<PAGE>   1
Exhibit 10.7

THIS DOCUMENT PREPARED BY (WITH
THE ASSISTANCE OF AN ATTORNEY
LICENSED IN THIS STATE), AND AFTER
RECORDING SHOULD BE RETURNED TO:

Gary N. Ruben, Esq.
Goldberg, Kohn, Bell, Black,
  Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois  60603





                    SPACE ABOVE THIS LINE FOR RECORDER'S USE

      THIS INSTRUMENT IS AN OPEN-END MORTGAGE AND SECURES PRESENT AND FUTURE
      INDEBTEDNESS, OBLIGATIONS AND ADVANCES UP TO A MAXIMUM AMOUNT OF
      $64,000,000.00 PLUS INTEREST THEREON, PURSUANT TO 42 PA. C.S. SECTIONS
      8143-8144.

      THE ADDRESS TO WHICH ANY NOTICES TO THE LENDER PERMITTED BY 42 PA. C.S.
      SECTION 8143 ARE TO BE DELIVERED IS SET FORTH IN THE INTRODUCTORY
      PARAGRAPH HEREOF.

      THIS INSTRUMENT IS ALSO A FINANCING STATEMENT FILED AS A FIXTURE FILING
      PURSUANT TO SECTIONS 9313 AND 9402 OF THE PENNSYLVANIA UNIFORM
      COMMERCIAL CODE.


                                                                 Loan No. 99-407

                           FORM OF OPEN-END MORTGAGE,
                    ASSIGNMENT OF RENTS AND SECURITY AGREEMENT


This OPEN-END MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this
"Mortgage") is made as of this 30th day of December, 1999, between BALANCED CARE
REALTY AT SCRANTON, INC., a Delaware corporation, ("Borrower"), whose address is
1215 Manor Drive, Mechanicsburg, Pennsylvania 17055 and HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation ("Lender"), whose address is 2 Wisconsin
Circle, Suite 400, Chevy Chase, Maryland 20815.
<PAGE>   2
                                    RECITALS

            A. Lender has agreed, subject to the terms and conditions of that
certain Loan Agreement dated the date hereof, executed by and among Borrower,
certain affiliates of Borrower (Borrower and such affiliates being referred to
collectively as "Borrower Parties") and Lender (the "Loan Agreement"), to make a
loan (the "Loan") to Borrower Parties. The Loan is evidenced by (i) that certain
Promissory Note A executed by Borrower Parties of even date herewith in the
original principal amount of Twenty-Five Million Six Hundred Thousand and No/100
Dollars ($25,600,000.00) (which note, together with all notes issued in
substitution or exchange therefor and all amendments thereto, is hereinafter
referred to as "Note A") and (ii) that certain Subordinated Promissory Note B
executed by Borrower Parties of even date herewith in the original principal
amount of Six Million Four Hundred Thousand and No/100 Dollars ($6,400,000.00)
(which note, together with all notes issued in substitution or exchange therefor
and all amendments thereto, is hereinafter referred to as "Note B"; Note A and
Note B being collectively referred to as the "Notes"), providing for monthly
payments as set forth in the Notes, with the balance thereof, due and payable on
December 31, 2001 (said date, or any earlier date on which the entire unpaid
principal amount shall be paid or required to be paid in full, whether by
prepayment, acceleration or otherwise is hereinafter called the "Maturity
Date"). The terms and provisions of the Loan Agreement and Notes are hereby
incorporated by reference in this Mortgage.

            B. Lender wishes to secure: (i) the payment of the Notes, together
with all interest, the "Exit Fee" (as defined in the Loan Agreement), and other
amounts, if any, due in accordance with the terms of the Notes, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Notes,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Notes, the Loan Agreement, this
Mortgage, the Environmental Indemnity (as defined in the Loan Agreement) and any
other documents evidencing or securing the Loan or executed in connection
therewith (such documents together with any modifications, renewals, extensions
or replacements thereof are collectively referred to as the "Loan Documents");
and (iii) the payment and performance of any and all other debts, claims,
obligations, demands, monies, liabilities and indebtedness of any kind or nature
now or hereafter owing, arising, due or payable to Lender from any or all of
Borrower, Borrower Parties, Guarantor


                                      -2-
<PAGE>   3
and the Affiliates of Guarantor and each of the Borrower Parties, including
without limitation all indebtedness due and obligations arising under the Other
Finance Documents ("Guarantor," "Affiliates" and "Other Finance Documents"
having the meanings ascribed thereto in the Loan Agreement). All payment
obligations of Borrower Parties, Guarantor and the Affiliates of Guarantor and
each of the Borrower Parties, including without limitation all indebtedness due
under the Loan Documents and the Other Finance Documents, to Lender, whether now
existing or hereafter arising, are hereinafter sometimes collectively referred
to as the "Indebtedness," and all other obligations of Borrower Parties,
Guarantor and the Affiliates of Guarantor and each of the Borrower Parties under
the Loan Documents and the Other Finance Documents are hereinafter sometimes
collectively referred to as the "Obligations".

