Document:

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Exhibit 10.15

                               LEASEHOLD MORTGAGE

                  THIS LEASEHOLD MORTGAGE (the "Mortgage") is made effective as
of October 1, 2000 (the "Effective Date") by BALANCED CARE AT MERRILLVILLE,
INC., a corporation organized under the laws of the State of Delaware
("Tenant"), having its chief executive office at 1215 Manor Drive,
Mechanicsburg, Pennsylvania, 17055, in favor of HEALTH CARE REIT, INC., a
corporation organized under the laws of the State of Delaware ("Lender"), having
its principal office at One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio
43603.

                  In consideration of the loan advances described in Article 2
made or to be made by Lender to Tenant and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Tenant has executed and delivered this Mortgage and by these presents does
mortgage, warrant, grant, transfer and convey to Lender and to its successors
and assigns, forever all of Tenant's right, title, and interest to and under the
following property which Tenant now owns or may hereafter acquire:

1. The leasehold estate of Tenant in the real property described on Exhibit A
attached hereto and made a part hereof ("Real Property") which is subject to the
Master Lease Agreement dated October 1, 2000 by and between Lender ("Landlord"),
and Tenant, as amended from time to time (the "Lease") for the operation of the
facility located on the Real Property ("Improvements"), together with all
options to purchase or lease said Real Property or any portion of or interest in
that Real Property, all modifications, extensions and renewals of the Lease and
all rights to renew, cancel, modify or terminate the Lease or extend the term of
the Lease and all options, privileges and rights granted Tenant under the Lease.
The Real Property and Improvements are collectively referred to as the
"Property".

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                  TO HAVE AND TO HOLD the same with all of the rights,
privileges and appurtenances thereto belonging unto Lender, its successors and
assigns forever in accordance with the terms and conditions set forth herein.

                              ARTICLE 1: WARRANTIES

Tenant covenants with Lender and its successors and assigns that the Lease is in
all respect valid and in full force and effect, that Tenant is not in default
under any of the terms and provisions thereof, that Tenant has no knowledge of,
nor has received any notice from the Landlord of any default under the Lease,
that no controversy exists involving any claim of default under the Lease.

                               ARTICLE 2: PURPOSES

2.1 Secured Obligations. This Mortgage secures performance of the following
obligations (the "Secured Obligations") of Tenant:

2.1.1 Payment of Credit Extended. The payment of the indebtedness of Tenant to
Lender in the original principal amount of $1,000,000.00, or so much thereof as
shall have been advanced to Tenant, plus interest on the unpaid balance thereof,
which indebtedness is evidenced by a promissory note with a maturity date of the
earlier of [i] the date on which Tenant acquires fee simple title to the
Property pursuant to the Option to Purchase under the Lease; or [ii] October 1,
2008 ("Note") made by Tenant and delivered to Lender on this date, and any
extensions, modifications, substitutions or renewals of the indebtedness or
Note.

2.1.2 Obligations Under Loan Documents. The performance of all obligations of
Tenant under the Loan Agreement (defined in Section 2.2.1), the Note, this
Mortgage and all other documents executed by Tenant or its affiliates in
connection therewith, any extensions, modifications or renewals thereof, and any
documents executed in substitution therefor (collectively, the "Loan
Documents").

2.1.3 Advances to Protect Property. The payment of unpaid balances of all
advances made by Lender for the payment of taxes, assessments, insurance
premiums, or costs incurred for the protection of the Property if paid by Lender
in accordance with the terms of the Lease.

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2.1.4 Future Advances. The payment of any unpaid balances of loan advances which
Lender may make or may be obligated to make under this Mortgage or the Loan
Agreement at any time after this Mortgage is delivered to the recorder for
record to the extent that the total unpaid loan indebtedness, exclusive of
interest thereon, does not exceed the maximum amount of $1,000,000.00 which may
be outstanding at any time and from time to time.

2.2 Open-End Mortgage. This Mortgage is executed pursuant to, and is intended by
the parties to be subject to, the applicable provisions of the Loan Agreement.
It is expressly understood and acknowledged by Tenant that this Mortgage is
intended to secure future advances of principal by Lender made after this
Mortgage is left for record. In addition, notwithstanding any provision hereof
regarding the maximum principal indebtedness secured hereby, Tenant acknowledges
and agrees that additional amounts advanced by Lender to repair or protect the
Property as provided herein shall be deemed to constitute additional advances
secured by the lien of this Mortgage.

2.2.1 Loan Agreement. This Mortgage is subject to a certain Loan Agreement
("Loan Agreement") executed by Tenant and Lender on even date. The Loan
Agreement sets forth, among other things, the terms and conditions under which
Lender is obligated to advance up to the full amount of the Note and may make
non-obligatory advances, all of which are secured by this Mortgage. The Loan
Agreement is hereby incorporated herein and made a part hereof as though fully
rewritten herein including the defined terms. No defenses, offsets, or
counterclaims available to Tenant arising out of the Loan Agreement or Note
shall be valid or effective against any transferee of this Mortgage or the Note
or its successors or assigns after this Mortgage and the Note are collaterally
assigned by Lender to one or more transferees who are providing financing to
Lender, and Tenant hereby expressly waives all such defenses, offsets, or
counterclaims to that extent. A copy of the Loan Agreement is maintained at the
offices of Lender and may be inspected by interested persons.

2.3 Interpretation. This Mortgage form is and shall be construed accordingly to
reflect the fact that the credit giving rise to the Secured Obligations would
not have been extended by Lender but for the security provided by this Mortgage.
Where the sense requires it, the singular may be read as the plural or the
reverse and any gender may be read as any other gender.

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                              ARTICLE 3: COVENANTS

3.1 Obligations. Tenant shall pay and perform all Secured Obligations when due
and required.

3.2 Lease.

3.2.1 Tenant agrees to keep and perform all obligations of the tenant under the
Lease. Tenant agrees not to commit or permit any breach of the Lease. If Tenant
shall default at the performance of any obligations of the Lease beyond
applicable cure periods, if any, Lender may, at its option and after written
notice to and receipt of consent from Landlord, with or without notice to
Tenant, take any action necessary or desirable to cure the default. Tenant
authorizes Lender to enter upon the Real Property for that purpose.

3.2.2 Tenant agrees to give immediate written notice to Lender of any default
under the Lease within Tenant's knowledge, or the receipt by Tenant of any
notice of default from Landlord and to furnish to Lender all information that
Lender may request concerning the performance by Tenant of obligations of the
tenant under the Lease.

3.2.3 Lender does not assume, nor shall it be deemed to have assumed or
otherwise be responsible for, performance of any of the obligations of Tenant as
Lessee under the Lease.

3.2.4 Tenant agrees that as long as this Mortgage is in effect, there shall be
no merger of the Lease with the fee estate of the Real Property, by reason of
the fact that the Lease may be held directly or indirectly by or for the account
of any person who shall hold the fee interest in all or part of the Real
Property or any interest of the Landlord under the Lease. In the event Tenant
acquires the fee title or any other interest in the Real Property covered by the
Lease, unless Tenant furnishes to Lender evidence reasonably satisfactory to
Lender that the leasehold estate and the fee estate have not merged and the
Lease retains priority over any encumbrances on the fee interest or other
interest in the Real Property (or that there are no such encumbrances), this
Mortgage will attach to and cover and be a lien upon the fee title or such other
interest so acquired and the fee title or other interest shall, without further
assignment, mortgage or conveyance, become subject to the lien of this Mortgage.

3.2.5 Except as otherwise set forth in the Lease, so long as this Mortgage is in
effect, Tenant agrees that no surrender or

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termination of the Lease, in whole or in part, shall be valid or effective.

3.2.6 Tenant agrees that if the Lease is terminated prior to the expiration of
its term by reason of Tenant's default, and if, pursuant to any provision of the
Lease, or otherwise, Lender or its designee shall acquire, from the Landlord, a
new lease of the fee interest of the Property or any part of the Property,
Tenant shall have no right, title or interest in the new lease.

3.2.7 Tenant agrees that if any action or proceeding shall be instituted to
evict Tenant or to recover possession of the Property or for any other purpose
affecting the Lease or this Mortgage, Tenant will immediately deliver to Lender
true copies of the complaint, summons, and all other pleadings and papers
received by Tenant.

3.2.8 Tenant shall pay, or reimburse Lender for, all sales taxes, intangible
taxes, mortgage taxes, gross receipts taxes, documentary stamp taxes, mortgage
assignment taxes, transfer taxes and similar taxes imposed on Lender relating to
the Secured Obligations, Note, this Mortgage, or the indebtedness secured by
this Mortgage. At the direction of Lender, Tenant shall pay or reimburse Lender
for such taxes 30 days after Lender gives notice to Tenant.

3.3 Insurance. Tenant shall furnish to Lender copies of all insurance policies,
certificates and other evidence of insurance required under the Lease on or
before the dates provided in the Lease and with those policies, certificates or
other evidence of insurance are required to be furnished to the Landlord under
the Lease.

3.4 Funds for Impositions and Insurance.

3.4.1 After an Event of Default and with the written consent of Landlord, Tenant
shall pay to Lender a sum (called "Funds") equal to one-twelfth of the yearly
payments for Impositions and insurance on the Property, as may be reasonably
estimated by Lender, together with the monthly payments to be made under the
Note. The Funds paid to Lender shall be used to make the specified payments and
as additional security for the Secured Obligations.

3.4.2 The Funds shall be deposited by Lender with an institution the deposits or
accounts of which are insured or guaranteed by federal or state agency, and
shall not be deemed to be funds held

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in trust, and may be held with the general funds of such depository. The funds
shall be placed in an interest-bearing account. All interest thereon shall be
considered "Funds".

3.4.3 If the amount of the Funds held by Lender together with future monthly
installments of Funds payable prior to the due dates of the Impositions and the
insurance on the Property shall not be sufficient to make payments as they fall
due, Tenant shall pay to Lender the amount necessary to pay the deficiency
within 10 days after the date from which Lender gives notice requesting payment
thereof.

3.4.4 Upon performance in full of the Secured Obligations, Lender shall promptly
refund to Tenant any Funds held by Lender.

3.4.5 If the Property is sold or acquired by Lender, Lender shall apply any
Funds then held by Lender as a credit against the Secured Obligations.

