<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 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:
___________________________________________________________________________
<PAGE>
ELDERTRUST
101 East State Street
Suite 100
Kennett Square, Pennsylvania 19348
(610) 925-4200
April 19, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 annual meeting of
shareholders of ElderTrust to be held on Thursday, May 20, 1999, at 10 a.m., at
101 East State Street, Kennett Square, Pennsylvania 19348.
The annual meeting has been called for the following purposes:
(1) To elect one trustee for a term of three years;
(2) To approve the 1999 share option and incentive plan; and
(3) To transact such other business as may properly come before
the annual meeting or any adjournments.
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/ Edward B. Romanov, Jr.
--------------------------
Edward B. Romanov, Jr.
President and Chief Executive
Officer
<PAGE>
ELDERTRUST
101 East State Street
Suite 100
Kennett Square, Pennsylvania 19348
(610) 925-4200
------------------
NOTICE TO ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
------------------
NOTICE IS HEREBY GIVEN that the 1999 annual meeting of shareholders of
ElderTrust will be held at 101 East State Street, Kennett Square, Pennsylvania
19348 on Thursday, May 20, 1999 at 10 a.m., for the following purposes:
(1) To elect one trustee for a three-year term and until his
successor is elected and qualified;
(2) To approve the 1999 share option and incentive plan; and
(3) To transact such other business as may properly come before
the meeting or any adjournments.
The board of trustees has fixed April 8, 1999 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.
Senior Vice President, Chief
Financial Officer, Treasurer and
Secretary
Kennett Square, Pennsylvania
April 19, 1999
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.
<PAGE>
ELDERTRUST
101 East State Street
Suite 100
Kennett Square, Pennsylvania 19348
(610) 925-4200
------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS
May 20, 1999
------------------
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 1999 annual meeting of shareholders to be held at 101
East State Street, Kennett Square, Pennsylvania 19348 on Thursday, May 20, 1999
at 10 a.m., and at any adjournments.
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' one nominee as trustee and FOR the proposal to approve the 1999 share
option and incentive plan. 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 shareholder's 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 19, 1999.
The securities which can be voted at the annual meeting consist of
common shares of beneficial interest of ElderTrust, par value $.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 April 8, 1999
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
7,201,100.
<PAGE>
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.
Abstentions and broker non-votes will be treated as shares that are present, in
person or by proxy, and entitled to vote for purposes of determining the
presence of a quorum at the annual meeting. Abstentions and broker non-votes
will not be counted as a vote cast on any matter presented at the annual
meeting.
A copy of the 1998 annual report to shareholders was previously mailed
to you. ElderTrust has filed its annual report on Form 10-K for the year ended
December 31, 1998 with the SEC. Shareholders may obtain, free of charge, a copy
of the ElderTrust 1998 annual report on Form 10-K, without exhibits, by writing
to ElderTrust, 101 East State Street, Suite 100, Kennett Square, Pennsylvania
19348, Attention: Corporate Secretary. ElderTrust will provide copies of the
exhibits to the 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. As of the annual meeting, the board of
trustees of ElderTrust will consist of five 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 one trustee will be
elected for a three-year term. As described below, the board of trustees'
nominee is Kent P. Dauten. The board of trustees recommends that you vote FOR
the board of trustees' nominee for election as trustee.
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 trustee of Mr. Dauten for a three-year term.
The board of trustees believes Mr. Dauten will stand for election and will serve
if elected as trustee. However, if he 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 vote.
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Information as to Nominee and Other Trustees
The following table sets forth certain information regarding the board
of trustees' nominee for election as trustee and those trustees who will
continue to serve as such after the annual meeting.
<TABLE>
<CAPTION>
Age at Position(s) Held
March 31, Trustee For Term with
1999 Since To Expire ElderTrust
---- ----- --------- ----------------
<S> <C> <C> <C>
Nominee:
- --------
Kent P. Dauten.......................... 43 1998 2002 Trustee
Continuing Trustees: Term Expires
- -------------------- ------------
Edward B. Romanov, Jr................... 48 1997 2000 President and Chief
Executive Officer
Rodman W. Moorhead, III................. 55 1998 2000 Trustee
Michael R. Walker....................... 50 1997 2001 Chairman of the Board
Timothy T. Weglicki..................... 47 1998 2001 Trustee
</TABLE>
The principal occupations for the past five years of the nominee for
trustee and the four other trustees whose terms of office will continue after
the annual meeting are set forth below.
Kent P. Dauten, a trustee of ElderTrust since January 1998, has served
as president of Keystone Capital, Inc., a management and consulting advisory
services firm, since March 1994. In February 1995, Mr. Dauten founded and served
as president of HIMSCORP, Inc., a medical records company, and continues to
serve as its president following its merger with Iron Mountain Incorporated in
October 1997. From January 1993 to March 1994, he was senior vice president of
Madison Dearborn Partners, Inc. and from September 1979 to December 1992, he
served in various investment management positions, most recently as senior vice
president of First Chicago Venture Capital. Mr. Dauten currently serves as a
director of Health Management Associates, Inc. of Naples, Florida, a NYSE-listed
health management firm, and Iron Mountain Incorporated, a NASDAQ-listed records
management company. Mr. Dauten formerly was a director of Genesis Health
Ventures, Inc. ("Genesis"). Mr. Dauten holds a master of business administration
from the Harvard Business School and a bachelor of arts in economics from
Dartmouth College.
