Community Psychiatric Centers Properties Incorporated
                         Community Psychiatric Centers Properties of Oklahoma,
                            Inc.
                         Community Psychiatric Centers Properties of Texas, Inc.
                         Community Psychiatric Centers Properties of Utah, Inc.
                         Courtland Gardens Health Center, Inc.
                         CPC Investment Corp.
                         CPC Managed Care Health Services, Inc.
                         CPC of Georgia, Inc.
                         CPC Properties of Arkansas, Inc.
                         CPC Properties of Illinois, Inc.
                         CPC Properties of Indiana, Inc.
                         CPC Properties of Kansas, Inc.
                         CPC Properties of Louisiana, Inc.
                         CPC Properties of Mississippi, Inc.
                         CPC Properties of Missouri, Inc.
                         CPC Properties of North Carolina, Inc.
                         First Rehab, Inc.
                         Florida Hospital Properties, Inc.
                         Health Care Holdings, Inc.
                         Health Care Technology, Inc.
                         Helian ASC of Northridge, Inc.
                         Helian Health Group, Inc.
                         Helian Recovery Corporation
                         Homestead Health Center, Inc.
                         Horizon Healthcare Services, Inc.
                         Interamericana Health Care Group

                                      S-1
<PAGE>

                         J.B. Thomas Hospital, Inc.
                         Lafayette Health Care Center, Inc.
                         MedEquities, Inc.
                         Medisave of Tennessee, Inc.
                         Medisave Pharmacies, Inc.
                         Old Orchard Hospital, Inc.
                         Palo Alto Surgecenter Corporation
                         Peachtree-Parkwood Hospital, Inc.
                         PersonaCare, Inc.
                         PersonaCare Living Center of Clearwater, Inc.
                         PersonaCare of Bradenton, Inc.
                         PersonaCare of Clearwater, Inc.
                         PersonaCare of Connecticut, Inc.
                         PersonaCare of Georgia, Inc.
                         PersonaCare of Huntsville, Inc.
                         PersonaCare of Little Rock, Inc.
                         PersonaCare of Ohio, Inc.
                         PersonaCare of Owensboro, Inc.
                         PersonaCare of Pennsylvania, Inc.
                         PersonaCare of Pompano East, Inc.
                         PersonaCare of Pompano West, Inc.
                         PersonaCare of Reading, Inc.
                         PersonaCare of San Antonio, Inc.
                         PersonaCare of San Pedro, Inc.
                         PersonaCare of Shreveport, Inc.
                         PersonaCare of St. Petersburg, Inc.
                         PersonaCare of Warner Robbins, Inc.
                         PersonaCare of Wisconsin, Inc.
                         PersonaCare Properties, Inc.
                         ProData Systems, Inc.
                         Recovery Inns of America, Inc.
                         Respiratory Care Services, Inc.
                         Stamford Health Facilities, Inc.
                         THC-Chicago, Inc.
                         THC-Hollywood, Inc.
                         THC-Houston, Inc.
                         THC-Minneapolis, Inc.
                         THC-North Shore, Inc.
                         THC-Orange County, Inc.
                         THC-San Diego, Inc.
                         THC-Seattle, Inc.
                         TheraTx Healthcare Management, Inc.
                         TheraTx Health Services, Inc.
                         TheraTx Management Services, Inc.
                         TheraTx Medical Supplies, Inc.
                         TheraTx Rehabilitation Services, Inc.
                         TheraTx Staffing, Inc.

                                      S-2
<PAGE>

                         Transitional Hospitals Corporation, a Delaware
                            Corporation
                         Transitional Hospitals Corporation, a Nevada
                            Corporation
                         Transitional Hospitals Corporation of Indiana, Inc.
                         Transitional Hospitals Corporation of Louisiana, Inc.
                         Transitional Hospitals Corporation of Michigan, Inc.
                         Transitional Hospitals Corporation of Nevada, Inc.
                         Transitional Hospitals Corporation of New Mexico, Inc.
                         Transitional Hospitals Corporation of Tampa, Inc.
                         Transitional Hospitals Corporation of Texas, Inc.
                         Transitional Hospitals Corporation of Wisconsin, Inc.
                         Tucker Nursing Center, Inc.
                         Tunstall Enterprises, Inc.
                         VC-OIA, Inc.
                         VC-TOHC, Inc.
                         VC-WM, Inc.
                         Vencare, Inc.
                         Vencare Rehab Services, Inc.
                         Vencor Facility Services, Inc.
                         Vencor Holdings, L.L.C.
                         Vencor Home Care Services, Inc.
                         Vencor Hospice, Inc.
                         Vencor Hospitals East, L.L.C.
                         Vencor Hospitals West, L.L.C.
                         Vencor, Inc.
                         Vencor Insurance Holdings, Inc.
                         Vencor Investment Company
                         Vencor Nevada, L.L.C.
                         Vencor Nursing Centers East, L.L.C.
                         Vencor Nursing Centers Central L.L.C.
                         Vencor Nursing Centers North, L.L.C.
                         Vencor Nursing Centers South, L.L.C.
                         Vencor Nursing Centers West, L.L.C.
                         Vencor Operating, Inc.
                         Vencor Pediatric Care, Inc.
                         Vencor Provider Network, Inc.
                         Ventech Systems, Inc.

                         by: Vencor Operating, Inc., as agent and attorney-in-
                               fact for each of the foregoing entities

                               By:__________________________
                               Name:
                               Title:

                                      S-3
<PAGE>
                                                                       EXECUTION

                         Stamford Health Associates, L.P.

                         BY:  Stamford Health Facilities, Inc., Its General
                               Partner

                              By:__________________________
                              Name:
                              Title:

                         Vencor Home Care and Hospice Indiana Partnership

                         BY:  Vencor Home Care Services, Inc., Its General
                               Partner

                              By:__________________________
                              Name:
                              Title:

                         BY:  Vencor Hospice, Inc., Its General Partner

                              By:__________________________
                              Name:
                              Title:

                         Vencor Hospitals Limited Partnership

                         BY:  Vencor Operating, Inc., Its General Partner

                              By:_________________________
                              Name:
                              Title:

                         BY:  Vencor Nursing Centers Limited Partnership, Its
                               General Partner

                              BY: Vencor Operating, Inc., Its General
                                   Partner

                                  By:_____________________
                                  Name:
                                  Title:
<PAGE>

                         Vencor Nursing Centers Central Limited Partnership

                         BY:  Vencor Operating, Inc., Its General Partner

                              By:_________________________
                              Name:
                              Title:

                         BY:  Vencor Nursing Centers Limited Partnership, Its
                               General Partner

                              By: Vencor Operating, Inc., Its General
                                   Partner

                                  By:_____________________
                                  Name:
                                  Title:
<PAGE>

                         Vencor Nursing Centers Limited Partnership

                         By:  Vencor Operating, Inc., Its General Partner

                              By:__________________________
                              Name:
                              Title:

                         By:  Vencor Hospitals Limited Partnership, Its
                               General Partner

                              BY: Vencor Operating, Inc., Its General
                                   Partner

                                  By:______________________
                                  Name:
                                  Title:

AGENTS AND LENDERS:

                         MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Arranger,
                         Collateral Agent and Administrative Agent and as a
                         Lender
<PAGE>

                         By:____________________________
                              Name:
                              Title:
<PAGE>

                        ABLECO FINANCE LLC, as a Lender

                        By:__________________________
                           Name:
                           Title:
<PAGE>

                         APPALOOSA INVESTMENT LIMITED PARTNERSHIP I, as a Lender

                         By: _______________________________
                             Name:
                             Title:
<PAGE>

                      BANKERS TRUST COMPANY, as a Lender

                      By: _________________________
                          Name:
                          Title:
<PAGE>

                         CHASE SECURITIES INC, AS AGENT FOR THE CHASE MANHATTAN
                         BANK, as a Lender

                         By: ____________________
                             Name:
                             Title:
<PAGE>

                         GOLDMAN SACHS CREDIT PARTNERS L.P., as a Lender

                         By:  ____________________________
                              Name:
                              Title:
<PAGE>

                         PARIBAS, as a Lender

                         By: ______________________
                             Name:
                             Title:

                         By: ____________________________________
                             Name:
                             Title:
<PAGE>

                         VAN KAMPEN PRIME RATE INCOME TRUST, as a Lender

                         By:  VAN KAMPEN INVESTMENT ADVISORY CORP.

