Environmental Condition And Indemnity Agreement

ENVIRONMENTAL CONDITION AND INDEMNITY AGREEMENT


THIS ENVIRONMENTAL CONDITION AND INDEMNITY AGREEMENT (the "Environmental Indemnity Agreement"), is made as of the Effective Date by and among Medina ALF, Inc., a Florida corporation ("Medina"), Centerville ALF, Inc., a Florida corporation ("Centerville"), Shippensburg ALF, Inc., a Florida corporation ("Shippensburg") (Medina, Centerville, and Shippensburg are collectively referred to hereinafter as "Seller"), Ocwen Financial Corporation, a Florida corporation ("Ocwen"), Balanced Care Realty (OFC), Inc., a Delaware corporation ("Buyer"), Balanced Care Corporation, a Delaware corporation ("Balanced Care"), Balanced Care at Medina, Inc., a Delaware corporation ("BCM"), Balanced Care at Centerville, Inc., a Delaware corporation ("BCC"), Balanced Care at Shippensburg, Inc., a Delaware corporation ("BCS") (BCM, BCC, and BCS are collectively referred to hereinafter as "Management Companies"), and Senior Care Operators of Shippensburg, LLC, a Delaware limited liability company ("Licensee"). Buyer, Balanced Care, Management Companies and Licensee shall be collectively referred to in this Environmental Agreement as "Indemnitors." Seller and Ocwen and their respective successors and assigns, affiliates, officers, directors, parents, subsidiaries, shareholders, employees, agents, representatives, contractors and consultants shall be collectively referred to in this Environmental Indemnity Agreement as, and shall constitute, the "Indemnified Parties."


WITNESSETH:


WHEREAS, Seller, Ocwen, and the Indemnitors have entered into an Agreement of Purchase and Sale ("Purchase Agreement") relative to the Property more fully described therein.


WHEREAS, this is the Environmental Indemnity Agreement contemplated by and referred to in Section 31.4 of the Purchase Agreement.


WHEREAS, as contemplated by the Purchase Agreement, a portion of the purchase price for the Property is being financed by Ocwen pursuant to a loan to Buyer ("Loan") upon the terms and conditions set forth in the Term Loan Agreement, effective on and as of the Effective Date, by and among Buyer, Balanced Care, the Management Companies, and Licensee ("Term Loan Agreement") and pursuant to the Term Note executed by Buyer in favor of Ocwen in connection therewith ("Term Note").
WHEREAS, this is the Environmental Indemnity Agreement contemplated by and referred to in Sections 3.11 and 8.8 of the Term Loan Agreement.


WHEREAS, in order to secure the obligations of Buyer set forth in the Term Loan Agreement, Buyer has executed three (3) Open-End Mortgages, Security Agreements, and Assignments of Leases and Rents to Ocwen, conveying the Property back to Ocwen, effective as of the Effective Date ("Mortgages"), as well as three (3) additional subordinate mortgages on such Property securing other obligations of Buyer and Balanced Care, effective as of the Effective Date ("Subordinate Mortgages").


WHEREAS, this is the Environmental Indemnity Agreement contemplated by and referred to in Section 27 of the Mortgages and Section 27 of the Subordinate Mortgages.


NOW THEREFORE, in consideration for the mutual promises, covenants and agreements set forth herein and in the Purchase Agreement, Term Loan Agreement, other Loan Documents (as defined in the Term Loan Agreement), and the documents and agreements executed in connection with the consummation of the transactions contemplated by the Purchase Agreement ("Purchase Documents"), as well as certain other valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties to this Environmental Indemnity Agreement, intending to be legally bound, hereby agree as follows:


AGREEMENT:


Section 1. DEFINITIONS. The capitalized terms used in this Environmental Indemnity Agreement which are defined in this Section 1 shall have the meanings attached to such terms in this Section 1.


"Actual Knowledge" or "actual knowledge" means the actual knowledge of such employees, agents, consultants, or representatives of any Indemnitor who, as a result of their positions, duties, and or responsibilities for such Indemnitor, would be reasonably expected to have knowledge of the particular matter at issue.