3.4.6 Lender has the right to make payments for which it is holding Funds, and
at its election, to make other payments required to be made by Tenant.

3.5 Application of Payments. All payments and proceeds of sale received by
Lender under this Mortgage shall be credited as set forth in the Note.

3.6 Charges and Liens. Except to the extent Tenant makes payments therefor under
Section 3.4 and except for items being contested in good faith in compliance
with the requirements of the Loan Agreement, Tenant shall promptly pay before
delinquent taxes, assessments, levies, and any other charges which have or may
become a lien on any of the Property.

3.7 Preservation of Property. Subject to the terms of the Lease, Tenant shall
keep the Property in good repair, and shall neither commit waste nor permit
impairment or deterioration of the Property.

3.8 Protection of Security. If Tenant fails to perform Tenant's agreements under
this Mortgage or if any action or proceeding is commenced which materially
affects Lender's interest in the Property, including without limit any
proceeding concerning eminent domain, insolvency, any decedent, or enforcement
of any ordinance, legislation, or regulation, then Lender is authorized to make
such appearances, disburse such sums, and take such action that Lender
reasonably determines is necessary or desirable to

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protect the Property and Lender's interest therein, including, without limit the
disbursement of sums for payment of reasonable attorneys' fees, taxes,
assessments, insurance premiums, costs incurred for the protection of the
Property, and the entry upon the Property to make repairs.

3.9 Inspection. After reasonable notice to Tenant, Lender or any person
authorized by Lender may enter upon and inspect any of the Property at all
reasonable times.

3.10 Eminent Domain. If the Property or any part thereof becomes the subject of
any proceeding ("Condemnation") for the taking of property or any conveyance in
lieu thereof, the provisions set forth in the Lease regarding Condemnation shall
prevail in the event that there are any proceeds paid to the Tenant as a result
of a Condemnation. After the payment of any amount due to the Landlord under the
Lease, the balance of the Condemnation proceeds shall be paid or caused to be
paid by the Tenant to the Lender to be applied to the payment of principal under
the Note, up to the outstanding amount of Secured Obligations, and Tenant hereby
directs such payment to be made directly to Lender and hereby assigns to Lender
Tenant's right thereto.

3.10.1 Payment Pending Restoration. Tenant's obligation to make payment on
Secured Obligations shall not abate pending any repair or restoration of the
Property due to the Condemnation. In addition, Tenant shall reimburse Lender,
within 10 days after demand, for all reasonable costs, expenses, and fees
(including architect and engineer fees) incurred by Lender in connection with
any repair or restoration of the Property due to the Condemnation.

3.10.2 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in this
Mortgage or at law or equity to the contrary, none of the Proceeds paid to
Lender shall be deemed trust funds, and Lender shall be entitled to dispose of
such proceeds as provided in this Section 3.10. Tenant expressly assumes all
risk of loss, including a decrease in the use, enjoyment, or value, of the
Property from any Condemnation.

3.11 Other Mortgages and Liens.

3.11.1 Prior Mortgages. If any of the Property is subject or becomes subject to
a lien prior to the lien of this Mortgage, the following provisions shall apply:

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     [i] Tenant shall pay when due all amounts required to be paid under any
obligation secured by a prior lien and shall otherwise perform all of the
obligations of Tenant hereunder.

     [ii] Tenant shall not request, accept, or permit payment to Tenant of any
loan amount or disbursement the repayment of which is secured by any prior
mortgage without prior express written consent from Lender.

     [iii] Tenant shall be in compliance with Section 3.3 and 3.4 if Tenant pays
the Impositions and maintains the insurance coverage required under any prior
mortgage to which Lender has expressly consented.

     [iv] A default in any prior mortgage shall be a default under this
Mortgage.

     [v] Lender may cure any defaults of Tenant under any prior Mortgage or pay,
in whole or in part, any prior lien. To the extent of such payments, Lender
shall be subrogated to the rights and lien of the prior lien; however, any prior
lien rights to which Lender may become subrogated shall not merge with the lien
of this Mortgage.

3.11.2 No Merger of Liens. Lender may at any time during the term of this
Mortgage hold more than one lien against the Property or any part thereof. All
such liens held by Lender shall remain separate and distinct from each other and
each shall retain its individual priority and shall not merge with any other
lien held by Lender, unless and until Lender executes and records an instrument
expressly merging any such liens. If a default in this Mortgage occurs, Lender
may foreclose upon any lien against the Property held by it in such order and at
such times as Lender may elect. If Lender acquires title to the Property other
than through foreclosure of this Mortgage, the lien of this Mortgage shall
continue and shall not merge with Lender's title to the Property.

3.11.3 No Consent. Nothing in this Section 3.11 shall be construed to mean that
Lender consents to any lien prior to the lien of this Mortgage.

3.12 Advances and Default Rate. Any payment made by Lender that Lender has the
right to make under any term of this Mortgage (except for payments from Funds
for which Funds have been deposited by Tenant) and expenses incurred and
payments made by Lender in taking action authorized by this Mortgage shall be

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indebtedness of Tenant secured by this Mortgage, shall be payable upon demand,
shall bear interest at the Default Rate (as defined in the Note) from the date
of disbursement, and shall be deemed advances under subsections 2.1.3 and 2.1.4.

3.13 Damage, Destruction and Rebuilding. In the event of a casualty, as
hereinafter defined, Tenant shall comply with the terms of the Lease. In the
event the Lease is not in effect, the following provisions shall apply:

3.13.1 Notice of Casualty. If the Property, or any part thereof, shall be
destroyed, in whole or in part, or damaged by fire, flood, windstorm or other
casualty (a "Casualty"), Tenant shall give written notice thereof to Lender
within one business day after the occurrence of the Casualty. Within 15 days
after the occurrence of the Casualty, Tenant shall provide the following
information to Lender: [i] the date of the Casualty; [ii] the nature of the
Casualty; [iii] a description of the damage or destruction caused by the
Casualty including the type of Property damaged and the area of the Improvements
damaged; [iv] a preliminary estimate of the cost to repair, rebuild, restore or
replace the Property; [v] a preliminary estimate of the schedule to complete the
repair, rebuilding, restoration or replacement of the Property; [vi] a
description of the anticipated property insurance claim including the name of
the insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date; and [vii] a description of
the business interruption claim including the name of the insurer, the insurance
coverage limits, the deductible amount, the expected settlement amount, and the
expected settlement date. Within five days after request from Lender, Tenant
will provide Lender with copies of all correspondence to the insurer and any
other information reasonably requested by Lender.

3.13.2 Application of Insurance Proceeds. Provided Lender has obtained the prior
written approval of Landlord, Lender may elect either to [i] require the Tenant
to rebuild or repair the Property according to plans and specifications approved
in writing by Lender and upon such conditions as Lender may reasonably require;
or [ii] apply the net proceeds of insurance against the Secured Obligations to
be credited as set forth in the Note. Notwithstanding the foregoing, if the
amount of insurance proceeds does not exceed $250,000.00 and there is no
existing uncured Event of Default hereunder, Tenant shall have the right to
require that the proceeds be applied to the restoration of the Property which
shall be upon such conditions as Lender may require. All net proceeds of
insurance policies resulting from claims for casualty

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to the Property or any element thereof shall be paid to and held by Lender
subject to the provisions of this Mortgage.

3.13.3 Repair. In the event Lender elects to have the Property rebuilt or
repaired [i] the Tenant shall promptly repair or rebuild the Property in a good
and workmanlike manner, in compliance with all laws and regulations, and in
accordance with plans and specifications, construction budget and construction
schedule approved by Lender; and [ii] Lender shall apply so much of the net
proceeds of such insurance as may be necessary to pay or reimburse the costs of
such repair or rebuilding, either on completion thereof or as the work
progresses.

3.13.4 Insufficient Proceeds. If the proceeds of any insurance settlement are
not sufficient to pay the costs of such repair, rebuilding or restoration in
full, Tenant shall deposit with Lender at Lender's option, and within 10 days of
Lender's request, an amount not to exceed the then outstanding principal
indebtedness secured hereby. Tenant shall not, by reason of the deposit or
payment, be entitled to any reimbursement from Lender or diminution in or
postponement of the payments to Lender on the Note.

3.13.5 No Abatement; Expenses. Tenant's obligation to make payments on Secured
Obligations shall not abate pending the repairs or rebuilding of the Property.
Tenant shall pay the costs, expenses and fees of any architect or engineer
employed by Lender to review any plans and specifications and to supervise and
approve the repairs or rebuilding of the Property.

3.13.6 Not Trust Funds. Notwithstanding anything herein or at law or equity to
the contrary, none of the insurance proceeds paid to Lender as herein provided
shall be deemed trust funds, and Lender shall be entitled to dispose of such
proceeds as provided in this Section 3.13. Tenant expressly assumes all risk of
loss, including a decrease in the use, enjoyment or value, of the Project from
any casualty whatsoever, whether or not insurable or insured against.

                 ARTICLE 4: TRANSFER OF THE PROPERTY; ASSUMPTION

4.1 Tenant's Successors. This Mortgage shall be binding upon Tenant's successors
and assigns and shall be binding upon and inure to the benefit of Lender and its
successors and assigns; however, Tenant may neither assign Tenant's rights under
this Mortgage nor delegate Tenant's duties under this Mortgage without the
express written consent of Lender.

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4.2 No Transfer. Except for transfers made in connection with Permitted Liens
(as defined in the Loan Agreement), Tenant shall not sell, lease, grant a lien
on or security interest in, or otherwise transfer or encumber all or any part of
the Property or any legal or equitable interests therein without the prior
written consent of Lender.

4.3 No Release of Tenant. No sale, transfer, or encumbrance of the Property or
of Tenant's rights under this Mortgage and the Note and no delegation of Secured
Obligations under this Mortgage or any other Secured Obligations shall release
Tenant from liability for any Secured Obligations unless: [i] Lender and such
transferee or delegee agree in writing that such transferee or delegee is
satisfactory to Lender and that such transferee or delegee shall perform the
Secured Obligations and pay such interest thereon as Lender may request, and
[ii] Lender delivers to Tenant a written release.

                              ARTICLE 5: [RESERVED]

                 ARTICLE 6: DEFAULT, ACCELERATION, AND REMEDIES

6.1 Event of Default. The occurrence of any Event of Default under a Loan
Document or the Lease shall constitute an Event of Default under this Mortgage.

