SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary proxy statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
Definitive proxy statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-12
ElderTrust
________________________________________________
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________________
(Name of Person (s) Filing proxy statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i) (1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:____________________________________________________
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:____________________________________________
(2) Form, Schedule or Registration Statement No.:______________________
(3) Filing Party:______________________________________________________
(4) Date Filed:________________________________________________________
ELDERTRUST
Little Falls Centre One
2711 Centerville Road, Suite 108
Wilmington, DE 19808
(302) 993-1022
April 25, 2003
Dear Shareholder:
You are cordially invited to attend the 2003 annual meeting of
shareholders of ElderTrust to be held on Friday, May 23, 2003, at 10
a.m., at the Hotel Du Pont, 11th & Market Streets, Wilmington, Delaware.
The annual meeting has been called for the following purposes:
(1) To elect two trustees for a three-year term and until their
successors are elected and qualified;
(2) To approve 2003 share option and incentive plan;
(3) To consider a shareholder proposal, if presented at the annual
meeting; and
(4) To transact such other business as may properly come before
the annual meeting or any adjournments or postponements.
It is important that your shares be represented at the annual meeting.
Whether or not you plan to attend the annual meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid envelope.
Very truly yours,
/s/ D. Lee McCreary, Jr.
__________________________
D. Lee McCreary, Jr.
President, Chief Executive
Officer, Chief Financial
Officer, Treasurer and
Secretary
ELDERTRUST
Little Falls Centre One
2711 Centerville Road, Suite 108
Wilmington, DE 19808
(302) 993-1022
__________________
NOTICE TO ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2003
__________________
NOTICE IS HEREBY GIVEN that the 2003 annual meeting of shareholders
of ElderTrust will be held at the Hotel Du Pont, 11th & Market Streets,
Wilmington, Delaware, on Friday, May 23, 2003, at 10 a.m., for the
following purposes:
(1) To elect two trustees for a three-year term and until their
successors are elected and qualified;
(2) To approve 2003 share option and incentive plan;
(3) To consider a shareholder proposal, if presented at the annual
meeting; and
(4) To transact such other business as may properly come before
the meeting or any adjournments.
The Board of Trustees has fixed March 31, 2003 as the record date for
the determination of shareholders entitled to notice of and to vote at
the annual meeting and all adjournments thereof. Only shareholders of
record at the close of business on that date will be entitled to notice
and to vote at the annual meeting. All shareholders are cordially
invited to attend the annual meeting.
In the event that there are not sufficient votes to approve any one
or more of the foregoing proposals at the time of the annual meeting, the
annual meeting may be adjourned in order to permit further solicitation
of proxies by ElderTrust.
By Order of the Board of Trustees
/s/ D. Lee McCreary, Jr.
_________________________________
D. Lee McCreary, Jr.
President, Chief Executive
Wilmington, Delaware Officer, Chief Financial Officer,
April 25, 2003 Treasurer and Secretary
Whether or not you plan to attend the annual meeting, you are urged
to sign, date and return the enclosed proxy in the accompanying pre-
addressed envelope which requires no postage stamp. Your proxy may be
revoked prior to the voting by filing with the Secretary of ElderTrust
a written revocation or a duly executed proxy bearing a later date or
by attending the annual meeting and voting in person.
ELDERTRUST
Little Falls Centre One
2711 Centerville Road, Suite 108
Wilmington, DE 19808
(302) 993-1022
__________________
PROXY STATEMENT
2003 ANNUAL MEETING OF SHAREHOLDERS
May 23, 2003
__________________
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This proxy statement is furnished to shareholders of ElderTrust in
connection with the solicitation by the Board of Trustees of ElderTrust
of proxies to be used at the 2003 annual meeting of shareholders to be
held at the Hotel Du Pont, 11th & Market Streets, Wilmington, Delaware,
on Friday, May 23, 2003, at 10 a.m., and at any adjournments or
postponements.
If the enclosed form of proxy is properly executed and returned to
ElderTrust in time to be voted at the annual meeting, the shares
represented thereby will be voted in accordance with the instructions
marked thereon. Executed but unmarked proxies will be voted FOR the
election of the Board of Trustees two nominees as trustees, FOR
approval of the 2003 share option and incentive plan and AGAINST the
shareholder proposal, if the proposal is presented at the annual meeting.
If any other matters are properly brought before the annual meeting, the
persons named in the accompanying proxy will vote the shares represented
by such proxies on such matters as determined by a majority of the Board
of Trustees of ElderTrust. The presence of a shareholder at the annual
meeting will not automatically revoke such shareholders proxy.
Shareholders may, however, revoke a proxy at any time prior to its
exercise by filing with the Secretary of ElderTrust a written revocation
or a duly executed proxy bearing a later date or by attending the annual
meeting and voting in person.
The cost of solicitation of proxies in the form enclosed herewith
will be borne by ElderTrust. In addition to the solicitation of proxies
by mail, ElderTrust, through its trustees, officers and regular employees,
may also solicit proxies personally or by telephone or telegraph.
ElderTrust will also request persons, firms and corporations holding
shares in their names, or in the name of their nominees, to send proxy
material to and obtain proxies from beneficial owners and will reimburse
such holders for their reasonable expenses in so doing. It is anticipated
that this proxy statement will be mailed to stockholders on or about April
25, 2003.
The securities which can be voted at the annual meeting consist of
common shares of beneficial interest of ElderTrust, par value $0.01 per
share. Each share entitles its owner to one vote on all matters. The
declaration of trust of ElderTrust does not provide for cumulative voting
in the election of trustees. The Board of Trustees has fixed the close of
business on March 31, 2003 as the record date for determination of
shareholders entitled to vote at the annual meeting. The number of common
shares outstanding on the record date was 7,711,811.
The presence, in person or by proxy, of at least a majority of the
outstanding common shares is necessary to constitute a quorum at the
annual meeting. Shareholders votes will be tabulated by the persons
appointed by the Board of Trustees to act as inspectors of election for
the annual meeting.
A copy of ElderTrusts 2002 annual report to shareholders
accompanies this proxy statement. ElderTrust has filed its 2002 annual
report on Form 10-K with the Securities and Exchange Commission.
Shareholders may obtain a copy of the Form 10-K, free of charge, by
writing to ElderTrust, Little Falls Centre One, 2711 Centerville Road,
Suite 108, Wilmington, DE 19808 Attention: Corporate Secretary.
ElderTrust will provide copies of the exhibits to its Form 10-K upon
payment of a reasonable fee.
ELECTION OF TRUSTEES
(Proposal 1)
The declaration of trust of ElderTrust provides for a minimum of
three trustees and a maximum of nine trustees. The Board of Trustees of
ElderTrust currently consists of seven members. The trustees are divided
into three classes, each consisting of approximately one-third of the
total number of trustees. The term of office of only one class expires
in each year and their successors are elected for terms of three years
and until their successors are elected and qualified. At the annual
meeting, two trustees will be elected for a three-year term. As described
below, the Board of Trustees nominees are D. Lee McCreary, Jr. and Rodman
W. Moorhead, III. The Board of Trustees recommends that you vote FOR the
Board of Trustees nominees for election as trustees.
Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as trustees of Mr. McCreary and Mr.
Moorhead, each for a three-year term. The Board of Trustees believes Mr.
McCreary and Mr. Moorhead will stand for election and will serve if
elected as trustee. However, if either fails to stand for election or
is unable to accept election, the proxies will be voted for the election
of such other person as a majority of the Board of Trustees of ElderTrust
may recommend. Trustees are elected by plurality of the votes cast. A
properly voted proxy marked WITHHELD with respect to the trustee
election will not be voted with respect to the election of Mr. McCreary
and Mr. Moorhead as trustees. Because trustees are elected by plurality
vote, any broker non-votes will have no effect on the result of the
election.
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Information as to Nominees and Other Trustees
The following table sets forth certain information regarding the
Board of Trustees nominees for election as trustees and those
trustees who will continue to serve as such after the annual meeting.
Age at Position(s)
March 31, Trustee For Term Held with
2003 Since To Expire ElderTrust
-------- ------- --------- ------------
Nominees:
- ---------
D. Lee McCreary, Jr........ 45 1999 2003 President,
Chief Executive
Officer, Chief
Financial
Officer,
Treasurer,
Secretary and
Trustee
Rodman W. Moorhead, III.... 59 1998 2003 Trustee
Continuing Trustees: Term Expires
- --------------------
Michael R. Walker.......... 54 1997 2004 Trustee
Harold L. Zuber, Jr........ 53 2001 2004 Trustee
James J. Clymer............ 53 2003 2004 Trustee
John G. Foos............... 53 2000 2005 Trustee
Edward J. Rodgers.......... 61 2003 2005 Trustee
The principal occupations for the past five years of the nominees
for trustee and the trustees whose term of office will continue after
the annual meeting are set forth below.
D. Lee McCreary, Jr., a trustee of ElderTrust since October 1999,
is the President, Chief Executive Officer, Chief Financial Officer,
Treasurer and Secretary of ElderTrust. In June 1997, Mr. McCreary
became Senior Vice President, Chief Financial Officer, Treasurer and
Secretary of ElderTrust Realty Group, Inc., predecessor to ElderTrust.
In July 1999, he was named acting President and Chief Executive Officer
and was appointed to those positions on a permanent basis and as a
trustee of ElderTrust in October 1999. From September 1994 until May
1997, Mr. McCreary was Vice President-Tax Services at Siegfried,
Schieffer & Seitz, a Wilmington, Delaware-based regional accounting
firm. Before joining Siegfried, Schieffer & Seitz, he was a partner
at Price Waterhouse LLP, where he worked for over 14 years providing
tax consulting services for companies in the healthcare, real estate
and financial services industries. Mr. McCreary is a member of the
American Institute of Certified Public Accountants. He holds a
Bachelor of Science degree from the University of Delaware.
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Rodman W. Moorhead, III, a trustee of ElderTrust since January
1998, has been employed since 1973 by Warburg Pincus, a private equity
and venture capital firm in New York, where he currently serves as
managing director and senior advisor. He is a director of Chancellor/
Beacon Academies, an operator of charter and for-profit elementary
schools; Coventry Health Care, Inc., a multi-market health maintenance
organization; 4GL School Solutions which finds data-driven solutions for
school management; Scientific Learning Corporation, a computerized special
education training company; and Transkaryotic Therapies, Inc., a gene
therapy company. He is a trustee of the Taft School and a member of the
Overseers Committee on University Resources, Harvard College. Mr.
Moorhead holds a Masters of Business Administration degree from Harvard
Business School and a Bachelor of Arts in Economics degree from Harvard
University.
Michael R. Walker is Chairman of the Board of Trustees of ElderTrust.
Mr. Walker served as Chief Executive Officer of Genesis Health Ventures,
Inc. (Genesis), from 1985 until May 2002 and as Chairman of the Board of
Genesis from 1985 until October 2002. Genesis is a nationwide supplier of
ancillary services to the long term care industry, including pharmacy,
medical equipment/supplies, rehabilitation therapy, diagnostic testing,
bulk purchasing, hospitality, physician and consulting services. From
October 1997 to October 2001, Mr. Walker also served as Chairman of the
Board and Chief Executive Officer of The Multicare Companies, Inc.,
formerly a 43.6% owned non-consolidated subsidiary of Genesis
(Multicare). In addition, Mr. Walker previously chaired the Alliance
for Quality Nursing Home Care, a coalition of the top fourteen long term
care providers, which has lobbied for and gained nearly $5 billion in
Medicare funding. Mr. Walker holds a master of business administration
degree from Temple University and bachelor of arts in business
administration degree from Franklin and Marshall College.
Harold L. Zuber, Jr., a trustee of ElderTrust since April 2001, Mr.
Zuber has served as Executive Vice President and Chief Financial Officer
of Teleflex Incorporated since 2000. With revenues of nearly $2.0 billion,
Teleflex manufactures products and provides services for the automotive,
marine, industrial, medical and aerospace markets worldwide. From 1990
to 2000, Mr. Zuber was Vice President and Chief Financial Officer of
Teleflex. He holds a Bachelor of Science degree from Clarion University.
James J. Clymer, a trustee since April 1, 2003, formed Key Real
Estate LLC, a commercial real estate firm, in 1997. Mr. Clymer
collaborates with other real estate development professionals to acquire
and develop commercial real estate. Mr. Clymer is the managing member of
Kennett Development Company, LLC, the developer of the 480,000 sq. ft.
