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                                OPTION AGREEMENT


         THIS OPTION AGREEMENT (the "Agreement") is made as of the 24th day of
January 2000, by and between D. Lee McCreary, Jr., an individual residing in
Landenberg, Pennsylvania ("Optionor"), and ElderTrust Operating Limited
Partnership, a Delaware limited partnership ("Optionee").

         1. Grant of Option. Optionor, in consideration of the sum of Ten
Dollars ($10) Dollars (the "Option Price"), receipt and sufficiency of which are
hereby acknowledged, hereby grants to Optionee the exclusive right and option
(the "Option") to purchase all of Optionor's right, title and interest in an to
Vernon ALF, L.L.C. ("Vernon ALF Ownership Interest"). Good and clear title to
the Vernon ALF Ownership Interest, free and clear of all liens and encumbrances
except as may be acceptable to Optionee, is to be conveyed upon exercise of the
Option.

         2. Exercise of the Option. The Option may be exercised by Optionee at
any time by providing written notice of such election to Optionor. Nothing
herein shall be construed to obligate Optionor to exercise the Option and
Optionor hereby acknowledge and agree that the Option may be exercised by
Optionee at Optionee's sole and absolute discretion.

         3. Purchase Price. If Optionor exercises the Option as herein provided,
Optionee shall pay to Optionor a purchase price for the Optionor's Vernon ALF
Ownership Interest in the amount of Three Thousand Two Hundred Forty-Four
($3,244.00) Dollars (the "Purchase Price").

         4. Representations and Warranties. Optionor hereby represents and
warrants to Optionee that Optionor is the sole owner of the Vernon ALF Ownership
Interest and has the full and complete authority to enter into this Agreement
and convey the Vernon ALF Ownership Interest free and clear of any lien, claim
or encumbrance. Optionee and Optionor agree to execute such other documentation
and take such other action as may be commercially reasonable to effectuate this
Agreement.

         5. Assignment. Optionee shall have the right to assign this Option, or
any of Optionee's Rights hereunder, or to name nominees to take title to the
Vernon ALF Ownership Interest.

         6. Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

         7. Notices. Wherever in this Agreement it shall be required or
permitted that notice or demand be given or served by either party to or on the
other, such notice or demand shall be deemed duly given or served if, and shall
not be deemed duly given or served unless, in writing and mailed by certified
mail, return receipt requested, or sent by Federal Express or comparable private
delivery service which provides proof of delivery, addressed as follows:

                            If given to Optionor:

                                    D. Lee McCreary, Jr.
                                    1512 Broadrun Road
                                    Landenberg, PA  19350

                            If given to Optionee:

                                    c/o ElderTrust
                                    101 East State Street
                                    Kennett Square, Pennsylvania  19348
                                    Attn:  Chief Operating Officer

         The time at which any notice or demand shall be deemed given or served
shall be the time at which such notice or demand is mailed or delivered, whether
or not such delivery is refused. Any notice may also be delivered personally but
only if delivered personally to the individuals to whom notice is required to be
given as set forth above.



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         IN WITNESS WHEREOF, Optionor and Optionee have executed this Agreement
as of the date first above written.

OPTIONOR:                                   OPTIONEE:

/s/ D. Lee McCreary, Jr.
-----------------------------
D. Lee McCreary, Jr.                        ELDERTRUST OPERATING LIMITED
Date:  March 22, 2000                       PARTNERSHIP
                                            a Delaware limited partnership

                                            By:  ElderTrust, its general partner


                                            By:  /s/ John H. Haas
                                                 -------------------------------
                                            Name:  John Haas
                                            Title: Chief Operating Officer
                                            Date: March 22, 2000

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