                              By: _________________________
                                  Name:
                                  Title:
<PAGE>

                         FRANKLIN MUTUAL ADVISERS LLC, as a Lender

                         By:  ______________________
                              Name:
                              Title:
<PAGE>

                         FRANKLIN FLOATING RATE TRUST, as a Lender

                         By: ____________________
                             Name:
                             Title:

                   FOOTHILL CAPITAL CORPORATION, as a Lender
<PAGE>

                         By: ______________________
                             Name:
                             Title:

                  FOOTHILL INCOME TRUST II, L.P., as a Lender

                   By:  FIT II GP, LLC, its general partner
<PAGE>

                              By: ______________________
                                  Name:
                                  Title:
<PAGE>

              ACKNOWLEDGEMENT AND CONSENT OF SUBSIDIARY GUARANTOR

          By its execution of a counterpart of this Seventh Amendment, the
undersigned, as a Subsidiary Guarantor under that certain Guaranty Agreement
dated as of September 13, 1999 (the "Guaranty") for the benefit of Lenders, and
as an Original Lien Grantor under that certain Security Agreement dated as of
September 13, 1999 (the "Security Agreement") between the undersigned, the
Borrowers and Collateral Agent, as Secured Party, hereby acknowledges that it
has read this Seventh Amendment and consents to the terms thereof and further
hereby confirms and agrees that, notwithstanding the effectiveness of this
Seventh Amendment, the obligations of the undersigned under the Guaranty and the
Security Agreement shall not be impaired or affected and each of the Guaranty
and the Security Agreement is, and shall continue to be, in full force and
effect and is hereby confirmed and ratified in all respects.

                              CARIBBEAN BEHAVIORAL HEALTH
                                SYSTEMS, INC.

                              By: ___________________
                                  Name:
                                  Title:

<PAGE>

                                                                         Annex A

Vencor, Inc
Cash Plan
Period: Weeks Beginning May 1, 2000 to June 26, 2000
Prepared: April 25, 2000
(in millions)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOW FORECAST: (Revised by Company on April 25, 2000)

Week Beginning:                         5/1/2000  5/8/2000  5/15/2000  5/22/2000 5/29/2000  6/5/2000 6/12/2000 6/19/2000 6/26/2000
                                        ------------------------------------------------------------------------------------------
<S>                                     <C>       <C>       <C>        <C>       <C>        <C>      <C>       <C>       <C>
Projected Receipts:
Facility Receipts                         $ 22.3    $ 28.3     $ 41.6     $ 38.7   $ 29.6     $ 22.2  $ 32.6     $ 41.5   $ 40.0
Agency Receipts                             13.7      15.5       16.6       16.6     10.2       15.1    15.8       15.8     15.1
PIP Receipts                                   -      11.3          -       11.3        -       11.3       -       11.3        -
Misc Receipts                                  -         -          -          -        -          -       -          -        -
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------

   Subtotal Receipts                      $ 36.0    $ 55.1     $ 58.2     $ 66.6   $ 39.8     $ 48.6  $ 48.4     $ 68.6   $ 55.1

Projected Disbursements:
Accounts Payable                          $(24.7)   $(23.7)    $(21.6)    $(20.6)  $(18.4)    $(25.8) $(25.8)    $(22.7)  $(22.7)
Ventas                                     (15.2)        -          -          -        -      (15.2)      -          -        -
Scheduled Medicare Payments                    -         -          -                   -          -       -          -        -
Payroll                                    (19.2)    (16.8)     (19.2)     (16.0)   (15.8)     (22.4)  (16.8)     (20.2)   (17.6)
Taxes                                       (5.9)     (8.9)      (5.9)      (8.7)    (5.9)      (9.6)   (5.9)      (9.6)    (5.6)
VEBA Funding                                (1.5)     (1.5)      (1.5)      (1.5)    (1.5)      (1.2)   (1.1)      (1.1)    (1.1)
Vendor Deposits                             (2.1)     (2.1)      (2.1)      (2.1)    (2.1)      (2.1)   (2.1)      (2.1)    (2.1)
Executive Retention                            -         -          -          -        -          -       -          -        -
Restructuring Costs                         (1.0)        -          -          -     (0.1)      (1.0)      -          -     (0.1)
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------
Subtotal Uses of Cash                     $(69.6)   $(53.0)    $(50.3)    $(48.9)  $(43.8)    $(77.3) $(51.7)    $(55.7)  $(49.2)
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------

Daily Cash Flow before Next Day
   Funding Requirements                   $(33.6)   $  2.1     $  7.9     $ 17.7   $ (4.0)    $(28.7) $ (3.3)    $ 12.9   $  5.9

Reduce (Borrow) Next Day Funding               -         -          -          -        -          -       -          -        -
 Requirement                              ------    ------     ------     ------   ------     ------  ------     ------   ------
Subtotal Net Sources (Uses) of Cash       $(33.6)   $  2.1     $  7.9     $ 17.7   $ (4.0)    $(28.7) $ (3.3)    $ 12.9   $  5.9
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------

Forecasted Revolver (Borrowing)           $(33.6)   $  2.1     $  7.9     $ 17.7   $ (4.0)    $(28.7) $ (3.3)    $ 12.9   $  5.9
 Repayment

Beginning Revolver                        $    -    $    -     $    -     $    -   $    -     $    -  $    -     $    -   $    -
Activity                                       -         -          -          -        -          -       -          -        -
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------
Ending Revolver                           $    -    $    -     $    -     $    -   $    -     $    -  $    -     $    -   $    -
                                          ======    ======     ======     ======   ======     ======  ======     ======   ======

Beginning Cash                            $131.5    $ 97.9     $100.0     $107.9   $125.6     $121.6  $ 92.9     $ 89.6   $102.5
Net Change in Cash                         (33.6)      2.1        7.9       17.7     (4.0)     (28.7)   (3.3)      12.9      5.9
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------
Ending Cash                               $ 97.9    $100.0     $107.9     $125.6   $121.6     $ 92.9  $ 89.6     $102.5   $108.4
                                          ======    ======     ======     ======   ======     ======  ======     ======   ======

----------------------------------------------------------------------------------------------------------------------------------
COVENANT COMPUTATION:
Cumulative Net Cash Flow                  $(33.6)   $(31.5)    $(23.6)    $ (5.9)  $ (9.9)    $(38.6) $(41.9)    $(29.0)  $(23.1)

Permitted Variance (1)                     (18.0)    (18.0)     (18.0)     (18.0)   (18.0)     (18.0)  (18.0)     (18.0)   (18.0)
                                          ------    ------     ------     ------   ------     ------  ------     ------   ------

Compliance with Cash Plan                 $(51.6)   $(49.5)    $(41.6)    $(23.9)  $(27.9)    $(56.6) $(59.9)    $(47.0)  $(41.1)
                                          ======    ======     ======     ======   ======     ======  ======     ======   ======
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The Borrower is allowed to disburse up to $52,500,000 above the permitted
     variance if, and only if, such disbursements are required to be made to
     repay obligations owing to Medicare or its agents.<PAGE>

                                                                    Exhibit 10.5
                            MASTER TRUST AGREEMENT

     This Trust Agreement is made and entered into as of January 17, 2000 by and
between Vencor, Inc. ("Vencor") and Norwest Bank Minnesota, National
Association, a national banking association, as the Trustee (the "Trustee");

                                   Recitals
                                   --------

A.   Vencor maintains Vencor, Inc. Retirement Savings Plan ("VRSP") and the
     Retirement Savings Plan for Certain Employees of Vencor and its Affiliates
     ("RSP"), each of which is intended to qualify under section 401(a) of the
     Internal Revenue Code of 1986 (together, the "Plans").