6.2 Rights and Remedies Upon Default. Whenever any Event of Default occurs,
subject to the prior rights of Landlord and with Landlord's prior written
consent, Lender may take any one or more of the following remedial steps
concurrently or successively in addition to any other remedies under the Loan
Documents, at law or in equity, to the extent permitted by applicable law.

6.2.1 Lender may enter and take possession of the Property without terminating
this Mortgage, and complete construction of the Improvements (or any part
thereof) and perform the obligations of Tenant under the Loan Documents.

6.2.2 The Property may be sold by private sale without judicial process or
appraisal (the same being hereby waived) upon 10 days' notice to Tenant and, by
such sale, foreclose Tenant's equity of redemption in the Property completely
and as effectively as through an action to foreclose, the same being hereby
waived.

6.2.3 Lender may foreclose this Mortgage or accept delivery of a deed in lieu of
foreclosure. In any foreclosure or sale, the

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Property may be sold in one or more parcels, lots, or groups (including mixtures
of personal and real property, or separately, any provision of law to the
contrary notwithstanding) and, to the extent permitted by law, Lender shall be
under no obligation either to marshal any assets of the Tenant or to marshal any
portions of the Property.

6.2.4 Lender may sue Tenant directly to collect any monies then due and may take
any action at law or equity (including bringing an action for a mandatory
injunction, restraining order or specific performance) to enforce performance of
the Secured Obligations.

6.2.5 For any security in which no interest arises under real estate law, Lender
may exercise its rights as a secured party under Article 9 of the Uniform
Commercial Code. Tenant agrees that a commercially reasonable manner of
disposition of the Property subject to security interests under Article 9 shall
include, without limitation and at the option of Lender, the sale of the
Property in whole or in part, concurrently with the foreclosure sale of the
Property in accordance with the provisions of this Mortgage.

6.2.6 Lender may terminate its obligation to disburse loan proceeds.

6.2.7 Lender may, and is hereby authorized by Tenant, at any time or from time
to time, to the fullest extent permitted by law, without advance notice to
Tenant (any such notice being expressly waived by Tenant) to set-off and apply
any and all sums held by Lender, any indebtedness of Lender to Tenant, any and
all claims by Tenant against Lender, against any obligations of Tenant
hereunder, whether or not such obligations or claims of Tenant are matured and
whether or not Lender has exercised any other remedies hereunder.

6.2.8 In any action or proceeding to foreclose this Mortgage, or upon actual or
threatened waste to any part of the Property, Lender may apply, without notice
to Tenant, for the appointment of a receiver ("Receiver") of the Property.
Unless prohibited by law, such appointment may be made either before or after
sale, without notice, without regard to the solvency or insolvency of Tenant at
the time of application for such Receiver and without regard to the then value
of the Property, and Lender may be appointed as Receiver. The Receiver shall
have the power to collect the rents, issues and profits of the Property during
the pendency of the foreclosure and, in case of a sale and deficiency

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during the full statutory period of redemption, whether there be redemption or
not, as well as during any future times, if any, when Tenant, except for the
intervention of such Receiver, would be entitled to collect such rents, issues
and profits, and all other powers which may be necessary or are usual in such
cases for the protection, possession, control, management and operation of the
Property during the whole of said proceeding. All sums of money received by the
Receiver from such rents and income, after deducting therefrom the reasonable
charges and expenses paid or incurred in connection with the collection and
disbursement thereof, shall be applied to the payment of the Secured Obligations
or applied to remedy any default hereunder as Lender may direct. Tenant, if
requested to do so, will consent to the appointment of any such Receiver as
aforesaid.

6.2.9 Lender may take any other action which Lender is entitled to take under
any law, equity, or the Loan Documents.

6.2.10 Lender may, at its option, but without any obligation so to do, and
without waiving or releasing Tenant from any of the agreements and covenants in
the Loan Documents, pay any sum or perform any act or take such action as Lender
may deem necessary or desirable in order to protect the lien of this Mortgage,
the Property or otherwise in the sole discretion of Lender. Tenant hereby grants
to Lender, and agrees that Lender shall have, after the occurrence of one or
more Events of Default, the absolute and immediate right to enter in and upon
the Property or any part thereof to such extent and as often as Lender, in its
sole discretion, deems necessary or desirable for such purpose. Lender may pay
and expend such sums of money as it may, in its sole discretion, deem necessary
for the purposes stated herein. Tenant hereby agrees to pay to Lender, on
demand, all such sums so paid or expended by Lender, together with interest
thereon from the date of each such payment or expenditure at the default rate
specified in the Note.

6.3 Sale of Property. Subject to the prior rights of Landlord and with
Landlord's prior written consent, the following provisions apply to any sale of
the Property pursuant to this Article 6 or pursuant to any judicial proceeding.

6.3.1 Receipt Sufficient Discharge for Purchaser. The receipt of the court
officer or other person conducting any such sale for the purchase money paid at
any such sale shall be sufficient discharge thereof to any purchaser of the
Property, or any part thereof, sold as aforesaid. No such purchaser or his
representatives, grantees or assigns, after paying such purchase money and

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receiving such receipt, shall be bound to see to the application of such
purchase money upon or for purpose of this Mortgage, or shall be answerable in
any matter whatsoever for any loss, misapplication or non-application of any
such purchase money or any part thereof, nor shall any such purchaser be bound
to inquire as to the necessity or expediency of any such sale.

6.3.2 Lender's Purchase of Property. Lender or any holder of the Note may bid
for and purchase the Property being sold, and upon compliance with the terms of
sale. Lender or any holder of the Note may hold, retain, possess and dispose of
such Property in its own absolute right without further accountability.

6.3.3 Application of Proceeds of Sale. Unless Lender elects otherwise, the
purchase money or proceeds of any such sale shall be applied first, to all
charges, expenses and fees payable by Tenant under the Loan Documents, including
all attorney's fees, Receiver's fees and other costs and expenses incurred by
Lender, with interest thereon at the default rate specified in the Note; second,
to all unpaid interest accrued on any of the Secured Obligations; third, to the
principal amount outstanding of the Secured Obligations; and the balance, if
any, to Tenant.

6.3.4 No Defense; Waiver. Failure to join or to provide notice to tenants under
any Leases as defendants in any foreclosure action or suit shall not [i]
constitute a defense to such foreclosure; [ii] preclude Lender from obtaining a
deficiency judgment or otherwise reduce or diminish the amount of any such
judgment in any manner whatsoever; or [iii] give rise to any claims by Tenant,
or any person claiming through or under Tenant, against Lender. Upon the request
of Lender and to the extent not prohibited by applicable law, Tenant shall
execute and file with the clerk of the court a legally sufficient waiver of any
statutory waiting period with respect to the execution of a judgment obtained by
Lender in connection with any foreclosure proceedings. The obligations of Tenant
to so execute and file such waiver shall survive the termination of this
Mortgage.

6.4 Condition of Event of Default. Lender and Borrower acknowledge that any
monetary obligation of Borrower under the terms of the Note, which cannot be
satisfied from revenues from operation of the Facility, are subject to and
conditioned upon Lender advancing funds pursuant to the Working Capital Loan
(subject to Borrower's obligation to advance working capital under Section 2.1.2
of the Loan Agreement. Lender's failure to advance such funds shall not entitle
Lender to declare an Event of Default due to Borrower's failure to comply with a
monetary obligation

                                     - 14 -
<PAGE>   15

that cannot be satisfied from revenues from operation of the Facility, however,
Lender shall not be prohibited from declaring an Event of Default as a result of
a non-monetary cause of Event of Default or a monetary Event of Default that
occurs when Lender does not have an obligation to advance pursuant to Section
2.1.2 of the Loan Agreement.

6.5 Applicable Law. Notwithstanding anything contained in this Mortgage or the
other Loan Documents to the contrary, Lender shall be entitled to all rights and
remedies that a mortgagee would have under Indiana law or in equity including,
but not by way of limitation, Ind. Code 32-15 Mortgage Foreclosure Actions, the
Uniform Commercial Code as adopted in the State of Indiana (the "UCC") and Ind.
Code 34-48 Receiverships (such laws, as amended, modified and/or replaced from
time to time are collectively referred to as, the "Applicable Law"). In the
event of any inconsistency between the provisions of this Mortgage and the
provisions of Applicable Law, the provisions of Applicable Law shall take
precedence over the provisions of this Mortgage, but shall not invalidate or
render unenforceable any other provisions of this Mortgage that can be construed
in a manner consistent with Applicable Law.

                            ARTICLE 7: MISCELLANEOUS

7.1 Advances by Lender. At any time and from time to time during the term of
this Mortgage, Lender may incur and/or pay and/or advance costs or expenses [i]
incurred or advanced by Lender which Lender is authorized or has the right (but
not necessarily the obligation) to incur or may incur under any term of any Loan
Document or any law; [ii] of whatever nature incurred or advanced by Lender in
exercising any right or remedy provided by any term of any Loan Document or in
taking any action which Lender is authorized to take by any term of any Loan
Document; [iii] required to be paid by Tenant by any term of any Loan Document,
but which Tenant fails to pay upon demand; or [iv] any and all costs and
expenses from which Tenant is required to hold Lender harmless by any term of
any Loan Document, but from which Tenant fails to hold Lender harmless. Any
reasonable costs, expenses, or advances incurred or paid by Lender shall become
part of the Loan and, upon demand, shall be paid to Lender together with
interest thereon at the default rate specified in the Note from the date of
disbursement by Lender. Payment of such costs, expenses, or advances shall be
secured by this Mortgage.

7.2 Attorney's Fees and Expenses. Tenant shall pay all reasonable costs and
expenses incurred by Lender in administering

                                     - 15 -
<PAGE>   16

the Secured Obligations and all collateral for the Secured Obligations,
enforcing or preserving Lender's rights under the Note, Loan Agreement, this
Mortgage, and all other Loan Documents, and in all matters of collection,
whether or not an Event of Default has actually occurred or has been declared
and thereafter cured, including but not limited to, [i] the reasonable fees,
expenses, and costs of any litigation, receivership, administrative, bankruptcy,
insolvency or other similar proceeding; [ii] reasonable attorney and paralegal
fees and disbursements; [iii] the reasonable expenses of Lender and its
employees, agents, attorneys, and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency or other proceedings and for lodging,
travel and attendance at meetings, hearings, depositions, and trials in
connection therewith; [iv] court costs; and [v] consulting and witness fees and
expenses incurred by Lender in connection with any such proceedings. All such
costs, charges and fees as incurred shall be deemed to be secured by this
Mortgage and collectible out of the proceeds of this Mortgage in any manner
permitted by law or by this Mortgage.

