Document:

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                               SECOND AMENDMENT TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                    ELDERTRUST OPERATING LIMITED PARTNERSHIP

         THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF ELDERTRUST OPERATING LIMITED PARTNERSHIP (this "Second
Amendment"), dated as of October 13, 1999, is entered into by ElderTrust, a
Maryland real estate investment trust, as general partner (the "General
Partner") of ElderTrust Operating Limited Partnership (the "Partnership"), for
itself and on behalf of the limited partners of the Partnership;

         WHEREAS, the General Partner has entered into a Rights Agreement, dated
as of October 13, 1999, between the General Partner and First Union National
Bank, as rights agent ("the "Rights Agreement"), pursuant to which the General
Partner has agreed to issue to the holders of its common shares of beneficial
interest rights to purchase shares of a newly created series of preferred shares
of beneficial interest, designated Series A Junior Participating Preferred
Shares (the "Series A Preferred Shares"), upon and subject to the terms and
conditions set forth in the Rights Agreement;

         WHEREAS, pursuant to Section 4.2.A of the Second Amended and Restated
Agreement of Limited Partnership of the Partnership (as heretofore amended, the
"Partnership Agreement"), the Partnership will issue to the General Partner
rights to purchase a new class of Partnership Units, to be entitled "Series A
Junior Participating Preferred Units," from time to time concurrently with the
issuance by the General Partner from time to time of a like number of Series A
Preferred Share purchase rights pursuant to the Rights Agreement; and

         WHEREAS, pursuant to the authority granted to the General Partner
pursuant to Section 14.1.B of the Partnership Agreement, the General Partner
desires to amend the Partnership Agreement (i) to establish a new class of
Units, to be entitled "Series A Junior Participating Preferred Units" (the
"Series A Preferred Units"), and to set forth the designations, preferences and
relative, participating, optional or other special rights, powers and duties of
such Series A Preferred Units, which are substantially the same as those of the
Series A Preferred Shares, pursuant to Section 4.2.A of the Partnership
Agreement and (ii) to protect the economic interests of limited partners in the
Partnership to the extent provided herein upon exercise by holders of certain
rights to purchase Series A Preferred Shares granted under the Rights Agreement
and Articles Supplementary relating to the Series A Preferred Shares.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the General Partner hereby amends the Partnership Agreement, as
follows:

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         1. Article 1 of the Partnership Agreement hereby is amended to add the
following definitions:

         "Common Unit" means a Partnership Unit that is not a Preferred Unit.
The Class A Units, Class B Units and Class C (LIHTC) Units are Common Units.

         "Exercise Percentage" has the meaning set forth in Section 4.3.

         "Liquidation Preference Amount" means, with respect to any Preferred
Unit as of any date of determination, the amount (including accrued and unpaid
distributions to the date of determination) payable with respect to such
Preferred Unit (as established by the instrument designating such Preferred
Unit) upon the voluntary or involuntary dissolution or winding up of the
Partnership as a preference over distributions to Units ranking junior to such
Preferred Unit.

         "Preferred Unit" means any Partnership Unit issued from time to time
pursuant to Section 4.2 that is specifically designated by the General Partner
at the time of its issuance as a Preferred Unit. Each class or series of
Preferred Units shall have such designations, preferences, and relative,
participating, optional, or other special rights, powers, and duties, including
rights, powers, and duties senior to the Common Units, all as determined by the
General Partner, subject to compliance with the requirements of Section 4.2.

         In addition, the definitions of "Partnership Unit," "Percentage
Interest," and "Shares Amount" appearing in Article 1 of the Partnership
Agreement hereby are deleted in their entirety and the following definitions are
inserted in their place:

         "Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
and includes Class A Units, Class B Units, Class C (LIHTC) Units, Series A
Preferred Units and any other classes or series of Partnership Units established
after the date hereof. The number of Partnership Units outstanding and the
Percentage Interests in the Partnership represented by such Partnership Units
are set forth in Exhibit A, as such Exhibit may be amended from time to time.
The ownership of Partnership Units shall be evidenced by a certificate in a form
approved by the General Partner. Without limitation on the authority of the
General Partner as set forth in Section 4.2 (but subject to the limitations
thereof), the General Partner may designate any Partnership Units, when issued,
as Common Units or as Preferred Units, may establish any other class of
Partnership Units, and may designate one or more series of any class of
Partnership Units.

         "Percentage Interest" means, as to a Partner holding a class or series
of Partnership Interests, its interest in such class or series, determined by
dividing the number of Partnership Units in such class or series owned by such
Partner by the total number of Partnership Units in such class or series then
outstanding as specified in Exhibit A, as such exhibit may be amended from time
to time, multiplied by the aggregate Percentage Interest allocable to such class
of Partnership Interests. If the Partnership shall at any time have

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outstanding more than one class of Partnership Interests, the Percentage
Interest attributable to each class of Partnership Interests shall be determined
as set forth in Section 4.2.B; provided, however, that, for purposes of
determining the rights and relationships among the various classes and series of
Partnership Units, Preferred Units shall not be considered to have any share of
the aggregate Percentage Interest in the Partnership unless, and only to the
extent, provided otherwise in the instrument creating such class or series of
Preferred Units.

         "Shares Amount" means a number of Shares equal to the number of Common
Units offered for redemption by a Redeeming Partner, multiplied by the
Conversion Factor; provided that, if the General Partner Entity issues to all
holders of Shares rights, options, warrants or convertible or exchangeable
securities entitling such holders to subscribe for or purchase Shares or any
other securities or property (collectively, the "rights") and if the Partnership
does not issue to all of the holders of Common Units at such time (other than
the General Partner) corresponding rights to subscribe for or purchase Common
Units or other securities or property corresponding to the securities or
property covered by the rights granted by the General Partner, then the Shares
Amount shall also include such rights that a holder of that number of Shares
would be entitled to receive had it owned such Shares at the time such rights
were issued; provided further that, if the rights issued by the General Partner
are issued pursuant to a shareholder rights plan (or other arrangement having
the same objective and substantially the same effect), then the Shares Amount
shall include such rights only to the extent that (a) the Common Units offered
for redemption were issued other than pursuant to Section 4.3 of this Agreement,
and (b) such rights have not been exercised by the holders thereof (and have not
otherwise terminated or been redeemed or eliminated).

         2. Section 4.2 of the Partnership Agreement hereby is amended to add
after Section 4.2.D the following section:

                  E. Series A Preferred Units. Under the authority granted to it
         by Section 4.2.A, the General Partner hereby establishes an additional
         class of Partnership Units entitled "Series A Junior Participating
         Preferred Units" (the "Series A Preferred Units"). Series A Preferred
         Units shall have the designations, preferences and relative,
         participating, optional or other special rights, powers and duties as
         set forth in Exhibit I hereto.

