INDEMNITY AGREEMENT
                               -------------------

         THIS  INDEMNITY  AGREEMENT  (this  "Agreement"),  made as of August 24,
1999, from BROOKDALE LIVING COMMUNITIES,  INC., a Delaware corporation having an
office at 77 West Wacker Drive, Suite 4400, Chicago,  Illinois 60601, Attention:
Darryl  W.  Copeland,  Facsimile  Number  (312)  977-3699  ("Guarantor")  to the
Indemnified  Parties (as hereinafter  defined)  including AH Battery Park Owner,
LLC, an Ohio limited  liability  company having an address 723 Electronic Drive,
Suite 300, Horsham,  Pennsylvania 19044, Attention:  David B. Fenkell, Facsimile
Number (215) 706-0877 (together with its successors and assigns, "Owner").


                                    RECITALS
                                    --------

         WHEREAS,  the sole member of Owner is AH Battery Park  Member,  LLC, an
Ohio limited liability company (the "Member");

         WHEREAS, Owner intends to develop a congregate housing facility with an
assisted living  component for the elderly in Battery Park City, New York, which
is currently referred to as "The Hallmark at Battery Park" (the "Project");

         WHEREAS,  Owner has obtained a loan from Key Corporate  Capital,  Inc.,
Fleet  National  Bank and  European  American  Bank  (collectively,  the "Senior
Lender") for the acquisition,  development and  construction of the Project,  in
the amount of up to $49,125,000 (the "Senior Loan");

         WHEREAS, Owner and Brookdale Living Communities of New York-BPC,  Inc.,
a Delaware corporation and an affiliate of Guarantor  ("Manager"),  are entering
into a  certain  management  agreement  dated  the date  herewith  and a certain
development  agreement  dated the date herewith  (collectively  the  "Management
Agreement"),  pursuant to which Manager  shall  manage,  operate and develop the
Property;

         WHEREAS,  Owner  purchased  Manager's  interests  in the  Project  from
Manager; and

         WHEREAS,  Owner is  unwilling  to enter into the  Management  Agreement
unless Guarantor  indemnifies Owner against certain liabilities  including those
arising under  Environmental Laws (as herein defined),  relating to the property
where the Project is located, which property consists of the fee simple interest
in the land (being more particularly  described in the documents  evidencing the
Senior  Loan)  and all  buildings,  structures  and  other  improvements  now or
hereafter situated on such land (the "Property").

         NOW,  THEREFORE,  in  consideration  of  entering  into the  Management
Agreement and the  covenants,  agreements,  representations  and  warranties set
forth in this  Agreement,  the parties  hereby  covenant,  agree,  represent and
warrant as follows:

<PAGE>

         1.     Defined   Terms.   Unless  the   context   otherwise   requires,
capitalized  terms used but not  otherwise  defined  herein  but  defined in the
Building  Loan  Agreement  dated as of the date hereof  between Owner and Senior
Lender (the "Loan Agreement") shall have the meanings provided  therefore in the
Loan Agreement, and the following terms shall have the following meanings:

         "Environmental  Claim" means any written  request for  information by a
Governmental   Authority,   or  any   written   notice,   notification,   claim,
administrative,  regulatory or judicial action, suit, judgment,  demand or other
written  communication  by  any  Person  or  Governmental  Authority  requiring,
alleging or asserting  liability with respect to any of the Indemnified  Parties
or the  Property,  whether  for  damages,  contribution,  indemnification,  cost
recovery, compensation, injunctive relief, investigatory,  response, remedial or
cleanup  costs,  damages  to  natural  resources,  personal  injuries,  fines or
penalties  arising out of, based on or  resulting  from (i) the  presence,  Use,
Release or threatened Release into the environment of any Hazardous Substance in
violation  of  any  Environmental  Law  originating  at or  from,  or  otherwise
affecting,  the Property, (ii) any fact,  circumstance,  condition or occurrence
forming the basis of any violation,  or alleged violation,  of any Environmental
Law by any of the  Indemnified  Parties or otherwise  affecting  the Property or
(iii)  any  alleged  injury  or  threat  of  injury  to  health,  safety  or the
environment  by  any of the  Indemnified  Parties  or  otherwise  affecting  the
Property arising from actions which are in violation of Environmental Laws.

         "Environmental Laws" means any and all applicable federal, state, local
and foreign laws,  rules,  regulations or municipal  ordinances  each as amended
from time to time, and any permits, approvals, licenses, registrations,  filings
and authorizations,  in each case as in effect as of the relevant date, relating
to the environment, health or safety, and pertaining to or imposing liability or
standards  of conduct  concerning  environmental  regulation,  contamination  or
clean-up,  including the Comprehensive Environmental Response,  Compensation and
Liability  Act,  the Resource  Conservation  and  Recovery  Act,  the  Emergency
Planning and  Community  Right-to-Know  Act of 1986,  the  Hazardous  Substances
Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean
Air Act,  the Toxic  Substance  Control Act,  the Safe  Drinking  Water Act, the
Occupational  Safety and Health  Act,  any state  super-lien  and  environmental
clean-up  statutes  and all  amendments  to and  regulations  in  respect of the
foregoing laws.