Exelon Generation Campus Project. From 1998 to 2001, he served as project
manager for the $40 million, 250,000 sq. ft. first phase of this project.
His current projects include a 46-acre industrial project in Carlisle,
Pennsylvania and a 30-acre commercial project in Chester County,
Pennsylvania. He has also been retained to manage a 131,000 sq. ft.
industrial and office project in Kennett Square, Pennsylvania. From
1993-1997, Mr. Clymer was Executive Vice President of Grubb & Ellis,
with responsibility for southern New Jersey, eastern Pennsylvania and
Delaware. From 1987 to 1993, he was a Regional Partner with Rouse &
Associates. Mr. Clymer has 22 years experience in commercial real
estate development following 10 years with manufacturing companies.
Mr. Clymer holds a Bachelor of Arts from Swarthmore College in
Mathematics and Economics and a Masters of Business Administration
from Farleigh Dickinson University.
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John G. Foos, a trustee of ElderTrust since April 2000, has served
since July 1989 as Chief Financial Officer of Independence Blue Cross,
the largest health insurer in the Philadelphia, Pennsylvania region.
Before joining Independence Blue Cross, Mr. Foos was a partner with the
public accounting firm of KPMG, LLP. Mr. Foos is a member of the board
of directors of Hoosiercare, Inc., a tax-exempt organization that owns
and operates 14 long-term care facilities in the east and midwest. Mr.
Foos is a member of the American Institute of Certified Public
Accountants and the Pennsylvania Institute of Certified Public
Accountants. He holds a Bachelor of Science degree in accounting from
Susquehanna University.
Edward J. Rodgers, a trustee of ElderTrust since April 1, 2003, is
a principal of Merion Investment Partners, L.P., a management company
that has applied for a small business administration license to operate
a mezzanine capital SBIC. He has held such position since June 2001.
During 2001, Mr. Rodgers was Managing Director in the Corporate and
Investment Banking Group at First Union National Bank, with responsibility
for the Defense and Aerospace Divisions. From 1996 to 2000, Mr. Rodgers
was Executive Vice President and Managing Director in the Corporate and
Investment Banking Group at First Union National Bank, with responsibility
for the Mid Atlantic Region. From 1992 to 1996, he reorganized and managed
First Fidelity Banks middle market lending group in Pennsylvania and
Delaware. Prior thereto, Mr. Rodgers held various positions with Fidelity
Bank. Mr. Rodgers has 35 years of management, business creation and
development experience in the financial services industry. Mr. Rodgers
serves on the Board of Trustees of Mercy Health System and on the Audit
Committee of Catholic Health East. Mr. Rodgers received a Bachelor of
Arts degree from La Salle College.
Board Meetings and Committees
During 2002, the Board of Trustees of ElderTrust held five regular
meetings and four special meetings. For the 2002 period, all trustees
of ElderTrust, except for Mr. Moorhead, attended more than 75 percent of
the aggregate of (A) the total number of meetings held by the Board of
Trustees and (B) the total number of meetings held by all committees of
the Board of Trustees on which the trustee served during the period. Mr.
Moorhead attended 8 of 13 Board and committee meetings on which he served.
ElderTrust has the following board committees:
Audit Committee. The current members of the audit committee are
Messrs. Foos, Moorhead and Zuber. Mr. Foos chairs the audit committee.
Under the written audit committee charter adopted by the Board of
Trustees, the primary function of the audit committee is to assist the
Board of Trustees in fulfilling its oversight responsibilities by
reviewing (A) the financial reports and other financial information
provided by ElderTrust to governmental bodies or to the public, (B)
ElderTrusts systems of internal controls regarding finance, accounting,
legal compliance and ethics that management and the Board have
established and (C) ElderTrusts auditing, accounting and financial
reporting processes generally. The audit committee held two meetings
during 2002. The Board of Trustees believes that each of the current
members of the audit committee is an independent trustee within the
meaning of applicable rules of the New York Stock Exchange.
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Compensation and Share Option Committee. The members of the
compensation and share option committee are Messrs. Moorhead and Foos.
Mr. Moorhead serves as chairman of the compensation and share option
committee. The compensation and share option committee held two meetings
during 2002.
Asset Management Committee. The current members of the asset
management committee are Messrs. McCreary, Zuber and Foos. Mr. McCreary
chairs the asset management committee. The asset management committee
has the authority to take all actions in connection with the Companys
assets and asset transactions. The asset management committee did not
meet during 2002.
Executive Committee. The current members of the executive committee
are Messrs. Walker, McCreary and Zuber. The executive committee may
exercise all of the powers of the Board of Trustees, except to the extent
prohibited by law. The executive committee did not meet during 2002.
Audit Committee Report
The audit committee has received and reviewed the disclosures in the
letter from the independent public accountants required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended, and has discussed with the independent public
accountants that firms independence from ElderTrust. The audit committee
has also discussed with the independent public accountants the matters
required to be discussed by the Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended.
The audit committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2002 and related matters with
management and ElderTrusts independent public accountants and reviewed
such accounting and auditing issues concerning ElderTrust and its
subsidiaries and affiliates as the audit committee deemed appropriate.
Based on these discussions and reviews, the audit committee has recommended
to the Board of Trustees that the audited financial statements for the year
ended December 31, 2002 be included in ElderTrusts Annual Report for the
year ended December 31, 2002 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
John G. Foos, Chairman
Rodman W. Moorhead, III
Harold L. Zuber, Jr.
Nominations by Shareholders
The entire Board of Trustees acts as a nominating committee for
selecting the Board of Trustees nominees for election as trustees and
has made its nominations for the annual meeting. The bylaws of
ElderTrust require that shareholder nominations for trustees be made
pursuant to timely notice in writing to the Secretary of ElderTrust.
To be timely, notice must be delivered to the principal executive offices
of ElderTrust not later than the close of business on the 60th day nor
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earlier than the close of business on the 90th day prior to the first
anniversary of the preceding years annual meeting. However, if the date
in the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date, notice by the shareholder to be
timely must be delivered not earlier than the close of business on the
90th day prior to the annual meeting and not later than the close of
business on the later of the 60th day prior to the annual meeting or
the tenth day following the day on which public announcement of the
date of the annual meeting is first made by ElderTrust. A shareholders
notice of nomination must set forth certain information specified in
ElderTrusts bylaws concerning each person the shareholder proposes to
nominate for election and the nominating shareholder. Under the bylaws,
shareholder nominations for the annual meeting were required to be
received not later than the close of business on March 23, 2003 nor
earlier than the close of business on February 23, 2003. No such
nominations were received. ElderTrusts bylaws provide that no person
may be elected as a trustee unless nominated in accordance with the
procedures set forth in the bylaws.
Compensation of Trustees
During 2002, non-employee trustees of ElderTrust received a
$10,000 annual retainer, a $1,000 attendance fee for regularly scheduled
board meetings and a $500 attendance fee for committee meetings and
telephonic meetings of the Board. For 2003, non-employee trustees of
ElderTrust will receive a $10,000 annual retainer, a $2,000 attendance
fee for regularly scheduled board meetings and a $1,000 attendance fee
for committee meetings and telephonic meetings of the Board. ElderTrust
also reimburses its trustees for travel expenses incurred in connection
with attending meetings of the Board of Trustees and committee meetings.
Non-employee trustees of ElderTrust are also eligible to participate
in ElderTrusts share option and incentive plans. In April 2002, each of
ElderTrusts non-employee trustees, including Messrs. Walker, Foos, Zuber
and Moorhead, received ten-year options for 2,000 shares each at an
exercise price of $7.90 per share. All options granted to non-employee
trustees in 2002 vested immediately. For 2003, each non-employee trustee
will receive a 10-year option grant for 3,000 common shares and an award
of distribution equivalent rights for 3,000 common shares.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth the cash and other compensation paid
by ElderTrust for 2002, 2001 and 2000 to each person who served as an
executive officer of ElderTrust during 2002.
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Summary Compensation Table
Long-Term
Compensation/
Annual Compensation Awards
---------------------------------
Common Shares All Other
Name and Principal Underlying Compensation
Position(s) Year Salary($) Bonus($) Options (#) ($)
_________________________________________________________________________
D. Lee McCreary, Jr. 2002 $334,400 $75,000(1) 0 $11,500(2)
President, Chief 2001 297,300 0(1) 25,000 19,100
Executive Officer, 2000 235,600 500,000(3) 250,000 51,700
Chief Financial
Officer, Treasurer
and Secretary
John H. Haas (4)
Vice President and 2002 198,200 25,000 0 7,000(5)
Chief Operating 2001 215,300 30,000 10,000 6,500
Officer 2000 192,300 0 25,000 0
_______________
(1) In view of the bonus Mr. McCreary received in 2000, the uncertainties
created by the then pending Genesis/Multicare bankruptcy proceedings
and the desirability of preserving cash to pay-down debt, the
compensation and share option committee determined that, rather than
being eligible to receive an annual bonus in 2001, Mr. McCreary would
be eligible instead to receive a bonus of up to 50% of his base
compensation covering 2001 and 2002, the exact amount of which would
not be determined until 2003. Pursuant to this arrangement, Mr.
McCreary received a $75,000 bonus in February 2003 for services
rendered in 2002 and 2001.
(2) Represents (a) $4,500 earned on distribution equivalent rights for
a total of 40,000 common shares held by Mr. McCreary at December 31,
2002 and (b) 2002 contributions of $7,000 made by ElderTrust to Mr.
McCrearys account under the Simple IRA Retirement Plan maintained by
ElderTrust for its employees.
(3) Includes a $300,000 bonus paid in 2000 for services rendered in 2000
and a $200,000 bonus paid in 2000 for services rendered in 1999.
(4) Mr. Haas resigned all of his offices and positions with ElderTrust as
of June 7, 2002. He remained an employee of ElderTrust through
October 31, 2002. Amounts shown in the table reflect amounts paid to
him through the date of his termination of employment.
(5) Represents 2002 contributions of $7,000 made by ElderTrust to Mr. Haas
account under the Simple IRA Retirement Plan maintained by ElderTrust
for its employees.
-8-
Option Grants
There were no share options granted to executive officers of
ElderTrust in 2002.
Option Exercises and Holdings
The following table sets forth information concerning each exercise
of share options during 2002 by each of the named executive officers, and
the number of common shares underlying unexercised options at year-end
2002 and the 2002 year-end value of all unexercised in-the-money options
held by the named executive officers.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Common
Shares Underlying
Shares Unexercised Options(#) Value of Unexercised
Acquired on Value ------------------------- In-the-Money Options($)(1)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------ ----------- ------------------------- --------------------------
D. Lee McCreary, Jr. - $ - 356,666 26,668 $ 652,191 $ 47,168
John H. Haas 18,333 87,565 - - - -
(1) Represents the fair market value of a common share on December 31,
2002 less the option exercise price times the number of option shares.
Employment Agreement
ElderTrust entered into an employment agreement with D. Lee McCreary,
Jr. dated October 13, 1999, under which Mr. McCreary serves as ElderTrusts
President and Chief Executive Officer. The initial term of the employment
agreement is three years, subject to annual renewals commencing on October
13, 2002. Mr. McCrearys initial annual base salary under the employment
agreement was $200,000, effective July 29, 1999, when he began serving as
acting President and Chief Executive Officer of ElderTrust. The annual
base salary is subject to increase on an annual basis by the Board of
Trustees. Effective May 1, 2002, Mr. McCrearys base salary is $340,000.
Mr. McCreary also is entitled to receive incentive compensation in the form
of share options and bonuses as determined by the share option and
compensation committee of the Board of Trustees.
