Document:

<PAGE>
Exhibit 10.8

                        SETTLEMENT AGREEMENT AND RELEASE

         This is a Settlement Agreement and Release (the "Settlement Agreement")
entered into and made effective as of March 31, 2002 ("Effective Date") between
and amongst the following parties:

                  A.       Balanced Care Corporation ("BCC"),

                  B.       Ocwen Financial Corporation ("Ocwen"),

                  C.       Medina ALF, Inc. ("Medina ALF"), Centerville ALF,
                           Inc. ("Centerville ALF"), and Shippensburg ALF, Inc.
                           ("Shippensburg ALF") (collectively, the "Landlords,
                           and individually, "Landlord"), and

                  D.       Senior Care Operators of Ohio, LLC ("SC-Ohio"),
                           Senior Care Operators of Centerville, LLC
                           ("SC-Centerville"), and Senior Care Operators of
                           Shippensburg, LLC ("SC-Shippensburg") (collectively,
                           the "Tenants").

         WHEREAS, Medina ALF owns an assisted living facility in Medina, Ohio,
and SC-Ohio entered into a lease with Medina ALF, Inc.;

         WHEREAS, Centerville ALF owns an assisted living facility in
Centerville, Ohio, and SC-Centerville entered into a lease with Centerville ALF,
Inc.;

         WHEREAS, Shippensburg ALF owns an assisted living facility in
Shippensburg, Pennsylvania, and SC-Shippensburg entered into a lease with
Shippensburg ALF, Inc.;

         WHEREAS, Ocwen is an affiliate of each Landlord;

         WHEREAS, BCC entered into a Working Capital Assurance Agreement and a
Shortfall Funding Agreement with each Landlord, in which BCC agreed to ensure
the timely payment of all lease obligations;

         WHEREAS, the Tenants have failed to pay rent since December of 2000;
<PAGE>
         WHEREAS, BCC failed to advance funds to the Tenants to cover any
outstanding obligations, including without limitation the payment of rent;

         WHEREAS, the Landlords filed a complaint against BCC in Centerville
ALF, Inc., et al. v. Balanced Care Corporation, Case No. C3 01-233 in the United
States District Court for the Southern District of Ohio, Western Division
(hereinafter the "Litigation");

         WHEREAS, the parties have negotiated extensively and agreed to resolve
and settle all outstanding differences amongst them;

         NOW, THEREFORE, in consideration of the promises and covenants
contained herein and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, and with the intent to be legally
bound, the parties covenant and agree as follows:

         1. Upon execution of this Settlement Agreement by all parties, Balanced
Care shall execute the Balanced Care Corporation Promissory Note, which contains
confession of judgment provisions (the "Note"), payable to the Landlords in the
total principal amount of Nine Hundred Thirty Six Thousand, Four Hundred Forty
Five Dollars and no cents ($936,445.00). Of this amount, $331,190.45 shall be
payable to Medina ALF, $408,299.48 shall be payable to Centerville ALF, and
$196,955.07 shall be payable to Shippensburg ALF. The Note shall bear interest
during the period from the date hereof on the unpaid principal balance, until
paid in full, at a rate of two and 66/100 percent (2.66%) per annum. Interest
will be calculated on a 360-day year consisting of twelve consecutive thirty-day
months. The form of the Note is attached to this Settlement Agreement as Exhibit
A.

         2. Balanced Care hereby acknowledges and agrees that the Note shall
contain warrant of attorney and confession of judgment (i.e. cognovit)
provisions. Balanced Care hereby waives any and all defenses and/or rights under
any applicable law to invalidate such cognovit provisions.

         3. No sooner than ninety-one (91) days after the execution of the Note
by Balanced Care, nor later than 120 days after the execution of the Note by
Balanced Care, provided that the events contemplated by Section 9 hereof shall
not have occurred during such 91 days, the Landlords shall cause their counsel
to file in the Litigation a Notice of Dismissal With Prejudice substantially
identical to the form attached to this Settlement

                                      -2-
<PAGE>
Agreement as Exhibit B ("Notice"). The Notice shall dismiss all claims against
Balanced Care with prejudice and shall state that Balanced Care shall be liable
for all costs.

         4. Subject to Paragraphs 6 and 9 hereof, BCC, SC-Ohio, SC-Centerville,
and SC-Shippensburg, on behalf of, and together with their shareholders, owners,
principals, directors, officers, managers, attorneys, employees, parents,
partners, fiduciaries, assigns, successors, affiliates, insurers, and agents,
hereby RELEASE, ACQUIT, AND FOREVER DISCHARGE Ocwen, Medina ALF, Centerville
ALF, and Shippensburg ALF, together with their shareholders, owners, principals,
directors, officers, managers, attorneys, employees, parents, partners,
fiduciaries, assigns, successors, affiliates, insurers, and agents, from any and
all liabilities, manners of action, causes of action, claims and/or demands,
both known and unknown, in law or in equity, including, but not limited to, any
and all claims for breach of contract, fraud, emotional distress, negligence,
economic loss, damage to reputation, intentionally tortious conduct, and/or
other misconduct concerning the subject matter of the Litigation.