            NOW, THEREFORE, TO SECURE the repayment of the Indebtedness and the
performance of the Obligations, Borrower has executed this Mortgage and does
hereby irrevocably mortgage, convey, assign, warrant, transfer, pledge and grant
to Lender a security interest in all of Borrower's right, title and interest in
and to the following described property and all proceeds thereof (which property
is hereinafter sometimes collectively referred to as the "Property"):

            A. The real estate described on Exhibit A attached hereto (the
"Land");

            B. All of the following (collectively, the "Improvements"): all
buildings, improvements and fixtures now or in the future located or to be
constructed on the Land; to the extent not owned by tenants of the Property, all
machinery, appliances, equipment, furniture, fixtures and all other personal
property of every kind or nature located in or on, or attached to, or used or to
be used in connection with the Land, buildings, improvements or fixtures and all
leases of any of the foregoing (subject, however, as to such personal property
which does not constitute building machinery or fixtures (the "Movable Personal
Property"), to purchase money security interests of vendors and lenders and the
lessor's interest in any Movable Personal Property leased by Borrower, which
interests are referred to collectively as the "Senior Movable Personal Property
Interests"); all building materials and goods procured for use or in connection
with the foregoing; and all additions, substitutions and replacements to any of
the foregoing;

            C. To the extent assignable, all plans, specifications,
architectural renderings, drawings, soil test


                                      -3-
<PAGE>   4
reports, other reports of examination or analysis of the Land or the
Improvements;

            D. All easements, rights-of-way, water courses, mineral rights,
water rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("Appurtenances");

            E. All agreements affecting the use, enjoyment or occupancy of the
Land and/or Improvements, including patient and residential care agreements,
leases, licenses and other occupancy agreements, now or hereafter entered into
(the "Leases") and all rents, prepayments, security deposits, termination
payments, royalties, profits, issues and revenues from the Land and/or
Improvements from time to time accruing under the Leases (the "Rents"),
reserving to Borrower, however, so long as no Event of Default (hereinafter
defined) has occurred hereunder, the right to receive and apply the Rents in
accordance with the terms and conditions of Section 8 of this Mortgage;

            F. All claims, demands, judgments, insurance proceeds, refunds,
reserves, deposits (except any deposit that is not pursuant to a Lease but is
held by Borrower as an accommodation to a resident), rights of action, awards of
damages, compensation, settlements and other rights to the payment of money
hereafter made resulting from or relating to (i) the taking of the Land or the
Improvements or any part thereof under the power of eminent domain, (ii) any
damage (whether caused by such taking, by casualty or otherwise) to the Land,
Improvements or Appurtenances or any part thereof, or (iii) the ownership or
operation of the Property;

            G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;

            H. All accounts, contract rights, general intangibles, chattel
paper, documents, instruments, inventory, goods, equipment (subject to the
Senior Movable Personal Property Interests) and all books and records relating
to the foregoing;


                                      -4-
<PAGE>   5
            I. Any monies on deposit with or for the benefit of Lender,
including deposits for the payment of real estate taxes and any cash collateral
account;

            J. All proceeds, products, replacements, additions, substitutions,
renewals and accessions of and to the Land, Improvements, Appurtenances or any
other property of the types described in the preceding granting clauses; and

            K. Any and all after-acquired right, title or interest of Borrower
in and to any property of the types described in the preceding granting clauses.

            TO HAVE AND TO HOLD the Property and all parts thereof together with
the rents, issues, profits and proceeds thereof, unto Lender and its successors
and assigns, to their own proper use, benefit, and advantage forever, subject,
however, to the terms, covenants, and conditions herein.

            PROVIDED ALWAYS, and these presents are upon the express condition
that, if the Obligations shall have been satisfied in full and all obligations
of the Lender under the Loan Documents have been terminated then this Mortgage
and the estate hereby granted shall cease and become void. Upon the occurrence
of such event, the Lender will, if requested to do so by the Borrower and at the
Borrower's expense, execute and deliver to the Borrower such documents as the
Borrower shall reasonably request to evidence or otherwise effect such event.

            Borrower covenants and agrees with Lender as follows:

            1. Payment of Indebtedness; Performance of Obligations. Borrower
shall promptly pay or cause to be paid when due the Indebtedness and shall
promptly perform or cause to be performed all Obligations.

            2. Taxes and Other Obligations. Borrower shall pay, when due, and
before any interest, collection fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and obligations, which may
become a lien on or charge against the Property (collectively, "Charges").
Borrower shall have the right to contest, in good faith by appropriate
proceedings, the amount or validity of any such Charges, so long as: (a)
Borrower has given prior written notice to Lender of Borrower's intent to so
contest or object to any such Charges; (b) such contest stays the enforcement or
collection of the Charges or any lien created; and (c) if the amount of the
Charges exceeds $25,000.00, Borrower has obtained an endorsement, in form and
substance satisfactory to Lender, to the loan policy of title


                                      -5-
<PAGE>   6
insurance issued to Lender insuring over any such lien, or Borrower has
deposited with Lender a bond or other security reasonably satisfactory to Lender
in the amount of 150% of the amount of such Charges.

            Should Borrower fail to make any of such payments, Lender may, at
its option and at the expense of Borrower, pay the amounts due for the account
of Borrower. Upon the request of Lender, Borrower shall immediately furnish to
Lender copies of all notices of amounts due and receipts evidencing payment.
Borrower shall promptly notify Lender of any lien on all or any part of the
Property and shall promptly discharge any unpermitted lien or encumbrance.