         3. Section 4.3 of the Partnership Agreement is hereby amended and
restated in its entirety as follows:

         If the General Partner acquires any Class A Units using the proceeds
from any exercise of any rights (as defined in the definition of Shares Amount)
issued under a shareholder rights plan (or other arrangement having the same
objective and substantially the same effect), then (a) the holders of Common
Units at such time (other than the General Partner) as a group shall have the
right to acquire, at the same price per Class A Unit paid by the General
Partner, a total number of additional Class A Units equal to the product of (i)
the total number of Common Units held by such holders, multiplied by (ii) a
fraction,

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the numerator of which is the number of Class A Units issued to the General
Partner as a result of the exercise of such rights and the denominator of which
is the total number of Class A Units held by the General Partner immediately
prior to such issuance (which fraction is referred to as the "Exercise
Percentage"), and (b) each holder of a Class A Unit, Class B Unit or Class C
(LIHTC) Unit at such time shall have the right to acquire, at the same price per
Class A Unit paid by the General Partner, a number of Class A Units equal to the
product of (iii) the aggregate number of Common Units that such holder holds at
such time, multiplied by (iv) the Exercise Percentage. (Thus, for example, if
the General Partner were to acquire 2,000,000 Class A Units at $5 per Unit from
the proceeds of the exercise of outstanding rights issued under a shareholder
rights plan at a time when the General Partner already owned 8,000,000 Class A
Units out of a total of 12,000,000 outstanding Common Units (which would
represent a 25% increase in the number of Class A Units held by the General
Partner), then the other holders of Common Units as a group would have the right
to purchase a total of 1,000,000 Class A Units at $5 per Class A Unit, and each
holder of a Class A Unit, Class B Unit or Class C (LIHTC) Unit would be entitled
to purchase his proportionate share of such Class A Units, or .25 Class A Units
for each Class A Unit, Class B Unit or Class C (LIHTC) Unit then held by such
holder.) In the event Partnership Units or Partnership Interests other than
Class A Units (including, without limitation, Series A Preferred Units) are
issued to the General Partner using proceeds of any exercise of rights issued
under a shareholder rights plan (or other arrangement having the same objective
and substantially the same effect), the holders of Common Units shall be granted
the right to acquire such other Partnership Units or Partnership Interests at
the same price as paid by the General Partner and in such amounts as would be
comparable to their rights had Class A Units been issued instead. The General
Partner shall provide prompt written notice to the holders of Common Units of
its acquisition of Class A Units (or other Partnership Units or Partnership
Interests) using such proceeds and shall establish in good faith such procedures
as it deems appropriate (including, without limitation, procedures to eliminate
the issuance of fractional Partnership Units if the General Partner deems
appropriate) to effectuate the rights of the holders of Common Units under the
preceding provisions of this Section 4.3. Except to the extent expressly granted
by the Partnership pursuant to this Section 4.3 or another agreement, no person
shall have any preemptive, preferential or other similar right with respect to
(i) additional Capital Contributions or loans to the Partnership; or (ii)
issuance or sale of any Partnership Units or other Partnership Interests.

         4. Section 8.6.C of the Partnership Agreement is hereby amended and
restated in its entirety as follows:

                  C. Exceptions to Exercise of Redemption Right.

                           (i) Notwithstanding the provisions of Sections 8.6.A
         and 8.6.B, a Partner shall not be entitled to exercise the Redemption
         Right pursuant to Section 8.6.A if (but only as long as) the delivery
         of Shares to such Partner on the Specified Redemption Date (i) would be
         prohibited under the Declaration of Trust or (ii) would be prohibited

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         under applicable federal or state securities laws or regulations (in
         each case regardless of whether the General Partner would in fact
         assume and satisfy the Redemption Right).

                           (ii) Notwithstanding the provisions of Sections 8.6.A
         and 8.6.B, a Partner shall not be entitled to exercise the Redemption
         Right pursuant to Section 8.6.A with respect to any Preferred Unit
         unless (i) such Preferred Unit has been issued to and is held by a
         Partner other than the General Partner, and (ii) the General Partner
         has expressly granted to such Partner the right to redeem such
         Preferred Units pursuant to Section 8.6.A.

                           (iii) Preferred Units shall be redeemed, if at all,
         only in accordance with such redemption rights or options as are set
         forth with respect to such Preferred Units (or class or series thereof)
         in the instruments designating such Preferred Units (or class or series
         thereof).

         5.       Exhibits to Partnership Agreement.

                  A. The General Partner shall maintain the information set
forth in Exhibit A to the Partnership Agreement, as such information shall
change from time to time, in such form as the General Partner deems appropriate
for the conduct of the Partnership's affairs, and Exhibit A shall be deemed
amended from time to time to reflect the information so maintained by the
General Partner, whether or not a formal amendment to the Partnership Agreement
has been executed amending such Exhibit A. In addition to the designation of
Series A Preferred Units pursuant to this First Amendment, such information
shall reflect (and Exhibit A shall be deemed amended from time to time to
reflect) the issuance of any additional Partnership Units to the General Partner
or any other Person, the transfer of Partnership Units and the redemption of any
Partnership Units, all as contemplated herein.

                  B. The Partnership Agreement is hereby amended by attaching
thereto as Exhibit I the Exhibit I attached hereto.

         6. Exhibit C to the Partnership Agreement hereby is amended to add new
Section 1.G as follows and existing Section 1.G shall be redesignated as Section
1.H:

                  G. Priority Allocation With Respect to Preferred Units. Any
         remaining items of Partnership gross income or gain for the Partnership
         Year, if any, shall be specially allocated to the General Partner or
         any other Partner that holds Preferred Units in an amount equal to the
         excess, if any, of the cumulative distributions received by such
         Partner for the current Partnership Year and all prior Partnership
         Years (other than distributions that are treated as being in
         satisfaction of the Liquidation Preference Amount for any Preferred
         Units held by such Partner or amounts paid in redemption of any
         Preferred Units, except to the extent that the Liquidation Preference
         Amount or amount paid in redemption includes accrued and unpaid
         distributions) over the cumulative allocations of Partnership gross
         income and gain to such Partner under this Section 1.F for all prior
         Partnership Years.

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         7. Certain Capitalized Terms. All capitalized terms used in this First
Amendment and not otherwise defined shall have the meanings assigned in the
Partnership Agreement or in the Articles Supplementary of the General Partner.
Except as modified herein, all terms and conditions of the Partnership Agreement
shall remain in full force and effect, which terms and conditions the General
Partner hereby ratifies and affirms.