7.3 Construction of Rights and Remedies and Waiver of Notice and Consent.

7.3.1 The provisions of this Section 7.3 shall apply to all rights and remedies
provided by this Mortgage or any Loan Document or by law or equity provided
Lender obtains Landlord's prior written consent.

7.3.2 WAIVER OF NOTICES AND CONSENT TO REMEDIES. Unless otherwise expressly
provided herein, any right or remedy may be pursued without notice to or further
consent of Tenant, both of which Tenant waives.

7.3.3 Each right or remedy under the Loan Documents is distinct from but
cumulative to each other right or remedy and may be exercised independently of,
concurrently with, or successively to any other rights and remedies.

7.3.4 No extension of time for or modification of amortization of the loan shall
release the liability or bar the availability of any right or remedy against
Tenant or any successor in interest, and Lender shall not be required to
commence proceedings against Tenant or any successor or to extend time for
payment or otherwise to modify amortization of the loan secured by this Mortgage
by reason of any demand by Tenant or any successor.

                                     - 16 -
<PAGE>   17

7.3.5 Lender has the right to proceed at its election against all security or
against any item or items of such security from time to time, and no action
against any item or items of security shall bar subsequent actions against any
item or items of security.

7.3.6 No forbearance in exercising any right or remedy shall operate as a waiver
thereof; no forbearance in exercising any right or remedy on any one or more
occasion shall operate as a waiver thereof on any further occasion; and no
single or partial exercise of any right or remedy shall preclude any other
exercise thereof or the exercise of any other right or remedy.

7.3.7 Failure by Lender to insist upon the strict performance of any of the
covenants and agreements herein set forth or to exercise any rights or remedies
upon default by Tenant hereunder shall not be considered or taken as a waiver or
relinquishment for the future of the right to insist upon and to enforce by
mandamus or other appropriate legal or equitable remedy strict compliance by
Tenant with all of the covenants and conditions hereof, or of the rights to
exercise any such rights or remedies, if such default by Tenant is continued or
repeated, or of the right to recover possession of the Property by reason
thereof. To the extent permitted by law, any two or more of such rights or
remedies may be exercised at the same time.

7.3.8 If any covenant or agreement contained in any Loan Document is breached by
Tenant and thereafter waived by Lender, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
thereunder. No waiver shall be binding unless it is in writing and signed by
Lender. No course of dealing between Lender and Tenant, nor any delay or
omission on the part of Lender in exercising any rights under any of the Loan
Documents, shall operate as a waiver.

7.3.9 Tenant and any other person now or hereafter obligated for the payment or
performance of all or any part of the Note shall not be released from paying and
performing under the Note, and the lien of this Mortgage shall not be affected
by reason of [i] the failure of Lender to comply with any request of Tenant (or
of any other person so obligated) to take action to foreclose this Mortgage or
otherwise enforce any of the provisions of this Mortgage or of any of the
Secured Obligations, or [ii] the release, regardless of consideration, of the
obligations of any person liable for payment or performance of the Note, or any
part thereof, or [iii] any agreement or stipulation extending the time of
payment or modifying the terms of the Note, and, in the event of such agreement
or stipulation, Tenant and all such other

                                     - 17 -
<PAGE>   18

persons shall continue to be liable under such documents, as amended by such
agreement or stipulation unless expressly released and discharged in writing by
Lender.

7.3.10 Tenant, for itself and its successors and assigns, hereby irrevocably
waives and releases, to the extent permitted by law, and whether now or
hereafter in force, [i] the benefit of any and all valuation and appraisement
laws, [ii] any right of redemption after the date of any sale of the Property
upon foreclosure, whether statutory or otherwise, in respect of the Property,
[iii] any applicable homestead or dower laws, and [iv] all exemption laws
whatsoever and all moratoriums, extensions or stay laws or rules, or orders of
court in the nature of any one or more of them.

7.3.11 Nothing contained in any of the Loan Documents shall constitute any
consent or request by Lender, express or implied, for the performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof, or be construed to permit the
making of any claim against Lender in respect of labor or services or the
furnishing of any materials or other property or any claim that any lien based
on the performance of such labor or services or the furnishing of any such
materials or other property is prior to the lien of this Mortgage.

7.4 Notices. All notices, demands, requests, and consents (hereinafter
"Notices") given pursuant to the terms of this Mortgage shall be in writing,
shall be addressed to the addresses set forth in the introductory paragraph of
this Mortgage and to Landlord at the address set forth in the Lease and shall be
served by [i] personal delivery; [ii] United States mail, postage prepaid; or
[iii] nationally recognized overnight courier. All Notices shall be deemed to be
given upon the earlier of actual receipt or three days after mailing or one
business day after deposit with the overnight courier. Any Notices meeting the
requirements of this Section shall be effective, regardless of whether or not
actually received. Lender and Tenant may change their notice address at any time
by giving the other party written notice of such change.

7.5 Amendment. This Mortgage may be amended only by a writing signed by Lender
and Tenant and consented to by Landlord. All references to this Mortgage,
whether in this Mortgage or in any other document or instrument, shall be deemed
to incorporate all amendments, modifications and renewals of this Mortgage made
after the Effective Date.

                                     - 18 -
<PAGE>   19

                            ARTICLE 8: INTERPRETATION

8.1 Captions. The captions and headings contained in this Mortgage are for
convenient reference only and are not to be used to interpret or define the
provisions hereof.

8.2 Severability. If any provision of this Mortgage or the application thereof
to any party or circumstance shall, to any extent, be adjudged to be invalid or
unenforceable, the remainder of this Mortgage and the application of any such
provision to other parties or circumstances shall not be affected thereby, and
each provision of this Mortgage shall be valid and enforceable to the fullest
extent permitted by law.

8.3 Governing Law. This Mortgage and the rights and obligations of the parties
hereunder shall be governed by and construed and interpreted in accordance with
the laws of the Commonwealth of Pennsylvania, except that the creation and
perfection of liens and security interests in the Property, and the procedures
for foreclosure and execution of the liens and security interests shall be
governed by, construed and interpreted in accordance with the laws of the state
where the Real Property at issue is located, in each case without regard to the
conflict of law rules of such state.

8.4 Survival. All agreements, representations, and warranties contained in this
Mortgage shall survive the execution and delivery of this Mortgage, and shall be
deemed to be effective continuously throughout the term of this Mortgage.

8.5 Conflict in Provisions. In the event of any conflict in the provisions of
this Mortgage and the Lease, the terms and provisions of the Lease shall govern.

                             ARTICLE 9: CONSTRUCTION

9.1 No Liability for Lender. Tenant hereby acknowledges and agrees that the
undertaking of Lender under this Mortgage is limited as follows:

     (a) Lender is not and will not be in any way the agent for or trustee of
Tenant. Lender does not intend to act in any way for or on behalf of Tenant in
disbursing the proceeds under the Loan Agreement. Lender's purpose in making the
requirements set forth herein and in the Loan Agreement is to protect the
validity and priority of this Mortgage and the value of its security.

                                     - 19 -
<PAGE>   20

     (b) This Mortgage is not to be construed by Tenant or anyone furnishing
labor, materials, or any other work or product for improving the Property as an
agreement by Lender to assure that anyone will be paid for furnishing such
labor, materials, or any other work or product. Tenant is and shall be solely
responsible for such payments.

     (c) Lender is not responsible for construction of any improvements to the
Property. Notwithstanding Lender's inspection of the Property and the
improvements, Lender assumes no responsibility for the quality of construction
or workmanship, or for the architectural or structural soundness of any
improvements to the Property, or for the adherence to or approval of any plans
and specifications for any improvements to the Property.

         NOW, THEREFORE, if Tenant shall pay the Secured Obligations in full and
shall fully comply with this Mortgage, then this Mortgage and the estate hereby
granted shall cease, and Lender shall thereupon release this Mortgage at the
cost and expense of Tenant (all claims for statutory penalties, in case of
Lender's failure to release, being hereby waived); otherwise, this Mortgage
shall remain in full force and effect.

               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

                                     - 20 -
<PAGE>   21

IN WITNESS WHEREOF, this Mortgage has been duly executed as of (but not
necessarily on) the Effective Date.

Signed and acknowledged                      BALANCED CARE AT MERRILLVILLE, INC.
in the presence of:
                                             By: /s/ Robin L. Barber
Signature /s/ Lorie A. Taylor                        Robin L. Barber
Print Name Lorie A. Taylor                       Title: Vice President and
                                                        Secretary

Signature /s/ Robyn Cronin
Print Name Robyn Cronin                      Tax I.D. No.: 25-1872167

COMMONWEALTH OF PENNSYLVANIA        )
                                    ) SS:
COUNTY OF CUMBERLAND                )

         The foregoing instrument was acknowledged before me this 1st day of
November, 2000 by Robin L. Barber, the Vice President and Secretary of Balanced
Care at Merrillville, Inc., a Delaware corporation, on behalf of the
corporation.

                                             /s/ Jaynelle D. Covert
                                             Notary Public

My Commission Expires: June 21, 2004                          [SEAL]

THIS INSTRUMENT PREPARED BY
AFTER RECORDING RETURN TO:

Cynthia L. Rerucha, Esq.
Shumaker, Loop & Kendrick, LLP
1000 Jackson Street
Toledo, Ohio 43624<PAGE>   1

Exhibit 10.16

                                 LOAN AGREEMENT

                                     BETWEEN

                             HEALTH CARE REIT, INC.

                                       AND

                       BALANCED CARE AT MERRILLVILLE, INC.