            3. Reserves for Taxes. At the time of and in addition to the monthly
installments of principal and interest due under the Notes, Borrower shall pay
to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to
be sufficient to pay at least thirty (30) days before they become due and
payable all taxes, assessments and other similar charges levied against the
Property (collectively, the "Taxes"). So long as no Event of Default exists
hereunder, Lender shall apply the sums to pay the Taxes. These sums may be
commingled with the general funds of Lender, and no interest shall be payable
thereon nor shall these sums be deemed to be held in trust for the benefit of
Borrower. If Lender at any time reasonably determines that such amount on
deposit is insufficient to fully pay such Taxes, Borrower shall, within ten (10)
days following notice from Lender, deposit such additional sum as may be
reasonably required by Lender. On the Maturity Date, the moneys then remaining
on deposit with Lender or its agent shall, at Lender's option, be applied
against the Indebtedness or so long as no Event of Default is then continuing,
be refunded to Borrower. The obligation of Borrower to pay the Taxes is not
affected or modified by the provisions of this Section 3.

            4. Insurance and Condemnation.

            (a) Insurance.

            (i) Borrower shall keep the Improvements insured, and shall maintain
      general liability coverage and such other coverages reasonably requested
      by Lender, by carrier(s), in amounts and in form at all times reasonably
      satisfactory to Lender, which carrier(s), amounts and form shall not be
      changed without the prior written consent of Lender, such consent not to
      be unreasonably withheld.


                                      -6-
<PAGE>   7
            (ii) In case of loss or damage by fire or other casualty, Borrower
      shall give immediate written notice thereof to the insurance carrier(s)
      and to Lender. Lender is authorized and empowered, and Borrower hereby
      irrevocably appoints Lender as its attorney-in-fact (such appointment is
      coupled with an interest), at its option, to make or file proofs of loss
      or damage and to settle and adjust any claim under insurance policies
      which insure against such risks, or to direct Borrower, in writing, to
      agree with the insurance carrier(s) on the amount to be paid in regard to
      such loss.

            (iii) Provided no Event of Default then exists and Borrower
      certifies as to same, the net insurance proceeds (after deduction of
      Lender's reasonable costs and expenses, if any, in collecting the same)
      shall be made available for the restoration or repair of the Property if,
      in Lender's reasonable judgment: (a) restoration or repair and the
      continued operation of the Property is economically feasible; (b) the
      value of Lender's security is not reduced; (c) the casualty loss is not
      more than twenty-five percent (25%) of the Loan Allocation amount
      attributable to the Property set forth on Exhibit A of the Loan Agreement;
      (d) the loss does not occur in the six (6) month period preceding the
      stated Maturity Date and Lender's independent consultant certifies that
      the restoration of the Property can be completed at least ninety (90) days
      prior to the Maturity Date; and (e) Borrower deposits with Lender from
      time-to-time an amount, in cash, which Lender, in its sole but reasonable
      discretion, determines is necessary, in addition to the net insurance
      proceeds to pay in full the cost of the restoration or repair (Borrowers'
      deposit shall be disbursed prior to any disbursement of insurance proceeds
      held by Lender). Any excess proceeds remaining after completion of such
      repair shall be distributed first to Borrower to the extent Borrower has
      deposited funds with Lender for such repair with the balance applied
      against the Indebtedness. Notwithstanding the foregoing, it shall be a
      condition precedent to any disbursement of insurance proceeds held by
      Lender hereunder that Lender shall have approved in its reasonable
      discretion (x) all plans and specifications for any proposed repair or
      restoration, (y) the construction schedule and (z) the architect's and
      general contractor's contract for all restoration that exceeds $250,000.00
      in the aggregate. Lender may


                                      -7-
<PAGE>   8
      establish other conditions it deems reasonably necessary to assure the
      work is fully completed in a good and workmanlike manner free of all liens
      or claims by reason thereof, and in compliance with all applicable laws,
      rules and regulations. At Lender's option, the net insurance proceeds
      shall be disbursed pursuant to a construction escrow acceptable to Lender.
      If an Event of Default then exists, or any of the conditions set forth in
      clauses (a) through (f) of this Section 4(a)(iii) have not been met or
      satisfied, the net insurance proceeds shall be applied to the Indebtedness
      in such order and manner as provided in the Note.

            (iv) In the event Borrower fails to provide Lender with evidence of
      the insurance coverage required by this Mortgage, Lender may purchase
      insurance at Borrower's expense (subject to Section 3 above) to protect
      Lender's interests in the Property. This insurance may, but need not,
      protect Borrower's interests. The coverage purchased by Lender may not pay
      any claim made by Borrower or any claim that is made against Borrower in
      connection with the Property. Borrower may later cancel any insurance
      purchased by Lender, but only after providing Lender with evidence that
      Borrower has obtained insurance as required by this Mortgage. If Lender
      purchases insurance for the Property, Borrower will (subject to Section 3
      above) be responsible for the costs of that insurance, including interest
      and other charges imposed by Lender in connection with the placement of
      the insurance, until the effective date of the cancellation or expiration
      of the insurance. The costs of the insurance may be added to the
      Obligations. The costs of the insurance may be more than the cost of
      insurance Borrower is able to obtain on its own.

            (b) Condemnation.