                       [Page Break Intentionally Inserted]

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         IN WITNESS WHEREOF, the undersigned has executed this Second Amendment
as of the date first set forth above.

                                            ELDERTRUST,
                                            as General Partner of
                                            ElderTrust Operating Limited
                                                 Partnership

                                            By: /s/ D. Lee McCreary, Jr.
                                                --------------------------------
                                            Name:  D. Lee McCreary, Jr.
                                            Title: President and Chief
                                                   Executive Officer

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                                    EXHIBIT I

          DESIGNATIONS, PREFERENCES AND OTHER RELATIVE, PARTICIPATING,
          OPTIONAL OR OTHER SPECIAL RIGHTS, POWERS AND DUTIES OF SERIES
                               A PREFERRED UNITS

         The Series A Preferred Units shall have the following designations,
preferences, rights, powers and duties:

         (1) Certain Defined Terms. The following capitalized terms used in this
Exhibit I shall have the respective meanings set forth below:

                  "Parity Units" has the meaning ascribed thereto in Section
(3)(A) below.

                  "Quarterly Distribution Payment Date" means the 15th day (or,
         if such day is not a Business Day, the next Business Day thereafter) of
         February, May, August and November of each year, commencing November
         15, 1999.

         (2)      Distributions.

                  (A) Each holder of the then outstanding Series A Preferred
         Units shall be entitled to receive out of funds legally available
         therefor, when, as and if declared by the Partnership, quarterly
         distributions payable in cash on the Quarterly Distribution Payment
         Date at the rate per Series A Preferred Unit equal to the greater of
         (a) $10.00 or (b) subject to the provision for adjustment hereinafter
         set forth, one thousand (1,000) times the aggregate per unit amount of
         all cash distributions, and one thousand (1,000) times the aggregate
         per unit amount (payable in kind) of all non-cash or other
         distributions (other than a distribution payable in Class A Units,
         Class B Units or Class C (LIHTC) Units of the Partnership, or a
         subdivision of the outstanding Class A Units, Class B Units or Class C
         (LIHTC) Units (by reclassification or otherwise)), declared on such
         Class A Units, Class B Units or Class C (LIHTC) Units, since the
         immediately preceding Quarterly Distribution Payment Date, or, with
         respect to the first Quarterly Distribution Payment Date, since the
         first issuance of any Series A Preferred Units or a fraction thereof.
         In the event the Partnership shall at any time after October 13, 1999
         (the "Rights Declaration Date") (i) declare or pay any distribution on
         Class A Units, Class B Units or Class C (LIHTC) Units payable in Class
         A Units, Class B Units or Class C (LIHTC) Units, (ii) subdivide the
         outstanding Class A Units, Class B Units or Class C (LIHTC) Units, or
         (iii) combine the outstanding Class A Units, Class B Units or Class C
         (LIHTC) Units into a smaller number of units, then in each such case
         the amount to which holders of Series A Preferred Units were entitled
         immediately prior to such event under clause (b) of the preceding
         sentence shall be adjusted by multiplying such amount by a fraction,
         the numerator of which is the number of Common Units outstanding
         immediately after such event and the denominator of which is the number
         of Common Units that were outstanding immediately prior to such event.

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                  (B) The Partnership shall declare a distribution on the Series
         A Preferred Units as provided in paragraph (A) above immediately after
         it declares a distribution on any Common Units (other than a
         distribution payable in Common Units); provided that, in the event no
         distribution shall have been declared on the Common Units during the
         period between any Quarterly Distribution Payment Date and the next
         subsequent Quarterly Distribution Payment Date, a distribution of
         $10.00 per unit on the Series A Preferred Units shall nevertheless be
         payable on such subsequent Quarterly Distribution Payment Date.

                  (C) Distributions shall begin to accrue and be cumulative on
         outstanding Series A Preferred Units from the Quarterly Distribution
         Payment Date next preceding the date of issue of such Series A
         Preferred Units, unless the date of issue of such units is prior to the
         record date set for the first Quarterly Distribution Payment Date, in
         which case distributions on such units shall begin to accrue from the
         date of issue of such units, or unless the date of issue is a Quarterly
         Distribution Payment Date or is a date after the record date for the
         determination of holders of Series A Preferred Units entitled to
         receive a quarterly distribution and before such Quarterly Distribution
         Payment Date, in either of which events such distributions shall begin
         to accrue and be cumulative from such Quarterly Distribution Payment
         Date. Accrued but unpaid distributions shall not bear interest.
         Distributions paid on the Series A Preferred Units in an amount less
         than the total amount of such distributions at the time accrued and
         payable on such units shall be allocated pro rata on a unit-by-unit
         basis among all such units at the time outstanding. The Board of
         Trustees of the General Partner may fix a record date for the
         determination of holders of Series A Preferred Units entitled to
         receive payment of a distribution declared thereon, which record date
         shall be no more than 60 days prior to the date fixed for the payment
         thereof.

         (3)      Certain Restrictions.

                  (A) Whenever distributions payable on the Series A Preferred
         Units as provided in Section (2) are not paid, thereafter and until
         such distributions, whether or not declared, on Series A Preferred
         Units outstanding shall have been paid in full, the Partnership shall
         not:

                           (i) declare or pay distributions on, or, except
         otherwise provided for in Section 8.6 of the Partnership Agreement,
         redeem or purchase or otherwise acquire for consideration, any units
         ranking junior (either as to distributions or upon liquidation,
         dissolution or winding up) to the Series A Preferred Units; or

                           (ii) declare or pay distributions on any units
         ranking on a parity (either as to distributions or upon liquidation,
         dissolution or winding up) (the "Parity Units") with the Series A
         Preferred Units, except distributions

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         paid ratably on the Series A Preferred Units and all such Parity Units
         on which distributions are payable in proportion to the total amounts
         to which the holders of all such units are then entitled; or

                           (iii) redeem or purchase or otherwise acquire for
         consideration any Parity Units, provided that the Partnership may at
         any time redeem, purchase or otherwise acquire any such Parity Units in
         exchange for any units ranking junior (either as to distributions or
         upon dissolution, liquidation or winding up) to the Series A Preferred
         Units; or

                           (iv) redeem or purchase or otherwise acquire for
         consideration any Series A Preferred Units, or any Parity Units, except
         in accordance with a purchase offer made in writing or by publication
         (as determined by the Board of Trustees of the General Partner) to all
         holders of such units upon such terms as the Board of Trustees of the
         General Partner, after consideration of the respective annual
         distribution rates and other relative rights and preferences of the
         respective series and classes, shall determine in good faith will
         result in fair and equitable treatment among the respective series or
         classes.