                                 OCTOBER 1, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE

<S>                 <C>                                                                                      <C>
ARTICLE 1:  PURPOSE AND DEFINITIONS...............................................................................1
         1.1        Purpose.......................................................................................1
         1.2        Definitions...................................................................................1
         1.3        Incorporation of Amendments...................................................................4
         1.4        Exhibits......................................................................................5

ARTICLE 2:  LOAN AND LOAN DOCUMENTS...............................................................................5
         2.1        Obligation to Lend............................................................................5
                    2.1.2    [Intentionally Deleted]..............................................................5
         2.2        Obligation to Repay...........................................................................5
                    2.2.1    Term of the Loan.....................................................................5
                    2.2.2    Interest and Payments................................................................5
         2.3        Use of Proceeds...............................................................................5
         2.4        Security......................................................................................5
         2.5        [Intentionally Deleted].......................................................................6
         2.6        Loan Expenses.................................................................................6
         2.7        Disbursements.................................................................................6
                    2.7.1    Loan Advances........................................................................6
                    2.7.2    Accrued Interest Payment.............................................................6
         2.8        Closing.......................................................................................6

ARTICLE 3:  CONDITIONS PRECEDENT TO DISBURSEMENT..................................................................6
         3.1        Conditions Precedent to Initial Disbursement..................................................6
                    3.1.1    Legal Opinion........................................................................6
                    3.1.2    Lender's Documents...................................................................6
                    3.1.3    Organizational Documents.............................................................7
                    3.1.4    Financial Statements.................................................................7
                    3.1.5    Other Closing Requirements...........................................................7
         3.2        Conditions Precedent to Each Disbursement.....................................................7
                    3.2.1    Disbursement Voucher.................................................................7
                    3.2.2    Post-Closing Obligations.............................................................7
                    3.2.3    No Event of Default..................................................................7

ARTICLE 4:  BORROWER'S REPRESENTATIONS AND WARRANTIES.............................................................7
         4.1        Organization and Good Standing................................................................8
         4.2        Power and Authority...........................................................................8
         4.3        Enforceability................................................................................8
         4.4        [Intentionally Deleted].......................................................................8
         4.5        [Intentionally Deleted].......................................................................8
         4.6        [Intentionally Deleted].......................................................................8
         4.7        [Intentionally Deleted].......................................................................8
</TABLE>

                                       i

<PAGE>   3

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE

<S>                 <C>                                                                                      <C>
         4.8        [Intentionally Deleted].......................................................................8
         4.9        [Intentionally Deleted].......................................................................8
         4.10       [Intentionally Deleted].......................................................................8
         4.11       Affirmation of Lease..........................................................................8

ARTICLE 5:  AFFIRMATIVE COVENANTS.................................................................................8
         5.1        Perform Obligations...........................................................................8
         5.2        Documents and Information.....................................................................8
                    5.2.1    Furnish Documents....................................................................9
                    5.2.2    Furnish Information..................................................................9
                    5.2.3    Further Assurances and Information...................................................9
                    5.2.4    Material Communications..............................................................9
                    5.2.5    Requirements for Financial Statements...............................................10
         5.3        Broker's Commission..........................................................................10
         5.4        Existence....................................................................................10
         5.5        [Intentionally Deleted]......................................................................10

ARTICLE 6:  NEGATIVE COVENANTS...................................................................................10
         6.1        No Debt......................................................................................10
         6.2        No Liens.....................................................................................10
         6.3        No Guaranties................................................................................10
         6.4        No Dissolution...............................................................................11
         6.5        [Intentionally Deleted]......................................................................11
         6.6        No Investments...............................................................................11
         6.7        Subordination of Payments....................................................................11
         6.8        Change of Location or Name...................................................................11

ARTICLE 7:  DEFAULT AND REMEDIES.................................................................................11
         7.1        Event of Default.............................................................................11
         7.2        Remedies on Default..........................................................................14
                    7.2.1    Acceleration........................................................................14
                    7.2.2    Other Remedies......................................................................14
                    7.2.3    Waiver..............................................................................14
                    7.2.4    Terminate Disbursement..............................................................14
                    7.2.5    [Intentionally Deleted].............................................................14
                    7.2.6    Lease Remedies......................................................................14

ARTICLE 8:  MISCELLANEOUS........................................................................................15
         8.1        Advances by Lender...........................................................................15
         8.2        [Intentionally Deleted]......................................................................15
         8.3        Construction of Rights and Remedies and Waiver of Notice and Consent.........................15
                    8.3.1    Applicability.......................................................................15
                    8.3.2    Waiver of Notices and Consent to Remedies...........................................15
                    8.3.3    Cumulative Rights...................................................................15
                    8.3.4    Extension or Modification of Loan...................................................15
                    8.3.5    Right to Select Security............................................................16
                    8.3.6    Forbearance Not a Waiver............................................................16
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE

<S>                 <C>                                                                                      <C>
                    8.3.7    No Waiver...........................................................................16
                    8.3.8    No Continuing Waivers...............................................................16
                    8.3.9    [Intentionally Deleted].............................................................16
                    8.3.10No Release.............................................................................16
         8.4        Assignment...................................................................................17
                    8.4.1    Assignment by Lender................................................................17
                    8.4.2    Assignment by Borrower..............................................................17
         8.5        Notices......................................................................................17
         8.6        Entire Agreement.............................................................................17
         8.7        Severability.................................................................................17
         8.8        Captions and Headings........................................................................18
         8.9        Governing Law................................................................................18
         8.10       Binding Effect...............................................................................18
         8.11       Modification.................................................................................18
         8.12       Construction of Agreement....................................................................18
         8.13       Counterparts.................................................................................18
         8.14       No Third-Party Beneficiary Rights............................................................18
         8.15       Lender's Authority to Furnish Copies of Loan Documents.......................................18
         8.16       Lender Merely a Lender.......................................................................19
                    8.16.1   No Agency...........................................................................19
                    8.16.2   No Obligation to Pay................................................................19
                    8.16.3   No Responsibility for Construction..................................................19
</TABLE>

EXHIBIT A:  DISBURSEMENT SCHEDULE

EXHIBIT B:  DISBURSEMENT VOUCHER

EXHIBIT C:  LEGAL DESCRIPTIONS

EXHIBIT D:  [INTENTIONALLY DELETED]

EXHIBIT E:  DOCUMENTS TO BE DELIVERED

EXHIBIT F:  BORROWER'S CERTIFICATE

EXHIBIT G:  FACILITY INFORMATION

                                      iii

<PAGE>   5

                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT ("Agreement") is made and entered into effective as
of October 1, 2000 (the "Effective Date") between BALANCED CARE AT MERRILLVILLE,
INC. a corporation organized under the laws of the State of Delaware (the
"Borrower"), having its chief executive office at 1215 Manor Drive,
Mechanicsburg, Pennsylvania 17055 and HEALTH CARE REIT, INC., a corporation
organized under the laws of the State of Delaware (the "Lender"), having an
address of One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603.

                                R E C I T A L S:

         A. Lender has entered into a lease with Borrower for certain facilities
described on Exhibit G ("Facilities").

         B. Lender has also agreed to provide a loan to Borrower in the maximum
amount of $1,000,000.00 ("Loan"), subject to the terms and conditions of this
Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants and the
premises contained herein, the parties agree as follows:

                       ARTICLE 1: PURPOSE AND DEFINITIONS

1.1 Purpose. The purpose of this Agreement is to establish the Loan with Lender
for the financing as set forth above.

1.2 Definitions. Except as otherwise expressly provided, [i] the terms defined
in this section have the meanings assigned to them in this section and include
the plural as well as the singular; [ii] all accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with generally
accepted accounting principles as of the time applicable; and [iii] the words
"herein", "hereof", and "hereunder" and similar words refer to this Agreement as
a whole and not to any particular section.

         "Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity (now or hereafter existing)
that, directly or indirectly, controls, or is controlled by, or is under common
control with Borrower. "Control" (and the correlative meanings of the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the

<PAGE>   6

direction of the management and policies of such entity. "Affiliate" includes,
without limitation, Guarantor.

         "Annual Financial Statements" means [i] for Borrower, an unaudited
balance sheet and statement of income for the most recent fiscal year; and [ii]
for Guarantor, an audited balanced sheet and statement of income for the most
recent fiscal year with consolidating schedules.

         "Borrower" means Balanced Care at Merrillville, Inc., a corporation
organized under the laws of the State of Delaware, its successors and permitted
assigns.

         "Business Day" means any day which is not a Saturday or Sunday or a
public holiday under the laws of the United States of America or the State of
Ohio.

         "Closing" means the Effective Date.

         "Disbursement Schedule" means the Disbursement Schedule attached hereto
as Exhibit A setting forth Borrower's estimate of the dates and amounts of the
disbursements required hereunder.

         "Disbursement Voucher" means Borrower's written request for a Loan
Advance set forth on the form attached hereto as Exhibit B.

         "Effective Date" means the date of this Agreement.

         "Event of Default" has the meaning set forth in Section 7.1.

         "Facility" means each facility located on a portion of the Land.
Reference in this Agreement to the "Facility" shall mean each Facility unless
expressly stated otherwise.

         "Financial Statements" means the annual, quarterly and year-to-date
financial statements of Borrower and Guarantor submitted to Lender prior to
Closing.

         "Guarantor" means Balanced Care Corporation.

         "Guaranty" means the Unconditional and Continuing Guaranty entered into
by Guarantor to guarantee payment of the Loan and any amendments thereto or
substitutions or replacement thereof.

         "Guaranty Documents" means the Guaranty and any other agreement or
instrument to be executed by Guarantor in accordance with the requirements of
the Loan Documents.

                                     - 2 -
<PAGE>   7

         "Land" means the real property described in Exhibit C attached hereto.

         "Lease" means the Master Lease Agreement of even date by which Lender
leased the Leased Property to Borrower, as amended from time to time.

         "Lease Documents" means the Lease and all other documents executed by
Borrower in connection with a Lease, each as amended from time to time.

         "Lender" means Health Care REIT, Inc., its successors and assigns.

         "Loan" means the loan by Lender to Borrower in the amount up to the
Loan Amount.

         "Loan Amount" means $1,000,000.00.

         "Loan Advance" means each advance of proceeds of the Loan.

         "Loan Documents" means [i] this Agreement; [ii] the Note; [iii] the
Mortgage; and [iv] all other documents and instruments executed by Borrower in
connection with the Loan, each as amended from time to time.

         "Loan Expenses" means all reasonable costs and expenses incurred by
Lender in investigating, making and administering the Loan, including but not
limited to, [i] reasonable attorneys' and paralegals' fees and costs; and [ii]
reasonable travel, transportation, food, and lodging costs and expenses incurred
by Lender and Lender's attorneys and paralegals, but excluding Lender's internal
bookkeeping and routine loan servicing costs.