B.   Vencor may decide in the future to designate additional defined
     contribution plans maintained by Vencor or an affiliate as Plans funded
     through this trust.

C.   Vencor maintains a master trust fund with Wachovia Bank of North Carolina,
     N.A. as trustee (the "Prior Trustee"), and the Prior Trustee has indicated
     that it cannot accommodate Vencor's desire to provide daily pricing on all
     securities in the Plans.

D.   The duties of the Prior Trustee will cease on January 31, 2000 and Vencor
     desires to enter into a master trust agreement effective February 1, 2000
     which will amend and restate the trust agreement for the Plans.

E.   The parties enter into this Agreement for the purpose of continuing the
     trust with Norwest Bank Minnesota National Association as successor
     Trustee.

                                   Agreement
                                   ---------

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

                              ARTICLE 1--GENERAL
                                         -------

     1.1  Establishment.  Vencor hereby continues with Trustee as successor to
          -------------
the Prior Trustee, the Vencor Master 401(k) Trust.  The Trust will consist of
Investment Funds designated from time to time by the Committee, suitably
distinct in investment characteristics and objectives, from which participants
in the Plans may choose for investment of assets in their accounts.  The Trustee
shall allocate to and invest contributions as part of each Investment Fund
pursuant to any investment directives made by the Participants and received from
the Committee.  Income from investments in each Investment Fund shall be
reinvested in the same Investment Fund.
<PAGE>

     1.2  Acceptance of Trust.  The Trustee accepts its appointment as such,
          -------------------
effective February 1, 2000 (the "Effective Date").

     1.3  Part of Plans.  This Trust forms a part of the Plans for which funds
          -------------
are held hereunder. Vencor warrants that promptly upon the adoption of any
amendment to a Plan it will furnish the Trustee with a copy of the amendment and
with an appropriate certificate evidencing its due adoption. Vencor further
agrees that no amendment of a Plan shall have the effect of changing the rights,
duties, and liabilities of the Trustee without its written consent.  The Trustee
may rely on the latest Plan documents furnished it as above provided without
further inquiry or verification.

     1.4  Certification of Fiduciaries and Administrator.  The Secretary or an
          ----------------------------------------------
Assistant Secretary of Vencor will certify to the Trustee the name of the person
or persons who comprise the Retirement Committee or who otherwise have authority
on behalf of Vencor to direct the Trustee as to disbursements from the Trust
Fund for purposes of the Plan and the name of the person or persons who have
authority on behalf of Vencor (including representatives of any plan service
provider which Vencor may use from time to time) to communicate with the Trustee
with respect to any other matters relating to the Trust Fund.  The Trustee shall
recognize the Retirement Committee as so certified as the administrator of each
Plan within the meaning of the Plan document unless and until receipt from the
Secretary of Vencor or an Assistant Secretary of Vencor of a certification
evidencing the appointment of some other person or persons as said
administrator.  The Secretary or an Assistant Secretary of Vencor shall provide
the Trustee with a specimen signature of each of the persons referred to above.
Action by the Board of Directors of Vencor (or a committee thereof) will be
certified by the Secretary or an Assistant Secretary of Vencor.  The Trustee may
rely on the latest relevant certificate without further inquiry or verification.

     1.5  Construction and Applicable Law.  This Trust is intended to constitute
          -------------------------------
a qualified trust under section 401(a) of the Internal Revenue Code and to be
entitled to tax exemption under section 501(a) thereof.  The Trustee may assume,
until advised to the contrary, that the Trust is so qualified and is entitled to
said tax exemption.  It is also intended that this Trust be in full compliance
with applicable requirements of the Plan.  This Trust Agreement shall be
construed and administered consistent with said intent.

     1.6  Committee. The Board of Directors of Vencor has, pursuant to the
          ---------
provisions of the Plans, appointed a Retirement Committee ("Committee") to
administer the Plan, keep records of individual participant benefits, and notify
each Participant of the amount of his benefits periodically.  The operation of
the Committee shall be governed by the terms of the Plans. Vencor will notify
the Trustee of the names of the members of the Committee and of any changes in
membership that may take place from time to time. The Committee, or its agent or
designee, shall direct the Trustee in writing to make payments from the Trust
Fund to Participants who qualify for such payments under the terms of the Plan.
Such written order (which may be conveyed by facsimile) to the Trustee shall
specify the name of the Participant,

                                       2
<PAGE>

his Social Security number, his address, and the amount and frequency of such
payments. The Trustee may request instructions in writing from the Committee, or
its agent or designee, on other matters and may rely and act thereon. The
Committee may further delegate its authority hereunder to direct the Trustee,
and if it does so shall notify the Trustee in writing of that delegation. The
Committee shall be responsible for the determination of individual accounts, and
the Trustee need not segregate accounts among Participants for investment
purposes, except as indicated in the Plans.

     1.7  Defined Terms.  All defined words and phrases in Article 1 of the
          -------------
VRSP, when used in this Trust Agreement, shall have the same meaning as given in
Article 1 of the VRSP, unless a different meaning is clearly required by the
context.

                        ARTICLE 2--PARTICIPATING PLANS
                                   -------------------

     2.1  Participating Plans. Vencor may direct that plans other than VRSP and
          -------------------
RSP participate in the Trust provided that any such other plan:

          (a)  is created or organized in the United States as a pension or
               profit sharing plan established by Vencor, or an affiliate of
               Vencor, for the exclusive benefit of employees and their
               beneficiaries;

          (b)  is qualified under Code section 401(a); and

          (c)  adopts this Trust as a trust for purposes of the plan.

A participating Plan may continue to participate so long as it satisfies the
foregoing conditions.  It shall be the duty of Vencor to notify the Trustee if
such conditions cease to be satisfied with respect to any participating Plan,
and in the absence of such notification, the Trustee shall be entitled to assume
that a participating Plan continues to satisfy such conditions.

     2.2  Interest of Plan In Trust Fund. Vencor may specify that all or a part
          ------------------------------
of a Plan's interest in the Trust Fund be held in a segregated account for that
Plan and invested separately from the remainder of the Trust Fund.  In such
event, assets of such segregated account shall be held and administered solely
for that Plan.  Except in cases of such segregation, no participating Plan shall
have any right, title or interest in or to any specific asset of the Trust Fund,
but shall have an undivided beneficial interest in the assets of the Trust Fund
not so segregated.

     2.3  Withdrawal on Disqualification.  Upon receipt of notice from Vencor of
          ------------------------------
the disqualification under Code Section 401(a) of any participating Plan, the
Trustee shall determine the value of the interest of such Plan in the Trust Fund
and withdraw and segregate the interest of such Plan.  The Trustee shall
continue to hold the interest of a disqualified Plan as a separate trust,
governed by the provisions of this Trust Agreement, until directed by Vencor to
transfer such segregated interest pursuant to Section 2.4.