         5. Subject to Paragraphs 6 and 9 hereof, Ocwen, Medina ALF, Centerville
ALF, and Shippensburg ALF, together with their shareholders, owners, principals,
directors, officers, managers, attorneys, employees, parents, partners,
fiduciaries, assigns, successors, affiliates, insurers, and agents, hereby
RELEASE, ACQUIT, AND FOREVER DISCHARGE BCC, SC-Ohio, SC-Centerville, and
SC-Shippensburg, on behalf of, and together with their shareholders, owners,
principals, directors, officers, managers, attorneys, employees, parents,
partners, fiduciaries, assigns, successors, affiliates, insurers, and agents,
from any and all liabilities, manners of action, causes of action, claims and/or
demands, both known and unknown, in law or in equity, including, but not limited
to, any and all claims for breach of contract, fraud, emotional distress,
negligence, economic loss, damage to reputation, intentionally tortious conduct,
and/or other misconduct concerning the subject matter of the Litigation.

         6. If the release by BCC and its affiliated and related companies in
Paragraph 4 of this Settlement Agreement is ever voided, then the release by
Landlords and its affiliated and related companies provided in Paragraph 5 of
this Settlement Agreement shall be void in the event that BCC and/or its
affiliated and related companies prosecute or assert a claim against Landlords
and/or their affiliates and/or related companies or otherwise seeks a recovery
against Landlords and/or their affiliates and/or related companies. If the
release by

                                      -3-
<PAGE>
the Landlords and their affiliated and related companies in Paragraph 5 of this
Settlement Agreement is ever voided, then the release by BCC and its affiliated
and related companies provided in Paragraph 4 of this Settlement Agreement shall
be void in the event that the Landlords and/or their affiliated and related
companies prosecute or assert a claim against BCC and/or their affiliated and
related companies or otherwise seeks a recovery against BCC and/or their
affiliated and/or related companies.

         7. This Settlement Agreement is entered into in conjunction with a
compromise and settlement of all controversies arising in or resulting from the
Litigation. The promises and covenants herein are not, and cannot be construed
as, an admission or acknowledgement on the part of any party of any liability,
wrongdoing, merit, or lack thereof in connection with the allegations made in
the Litigation.

         8. Subject to Paragraph 9 below, nothing set forth in this Settlement
Agreement (specifically including, but not limited to, the release provided in
Section 5 hereof) is intended or shall be construed to release, mitigate, or
limit any obligation or duty of any party to the (i) Note, (ii) the Agreement of
Purchase and Sale among Ocwen, BCC, the Landlords, Balanced Care Realty (OFC),
Inc., a subsidiary of Balanced Care, and certain other parties, dated of even
date herewith ("Purchase Agreement"), (iii) any document, instrument,
certificate or agreement executed by any party in connection with the
consummation of the transactions contemplated by the Purchase Agreement, or (iv)
the documents, instruments, certificates, or agreements executed in connection
with the Term Loan Agreement, dated of even date herewith, by and among BCC,
Ocwen, Balanced Care Realty (OFC), Inc., and certain other parties, including
but not limited to the Term Loan Agreement itself ("Term Loan Agreement").

         9. BCC and Tenants hereby represent that none of them are entering into
this Settlement Agreement in contemplation of insolvency, a filing of
bankruptcy, whether voluntary or involuntary, or with an intent to hinder, delay
or defraud their respective equityholders or creditors. In the event that (a)
within 91 days after the Effective Date (i) BCC or any Tenant makes an
assignment for the benefit of creditors of all or substantially all of its
assets, (ii) BCC or any Tenant petitions or applies to any tribunal for the
appointment of a trustee or receiver for BCC or such Tenant, or of any
substantial part of the assets of BCC or such Tenant, (iii) BCC or any Tenant
commences any proceeding relating to BCC or Tenant

