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                                OPTION AGREEMENT

         THIS OPTION AGREEMENT (this "Agreement") is made this 30th day of
November, 1998, by and between Edward B. Romanov, Jr., an individual residing in
Point Pleasant, 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 and 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 on or before November 30, 1999 (the "Option Period") by providing
written notice of such election to Optionor prior to the expiration of the
Option Period. 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 Premises in the amount
of Thirty-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 thc 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. Time of the Essence. Whether or not elsewhere herein expressly
provided, all times and dates for performance set forth in this Agreement are
agreed to be of the essence of this Agreement.
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         8. 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:

                                     c/o ElderTrust
                                     101 East State Street
                                     Kennett Square, Pennsylvania 19348
                                     Attn: Edward B. Romanov, Jr.

                  If given to Optionee:

                                     c/o ElderTrust
                                     101 East State Street
                                     Kennett Square, Pennsylvania 19348
                                     Attn: Chief Financial 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 bc delivered personally but
only if delivered personally to the individuals to whom notice is required to be
given as set forth above.

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

OPTIONOR:                                  OPTIONEE:

/s/ Edward B. Romanov, Jr.
-----------------------------              ELDERTRUST OPERATING LIMITED
Edward B. Romanov, Jr.                     PARTNERSHIP,
                                              a Delaware limited partnership

                                           By: ElderTrust, its general partner


                                           By: /s/ D. Lee McCreary, Jr.
                                               ----------------------------
                                           Name:    D. Lee McCreary, Jr.
                                           Title:   Senior Vice-President