                                       3
<PAGE>

     2.4  Transfer to Alternate Funding Agency. Vencor, by written direction
          ------------------------------------
delivered to the Trustee, may direct the withdrawal and transfer of assets
constituting all or a part of the interest of a participating Plan in the Trust
Fund to a successor funding agency, which may be the Trustee acting under a
separate trust agreement.  The Trustee shall make the transfer as soon as
practicable, either in cash, or in the discretion of the Trustee, in other
property or partly in cash and partly in other property.

     2.5  Merger or Split-up of Plans.  If two or more Plans are merged into a
          ---------------------------
single Plan, or if a Plan is divided into two or more Plans, the resulting Plan
or Plans shall continue to participate in this Trust unless Vencor directs the
Trustee to make a transfer of assets with respect to such Plan or Plans to an
alternate funding agency pursuant to Section. 2.4.  The Trustee shall make such
adjustments of the accounts maintained for each Plan under Section. 3.3 as are
appropriate to reflect any such merger or split-up of Plans.

                             ARTICLE 3--TRUST FUND
                                        ----------

     3.1  Composition.  All assets of the trust for the Plan(s) named in the
          -----------
recitals to this Trust Agreement, all other sums of money, securities and other
property acceptable to the Trustee and received by it to be held in trust
hereunder, as evidenced by its receipts, from whatever source received, together
with all investments made therewith, the proceeds thereof, and all earnings and
accumulations thereon, and the part thereof from time to time remaining, shall
be held and administered by the Trustee, in trust, in a fund referred to herein
as the "Trust Fund," in accordance with the terms and provisions hereof.  The
Trust Fund shall be held, administered, and disbursed by the Trustee without
distinction between principal and income.

     3.2  Contributions.  The Trustee shall have no duty to require any
          -------------
contributions to be made to it, to determine that the contributions received by
it comply with the provisions of the Plans or with any applicable resolution of
the board of directors of any Participating Employer providing therefor, or to
collect any contributions payable to it pursuant to the Plans.  The
responsibility of the Trustee shall be limited to the sums of money, securities,
and other property actually received by it.

     3.3  Separate Accounting For Each Plan.  The Trustee need not maintain
          ---------------------------------
separate accounts to reflect the interest of each Plan participating in the
Trust Fund.

     3.4  Exclusive Benefit of Participants and Beneficiaries.  The Trust Fund
          ---------------------------------------------------
shall be used for the exclusive benefit of the Participants and their
beneficiaries covered by the participating Plans.  No assets of any
participating Plan shall be available to pay benefits to participants and their
beneficiaries of any other participating Plan.  Nothing herein, however, shall
be construed to prevent any right of return or refund of assets of the Trust
Fund to an employer as authorized under any participating Plan or to restrict
the use of such assets for the payment of taxes,

                                       4
<PAGE>

expenses of administration or other charges properly assessed against the Trust
Fund under any participating Plan or pursuant to this Trust Agreement.

                              ARTICLE 4--TRUSTEE
                                         -------

     4.1  General Responsibility.  The general responsibilities of the Trustee
          ----------------------
shall be as follows:

          (a)  The Trustee shall hold, administer, invest and reinvest, and
               disburse the Trust Fund in accordance with the powers and subject
               to the restrictions stated herein.

          (b)  The Trustee shall disburse monies and other properties from the
               Trust Fund on direction of Vencor pursuant to the provisions of
               the Plans at the time or times to the payee or payees specified
               by Vencor in directions to the Trustee in such form as the
               Trustee may reasonably require. The Trustee shall be under no
               liability for any distribution made by it pursuant to such
               directions and shall be under no duty to make inquiry as to
               whether any distribution made by it pursuant to any such
               direction is made pursuant to the provisions of the Plans. The
               receipt of the payee shall constitute a full acquittance to the
               Trustee.

          (c)  The Trustee shall have the responsibilities, if any, expressly
               allocated to it by the Plans.  Except as responsibilities may be
               expressly so allocated, the Trustee in its capacity as such shall
               have no responsibility or authority with respect to the operation
               and administration of the Plans, and the rights, powers, and
               duties of the Trustee shall be governed solely by the terms of
               this Trust Agreement without reference to the provisions of the
               Plans.

     4.2  Powers of Trustee.  The Trustee shall have the right, power, and
          -----------------
authority to take any action and to enter into and carry out every agreement
with respect to the Trust Fund that may be necessary or advisable to discharge
its responsibilities hereunder, and without limiting the generality of the
foregoing and in addition to all other powers and authorities herein elsewhere
specifically granted to the Trustee, the Trustee shall have the following powers
and authorities to be exercised in its absolute discretion, except as otherwise
expressly provided herein:

          (a)  To hold securities and other properties in bearer form or in the
               name of a nominee or nominees without disclosing any fiduciary
               relationship; provided, however, that on the books and records of
               the Trustee such securities and properties shall constantly be
               shown to be a part of the Trust Fund, and no such registration or
               holding by the Trustee shall relieve it from liability for the
               safe custody and proper disposition of such securities and
               properties in accordance with the terms and provisions hereof.

                                       5
<PAGE>

          (b)  To sell, grant options to buy, transfer, assign, convey,
               exchange, mortgage, pledge, lease or otherwise dispose of any of
               the properties comprising the Trust Fund at such prices and on
               such terms and in such manner as it may deem proper, and for
               terms within or extending beyond the duration of the Trust.

          (c)  To manage, administer, operate, lease for any number of years,
               regardless of any restrictions on leases made by fiduciaries,
               develop, improve, repair, alter, demolish, mortgage, pledge,
               grant options with respect to, or otherwise deal with any real
               property or interest therein at any time held by it; and to cause
               to be formed a corporation or trust to hold title to any such
               real property with the aforesaid powers, all upon such terms and
               conditions as may be deemed advisable.

          (d)  To renew or extend or participate in the renewal or extension of
               any note, bond or other evidence of indebtedness, or any other
               contract or lease, or to exchange the same, or to agree to a
               reduction in the rate of interest or rent thereon or to any other
               modification or change in the terms thereof, or of the security
               therefor, or any guaranty thereof, in any manner and to any
               extent that it may deem advisable in its absolute discretion; to
               waive any default, whether in the performance of any covenant or
               condition of any such note, bond or other evidence of
               indebtedness, or any other contract or lease, or of the security
               therefor, and to carry the same past due or to enforce any such
               default as it may in its absolute discretion deem advisable; to
               exercise and enforce any and all rights to foreclose, to bid in
               property on foreclosure; to exercise and enforce in any action,
               suit, or proceeding at law or in equity any rights or remedies in
               respect to any such note, bond or other evidence of indebtedness,
               or any other contract or lease, or the security therefor; to pay,
               compromise, and discharge with the funds of the Trust Fund any
               and all liens, charges, or encumbrances upon the same, in its
               absolute discretion, and to make, execute, and deliver any and
               all instruments, contracts, or agreements necessary or proper for
               the accomplishment of any of the foregoing powers.

          (e)  To use the assets of the Trust Fund, whether principal or income,
               for the purpose of improving, maintaining, or protecting property
               acquired by the Trust Fund, and to pay, compromise, and discharge
               with the assets of the Trust Fund any and all liens, charges, or
               encumbrances at any time upon the same.

          (f)  To hold uninvested such cash funds as may appear reasonably
               necessary to meet the anticipated cash requirements of the
               Plan(s) from time to time and to deposit the same or any part
               thereof, either separately or together

                                       6
<PAGE>

               with other trust funds under the control of the Trustee, in its
               own deposit department or to deposit the same in its name as
               Trustee in such other depositories as it may select.

