MEDITRUST ESCROW AGREEMENT

ESCROW AGREEMENT





THIS AGREEMENT is made as of the 31st day of December, 1997, by and among BALANCED CARE CORPORATION, a Delaware corporation, having its principal place of business at 5021 Louise Drive, Suite 200, Mechanicsburg, PA 17055 ("BCC") (hereinafter referred to as "BCC"), MEDITRUST ACQUISITION CORPORATION II, a Delaware corporation, having its place of business at 197 First Avenue, Needham Heights, Massachusetts 02194 (hereinafter referred to as "Meditrust") and NUTTER, MCCLENNEN & FISH, LLP, a Massachusetts limited liability partnership, having its place of business at One International Place, Boston, Massachusetts 02110 (the "Escrow Agent").



W I T N E S S E T H:



WHEREAS, Meditrust has entered those certain Facility Lease Agreements, more particularly described on EXHIBIT A attached hereto and incorporated herein by reference, with various Subsidiaries (as hereinafter described) of BCC (collectively, the "Leases") and the Lease Obligations (as defined under each Lease) are guarantied by BCC;



WHEREAS, the holders of the lessees' interests under the Leases (collectively, the "Lessees") have requested that (a) Meditrust consent to the assignment by the Lessees of their respective interests under the Leases to the seven (7) newly-formed single purpose entities described on EXHIBIT B attached hereto and incorporated herein by reference (collectively, the "TC Realty Subsidiaries"), which are Subsidiaries of TC Realty Holding Company, a Delaware corporation (the "Parent") and (b) in connection with such assignment transaction (the "Assignment Transaction"), Meditrust (i) enter into development arrangements with BCC Development and Management Co., a Delaware corporation (the "Developer") and the TC Realty Subsidiaries, pursuant to which, the Developer will supervise the completion of the construction of each Facility (as defined under each Lease), (ii) consent to the TC Realty Subsidiaries entering into management agreements with Subsidiaries of BCC, (iii) make certain working capital loans to the Parent (the "Working Capital Loans"), so that the Parent can use the proceeds of such Working Capital Loans as equity contributions to the TC Realty Subsidiaries and (iv) consent to the grant to BCC by the Parent of options to acquire all of the issued and outstanding equity interests in the TC Realty Subsidiaries;



WHEREAS, Meditrust is willing to consent to the Assignment Transaction subject to certain conditions (the "Closing Conditions");



WHEREAS, notwithstanding the fact that the Closing Conditions have not been satisfied, BCC has requested and Meditrust has agreed to place a portion of the requested Working Capital Loan proceeds in escrow, subject to the terms hereof;



NOW, THEREFORE, for good and valuable consideration paid by each of the parties hereto to the other, the receipt and sufficiency of which is hereby acknowledged, Meditrust,

BCC and the Escrow Agent agree with each other as follows:



1. DELIVERY INTO ESCROW: Concurrently with the execution and delivery of this Agreement, Meditrust shall deliver TWO MILLION ONE HUNDRED FIFTY-NINE THOUSAND EIGHT HUNDRED NINETEEN DOLLARS ($2,159,819) (the "Escrowed Funds") to the Escrow Agent to hold such Escrowed Funds in an interest-bearing account, with the interest accruing thereon to accrue to the benefit of Meditrust. Meditrust hereby agrees that the Escrowed Funds shall be held in escrow by the Escrow Agent until the earlier to occur of (i) the date of the consummation of the Assignment Transaction (the "Closing Date"), which shall not occur unless and until Meditrust has determined, in its sole and absolute discretion, that all of the Closing Conditions have been satisfied and (ii) the Termination Date (as hereinafter defined). The Termination Date shall be defined as February 27, 1998, unless the same is extended by Meditrust (in writing) in its sole and absolute discretion.



2. OBLIGATION OF BCC: In consideration of Meditrust's agreement to place the Escrowed Funds in escrow pursuant to the terms hereof, BCC hereby agrees to pay to Meditrust, upon the earlier to occur of the Closing Date or the Termination Date (as the same may be extended in accordance with the terms hereof), an amount (the "Make-Whole Payment") equal to all costs and expenses incurred by Meditrust in connection with all arrangements made by Meditrust to place the Escrowed Funds in escrow pursuant to the terms hereof including, without limitation, "Meditrust's Cost of Funds" (as hereinafter defined) minus the interest, if any, earned on the Escrowed Funds. Calculation of the Make-Whole Payment shall be determined on and as of the Closing Date or the Termination Date (as the same may be extended in accordance with the terms hereof), as applicable. The Make-Whole Payment shall be due and payable by BCC whether or not the Assignment Transaction is consummated (regardless of the reason); although, notwithstanding the foregoing, Meditrust agrees that, in the event that the Assignment Transaction is consummated, the Make-Whole Payment may be paid by the TC Realty Subsidiaries on the Closing Date in connection with the consummation of the Assignment Transaction. The provisions of this Section 2 shall survive the expiration or earlier termination of this Agreement.



As used herein, "Meditrust's Cost of Funds" shall mean the interest expense incurred by Meditrust in borrowing the Escrowed Funds at the "Prime Rate" (as hereinafter defined). As used herein, the Prime Rate shall mean the variable rate of interest per annum from time to time announced by Fleet Bank of Connecticut, N.A. ("Fleet") as its prime rate of interest, and in the event that Fleet no longer announces a prime rate of interest, then the Prime Rate shall be deemed to be the variable rate of interest per annum which is the prime rate of interest or base rate of interest from time to time announced by any other major bank or other financial institution reasonably selected by Meditrust.



3. TERMS OF THE ESCROW ARRANGEMENT: In the event that the Assignment Transaction is consummated on or prior to the Termination Date (as the same may be extended in accordance with the terms hereof), on the Closing Date, Meditrust shall instruct





the Escrow Agent to disburse the Escrowed Funds in accordance with the Disbursement Authorization Statement approved by Meditrust in connection with the consummation of the Assignment Transaction. In the event that the Assignment Transaction is not consummated on or prior to the Termination Date (as the same may be extended in accordance with the terms hereof), Meditrust shall instruct the Escrow Agent to return the Escrowed Funds to Meditrust. Meditrust shall endeavor to provide to BCC copies of all written instructions furnished by Meditrust to the Escrow Agent concurrently with the delivery of the same to the Escrow Agent, but Meditrust shall have no liability as a result of any failure to provide such copies to BCC.



4. THE ESCROW AGENT'S DUTIES: The Escrow Agent may rely upon and shall be protected in acting or refraining from acting upon any written notice, instruction, request, affidavit, or other instrument, document or agreement furnished to it by Meditrust pursuant to this Agreement or ...