                  (B) The General Partner shall not permit any subsidiary of the
         Partnership to purchase or otherwise acquire for consideration any
         Partnership Units unless the Partnership could, under paragraph (A) of
         this Section (3), purchase or otherwise acquire such units at such time
         and in such manner.

                  (C) Notwithstanding anything contained in this Section (3) to
         the contrary, nothing herein shall limit or restrict the right of a
         holder of a Partnership Unit to require the Partnership to redeem such
         Partnership Unit in accordance with the provisions of Section 8.6 of
         the Partnership Agreement.

         (4)      Liquidation, Dissolution or Winding Up.

                  (A) Upon any liquidation (voluntary or otherwise), dissolution
         or winding up of the Partnership, no distribution shall be made to the
         holders of Partnership Units ranking junior (either as to distributions
         or upon liquidation, dissolution or winding up) to the Series A
         Preferred Units unless, prior thereto, the holders of Series A
         Preferred Units shall have received (i) $35,500 per Unit, plus (ii) any
         unpaid distributions accrued and unpaid thereon, whether or not
         declared, to the date of such payment (the "Series A Junior Liquidation
         Preference"). Following the payment of the full amount of the Series A
         Junior Liquidation Preference, no additional distributions shall be
         made to the holders of Series A Preferred Units unless, prior thereto,
         the holders of Common Units shall have received an amount per unit (the
         "Common Adjustment") equal to the quotient obtained by dividing (i) the
         Series A Junior Liquidation Preference by (ii) 1,000 (as appropriately
         adjusted as set forth in subparagraph (C) below to reflect such events
         as unit splits, unit distributions and recapitalizations with respect
         to the Common Units) (such

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         number in clause (ii) immediately above as so adjusted being referred
         to as the "Adjustment Number"). Following the payment of the full
         amount of the Series A Junior Liquidation Preference and the Common
         Adjustment in respect of all outstanding Series A Preferred Units and
         Common Units, respectively, holders of Series A Preferred Units and
         holders of Common Units shall receive their ratable and proportionate
         share of the remaining assets to be distributed in the ratio of the
         Adjustment Number to one (1) with respect to such Series A Preferred
         Units and Common Units, on a per unit basis, respectively.

                  (B) In the event, however, that there are not sufficient
         assets available to permit payment in full of the Series A Junior
         Liquidation Preference and the liquidation preferences of all other
         series of Preferred Units, if any, which rank on a parity with the
         Series A Preferred Units, then such remaining assets shall be
         distributed ratably to the holders of such Parity Units in proportion
         to their respective liquidation preferences. In the event, however,
         that there are sufficient assets available to permit payment in full of
         the Common Adjustment, then such remaining assets shall be distributed
         ratably to the holders of Common Units.

                  (C) In the event the Partnership shall at any time after the
         Rights Declaration Date (i) declare any distribution on Class A Units,
         Class B Units or Class C (LIHTC) Units payable in Class A Units, Class
         B Units or Class C (LIHTC) Units, (ii) subdivide the outstanding Class
         A Units, Class B Units or Class C (LIHTC) Units, or (iii) combine the
         outstanding Class A Units, Class B Units or Class C (LIHTC) Units into
         a smaller number of units, then in each such case the Adjustment Number
         in effect immediately prior to such event shall be adjusted by
         multiplying such Adjustment Number by a fraction, the numerator of
         which is the number of Common Units outstanding immediately after such
         event and the denominator of which is the number of Common Units that
         were outstanding immediately prior to such event.

                  5. Consolidation, Merger, Etc. In case the Partnership shall
enter into any consolidation, merger, combination or other transaction in which
Class A Units, Class B Units or Class C (LIHTC) Units are exchanged for or
changed into other units or securities, cash and/or any other property, then in
any such case the Series A Preferred Units shall at the same time be similarly
exchanged or changed into such units or securities, cash and/or any other
property in an amount per unit (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of units, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each Class A Unit, Class B Unit or Class C
(LIHTC) Units is changed or exchanged. In the event the Partnership shall at any
time after the Rights Declaration Date (i) declare any distribution on Class A
Units, Class B Units or Class C (LIHTC) Units payable in Class A Units, Class B
Units or Class C (LIHTC) Units, (ii) subdivide the outstanding Class A Units,
Class B Units or Class C (LIHTC) Units, or (iii) combine the outstanding Class A
Units, Class B Units or Class C (LIHTC) Units into a smaller number of units,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of Series A Preferred Units (as previously
adjusted, if any prior adjustment has occurred)

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shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of Class A Units, Class B Units or Class C (LIHTC) Units
outstanding immediately after such event and the denominator of which is the
number of Class A Units, Class B Units or Class C (LIHTC) Units that were
outstanding immediately prior to such event.

         6. Redemption Right. The outstanding Series A Preferred Units may be
redeemed as a whole, but not in part, at any time, or from time to time, at the
option of the Board of Trustees of the General Partner, at a cash price per unit
equal to 105 percent of (i) the product of the Adjustment Number times the
Average Market Value (as such term is hereinafter defined) of a Class A Unit,
plus (ii) all distributions which on the redemption date are payable on the
Series A Preferred Units to be redeemed and have not been paid, earned or
declared and a sum sufficient for the payment thereof set apart, without
interest. The "Average Market Value" of a Class A Unit shall equal the average
of the per share closing sale prices of the Shares of the General Partner during
the 30-day period immediately preceding the date before the redemption date on
the Composite Tape for New York Stock Exchange Listed Stocks, or, if such Shares
are not quoted on the Composite Tape, on the New York Stock Exchange, or, if
such Shares are not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which such Shares are listed, or, if such Shares are not listed on
any such exchange, the average of the per share closing sale prices of the
Shares during such 30-day period, as quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use,
or if no such quotations are available, the fair market value of a Share as
determined by the Board of Trustees of the General Partner in good faith.

         7. Ranking. Notwithstanding anything contained herein to the contrary,
the Series A Preferred Units shall rank junior to all other series of Preferred
Units as to voting rights, the payment of distributions and the distribution of
assets in liquidation, unless the terms of any such series shall provide
otherwise.