         "Guarantor"  has the meaning  provided in the first  paragraph  of this
Agreement.

         "Hazardous  Substance"  means,  collectively,   (i)  any  petroleum  or
petroleum products or waste oils, explosives,  radioactive materials,  asbestos,
urea formaldehyde foam insulation,  polychlorinated  biphenyls ("PCBs"), lead in
drinking  water,   and  lead  based  paint,  the  presence,   generation,   use,
transportation,  storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any  Environmental Law or (y) is subject to notice
or reporting  requirements  under any  Environmental  Law, (ii) any chemicals or
other  materials or substances  which are now or hereafter  become defined as or
included  in the  definition  of  "hazardous  substances,"  "hazardous  wastes,"
"hazardous  materials,"  "extremely  hazardous

                                       2

<PAGE>

wastes," "restricted  hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants,"  "pollutants" or words of similar import under any Environmental
Law and (iii) any other chemical or any other material or substance, exposure to
which  is  now  or  hereafter   prohibited,   limited  or  regulated  under  any
Environmental Law.

         "Indemnified Parties" is defined in Section 2(a) of this Agreement.

         "Owner" has the meaning provided in the Recitals to this Agreement.

         "Person" means any individual,  corporation, limited liability company,
partnership,  joint venture, estate, trust,  unincorporated  association, or any
other entity, any federal,  state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.

         "Release" means, with respect to any Hazardous Substances, any release,
threatened release,  spill,  emission,  leaking,  pumping,  injection,  deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or outdoor
environment, including, without limitation, the movement of Hazardous Substances
through  ambient air,  soil,  surface  water,  ground water,  wetlands,  land or
subsurface strata.

         "Remedial Work" means any investigation, site monitoring,  containment,
cleanup, removal,  restoration or other work of any kind reasonably necessary or
required under an applicable Environmental Law.

         "Use" means, with respect to any Hazardous  Substance,  the generation,
manufacture,  processing,  distribution,  handling, use, treatment, recycling or
storage of such  Hazardous  Substance  in  violation  of  Environmental  Laws or
transportation  to or from  the  property  of  such  Person  of  such  Hazardous
Substance in violation of Environmental Laws.

         2.     Indemnification.

                (a)      Guarantor  agrees to indemnify,  reimburse,  defend and
hold  harmless  Owner,  Member,  Alliance  Holdings,  Inc. and their  directors,
officers,  employees,  partners,  members,  managers,  shareholders  and  agents
(individually,   an  "Indemnified  Party"  and  collectively,  the  "Indemnified
Parties")  for,  from and  against  all  demands,  claims,  actions or causes of
action,  assessments,   losses,  damages,   liabilities,   costs  and  expenses,
including,  without  limitation,  interest,  penalties,  consequential  damages,
reasonable   attorneys'  fees,  reasonable   disbursements  and  expenses,   and
reasonable  consultants'  fees,  disbursements and expenses,  including costs of
Remedial Work (collectively "Losses"),  asserted against,  resulting to, imposed
on, or incurred by any of them,  directly or indirectly,  in connection with any
of the following:

                i)       events, circumstances,  or conditions which are alleged
         to, or do, form the basis for an Environmental Claim;

                                       3

<PAGE>

                ii)      the  presence,  Use or Release of Hazardous  Substances
         at, on, in, under or from the Property,  which presence, use or release
         requires or could reasonably require Remedial Work;

                iii)     any  Environmental   Claim  against  any  Person  whose
         liability  for  such  Environmental  Claim  Guarantor  has or may  have
         assumed or retained either contractually or by operation of law;

                iv)      any  failure of  Guarantor  to  fulfill  each and every
         obligation undertaken pursuant to this Agreement;

                v)       events,  circumstances,  or conditions  relating to the
         Project or the  Manager  which  occur,  are alleged to, or do, form the
         basis for any claim  under any  applicable  laws  except to the  extent
         caused directly by Owner or any of the Indemnified Parties;

                vi)      any  failure of the  Manager to fulfill  each and every
         obligation undertaken pursuant to the Management Agreement; or

                vii)     anything occurring at or around, or in connection with,
         the Project during the term of the Management  Agreement  except to the
         extent caused directly by Owner or any of the Indemnified Parties.

                It is specifically acknowledged and agreed that David B. Fenkell
is an Indemnified Party.