          (g)  To receive, collect, and give receipts for every item of income
               or principal of the Trust Fund.

          (h)  To institute, prosecute, maintain, or defend any proceeding at
               law or in equity concerning the Trust Fund or the assets thereof,
               at the sole cost and expense of the Trust Fund, and to
               compromise, settle, and adjust any claims and liabilities
               asserted against or in favor of the Trust Fund or of the Trustee;
               but the Trustee shall be under no duty or obligation to
               institute, maintain, or defend any action, suit, or other legal
               proceeding unless it shall have been indemnified to its
               satisfaction against any and all loss, cost, expense, and
               liability it may sustain or anticipate by reason thereof.

          (i)  To vote all stocks and to exercise all rights incident to the
               ownership of stocks, bonds, or other securities or properties
               held in the Trust Fund and to issue proxies to vote such stocks;
               to enter into voting trusts for such period and upon such terms
               as it may determine; to give general or special proxies or powers
               of attorney, with or without substitution; to sell or exercise
               any and all subscription rights and conversion privileges; to
               sell or retain any and all stock dividends; to oppose, consent
               to, or join in any plan of reorganization, readjustment, merger,
               or consolidation in respect to any corporation whose stocks,
               bonds, or other securities are a part of the Trust Fund,
               including becoming a member of any stockholders' or bondholders'
               committee; to accept and hold any new securities issued pursuant
               to any plan of reorganization, readjustment, merger,
               consolidation, or liquidation; to pay any assessments on stocks
               or securities or to relinquish the same; and to otherwise
               exercise any and all rights and powers to deal in and with the
               securities and properties held in the Trust Fund in the same
               manner and to the same extent as any individual owner and holder
               thereof might do.

          (j)  To make application for any contract issued by an insurance
               company to be purchased under a Plan, to accept and hold any such
               contract, and to assign and deliver any such contract.

          (k)  To employ such agents, experts, counsel, and other persons (any
               of whom may also be employed by or represent the Participating
               Employers) deemed by the Trustee to be  necessary or proper for
               the administration of the  Trust; to rely and act on information
               and advice furnished by such agents, experts, counsel, and other
               persons; and to pay their reasonable

                                       7
<PAGE>

               expenses and compensation for services to the Trust from the
               Trust Fund. Notwithstanding the foregoing, no person so serving
               may receive compensation from the Trust Fund for fiduciary
               services if such person, natural or otherwise, is affiliated with
               Vencor, and no person so serving who already receives full-time
               pay from any Participating Employer shall receive compensation
               from the Trust Fund, except for reimbursement of expenses
               properly and actually incurred.

          (l)  To pay out of the Trust Fund all real and personal property
               taxes, income taxes, and other taxes of any and all kinds levied
               or assessed under existing or future laws against the Trust Fund,
               without any approval or direction of  Vencor.

          (m)  To pay any estate, inheritance, income, or other tax, charge, or
               assessment attributable to any benefit which, in the Trustee 's
               opinion, it shall be or may be required to pay out of such
               benefit; and to require, before making any payment, such release
               or other document from any taxing authority and such indemnity
               from the intended payee as the Trustee shall deem necessary for
               its protection.

          (n)  To retain any funds or property subject to any dispute without
               liability for the payment of interest, and to decline to make
               payment or delivery thereof until final adjudication is made by a
               court of competent jurisdiction.

          (o)  To provide ancillary services to the Trust for not more than
               reasonable compensation.

          (p)  To serve not only as Trustee but also in any other fiduciary
               capacity with respect to the Plans pursuant to such agreements or
               practices as the Trustee considers necessary or appropriate under
               the circumstances.

          (q)  To participate in and use the Federal Book-entry Account System
               (a service provided by the Federal Reserve Bank for its member
               banks for deposit of Treasury securities), or to use the
               Depository Trust Company, Midwest Trust Company or other
               generally accepted central depositories.

          (r)  To make, execute, acknowledge, and deliver any and all documents
               of transfer and conveyance and any and all other instruments that
               may be necessary or appropriate to carry out the powers herein
               granted to the Trustee.

                                       8
<PAGE>

          (s)  To bring action before any court of competent jurisdiction for
               instructions with respect to any matter pertaining to the
               interpretation of this Trust Agreement or the administration of
               the Trust Fund.

     4.3  Compensation and Expenses.  The Trustee shall be entitled to receive
          -------------------------
such reasonable compensation for its services as Trustee or in any other
capacity in connection with the Plans as may be agreed upon with Vencor.  Its
initial fees shall be as set forth on Annex A hereto, which fees may not
increase prior to January 31, 2003.  Except for the restriction on changes in
the preceding sentence, the Trustee's fees may be amended at any time by 60 days
advance written notice from the Trustee to the Committee, provided that, if the
Committee objects in writing to the change within that 60 days period, the fees
may not change as so noted, although the Trustee reserves the right to resign if
no change is agreed upon.  Such fees shall be deducted by the Trustee from the
earnings or corpus of the Trust Fund, unless first paid by the Employer, with
the exception of any expenses which are specifically indicated on Annex A as
requiring Employer direction before payment from the Trust.  The Trustee shall
be entitled to reimbursement for all reasonable and necessary costs, expenses,
and disbursements incurred by it in the performance of such services, including
costs, expenses and disbursements relating to representation of the Trust Fund's
interests in Vencor's bankruptcy proceedings. All necessary expenses that may
arise in connection with the administration of the Plans and Trust will be paid
from the Trust, unless otherwise paid by the Employer.

     4.4  Records and Accountings.  The Trustee shall keep accurate and detailed
          -----------------------
records and accounts of all investments, receipts, and disbursements, and other
transactions hereunder, and all records, books, and accounts relating thereto
shall be open to inspection by any person designated by Vencor at all reasonable
times. Within 30 days following the close of each calendar month, quarter and
year, the Trustee shall file with the Employer a written report setting forth
all investments, receipts and disbursements and other transactions during such
period.  Such reports shall contain an exact description of all securities
purchased, exchanged or sold, the cost or net proceeds of sale, and shall show
the securities and investments held at the end of such period, and the cost of
each item, as carried on the books of the Trustee.  The accounting shall also
furnish Vencor such other information as the Trustee may possess and as may be
necessary for them to comply with the reporting requirements of the Plan.  If
the fair market value of an asset in the Trust Fund is not available, when
necessary for accounting or reporting purposes the fair value of the asset shall
be determined in good faith by the Trustee, assuming an orderly liquidation at
the time of such determination.  If there is a disagreement between the Trustee
and anyone as to any act or transaction reported in an accounting, the Trustee
shall have the right to have its account settled by a court of competent
jurisdiction.  The Trustee shall make such other reports as may be agreed upon
with Vencor.

     4.5  Record Retention.  The Trustee shall retain its records relating to
          ----------------
the Trust as long as necessary for the proper administration thereof and at
least for any period required by the Plan or other applicable law.

                                       9
<PAGE>

                            ARTICLE 5--INVESTMENTS
                                       -----------

     5.1  General.  Except as otherwise expressly provided herein, the Trustee
          -------
shall invest and reinvest the Trust Fund in such securities or other property
consistent with the investment objectives set forth in the Plans or by the
Committee from time to time, and without limiting the generality of the
foregoing, shall also be subject to the following:

          (a)  Investments shall be as consistent as reasonably possible with
               any funding policy communicated to the Trustee in writing by
               Vencor pursuant to the Plan(s).  The Trustee may rely on the
               latest such communication received by it without further inquiry
               or verification.