Mr. McCrearys employment may be terminated by ElderTrust (a) upon 15
days notice for cause by a two-thirds vote of the entire Board of Trustees
or (b) upon 90 days notice without cause by a two-thirds vote of the
entire Board of Trustees. Mr. McCreary may terminate his employment on
90 days notice if (a) ElderTrust terminates by a two-thirds vote of the
entire Board of Trustees the automatic extension of the term of his
employment agreement, (b) ElderTrust assigns duties to him that are
inconsistent with his status with ElderTrust or substantially alters the
nature or status of his responsibilities, (c) ElderTrust reduces his base
salary under his employment agreement, (d) ElderTrust relocates his
principal place of employment or relocates the principal office or
corporate headquarters to a location 35 miles or more from his current
principal place of employment, (e) there is a change in control of
ElderTrust, (f) a material failure on the part of ElderTrust to comply
with any of the provisions of the employment agreement, (g) any
termination of his employment for reasons other than death, disability
or cause or the termination by the Board of Trustees of the automatic
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extension of the term of his employment agreement or (h) the commencement
by of a proceeding seeking the liquidation, reorganization, dissolution or
winding-up of ElderTrust or its subsidiaries or the appointment of a
bankruptcy trustee or receiver for ElderTrust or its subsidiaries.
If ElderTrust terminates Mr. McCrearys employment without cause, or
Mr. McCreary terminates his employment agreement as described above, Mr.
McCreary would be entitled to a severance payment equal to three times his
average annual base salary for the preceding three years, or, if less,
over the expired term of his employment agreement, plus the average annual
value as of the date of grant of his share options vesting in a fiscal
year and the value of his dividend equivalent rights credited to his
account in the fiscal year immediately preceding his termination, provided
that the value attributed to such share options and distribution equivalent
rights shall not exceed 50% of his average annual base salary for the three-
year period preceding the termination of his employment agreement. All
share options, awards and similar equity rights, if any, also would vest
and become exercisable immediately prior to his termination and remain
exercisable through their original terms. Following termination of his
employment agreement for any reason, other than for cause or upon Mr.
McCrearys death, ElderTrust would maintain in full force and effect, for
the greater of two years or the remaining term of the employment agreement,
all employee benefit plans and programs to which Mr. McCreary was entitled
prior to his termination.
If Mr. McCreary becomes disabled for a period of twelve months or
for periods aggregating more than twelve months in any 24-month period,
ElderTrust may terminate Mr. McCrearys employment upon 30 days notice
and payment of any unpaid portion of his salary, bonus and benefits up to
the last day of the month of his termination. Upon Mr. McCrearys death,
his heirs would be entitled to receive the unpaid portion of his salary,
bonus and accrued benefits through the last day of the month of his death.
Upon the death or disability of Mr. McCreary, all distribution equivalent
rights and share options would become fully vested.
Report on Executive Compensation
For 2002, the compensation and share option committee made salary
and bonus decisions for ElderTrusts chief executive officer and the chief
executive officer was delegated the authority to fix the salary and bonus
of ElderTrusts other executive officer. The compensation and share option
committee also administered ElderTrusts share option and incentive plans.
The compensation and share option committee held two meetings in 2002.
In general, ElderTrusts compensation policies and practices with
respect to executive officers are designed and implemented to motivate
and retain senior executives. Total compensation is currently divided
into three primary components: base salary, bonuses and share options.
ElderTrust uses its share option and incentive plans as a long-term
incentive plan for executive officers and key employees. The objectives
of the share option and incentive plans are to align the long-term interests
of executive officers and shareholders by creating a direct link between
executive compensation and shareholder return, and to enable executives to
develop and maintain a long-term equity interest in ElderTrust.
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In April 2001, the compensation committee adopted a policy providing
for an annual review of Mr. McCrearys salary in April of each year. At
that time, that compensation committee would set Mr. McCrearys salary for
the year beginning May 1 of that year. In connection with its determination
of Mr. McCrearys salary for 2002, the compensation committee reviewed
published annual compensation information for healthcare REIT executives,
including base compensation, bonuses and stock option awards. Based upon
this information, the compensation committee set a base compensation level
of $340,000 for Mr. McCreary beginning May 1, 2002.
Based on a review of the healthcare REIT industry data in 2001, the
compensation and share option committee established a bonus structure of
up to 50% of base compensation, In view of the bonus Mr. McCreary received
in 2000, the uncertainties created by the then pending Genesis/Multicare
bankruptcy proceedings and the desirability of preserving cash to pay-down
debt, the compensation and share option committee determined that, rather
than being eligible to receive an annual bonus in 2001, Mr. McCreary would
be eligible instead to receive a bonus of up to 50% of his base compensation
covering 2001 and 2002, the exact amount of which would not be determined
until 2003. Pursuant to this arrangement, Mr. McCreary received a $75,000
bonus in February 2003 for services rendered in 2002 and 2001.
Generally, Section 162(m) of the Internal Revenue Code of 1986, as
amended, denies deduction to any publicly held company, such as ElderTrust,
for certain compensation exceeding $1,000,000 paid to the Chief Executive
Officer and the four other highest paid executive officers. Certain
performance-based compensation is excluded from this $1,000,000 cap.
At this time, Mr. McCrearys compensation subject to the deductibility
limits does not exceed $1,000,000. In the compensation and share option
committees view, ElderTrust is not likely to be affected by the
nondeductibility rules in the near future.
COMPENSATION AND SHARE OPTION
COMMITTEE
Rodman W. Moorhead, III, Chairman
John G. Foos
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Performance Graph
The following graph compares the cumulative total shareholder
return on ElderTrusts common shares since January 27, 1998, the date
ElderTrusts common shares began trading on the New York Stock Exchange,
with the cumulative total shareholder return from January 27, 1998
through December 31, 2002 of (A) the NAREIT Equity REIT Index for all
REITs and (B) the NAREIT Health Care Equity REIT Index. The comparison
assumes $100 was invested on January 27, 1998 in ElderTrust common shares
and in each of the indices and assumes reinvestment of distributions.
Total Shareholder Return
[Performance Graph]
NAREIT NAREIT
Equity REIT Health Care Equity
Index (all REITs) REIT Index ElderTrust
----------------- ------------------ ------------
January 27, 1998 $100 $100 $100
December 31, 1998 85 83 69
December 31, 1999 81 63 46
December 31, 2000 103 79 23
December 31, 2001 117 120 67
December 31, 2002 121 126 57
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
ElderTrust trustees, officers and beneficial owners of more than 10% of
ElderTrusts outstanding equity securities to file with the SEC initial
reports of ownership of ElderTrusts equity securities and to file
subsequent reports when there are changes in such ownership. Based on a
review of reports submitted to ElderTrust for 2002, ElderTrust believes
that all Section 16(a) filing requirements for that year applicable to
such persons were complied with on a timely basis, except for Mr. Walker
who was two days late in filing a change in ownership report for a single
sale transaction.
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Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2002,
with respect to compensation plans (including individual compensation
arrangements) that were in effect during fiscal 2002 under which
ElderTrust common shares are authorized for issuance:
Number of
Securites to be Number of securities
issued upon Weighted- remaining available for
exercise of average exercise future issuance under
outstanding price of equity compensation
options, outstanding plans (excluding
warrants and options, warrants securities reflected
Plan Category rights and rights in column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders..... 757,669 $8.24 156,125(1)
Equity compensation
plans not approved
by security holders.. N/A N/A N/A
Total................ 757,669 8.24 156,125(1)
(1) Includes 20,118 common shares that may be granted or awarded under
the 1998 share option and share incentive plan as of January 1,
2003 and 136,007 common shares that may be granted or awarded
under the 1999 share option and share incentive plan. Under the
1998 share option and incentive plan, the maximum number of shares
available for issuance is 779,340 common shares plus as of each
January 1 9.9% of any net increase since the preceding January 1
in the total number of common shares actually outstanding (assuming
that all units of limited partnership interest of ElderTrust
Operating Limited Partnership (other than units owned by ElderTrust)
are converted into common shares). Under the 1999 share option and
share incentive plan, a total of 350,000 common shares are reserved
for issuance.
Certain Relationships and Related Transactions
During September 2002, the Company acquired, or obtained options to
acquire, from Mr. McCreary, the Companys President and Chief Executive
Officer, the controlling 1% ownership interests in three entities that
hold leasehold and purchase option rights to seven skilled nursing
facilities and that own one assisted living facility and one independent
living facility, respectively. The Company had owned a 99% non-
controlling interest in these entities since 1998. ElderTrust acquired
Mr. McCrearys 1% controlling interests in these entities for approximately
$85,000. The options, which the Company intends to exercise upon receipt
of lender approval, are exercisable for a combined additional price of
approximately $17,000.
During 2002, ElderTrust, through its operating subsidiary, ElderTrust
Operating Limited Partnership, had a nonvoting 95% interest in ET Capital
Corp. The voting 5% equity interest was owned by Mr. McCreary. Mr.
McCreary is the sole director of ET Capital. In addition, Mr. McCreary
is President, Secretary and Treasurer of ET Capital. In prior periods,
the Company made a total of $9.0 million of loans to ET Capital, which
were used by ET Capital to partially fund its investments. Of these
loans, $5.9 million bear interest at a weighted average rate of 12.1%
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and $3.1 million bear interest at 15.0%. The largest amount of
indebtedness outstanding during 2002 was $9.0 million. At March 31,
2003, the amount of outstanding indebtedness totaled $9.0 million.
ET Capital is the sole remaining entity in which ElderTrust
accounts for its investment under the equity method of accounting. The
Board of Trustees has approved the purchase from Mr. McCreary of his 5%
voting interest in ET Capital for a purchase price of $1.00. Following
the purchase, ElderTrust will consolidate ET Capital along with
ElderTrusts other investments.
In addition to serving as Chairman of the Board of Trustees of
ElderTrust, Mr. Walker served as Chief Executive Officer of Genesis,
ElderTrusts principal tenant, from 1985 until May 2002 and as Chairman
of the Board of Genesis from 1985 until October 2002. At December 31,
2002, the Company leased or subleased nineteen properties to subsidiaries
of Genesis. The Company received lease payments totaling $10.2 million in
2002 on these properties. At December 31, 2002 the Company also leased
eight properties to entities in which Genesis has made equity investments.
The Company received lease payments totaling $8.1 million in 2002 on these
properties.
APPROVAL OF 2003 SHARE OPTION AND INCENTIVE PLAN
(Proposal 2)
On March 27, 2003, the board of trustees approved the 2003 share
option and incentive plan, subject to approval of the plan by
shareholders at the annual meeting. A total of 250,000 common shares
are reserved for issuance under the plan, representing 3.2% of the
currently outstanding common shares. All trustees, officers, employees
and consultants of ElderTrust and its subsidiaries (14 persons) are
eligible to participate in the 2003 share option and incentive plan.
The principal provisions of the 2003 share option and incentive
plan are summarized below. This summary is not complete and is qualified
in its entirety by the terms of the 2003 share option and incentive plan,
a copy of which is attached to this proxy statement as Annex A.
Description of 2003 Share Option and Incentive Plan
Share Options. The 2003 share option and incentive plan permits the
granting of (a) options to purchase common shares intended to qualify as
incentive options (Incentive Options) under Section 422 of the Internal
Revenue Code of 1986, as amended (the Code) and (b) options that do not
so qualify (Non-Qualified Options). The option exercise price of each
option will be determined by the compensation committee of the board of
trustees, which will administer the plan, but may not be less than 100%
of the fair market value of the common shares on the date of grant.
The term of each option will be fixed by the compensation committee
and may not exceed ten years from the date of grant in the case of an
Incentive Option. The compensation committee will determine at what time
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or times each option may be exercised and, subject to the provisions of
the 2003 share option and incentive plan, the period of time, if any,
after retirement, death, disability or termination of employment during
which options may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
compensation committee.
Upon exercise of options, the option exercise price must be paid in
full either in cash or by certified or bank check or other instrument
acceptable to the compensation committee or, if the compensation committee
so permits, by delivery of common shares already owned by the plan
participant or delivery of a promissory note. The exercise price may also
be delivered to ElderTrust by a broker pursuant to irrevocable instructions
to the broker from the plan participant; provided that an executive officer
or trustee of the Company may not use the cashless exercise feature without
the express prior consent of the Company.
To qualify as Incentive Options, options must meet additional federal
tax requirements, including limits on the value of shares subject to
Incentive Options which first become exercisable in any one calendar
year, and a shorter term and higher minimum exercise price in the case
of certain large shareholders.
Under the terms of the 2003 share option and incentive plan, options
for no more than 100,000 common shares may be granted to any individual
during any one calendar year. In addition, of the 250,000 common shares
reserved for issuance under the 2003 share option and share incentive plan,
no more than 150,000 common shares may be issued pursuant to awards other
than awards of share options.