                (b)  Nothing  in this  Agreement  shall be deemed to  deprive an
Indemnified  Party of any rights or remedies  provided to such Indemnified Party
elsewhere in this  Agreement or otherwise  available to such  Indemnified  Party
under law.  Guarantor waives and releases each Indemnified Party from any rights
or  defenses  Guarantor  may have  under  common law or  Environmental  Laws for
liability  arising  from or  resulting  from the  presence,  Use or  Release  of
Hazardous  Substances  except  to  the  extent  directly  caused  by  the  gross
negligence, fraud or willful misconduct of such Indemnified Party.

                3.       Payment. All payments due to an Indemnified Party under
this Agreement shall be payable to such  Indemnified  Party within ten (10) days
after written demand therefor,  and shall bear interest at ten percent (10%) per
annum from the date such payment is due until the date of payment.

                4.        Governing Law; Waiver of Jury Trial; Consent to Venue.

                (a)      The  parties  agree  that  the  State  of  Ohio  has  a
substantial  relationship  to the  parties  and to  the  underlying  transaction
embodied hereby, and in all respects, including, without limitation,  matters of
construction,  validity and  performance,  this  Agreement  and the  obligations
arising  hereunder  shall be governed by, and construed in accordance  with, the
laws of the State

                                       4

<PAGE>

of Ohio  applicable  to  contracts  made and  performed  in such  State  and any
applicable  law  of  the  United  States  of  America  subject,  however,  as to
performance,  to the  Environmental  Laws governing the Project.  To the fullest
extent permitted by law, Guarantor hereby unconditionally and irrevocably waives
any  claim  to  assert  that  the law of any  other  jurisdiction  governs  this
Agreement,  and this Agreement  shall be governed by and construed in accordance
with the laws of the State of Ohio subject,  however, as to performance,  to the
Environmental Laws governing the Project.

                (b)      THE  GUARANTOR,  AFTER  CONSULTING  OR  HAVING  HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL,  KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION  BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT,  OR ANY OF
THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT,  OR ANY COURSE OF  CONDUCT,
DEALING,  STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE GUARANTOR.  THE
GUARANTOR  SHALL NOT SEEK TO  CONSOLIDATE,  BY  COUNTERCLAIM  OR OTHERWISE,  ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN  WAIVED  WITH ANY OTHER  ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED UNLESS THE FAILURE TO SO CONSOLIDATE
WOULD RESULT IN A MANDATORY LOSS OF SUCH CLAIM.  IN THE EVENT OF A DISPUTE UNDER
THIS  AGREEMENT,  THE GUARANTOR  HEREBY AGREES THAT EXCLUSIVE  JURISDICTION  AND
VENUE LIES IN A COURT OF COMPETENT JURISDICTION IN FRANKLIN COUNTY, OHIO.

                5.       Modification,   Waiver  in  Writing.  No  modification,
amendment, extension, discharge,  termination or waiver of any provision of this
Agreement or consent to any departure by Guarantor therefrom, shall in any event
be effective  unless the same shall be in a writing  signed by the party against
whom  enforcement is sought,  and then such waiver or consent shall be effective
only in the specific instance,  and for the purpose,  for which given. Except as
otherwise  expressly  provided herein, no notice to or demand on Guarantor shall
entitle  Guarantor to any other or future notice or demand in the same,  similar
or other circumstances.

                6.       Delay Not a Waiver.  Neither  any failure nor any delay
on the part of any Indemnified Party in insisting upon strict performance of any
term, condition, covenant or agreement or exercising any right, power, remedy or
privilege hereunder,  shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise,  or the
exercise of any other right, power, remedy or privilege. In particular,  and not
by way of  limitation,  by  accepting  payment  after the due date of any amount
payable under this Agreement,  an Indemnified  Party shall not be deemed to have
waived any right either to require  prompt payment when due of all other amounts
due under this  Agreement,  or to declare a default for failure to effect prompt
payment of any such other amount.

                7.       Notices. All notices, consents,  approvals and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand  delivery,  with proof of
attempted  delivery,  (b)  certified or registered