                                      -4-
<PAGE>
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction whether now or
hereinafter in effect, (iv) any petition or application is filed, or any
proceedings are commenced against BCC or any Tenant, and BCC or such Tenant by
any act indicates its approval thereof, consent thereto, or acquiescence
therein, or any order is entered appointing a trustee or receiver, or
adjudicating BCC or a Tenant bankrupt or insolvent, or approving the petition at
any such proceedings and such order remains unstayed or undischarged for more
than sixty (60) days, (v) any order is entered in any proceedings against BCC or
any Tenant decreeing the dissolution of BCC or any Tenant and such order remains
unstayed or undischarged for more than sixty (60) days, or (vi) any claim is
asserted that any of the Loan Documents (as defined in the Term Loan Agreement),
the Note, the Deferred Purchase Price Note (as defined in the Term Loan
Agreement), this Settlement Agreement, the Purchase Agreement, and/or the
Purchase Documents (as defined in the Term Loan Agreement) were made as part of
or constitute a fraudulent conveyance, and (b) as a result of the foregoing, the
transactions contemplated by the Purchase Agreement and the Purchase Documents,
the Term Loan Agreement and other Loan Documents, and this Settlement Agreement
and the Note, are set aside, rescinded, voided or unwound in whole (but not in
part), then the Landlords shall return the $5,030,456.45 down payment to BCC,
BCC shall ensure that the Borrower (as defined in the Term Loan Agreement)
reconveys the Project Properties (as defined in the Term Loan Agreement) to the
Landlords, all Notes issued under the Term Loan Agreement shall be marked
cancelled and returned to the makers thereof, Ocwen shall release and terminate
the Security Documents (as defined in the Term Loan Agreement), the parties
shall take whatever other action is required in order to place all affected
parties in substantially the same position as such parties occupied prior to the
date that the Term Loan Agreement, Purchase Agreement, and this Settlement
Agreement were entered into by the parties thereto, the releases provided in
Paragraphs 4 and 5 hereof shall be void ab initio, and shall be of no force and
effect, and Ocwen and the Landlords shall have the right to bring any action or
claim of any nature or type against BCC or any Tenant in connection with the
subject matter of the Litigation.

         10. In the event of any conflict between the express terms of this
Settlement Agreement and the express terms of the Note, the terms of the Note
shall control.

                                      -5-
<PAGE>
         11. The parties hereby warrant that no part of the claims they have
respectively compromised herein, including without limitation any claim set
forth by any pleading in the Litigation, has been assigned to any other person,
firm or corporation.

         12. The parties shall maintain the terms of the settlement and the
allegations respecting the Litigation in the strictest confidence, except as
required by law or any applicable reporting requirements.

         13. This Agreement shall be binding upon, inure to the benefit of and
be enforceable by and against the partners, heirs, personal representatives,
successors, assigns and transferors of each of the parties.

         14. This Agreement shall be governed by the law of the State of Ohio,
and the parties hereby consent to be subject to the jurisdiction of the United
States District Court for the Southern District of Ohio, Western Division, or
any other court sitting in Montgomery County, Ohio, with respect to any matter
arising out of this Settlement Agreement.

         15. The failure of any party at any time to require performance by any
other party of any provision of this Settlement Agreement or the Note shall not
affect in any way the full rights of that party to require performance at any
time thereafter, nor shall the waiver by any party of a breach of any provision
of this Settlement Agreement or the Note be taken or held to be a waiver of the
provision.

         16. Except as otherwise provided in Paragraph 6 of this Settlement
Agreement, if any provision of this Settlement Agreement, or its application to
any person, party or circumstance, is held invalid, the remainder of this
Settlement Agreement and its application to all other persons, parties and
circumstances shall not be affected adversely thereby unless the provision or
provisions held invalid or inapplicable will, if not enforced, substantially
impair the benefits and fairness of the remaining Settlement Agreement.

         17. This Settlement Agreement may be executed in any number of
counterparts, and each such counterpart shall for all purposes be deemed to be
an original. All such counterparts shall together constitute but one and the
same instrument. The effective date of this Settlement Agreement shall not be
altered or otherwise affected by the date upon which the Settlement Agreement is
executed by one or more of the parties.

                                      -6-
<PAGE>
         18. Ocwen and the Landlords represent and warrant to BCC that (a) other
than a loan from Manufacturers and Traders Trust Company ("M&T") to Ocwen (the
"Mortgage Loan"), the Project Properties (as defined in the Term Loan Agreement)
are not pledged for or otherwise encumbered by any lien or encumbrance securing
any Indebtedness (as defined in the Term Loan Agreement) and (b) the Landlords
have not incurred any Indebtedness, whether secured or unsecured. As of the
Effective Date, the Mortgage Loan will not be secured by the Project Properties
(or any personal property contained therein) but instead will be secured by
(among other collateral) an assignment of the Mortgages (as defined in the Term
Loan Agreement), the other Loan Documents, and certain other documents executed
in connection with the Loan (as defined in the Term Loan Agreement) transaction
and the transactions contemplated by the Purchase Documents.

         IN WITNESS WHEREOF, the parties have hereunto set their hands.

BCC:

BALANCED CARE CORPORATION

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Senior Vice President and Legal Counsel &
            Assistant Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Senior Vice President, Legal Counsel
and Assistant Secretary and a duly authorized representative for Balanced Care
Corporation, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires:8-20-02

                                      -7-
<PAGE>
OCWEN:

OCWEN FINANCIAL CORPORATION

By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Ocwen Financial Corporation, this 4th day of
April, 2002.

                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires: 11/16/03

LANDLORDS:

MEDINA ALF, INC.

By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

                                      -8-
<PAGE>
STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Medina ALF, Inc., this 4th day of April, 2002.

                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03

CENTERVILLE ALF, INC.

By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Centerville ALF, Inc., this day of April, 2002.

                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03

                                      -9-
<PAGE>
SHIPPENSBURG ALF, INC.