            (i) Borrower shall within three (3) business days of its receipt of
      notice thereof, notify Lender of any action or proceeding relating to any
      condemnation or other taking, whether direct or indirect, of the Property,
      or part thereof, and Borrower shall, after consultation with and subject
      to Lender's approval, appear in and prosecute any such action or
      proceeding. Upon Borrower's failure to act in accordance with Lender's
      prior approval, Borrower authorizes Lender, at


                                      -8-
<PAGE>   9
      Lender's option, as attorney-in-fact for Borrower (such appointment as
      attorney-in-fact is coupled with an interest), to commence, appear in and
      prosecute, in Lender's or Borrower's name, any action or proceeding
      relating to any condemnation or other taking of the Property, and to
      settle or compromise any claim in connection with such condemnation or
      other taking. The proceeds of any award, payment or claim for damages,
      direct or consequential, in connection with any condemnation or other
      taking of the Property, or part thereof, or for conveyances in lieu of
      condemnation, are hereby assigned to and shall be paid to Lender and in
      accordance with the provisions of Section 4(b)(ii) below. Lender is
      authorized (but is under no obligation) to collect any such proceeds.

            (ii) Lender may, in its sole discretion, elect to (y) apply the net
      proceeds of any condemnation award (after deduction of Lender's reasonable
      costs and expenses, if any, in collecting the same) in reduction of the
      Indebtedness in such order and manner as provided in the Note, whether due
      or not or (z) make the proceeds available to Borrower for the restoration
      or repair of the Property. If the net proceeds of the condemnation award
      are made available to Borrower for restoration or repair, the net proceeds
      of the condemnation award shall be disbursed upon satisfaction of and in
      accordance with the terms and conditions set forth in Section 4(a)(iii)
      above. Lender is authorized (but is under no obligation) to collect any
      such proceeds.

            5. Preservation and Maintenance of Property. Borrower shall: (a) not
commit waste or permit impairment or deterioration of the Property; (b) not
abandon the Property; (c) keep the Property in good repair and restore or repair
promptly, in a good and workmanlike manner, all or any part of the Property to
the equivalent of its original condition, or such other condition as Lender may
approve in writing, upon any damage or loss thereto; (d) comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property; (e) provide for management of the Property by a property manager
reasonably satisfactory to Lender pursuant to a contract in form and substance
reasonably satisfactory to Lender; and (f) give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security granted by
the Loan Documents or the rights or powers of Lender. Neither


                                      -9-
<PAGE>   10
Borrower nor any tenant or other person shall remove, demolish or materially
alter any Improvement on the Land except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like kind.

            6. Protection of Lender's Security. If (a) Borrower fails to pay the
Indebtedness or to perform the Obligations, (b) any action or proceeding is
commenced which materially adversely affects or could materially adversely
affect the Property or Lender's interest therein, including any loss, damage,
cost, expense or liability incurred by Lender with respect to (i) any
environmental matters relating to the Property or (ii) the preparation of the
commencement or defense of any action or proceeding or any threatened action or
proceeding affecting the Loan Documents or the Property, then Lender, at
Lender's option, may make such appearances, disburse such sums and take such
lawful action, taking into account the rights of residents at the Property, as
Lender deems necessary, in its sole discretion, to protect the Property or
Lender's interest therein, including entry upon the Property to take such
actions Lender determines appropriate to preserve, protect or restore the
Property. Any amounts disbursed by Lender pursuant to this Section 6 (including
attorneys' fees, costs and expenses), together with interest thereon at the
"Default Rate" (defined in the Notes) from the date of disbursement, shall
become additional Indebtedness of Borrower secured by the lien of this Mortgage
and the other Loan Documents and shall be due and payable on demand. Nothing
contained in this Section 6 shall require Lender to incur any expense or take
any action hereunder.

            7. Actions. Borrower shall warrant title and appear in and defend
any claim or any action or other proceeding purporting to affect title or other
interests relating to any part of the Property, the security of this Mortgage or
the rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower, appear in and
defend any such claim, action or proceeding and any claim, action or other
proceeding asserted or brought against Lender in connection with or relating to
any part of the Property or this Mortgage.

            8. Leases; Assignment of Rents.

            Borrower shall not, without Lender's prior written consent (which
consent shall not be unreasonably withheld), execute, modify, amend, surrender
or terminate any non-residential Lease, except as expressly permitted by the
Loan Agreement. All Leases shall be on forms previously approved by


                                      -10-
<PAGE>   11
Lender. Borrower shall not be authorized to enter into any ground lease of the
Property without Lender's prior written approval. If Lender's consent to any
non-residential Lease or the renewal of any existing non-residential Lease is
required under the Loan Agreement, at Lender's request, Borrower shall cause the
tenant thereunder to execute a subordination and attornment agreement in form
and substance satisfactory to Lender. Borrower shall comply with and observe
Borrower's obligations as landlord under all Leases. Borrower shall furnish
Lender within twenty (20) days following Lender's request, with a rent roll, in
form reasonable acceptable to Lender, and executed copies of all Leases.

            Borrower absolutely and unconditionally assigns and transfers to
Lender, all of Borrower's right, title and interest in and to the Rents;
provided, however, so long as there shall not have occurred an Event of Default,
Borrower shall have a license, revocable immediately upon an Event of Default,
to collect all Rents, and shall hold the same, in trust, to be applied first to
the payment of all impositions, levies, taxes, assessments and other charges
upon the Property, second to maintenance of insurance policies upon the Property
required hereby, third to the expenses of Property operations, including
maintenance and repairs required hereby, fourth to the payment of that portion
of the Indebtedness then due and payable, and fifth, the balance, if any, to or
as directed by Borrower. If an Event of Default has occurred and is continuing,
Borrower's right to collect and secure the Rents shall cease and Lender shall
have the sole right, with or without taking possession of the Property to
collect all Rents. Borrower has executed and delivered to Lender an Assignment
of Leases and Rents of even date herewith, and, to the extent the provisions of
this Section 8 are inconsistent with the provisions of said Assignment of Leases
and Rents, the provisions of said Assignment of Leases and Rents shall control.