         8. Voting Rights. The holders of Series A Preferred Units shall have
the following voting rights:

                  (A) Subject to the provision for adjustment hereinafter set
         forth, each Series A Preferred Unit shall entitle the holder thereof to
         one thousand (1,000) votes on all matters submitted to a vote of the
         Partners. In the event the General Partner shall at any time after the
         Rights Declaration Date (i) declare any distribution on Class A Units,
         Class B Units or Class C (LIHTC) Units payable in Class A Units, Class
         B Units or Class C (LIHTC) Units, (ii) subdivide the outstanding Class
         A Units, Class B Units or Class C (LIHTC) Units, or (iii) combine the
         outstanding Class A Units, Class B Units or Class C (LIHTC) Units into
         a smaller number of units, then in each such case the number of votes
         per unit to which holders of Series A Preferred Units were entitled
         immediately prior to such event shall be adjusted by multiplying such
         number by a fraction, the numerator of which is the number of Common
         Units outstanding immediately after such event and the denominator of
         which is the number of Common Units that were outstanding immediately
         prior to such event.

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                  (B) Except as otherwise provided by law, the holders of Series
         A Preferred Units and the holders of Common Units and any other
         Partnership Units having general voting rights shall vote together as
         one class on all matters submitted to a vote of the Partners.

                  (C) Except as set forth herein, holders of Series A Preferred
         Units shall have no special voting rights and their consent shall not
         be required (except to the extent they are entitled to vote with
         holders of Common Units as set forth herein) for taking any Partnership
         action.

         9. General. The rights of the General Partner, in its capacity as a
holder of the Series A Preferred Units, are in addition to and not in limitation
on any other rights or authority of the General Partner, in any other capacity,
under the Partnership Agreement. In addition, nothing contained in this Exhibit
I shall be deemed to limit or otherwise restrict any rights or authority of the
General Partner under the Partnership Agreement, other than in its capacity as a
holder of the Series A Preferred Units. The foregoing is not intended to
indicate that the General Partner is, or will be, the only holder of Series A
Preferred Units.

                                     * * * *

                                       A-6<PAGE>

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of October 13,
1999 by and between Eldertrust, a real estate investment trust, with its
principal place of business at 101 East State Street, Kennett Square, PA 19348
(the "Company"), and D. Lee McCreary, Jr. (the "Executive").

                                   WITNESSETH:

         The Company desires to continue to employ the Executive as an employee
of the Company, and the Executive desires to continue to provide services to the
Company, all upon the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows: 1. Offer and Acceptance of Employment. The Company
hereby agrees to employ the Executive as the President and Chief Executive
Officer of the Company. The Executive accepts such employment and agrees to
perform the customary responsibilities of such position during the term of this
Agreement. The Executive will perform such other duties as may from time to time
be reasonably assigned to him by the Board of Trustees of the Company, provided
such duties are consistent with and do not interfere with the performance of the
duties described herein and are of a type customarily performed by persons of
similar titles with similar corporations. Nothing in this Agreement shall
preclude Executive from serving as a director, trustee, officer of, or partner
in, any other firm, trust, corporation or partnership or from pursuing personal
investments, as long as such activities do not interfere with Executive's
performance of his duties hereunder.

         2. Period of Employment.

         (a) Period of Employment. The period of the Executive's employment
under this Agreement shall commence on the date hereof and shall, unless sooner
terminated pursuant to Section 4, continue for a three year period ending on
October 13, 2002 (such period, as extended from time to time, herein referred to
as the "Term"). Subject to Section 2(b), and if the Term has not been terminated
pursuant to Section 4, on October 13, 2001 and on each October 13 thereafter the
Term shall be extended for an additional period of one year.

         (b) Termination of Automatic Extension by Notice. The Company (with the
affirmative vote of two-thirds of the entire membership of the

<PAGE>

Board of Trustees at a meeting of the Board of Trustees called and held for such
purpose) or the Executive may elect to terminate the automatic extension of the
Term set forth in Section 2(a) ("Automatic Extension") by giving written notice
of such election. Any notice given hereunder must be given not less than one
year prior to the end of the then current Term.

         3. Compensation and Benefits.

         (a) Base Salary. As long as Executive remains an employee of Company,
Executive will be paid a base salary which shall continue at the rate currently
in effect, subject to adjustment as hereinafter provided. The Compensation and
Share Option Committee of the Board of Trustees shall review Executive's base
salary on an annual basis and make recommendations with respect to increases in
base salary to the Board of Trustees. Any increase in base salary shall not
reduce or limit any other obligation of the Company hereunder. Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described below, is referred
to herein as "Base Salary." Effective July 29, 1999 the Executive's Base Salary
shall be $200,000. Executive's Base Salary, as in effect from time to time, may
not be reduced by the Company without Executive's consent, provided that the
Base Salary payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of any deferred
compensation or savings plan or other employee benefit arrangement maintained or
established by the Company. The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with its customary periodic payroll
practices.

         (b) Incentive Compensation. Executive shall be eligible to receive
incentive compensation in the form of share options in amounts determined from
time to time by the Compensation and Share Option Committee of the Board of
Trustees.

         (c) Benefits, Perquisites and Expenses.

             (i) Benefits. During the Term, Executive shall be eligible to
participate in (1) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan or program of
the Company, and (2) each pension, profit sharing, retirement, deferred
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such plan under the generally
applicable provisions thereof. With respect to the pension or retirement
benefits payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined in accordance
with the terms of the applicable plan or program. Nothing in this

                                       2

<PAGE>

Section 3(c), in and of itself, shall be construed to limit the ability of the
Company to amend or terminate any particular plan, program or arrangement.

             (ii) Vacation. During the Term, the Executive shall be entitled to
the number of paid vacation days in each calendar year determined by the Company
from time to time for its senior executive officers, but not less than four
weeks in any calendar year. The Executive shall also be entitled to all paid
holidays given by the Company to its senior officers. Vacation days which are
not used during any calendar year may not be accrued, nor shall Executive be
entitled to compensation for unused vacation days.

             (iii) Perquisites. During the Term, Executive shall be entitled to
receive such perquisites (e.g., fringe benefits) as are generally provided to
other senior officers of the Company in accordance with the then current
policies and practices of the Company.

             (iv) Business Expenses. During the Term, the Company shall pay or
reimburse Executive for all reasonable expenses incurred or paid by Executive in
the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may reasonably
require and in accordance with the generally applicable policies and practices
of the Company.