By:   /s/   William B. Shepro
Print Name: William B. Shepro
Title:      Sr. Vice President

STATE OF FLORIDA           )
                           )  SS
COUNTY OF PALM BEACH       )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by William B. Shepro, the Sr. Vice President, a duly
authorized representative for Medina ALF, Inc., this 4th day of April, 2002.

                                           /s/Jerry Daniel Payton
                                           Notary Public
                                           My Commission Expires:11/16/03

                                      -10-
<PAGE>
TENANTS:

SENIOR CARE OPERATORS OF OHIO, LLC

By:      Balanced Care at Medina, Inc., its Manager

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Medina, Inc., the acting manager of Senior Care Operators of
Ohio, LLC, a Delaware limited liability company, on behalf of Senior Care
Operators of Ohio, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires: 8/20/02

                                      -11-
<PAGE>
SENIOR CARE OPERATORS OF CENTERVILLE, LLC

By:      Balanced Care at Centerville, Inc., its Manager

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Centerville, Inc., the acting manager of Senior Care Operators
of Centerville, LLC, a Delaware limited liability company, on behalf of Senior
Care Operators of Centerville, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires:8-20-02

                                      -12-
<PAGE>
SENIOR CARE OPERATORS OF SHIPPENSBURG, LLC

By:      Balanced Care at Shippensburg, Inc.,
         its Manager

By:   /s/   Robin L. Barber
Print Name: Robin L. Barber
Title:      Vice President and Secretary

COMMONWEALTH OF PENNSYLVANIA        )
                                    )  SS
COUNTY OF CUMBERLAND                )

         SWORN TO AND SUBSCRIBED before me, a Notary Public in and for said
County and State, by Robin L. Barber, the Vice President and Secretary of
Balanced Care at Shippensburg, Inc., the acting manager of Senior Care Operators
of Shippensburg, LLC, a Delaware limited liability company, on behalf of Senior
Care Operators of Shippensburg, LLC, this 9th day of April, 2002.

                                           /s/Barbara E. Davis
                                           Notary Public
                                           My Commission Expires: 8-20-02

                                      -13-<PAGE>

Exhibit 10.9

                                  AGREEMENT FOR
               TERMINATION OF LEASE DOCUMENTS AND MUTUAL RELEASES
                                    (Medina)

            THIS AGREEMENT FOR TERMINATION OF LEASE DOCUMENTS AND MUTUAL
RELEASES (this "Agreement") is made and entered into as of March 31, 2002, by
and among Ocwen Financial Corporation, a Florida corporation ("Ocwen"), Medina
ALF, Inc., a Florida Corporation ("Landlord"), Ocwen Federal Bank FSB, a
federally chartered savings bank ("Bank"), Balanced Care Corporation, a Delaware
corporation ("Balanced Care"), BCC Development and Management Co., a Delaware
corporation ("Developer"), Senior Care Operators of Ohio, LLC, a Delaware
limited liability company ("Tenant"), Balanced Care at Medina, Inc., a Delaware
corporation("Manager"), Senior Care Operators, LLC, a Delaware limited liability
company ("SCO"), and Oakhaven Senior Living, Inc., a California corporation
("OSL"), with respect to the following:

                                    RECITALS

            A. Landlord and Tenant are parties to that certain Lease Agreement
dated as of December 31, 1997 (as the same may have been further amended or
modified from time to time in accordance with the terms thereof, the "Lease"),
covering certain "Premises", as more particularly described in the Lease. Tenant
presently operates a residential care facility (the "Facility") on the Premises
known as "Outlook Pointe at Medina".

            B. Landlord, Tenant and Developer are also parties to that certain
Development Agreement dated as of December 31, 1997 (as the same may have been
amended or modified in accordance with the terms thereof, the "Development
Agreement"), entered into in connection with the Lease.

            C. Landlord and Tenant are also parties to that certain Security
Agreement dated as of December 31, 1997 (as the same may have been amended or
modified in accordance with the terms thereof, the "First Security Agreement"),
entered into in connection with the Lease.

            D. Landlord, Tenant and Developer are also parties to that certain
Security Agreement dated as of December 31, 1997 (as the same may have been
amended or modified in accordance
<PAGE>
with the terms thereof, the "Second Security Agreement"), entered into in
connection with the Lease.

            E. SCO and OSL are also parties to that certain Guaranty of Payment
and Performance dated as of December 31, 1997 (as the same may have been amended
or reaffirmed from time to time in accordance with the terms thereof, the "Lease
Guaranty"), made in favor of Landlord, in connection with the Lease.

            F. Balanced Care is also a party to that certain Construction
Completion Guaranty dated as of December 31, 1997 (as the same may have been
amended or reaffirmed from time to time in accordance with the terms thereof,
the "Completion Guaranty"), made in favor of Landlord, in connection with the
Lease.

            G. Landlord, Tenant, Developer, Balanced Care, SCO and OSL are also
parties to that certain Environmental Indemnity Agreement dated as of December
31, 1997 (as the same may have been amended or modified from time to time in
accordance with the terms thereof, the "Environmental Indemnity Agreement"),
entered into in connection with the Lease.