Restricted Shares. The compensation committee may also award common
shares to participants, subject to such conditions and restrictions as the
compensation committee may determine. These conditions and restrictions may
include the achievement of certain performance goals and/or continued
employment with ElderTrust through a specified restricted period. If the
performance goals and any other restrictions are not attained, the
participants would forfeit their restricted common shares. The purchase
price of restricted common shares will be determined by the compensation
committee.
Deferred Common Shares. The compensation committee may also award
deferred common share units which are ultimately payable in the form of
unrestricted common shares. The deferred common shares may be subject to
such conditions and restrictions as the compensation committee may
determine. These conditions and restrictions may include the achievement
of certain performance goals and/or continued employment with ElderTrust
through a specified restricted period. If the performance goals and other
restrictions are not attained, the participants will forfeit their deferred
common share units. During the deferral period, subject to terms and
conditions imposed by the compensation committee, the deferred common share
units may be credited with distribution equivalent rights.
Unrestricted Common Shares. The compensation committee may also grant
shares (at no cost or for a purchase price determined by the compensation
committee) which are free from any restrictions under the 2003 share option
and incentive plan. Common shares may be issued to participants in
recognition of past services or other valid consideration, and may be
issued in lieu of cash compensation to be paid to such participants.
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Performance Share Awards. The compensation committee may also grant
performance shares awards to participants entitling the participants to
receive common shares upon the achievement of individual or Company
performance goals and such other conditions as the compensation committee
shall determine.
Distribution Equivalent Rights. The compensation committee may grant
distribution equivalent rights, which entitle the recipient to receive
credits for distributions that would be paid if the recipient had held a
specified number of common shares. Distribution equivalent rights may be
granted as a component of another award or as a freestanding award.
Distribution equivalent rights credited under the 2003 share option and
incentive plan may be paid currently or be deemed to be reinvested in
additional common shares, and may thereafter accrue additional distribution
equivalent rights at fair market value at the time of deemed reinvestment.
Distribution equivalent rights may be settled in cash, shares or a
combination thereof, in a single installment or installments, as specified
in the award. Awards payable in cash on a deferred basis may provide for
crediting and payment of interest equivalents.
Adjustments for Share Splits, Mergers and Similar Events. The
compensation committee will make appropriate adjustments to the maximum
number of shares reserved for issuance under the plan, the maximum number
of share options that can be granted to any individual in any one calendar
year, the maximum number of share awards other than awards of share
options and outstanding awards to reflect common share splits and similar
events. In the event of a merger, liquidation, sale of ElderTrust or
similar event, the compensation committee, in its discretion, may provide
for substitution or adjustment of outstanding awards, or may terminate
all awards with payment of cash or in-kind consideration.
Change of Control. The compensation committee may provide in each
award agreement that the award becomes fully vested and non-forfeitable
upon a Change of Control of ElderTrust (as defined in the 2003 share
option and incentive plan or as otherwise defined in the award agreement).
Amendments and Termination. The board of trustees may at any time
amend or discontinue the 2003 share option and incentive plan and the
compensation committee may at any time amend or cancel outstanding
awards for the purpose of satisfying changes in law or for any other
lawful purpose. However, no such action may be taken which adversely
affects any rights under an outstanding award without the holders
consent.
Federal Income Tax Consequences of the 2003 Share Option and Incentive
Plan
The grant of an option will not be a taxable event for the plan
participant or ElderTrust.
Incentive Options. A plan participant will not recognize taxable
income upon exercise of an Incentive Option (except that the alternative
minimum tax may apply), and any gain realized upon a disposition of
common shares received pursuant to the exercise of an Incentive Option
will be taxed as long-term capital gain if the plan participant holds
the shares for at least two years after the date of grant and for one
year after the date of exercise (the holding period requirement).
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ElderTrust will not be entitled to any business expense deduction with
respect to the exercise of an Incentive Option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the plan participant generally must be an employee of
ElderTrust or a subsidiary from the date the option is granted through
a date within three months before the date of exercise of the option. In
the case of a plan participant who is disabled, the three-month period
for exercise following termination of employment is extended to one year.
In the case of an employee who dies, both the time for exercising Incentive
Options after termination of employment and the holding period for common
shares received pursuant to the exercise of the option are waived.
If all of the foregoing requirements are met except the holding
period requirement mentioned above, the plan participant will recognize
ordinary income upon the disposition of the common shares in an amount
generally equal to the excess of the fair market value of the common
shares at the time the option was exercised over the option exercise
price (but not in excess of the gain realized on the sale). The balance
of the realized gain, if any, will be capital gain. The employer
corporation will be allowed a business expense deduction to the extent
the plan participant recognizes ordinary income subject to Section 162(m)
of the Code summarized below.
If a plan participant exercises an Incentive Option by tendering
common shares with a fair market value equal to part or all of the option
exercise price, the exchange of shares will be treated as a nontaxable
exchange (except that this treatment would not apply if the plan
participant had acquired the shares being transferred pursuant to the
exercise of an Incentive Option and had not satisfied the holding period
requirement summarized above). If the exercise is treated as a tax free
exchange, the plan participant would have no taxable income from the
exchange and exercise (other than minimum taxable income as discussed
above) and the tax basis of the shares exchanged would be treated as the
substituted basis for the shares received. If the plan participant used
shares received pursuant to the exercise of an Incentive Option (or
another statutory option) as to which the plan participant had not
satisfied the applicable holding period requirement, the exchange would
be treated as a taxable disqualifying disposition of the exchanged shares.
If, pursuant to an option agreement, ElderTrust withholds shares in
payment of the option price for incentive options, the transaction should
generally be treated as if the withheld shares had been sold in a
disqualifying disposition after exercise of the option, so that the plan
participant will realize ordinary income with respect to such shares. The
shares paid for by the withheld shares should be treated as having been
received upon exercise of an incentive stock option, with the tax
consequences described above. However, the Internal Revenue Service has
not ruled on the tax treatment of shares received on exercise of an
incentive stock option where the option exercise price is paid with
withheld shares.
Non-Qualified Options. Upon exercising a Non-Qualified Option, a
plan participant will recognize ordinary income in an amount equal to
the difference between the exercise price and the fair market value of
the common shares on the date of exercise (except that, if the plan
participant is subject to certain restrictions imposed by the securities
-17-
laws, the measurement date will be deferred, unless the plan participant
makes a special tax election within 30 days after exercise). Upon a
subsequent sale or exchange of shares acquired pursuant to the exercise
of a Non-Qualified Option, the plan participant will have taxable gain
or loss, measured by the difference between the amount realized on the
disposition and the tax basis of the shares (generally, the amount paid
for the shares plus the amount treated as ordinary income at the time
the option was exercised).
If the employer corporation complies with applicable reporting
requirements and with the restrictions of Section 162(m) of the Code,
it will be entitled to a business expense deduction in the same amount
and generally at the same time as the plan participant recognizes
ordinary income. Under Section 162(m) of the Code, if the plan
participant is one of certain specified executive officers, then,
unless certain exceptions apply, the employer is not entitled to deduct
compensation with respect to the plan participant, including compensation
related to the exercise of shares options, to the extent such compensation
in the aggregate exceeds $1.0 million for the taxable year. The options
are intended to comply with the exception to Section 162(m) for
performance-based compensation.
If the plan participant surrenders common shares in payment of part
or all of the exercise price for Non-Qualified Options, no gain or loss
will be recognized with respect to the shares surrendered (regardless of
whether the shares were acquired pursuant to the exercise of an Incentive
Option) and the plan participant will be treated as receiving an equivalent
number of shares pursuant to the exercise of the option in a nontaxable
exchange. The basis of the shares surrendered will be treated as the
substituted tax basis for an equivalent number of option shares received
and the new shares will be treated as having been held for the same
holding period as had expired with respect to the transferred shares.
The difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the
exercise of the option will be taxed as ordinary income. The plan
participants basis in the additional shares will be equal to the
amount included in the plan participants income.
If, pursuant to an option agreement, ElderTrust withholds shares
in payment of the option price for Non-Qualified Options or in payment
of tax withholding, the transaction should generally be treated as if
the withheld shares had been sold for an amount equal to the exercise
price after exercise of the option.
Restricted Shares. A plan participant who is awarded Restricted
Shares will not recognize any taxable income for federal income tax
purposes in the year of the award, provided that the common shares
are subject to restrictions (that is, the Restricted Shares are
nontransferable and subject to a substantial risk of forfeiture). If
a plan participant is subject to Section 16(b) of the Securities
Exchange Act of 1934 (by reason of such plan participants status as
a director, executive officer or greater than 10% shareholder of
ElderTrust) on the date of the award, the common shares generally will
be deemed to be subject to restrictions (in addition to the restrictions
imposed by the award) for at least six months following the date of the
award. However, the plan participant may elect under Section 83(b) of the
Code to recognize compensation income in the year of the award in an
amount equal to the fair market value of the common shares on the date
of the award, determined without regard to the restrictions. If the plan
participant does not make such a Section 83(b) election, the fair market
value of the common shares on the date the restrictions lapse will be
treated as compensation income to the plan participant and will be
taxable in the year the restrictions lapse. ElderTrust generally will
be entitled to a deduction for compensation paid in the same amount
treated as compensation income to the participant in the year the plan
participant is taxed on the income.
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Unrestricted Common Shares. Plan participants who are awarded
unrestricted common shares will be required to recognize ordinary income
in an amount equal to the fair market value of the shares on the date of
the award, reduced by the amount, if any, paid for such shares. ElderTrust
generally will be entitled to a deduction for compensation paid in the
same amount treated as compensation income to the participant in the year
the plan participant is taxed on the income.
Upon a plan participants disposition of unrestricted common shares,
any gain realized in excess of the amount reported as ordinary income will
be reportable by the participant as a capital gain, and any loss will be
reportable as a capital loss. Capital gain or loss will be long-term if
the participant has held the shares for at least one year. Otherwise, the
capital gain or loss will be short-term.
Deferred Common Shares. There are no immediate tax consequences of
receiving an award of deferred common shares under the 2003 share option
and incentive plan. A plan participant who is awarded deferred common
shares will be required to recognize ordinary income in an amount equal to
the fair market value of shares issued to such participant at the end of
the deferral period, reduced by the amount, if any, paid for such shares.
ElderTrust generally will be entitled to a deduction for compensation
paid in the same amount treated as compensation income to the participant
in the year the plan participant is taxed on the income.
Upon a plan participants disposition of deferred common shares, any
gain realized in excess of the amount reported as ordinary income will be
reportable by the participant as a capital gain, and any loss will be
reportable as a capital loss. Capital gain or loss will be long-term if
the participant has held the shares for at least one year. Otherwise, the
capital gain or loss will be short-term.
Performance Share Awards. There are no immediate tax consequences of
receiving an award of performance shares under the 2003 share option and
incentive plan. A plan participant who is awarded performance shares will
be required to recognize ordinary income in an amount equal to the fair
market value of shares issued to such participant pursuant to the award,
reduced by the amount, if any, paid for such shares. ElderTrust generally
will be entitled to a deduction for compensation paid in the same amount
treated as compensation income to the participant in the year the plan
participant is taxed on the income.
Upon a plan participants disposition of performance shares, any
gain realized in excess of the amount reported as ordinary income will
be reportable by the participant as a capital gain, and any loss will be
reportable as a capital loss. Capital gain or loss will be long-term if
the participant has held the shares for at least one year. Otherwise, the
capital gain or loss will be short-term.
Distribution Equivalent Rights. Plan participants who receive
distribution equivalent rights will be required to recognize ordinary
income in an amount distributed to the participant pursuant to the award.
ElderTrust generally will be entitled to a deduction for compensation
paid in the same amount treated as compensation income to the participant
in the year the plan participant is taxed on the income.
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Reasons for Obtaining Shareholder Approval
The Board of Trustees has adopted the 2003 share option and
incentive plan, subject to shareholder approval of the plan at the
annual meeting. ElderTrust is submitting the 2003 share option and
incentive plan for shareholder approval at the annual meeting because
shareholder approval is required to (a) qualify the 2003 share option
and incentive plan under Section 422 of the Code relating to the grant
of Incentive Options, (b) obtain a federal income tax deduction under
Section 162(m) of the Code for compensation recognized by certain plan
participants in connection with the exercise of options granted under
the 2003 share option and incentive plan and (c) satisfy the listing
approval requirements of the New York Stock Exchange.