         "Material Obligation" means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on a Facility (or any part
thereof, including any personal property) and any agreement relating thereto;
[ii] any obligation or agreement that is material to the construction,
development or operation of a Facility or that is material to Borrower's
business or financial condition; and [iii] any indebtedness or capital lease of
Borrower that has an outstanding principal balance of at least $50,000.00 and
any agreement relating thereto.

         "Mortgage" means the leasehold mortgage from Borrower for the benefit
of Lender on the leasehold interest of Borrower arising

                                     - 3 -
<PAGE>   8

under the Lease securing the obligations of Borrower relating to the Loan, any
amendments thereto or substitutions or replacements thereof.

         "Note" means the Note of even date made by Borrower in favor of Lender
for a principal amount equal to the Loan Amount, and any extensions,
modifications, substitutions or renewals thereof.

         "Net Worth" has the meaning set forth in the Lease.

         "Organizational Documents" means [i] for a corporation, its Articles of
Incorporation certified by the Secretary of State of the state of organization,
as amended to date, and its Bylaws certified by an officer of such corporation,
as amended to date; [ii] for a limited partnership, its Certificate of
Partnership certified by the Secretary of State of the state of organization, as
amended to date, and its Limited Partnership Agreement certified by the general
partner of such partnership, as amended to date; and [iii] for a limited
liability company, its Certificate of Organization certified by the Secretary of
State of the State of Organization, as amended to date and its Operating
Agreement certified by the managing member of such limited liability company, as
amended to date.

         "Periodic Financial Statements" means the unaudited balance sheet and
statement of income of Borrower for the most recent month and quarter on an
individual facility and consolidated basis.

         "State" means the Commonwealth of Pennsylvania.

1.3 Incorporation of Amendments. The definition of any agreement, document, or
instrument set forth in this Agreement or in any other Loan Document shall be
deemed to incorporate all amendments, modifications, and renewals thereof and
all substitutions and replacements therefor.

                                     - 4 -
<PAGE>   9

1.4 Exhibits. The following exhibits are attached hereto and incorporated
herein:

                           Exhibit A: Disbursement Schedule
                           Exhibit B: Disbursement Voucher
                           Exhibit C: Legal Description
                           Exhibit D: [Intentionally Deleted]
                           Exhibit E: Documents to be Delivered
                           Exhibit F: Borrower's Certificate
                           Exhibit G: Facility Information

                       ARTICLE 2: LOAN AND LOAN DOCUMENTS

2.1 Obligation to Lend. Subject to the terms and upon the conditions set forth
in the Loan Documents, Lender shall lend to Borrower up to the Loan Amount. The
indebtedness of Borrower to Lender for the Loan is evidenced by the Note.

2.1.2 Borrower Working Capital Contribution. Notwithstanding Section 2.1, Lender
shall not be obligated to advance more than $250,000.00 of the Loan Amount
unless and until Borrower provides evidence acceptable to Lender that Borrower
has funded $250,000.00 in working capital expenses from Borrower's own funds.

2.2 Obligation to Repay. Borrower shall repay the Loan in accordance with the
terms of the Note and the other Loan Documents.

2.2.1 Term of the Loan. The term of the Loan will expire on the Maturity Date
set forth in the Note.

2.2.2 Interest and Payments. Borrower shall make payments in accordance with the
Note at the rate set forth in the Note.

2.3 Use of Proceeds. For purposes of this Section 2.3 only, "Leased Facility"
means any Facility that is subject to the Lease. All proceeds of the Loan (less
closing costs) shall be used by Borrower solely for working capital for any
Leased Facility, including but not limited to Rent payable under the lease.

2.4 Security. The Loan is guaranteed by Guarantor pursuant to the Guaranty. The
Loan is secured by a security interest in certain property of Borrower granted
pursuant to the provisions of Article 24 of the Lease and by a pledge of all of
the issued and outstanding securities of Borrower granted pursuant to the
provisions of Section 25.19 of the Lease.

                                     - 5 -
<PAGE>   10

2.5 [Intentionally Deleted].

2.6 Loan Expenses. At the Closing, Lender shall pay for the recording costs of
the Mortgage.

2.7 Disbursements.

2.7.1 Loan Advances. Subject to the terms and conditions of this Agreement,
including Section 2.1 and Section 2.1.2, Lender shall make an initial Loan
Advance in the amount of $90,000.00 ("Monthly Amount"). On or before the 20th
day of each month following Closing, Borrower shall submit to Lender a
Disbursement Voucher for and Lender shall make a Loan Advance in an amount equal
to the difference between [i] the Monthly Amount, and [ii] the total
expenditures made by Borrower from the previous month's Monthly Amount. In
addition to the Monthly Amount and in accordance with the terms and conditions
of this Agreement, Borrower may request additional Loan Advances consistent with
the Disbursement Schedule by submitting a Disbursement Voucher that states the
amount of the Loan Advance requested, and Lender shall be obligated to make a
Loan Advance based on Borrower's request, subject to the terms and conditions of
this Agreement.

2.7.2 Accrued Interest Payment. At Lender's option, Lender may advance Loan
proceeds to pay the accrued interest on the Loan.

2.8 Closing. Lender may elect to close by exchanging executed counterparts of
one or more of the Loan Documents and other closing documents by mail or a
national courier service, or by telecopier followed by exchanging documents by
mail or national courier service.

                 ARTICLE 3: CONDITIONS PRECEDENT TO DISBURSEMENT

3.1 Conditions Precedent to Initial Disbursement. Borrower shall comply with,
and Lender's obligation to disburse the first Loan Advance shall be conditioned
upon Borrower's performance of the following conditions precedent:

3.1.1 Legal Opinion. Borrower shall have delivered to Lender an opinion of
counsel, in form and substance satisfactory to Lender, covering the law of the
State and such other federal and state laws as Lender may require.

3.1.2 Lender's Documents. Borrower shall have delivered to Lender fully executed
originals of the Loan Documents.

                                     - 6 -
<PAGE>   11

3.1.3 Organizational Documents. Borrower shall have delivered to Lender copies
of Borrower's Organizational Documents, in form and substance satisfactory to
Lender, and Borrower's resolutions authorizing the Loan Documents, certified by
Borrower to be true and complete and not revoked or amended since the respective
dates thereof.

3.1.4 Financial Statements. Borrower shall have delivered to Lender the
Financial Statements, all in form and substance satisfactory to Lender.

3.1.5 Other Closing Requirements. Borrower shall have satisfied the requirements
of Section 3.2.3 and all other closing requirements of the Loan Documents, and
Lease Documents.

3.2 Conditions Precedent to Each Disbursement. Borrower shall comply with, and
Lender's obligation to disburse each Loan Advance after the first Loan Advance
shall be conditioned upon Borrower's performance of the following conditions
precedent:

3.2.1 Disbursement Voucher. Borrower shall have delivered to Lender a
Disbursement Voucher.

3.2.2 Post-Closing Obligations. Borrower shall have satisfied all post-closing
obligations under the Lease to be performed as of the date of such Loan Advance
request.

3.2.3 No Event of Default. There shall be no uncured Event of Default under any
Loan Document or Lease Document or any event which with the giving of notice or
the passage of time would constitute an Event of Default.

3.2.4 Monthly Statements. Borrower shall have delivered to Lender reasonably
satisfactory evidence of Borrower's use of the previous month's Loan Advance.

         ARTICLE 4: BORROWER'S REPRESENTATIONS AND WARRANTIES

         Borrower hereby makes the following representations and warranties, as
of the Effective Date and the date of each Loan Advance, to Lender and
acknowledges that Lender is making the Loan in reliance upon such
representations and warranties. Borrower's representations and warranties shall
survive the Closing and, except as specifically provided below, shall continue
in full force and effect until Borrower has repaid the Loan in full and
performed all other obligations under the Loan Documents.

                                     - 7 -
<PAGE>   12

4.1 Organization and Good Standing. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.

4.2 Power and Authority. Borrower has the power and authority to execute,
deliver, and perform Borrower's obligations under the Loan Documents and has
taken all requisite action to authorize the execution, delivery and performance
of Borrower's obligations under such documents.

4.3 Enforceability. The Loan Documents constitute valid and binding obligations
of Borrower, enforceable in accordance with their terms. The Guaranty Documents
constitute valid and binding obligations of Guarantor, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other state and federal laws relating to or
affecting the rights of creditors generally and general principles of equity.

4.4 [Intentionally Deleted].

4.5 [Intentionally Deleted].

4.6 [Intentionally Deleted].

4.7 [Intentionally Deleted].

4.8 [Intentionally Deleted].

4.9 [Intentionally Deleted].

4.10 [Intentionally Deleted].

4.11 Affirmation of Lease. Borrower affirms to Lender that all representations
and warranties set forth in the Lease Documents (if any) as of the date made are
true, complete and accurate.

                        ARTICLE 5: AFFIRMATIVE COVENANTS

5.1 Perform Obligations. Borrower shall perform all its obligations under the
Loan Documents and perform its obligations under the respective Lease Documents.
For so long as the Lease remains in full force and effect, Borrower shall be
deemed to comply with this Article 5 if Borrower complies with the Affirmative
Covenants set forth in the Lease.

5.2 Documents and Information.

                                     - 8 -
<PAGE>   13

5.2.1 Furnish Documents. Borrower shall periodically during the term of the Loan
deliver to Lender the Annual Financial Statements, Periodic Financial Statements
and other documents described on Exhibit E within the specified time periods.
With each delivery of Annual Financial Statements and Periodic Financial
Statements to Lender, Borrower shall also deliver to Lender a certificate signed
by the Chief Financial Officer of Borrower in the form of Exhibit F.

5.2.2 Furnish Information. Borrower and Guarantor shall each [i] within 15
business days after any request therefor, supply Lender with such information
concerning its financial condition, affairs and property, as Lender may
reasonably request from time to time hereafter; [ii] promptly notify Lender in
writing of any condition or event that constitutes a breach or event of default
of any term, condition, warranty, representation, or provisions of any Loan
Document, Guaranty Document, or any other Material Obligation, and of any
material adverse change in its financial condition; [iii] maintain a standard
and modern system of accounting; [iv] upon reasonable prior notice permit Lender
or any of its agents or representatives to have access to and to examine all of
its books and records regarding the financial condition of Borrower, Guarantor
and any Facility at any time or times hereafter during business hours; and [v]
permit Lender to copy and make abstracts from any and all of said books and
records, provided that such copies and abstracts shall not be made available by
Lender to anyone other than to governmental authorities, attorneys, auditors,
underwriters, credit rating agencies and such other persons for which there is a
legitimate business purpose for such disclosure and subject to patient
confidentiality.