          (b)  The Trustee may invest and reinvest principal and income of the
               Trust Fund in common, preferred, and other stocks of any
               corporation; voting trust certificates; interests in investment
               trusts, including, without limiting the generality thereof,
               participations issued by an investment company as defined in the
               Investment Company Act of 1940, as from time to time amended;
               bonds, notes, and debentures, secured or unsecured; mortgages on
               real or personal property; conditional sales contracts; real
               estate and leases; and limited partnerships.

          (c)  The Trustee shall have full power and authority to invest money
               or assets of this trust in any collective investment fund of a
               bank or trust company consisting of assets of employee benefit
               trusts and qualifying as a group trust under Section 401 of the
               Code.  The governing document of any such fund in which assets of
               this trust are invested is hereby incorporated and made a part
               hereof as if fully set forth at length herein.  Assets of this
               trust invested in such fund shall be held and administered by the
               trustee of the fund in accordance with the terms of and under the
               powers granted in said governing document.

          (d)  The Trustee may invest and reinvest the principal and income of
               the Trust Fund by investing in an annuity contract or contracts
               (including any agreement or agreements supplemental thereto)
               issued by an insurance company.

          (e)  The Trust is currently invested in the common stock of Vencor and
               Ventas, Inc. (which was acquired by the Trust Fund upon a
               spinnoff from Vencor) (together, "Company Stock") although future
               investments in Company Stock ceased prior to the effective date
               of this Agreement, in the case of Ventas, Inc. because it was no
               longer affiliated with Vencor, and, in the case of Vencor stock,
               due to the loss of market liquidity and declining value of the
               stock.

                                       10
<PAGE>

          (f)  If Company Stock is directed by a Participant to be sold as
               allowed by the Plan, and if there is no generally recognized
               market for such securities, the sale shall be for not less than
               fair market value, as determined in good faith by the Trustee.
               In no event may a commission be charged to the Trust Fund for the
               private purchase or sale of Company Stock.

          (g)  The Trustee may invest and reinvest principal and income of the
               Trust Fund in deposits (including savings accounts, savings
               certificates, and similar interest-bearing instruments or
               accounts) in itself or its affiliates, provided such deposits
               bear a reasonable rate of interest.

          (h)  The Trustee may lend any securities or security from time to time
               constituting a part of the Trust Fund in exchange for such
               consideration and upon such terms and conditions as the Trustee
               deems appropriate.  In any such transaction the Trustee may
               transfer legal title to the securities being loaned to the
               obligor, and may permit the obligor to return to the Trust Fund
               securities that are identical (but not necessarily evidenced by
               the same certificates) to those transferred to it by the Trustee
               hereunder.

          (i)  The Trustee may transfer, at any time and from time to time, all
               or any part of the funds of the Trust to any trust which is
               qualified under section 401(a) and exempt under section 501(a) of
               the Internal Revenue Code and is maintained as a medium for the
               pooling of a portion of the funds of pension and profit sharing
               trusts for diversifying investments, and may execute such
               documents and other instruments as may be necessary in connection
               therewith.  The terms and provisions of any such trust shall,
               upon such transfer and execution, be incorporated by reference
               into this Trust Agreement to the extent of the assets so
               transferred.

     5.2  Appointment of Investment Adviser as Investment Manager.  Vencor may
          -------------------------------------------------------
appoint one or more parties that are registered as investment advisers under the
Investment Advisers Act of 1940 to serve as an investment manager as specified
in the Plan.  The appointment of any such investment manager and investment of
the Trust Fund pursuant to such appointment shall be subject to the following,
notwithstanding any provisions hereof to the contrary:

          (a)  Written notice of each such appointment shall be given to the
               Trustee a reasonable time in advance of the effective date of the
               appointment.  The notice shall state what portion of the Trust
               Fund is to be invested by the investment manager and shall direct
               the Trustee to segregate such portion of the Trust Fund into a
               separate account for the investment manager.  Each such separate
               account is referred to in this section as an Investment Account.

                                       11
<PAGE>

          (b)  The Trustee shall not act on any direction or instruction of the
               investment manager until the Trustee has been furnished with an
               acknowledgement in writing by the investment manager that it is a
               fiduciary with respect to the Investment Account.

          (c)  There shall be a written agreement between Vencor and each
               investment manager.  The Trustee shall receive a copy of each
               such agreement and all amendments thereto and shall give written
               acknowledgement of receipt of same.  Each agreement with an
               investment manager shall provide that:

               (1)  All directions given by an investment manager to the Trustee
                    shall be in writing, signed by an officer or partner of the
                    investment manager or by such other person as may be
                    designated in writing by the investment manager; provided
                    that the Trustee shall accept oral directions for the
                    purchase or sale of securities, which shall be confirmed by
                    such authorized personnel of the investment manager in
                    writing;

               (2)  All settlements of purchases and sales shall be in the city
                    where the Trustee is located, or such other place as the
                    Trustee may direct;

               (3)  In all events the Trustee is to retain physical custody of
                    or title to all assets included in an Investment Account;
                    and

               (4)  Vencor, by written notice to the investment manager and the
                    Trustee, may modify or terminate the authority of the
                    investment manager.

          (d)  Payment of the cost of the acquisition, sale, or exchange of any
               security or other property for an Investment Account shall be
               charged to that Investment Account unless the agreement between
               Vencor and investment manager provides otherwise.

          (e)  So long as the appointment of an investment manager is in effect,
               the investment manager shall have full power and authority to
               direct the Trustee as to, and full responsibility for, investment
               of its Investment Account and for the retention and disposition
               of any assets in its Investment Account.  Subject to any
               limitations in the agreement between Vencor and the investment
               manager, the investment manager shall have the same investment
               discretion as is accorded the Trustee under Sec. 5.1.  The
               Trustee may invest any portion of an Investment Account that
               would otherwise be held in cash but has no obligation to do so.

                                       12
<PAGE>

          (f)  Unless the written agreement between Vencor and investment
               manager expressly provides to the contrary, the Trustee shall
               have the voting power with respect to all stocks and other
               securities in the Investment Account.

          (g)  The Trustee shall make available to an investment manager copies
               of or extracts from such portions of its accounts, books, or
               records relating to the Investment Account of such investment
               manager as the Trustee may deem necessary or appropriate in
               connection with the exercise of the investment manager's
               function, or as Vencor may direct.

          (h)  All charges (other than those covered in subsection (d) above)
               against each Investment Account shall be made in such proportions
               as Vencor may direct from time to time.

          (i)  If the authority of an investment manager is terminated and a
               successor investment manager is not appointed, the assets held in
               its Investment Account may or may not continue to be segregated
               as the Trustee may determine.  Until receipt of written notice of
               the termination of the authority of an investment manager, the
               Trustee shall be fully protected in assuming the continuing
               authority of such investment manager.

          (j)  Any direction by an investment manager shall be complete as to
               the terms with respect thereto, it being intended that the
               Trustee shall have no obligation whatsoever to invest or
               otherwise manage any asset of an Investment Account.

          (k)  Vencor agrees to indemnify the Trustee for and to hold it
               harmless against any and all liabilities, losses, costs, or
               expenses (including legal fees and expenses) of whatsoever kind
               and nature which may be imposed on, incurred by, or asserted
               against the Trustee at any time by reason of action taken in
               accordance with directions of an investment manager or action
               omitted because no such directions are given.  However, no such
               indemnification shall be required in any case in which such
               liabilities, losses, costs, or expenses are incurred by the
               Trustee because it participated knowingly in, or knowingly
               undertook to conceal, an act or omission of an investment
               manager, knowing such act or omission was a breach of fiduciary
               duty by said investment manager.