            H. Landlord and Tenant are also parties to that certain Assignment
and Pledge of Deposit Account Agreement dated as of December 31, 1997 (as the
same may have been amended or modified from time to time in accordance with the
terms thereof, the "First Assignment of Deposit Account Agreement"), entered
into in connection with the Lease.

            I. Landlord, Tenant and Developer are also parties to that certain
Assignment and Pledge of Deposit Account Agreement dated as of December 31, 1997
(as the same may have been amended or modified from time to time in accordance
with the terms thereof, the "Second Assignment of Deposit Account Agreement"),
entered into in connection with the Lease.

            J. Landlord and Tenant are also parties to that certain Assignment
of Contracts, Plans, Permits and Approvals dated as of December 31, 1997 (as the
same may have been amended or modified from time to time in accordance with the
terms thereof, the "First Assignment of Contracts"), entered into in connection
with the Lease.

            K. Landlord, Tenant and Developer are also parties to that certain
Assignment of Contracts, Plans, Permits and
<PAGE>
Approvals dated as of December 31, 1997 (as the same may have been amended or
modified from time to time in accordance with the terms thereof, the "Second
Assignment of Contracts"), entered into in connection with the Lease.

            L. Landlord, Tenant and Bank are also parties to that certain
Lockbox and Blocked Account Agreement dated as of December 31, 1997 (as the same
may have been amended or modified from time to time in accordance with the terms
thereof, the "Lockbox Agreement"), entered into in connection with the Lease.

            M. Landlord, Tenant, Developer, SCO, OSL and Balanced Care are also
parties to that certain Non-Competition Agreement dated as of December 31, 1997
(as the same may have been amended or modified from time to time in accordance
with the terms thereof, the "Non-Competition Agreement"), entered into in
connection with the Lease.

            N. Landlord, Tenant and Developer are also parties to that certain
Assignment of Construction Contract dated as of December 31, 1997 (as the same
may have been amended or modified from time to time in accordance with the terms
thereof, the "Assignment of Construction Contract"), entered into in connection
with the Lease.

            O. Landlord, Tenant and Developer are also parties to that certain
Assignment of Architect's Contract dated as of December 31, 1997 (as the same
may have been amended or modified from time to time in accordance with the terms
thereof, the "Assignment of Architect's Contract"), entered into in connection
with the Lease.

            P. Landlord, Tenant, and Developer are also parties to that certain
Assignment of Engineer's Contract dated as of December 31, 1997 (as the same may
have been amended or modified from time to time in accordance with the terms
thereof, the "Assignment of Engineer's Contract"), entered into in connection
with the Lease.

            Q. Tenant and Manager are also parties to that certain Management
Agreement dated as of December 31, 1997 (as the same may have been amended or
modified from time to time in accordance with the terms thereof, the "Management
Agreement"), entered into in connection with the Lease.

            R. Landlord, Tenant and Manager are also parties to that certain
Management Agreement Subordination Agreement dated
<PAGE>
as of December 31, 1997 (as the same may have been amended or modified from time
to time in accordance with the terms thereof, the "Management Agreement
Subordination Agreement"), entered into in connection with the Lease.

            S. Landlord and Tenant are also parties to that certain Assignment
of Leases, Rents and Receivables dated as of December 31, 1997 (as the same may
have been amended or modified from time to time in accordance with the terms
thereof, the "Assignment of Rents"), entered into in connection with the Lease.

            T. Landlord and Balanced Care are also parties to that certain Right
of First Refusal Agreement dated as of December 31, 1997 (as the same may have
been amended or modified from time to time in accordance with the terms thereof,
the "Right of First Refusal Agreement"), entered into in connection with the
Lease.

            U. Landlord, Tenant and Balanced Care are also parties to that
certain Subordination and Standstill Agreement dated as of December 31, 1997 (as
the same may have been amended or modified from time to time in accordance with
the terms thereof, the "Subordination and Standstill Agreement"), entered into
in connection with the Lease.

            V. Landlord and Balanced Care are also parties to that certain
Working Capital Assurance Agreement dated as of December 31, 1997 (as the same
may have been amended or modified from time to time in accordance with the terms
thereof, the "Working Capital Assurance Agreement"), entered into in connection
with the Lease.

            W. Landlord, Tenant, Balanced Care and Developer are also parties to
that certain Post-Closing Agreement dated as of December 31, 1997 (as the same
may have been amended or modified from time to time in accordance with the terms
thereof, the "Post-Closing Agreement"), entered into in connection with the
Lease.

