HAZARDOUS SUBSTANCE INDEMNIFICATION

Loan No. 98-674



HAZARDOUS SUBSTANCE

INDEMNIFICATION AGREEMENT





This HAZARDOUS SUBSTANCE INDEMNIFICATION AGREEMENT ("Indemnity") is made as of the 14th day of October, 1998, by Brookdale Living Communities of New Mexico-SF, Inc., a corporation organized and existing under the laws of Delaware, whose address is c/o Brookdale Living Communities, Inc., 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601 ("Operator"), and Brookdale Living Communities, Inc., a corporation organized and existing under the laws of Delaware whose address is 77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr. ("Parent"). Operator and Parent are hereinafter collectively referred to as "Indemnitors" and each individually as an "Indemnitor") to and in favor of HELLER FINANCIAL, INC., a Delaware corporation, with a mailing address at 500 West Monroe Street, 30th Floor, Chicago, Illinois 60661 (HELLER FINANCIAL, INC. and its successors and assigns are hereinafter collectively referred to as "Lender").





A. Substantially contemporaneously herewith, Lender is entering into a financing transaction ("Loan") with The PDL Business Trust, a Delaware business trust ("Borrower"), which Loan is evidenced by a certain Fixed Rate Program Promissory Note Secured by Mortgage ("Note") in the principal amount of TWELVE MILLION TWO HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS ($12,250,000) of even date herewith executed and delivered by Borrower, as maker, to the order of Lender, as payee, secured by, inter alia, a Ground Leasehold Mortgage, Assignment of Rents and Security Agreement and Fixture Filing of even date herewith ("Ground Lease Mortgage") encumbering certain real property located in Santa Fe, New Mexico and more fully described on Exhibit A attached hereto and incorporated herein ("Land") (the Note, the Ground Lease Mortgage, and any other documents evidencing or securing the Loan or executed in connection therewith, and any modification, renewal, or extension thereof are hereinafter collectively referred to as the "Borrower Loan Documents"). Substantially contemporaneously herewith, Borrower and Operator are entering into a lease (the "Operator Lease") of the Property (as defined in the Ground Lease Mortgage) pursuant to which Operator will operate, manage and maintain the Property. In connection therewith, Operator has executed a guaranty of certain obligations of Borrower under the Borrower Loan Documents ("Guaranty") which Guaranty is secured by a Sub-Leasehold Mortgage, Assignment of Rents and Security Agreement and Fixture Filing ("Sub-Leasehold Mortgage") against Operator's interest in the Property under the Operator Lease. The Guaranty, this Indemnity and all other documents executed by Operator which evidence or secure the Guaranteed Obligations (as defined in the Guaranty) are collectively referred to as the "Guaranty Documents".



B. Lender has required this Indemnity as a condition of Lender's disbursing the Loan and accepting the Guaranty.



C. Parent owns all of the outstanding stock of Operator, and it is in each of Parent's and Operator's direct financial interest and benefit to induce Lender to make the Loan by executing and delivering this Indemnity.



NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:



1. Indemnity.



Each Indemnitor hereby agrees, jointly and severally, unconditionally, absolutely and irrevocably, to indemnify, defend (with counsel reasonably acceptable to Lender and at Indemnitor's sole cost) and hold harmless Lender and its officers, directors, employees, shareholders, agents and affiliates (collectively the "Lender's Group"), against and in respect of any and all liabilities, obligations, deficiencies, demands, claims, actions, or causes of action, assessments, losses, costs, expenses (including, without limitation, court costs and reasonable attorneys' fees and expenses), interest, fines, penalties, actual and punitive damages, and all costs and expenses of any and all investigations, remedial measures, proceedings, arbitrations, mediations, judgments, settlements, and compromises whatsoever (collectively the "Liabilities") sustained or incurred by Lender's Group resulting from or arising out of or by virtue of a claim made by any party resulting from:



(a) The presence on or under, or the escape, seepage, leakage, spillage,

discharge, emission, disposal (whether arranged or otherwise) or

release from, the Land into or upon any land, the atmosphere, or any

watercourse, body of water or wetland, of any "Hazardous Materials" (as

hereinafter defined).



(b) Any failure of the Land, any improvements located thereon or activities

thereon to comply with all applicable "Environmental Laws" (as

hereinafter defined).



(c) Any personal injury relating to the presence of any Hazardous Materials

on or from the Land or the improvements located thereon.



The term "Environmental Laws" shall include any federal, state or local laws or regulations relating to health, safety or protection of the environment. The term "Hazardous Materials" shall include Hazardous Substances, as defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., any petroleum or petroleum products, asbestos or asbestos containing material, or any other hazardous substances, hazardous wastes or hazardous materials as defined by other Environmental Laws.



Notwithstanding anything contained herein to the contrary, the Indemnitors shall not be responsible for indemnifying or holding Lender harmless from and against Liabilities incurred in connection with or as a result of, any of the matters described in clauses (a) through (c) above inclusive to the extent: (A) that such Liabilities result from Hazardous Materials being placed on, above or under, or emitted from, the Land and/or improvements located thereon, (i) by Lender or its agents or (ii) subsequent to (and not resulting from any condition existing prior to) Indemnitors vacating, and relinquishing possession and control of, the Property and Lender or any successor in title to Borrower (other than Indemnitors or any of their respective affiliates) as a foreclosure purchaser or designee of Lender taking actual possession of, or title to, the Property; or (B) as long as necessary, and only to the extent necessary for the indemnification herein contained to be effective and enforceable, this agreement to indemnify Lender shall not extend to liability, claims, damages, losses or expenses arising out of: (1) the preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs or specifications by the Lender or the agents or employees of the Lender; or (2) the giving of or the failure to give directions or instructions by the Lender or the agents or employees of the Lender, where such giving or failure to give directions or instructions is the primary cause of bodily injury to persons or damage to property. As used herein, the term "Property" shall mean "Property" as defined in the Ground Lease Mortgage.



2. Indemnification Procedure.



(a) Notice. Each Indemnitor shall notify Lender promptly (and in any event

within 10 business days) upon receipt of any inquiry, notice, claim,

charge, cause of action or demand pertaining to the matters indemnified

under Paragraph 1 above, including, without limitation, any notice of

inspection, abatement or noncompliance, stating the nature and basis of

such inquiry or notification. For identical notices from different

Indemnitors, only one such notice needs to be provided to Lender. Each

Indemnitor shall promptly deliver to Lender any and all documentation

or records as Lender may reasonably request in connection with such

notice or inquiry and shall keep Lender advised of any subsequent

developments. If any person or entity entitled to indemnification under

this Indemnity ("Indemnified Party") asserts a claim for

indemnification or receives notice of the assertion of any claim or of

the commencement of any action or proceeding against such Indemnified

Party, Indemnified Party shall give written notice together with a

statement of any available information regarding such claim to

Indemnitors within 30 days after learning of such claim or within such

shorter time as may be necessary to give Indemnitors a reasonable

opportunity to respond to such claim. Indemnitors shall ...