            9. Statements by Borrower. Borrower shall within ten (10) days after
Lender's request, furnish Lender with a written statement, duly acknowledged,
setting forth the sums, according to Borrower's books and records, secured by
the Loan Documents and any right of set-off, counterclaim or other defense which
exists against such sums and the Obligations.

            10. Transfers of the Property. Except for Leases entered into in
compliance with the other provisions of this Mortgage and the Loan Agreement,
Borrower shall not transfer all or any part of the Property, or any interest
therein, unless and until Borrower has fully complied with all of the provisions
of


                                      -11-
<PAGE>   12
Section 2.2 of the Loan Agreement such that Borrower would be entitled to cause
Lender to release the lien of this Mortgage pursuant to that Section 2.2. There
shall be no transfer, sale, assignment, encumbrance, or disposition of any of
the capital stock of Borrower.

            11. No Additional Liens, Encumbrances or Indebtedness. Borrower
covenants not to execute any mortgage, security agreement, assignment of leases
and rents or other agreement granting a lien (except the liens granted to Lender
by the Loan Documents and Senior Movable Personal Property Interests) against or
encumbrance on the Property or take or fail to take any other action which would
result in a lien against the Property or the interest of Borrower in the
Property without the prior written consent of Lender; provided, however,
Borrower may in good faith, by appropriate proceeding, contest the validity or
amount of any asserted lien and, pending such contest, Borrower shall not be
deemed to be in default hereunder if the amount secured by such lien is not more
than $25,000.00, or, if it is more than $25,000.00, then Borrower shall first
obtain an endorsement, in form and substance satisfactory to Lender to the loan
policy of title insurance issued to Lender insuring over such lien, or, if no
such loan policy shall have been issued, then Borrower shall deposit with Lender
a bond or other security satisfactory to Lender in the amount of 150% of the
amount of such lien to assure payment of the same as and when due.

            12. Borrower and Lien Not Released. Without affecting the liability
of Borrower or any other person liable for the payment of the Indebtedness, and
without affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and without notice to
any junior lien holder or holder of any right or other interest in and to the
Property: (a) release any person so liable; (b) waive or modify any provision of
this Mortgage or the other Loan Documents or grant other indulgences; (c)
release all or any part of the Property; (d) take additional security for any
obligation herein mentioned; (e) subordinate the lien or charge of this
Mortgage; (f) consent to the granting of any easement; or (g) consent to any map
or plan of the Property.

            13. Uniform Commercial Code Security Agreement.

            (a) This Mortgage shall constitute a security agreement pursuant to
the Uniform Commercial Code (the "UCC") for any portion of the Property which,
under applicable law, may be subject to a security interest pursuant to the UCC
(such portion of the Property is hereinafter called the "Personal Property")


                                      -12-
<PAGE>   13
and, subject to the Senior Movable Personal Property Interests, Borrower hereby
grants to Lender a security interest in the Personal Property. Lender shall have
all of the rights and remedies of a secured party under the UCC as well as all
other rights and remedies available at law or in equity.

            (b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property. Borrower hereby
authorizes and empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file, on Borrower's behalf, all financing
statements and refilings and continuations thereof as Lender deems necessary or
advisable to create, preserve and protect such lien. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
of any record searches for financing statements as Lender may reasonably
require.

            (c) Borrower shall not, without the prior written consent of Lender
(which consent will not be unreasonably withheld), sell, assign, transfer,
encumber, remove or permit to be removed from the Property any of the Personal
Property. So long as no Event of Default exists, Borrower may sell or otherwise
dispose of the Personal Property when obsolete, worn out, inadequate,
unserviceable or unnecessary for use in the operation of the Property, but only
upon replacing the same with other Personal Property at least equal in value and
utility to the disposed Personal Property. Any replacement or substituted
Personal Property shall be, subject to the Senior Movable Personal Property
Interests, subject to the security interest granted herein.

            (d) To the extent permitted by law, Borrower and Lender agree that
with respect to all items of Personal Property which are or will become fixtures
on the Land, this Mortgage, upon recording or registration in the real estate
records of the proper office, shall constitute a "fixture filing" within the
meaning of the UCC.

            14. Events of Default; Acceleration of Indebtedness. The occurrence
of any one or more of the following events shall constitute an "Event of
Default" under this Mortgage:


                                      -13-
<PAGE>   14
            (a) failure of Borrower to pay, within ten (10) days of the due
date, any of the Indebtedness, including any payment due under either or both of
the Notes; or

            (b) failure of Borrower to strictly comply with Sections 4(a)(i)
(insurance), 8 (Leases), 10 (prohibition on transfers), and 11 (no additional
liens) of this Mortgage; or

            (c) failure of Borrower, within thirty (30) days after written
notice and demand, to satisfy each and every Obligation not set forth in the
subsections above; provided, however, if such Obligation cannot by its nature be
cured within thirty (30) days, and if Borrower commences to cure such failure
promptly after written notice thereof and thereafter diligently pursues the
curing thereof (and then in all events cures such failure within ninety (90)
days after the original notice thereof), Borrower shall not be in default
hereunder during such period of diligent curing; or

            (d) the occurrence of an Event of Default under the Loan Agreement,
or

            (e) Borrower delivering or causing to be delivered to Lender a
notice pursuant to 42 Pa. C.S. Section 8143 electing to limit the indebtedness
secured by this Mortgage.

Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.

            15. Entry; Foreclosure. Upon the occurrence of an Event of Default,
Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual
possession of the Property, or to the extent permitted by law, Lender or a
receiver appointed by a court of competent jurisdiction, may enter and take
possession of all or any part of the Property, and may exclude Borrower and its
respective agents and employees wholly therefrom, and may have joint access with
Borrower to the books, papers and accounts of Borrower. If Borrower shall for
any reason fail to surrender or deliver the Property or any part thereof after
such demand by Lender, Lender or such receiver may obtain a judgment or decree
conferring on Lender or such receiver, the right to immediate possession of the
Property or requiring the delivery of the


                                      -14-
<PAGE>   15
Property to Lender or such receiver, and Borrower specifically consents to the
entry of such judgment or decree. Upon every such entering upon or taking of
possession, Lender or such receiver may hold, store, use, operate, manage and
control the Property and conduct the business thereof, and Lender or such
receiver may take any action required by applicable law or which Lender or such
receiver believes necessary to enforce compliance with the environmental
provisions contained herein or in the other Loan Documents, and negotiate with
governmental authorities with respect to the Property's environmental compliance
and remedial measures in connection therewith. Lender and such receiver and
their representatives shall have no liability for any loss, damage, injury, cost
or expense resulting from any action or omission which was taken or omitted in
good faith.

            When the Indebtedness or any part thereof shall become due, whether
by acceleration or otherwise, Lender may, either with or without entry or taking
possession as herein provided or otherwise, proceed by suit or suits at law or
in equity or by any other appropriate proceeding or remedy to: (a) enforce
payment of the Notes or the performance of any term, covenant, condition or
agreement of Borrower under any of the Loan Documents; (b) foreclose the lien
hereof for the Indebtedness or part thereof and sell the Property as an entirety
or otherwise, as Lender may determine; (c) exercise its rights under Section 13
with respect to all or any portion of the Personal Property in accordance with
the provisions of the UCC; and/or (d) pursue any other right or remedy available
to it under or by the law and decisions of the State in which the Land is
located. Notwithstanding any statute or rule of law to the contrary, the failure
to join any tenant or tenants of the Property as party defendant or defendants
in any foreclosure action or the failure of any such order or judgment to
foreclose their rights shall not be asserted by Borrower as a defense in any
civil action instituted to collect (a) the Indebtedness, or any part thereof or
(b) any deficiency remaining unpaid after foreclosure and sale of the Property.

            Upon any foreclosure sale, Lender may bid for and purchase the
Property and shall be entitled to apply all or any part of the Indebtedness as a
credit to the purchase price.

            16. Appointment of Receiver or Mortgagee in Possession. If an Event
of Default is continuing or if Lender shall have accelerated the Indebtedness,
Lender, upon application to a court of competent jurisdiction, shall be entitled
as a matter of strict right, without notice, and without regard to the occupancy
or value of any security for the Indebtedness or the


                                      -15-
<PAGE>   16
insolvency of any party bound for its payment, to the appointment, at its
option, of itself as mortgagee in possession, or of a receiver to take
possession of and to operate the Property, and to collect and apply the Rents.

            17. Expenditures and Expenses. In any action to foreclose the lien
hereof or otherwise enforce Lender's rights and remedies hereunder, there shall
be allowed and included as additional Indebtedness all Costs (as defined in the
Loan Agreement) which may be paid or incurred by or on behalf of Lender. All
Costs and such other costs, expenses and fees as may be incurred by Lender in
the protection of the Property and the maintenance of the lien of this Mortgage,
including, attorneys' fees and costs in any litigation or proceeding affecting
this Mortgage, the Notes, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by this Mortgage.

            18. Application of Proceeds of Foreclosure Sale. The proceeds of any
foreclosure sale of the Property shall be distributed and applied in the order
of priority set forth in the Notes with the excess, if any, being applied, to
any party entitled thereto as their rights may appear.

            19. Future Advances. This Mortgage is given to secure not only the
existing Indebtedness, but also future advances (whether such advances are
obligatory or are made at the option of Lender, or otherwise) ("Future
Advances") made by Lender under the notes securing the Indebtedness (including
the Notes), the Other Finance Documents, or this Mortgage, to the same extent as
if such future advances were made on the date of the execution of this Mortgage.
The total amount of indebtedness that may be so secured may decrease or increase
from time to time, but all Indebtedness secured hereby shall in no event exceed
$64,000,000.00.

            20. Waiver of Statute of Limitations. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien created by any of the Loan Documents or to any action brought to enforce
the Notes or any other obligation secured by any of the Loan Documents.

            21. Waiver of Homestead and Redemption. Borrower hereby waives, to
the extent permitted by applicable law, all


                                      -16-
<PAGE>   17
right of homestead exemption in the Property. Borrower hereby waives, to the
extent permitted by applicable law, all right of redemption on behalf of
Borrower and on behalf of all other persons acquiring any interest or title in
the Property subsequent to the date of this Mortgage, except decree or judgment
creditors of Borrower.