            X. The Lease, the Development Agreement, the First Security
Agreement, the Second Security Agreement, the Lease Guaranty, the Completion
Guaranty, the Environmental Indemnity Agreement, the First Assignment of Deposit
Account Agreement, the Second Assignment of Deposit Account Agreement, the First
Assignment of Contracts, the Second Assignment of Contracts, the Lockbox
Agreement, the Non-Competition Agreement, the Assignment of Construction
Contract, the Assignment of Architect's
<PAGE>
Contract, the Assignment of Engineer's Contract, the Management Agreement, the
Management Agreement Subordination Agreement, the Assignment of Rents, the Right
of First Refusal Agreement, the Subordination and Standstill Agreement, the
Working Capital Assurance Agreement and the Post-Closing Agreement, together
with any and all other documents, instruments, agreements or other writings
executed under or in connection therewith, or executed in connection with any of
the transactions contemplated by any of the foregoing, are collectively referred
to herein as the "Lease Documents".

            Y. Landlord, as owner of the Premises, has agreed to sell, and
Balanced Care Realty (OFC), Inc., a Delaware corporation and wholly-owned
subsidiary of Balanced Care ("Buyer"), has agreed to purchase, the Premises
pursuant to that certain Agreement of Purchase and Sale dated as of March 31,
2002 (the "Purchase Agreement"), by and among Landlord, Buyer, Ocwen, Balanced
Care and the other parties named therein. In order to finance the purchase of
the Premises from Landlord, Buyer will obtain a loan from Ocwen, an affiliate of
Landlord, pursuant to a Term Loan Agreement dated as of March 31, 2002 (the
"Term Loan Agreement"), by and among Ocwen, Buyer and the other parties named
therein. Closing on the transactions contemplated under the Purchase Agreement
and the Term Loan Agreement is to be effective on and as of March 31, 2002 (the
"Closing Date"). In connection with the Purchase Agreement and the Term Loan
Agreement and the transactions contemplated thereunder, the parties hereto
desire to mutually cancel and terminate the Lease Documents to which each is a
party on the terms and conditions contained herein.

                                    AGREEMENT

            IN CONSIDERATION OF the foregoing recitals, the mutual promises and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

            1. Termination of Lease Documents. Subject to all of the terms and
conditions of this Agreement, each of the Lease Documents and the respective
obligations of the parties thereunder, including, but not limited to, (i)
Tenant's obligations with respect to past, present or future Base Rent and
Additional Rent and those items that directly relate to the payment of Base Rent
and/or Additional Rent (e.g., late payments, charges and interest)
(collectively, the "Terminated Rent Obligations") and (ii) Tenant's option to
purchase the
<PAGE>
Premises under Section 21 of the Lease, shall be terminated on and as of the
Closing Date; provided, however, that the foregoing termination is subject to
the terms and conditions of that certain Settlement Agreement and Release dated
as of even date herewith by and among Ocwen, Landlord, Balanced Care and the
other parties named therein (the "Settlement Agreement"), which contemplates
that the termination of the Lease Agreements and the releases contained in
Section 2 hereof may be voided, invalidated and set aside upon the occurrence of
certain events, as more specifically set forth in Section 9 of the Settlement
Agreement.

            2. Mutual Releases.

                  (a) Except as set forth in Section 2(c) below and as provided
in Section 9 of the Settlement Agreement, Ocwen, Landlord and Bank, on behalf
of, and together with their respective shareholders, owners, principals,
directors, officers, managers, attorneys, employees, parents, partners,
fiduciaries, assigns, successors, affiliates, insurers, and agents, hereby
RELEASE, ACQUIT, AND FOREVER DISCHARGE, Balanced Care, Developer, Manager,
Tenant, SCO and OSL, together with their respective shareholders, members,
owners, principals, directors, officers, managers, attorneys, employees,
parents, partners, fiduciaries, assigns, successors, affiliates, insurers, and
agents, from any and all liabilities, manners of action, causes of action,
claims and/or demands, both known and unknown, in law or in equity, including,
but not limited to, any and all claims for breach of contract, fraud, emotional
distress, negligence, economic loss, damage to reputation, intentionally
tortious conduct, and/or other misconduct arising out of or in connection with
the Lease Documents.

                  (b) Except as set forth in Section 2(c) below, Balanced Care,
Developer, Manager, Tenant, SCO and OSL, on behalf of, and together with their
respective shareholders, members, owners, principals, directors, officers,
managers, attorneys, employees, parents, partners, fiduciaries, assigns,
successors, affiliates, insurers, and agents, hereby RELEASE, ACQUIT, AND
FOREVER DISCHARGE Ocwen, Landlord and Bank, together with their respective
shareholders, owners, principals, directors, officers, managers, attorneys,
employees, parents, partners, fiduciaries, assigns, successors, affiliates,
insurers, and agents, from any and all liabilities, manners of action, causes of
action, claims and/or demands, both known and unknown, in law or in equity,
including, but not limited to, any and all claims for breach of contract, fraud,
emotional
<PAGE>
distress, negligence, economic loss, damage to reputation, intentionally
tortious conduct, and/or other misconduct arising out of or in connection with
the Lease Documents.