Section 422 of the Code and applicable Treasury regulations, among
other things, condition Incentive Option treatment for option grants on
shareholder approval of the share option plan pursuant to which the
Incentive Options are granted. Under Section 162(m) of the Code and
applicable Treasury regulations, no deduction is allowed for annual
compensation in excess of $1 million paid by a publicly traded
corporation to its chief executive officer and the four other most
highly compensated officers. Under those provisions, however, there
is no limitation on the deductibility of qualified performance-based
compensation. To satisfy this definition: (a) the compensation must
be paid solely on account of the attainment of one or more pre-
established, objective performance goals; (b) the performance goals
under which compensation is paid must be established by a compensation
committee having the authority to establish and administer performance
goals and comprised solely of two or more directors who qualify as
outside directors for purposes of the exception; (c) the material
terms under which the compensation is to be paid must be disclosed to
and subsequently approved by shareholders of the corporation before
payment is made in a separate vote; and (d) the compensation committee
must certify in writing before payment of the compensation that the
performance goals and any other material terms were in fact satisfied.
Under applicable Treasury regulations, in the case of compensation
attributable to share options, the performance goal requirement
(summarized in (a) above) and the shareholder approval requirement
(summarized in (c) above) are deemed satisfied, and the certification
requirement (summarized in (d) above) is inapplicable, if: (a) the grant
or award is made by a compensation committee satisfying the above
requirements; (b) the plan under which the option is granted states the
maximum number of shares with respect to which options may be granted
during a specified time period to an employee; (c) under the option
exercise price equals or exceeds the fair market value of the shares
on the date of grant; and (d) the share option plan is approved by
shareholders.
Based on the closing price of $6.84 per common share on March 31,
2003, the aggregate market value of the 250,000 common shares reserved
for issuance under the 2003 share option and incentive plan is $1.7
million. In addition to the 2003 share option and incentive plan,
ElderTrust maintains the 1998 share option and incentive plan and the
1999 share option and incentive plan. Under the 1998 share option and
incentive plan, the maximum number of shares available for issuance is
779,340 common shares plus as of each January 1st 9.9% of any net
increase since the preceding January 1st in the total number of common
shares actually outstanding (assuming that all units of limited
partnership interest of ElderTrust Operating Limited Partnership (other
than units owned by ElderTrust) are converted into common shares). Under
this formula, a total of 799,458 common shares are reserved for issuance
under the 1998 share option and share incentive plan and 20,118 common
shares remain available for future grant at March 31, 2003. A total of
350,000 common shares are reserved for issuance under the 1999 share
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option and share incentive plan. At March 31, 2003, 34,072 common shares
were available for future grant under the 1999 share option and incentive
plan.
Required Vote
The affirmative vote of a majority of the votes cast is required to
approve the 2003 share option and share incentive plan, provided that the
total vote cast on the proposal represents over 50% of all votes entitled
to be cast on the proposal. For purposes of this vote requirement of the
NYSE, (i) a majority of the outstanding common shares must vote on the
proposal and (ii) votes in favor must constitute at least a majority of
the total votes cast on the proposal. For these purposes, abstentions
are considered votes cast but broker non-votes are not considered votes
cast. Therefore, an abstention or a broker non-vote generally will have
the effect of a vote against the proposal, unless holders of more than 50%
of the common shares cast votes on the proposal and the number of votes
for exceeds the number of votes against and the number of abstentions
(but not broker non-votes), in which event neither an abstention nor a
broker non-vote will have an effect on the result of the vote.
The Board of Trustees believes that the 2003 share option and
incentive plan will further strengthen the ability of ElderTrust to
attract, retain and motivate its officers, trustees and employees.
Accordingly, the Board of Trustees recommends a vote FOR approval of the
2003 share option and incentive plan.
SHAREHOLDER PROPOSAL
(Proposal 3)
The following shareholder proposal has been submitted for
consideration by Insight Investments, LP, 748 Perinton Hills Office
Park, Fairport, NY 14450, owner of 409,500 ElderTrust common shares.
If Insights Investments, LP, or its representative who is qualified
under state law to present the proposal on its behalf, attends the
annual meeting and presents the proposal, the proposal will be voted
upon at the annual meeting.
RESOLVED, that the shareholders of ElderTrust (the Company),
believing that the value of their investment would best be maximized
through a sale of the Companys assets or a merger into a larger entity,
hereby request that the Board of Trustees immediately pursue such a sale
or merger, in one or more transactions, such that all of the Companys
business is sold in an expeditious manner.
SUPPORTING STATEMENT:
We believe that ElderTrust as currently structured is too small to
operate in an efficient manner or to compete effectively with other
healthcare real estate investment trusts (REITs). Furthermore, we
believe that the Company cannot access the capital markets in a manner
that would allow it to grow into a more competitive structure in any
reasonable time frame. We believe that these structural and competitive
limitations have resulted in the Companys stock price trading at levels
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well below its intrinsic value. The Companys difficulty in accessing the
capital markets is exemplified by the August 2002 credit line agreement
that provided borrowings of up to $7.5 million but for only 18 months and
required the Company to post as collateral properties with a net book value
of $38.9 million. Publicly available reports indicate that other healthcare
REITs have credit lines for much longer periods and do not need to post as
much collateral on a relative basis. Also, apparently because of the
Companys small size, its operating expenses absorb what we believe is a
significantly higher proportion of its funds from operations (FFO) as
compared to other public healthcare REITs.
Other healthcare REITs appear to have a much lower cost of capital,
which puts the Company at a significant disadvantage in trying to acquire
additional assets in a manner that would increase per share intrinsic
value. We believe this apparent financing disadvantage makes a possible
alternative to selling the Company growth through acquisition unlikely to
succeed.
Additionally, the Companys apparent financing difficulties seems
to have caused the Board to adopt a dividend payout ratio that is
significantly below industry standards in order to reduce debt. The
Company specifically refers to various debt covenants and restrictions
in explaining the current dividend policy in the December 4, 2002 Form
8-K. We believe the Companys payout ratio is currently less than 50%
of expected 2003 FFO while many other healthcare REITs have payout
ratios of 70 to 80%. We further believe this low dividend has contributed
to the share price being well below what we calculate as net asset value.
Potential larger acquirers of the Company should be able to refinance
the debt on more favorable terms. In addition, since a potential buyer
could possibly reduce the Companys operating expenses by integrating it
into its own corporate structure, a sale price above average industry FFO
multiples may be achievable. Therefore, we believe the sale or merger of
the Company would provide a return to shareholders far in excess of the
current share price or that which is likely to be achieved under the
current structure.
COMPANY RESPONSE TO SHAREHOLDER PROPOSAL
For the reasons described below, the Board believes that the
shareholder proposal is not in the best interests of ElderTrust and its
shareholders and, therefore, recommends a vote AGAINST the proposal.
The Board continually evaluates various alternatives to maximize
shareholder value. These alternatives may include enhancing the value
of the Companys existing assets, growing the Company through acquisition,
selling individual assets when appropriate as well as a sale of the
Companys assets or a merger into a larger entity. The Board believes
that decisions relating to a sale of the Companys assets or a merger
should be the responsibility of the Board and that retaining flexibility
will enhance the Companys ability to maximize shareholder value.
The Company has spent the last several years improving the Companys
financial stability, and for the first time in three years, has adopted a
new dividend policy. In December 2002, the Company announced that it
intended to resume quarterly distributions to holders of its common shares
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and that the initial distribution at a rate of $0.16 per quarter, or $0.64
per year. On March 31, 2003, the Company announced that its Board of
Trustees had declared a quarterly distribution to the common shareholders
of $0.16 for the quarter ended March 31, 2002, payable on May 16, 2003 to
common shareholders of record on April 28, 2003. The dividend level was
determined taking into account a number of factors, including the Companys
required dividend level under federal income tax law, its estimate of cash
available for distribution and financial covenants under the Companys debt
instruments.
In addressing the new dividend policy, the Company believes that
cash available for distribution (CAD) is a more appropriate measure
for determining a dividend policy than funds from operations (FFO).
CAD is generally defined as being equal to FFO less debt principal
amortization and capital expenditures , both of which involve cash
outlays. As a result, the Company believes that CAD is a better proxy
for cash available to pay a dividend.
At the time the new dividend policy was established, the Company
had an annualized FFO of approximately $1.65 per share. However, as
previously disclosed, two properties (Harston and Pennsburg) may be
disposed of to satisfy a $14.9 million nonrecourse debt with an extended
maturity date of April 10, 2003. If the properties are disposed of to
satisfy the debt, FFO would be reduced by approximately $0.14 per share.
If the properties are not sold, it is expected that the cash flow from
these properties would be used to reduce debt secured by the properties.
As a result, the starting point for CAD is approximately $1.51 per share.
As we have disclosed previously, we estimate that cash needed to pay
other amortizing loans, except for our Wachovia Bank Guidance Line and the
$30 million in debt originated by JP Morgan (a balance that includes the
$14.9 million loan secured by the Harston and Pennsburg properties), to be
approximately $0.40 per share. Required principal payments on the Wachovia
Bank Guidance Line were estimated at $0.25 per share. (The balance under
the Guidance Line was paid in full in January 2003.) The JP Morgan
originated debt has no principal amortization requirement other than that
under the Harston/Pennsburg loan extension. Finally, the Company
estimates its annual capital expenditures to be approximately $0.05 per
share. Thus, CAD is approximately $0.81 per share ($1.51 less the sum of
$0.40, $0.25 and $0.05).
The Company also has interest and minimum equity covenant ratios that
must be maintained under various debt instruments and guarantees. As
previously disclosed these ratios increase over time and thus require a
continued reduction of debt outstanding. As a result, and even though the
full repayment of the Guidance Line eliminated the $0.25 principal payment,
this cash is expected to be used to reduce other debt outstanding so that
the Company will continue to meet its debt covenants.
The Board believes that the Companys dividend policy, which
represents approximately 80% of CAD ($0.64/$0.81) is prudent based on
current market conditions and should allow for the dividend to be
increased over time without the CAD dividend coverage issues currently
faced by some other public healthcare REITs whose cash available for
distribution is less than their current dividend payments.
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The Board believes that the Companys focus on debt reduction
provides an opportunity to substantially increase shareholder value
over time. Once the Company has successfully addressed existing debt
maturities, the Company expects to obtain a larger secured line of
credit and ultimately an unsecured line of credit. In addition, the
Board believes that the Company has the same access on comparable terms
to secured debt financings as do other healthcare REITs. Most healthcare
REITs do not have an unsecured debt rating and use secured debt to fund
the cost of acquisitions. The Board also believes that the Company, due
to its size and operating leverage, has a greater ability to increase its
CAD per share than larger competitors and, therefore, to increase its
share price faster than its competitors. The Board believes that the
Companys current strategy is likely to yield better returns to
shareholders than an immediate sale of the Company.
The Board believes that this is not the most advantageous time to
sell the Company. While the Board concurs that the Companys stock price
may be trading at levels below its intrinsic value, it believes that the
Companys stock price has decreased, as have the stock of other healthcare
REITs, due to various factors, including the impact on operators of
reductions in Medicare and Medicaid reimbursement, the possibility of
further reductions in Medicare and Medicaid reimbursement levels, labor
cost increases, increased competition and increased professional liability
obligations. In addition, the Board believes that the uncertainty relating
to the current restructuring of Genesis Health Ventures, Inc., the Companys
largest tenant, impacts the marketability of the Company. The stabilization
of the industry and Genesis will provide a better opportunity to sell if the
Board believes that to be the best alternative.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES RECOMMENDS THAT
YOU VOTE AGAINST THE SHAREHOLDER PROPOSAL, AND YOUR PROXY WILL BE SO VOTED
IF THE PROPOSAL IS PRESENTED UNLESS YOU SPECIFY OTHERWISE.
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Required Vote
The affirmative vote a majority of all of the votes cast is required
for approval of the shareholder proposal. For purposes of the vote on
the shareholder proposal, abstentions and broker non-votes will not be
counted as votes cast and will have no effect on the result of the vote.