            22. Governing Law; Severability. This Mortgage shall be governed by
and construed in accordance with the internal laws of the State of Illinois
except that the provisions of the laws of the jurisdiction in which the Land is
located shall be applicable to the creation, perfection and enforcement of the
lien created by this Mortgage. The invalidity, illegality or unenforceability of
any provision of this Mortgage shall not affect or impair the validity, legality
or enforceability of the remainder of this Mortgage, and to this end, the
provisions of this Mortgage are declared to be severable.

            23. Notice. Notices shall be given under this Mortgage in conformity
with the terms and conditions of the Loan Agreement and in conformity with
applicable law.

            24. Successors and Assigns Bound; Joint and Several Liability;
Agents; Captions. The covenants and agreements contained in the Loan Documents
shall bind, and the rights thereunder shall inure to, the respective successors
and assigns of Lender and Borrower, subject to the provisions of Section 10
hereof. All covenants and agreements of Borrower shall be joint and several. In
exercising any rights under the Loan Documents or taking any actions provided
for therein, Lender may act through its employees, agents or independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.

            25. Release. Upon payment of all sums secured by this Mortgage, or
as otherwise provided in Section 2.2 of the Loan Agreement, Lender shall release
this Mortgage in adequate recordable form (including delivering to Borrower
UCC-3 termination statements). Borrower shall pay Lender's reasonable costs
incurred in releasing this Mortgage and any financing statements related hereto.

            26. Loss of Notes. Upon notice from Lender of the loss, theft, or
destruction of the Notes and upon receipt of an affidavit of lost note and an
indemnity reasonably satisfactory to Borrower from Lender, or in the case of
mutilation of the Notes, upon surrender of the mutilated Note, Borrower shall
make and


                                      -17-
<PAGE>   18
deliver a new note of like tenor in lieu of the then to be superseded Note.

            27. Easements and Rights of Way. Lender agrees to execute such
documents and instruments (in form reasonably satisfactory to Lender) as
Borrower may reasonably request in connection with the granting by Borrower of
easements and rights of way to public or quasi public authorities, utility
companies and others in, over, through and under the Property, including without
limitation affirming to the grantee of such easements and rights of way that
this Mortgage will be subordinate to the grantee's interest therein; provided,
however, no such document, instrument or grant shall decrease (in Lender's
reasonable discretion) the value of the Property.

            28. Senior Personal Property Interests. Lender agrees that Borrower,
from time to time, may refinance or otherwise incur indebtedness in connection
with financing (on a purchase money basis, on an operating lease basis or on a
capital lease basis) items of Movable Personal Property which Borrower desires
to acquire (or acquire the use of) for the operation of the Property by the
granting of one or more Senior Personal Property Interests to third parties.
Lender acknowledges that Movable Personal Property in the Property are or may
currently be subject to Senior Personal Property Interests. Lender shall from
time to time at the request of Borrower execute and deliver to the holder(s) of
such Senior Personal Property Interests subordination agreements in form and
substance reasonably acceptable to Lender and such holder(s) of Senior Personal
Property Interests. At Lender's request from time to time, Borrower shall
provide Lender with copies of any lease, and of all documents, instruments and
agreements pertaining to such Senior Personal Property Interests.

            29. Open-end Mortgage. This Mortgage is intended to be an "Open-End
Mortgage" as defined in 42 Pa. C.S. Sections 8143(f) and, as such, is intended
to have the benefit of such Pennsylvania laws relating to open-end mortgages as
may be in effect from time to time, including without limitation 42 Pa. C.S.
Section 8143-8144. This Mortgage secures present and future indebtedness,
obligations and advances, including Future Advances, up to a maximum amount of
$64,000,000.00 plus interest thereon. Without limiting the generality of the
foregoing, this Mortgage secures unpaid balances of advances made with respect
to the Property for the payment of taxes, assessments, maintenance charges,
insurance premiums and costs incurred for the protection of this Mortgage and
the lien and security hereof and expenses


                                      -18-
<PAGE>   19
incurred by the Lender by reason of default by the Borrower hereunder.

            30. CONFESSION OF JUDGMENT IN EJECTMENT. FOR THE PURPOSE OF
OBTAINING POSSESSION OF THE PROPERTY AT ANY TIME WHEN AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY PROTHONOTARY OR CLERK OR ANY COURT OF RECORD IN THE
COMMONWEALTH OR ELSEWHERE, AS ATTORNEY FOR THE BORROWER AND ALL PERSON CLAIMING
UNDER OR THROUGH THE BORROWER, AS OF ANY TERM OR TIME, TO COMMENCE AN AMICABLE
ACTION IN EJECTMENT FOR POSSESSION OF THE PROPERTY AND TO APPEAR IN SUCH COURT
FOR AND TO CONFESS JUDGMENT AGAINST THE BORROWER AND AGAINST ALL PERSONS
CLAIMING UNDER OR THROUGH THE BORROWER IN FAVOR OF THE LENDER, FOR RECOVERY BY
THE LENDER OF POSSESSION THEREOF, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF
VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF
POSSESSION MAY IMMEDIATELY BE ISSUED FOR POSSESSION OF THE PROPERTY, WITHOUT ANY
PRIOR WRIT OR PROCEEDING WHATSOEVER, AND WITHOUT ANY STAY OF EXECUTION. THE
BORROWER HEREBY IRREVOCABLY WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS
AND IN THE ENTRY OF ANY JUDGMENT RESULTING THEREFROM, STAY OF EXECUTION, THE
RIGHT OF INQUISITION AND EXTENSION OF TIME OF PAYMENT IF FOR ANY REASON AFTER
SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE
PROPERTY SHALL REMAIN IN OR BE RESTORED TO THE BORROWER, THE LENDER SHALL HAVE
THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE
FURTHER AMICABLE ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE
PROPERTY. THE LENDER MAY BRING AN AMICABLE ACTION IN EJECTMENT AND CONFESS
JUDGMENT THEREIN BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE
THIS MORTGAGE, OR AFTER ENTRY OF JUDGMENT THEREIN, OR AFTER SHERIFF SALE OF THE
PROPERTY IN WHICH THE LENDER IS THE SUCCESSFUL BIDDER. THE AUTHORIZATION TO
PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND TO CONFESS JUDGMENT THEREIN
IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE AND SHALL
SURVIVE ANY EXECUTION SALE TO THE LENDER.