                                       5

<PAGE>

United States mail,  postage prepaid,  (c) expedited  prepaid delivery  service,
either  commercial  or United  States  Postal  Service,  with proof of attempted
delivery, or (d) by telecopier (with answerback acknowledged) provided that such
telecopied  notice must also be  delivered by one of the means set forth in (a),
(b) or (c) above,  addressed if to any Indemnified Party at the address of Owner
set  forth on the first  page  hereof,  and if to  Guarantor  at its  designated
address set forth on the first page hereof,  or at such other address and Person
as shall be designated  from time to time by any party  hereto,  as the case may
be, in a written notice to the other parties  hereto in the manner  provided for
in this  Section 7. A copy of all  notices,  consents,  approvals  and  requests
directed to Owner shall be  delivered  concurrently  to the  following:  Squire,
Sanders & Dempsey  L.L.P.,  41 South High  Street,  Suite 1300,  Columbus,  Ohio
43215,  Attention:  Paul F. Sefcovic,  Esq.,  Facsimile Number (614) 365-2499. A
copy of all notices,  consents,  approvals  and  requests  directed to Guarantor
shall be  delivered  concurrently  to each of the  following:  Brookdale  Living
Communities,  Inc., 77 West Wacker Drive, Suite 4400,  Chicago,  Illinois 60601,
Attention:  Darryl W. Copeland, Jr., Facsimile Number (312) 977-3699;  Brookdale
Living Communities,  Inc., 77 West Wacker Drive, Suite 4400,  Chicago,  Illinois
60601, Attention:  Robert J. Rudnik,  Esquire,  Facsimile Number (312) 977-3769;
and  Brookdale  Living  Communities,  Inc.,  77 West Wacker  Drive,  Suite 4400,
Chicago, Illinois 60601, Attention:  Scott E. Jordan, Esquire,  Facsimile Number
(312) 977-3769.  A notice shall be deemed to have been given: (a) in the case of
hand  delivery,  at the  time of  delivery;  (b) in the  case of  registered  or
certified  mail,  when delivered or the first  attempted  delivery on a Business
Day;  (c) in the case of expedited  prepaid  delivery  upon the first  attempted
delivery on a Business  Day; or (d) in the case of  telecopier,  upon receipt of
answerback confirmation received prior to 5:00 p.m. local time on a Business Day
or if  confirmation  received  thereafter on the next  succeeding  Business Day,
provided  that such  telecopied  notice was also  delivered  as required in this
Section 7. A party  receiving a notice which does not comply with the  technical
requirements for notice under this Section 7 may elect to waive any deficiencies
and treat the notice as having been properly given.

                8.       Assignment. Guarantor shall not shall have the right to
assign this  Agreement and the  obligations  hereunder to any Person without the
consent of David B. Fenkell.  All references to "Indemnified  Parties" hereunder
shall be deemed to include the heirs,  successors and assigns of the Indemnified
Parties.

                9.       Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provision or the remaining provisions of this Agreement.

                10.      Heading and Recitals.  The information set forth in the
heading and  recitals  hereof are hereby  incorporated  herein as a part of this
Agreement with the same effect as if set forth in the body hereof.

                                       6

<PAGE>

                11.      Counterparts.  This  Agreement  may be  executed in any
number of counterparts, each of which when so executed and delivered shall be an
original,  but  all  of  which  shall  together  constitute  one  and  the  same
instrument.

                12.      Intentionally Omitted.

                13.      Survival.  This Agreement  shall survive in perpetuity.
Notwithstanding  the foregoing,  Guarantor  shall not indemnify any  Indemnified
Party with respect to any Losses  incurred in  connection  with,  or as a direct
result of, any or all of the matters  described above in Section 2(a)(i) through
2(a)(iii) to the extent that  Guarantor can  establish  directly and solely that
such Losses result from Hazardous Substances being placed on, above or under the
Property by the affirmative act or gross negligence of such  Indemnified  Party.
Guarantor  agrees that this Agreement shall continue to be effective or shall be
reinstated  as the case may be, if at any time any payment is made by  Guarantor
to any  Indemnified  Party and such payment is  rescinded  or must  otherwise be
returned by such  Indemnified  Party upon insolvency,  bankruptcy,  liquidation,
reorganization,    readjustment,    composition,   dissolution,    receivership,
conservatorship,  winding up or other similar proceeding  involving or affecting
Guarantor, all as though such payment had not been made.

              14.        Time  of  the  Essence.  Time  is of the  essence  with
respect to each and every covenant,  agreement and obligation of Guarantor under
this Agreement.

              15.        Termination.  Notwithstanding  anything to the contrary
contained herein, upon the sale of the Property by Owner or a sale of the equity
interest  in Owner  or  Member  to an  unrelated  third  party  purchaser,  this
Agreement and the  indemnity  obligation  provided  hereunder  shall  terminate,
except to the extent any such  obligations  exist and remain unpaid or otherwise
unsatisfied;  provided, however, that if subsequent to any such sale, Losses are
incurred as set forth in Section 2(a) and it is proven that such Losses occurred
as a  result  of  actions  or  omissions  of  Manager  or  Guarantor,  then  the
indemnification  provided  herein  shall  continue to be  effective  or shall be
reinstated, as the case may be.

                                       7

<PAGE>

         IN WITNESS WHEREOF,  the Guarantor has caused this Indemnity  Agreement
to be duly executed by its duly authorized representative, all as of the day and
year first above written.


                                   GUARANTOR:

                                   BROOKDALE LIVING COMMUNITIES, INC.,
                                   a Delaware corporation


                                   By:  /s/ Mark J. Schulte
                                        --------------------------------
                                   Name:     Mark J. Schulte
                                   Its:      President