SECURITIES OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of ElderTrust common shares, including common shares
that may be issued in exchange for units of limited partnership of the
ElderTrust Operating Limited Partnership (the Operating Partnership)
presented for redemption and upon exercise of options exercisable within
60 days, for (a) each trustee and executive officer of ElderTrust, (b)
all trustees and executive officers as a group and (c) each person
believed by management to beneficially own more than 5% of the
outstanding common shares. The information is as of April 1, 2003,
except as otherwise indicated. Except as indicated below, each person
has sole voting and investment power. Unless indicated otherwise below,
the address for our trustees and officers is c/o ElderTrust, Little Falls
Centre One, 2711 Centerville Road, Suite 108, Wilmington, DE 19808.
Units of
Limited
Number Partnership Percent
of of the Common of all
Name of and Business Common Operating Share Common
Address of Beneficial Owner Shares Partnership Options Total Shares
- --------------------------- -------- ----------- ------- ----- -------
Michael R. Walker
Chairman of the Board 316,666(1) 228,416(2) 152,000 697,082 8.6%
D. Lee McCreary, Jr.
President, Chief
Executive Officer,
Chief Financial
Officer, Treasurer,
Secretary and Trustee 300,428(3) - 286,666 587,094 7.3
James J. Clymer
Trustee 1,000 - - 1,000 *
John G. Foos
Trustee 37,200(4) - 2,000 39,200 *
Edward J. Rodgers
Trustee - - - - -
Rodman W. Moorhead, III
Trustee 37,500 - 43,500 81,000 1.0
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Harold L. Zuber, Jr.
Trustee 162,700(5) - 2,000 164,700 2.1
John H. Haas (6)
Vice President and
Chief Operating Officer 28,333 - - 28,333 *
All trustees and executive
officers as a group
(8 persons) 883,827 228,416 486,166 1,598,409 20.0
Insight Investments, LP
Ruff Management, LLC
Charles W. Ruff (7)
748 Perinton Hills
Office Park
Fairport NY, 14450 419,500 - - 419,500 5.4
North Star Partners, L.P.
Andrew R. Jones (8)
61 Wilton Road
Westport, CT 06880 580,500 - - 580,500 7.5
Wynnefield Partners
Small Cap Value, L.P.
Wynnefield Small Cap
Value Offshore Fund, Ltd.
Wynnefield Small Cap
Value, L.P. I
Wynnefield Small Cap
Value, L.P. I
Wynnefield Capital
Management LLC
Wynnefield Capital, Inc.(9)
450 Seventh Avenue
Suite 509
New York, NY 10123 408,800 - - 408,800 5.3
_________________________
* Less than one percent.
(1) Includes 76,566 common shares owned by Mr. Walker directly, 176,500
common shares owned indirectly through the Walker Family Partnership
and 63,600 common shares owned indirectly through a corporation of
which he is the principal stockholder and the sole officer.
(2) Includes 62,566 units owned by Mr. Walker directly and 165,850 units
owned indirectly through a corporation of which he is the principal
stockholder and the sole officer.
(3) Includes 275,225 common shares owned directly by Mr. McCreary, 23,105
common shares held in an IRA and 2,098 common shares owned as
custodian for his children.
(4) Includes 35,500 common shares owned directly, 1,500 common shares
owned indirectly by a family partnership, of which Mr. Foos serves
as the investment advisor/manager and 200 common shares owned
indirectly by his children. Mr. Foos shares voting power with his
spouse with respect to 1,500 common shares owned directly by him.
(5) Includes 126,200 common shares owned by Mr. Zuber directly, 3,000
common shares held in an IRA and 33,500 common shares owned
indirectly by his children.
-26-
(6) Mr. Haas resigned all of his offices and positions with ElderTrust
as of June 7, 2002. He remained an employee of ElderTrust through
October 31, 2002. Share ownership information for Mr. Haas is as
of October 31, 2002.
(7) The Schedule 13D of the reporting persons, dated December 16, 2002,
states that (a) each of the reporting persons has sole voting and
sole dispositive power with respect to 409,500 of these shares and
(b) Mr. Ruff has shared dispositive power with respect to the
remaining 10,000 of these shares.
(8) Amendment No. 1 to the Schedule 13G of North Star Partners L.P. and
Mr. Jones, dated February 12, 2003, states that each of the
reporting persons has shared voting power and shared dispositive
power with respect to 569,200 of these shares and sole dispositive
power with respect to the remaining 11,300 of these shares.
(9) The Schedule 13D of the reporting persons, dated January 7, 2003,
states that Wynnefield Partners Small Cap Value, L.P. (the
Partnership) has sole voting and sole dispositive power with
respect to 134,060 of these shares, Wynnefield Small Cap Value
Offshore Fund, Ltd. (the Fund) has sole voting and sole
dispositive power with respect to 89,930 of these shares,
Wynnefield Partners Small Cap Value, L.P. I (the Partnership I)
has sole voting and sole dispositive power with respect to 184,810
of these shares, Wynnefield Capital Management LLC (WCM) has sole
voting and sole dispositive power with respect to 318,870 of these
shares and Wynnefield Capital, Inc. (WCI) has sole voting and
sole dispositive power with respect to 89,930 of these shares.
The Schedule 13D of the reporting persons also states that (a)
WCM is the sole general partner of the Partnership and Partnership
I and, accordingly, may be deemed to be the indirect beneficial
owner of the common shares beneficially owned by those entities,
(b) Nelson Obus and Joshua Landes are the co-managing members of
WCM and, accordingly, each of Messrs. Obus and Landes may be deemed
to be the indirect beneficial owner of the shares beneficially owned
by WCM, (c) WCI is the sole investment manager of the Fund and,
accordingly, may be deemed to be the indirect beneficial owner of
the shares beneficially owned by the Fund and (d) Messrs. Obus and
Landes are the principal executive officers of WCI and, accordingly,
each of Messrs. Obus and Landes may be deemed to be the indirect
beneficial owner of the shares beneficially owned by WCI.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Trustees has appointed KPMG LLP to act as the Companys
independent public accountants for 2003. Representatives of KPMG LLP
will be present at the annual meeting. They will be given an opportunity
to make a statement if they desire to do so and will be available to
respond to appropriate questions.
KPMG LLPs fees for providing services to ElderTrust in 2002 were
as follows:
Audit Fees
Audit fees billed for services rendered during 2002, including the
review of quarterly financial statements, were $148,000.
Financial Information Systems Design and Implementation Fees
None.
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Other Fees
In addition, ElderTrust was billed $12,000 for other fees for
services rendered during 2002, including the preparation of federal and
state tax returns for the tax year 2002.
The audit committee of the Board of Trustees has considered whether
the provision of the foregoing non-audit services by KPMG LLP is
compatible with maintaining KPMG LLPs independence.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2004
annual meeting must be received by ElderTrust no later than December 27,
2003 pursuant to the proxy soliciting rules of the SEC in order to be
considered for inclusion in ElderTrusts proxy statement and form of
proxy relating to the 2004 annual meeting. Nothing in this paragraph
shall be deemed to require ElderTrust to include in its proxy statement
and proxy relating to the 2004 annual meeting any shareholder proposal
which may be omitted from its proxy materials pursuant to applicable
regulations of the SEC in effect at the time such proposal is received.
Pursuant to ElderTrusts bylaws, any shareholder who intends to
present a proposal for action at the 2004 annual meeting also must have
delivered notice to the principal executive offices of ElderTrust not
later than the close of business on March 24, 2004 nor earlier than the
close of business on February 23, 2004; however, if the date of the 2004
annual meeting is advanced by more than 30 days or delayed by more than
60 days from May 23, 2004 notice by the shareholder to be timely must be
delivered not earlier than the close of business on the 90th day prior to
the 2004 annual meeting and not later than the close of business on the
later of the 60th day prior to the 2004 annual meeting or the tenth day
following the day on which public announcement of the date of the 2004
annual meeting is first made by ElderTrust.
OTHER BUSINESS TO BE TRANSACTED
The Board of Trustees does not know of any other matters to be
presented for action by the shareholders at the annual meeting. If,
however, any other matters not now known are properly brought before
the meeting, the persons named in the accompanying proxy will vote such
proxy in accordance with the determination of a majority of the Board
of Trustees.
ADDITIONAL INFORMATION
If you and other residents at your mailing address own common shares
in street name, your broker or bank may have sent you a notice that your
household will receive only one annual report and proxy statement for
each company in which you hold shares through that broker or bank. This
practice of sending only one copy of proxy materials is known as
householding. If you did not respond that you did not want to
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participate in householding, you were deemed to have consented to the
process. If the foregoing procedures apply to you, your broker has sent
one copy of our annual report and proxy statement to your address. You
may revoke your consent to householding at any time by sending your name,
the name of your brokerage firm, and your account number to Householding
Department, 51 Mercedes Way, Edgewood, NY 11717 (telephone number:
1-800-542-1061). The revocation of your consent to householding will be
effective 30 days following its receipt. In any event, if you did not
receive an individual copy of this proxy statement or our annual report,
we will send a copy to you if you address your written request to or call
ElderTrust, Little Falls Centre One, 2711 Centerville Road, Suite 108,
Wilmington, DE 19808, Attention: Kelly Keomanikhoth (telephone number:
1-302-993-1022). If you are receiving multiple copies of our annual report
and proxy statement, you can request householding by contacting Ms.
Keomanikhoth in the same manner.
By Order of the Board of Trustees
/s/ D. Lee McCreary, Jr.
_________________________________
D. Lee McCreary, Jr.
President, Chief Executive
Officer, Chief Financial Officer,
Treasurer and Secretary
Wilmington, Delaware
April 25, 2003
-29-
ANNEX A
ELDERTRUST
2003 SHARE OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the ElderTrust 2003 Share Option and
Incentive Plan (the Plan). The purpose of the Plan is to encourage
and enable the officers, employees, Non-Employee Trustees, consultants
and advisors of ElderTrust (the Company), and the employees,
consultants and advisors of ElderTrust Operating Limited Partnership
(the Operating Partnership) and the Companys other Subsidiaries, upon
whose judgment, initiative and efforts the Company largely depends for
the successful conduct of its business to acquire a proprietary interest
in the Company. It is anticipated that providing such persons with a
direct stake in the Companys welfare will assure a closer identification
of their interests with those of the Company, thereby stimulating their
efforts on the Companys behalf and strengthening their desire to remain
with the Company.
The following terms shall be defined as set forth below:
Act means the Securities Exchange Act of 1934, as amended
from time to time.
Administrator means either the Board or the Committee, to the
extent the Committee has been delegated authority pursuant to Section 2.
Award or Awards, except where referring to a particular
category of grant under the Plan, shall include Incentive Share Options,
Non-Qualified Share Options, Restricted Share Awards, Deferred Share
Awards, Unrestricted Share Awards, Performance Share Awards and
Distribution Equivalent Rights.
Board means the Board of Trustees of the Company as
constituted from time to time.
Change of Control is defined in Section 15.
Code means the Internal Revenue Code of 1986, as amended
from time to time, and any successor Code, and related rules,
regulations and interpretations.
Committee means the Committee of the Board referred to in
Section 2 (b).
Company means ElderTrust, a Maryland real estate investment
trust, and any successor thereto.
Deferred Share Award means Awards granted pursuant to Section
7.
A-1
Distribution Equivalent Right means Awards granted pursuant
to Section 10.
Effective Date means the date on which the Plan is initially
approved by Shareholders as set forth in Section 17.
Fair Market Value on any given date means the last reported
sale price at which Shares are traded on such date or, if no Shares are
traded on such date, the next preceding date on which Shares were traded,
as reflected on the principal stock exchange or, if applicable, any other
national stock exchange on which the Shares are traded or admitted to
trading.
Incentive Share Option means any Share Option that qualifies
as and is designated in writing in the related Option agreement as
constituting an incentive stock option as defined in Section 422 of the
Code.
Non-Employee Trustee means a member of the Board who is not
also an employee of the Company or any Subsidiary.
Non-Qualified Share Option means any Share Option that is not
an Incentive Share Option.
Operating Partnership means ElderTrust Operating Limited
Partnership, a Delaware limited partnership, and any successor thereto.
Option or Share Option means any option to purchase Shares
granted pursuant to Section 5.
Performance Share Award means Awards granted pursuant to
Section 9.
Restricted Share Award means Awards granted pursuant to
Section 6.
Shares means the common shares of beneficial interest, par
value $.01 per share, of the Company, subject to adjustments pursuant to
Section 3.