            31. Consent to Jurisdiction and Service of Process. For purposes of
confession of judgment and the foreclosure of this Mortgage, Borrower hereby:
(a) irrevocably submits to the jurisdiction of the Court of Common Pleas of
[_____________________] County, Pennsylvania, and to the jurisdiction of the
United States Court for the [_____________] District of Pennsylvania for the
purposes of any action or proceeding arising in relation to confession of
judgment or arising out of or relating to this Mortgage or the subject matter
hereof and brought by any other party; (b) waives and agrees not to assert, by
way of motion, as a defense or otherwise, in any such action or proceeding, any


                                      -19-
<PAGE>   20
claim that (i) Borrower is not personally subject to the jurisdiction of such
courts, (ii) the action or proceeding is brought in an inconvenient forum or
(iii) the venue of the action or proceeding is improper; and (b) agrees that,
notwithstanding any right or privilege Borrower may possess at any time,
Borrower and its property are and shall be generally subject to suit on account
of the obligations assumed by Borrower hereunder. Borrower hereby agrees that
service either in person or by certified or registered U.S. mail in accordance
with the provisions of Section 23 hereof shall constitute valid in personam
service upon Borrower and its successors and assigns in any action or proceeding
with respect to any matter as to which Borrower has submitted to jurisdiction
hereunder.

            32. Coal Notice. THIS DOCUMENT MAY NOT SELL, CONVEY, TRANSFER,
MORTGAGE, INCLUDE, OR INSURE THE TITLE TO THE COAL AND RIGHT OF SUPPORT
UNDERNEATH THE SURFACE LAND DESCRIBED OR REFERRED TO HEREIN, AND THE OWNER OR
OWNERS OF SUCH COAL MAY HAVE THE COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL
AND IN THAT CONNECTION DAMAGE MAY RESULT TO THE SURFACE OF THE LAND AND ANY
HOUSE, BUILDING, OR OTHER STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS
NOTICE DOES NOT ENLARGE, RESTRICT, OR MODIFY ANY LEGAL RIGHTS OR ESTATES
OTHERWISE CREATED, TRANSFERRED, EXCEPTED, OR RESERVED BY THIS INSTRUMENT. (This
notice is set forth in the manner provided in Section 1 of the Act of July 17,
1957, P.L. 984, as amended, and is not intended as notice of unrecorded
instruments, if any.)


                                      -20-
<PAGE>   21
            IN WITNESS WHEREOF, Borrower has executed this Mortgage or has
caused the same to be executed by its duly authorized representatives as of the
date first above written.

            BORROWER ACKNOWLEDGES THAT THIS MORTGAGE CONTAINS A CONFESSION OF
JUDGMENT, BY WHICH BORROWER WAIVES IMPORTANT LEGAL RIGHTS, AND BORROWER HAS
DISCUSSED THE CONFESSION OF JUDGMENT WITH ITS LEGAL COUNSEL.



                                         BORROWER:

                                         BALANCED CARE REALTY AT SCRANTON, INC.,
WITNESS:                                 a Delaware corporation


/s/Patricia Caraballo                    By /s/Clint T. Fegan
Name:  Patricia Caraballo                Its VP-CFO


CERTIFICATE OF ADDRESS:

Lender hereby certifies that the precise and complete address of the mortgagee
(Lender) under the foregoing Mortgage is as follows:

500 West Monroe Street, Chicago, Illinois  60661


LENDER:

HELLER FINANCIAL, INC.,
a Delaware corporation


By:/s/Kevin J. McMeen
Its:


                                      -21-
<PAGE>   22
                                 ACKNOWLEDGMENT


STATE OF ILLINOIS       )
                        ) SS
COUNTY OF COOK          )


            I, Kerri A. Dobson, a Notary Public in and for and residing in said
County and State, DO HEREBY CERTIFY THAT Clint T. Fegan, the VP-CFO of BALANCED
CARE REALTY AT SCRANTON, INC., a Delaware corporation, personally known to me to
be the same person whose name is subscribed to the foregoing instrument appeared
before me this day in person and acknowledged that s/he signed and delivered
said instrument as his/her own free and voluntary act and as the free and
voluntary act of said corporation for the uses and purposes therein set forth.

            GIVEN under my hand and notarial seal this 29th day of December,
1999.

                               /s/Kerri A. Dobson
                                  Notary Public

                               My Commission Expires:
                               01/24/01


                                      -22-