     5.3  Committee Directed Investment Funds; Participant Directed Accounts.
          ------------------------------------------------------------------
The Trustee shall be a directed Trustee only, with no discretionary authority or
responsibility, with respect to the assets of the Plans allocated or allocable
to the accounts of the Participants.  The Committee, as a named fiduciary, shall
be solely responsible for the investment of the assets of the Plans allocated or
allocable to the accounts of Participants (except as provided more specifically
in

                                       13
<PAGE>

paragraph (i) immediately below or by Section 5.2 of the Trust). Without
limitation, the Committee, as named fiduciary:

     (a)  shall be responsible for investing such assets, except to the extent
          that such investment responsibility is delegated to one or more
          investment managers (other than the Trustee) under Section 403(a)(2)
          of ERISA;

     (b)  shall, to the extent that Participants and their Beneficiaries are
          given the right to direct the investment of their accounts, be the
          fiduciary to whom Participants and Beneficiaries are entitled to give
          such investment directions and the fiduciary responsible for carrying
          out such investment directions (by directing the Trustee or
          otherwise);

     (c)  shall be responsible for any loss, or by reason of any breach, which
          results from the Participant's or Beneficiary's exercise of control
          over his account, except to the extent that Section 404(c) of ERISA
          provides otherwise;

     (d)  shall be responsible for determining whether the documents and
          instruments governing the investment of the assets allocated or
          allocable to the accounts are consistent with the provisions of Titles
          I and IV of ERISA, and if not, investing such assets in accordance
          with Titles I and IV of ERISA notwithstanding such documents and
          instruments;

     (e)  all directions given by the Retirement Committee to the Trustee shall
          be in writing, signed by the duly authorized person or persons;
          provided that the Trustee shall accept oral directions for the
          purchase or sale of securities which shall be confirmed by such
          authorized personnel in writing; and

     (f)  any direction by the Retirement Committee shall be complete as to its
          terms, it being intended that the Trustee shall have no obligation
          whatsoever to invest or otherwise manage any asset of the Trust Fund.

Notwithstanding the above, the Trustee shall be responsible for voting all
securities held by the Trust, including Company Stock, and for making decisions
about tender of Company Stock if a tender offer, reorganization, or other
corporate transaction requires an investment decision, and shall be responsible
for prudently carrying out the investment instructions conveyed to it with care,
skill and diligence normally exercised by prudent persons familiar with like
matters.  If a proxy is solicited on mutual fund shares held in the Trust with
regard to an issue that might increase fees within the fund or alter its
investment policy, the Trustee shall promptly notify the Committee in writing,
and shall not vote that proxy unless and until directed by the Committee how to
vote.

                                       14
<PAGE>

                         ARTICLE 6--CHANGE IN TRUSTEE
                                    -----------------

     6.1  Resignation.  The Trustee may resign at any time by giving 60 days'
          -----------
advance written notice to Vencor.

     6.2  Removal.  Vencor may remove the Trustee by giving 60 days' advance
          -------
written notice to the Trustee.

     6.3  Successor.  In the event of the resignation or removal of the Trustee,
          ---------
Vencor shall promptly appoint a successor.  If no appointment of a successor is
made by Vencor within a reasonable time after resignation or removal of the
Trustee, any court of competent jurisdiction may appoint a successor, after such
notice, if any, solely to Vencor and the retiring Trustee, as such court may
deem proper and suitable.  The retiring Trustee shall be furnished with written
notice from Vencor or the court, as the case may be, of the appointment of the
successor, and shall also be furnished with written evidence of the successor's
acceptance of the trusteeship.  Only then shall the retiring Trustee cease to be
such.

     6.4  Duties on Succession.  Every successor Trustee accepting a trusteeship
          --------------------
under this Trust Agreement shall have all the right, title, powers, duties,
exemptions, and limitations of the predecessor Trustee hereunder.  No
predecessor Trustee shall have any right, title, or interest in the Trust Fund
except as hereinafter provided.  The Trustee shall, upon the appointment and
acceptance of a successor Trustee, transfer and deliver the assets of the Trust
Fund to the successor, after reserving such reasonable amount as it shall deem
necessary to provide for its fees and expenses and any sums chargeable against
the Trust Fund for which it may be liable.  Any predecessor Trustee shall do all
acts necessary to vest title of record in the successor Trustee.  If any assets
in the Trust Fund have been invested in a common or collective trust fund, the
predecessor shall cause such investment to be liquidated at the earliest
practical time after notice has been given or received by the predecessor of the
resignation or removal.  No person becoming a Trustee hereunder shall be in any
way liable or responsible for anything done or omitted to be done by any Trustee
prior to such person's acceptance of the trusteeship, nor shall such person have
any duty to examine the administration of the Trust prior to such acceptance.

     6.5  Changes in Organization of Trustee.  If any Trustee acting hereunder
          ----------------------------------
is merged with another corporation or association, or is succeeded by another
corporation or association, through consolidation or otherwise, the acquiring
corporation or association shall thereupon become Trustee hereunder. When
authorized by statute or court order any Trustee acting hereunder may permit
itself to be succeeded as such Trustee by another corporation or association in
which case the acquiring corporation or association shall thereupon become
Trustee hereunder.  In each case the acquiring corporation or association shall
be Trustee of the Trust as though specifically so named herein.  Notwithstanding
the foregoing provisions of this section, an acquiring corporation or
association shall become Trustee hereunder only if it has trust powers and is
formed under the laws of the United States of America or any subdivision
thereof.

                                       15
<PAGE>

                           ARTICLE 7--MISCELLANEOUS
                                      -------------

     7.1  Benefits May Not Be Assigned or Alienated.  None of the benefits under
          -----------------------------------------
the Plans are subject to the claims of creditors of Participants, Former
Participants or their Beneficiaries and will not be subject to attachment,
garnishment or any other legal process.  Neither a Participant, a Former
Participant, a Beneficiary, a contingent Beneficiary, nor a spouse may assign,
sell borrow on or otherwise encumber any of his beneficial interest in this
Trust nor shall any such benefits be in any manner liable for or subject to the
deeds, contracts, liabilities, engagements, or torts of any Participant,
terminated Participant, Beneficiary, contingent Beneficiary or spouse.  The
preceding sentences shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined by the Committee to be
a qualified domestic relations order, as defined in Section 414(p) of the Code.

     7.2  Evidence.  Evidence required of anyone under this Trust Agreement may
          --------
be by certificate, affidavit, document, or other instrument which the person
acting in reliance thereon considers to be pertinent and reliable, and to be
signed, made, or presented by the proper party.

     7.3  Dealings of Others With Trustee.  No person (corporate or individual)
          -------------------------------
dealing with the Trustee shall be required to see to the application of any
money paid or property delivered to the Trustee or to determine whether the
Trustee is acting pursuant to any authority granted to it under this Trust
Agreement.

     7.4  Audits.  Vencor shall have the right to cause the books, records, and
          ------
accounts of the Trustee that relate to the Trust to be examined and audited by
independent auditors designated by Vencor at such times as Vencor may determine,
and the Trustee shall make such books, records, and accounts available for such
purposes at all reasonable times.

     7.5  Trustee  Warranty Against Conviction.  A person accepting trusteeship
          ------------------------------------
hereunder warrants that such person has not been convicted of or imprisoned for
a crime preventing such person from serving as Trustee hereunder.

     7.6  Successor Employers.  The provisions of this Trust Agreement shall be
          -------------------
binding on each Participating Employer and its successors.  If a successor to a
Participating Employer or a purchaser of all or substantially all of its assets
elects to continue the Trust, such successor or purchaser shall be substituted
for the Participating Employer under this Trust Agreement.