"Effective Date" means March 31, 2002.


"Environment" or "Environmental" means any water or water vapor, any land including land surface or subsurface, soil, air, fish, wildlife, and all other natural resources.


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"Environmental Laws" mean all federal, state and local environmental, land use, zoning, public health, chemical use, safety and sanitation laws, statutes, ordinances, or codes relating to the protection of the Environment and/or governing the use, exposure, release, storage, treatment, generation, transportation, processing, handling, production, sale, transport, reuse, recycling or disposal of Hazardous Substances, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601, et seq.), the Clean Air Act, as amended (42 U.S.C. Sections 7401, et seq.), the Clean Water Act, as amended (33 U.S.C. Sections 1251, et seq.), the Occupational Safety and Health Act, as amended (29 U.S.C. Sections 651, et seq.), and all rules, regulations, policies, guidelines, interpretations, decisions, orders or requirements (including consent decrees, judicial decisions and administrative orders) of federal, state and local governmental agencies and authorities with respect thereto.


"Environmental Permits" means all permits, licenses, approvals, authorizations, standards, directives, consents or registrations required by any Environmental Laws in connection with the ownership, use and/or operation of the Property and/or the use, exposure, release, storage, treatment, generation, transportation, processing, handling, production, sale, transport, reuse, recycling or disposal of Hazardous Substances at the Property.


"Hazardous Substance" means, without limitation, any flammable explosives, radioactive material, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, crude oil or any petroleum based products, asbestos-containing material in any form or condition, lead-based paint in any form or condition, methane gas or any related substance, hazardous materials, hazardous wastes, or hazardous or toxic substances or related materials, as defined in the Environmental Laws and in the regulations promulgated thereunder. Notwithstanding the foregoing, the term Hazardous Substances as defined herein shall not include (a) pharmaceuticals and cleaning agents of the types and in the quantities and concentrations normally stocked by health care and senior housing providers similar to the Project Properties (as defined in the Term Loan Agreement), (b) oil in de minimis amounts typically associated with the use of certain portions of the Property for driving and parking motor vehicles, or (c) medical wastes generated at the Property; provided that the foregoing are used, stored, transported and/or disposed of in accordance with all Environmental Laws.


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"Property" means the Land, Improvements and Fixtures (as such are defined in the Purchase Agreement), whether located in the past, present or future on the Property.


"Release" has the same meaning as given to that term in the Comprehensive, Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.Sections 9601, et seq.), and all regulations promulgated thereunder.


Section 2. REPRESENTATIONS AND WARRANTIES. Indemnitors, jointly and severally, represent and warrant to the Indemnified Parties that, except as may otherwise be set forth in the Site Assessment Reports listed on Exhibit A hereto (the "Reports"):


(a) Neither the Property nor to Indemnitors' actual knowledge, any property adjacent to the Property is being, nor to Indemnitors' actual knowledge, at any time in the past has been used in violation of Environmental Laws for the storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance or as a landfill or other waste disposal site or for the storage of petroleum, crude oil or any petroleum based products.


(b) No underground, partially underground or above-ground storage tanks, lines or related systems are, nor to Indemnitors' actual knowledge, at any time in the past have been, located in, on or under the Property.


(c) The soil, subsoil, bedrock, surface water and groundwater of the Property and all buildings, structures or other Improvements on the Property are free of any Hazardous Substances.


(d) To Indemnitors' actual knowledge, at no time in the past, nor currently, has there been a Release nor threat of a Release on, at or from the Property or any property adjacent to or within a one-mile radius of the Property which through soil, subsoil, bedrock, surface water or groundwater migration could come to be located on the Property, and Indemnitors have not received any form of notice or inquiry from any federal, state or local governmental agency or authority, any operator, tenant, subtenant, licensee or occupant of the Property or any property adjacent to or within a one-mile radius of the Property or any other person with regard to a Release or the threat of a Release on, at or from the Property or any property adjacent to or within a one-mile radius of the Property.


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