FORM OF AHP ENVIRONMENTAL INDEMNIFICATION AGMT.

ENVIRONMENTAL INDEMNIFICATION AGREEMENT





THIS ENVIRONMENTAL INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into as of January 30, 1998, by BALANCED CARE CORPORATION, a Delaware corporation ("Indemnitor") to and for the benefit of AHP OF INDIANA, INC., a Delaware limited partnership ("Landlord") and American Health Properties, Inc., a Delaware corporation.



R E C I T A L S



A. Indemnitor and American Health Properties, Inc., a Delaware corporation ("American Health") have entered into that certain Facility Agreement of even date herewith (the "Facility Agreement") and, pursuant to the Facility Agreement, and concurrently with Indemnitor's delivery of this Agreement to Landlord, (i) Landlord has executed that certain Assignment of Real Property Acquisition Rights (the "Acquisition Agreement") of even date herewith pursuant to which Landlord has agreed to acquire that certain real property located in [Vanderburgh] County, [Indiana] more particularly described in Exhibit A attached hereto (the "Land"), on the terms and subject to the terms set forth therein, (ii) BCC Development and Management Co., a Delaware corporation ("Developer") a Person which is wholly-owned by Indemnitor and Landlord have entered into that certain Development Agreement of even date herewith (the "Development Agreement") pursuant to which Developer (which is a wholly-owned subsidiary of Indemnitor) has agreed to construct a [___] unit assisted living facility (the "Facility") upon the Property for the fees and on the terms stated therein, (iii) _____________, a [Delaware limited liability company] and Landlord have entered into that certain Lease, of even date herewith (the "Lease"), pursuant to which Tenant has agreed to lease the "Property" (as such term is defined in the Lease) from Landlord, in accordance with the terms and conditions set forth therein, and (iv) Balanced Care at Anderson, Inc., a Delaware corporation ("Manager") and Tenant have entered into that certain Management Agreement for the Facility pursuant to which Manager will manage the Facility on behalf of Tenant for the compensation and on the terms and subject to the conditions provided in the Management Agreement. All capitalized terms used herein shall be defined as stated in the Facility Agreement unless stated to the contrary herein.



B. Indemnitor has guaranteed the obligations of Developer under the Development Agreement and of Manager under the Management Agreement.



C. Landlord has required the execution and delivery of this Agreement by Indemnitor as a condition precedent to the acquisition by Landlord of the Land and Landlord would not be willing to acquire the Land, develop the Property or enable Indemnitor or Developer, Indemnitor's subsidiary, to earn the compensation provided in the Development Agreement or the Management Agreement in the absence of the execution and delivery by Indemnitor of this Agreement.



NOW, THEREFORE, as an inducement to Landlord to acquire the Land and thereafter cause Developer to develop and, upon completion, manage the Property, and for other good



and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Indemnitor, intending to be legally and fully bound, hereby covenants and agrees to and for the benefit of Landlord as follows:



1. Recitals. The recitals set forth above are true and correct and are by this reference incorporated herein.



2. Hazardous Substances. "Hazardous Substances" shall mean any hazardous or toxic material or waste which is regulated by any authority of or operating under the authority of any local or municipal government, the State, or the United States of America or which may require remediation at the behest of any governmental or quasi-governmental agency or which may cause a detriment to or impair the value or beneficial use of the Land or Improvements or cause a health, safety or environmental hazard on, under or about any portion of the Property, including, without limitation, any material or substance which is: (1) petroleum or a petroleum by-product or a fraction, derivative or product of the decay or decomposition thereof; (2) asbestos or an asbestos containing material in any form; (3) a hydrocarbon or similar substance; (4) PCB; (5) formaldehyde; (6) medical waste, (7) radioactive, (8) flammable or explosive; (9) leaked or released from any underground storage tanks; (10) listed as a "toxic pollutant" pursuant to Section 311 of the Federal Pollution Control Act (33 U.S.C. Section 1317) including any amendments thereto; (11) defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) including any amendments thereto; (12) defined as a "hazardous substance" pursuant to Section 101 of 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) including any amendments thereto; (13) listed in the United States Department of Transportation Table (49 CFR ss. 172.101) or by the U.S. Environmental Protection Agency as a hazardous substance; (14) any material, waste or substance which is governed, regulated, listed and/or defined under any Applicable Laws of the State or in the regulations or judicial or administrative orders, decisions or decrees promulgated pursuant to any of the foregoing State or federal laws. The foregoing list of definitions and statutes is intended to be illustrative and not exhaustive, and such list shall not be deemed to include all definitions and laws applicable to the subject matter contained herein, all such laws being included within the definition of Applicable Laws.



3. Compliance with Laws and Regulations. Indemnitor hereby represents, warrants, covenants and agrees to and with Landlord that all operations or activities upon, or any use or occupancy of the Property, or any portion thereof, by Indemnitor, any Affiliates of Indemnitor (wherein the term "Affiliates" shall mean any person or entity controlling, controlled by or under common control with Indemnitor, and the term "control" shall mean the power, directly or indirectly, to direct the management or policies of such person or entity), any agent, contractor or employee of Indemnitor or Affiliates ("Agents"), or any tenant or subtenant of Indemnitor of the Property, or any portion thereof, shall always be in all respects in compliance with any and all federal, State or local laws, regulations, rules, ordinances, common law, court or administrative orders or governmental or insurance requirements relating to Hazardous Substances, including but not limited to the discharge and





removal of Hazardous Substances, that Indemnitor shall pay immediately when due the costs of removal of any Hazardous Substances which are at any time at, under or about the Land as and to the extent required (i) to comply with applicable federal, State or local laws, regulations, rules ordinances, common law, court or administrative orders and governmental or insurance requirements or (ii) to avoid the potential for any release of such Hazardous Substances or (iii) to prevent any liability to Indemnitor, Indemnitee or the Agents or Affiliates of either arising from the presence of such Hazardous Substances, and Indemnitor, Affiliates and Agents will keep the Property free of any lien imposed pursuant to laws, regulations, ordinances, court or administrative orders or governmental or insurance requirements relating to Hazardous Substances. Indemnitor further covenants that neither Indemnitor, the Agents, nor the Affiliates will permit or suffer the release or disposal of any Hazardous Substances over or upon the Property. Indemnitor also covenants that neither Indemnitor, the Agents, nor the Affiliates will have any Hazardous Substance upon the Property except in strict and absolute compliance with all applicable laws, regulations, rules, ordinances, common law, court or administrative orders or governmental or insurance requirements and in quantities which are customary for the operation of the Property for the "Primary Intended Use" thereof (as defined in the Lease). In addition, Indemnitor covenants and agrees that none of the Indemnitor, the Agents, and the Affiliates will allow the manufacture, voluntary transmission or (except in strict and absolute compliance with applicable Federal, state and local laws, statutes, ordinances, codes, common law, rules, regulations, orders, decrees, other applicable requirements of governmental authorities) presence of any Hazardous Substances over or upon the Property. Landlord shall have the right at any time to conduct an environmental audit of the Property and Indemnitor shall cooperate in the conduct of such environmental audit. Furthermore, ...