5.2.3 Further Assurances and Information. Borrower shall, on request of Lender
from time to time, execute, deliver, and furnish documents as may be reasonably
necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Lender, Borrower shall provide to
Lender such additional information regarding Borrower or Borrower's financial
condition as Lender, or any existing or proposed creditor of Lender, or any
auditor or underwriter of Lender, may require from time to time, including,
without limitation, a current Borrower's Certificate in the form of Exhibit F.

5.2.4 Material Communications. Borrower shall transmit to Lender, within five
business days after receipt thereof, any communication that may materially and
adversely affect Borrower, any existing

                                     - 9 -
<PAGE>   14

Facility, the Loan Documents or the Lease Documents and Borrower will promptly
respond to Lender's inquiry with respect to such communication. Upon receipt of
written notice thereof, Borrower shall promptly notify Lender in writing of any
threatened or existing litigation or proceeding against, or investigation of,
Borrower or any Facility that may materially and adversely affect the right to
operate the Facility or title to the Facility or Lender's interest therein.

5.2.5 [Intentionally Deleted].

5.3 Broker's Commission. Borrower and Lender each represent that it has not
incurred an obligation to any broker in connection with the Loan. Lender and
Borrower shall each indemnify the other from claims, liability, loss, damage or
expense (including attorneys' fees) arising out of or relating to a breach of
this representation.

5.4 Existence. Borrower shall maintain its existence throughout the term of this
Agreement and every other Loan Document.

5.5 [Intentionally Deleted].

                          ARTICLE 6: NEGATIVE COVENANTS

         Until the Loan has been paid in full, Borrower shall not do any of the
following without the prior written consent of Lender which shall not be
unreasonably withheld except to the extent specifically permitted under the
terms of the Lease. For so long as the Lease remains in full force and effect,
Borrower shall be deemed to comply with this Article 6 if Borrower complies with
the Negative Covenants set forth in the Lease.

6.1 No Debt. Borrower shall not create, incur, assume, or permit to exist any
indebtedness other than [i] trade debt incurred in the ordinary course of
Borrower's business; [ii] the Loan (including any future increase in the Loan
Amount); and [iii] all other indebtedness allowable under the terms of the Lease
Documents to which Borrower is a party.

6.2 No Liens. Borrower shall not create, incur, or permit to exist any lien upon
or pledge of any interest in Borrower except for liens or pledges in favor of
Lender.

6.3 No Guaranties. Borrower shall not create, incur, assume, or permit to exist
any guarantee of any loan or other indebtedness except for [i] the endorsement
of negotiable instruments for

                                     - 10 -
<PAGE>   15

collection in the ordinary course of business; [ii] guaranties in favor of
Lender; and [iii] all other guaranties allowable under the terms of the Lease
Documents to which Borrower is a party.

6.4 No Dissolution. Except as may be permitted in the Lease, Borrower shall not
dissolve, liquidate, merge, consolidate or terminate its existence or sell,
assign, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired).

6.5 [Intentionally Deleted].

6.6 No Investments. Except as may be permitted in the Lease, Borrower shall not
purchase or otherwise acquire, hold, or invest in securities (whether capital
stock or instruments evidencing indebtedness) of or make loans or advances to
any person, including, without limitation, any shareholder, partner or member of
Borrower.

6.7 Subordination of Payments. Except as may be permitted in the Lease, after
the occurrence of an Event of Default and until such Event of Default is cured,
Borrower shall not make any payments or distributions (including, without
limitation, salary, bonuses, fees, principal, interest, dividends, liquidating
distributions, management fees, cash flow distributions or lease payments) to
any Affiliate or any shareholder, member or partner of Borrower or any
Affiliate, or any family member of any such shareholder, member or partner.

6.8 Change of Location or Name. Except as may be permitted in the Lease,
Borrower shall not change any of the following: [i] the location of the
principal place of business or chief executive office of Borrower, or any office
where any of Borrower's books and records are maintained; or [ii] the name under
which Borrower conducts any of its business or operations, until Borrower has
given Lender 30 days' advance notice and has executed and delivered to Lender
all UCC financing statements, amendments and other documents reasonably
requested by Lender in connection with such change.

                         ARTICLE 7: DEFAULT AND REMEDIES

7.1 Event of Default. Any one or more of the following events shall constitute
an "Event of Default" hereunder:

                                     - 11 -
<PAGE>   16

7.1.1 Borrower fails to pay to Lender any monetary obligation payable by
Borrower under the Loan Documents when such payment is due, provided, however,
Borrower shall not be in default hereunder if Borrower makes such payment within
10 days after written notice from Lender that such payment is due.

7.1.2 Lender gives Borrower three or more notices of non-payment pursuant to
Section 7.1.1 hereof during any 12-month period.

7.1.3 Borrower (where applicable) fails to comply with any covenant set forth in
Section 5.4, or Article 6 of this Agreement.

7.1.4 Borrower fails to observe and perform any other covenant, condition or
agreement under the Loan Documents to be performed by Borrower and [i]
continuance of such failure for a period of 30 days after written notice thereof
is given to the Borrower by the Lender; or [ii] if, by reason of the nature of
such default the same cannot be remedied within the said 30 days, Borrower fails
to proceed with reasonable diligence (reasonably satisfactory to Lender) after
receipt of the notice to cure the same or, in any event, fails to cure such
default within 60 days after receipt of the notice. The foregoing notice and
cure provisions do not apply to any Event of Default otherwise specifically
described in any other subsection of Section 7.1.

7.1.5 [i] The filing by Borrower of a petition under 11 U.S.C. or the
commencement of a bankruptcy or similar proceeding by Borrower; [ii] the failure
by Borrower within 60 days to dismiss any involuntary bankruptcy petition or
other commencement of a bankruptcy, reorganization or similar proceeding against
Borrower or to lift or stay any execution, garnishment or attachment of the
Facility; [iii] the entry of an order for relief under 11 U.S.C. in respect of
Borrower; [iv] assignment by Borrower for the benefit of its creditors; [v] the
entry by Borrower into an agreement of composition with its creditors; [vi] the
approval by a court of competent jurisdiction of a petition applicable to
Borrower in any proceeding for its reorganization instituted under the
provisions of any state or federal bankruptcy, insolvency, or similar laws; or
[vii] appointment by final order, judgment or decree of a court of competent
jurisdiction of a receiver of the whole or any substantial part of the
properties of Borrower (provided such receiver shall not have been removed or
discharged within 60 days of the date of his qualification).

7.1.6 [i] Any receiver, administrator, custodian or other person takes
possession or control of all or part of any Facility and continues in possession
for 60 days; [ii] any writ against all or

                                     - 12 -
<PAGE>   17

part of any Facility is not released within 60 days; [iii] any judgment is
rendered against all or part of any Facility, any Affiliate or Borrower and
which is undismissed for 60 days (except as otherwise provided in this section);
[iv] all or a substantial part of the assets of Borrower or Guarantor are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come into the possession of any receiver, trustee, custodian, or assignee for
the benefit of creditors and are not released within 60 days; [v] Borrower or
Guarantor is enjoined, restrained, or in any way prevented by court order, or
any proceeding is filed or commenced seeking to enjoin, restrain, or in any way
prevent Borrower or Guarantor from conducting all or a substantial part of its
business or affairs and such proceeding is not released within 60 days; or [vi]
if a notice of lien, levy, or assessment is filed of record with respect to all
or any part of the property of Borrower or Guarantor and is not dismissed within
30 days.

7.1.7 Any representation or warranty made by Borrower or Guarantor in the Loan
Documents, the Guaranty Documents, any security for the Loan, or any report,
certificate, application, financial statement or other instrument furnished by
Borrower or Guarantor pursuant hereto or thereto shall prove to be false,
misleading or incorrect in any material respect as of the date made.

7.1.8 [Intentionally Deleted].

7.1.9 Any guarantor (if any) of the Loan dies, dissolves, terminates, is
adjudicated incompetent, files a petition in bankruptcy, or is adjudicated
insolvent under 11 U.S.C. or any other insolvency law, or fails to comply with
any covenant or requirement set forth in the guaranty of such guarantor.

7.1.10 An Event of Default under the Lease shall be an Event of Default
hereunder.

7.1.11 Notwithstanding anything to the contrary in this Agreement or the other
Loan Documents, for so long as the Lease is in full force and effect, no default
hereunder (other than a default pursuant to Section 7.1.1) shall be deemed a
default unless and until the same constitutes a default under the Lease
Documents (other than by virtue of the amendment effected by Section 4 of the
Amendment to the Master Lease of even date herewith) and Borrower shall have the
benefit of any grace period provided in the Lease Documents in connection with
such default. Notwithstanding the foregoing, Lender shall not be obligated to

                                     - 13 -
<PAGE>   18

declare an Event of Default under the Lease to declare an Event of Default
hereunder.

7.2 Remedies on Default. Whenever any Event of Default occurs, Lender may, in
addition to any other remedies under the Loan Documents, at law or in equity,
take any one or more of the following remedial steps concurrently or
successively, without advance notice to Borrower (any such notice being
expressly waived by Borrower):

7.2.1 Acceleration. Lender may declare the Loan to be immediately due and
payable, without presentment of any kind, demand, notice of dishonor, protest,
or other notice of any kind, all of which Borrower hereby waives.

7.2.2 Other Remedies. Lender may take whatever action at law or in equity as may
appear necessary or desirable to collect any monies then due and/or thereafter
to become due.

7.2.3 Waiver. Without waiving any prior or subsequent Event of Default, Lender
may waive any Event of Default or, with or without waiving any Event of Default,
remedy any default.

7.2.4 Terminate Disbursement. Lender may terminate its obligation to disburse
Loan proceeds.

7.2.5 [Intentionally Deleted].

7.2.6 Lease Remedies. Pursuant to the cross-default provision of the Lease,
Lender may declare an Event of Default under the Lease and may exercise its
remedies thereunder.