     7.7  Waiver of Notice.  Any notice required under this Trust Agreement may
          ----------------
be waived by the person entitled thereto.

     7.8  Headings.  Headings at the beginning of articles and sections are for
          --------
convenience of reference, shall not be considered a part of this Trust
Agreement, and shall not influence its construction.

                                       16
<PAGE>

     7.9   Use of Compounds of Word "Here".  Use of the words "hereof",
           -------------------------------
"herein", "hereunder", or similar compounds of the word "here" shall mean and
refer to the entire Trust Agreement unless the context clearly indicates
otherwise.

     7.10  Construed as a Whole.  The provisions of this Trust Agreement shall
           --------------------
be construed as a whole in such manner as to carry out the provisions thereof
and shall not be construed separately without relation to the context.

     7.11  Counterparts.  This Trust Agreement may be executed in any number of
           ------------
counterparts, each of which shall be deemed an original.  Such counterparts
shall constitute but one and the same instrument, which may be sufficiently
evidenced by any one counterpart.

     7.12  Law Controlling.  This Trust Agreement is made in contemplation of
           ---------------
the laws of the State of Minnesota and shall be construed in accordance with
the laws thereof, except where such laws are superseded by Act or the Code, in
which case such Act or law shall control.

                      ARTICLE 8--AMENDMENT AND TERMINATION
                                 -------------------------

     8.1  No Diversion.  The Trust Fund shall be for the exclusive purpose of
          ------------
providing benefits to participants under the Plans and their beneficiaries and
defraying reasonable expenses of administering the Plans.  Such expenses may
include premiums for the bonding of Plan officials required by the Plan document
or applicable law.  No part of the corpus or income of the Trust Fund may be
used for, or diverted to, purposes other than for the exclusive benefit of
participants under the Plans or their beneficiaries.  Notwithstanding the
foregoing, all contributions made by the Employer are expressly conditioned upon
the initial and continued qualification of the Plans under the Code, and upon
the deductibility of contributions made to the Plans under Section 404 of the
Code.  Upon the Employer's request, a contribution which is made by a mistake of
fact, or conditioned upon qualification of the Plans, or any amendment thereof,
or upon the deductibility of contributions, shall be refunded to the Employer
within one year after the payment of the contribution, the denial of the
qualification or the disallowance of the deduction (to the extent disallowed),
whichever is applicable. After the termination of a Plan and the satisfaction of
all liabilities of that Plan to participants and their beneficiaries, any
residual assets remaining in the Trust Fund attributable to that Plan shall be
returned to such Participating Employer or Employers as Vencor may specify.  In
the case of any such return of contribution Vencor shall cause such adjustment
to be made to the Accounts of Participants as it considers fair and equitable
under the circumstances resulting in the return of such contribution.

     8.2  Amendment.  Subject to the provisions of Section 8.1 hereof, this
          ---------
Trust Agreement may be amended at any time or from time to time and in any
manner by written agreement of the Trustee and Vencor, and the provisions of any
such amendment may be made applicable to the Trust Fund as constituted at the
time of the amendment as well as to the part of the Trust Fund subsequently
acquired.  No amendment or modification shall operate to deprive any
Participant, Former Participant, Beneficiary, contingent Beneficiary, or spouse
of any vested rights or benefits accrued to him prior to such amendment or
modification, nor shall any amendment or

                                       17
<PAGE>

modification cause or authorize any part of the funds of the Trust to revert to
or be refunded to the Employer, except as indicated in the Plans. Moreover, no
amendment to the Plans or Trust shall decrease the balance of a Participant's
Individual Account or eliminate an optional form of benefit, except as allowed
by ERISA or the Code.

     8.3  Termination of Plan.  If all the Plans are terminated, this Trust
          -------------------
shall nevertheless continue in effect until the Trust Fund has been distributed
in accordance with the provisions of the Plans pursuant to directions under
Section 4.1(c) hereof.

     8.4  Transfer to Other Funding Agency.  If pursuant to directions under
          --------------------------------
Section 4.1(c) hereof the entire Trust Fund is transferred to a funding agency
for the Plans that is not a trustee, this Trust shall thereupon terminate.

                        ARTICLE 9--LIABILITY OF TRUSTEE
                                   --------------------

     9.1  Factual Matters.  The Trustee shall be fully protected in relying upon
          ---------------
the existence of any fact or state of facts represented to it in writing by the
Employer or the Committee.

     9.2  Indemnity.  Except with respect to fiduciary responsibility for any
          ---------
error or loss that may result by reason of the exercise or non-exercise of that
fiduciary responsibility which is allocated to the Trustee hereunder which is
determined to be the result of the Trustee's own negligence or willful
misconduct, the Employer shall indemnify the Trustee, directly from the
Employer's own assets (including the proceeds of any insurance policy the
premiums of which are paid from the Employer's own assets), from and against any
and all claims, demands, losses, damages, expenses (including, by way of
illustration and not limitation, reasonable attorneys' fees and other legal and
litigation costs), judgments and liabilities arising from, out of, or in
connection with the administration of the Plans and Trust.  The Trustee shall
not be liable for any action taken by the Trustee or any failure to act by the
Trustee if the action taken or the failure to act was directed by the
Administrator, the Committee, the Company, or an Investment Manager or any other
named fiduciary, if the Trustee reasonably relied on such direction and the
Trustee reasonably believed such direction was consistent with the Act.

     9.3  Survival.  The indemnity provided by Section 9.2 shall survive the
          --------
termination of this Trust Agreement.

     9.4  Duty of Care.  The Trustee shall discharge its duties hereunder with
          ------------
the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims.

     9.5  Benefit Payments.  The Trustee shall be under no obligation to
          ----------------
determine the amount of benefits to which Participants or their beneficiaries
will be entitled or to keep any records of the respective interest of any
individual Participant or beneficiary in the Plans.  The Trustee,

                                       18
<PAGE>

upon written instructions from the Committee, shall make payments to the
Participants who qualify for such benefits. The Trustee shall have no liability
to the Employer, Committee, or to any other person in making such payments. The
Trustee shall not be required to determine or make any investigation to
determine the identity or mailing address of any person entitled to benefits and
shall have discharged its obligation in that respect when it shall have sent
checks, securities and other papers by ordinary mail to such person or persons
and addresses as may be certified to it in writing by the Committee.

     9.6  No Guarantee.  It is recognized that the Trustee does not guarantee
          ------------
the assets of the Trust from loss or depreciation and shall be liable only for
failure to discharge his duties in accordance with this Trust Agreement.

     9.7  Prior Trustee.  Trustee shall not be liable, responsible, or required
          -------------
to account to Vencor for the acts of Prior Trustee under the Trust, shall be
entitled to indemnity pursurant to Section 9.2 hereof therefor, and shall be
liable under the Trust as provided herein and only with respect to the assets of
the Trust and the accounts and records of the Trust when, and if, delivered to
it. Trustee agrees to discharge all the duties, obligations and responsibilities
imposed on the Trustee in accordance with the terms of the Trust.

          IN WITNESS WHEREOF, Vencor and the Trustee have caused this Trust
Agreement to be executed by their duly authorized officers as of the day and
year first above written, to be effective on the Effective Date.

NORWEST BANK MINNESOTA,           VENCOR, INC.
NATIONAL ASSOCIATION

By:__________________________     By:______________________________

Name:________________________     Name:____________________________
         (please print)                      (please print)

Title:_______________________     Title:___________________________

Date:________________________     Date:____________________________

                                       19
<PAGE>

                                  ANNEX A TO
                            MASTER TRUST AGREEMENT

                             Trustee Fee Schedule
                             --------------------

                                       20

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