Subsidiary means any corporation or other entity (other than
the Company) in any unbroken chain of corporations or other entities
beginning with the Company if each of the corporations or entities (other
than the last corporation or entity in the unbroken chain) owns shares
or other interests possessing 50 percent or more of the economic interest
or the total combined voting power of all classes of shares or other
interests in one of the other corporations or entities in the chain.
Unrestricted Share Award means any Award granted pursuant to
Section 8.
A-2
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) The Plan shall be administered by the Board, which shall
have the full power and authority to take all actions and to make all
determinations required or provided for under the Plan or any Award
granted or agreement entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Board to be necessary or
appropriate to the administration of the Plan or any Award granted or
agreement entered into hereunder.
(b) The Board from time to time may appoint a Committee consisting
of two or more members of the Board. The Board may delegate to the
Committee such powers and authorities related to the administration of
the Plan, as set forth in Section 2(a) above, as the Board shall
determine, consistent with the By-Laws of the Company and applicable
law. In the event that the Plan or any Award granted or agreement
entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or
such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as
provided for in this Section 2.
(c) Powers of Administrator. The Administrator shall have the power
and authority to grant Awards consistent with the terms of the Plan,
including the power and authority:
(i) to select the individuals to whom Awards may from time to time
be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Share Options, Non-Qualified Share Options, Restricted
Share Awards, Deferred Share Awards, Unrestricted Share Awards,
Performance Share Awards and Distribution Equivalent Rights, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of Shares to be covered by any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of
the Plan, of any Award, which terms and conditions may differ among
individual Awards and participants, and to approve the form of written
instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all
or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at
any time the post-termination period in which Share Options may be
exercised;
A-3
(vii) to determine at any time whether, to what extent, and under
what circumstances Shares and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting deemed interest (at rates determined by
the Administrator) or distributions or deemed distributions on such
deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be made
in the Administrators sole and absolute discretion and shall be final
and binding on all persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; RECAPITALIZATIONS; MERGERS;
SUBSTITUTE AWARDS
(a) Shares Issuable. The maximum number of Shares reserved and
available for issuance under the Plan shall be 250,000 Shares. For
purposes of this limitation, if any portion of an Award is forfeited,
canceled, reacquired by the Company, satisfied without the issuance of
Shares or otherwise terminated, the Shares underlying such portion of
the Award shall be added back to the Shares available for issuance under
the Plan. Subject to such overall limitation, Shares may be issued for
up to 150,000 Shares pursuant to Awards other than Awards of Share
Options; provided, however, that, Shares Options with respect to no
more than 100,000 Shares may be granted to any one individual participant
during any one calendar year period. The Shares available for issuance
under the Plan may be authorized but unissued Shares or Shares reacquired
by the Company.
(b) Recapitalizations. If, through, or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, share
dividend, share split, reverse share split or other similar transaction,
the outstanding Shares are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company, or
additional shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect to such
Shares or other securities, the Administrator may make an appropriate or
proportionate adjustment in (i) the maximum number of Shares reserved for
issuance under the Plan, (ii) the number of Share Options that can be
granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under
the Plan, and (iv) the price for each share subject to any then outstanding
Share Options under the Plan, without changing the aggregate exercise price
(i.e., the exercise price multiplied by the number of Share Options) as
to which such Share Options remain exercisable. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional
Shares shall be issued under the Plan resulting from any such adjustment,
but the Administrator in its discretion may make a cash payment in lieu
of fractional shares.
A-4
(c) Mergers. In contemplation of and subject to the consummation of
a consolidation or merger or sale of all or substantially all of the
assets of the Company in which outstanding shares are exchanged for
securities, cash or other property of an unrelated corporation or
business entity or in the event of a liquidation of the Company (in
each case, a Transaction), the Board, or the board of directors of
any entity assuming the obligations of the Company, may, in its
discretion, take any one or more of the following actions, as to
outstanding Awards: (i) provide that such Awards shall be assumed
or equivalent awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), and/or (ii) upon
written notice to the participants, provide that all Awards will
terminate immediately prior to the consummation of the Transaction.
In the event that, pursuant to clause (ii) above, Awards will terminate
immediately prior to the consummation of the Transaction, all vested
Awards, other than Share Options, shall be fully settled in cash or in
kind at such appropriate consideration as determined by the Administrator
in its sole discretion after taking into account the consideration payable
per Share pursuant to the business combination (the Merger Price) and
all Share Options shall be fully settled, in cash or in kind, in an
amount equal to the difference between (A) the Merger Price times the
number of Shares subject to such outstanding Share Options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding Share Options; provided,
however, that each participant shall be permitted, within a specified
period determined by the Administrator prior to the consummation of the
Transaction, to exercise all outstanding Share Options, including those
that are not then exercisable, subject to the consummation of the
Transaction.
(d) Substitute Awards. The Administrator may grant Awards under
the Plan in substitution for Shares and Share based awards held by
employees of another corporation who become employees of the Company
or a Subsidiary as the result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary or the
acquisition by the Company or a Subsidiary of property or Shares of
the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the
Administrator considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers
and other employees, Non-Employee Trustees, consultants and advisors of
the Company, the Operating Partnership and the Companys other
Subsidiaries who are responsible for or contribute to the management,
growth or profitability of the Company, the Operating Partnership and
the Companys other Subsidiaries as are selected from time to time by
the Administrator in its sole discretion.
A-5
SECTION 5. SHARE OPTIONS
Any Share Option granted under the Plan shall be in such form as
the Administrator may from time to time approve.
Share Options granted under the Plan may be either Incentive Share
Options or Non-Qualified Share Options. Incentive Share Options may be
granted only to employees of the Company or any Subsidiary that is a
subsidiary corporation within the meaning of Section 424(f) of the
Code. To the extent that any Option does not qualify as an Incentive
Share Option, it shall be deemed a Non-Qualified Share Option.
No Incentive Share Option shall be granted under the Plan after
March 27, 2013.
(a) Share Options Granted to Employees, Consultants, Advisors and
Non-Employee Trustees. The Administrator in its discretion may grant
Share Options to eligible employees, consultants and advisors of the
Company or any Subsidiary and to Non-Employee Trustees. Share Options
granted pursuant to this Section 5(a) shall be subject to the following
terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable. If the Administrator so determines,
Share Options may be granted in lieu of cash compensation at the
participants election, subject to such terms and conditions as the
Administrator may establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Shares
covered by a Share Option granted pursuant to this Section 5(a) shall
be determined by the Administrator at the time of grant but shall not
be less than 100 percent of the Fair Market Value on the date of grant.
If an employee owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of Shares of the Company or any parent or
subsidiary corporation and an Incentive Share Option is granted to such
employee, the exercise price of such Incentive Share Option shall be not
less than 110 percent of the Fair Market Value on the grant date.
(ii) Option Term. The term of each Share Option shall be fixed by
the Administrator, but no Incentive Share Option shall be exercisable
more than ten years after the date the Share Option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10 percent of the combined voting
power of all classes of Shares of the Company or any parent or subsidiary
corporation and an Incentive Share Option is granted to such employee,
the term of such Share Option shall be no more than five years from the
date of grant.
(iii) Exercisability; Rights of a Shareholder. Share Options shall
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Administrator at or after the grant date;
provided, however, that Share Options granted in lieu of compensation
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shall be exercisable in full as of the grant date unless the Administrator
otherwise provides in the Option Award agreement. The Administrator may
at any time accelerate the exercisability of all or any portion of any
Share Option. A participant shall have the rights of a Shareholder only
as to Shares acquired upon the exercise of a Share Option and not as to
unexercised Share Options.
(iv) Method of Exercise. Share Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may
be made by one or more of the following methods to the extent provided
in the Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) In the form of Shares that are not then subject to restrictions
under any Company plan and that have been beneficially owned by the
participant for at least six months, if permitted by the Administrator
in its discretion. Such surrendered Shares shall be valued at Fair Market
Value on the exercise date;
(C) By the participant delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
participant chooses to pay the purchase price as so provided, the
participant and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment procedure;
provided further, however, that an executive officer or trustee of the
Company may not use the cashless exercise method to pay the exercise
price of his Share Option unless he has obtained the express prior
consent of the Company; or
(D) By the participant delivering to the Company a promissory note
if the Administrator has expressly authorized the loan of funds to the
participant for the purpose of enabling or assisting the participant to
effect the exercise of his Share Option; provided that at least so much
of the exercise price as represents the par value of the Shares shall be
paid other than with a promissory note; provided that an executive
officer or trustee of the Company may not use this exercise method to
pay the exercise price of his Share Option.
Payment instruments will be received subject to collection. The
delivery of certificates representing the Shares to be purchased pursuant
to the exercise of a Share Option will be contingent upon receipt from
the participant (or a purchaser acting in his stead in accordance with
the provisions of the Share Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements
contained in the Share Option or applicable provisions of laws.
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(v) Annual Limit on Incentive Share Options. To the extent required
for incentive stock option treatment under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Share Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by a participant
during any calendar year shall not exceed $100,000. To the extent that
any Share Option exceeds this limit, it shall constitute a Non-Qualified
Share Option.
(b) Non-transferability of Share Options. No Share Option shall be
transferable by the participant otherwise than by will or by the laws of
descent and distribution and all Share Options shall be exercisable,
during the participants lifetime, only by the participant.
Notwithstanding the foregoing, the Administrator, in its sole discretion,
may provide in the Award agreement regarding a given Share Option that
the participant may transfer, without consideration for the transfer, his
Non-Qualified Share Options to members of his family, to trusts for the
benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and conditions
of this Plan and the applicable Option Award agreement.
(c) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement, or, subject to Section 13
below, in writing after the Award agreement is issued, a participants
rights in all Share Options shall automatically terminate upon the
participants termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
SECTION 6. RESTRICTED SHARE AWARDS
(a) Nature of Restricted Share Awards. A Restricted Share Award is
an Award entitling the recipient to acquire, at par value or such other
higher purchase price determined by the Administrator, Shares subject to
such restrictions and conditions as the Administrator may determine at
the time of grant (Restricted Shares). Conditions may be based on
continuing employment (or other business relationship) and/or achievement
of pre-established performance goals and objectives. Such performance
goals and objectives shall be established in writing by the Administrator
prior to the ninetieth day of the year in which the grant is made and
while the outcome is substantially uncertain. Performance goals and
objectives shall be based on Share price, market share, sales, earnings
per Share, return on equity, costs, or any combination of these factors.
Performance goals and objectives may include positive results,
maintaining the status quo or limiting economic losses. The grant of
a Restricted Share Award is contingent on the participant executing the
Restricted Share Award agreement. The terms and conditions of each such
agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and participants.
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(b) Rights as a Shareholder. Upon execution of the Restricted Share
Award agreement and paying any applicable purchase price, a participant
shall have the rights of a Shareholder with respect to the voting of the
Restricted Share, subject to such terms and conditions as may be contained
in the Restricted Share Award agreement. Unless the Administrator shall
otherwise determine, certificates evidencing the Restricted Shares shall
remain in the possession of the Company until such Restricted Shares are
vested as provided in Section 6(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a Share
power endorsed in blank.
(c) Restrictions. Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Share Award agreement.
If a participants employment (or other business relationship) with the
Company and its Subsidiaries terminates for any reason, the Company shall
have the right to repurchase Restricted Shares that have not vested at
the time of termination at their original purchase price, from the
participant or the participants legal representative.
(d) Vesting of Restricted Shares. The Administrator at the time of
grant shall specify the date or dates and/or the attainment of pre-
established performance goals, objectives and other conditions on which
the non-transferability of the Restricted Shares and the Companys right
of repurchase or forfeiture shall lapse. Subsequent to such date or
dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions
have lapsed shall no longer be Restricted Shares and shall be deemed
vested. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 13 below, in
writing after the Award agreement is issued, a participants rights in
any shares of Restricted Shares that have not vested shall automatically
terminate upon the participants termination of employment (or other
business relationship) with the Company and its Subsidiaries and such
shares shall be subject to the Companys right of repurchase as provided
in Section 6(c) above.
(e) Waiver, Deferral and Reinvestment of Distributions. The
Restricted Share Award agreement may require or permit the immediate
payment, waiver, deferral or reinvestment (in the form of additional
Restricted Shares) of distributions paid on the Restricted Shares.