         4. Employment Termination. The Term of employment under this Agreement
may be earlier terminated only as follows:

         (a) Cause. For purposes hereof, a termination by the Corporation for
"Cause" shall mean termination by action of at least two-thirds of the members
of the Board of Trustees of the Company at a meeting duly called and held upon
at least 15 days' prior written notice to Executive specifying the particulars
of the action or inaction alleged to constitute "Cause" (and at which meeting
Executive and his counsel were entitled to be present and given reasonable
opportunity to be heard) because of (i) Executive's conviction of any felony
(whether or not involving the Company or any of its subsidiaries) involving
moral turpitude which subjects, or if generally known, would subject, the
Company or any of its subsidiaries to public ridicule or embarrassment, (ii)
fraud or other willful misconduct by Executive in respect of his obligations
under this Agreement, or (iii) willful refusal or continuing failure to attempt,
without proper cause and, other than by reason of illness, to follow the lawful
directions of the Board of Trustees following thirty days' prior written notice
to Executive of his refusal to perform, or failure to attempt to perform such
duties and which during such thirty day period such refusal or failure to
attempt is not cured by the Executive. "Cause" shall not include a bona fide
disagreement over a corporate policy, so long as Executive does not willfully
violate on a continuing basis specific written directions from the Board of
Trustees, which directions are consistent with the provisions of this Agreement.
Action or inaction

                                       3

<PAGE>

by Executive shall not be considered "willful" unless done or omitted by him
intentionally and without his reasonable belief that his action or inaction was
in the best interests of the Company, and shall not include failure to act by
reason of total or partial incapacity due to physical or mental illness.

         (b) Without Cause. Notwithstanding anything to the contrary contained
in this Agreement, the Company (with the affirmative vote of two-thirds of the
entire membership of the Board of Trustees at a meeting of the Board of Trustees
called and held for the purpose) may, at any time after at least 90 days' prior
written notice in accordance with Section 4(e) hereof to the Executive,
terminate the Executive's employment hereunder without Cause.

         (c) Death or Disability. If Executive dies, his employment shall
terminate as of the date of death. If Executive develops a disability, the
Company may terminate Executive's employment hereunder. As used in this
Agreement, the term "disability" shall mean incapacity due to physical or mental
illness which has caused the Executive to be unable to substantially perform his
duties with the Company on a full time basis for (i) a period of twelve
consecutive months, or (ii) for shorter periods aggregating more than twelve
months in any twenty-four month period. During any period of Disability, the
Executive agrees to submit to reasonable medical examinations upon the
reasonable request, and at the expense, of the Company.

         (d) Good Reason. The Executive may terminate the Executive's employment
for Good Reason at any time during the term of this Agreement. For purposes of
this Agreement, "Good Reason" shall mean any of the following:

             (i) the assignment to the Executive by the Company of any duties
inconsistent with the Executive's status with the Company or a substantial
alteration in the nature or status of the Executive's responsibilities from
those in effect immediately prior to the date hereof, or a reduction in the
Executive's titles or offices as in effect immediately prior to the date hereof,
or any removal of the Executive from, or any failure to reelect the Executive
to, any of such positions, except in connection with the termination of his
employment for disability or cause or as a result of the Executive's death or by
the Executive other than for Good Reason, or the termination by the Company's
Board of Trustees of the Automatic Extension;

             (ii) a reduction by the Company in the Executive's Base Salary as
in effect on the date hereof or as the same may be increased from time to time
during the term of this Agreement;

             (iii) a relocation of the Executive's principal place of employment
or the relocation of the Company's principal office or corporate

                                       4

<PAGE>

headquarters to a location 35 miles or more from the Executive's current
principal place of employment.

             (iv) any "Change of Control" as set forth in Section 6 hereof;

             (v) any material failure by the Company to comply with any of the
provisions of this Agreement;

             (vi) any termination of the Executive's employment for reasons
other than death, disability or Cause or the termination by the Board of
Trustees of the Automatic Extension pursuant to Section 2(b) of this Agreement;

             (vii) the commencement of a proceeding or case, with or without the
application or consent of the Company or any of its subsidiaries, in any court
of competent jurisdiction, seeking (A) the liquidation, reorganization,
dissolution or winding-up of the Company or its subsidiaries, or the composition
or readjustment of the debts of the Company or its subsidiaries, (B) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or its subsidiaries or of all or any substantial part of their
respective assets, or (C) any similar relief in respect of the Company or its
subsidiaries under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.

         (e) Notice of Termination. Any termination, except for death, pursuant
to this Section 4 shall be communicated by a Notice of Termination. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate those specific termination provisions in this Agreement relied
upon and which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.

         (f) Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated by the Company for disability, 30 days after Notice of
Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period), (ii) if Executive's employment is terminated due to
Executive's death, on the date of death; (iii) if the Executive's employment is
terminated for Good Reason as a result of a Change of Control, as set forth in
Section 6 hereof; or (iv) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which shall not
be less than 90 nor more than 180 days from the date such Notice of Termination
is given).

         (g) Transfer of Minority Interests. The Executive shall transfer all of
his direct or indirect interests in entities in which the Company has an

                                       5

<PAGE>

interest (which shall not for the purposes of this Section 4(g) be deemed to
include ET Capital Corp.) immediately upon termination of the Executive's
employment with the Company for any reason. Such transfer shall be in a manner
reasonably determined by the Board of Trustees and at fair market value, as
determined by the Board.

         5. Payments upon Termination.

         (a) Termination Due to Death or Disability. Upon the death or
Disability of the Executive (i) the Company shall pay to the Executive or his
estate (1) his full Base Salary and other accrued benefits earned up to the last
day of the month of the Executive's death or Disability, (2) all deferred
compensation of any kind, including, without limitation, any amounts earned
under any bonus plan, and (3) if any bonus, under any bonus plan, shall be
payable in respect of the year in which the Executive's death or Disability
occurs, such bonus(es) prorated up to the last day of the month of the
Executive's death or Disability and (ii) all restricted shares, dividend
equivalent rights, share option and performance share awards made to the
Executive shall automatically become fully vested as of the date of death or
Disability.

         (b) Termination for Cause. If the Executive's employment shall be
terminated for Cause, the Company shall pay the Executive: (i) his full Base
Salary through the Date of Termination (as defined in Section 4(f)) at the rate
in effect at the time Notice of Termination (as defined in Section 4(e)) is
given, and (ii) all deferred compensation of any kind. In addition, Executive
shall have the option to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance policy owned by the
Company and relating specifically to Executive. The Company shall have no
further obligations to the Executive under this Agreement.

         (c) Termination by Executive for Good Reason or by the Company for
Reasons other than for Cause, Death or Disability.