                  (c) Notwithstanding the foregoing or anything else to the
contrary contained in this Agreement, except for any provisions of the Lease
Documents relating to the Terminated Rent Obligations, this Agreement shall not
effect, limit, modify or release any party from any obligation or operate as a
waiver of any rights of any party under or pursuant to any other provisions of
the Lease Documents which, by their express terms, survive the termination of
such Lease Documents. Further, Balanced Care agrees to defend, indemnify and
hold harmless Landlord, Ocwen and Bank from and against any and all liens,
claims, costs, losses, expenses, damages, actions and causes of action for which
Tenant, Manager, Developer, SCO or OSL is responsible under the Lease Documents
and which accrue or accrued on or before the Closing Date (other than in
connection with the Terminated Rent Obligations).

            3. Delivery of the Premises. On the Closing Date, Tenant shall
deliver to Landlord possession of the Premises. Upon surrender, the Premises
shall be broom-clean (i.e., free of debris and rubbish), and in a safe
condition, and in such other condition that is acceptable to Buyer.

            4. Mutual Termination of Lease. On the Closing Date, Landlord and
Tenant shall execute in recordable form a Mutual Termination of Lease relating
to the Lease in substantially the form of Exhibit A attached hereto, and shall
cause the same to be recorded as soon as practicable in the office of the county
recorder in the appropriate county where the Facility is located (the "County").
Landlord and Tenant each hereby agree promptly to execute and deliver such other
documents as the other party may reasonably request in order to confirm the
termination of the Lease in accordance with the terms of this Agreement.

            5. Further Assurances. The parties hereto agree to execute and
deliver to the other parties hereto any agreement, document or instrument deemed
reasonably necessary or desirable to give effect to the transactions described
in this Agreement. Without limiting the generality of the foregoing, Landlord
agrees (i) to execute on the Closing Date in recordable form and cause to be
recorded in the office of the county recorder in the County as soon as
practicable, any and all instruments deemed reasonably necessary by Landlord to
remove the effect on title
<PAGE>
to the Premises of any mortgage or deed of trust, by and between Landlord, as
mortgagor, and Manufacturers and Traders Trust Company, a New York banking
corporation (together with its successors or assigns, "M&T"), as mortgagee, and
(ii) to execute on the Closing Date and cause to be recorded or filed, as
applicable, in the appropriate office as soon as practicable, such statements as
are necessary to effect a termination of any financing statements or fixture
filings relating to the Premises in favor of Landlord or M&T.

            6. Miscellaneous.

                  (a) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. This Agreement shall be deemed to be a
contract made under and shall be construed in accordance with and governed by
the laws of the State of Ohio, without regard to its conflict of law principles.
In the event of any dispute, claim or controversy arising out of the terms or
conditions of this Agreement, the parties hereto hereby agree that such dispute,
claim, or controversy shall be brought and heard only in the United States
District Court for the Southern District of Ohio, Western Division, in such
other federal court as Ocwen shall select, in state court in the State of Ohio,
County of Montgomery, or in such other state court in such other county and
state as Ocwen may select, and all applicable appellate courts thereof, and the
parties hereto hereby waive any objection to jurisdiction, venue or forum non
convenes that such party may have otherwise had if this provision were not
included herein.

                  (b) There are no agreements, understandings, commitments,
representations or warranties with respect to the subject matter hereof except
as expressly set forth in this Agreement and the Settlement Agreement. This
Agreement supersedes all prior and/or contemporaneous oral or written
negotiations, understandings and agreements with respect to the subject matter
hereof; provided, however, that nothing contained herein shall be deemed to
modify in any way the Term Loan Agreement, the Purchase Agreement or any other
documents, instruments, agreements or other writings executed under or in
connection therewith.

                  (c) Neither anything contained herein nor the transactions
provided for herein shall be deemed or construed to constitute a "bulk sale" or
an assumption by Landlord of any obligations of any other party hereto.
<PAGE>
                  (d) Each of the parties hereto acknowledges that it has
negotiated for the specific considerations to be received by it hereunder and
that damages would be an inadequate remedy for the breach of this Agreement by
another party hereto. Each of the parties hereto shall be entitled to enforce
the terms of this Agreement by an action either for specific performance or for
injunctive relief, or both, to prevent the breach or continued breach of this
Agreement. The prevailing party in any proceeding pursuant to or based upon this
Agreement or in which this Agreement is asserted as a defense shall be entitled
to recover attorneys' fees and costs incurred in such proceeding in such amount
as the court shall determine to be reasonable.

                  (e) All capitalized terms not defined in this Agreement but
defined in the Lease shall have the meaning given to such terms under the Lease.

                            [SIGNATURE PAGE FOLLOWS]
<PAGE>
      IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the day and year first above written.