SECTION 7. DEFERRED SHARE AWARDS
(a) Nature of Deferred Share Awards. A Deferred Share Award is an
Award of phantom Share units to a participant, subject to restrictions
and conditions as the Administrator may determine at the time of grant.
Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals
and objectives. The grant of a Deferred Share Award is contingent on the
participant executing the Deferred Share Award agreement. The terms and
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conditions of each such agreement shall be determined by the Administrator,
and such terms and conditions may differ among individual Awards and
participants. At the end of the deferral period, the Deferred Share Award,
to the extent vested, shall be paid to the participant in the form of Shares.
(b) Election to Receive Deferred Share Awards in Lieu of Compensation.
The Administrator may, in its sole discretion, permit a participant to
elect to receive a portion of the cash compensation or Restricted Share
Award otherwise due to such participant in the form of a Deferred Share
Award. Any such election shall be made in writing and shall be delivered
to the Company no later than the date specified by the Administrator and
in accordance with rules and procedures established by the Administrator.
The Administrator shall have the sole right to determine whether and under
what circumstances to permit such elections and to impose such limitations
and other terms and conditions thereon as the Administrator deems
appropriate.
(c) Rights as a Shareholder. During the deferral period, a
participant shall have no rights as a Shareholder; provided, however,
that the participant may be credited with Distribution Equivalent
Rights with respect to the phantom Share units underlying his Deferred
Share Award, subject to such terms and conditions as the Administrator
may determine.
(d) Restrictions. A Deferred Share Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the
deferral period.
(e) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 13
below, in writing after the Award agreement is issued, a participants
right in all Deferred Share Awards that have not vested shall
automatically terminate upon the participants termination of employment
(or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 8. UNRESTRICTED SHARE AWARDS
Grant or Sale of Unrestricted Shares. The Administrator may, in its
sole discretion, grant (or sell at par value or such other higher purchase
price determined by the Administrator) an Unrestricted Share Award to any
participant pursuant to which such participant may receive Shares free of
any restrictions (Unrestricted Shares) under the Plan. Unrestricted
Share Awards may be granted or sold as described in the preceding sentence
in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such participant.
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SECTION 9. PERFORMANCE SHARE AWARDS
(a) Nature of Performance Share Awards. A Performance Share Award
is an Award entitling the recipient to acquire Shares upon the attainment
of specified performance goals. The Administrator may make Performance
Share Awards independent of or in connection with the granting of any
other Award under the Plan. The Administrator in its sole discretion
shall determine whether and to whom Performance Share Awards shall be
made, the performance goals applicable under each such Award, the periods
during which performance is to be measured, and all other limitations and
conditions applicable to the awarded Performance Shares; provided, however,
that the Administrator may rely on the performance goals and other
standards applicable to other performance unit plans of the Company in
setting the standards for Performance Share Awards under the Plan.
(b) Rights as a Shareholder. A participant receiving a Performance
Share Award shall have the rights of a Shareholder only as to shares
actually received by the participant under the Plan and not with respect
to shares subject to the Award but not actually received by the
participant. A participant shall be entitled to receive a Share
certificate evidencing the acquisition of Shares under a Performance
Share Award only upon satisfaction of all conditions specified in the
written instrument evidencing the Performance Share Award (or in a
performance plan adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 13
below, in writing after the Award agreement is issued, a participants
rights in all Performance Share Awards shall automatically terminate
upon the participants termination of employment (or cessation of
business relationship) with the Company and its Subsidiaries for any
reason.
(d) Acceleration, Waiver, Etc. At any time prior to the
participants termination of employment (or other business relationship)
by the Company and its Subsidiaries, the Administrator may in its sole
discretion accelerate, waive or, subject to Section 13, amend any or all
of the goals, restrictions or conditions imposed under any Performance
Share Award.
SECTION 10. DISTRIBUTION EQUIVALENT RIGHTS
(a) Distribution Equivalent Rights. A Distribution Equivalent
Right is an Award entitling the recipient to receive credits based on
cash distributions that would have been paid on the Shares specified in
the Distribution Equivalent Right (or other award to which it relates)
if such shares had been issued to and held by the recipient. A
Distribution Equivalent Right may be granted hereunder to any participant
as a component of another Award or as a freestanding award. The terms and
conditions of Distribution Equivalent Rights shall be specified in the
grant. Distribution equivalents credited to the holder of a Distribution
A-11
Equivalent Right may be paid currently or may be deemed to be reinvested
in additional Shares, which may thereafter accrue additional equivalents.
Any such reinvestment shall be at Fair Market Value on the date of
reinvestment. Distribution Equivalent Rights may be settled in cash or
Shares or a combination thereof, in a single installment or installments,
all determined in the sole discretion of the Administrator. A
Distribution Equivalent Right granted as a component of another Award
may provide that such Distribution Equivalent Right shall be settled
upon exercise, settlement, or payment of, or lapse of restrictions
on, such other award, and that such Distribution Equivalent Right shall
expire or be forfeited or annulled under the same conditions as such
other award. A Distribution Equivalent Right granted as a component of
another Award may also contain terms and conditions different from such
other award.
(b) Interest Equivalents. Any Award under this Plan that is settled
in whole or in part in cash on a deferred basis may provide in the grant
for interest equivalents to be credited with respect to such cash payment.
Interest equivalents may be compounded and shall be paid upon such terms
and conditions as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 13
below, in writing after the Award agreement is issued, a participants
rights in all Distribution Equivalent Rights or interest equivalents
shall automatically terminate upon the participants termination of
employment (or cessation of business relationship) with the Company and
its Subsidiaries for any reason.
SECTION 11. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than
the date as of which the value of an Award or of any Shares or other
amounts received thereunder first becomes includable in the gross income
of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Administrator regarding payment
of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant. The
Companys obligation to deliver Share certificates to any participant is
subject to and conditioned on tax obligations being satisfied by the
participant.
(b) Payment in Shares. Subject to approval by the Administrator, a
participant may elect to have such tax withholding obligation satisfied,
in whole or in part, by (i) authorizing the Company to withhold from
Shares to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due, or (ii) transferring to
the Company Shares owned by the participant with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due.
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SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed
a termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary
or from the Company to a Subsidiary, or from one Subsidiary to another;
or
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the employees
right to reemployment is guaranteed either by a statute or by contract
or under the written policy pursuant to which the leave of absence was
granted or if the Administrator otherwise so provides in writing.
SECTION 13. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award
for the purpose of satisfying changes in law or for any other lawful
purpose, but no such action shall adversely affect rights under any
outstanding Award without the holders written consent. Nothing in this
Section 13 shall limit the Boards authority to take any action permitted
pursuant to Section 3(c).
SECTION 14. STATUS OF PLAN
Unless the Administrator shall otherwise expressly determine in
writing, with respect to the portion of any Award which has not been
exercised and any payments in cash, Shares or other consideration not
received by a participant, a participant shall have no rights greater
than those of a general creditor of the Company. In its sole discretion,
the Administrator may authorize the creation of trusts or other
arrangements to meet the Companys obligations to deliver Shares or make
payments with respect to Awards hereunder, provided that the existence
of such trusts or other arrangements is consistent with the foregoing
sentence.
SECTION 15. CHANGE OF CONTROL PROVISIONS
(a) Upon the occurrence of a Change of Control as defined in this
Section 15 or as otherwise defined in the Award agreement, each Award
shall be subject to such terms, if any, with respect to a Change of
Control as have been provided by the Administrator either in the Award
agreement or, subject to Section 13 above, in writing after the Award
agreement is issued.
(b) Change of Control shall mean the occurrence of any one of the
following events:
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(i) any person (as such term is used in Sections 13(d) and 14(d)
of the Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power
of the Companys then outstanding securities; (ii) during any two (2)
year period, individuals who at the beginning of such period constitute
the Board of Trustees, including for this purpose any new trustee whose
election resulted from a vacancy on the Board of Trustees caused by the
mandatory retirement, death, or disability of a trustee and was approved
by a vote of at least two-thirds (2/3rds) of the trustees then still in
office who were trustees at the beginning of the period, cease for any
reason to constitute a majority thereof; (iii) notwithstanding clauses
(i) or (v) of this Section 15(b), 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; (iv) the sale in one or a series
of transactions of all or substantially all of the assets of the Company;
(v) 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 (vi) 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 Act other than in circumstances specifically covered by
clauses (i) - (v) above.
SECTION 16. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The
Administrator may require each person acquiring Shares pursuant to an
Award to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to distribution thereof.
No Shares shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange or similar requirements
have been satisfied. The Administrator may require the placing of such
stop-orders and restrictive legends on certificates for Shares and Awards
as it deems appropriate.
(b) Delivery of Share Certificates. Share certificates to be
delivered to participants under this Plan shall be deemed delivered for
all purposes (i) when the Company or a Share transfer agent of the
Company shall have mailed such certificates in the United States mail,
addressed to the participant, at the participants last known address on
file with the Company, or (ii) when the Company records the issuance of
Shares in the participants name using the book entry method.
A-15
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such
arrangements may be either generally applicable or applicable only in
specific cases. The adoption of this Plan and the grant of Awards shall
not confer upon any employee any right to continued employment with the
Company or any Subsidiary and shall not interfere in any way with the
right of the Company or any Subsidiary to terminate the employment of
any of its employees at any time.
(d) Trading Policy Restrictions. Option exercises and other Awards
under the Plan shall be subject to such Company insider-trading-policy-
related restrictions, terms and conditions as may be established by the
Administrator, or in accordance with policies set by the Administrator,
from time to time.
SECTION 17. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of Shareholders at which a
quorum is present. Subject to such approval by the Shareholders and to
the requirement that no Share may be issued hereunder prior to such
approval, Share Options and other Awards may be granted hereunder on
and after adoption of this Plan by the Board.
SECTION 18. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be
governed by, and construed in accordance with, the laws of the State
of Maryland, applied without regard to conflict of law principles.
* * * * *
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ELDERTRUST
2711 Centerville Road, Suite 108, Wilmington, DE 19808
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 23, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of ElderTrust hereby appoints John G.
Foos and Michael R. Walker, and each of them, with full power of
substitution, as proxies to cast all votes, as designated below, which
the undersigned shareholder is entitled to cast at the 2003 annual
meeting of shareholders to be held on May 23, 2003 at 10:00 a.m.,
local time, at the Hotel Du Pont, 11th & Markets Streets, Wilmington,
DE 19801, and at any adjournments, upon the following matters:
(Continued and to be signed on reverse side)
THIS PROXY WILL BE VOTED AS DIRECTED BY THE Please
UNDERSIGNED SHAREHOLDER. UNLESS CONTRARY mark here
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED for address
FOR THE ELECTION OF THE NOMINEES LISTED IN change or
PROPOSAL 1, FOR PROPOSAL 2, AGAINST PROPOSAL 3 comments see
AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF reverse side
A MAJORITY OF THE BOARD OF TRUSTEES AS TO
OTHER MATTERS.
1. To elect two trustees each for a
three-year term.
01 D. Lee McCreary, Jr. and
02 Rodman W. Moorhead, III
WITHHOLD
FOR AUTHORITY
nominee to vote for nominee
listed above listed above
INSTRUCTION: To withhold authority
to vote for any individual nominee,
write that nominee's name on the
space provided below.
FOR AGAINST ABSTAIN
2. To approve the 2003 share option and
incentive plan.
3. Shareholder proposal requesting that
the Board of Trustees pursue a sale
of ElderTrust's assets or a merger of
ElderTrust into a large entity. FOR AGAINST ABSTAIN
4. As determined by a majority of
ElderTrustss Board of Trustees, the
proxies are authorized to vote upon
such other business as may properly
come before the meeting or any
adjournments.
The undersigned shareholder hereby acknowledges receipt of the Notice
of Annual Meeting and Proxy Statement and hereby, revokes any proxy
or proxies heretofore given. This proxy may be revoked at any time
prior to its exercise.
If you receive more than one proxy card, please date, sign and
return all cards in the accompanying envelope.
Dated:__________________________, 2003
______________________________________
Signature
______________________________________
Signature if held jointly
Please date and sign here exactly as name
hereon. When signing as attorney,
administrator, trustee or guardian, give
full title as such; and when stock has been
issued in the name of two or more persons,
all should sign.)