             (i) In the event (1) the Company terminates the Term without Cause,
or (2) the Executive terminates the Term for Good Reason, then the Company shall
make a lump-sum payment to the Executive equal to (x) three (3) times the
Executive's average annual Base Salary for the last three years, or, if less,
over the expired term this Agreement, plus (y) the average annual value as of
the date of grant of the Executive's share options vesting in a fiscal year
(using a Black-Scholes valuation as reasonably determined by the Company), plus
(z) the value of the Executive's dividend equivalent rights credited to the
Executive's memo account in the fiscal year immediately preceding such
termination, provided that the value attributed to such share options and
dividend equivalent rights shall not exceed 50 percent (50%) of Executive's
average annual Base Salary for the three-year period preceding the termination
of the Term; and all share options, share awards and

                                       6

<PAGE>

similar equity rights, if any, shall vest and become exercisable immediately
prior to the termination of the Term and remain exercisable through their
original terms with all rights.

             (ii) Following termination of the Term for any reason, other than
for Cause or upon the death of the Executive, the Company shall also maintain in
full force and effect, for the continued benefit of the Executive for a period
equal to the greater of (x) the period of the Term otherwise remaining or (y)
two (2) years without giving effect to such termination, all employee benefit
plans and programs to which the Executive was entitled prior to the date of
termination (including, without limitation, the benefit plans and programs
provided for herein) if the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred by the
terms thereof, the Company shall pay to the Executive an amount equal to the
annual contribution, payments, credits or allocations made by the Company to
him, to his account or on his behalf under such plans and programs from which
his continued participation is barred except that if the Executive's
participation in any health, medical, life insurance or disability plan or
program is barred, the Company shall obtain and pay for, on the Executive's
behalf, to the extent possible individual insurance plans, policies or programs
which provide to the Executive health, medical, life and disability insurance
coverage which is equivalent to the insurance coverage to which the Executive
was entitled prior to the date of termination.

         6. Change of Control.

         (a) Upon a Change of Control (as defined below), the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice (i) for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control, or (ii) at any time, within
twenty-four (24) months following the date of a Change of Control, if any other
event constituting Good Reason hereunder continues for more than ten (10) days
after the Executive delivers notice thereof to the Company. The failure of
Executive to exercise his rights hereunder following an event constituting a
Change of Control shall not preclude Executive from exercising such rights
following the occurrence of a subsequent Change of Control event, even if
related to a prior Change of Control Event.

         (b) For purposes of this Agreement, the term "Change of Control" shall
mean the happening of any of the following:

             (i) if any person ("Person") (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty

                                       7

<PAGE>

percent (50%) or more of the combined voting power of the Company's then
outstanding securities;

             (ii) notwithstanding clauses (i) or (iv) of this Section 6, the
Company consummates a merger or consolidation of the Company with or into
another corporation or trust, the result of which is that the shareholders of
the Company at the time of the execution of the agreement to merge or
consolidate own less than eighty percent (80%) of the total equity of the entity
surviving or resulting from the merger or consolidation or of a entity owning,
directly or indirectly, one hundred percent (100%) of the total equity of such
surviving or resulting entity;

             (iii) the sale in one or a series of transactions of all or
substantially all of the assets of the Company;

             (iv) any Person has commenced a tender or exchange offer, or
entered into an agreement or received an option to acquire beneficial ownership
of fifty percent (50%) or more of the total number of voting shares of the
Company unless the Board of Trustees has made a determination that such action
does not constitute and will not constitute a change in the Persons in control
of the Company; or

             (v) there is a change of control in the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act other than in circumstances
specifically covered by clauses (i) - (iv) above.

         7. Certain Tax Matters. Notwithstanding any other provision of this
Agreement or of any other agreement, contract, or understanding heretofore or
hereafter entered into by the Executive with Employer, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal employment agreement or other arrangement
for the direct or indirect provision of compensation to the Executive (including
groups or classes of participants or beneficiaries of which the Executive is a
member), whether or not such compensation is deferred, is in cash, or is in the
form of a benefit to or for the Executive (a "Benefit Arrangement"), if the
Executive is a "disqualified individual," as defined in Section 280G(c) of the
Internal Revenue Code (the "Code"), any right to receive any payment or other
benefit under this Agreement shall not become exercisable or vested (i) to the
extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the Executive under
this Agreement, all Other Agreements, and all Benefit Arrangements, would cause
any payment or benefit to the Executive under this Agreement to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code as then
in effect (a "Parachute Payment") and (ii) if, as a result of receiving a
Parachute Payment, the aggregate

                                       8

<PAGE>

after-tax amounts received by the Executive from the Employer under this
Agreement, all Other Agreements, and all Benefit Arrangements would be less than
the maximum after-tax amount that could be received by the Executive without
causing any such payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to exercise, vesting, payment, or
benefit under this Agreement, in conjunction with all other rights, payments, or
benefits to or for the Executive under any Other Agreement or any Benefit
Arrangement would cause the Executive to be considered to have received a
Parachute Payment under this Agreement that would have the effect of decreasing
the after-tax amount received by Executive as described in clause (ii) of the
preceding sentence, then the Executive shall have the right, in Executive's sole
discretion, to designate those rights, payments, or benefits under this
Agreement, any Other Agreements, and any Benefit Arrangements that should be
reduced or eliminated so as to avoid having the payment or benefit to Executive
under this Agreement be deemed to be a Parachute Payment. The Employer will take
the position for tax purposes that no payments made under this Agreement are
"parachute payments" within the meaning of Section 280G(b)(2) of the Code.

         8. Executive's Covenants.

         (a) Nondisclosure. At all times during and after the Term, Executive
shall keep confidential and shall not, except with the Company's express prior
written consent, or except in the proper course of his employment with the
Company, directly or indirectly, communicate, disclose, divulge, publish, or
otherwise express, to any Person, or use for his own benefit or the benefit of
any Person, any trade secrets, confidential or proprietary knowledge or
information, no matter when or how acquired concerning the conduct and details
of the Company's and its subsidiaries' business, including without limitation,
names of customers and suppliers, marketing methods, trade secrets, policies,
prospects and financial condition. For purposes of this Section 8, confidential
information shall not include any information which is now known by or readily
available to the general public or which becomes known by or readily available
to the general public other than as a result of any improper act or omission of
Executive.

         (b) Non-Competition. During the Term hereof and for a period of three
(3) years thereafter, Executive shall not, except with the Company's express
prior written consent, directly or indirectly, in any capacity, for the benefit
of any Person:

             (i) Solicit any Person who is or during such period becomes a
customer, supplier, employee, salesman, agent or representative of the Company
or any subsidiary, in any manner which interferes or might interfere with such
Person's relationship with the Company or any subsidiary, or in an effort to
obtain such Person as a customer, supplier, employee, salesman, agent, or
representative

                                       9

<PAGE>

of any business in competition with the Company or any subsidiary within 15
miles of any office or facility owned, leased or operated by the Company or any
subsidiary.

