ENVIRONMENTAL INDEMNITY AGREEMENT BY BALANCED CARE

ENVIRONMENTAL INDEMNITY AGREEMENT



THIS ENVIRONMENTAL INDEMNITY AGREEMENT (the "Agreement") is made this 22nd day of April, 1999 by and among BALANCED CARE CORPORATION, a Delaware corporation, BCC AT DARLINGTON, INC., a Delaware corporation, BALANCED CARE AT BUTLER, INC., a Delaware corporation, BALANCED CARE AT SARVER, INC., a Delaware corporation, BALANCED CARE AT NORTH RIDGE, INC., a Delaware corporation, BALANCED CARE AT EYERS GROVE, INC., a Delaware corporation (collectively and individually, the "Borrower"), in favor of HCFP FUNDING, INC., a Delaware corporation, having its principal office at Two Wisconsin Circle, Fourth Floor, Chevy Chase, Maryland 20815 ("Lender").





A. Borrower is the owner of certain real and personal property known, as more particularly described in Exhibit A attached hereto and made a part hereof by this reference (collectively, the "Property").



B. Borrower has asked the Lender to make a revolving credit loan available to the Borrower in the principal amount of $15,000,000 (the "Loan"), and the Lender has agreed to make the Loan, provided (among other things) (i) the Borrower agrees to execute and deliver those security instruments listed and described in Exhibit B attached hereto and made a part hereof by this reference (as amended, modified, supplemented and restated from time to time, collectively, the "Mortgage"), covering the Property (as defined in the Mortgage) and securing the Borrower's obligations to the Lender in connection with the Loan (the "Obligations"), and (ii) the Borrower executes and delivers this Agreement in favor of Lender.





NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower hereby agrees as follows:



1. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned to such terms in that certain Loan and Security Agreement of even date herewith made by and between Lender and Borrower and pursuant to which Lender has agreed to make the Loan (as amended, modified and restated from time to time, the "Loan Agreement") In addition, for the purposes of this Agreement, the following terms shall have the meanings set forth below:



"Environmental Laws" shall mean all provisions of laws, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by any Governmental Authority concerning the protection of, or regulation of the discharge of substances into, the environment or concerning the health or safety of persons with respect to environmental hazards, and includes, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S. C. Section 1251 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the National Environmental Policy of 1975, 42 U.S.C. Section 4321 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section 300 (f) et seq., and any similar or implementing law of the State of North Carolina and the Commonwealth of Pennsylvania, and all amendments, rules, and regulations promulgated thereunder.



"Hazardous Constituent" shall have the meaning assigned to that term under 40 C.F.R. Section 260.10.



"Hazardous Substances" shall mean at any time any substance, waste, pollutant, contaminant or material, in solid, liquid or gaseous form, which: (i) is a substance regulated or defined or designated as hazardous, extremely or imminently hazardous, dangerous, or toxic pursuant to any law, by any local, state, territorial or federal governmental authority; (ii) is a substance with respect to which such a governmental authority



otherwise requires environmental investigation, monitoring, reporting, or remediation; including but not limited to, (A) all substances, wasters, pollutants, contaminants and materials regulated, or defined or designated as hazardous, extremely or imminently hazardous, dangerous or toxic, under the following federal statutes and their state counterparts, as well as these statutes' implementing regulations: the Hazardous Materials Transportation Act, 42 U.S.C. Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act, 2 U.S.C. Section 9601 et seq. ("CERCLA"), the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Safe Drinking Water Act Section 2011 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 7401 et seq., and the Emergency Planning and Community Right to Know, 42 U.S.C. Section 11011 et seq.; (B) petroleum and petroleum products including crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) radioactive substances; (F) asbestos; (G) urea formaldehyde; and (H) polychlorinated biphenyls.



"Solid Wastes" shall have the meaning assigned thereto in C.F.R. Section 261.2.



"Storage Containers" shall mean existing and future containers for Toxic Substances and above ground and underground storage tank systems (including underground piping, conduits or sumps ...