7.3 Condition of Event of Default. Lender and Borrower acknowledge that any
monetary obligation of Borrower under the terms of the Note, which cannot be
satisfied from revenues from operation of the Facility, are subject to and
conditioned upon Lender advancing funds pursuant to the Working Capital Loan
(subject to Borrower's obligation to advance working capital under Section
2.1.2). Lender's failure to advance such funds shall not entitle Lender to
declare an Event of Default due to Borrower's failure to comply with a monetary
obligation that cannot be satisfied from revenues from operation of the
Facility, however, Lender shall not be prohibited from declaring an Event of
Default as a result of a non-monetary cause Event of Default or a monetary Event
of Default that occurs when Lender does not have an obligation to advance
pursuant to Section 2.1.2.

                                     - 14 -
<PAGE>   19

                            ARTICLE 8: MISCELLANEOUS

8.1 Advances by Lender. Following the occurrence of an Event of Default, Lender
may incur and/or pay and/or advance costs or expenses: [i] which Lender is
authorized or has the right (but not necessarily the obligation) to incur or may
incur under any Loan Document or any law; [ii] in exercising any right or remedy
provided under any Loan Document or in taking any action which Lender is
authorized to take under any Loan Document; [iii] which are required to be paid
by Borrower under any Loan Document, but which Borrower fails to pay upon
demand; or [iv] from which Borrower is required to hold Lender harmless under
any Loan Document, but from which Borrower fails to hold Lender harmless. Any
reasonable costs, expenses, or advances incurred or paid by Lender as described
in this Section 8.1 shall become part of the Loan and, upon demand, shall be
paid to Lender together with interest thereon at the Default Rate from the date
of disbursement by Lender.

8.2 [Intentionally Deleted].

8.3 Construction of Rights and Remedies and Waiver of Notice and Consent.

8.3.1 Applicability. The provisions of this Section 8.3 shall apply to all
rights and remedies provided by any Loan Document or by law or equity.

8.3.2 Waiver of Notices and Consent to Remedies. Unless otherwise expressly
provided herein, any right or remedy may be pursued without notice to or further
consent of Borrower, both of which Borrower waives.

8.3.3 Cumulative Rights. Each right or remedy under the Loan Documents is
distinct from but cumulative to each other right or remedy and may be exercised
independently of, concurrently with, or successively to any other rights and
remedies.

8.3.4 Extension or Modification of Loan. No extension of time for or
modification of amortization of the Loan shall release the liability or bar the
availability of any right or remedy against Borrower or any successor in
interest, and Lender shall not be required to commence proceedings against
Borrower or any successor or to extend time for payment or otherwise to modify
amortization of the Loan by reason of any demand by Borrower or any successor.

                                     - 15 -
<PAGE>   20

8.3.5 Right to Select Security. Lender has the right to proceed at its election
against all security or against any item or items of such security from time to
time, and no action against any item or items of security shall bar subsequent
actions against any item or items of security.

8.3.6 Forbearance Not a Waiver. No forbearance in exercising any right or remedy
shall operate as a waiver thereof; no forbearance in exercising any right or
remedy on any one or more occasion shall operate as a waiver thereof on any
further occasion; and no single or partial exercise of any right or remedy shall
preclude any other exercise thereof or the exercise of any other right or
remedy.

8.3.7 No Waiver. Failure by Lender to insist upon the strict performance of any
of the covenants and agreements herein set forth or to exercise any rights or
remedies upon default by Borrower hereunder shall not be considered or taken as
a waiver or relinquishment for the future of the right to insist upon and to
enforce by mandamus or other appropriate legal or equitable remedy strict
compliance by Borrower with all of the covenants and conditions hereof, or of
the rights to exercise any such rights or remedies, if such default by Borrower
is continued or repeated. To the extent permitted by law, any two or more of
such rights or remedies may be exercised at the same time.

8.3.8 No Continuing Waivers. If any covenant or agreement contained in the Loan
Documents is breached by Borrower and thereafter waived by Lender, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder. No waiver shall be binding unless it is in
writing and signed by Lender. No course of dealing between Lender and Borrower,
nor any delay nor omission on the part of Lender in exercising any rights under
the Loan Documents, shall operate as a waiver.

8.3.9 [Intentionally Deleted].

8.3.10 No Release. Borrower and any other person now or hereafter obligated for
the payment or performance of all or any part of the Note shall not be released
from paying and performing under the Note by reason of [i] the failure of Lender
to comply with any request of Borrower (or of any other person so obligated), to
take action to enforce any of the provisions of the Loan Documents, or [ii] the
release, regardless of consideration, of the obligations of any person liable
for payment or performance of the Note, or any part thereof, or [iii] any
agreement or

                                     - 16 -
<PAGE>   21

stipulation extending the time of payment or modifying the terms of the Note,
and in the event of such agreement or stipulation, Borrower and all such other
persons shall continue to be liable under such documents, as amended by such
agreement or stipulation, unless expressly released and discharged in writing by
Lender.

8.4 Assignment.

8.4.1 Assignment by Lender. Lender may assign, negotiate, pledge, or transfer
this Agreement, each Note and all other Loan Documents to any creditors to
secure a loan from such creditors to Lender and, in case of such assignment, the
rights and remedies of Lender shall be enforceable against Borrower by such
creditors with the same force and effect and to the same extent as the same
would have been enforceable by Lender but for such assignment. Lender shall have
the right to sell participation interests in the Loan provided that Lender shall
be designated the agent for all participants in the Loan.

8.4.2 Assignment by Borrower. Borrower shall not assign or attempt to assign its
rights nor delegate its obligations under this Agreement except as permitted by
the terms of the Lease.

8.5 Notices. All notices, demands, requests, and consents (hereinafter
"notices") given pursuant to the terms of this Agreement shall be in writing,
shall be addressed to the addresses set forth in the introductory paragraph of
this Agreement and shall be served by [i] personal delivery; [ii] United States
mail, postage prepaid; or [iii] nationally recognized overnight courier. All
notices shall be deemed to be given upon the earlier of actual receipt or three
days after deposit in the United States mail or one business day after deposit
with the overnight courier. Any notices meeting the requirements of this section
shall be effective, regardless of whether or not actually received. Lender and
Borrower may change their notice address at any time by giving the other party
notice of such change.

8.6 Entire Agreement. This Agreement, the Lease Documents and the other Loan
Documents constitute the entire agreement between Borrower and Lender. No
representations, warranties, and agreements have been made by Lender except as
set forth in this Agreement, the other Loan Documents and the Lease Documents.

8.7 Severability. If any term or provision of this Agreement is held or deemed
by Lender to be invalid or unenforceable, such holding shall not affect the
remainder of this Agreement and the same shall remain in full force and effect.

                                     - 17 -
<PAGE>   22

8.8 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Agreement or the intent of any provision thereof.

8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State, without giving effect to the
conflict of laws rules thereof.

8.10 Binding Effect. This Agreement will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Lender and Borrower.

8.11 Modification. This Agreement may only be modified by a writing signed by
both Lender and Borrower. All references to this Agreement, whether in this
Agreement or in any other document or instrument, shall be deemed to incorporate
all amendments, modifications, and renewals of this Agreement made after the
date hereof. If Borrower requests Lender's consent to any change in ownership,
merger or consolidation of Borrower, any assumption of the Loan, or any
modification of the Loan Documents, Borrower shall provide Lender all relevant
information and documents sufficient to enable Lender to evaluate the request.

8.12 Construction of Agreement. This Agreement has been prepared by Lender and
its professional advisors and reviewed by Borrower and its professional
advisors. Lender, Borrower and their advisors believe that this Agreement is the
product of all their efforts, it expresses their agreement, and that it shall
not be interpreted in favor of either Lender or Borrower or against either
Lender or Borrower merely because of their efforts in preparing it.

8.13 Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original hereof.

8.14 No Third-Party Beneficiary Rights. No person not a party to this Agreement
shall have or enjoy any rights hereunder and all third-party beneficiary rights
are expressly negated. Without limiting the generality of the foregoing, no one
other than Borrower shall have any rights to obtain or compel a disbursement of
proceeds of the Loan hereunder.

8.15 Lender's Authority to Furnish Copies of Loan Documents. Lender may exhibit
or furnish the Loan Documents or copies thereof to any potential transferee of
the Loan Documents (whether such

                                     - 18 -
<PAGE>   23

transfer is absolute or collateral), to any governmental or regulatory authority
in connection with any legal, administrative or regulatory proceedings requiring
the disclosure of the terms of the Loan Documents, to Lender's attorneys,
auditors and underwriters, and to any other person or entity for which there is
a legitimate business purpose for such disclosure.

8.16 Lender Merely a Lender.

8.16.1 No Agency. Lender is not and will not be in any way the agent for or
trustee of Borrower. Lender does not intend to act in any way for or on behalf
of Borrower in disbursing the proceeds of the Loan. Lender does not intend to be
and is not and will not be responsible for the completion of any improvements
erected or to be erected upon the land; the payment of bills or any other
details in connection with the land and improvements; any plans and
specifications prepared in connection with the land and improvements; or
Borrower's relations with any contractors, subcontractors, materialmen, or
laborers performing work or supplying materials for the land and improvements.

8.16.2 No Obligation to Pay. This Agreement is not to be construed by Borrower
or anyone furnishing labor, materials, or any other work or product for
improving the Land as an agreement upon the part of Lender to assure that anyone
will be paid for furnishing such labor, materials, or any other work or product.
Borrower shall be solely responsible for such payments.

8.16.3 No Responsibility for Construction. Lender is not responsible for
construction of the improvements. Notwithstanding inspection of the land and the
improvements, Lender assumes no responsibility for the quality of construction
or workmanship or for the architectural or structural soundness of any
improvements to be erected upon the land or for the adherence to or approval of
any plans and specifications in connection therewith or for any improvements.

               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

                                     - 19 -
<PAGE>   24

         IN WITNESS WHEREOF, Lender and Borrower have executed and delivered
this Agreement effective as of the Effective Date.

LENDER:                                 HEALTH CARE REIT, INC.

                                        By: /s/ Erin C. Ibele

                                            Title: Vice President and
                                                   Corporate Secretary

BORROWER:                               BALANCED CARE AT MERRILLVILLE, INC.

                                        By: /s/ Robin L. Barber
                                            Robin L. Barber

Tax I.D. No. 25-1872167                 Title: Vice President and Secretary

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