             (ii) Establish, engage, own, manage, operate, join or control, or
participate in the establishment, ownership (other than as the owner of less
than one percent of the stock of a corporation whose shares are publicly
traded), management, operation or control of, or be a director, officer,
employee, salesman, agent or representative of, or be a consultant to, any
Person in any business in competition with the Company or any subsidiary, at any
location within 15 miles of any office or facility owned, leased or operated by
the Company or any subsidiary, or act or conduct himself in any manner which he
would have reason to believe inimical or contrary to the best interests of the
Company or any subsidiary.

         (c) Enforcement. Executive acknowledges that any breach by him of any
of the covenants and agreements of this Section 8 ("Covenants") will result in
irreparable injury to the Company for which money damages could not adequately
compensate the Company, and therefore, in the event of any such breach, the
Company shall be entitled, in addition to all other rights and remedies which
the Company may have at law or in equity, to have an injunction issued by any
competent court enjoining and restraining Executive and/or all other Persons
involved therein from continuing such breach. The existence of any claim or
cause of action which Executive or any such other Person may have against the
Company shall not constitute a defense or bar to the enforcement of any of the
Covenants. If the Company is obliged to resort to litigation to enforce any of
the Covenants which has a fixed term, then such term shall be extended for a
period of time equal to the period during which a material breach of such
Covenant was occurring, beginning on the date of a final court order (without
further right of appeal)holding that such a material breach occurred, or, if
later, the last day of the original fixed term of such Covenant.

         (d) Consideration. Executive expressly acknowledges that the Covenants
are a material part of the consideration bargained for by the Company and,
without the agreement of Executive to be bound by the Covenants, the Company
would not have agreed to enter into this Agreement.

                                       10
<PAGE>

         (e) Scope. If any portion of any Covenant or its application is
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.

         9. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.

         (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of payment provided for under this
Agreement be reduced by any compensation earned by the Executive as the result
of employment by another employer after the Date of Termination, or otherwise.
The amounts payable to Executive under Section 5 hereof shall not be treated as
damages but as severance compensation to which, Executive is entitled by reason
of termination of his employment in the circumstances contemplated by this
Agreement.

         (b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or
other contract, plan or arrangement.

         10. Miscellaneous.

         (a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized express courier
service, postage or delivery changes prepaid, with receipt, or (iv) delivered by
telecopy (with receipt, and with original delivered in accordance with any of
(i), (ii) or (iii) above) to the parties at their respective addresses stated
below or to such other addresses of which the parties may give notice in
accordance with this Section.

         If to the Company, to:

         ElderTrust
         101 East State Street, Suite 100
         Kennett Square, PA 19348
         Attention: Chairman

                                       11

<PAGE>

         If to Executive, to:

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

         (b) Entire Understanding. This Agreement sets forth the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof.

         (c) Modification. This Agreement shall not be amended, modified,
supplemented or terminated except in writing signed by both parties. No action
taken by the Company hereunder, including without limitation any waiver, consent
or approval, shall be effective unless approved by a majority of the Board of
Trustees.

         (d) Termination of Prior Employment Agreements. All prior employment
agreements between Executive and the Company and/or any of its affiliates (and
any of their predecessors) are hereby terminated as of the date hereof as fully
performed on both sides.

         (e) Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Company and its successors and assigns
and upon Executive and his heirs, executors, and legal representatives. This
Agreement is a personal employment contract of the Company, being for the
personal services of Executive, and shall not be assignable by the Executive.

         (f) Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.

         (g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.

         (h) Section Headings. Section and subsection headings in this Agreement
are inserted for convenience of reference only, and shall neither constitute a
part of this Agreement nor affect its construction, interpretation, meaning or
effect.

                                       12
<PAGE>

         (i) References. All words used in this Agreement shall be construed to
be of such number and gender as the context requires or permits.

         (j) Controlling Law. This Agreement is made under, and shall be
governed by, construed and enforced in accordance with, the substantive laws of
the State of Maryland applicable to agreements made and to be performed entirely
therein.

         (k) Settlement of Disputes. The Company and Executive agree that any
claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Executive's employment by the Company
(including, without limitation, any such claim, dispute or controversy arising
under any federal, state or local statute, regulation or ordinance or any of the
Company's employee benefit plans, policies or programs) shall be resolved solely
and exclusively by binding arbitration. The arbitration shall be held in the
city of Philadelphia, Pennsylvania (or at such other location as shall be
mutually agreed by the parties). The arbitration shall be conducted in
accordance with the Expedited Employment Arbitration Rules (the "Rules") of the
American Arbitration Association (the "AAA") in effect at the time of the
arbitration, except that the arbitrator shall be selected by alternatively
striking from a list of five arbitrators supplied by the AAA. All fees and
expenses of the arbitration, including a transcript if either requests, shall be
borne equally by the parties. If Executive prevails as to any material issue
presented to the arbitrator, the entire cost of such proceedings (including,
without limitation, Executive's reasonable attorneys fees) shall be borne by the
Company. If Executive does not prevail as to any material issue, each party will
pay for the fees and expenses of its own attorneys, experts, witnesses, and
preparation and presentation of proofs and post-hearing briefs (unless the party
prevails on a claim for which attorney's fees are recoverable under the Rules).
Any action to enforce or vacate the arbitrator's award shall be governed by the
Federal Arbitration Act, if applicable, and otherwise by applicable state law.
If either the Company or Executive pursues any claim, dispute or controversy
against the other in a proceeding other than the arbitration provided for
herein, the responding party shall be entitled to dismissal or injunctive relief
regarding such action and recovery of all costs, losses and attorney's fees
related to such action.

         (l) Approval and Authorizations. The execution and the implementation
of the terms and conditions of this Agreement have been fully authorized by the
Board of Trustees.

         (m) Indulgences, Etc. Neither the failure nor delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall the single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right,

                                       13

<PAGE>

remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.

         (n) Legal Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages for breach of
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorney's fees and
disbursements incurred by him.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under seal, intending to be legally bound
hereby.

                                       COMPANY:

Attest:

/s/ Kelly A. McAteer                   By: /s/ Michael Walker
------------------------------             -----------------------------
Assistant Secretary                    Its: Chairman
                                           -------------

Date of Execution:  3/31/00            Date of Execution:  3/31/00
                 -------------                           ------------

                                       EXECUTIVE:

                                       /s/ D. Lee McCreary, Jr.
                                       ---------------------------------
                                       D. Lee McCreary, Jr.
                                       Date of Execution:   3/31/00
                                                         -------------

                                       14

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