                                      OCWEN FINANCIAL CORPORATION, a
                                      Florida corporation

                                      By: /s/ William B. Shepro
                                            Name: William B. Shepro
                                            Title: Sr. Vice President

                                      MEDINA ALF, INC., a Florida corporation

                                      By: /s/ William B. Shepro
                                            Name: William B. Shepro
                                            Title: Sr. Vice President

                                      OCWEN FEDERAL BANK FSB, a federally
                                      chartered savings bank

                                      By: /s/ William B. Shepro
                                            Name: William B. Shepro
                                            Title: Sr. Vice President

                                      BALANCED CARE CORPORATION, a Delaware
                                      corporation

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Senior Vice President
                                                   and Legal Counsel & Assistant
                                                   Secretary

                                      BCC DEVELOPMENT AND MANAGEMENT CO., a
                                      Delaware corporation

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Vice President and
                                                   Secretary
<PAGE>
                                      SENIOR CARE OPERATORS OF OHIO, LLC, a
                                      Delaware limited liability company

                                      By: BALANCED CARE AT MEDINA, INC., a
                                          Delaware corporation, its Manager

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Vice President and
                                                   Secretary

                                      BALANCED CARE AT MEDINA, INC., a Delaware
                                      corporation

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Vice President and
                                                   Secretary

                                      SENIOR CARE OPERATORS, LLC, a Delaware
                                      limited liability company

                                      By: BALANCED CARE AT CENTERVILLE,
                                          INC., a Delaware corporation,
                                          its Manager

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Vice President and
                                                   Secretary

                                      OAKHAVEN SENIOR LIVING, INC., a California
                                      corporation

                                      By: /s/ Robin L. Barber
                                            Name: Robin L. Barber
                                            Title: Vice President and
                                                   Secretary
<PAGE>
                                    EXHIBIT A

                       Form of Mutual Termination of Lease

PREPARED BY:

Robin L. Barber, Esquire
Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, PA 17055

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

Squire, Sanders & Dempsey, L.L.P.
1300 Huntington Center
41 South High Street
Columbus, OH  43215-6197
Att:  Jill A. Aebker, Esquire

                                   (Space Above Line For Recorder's Use Only)

                           MUTUAL TERMINATION OF LEASE

            THIS MUTUAL TERMINATION OF LEASE is made and entered into as of
      March 31, 2002, by and between MEDINA ALF, INC., a Florida corporation
      (the "Landlord"), and SENIOR CARE OPERATORS OF OHIO, LLC, a Delaware
      limited liability company (the "Tenant"), with respect to the following:

A.    Landlord is the landlord and Tenant is the tenant pursuant to that certain
      Lease dated as of December 31, 1997 (as the same may have been modified or
      amended, the "Lease"). The Lease describes and covers certain real
      property located in Medina County, Ohio, and more particularly described
      on Exhibit A attached hereto and incorporated herein by this reference
      (the "Property"). The Lease is evidenced of record by that certain
      Memorandum of Lease dated as of December 31, 1997, recorded in the Office
      of the Recorder of Medina County, OH on February 2, 1998 and recorded in
      Volume OR 1307, Page 309.

                                       A-1
<PAGE>
B.    Subject to the terms and conditions of that certain Agreement for
      Termination of Lease Documents and Mutual Releases dated as of March 31,
      2002 (the "Termination Agreement"), by and among Landlord, Tenant and the
      other parties named therein, Landlord and Tenant mutually desire to cancel
      and terminate the Lease effective as of March 31, 2002 (the "Closing
      Date"), irrespective of the date of the execution and recordation of this
      instrument.

            NOW, THEREFORE, for and in consideration of the foregoing recitals
and for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, subject to the terms and conditions of the Termination
Agreement, Landlord and Tenant, intending to be legally bound hereby, do hereby
mutually cancel and terminate the Lease, and the leasehold estate created
thereby, effective on the Closing Date.

            This instrument may be signed in multiple counterparts which, when
duly delivered and taken together, shall constitute a binding agreement between
all parties.

            IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned have caused this Mutual Termination of Lease to be executed as of
the date first above written.

"Tenant"                                    "Landlord"

SENIOR CARE OPERATORS OF                    MEDINA ALF, INC., a Florida
OHIO, LLC, a Delaware limited               corporation
liability company

By: Balanced Care at Medina,                By:
    Inc., a Delaware                            Name:
    corporation, it Manager                     Title:

By:
     Robin L. Barber
     Vice President and
     Secretary

                                       A-2
<PAGE>
STATE OF PENNSYLVANIA
COUNTY OF CUMBERLAND

            On                    , 2002 before me, a Notary Public, personally
appeared Robin L. Barber, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that she executed the same in her
authorized capacity, and that by her signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

            IN WITNESS WHEREOF, I have hereunto set my hand and seal on this
        day of                , 2002.

                                  Notary Public

MY COMMISSION EXPIRES:

STATE OF
COUNTY OF

            On                    , 2002 before me, a Notary Public, personally
appeared                                                , personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

            IN WITNESS WHEREOF, I have hereunto set my hand and seal on this
        day of                , 2002.

                                  Notary Public

MY COMMISSION EXPIRES:

                                       A-3
<PAGE>
                                    EXHIBIT A
                                       TO
                           MUTUAL TERMINATION OF LEASE

                        Legal Description of the Property

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