Edward B. Romanov, Jr. is the president and chief executive officer and
a trustee of ElderTrust. Mr. Romanov served as senior vice president,
development, of Genesis from June 1990 until August 1997. He resigned as an
employee of Genesis upon completion of ElderTrust's initial public offering in
January 1998. From January 1994 until June 1997, Mr. Romanov had responsibility
for merger and acquisition activity by Genesis. During this period, he
successfully negotiated the acquisition of several healthcare companies by
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Genesis with total assets in excess of $500 million. From June 1990 through May
1995, Mr. Romanov was a financial consultant to Genesis, under a consulting and
services agreement between Genesis and American Community Environments
Corporation, of which he was an employee. Before joining Genesis, Mr. Romanov
was founder and president of WesTerra Construction, WesTerra Capital Company and
WesTerra Development, through which Mr. Romanov developed and financed real
estate projects. Mr. Romanov holds both a master of business administration
degree and a bachelor of science degree from Lehigh University.
Rodman W. Moorhead, III, a trustee of ElderTrust since January 1998,
has been employed since 1973 by E.M. Warburg, Pincus & Co., LLC, a specialized
financial services firm in New York, where he currently serves as senior
managing director. He is a director of Coventry Corporation, a multi-market
health maintenance organization, NeXstar Pharmaceuticals, Inc., a novel human
therapy and drug delivery company, Transkaryotic Therapies, Inc., a gene therapy
company, Xomed Surgical Products, a surgical sponge and wound care products
company and several private companies. He is a trustee of The Taft School and a
member of the overseers' committee on university resources, Harvard College. Mr.
Moorhead holds a master of business administration degree from the 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 also serves as the chairman and chief executive officer of Genesis,
positions which he has held since he founded Genesis in 1985. In 1981, Mr.
Walker co-founded Health Group Care Centers. At Health Group Care Centers, he
served as chief financial officer and, later, as president and chief operating
officer. Before its sale in 1985, Health Group Care Centers operated nursing
homes with 4,500 nursing beds in 12 states. From 1978 to 1981, Mr. Walker was
the vice president and treasurer of AID Healthcare Centers, Inc. AID Healthcare
Centers, which owned and operated 20 nursing centers, was co-founded in 1977 by
Mr. Walker as the nursing home division of Hospital Affiliates International.
Mr. Walker holds a master of business administration degree from Temple
University and a bachelor of arts in business administration degree from
Franklin and Marshall College.
Timothy T. Weglicki, a trustee of ElderTrust since January 1998, has
been a general partner of ABS Partners, L.P., a private investment firm, since
December 1993. He is also the managing member of ABS Partners II, LLC and ABS
Partners III, LLC, two private equity funds. Before joining ABS Partners, L.P.,
Mr. Weglicki was a managing director of Alex, Brown & Sons, Inc., where he
established and headed its capital markets group and prior thereto headed the
firm's equity division, corporate finance department and health care investment
banking group. He is director of VitalCom, Inc., a wireless patient monitoring
company, PQC, a physician practice management company, and several privately
held companies. Mr. Weglicki holds a master of business administration degree
from The Wharton Graduate School of Business and a bachelor of arts degree from
The Johns Hopkins University.
Executive Officers Who are Not Trustees
D. Lee McCreary, Jr., age 42, is senior vice president, chief financial
officer and secretary of ElderTrust. From September 1994 until May 1997, Mr.
McCreary was vice
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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 both the
American Institute of Certified Public Accountants and the Maryland Association
of Certified Public Accounts. He holds a bachelor of science degree from the
University of Delaware.
Board Meetings and Committees
During 1998, the board of trustees of ElderTrust held six regular
meetings and one special meetings. For the 1998 period, no trustee attended less
than 75 percent of the (A) total number of meetings held by the board of
trustees and (B) total number of meetings held by all committees of the board of
trustees on which the trustee served. ElderTrust has the following standing
committees of the board of trustees:
Executive Committee. The members of the executive committee are Messrs.
Walker, Romanov and Weglicki. The executive committee may exercise all of the
powers of the board of trustees, except to the extent prohibited by law. The
executive committee held two meetings during 1998.
Audit Committee. The members of the audit committee are Messrs. Dauten
and Moorhead and Mr. Stuart D. Halpert, all of whom are non-employee trustees.
The audit committee has the authority (A) to make recommendations concerning the
engagement of the independent auditor, (B) to review with the independent
auditors the plans and results of the audit engagement, (C) to review the
independence of the independent public accountants, (D) to approve professional
services provided by the independent public accountants, (E) to consider the
range of audit and non-audit fees and (F) to review the adequacy of ElderTrust's
internal accounting controls. The audit committee did not meet during 1998.
Compensation Committee. The members of the compensation committee are
Messrs. Walker, Moorhead and Weglicki, all of whom are non-employee trustees.
The compensation committee has the authority (A) to determine compensation for
ElderTrust's executive officers and (B) to review and make recommendations
concerning proposals by management with respect to compensation, bonuses,
employment agreements and other benefits and policies for ElderTrust's executive
officers. The compensation committee held one meeting during 1998.
Share Option Committee. The members of the share option committee are
Messrs. Moorhead and Weglicki, each of whom are non-employee trustees. The share
option committee has the authority to take all actions and make all
determinations, including the grant of options, distribution equivalent rights
and share awards, under ElderTrust's share option and incentive plans. The share
option committee held one meeting during 1998.
5
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Nominations by Shareholders
The entire board of trustees acts as a nominating committee for
selecting management's 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 earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting. However,
if the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date or if ElderTrust has not previously
held an annual meeting, 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
shareholder's notice of nomination must set forth certain information specified
in ElderTrust's bylaws concerning each person the shareholder proposes to
nominate for election and the nominating shareholder. Public notice of the date
of the annual meeting was made on March 10, 1999 by the issuance of a press
release on that date and the filing of a current report on Form 8-K with the
SEC. Shareholder nominations for the annual meeting were required to be received
on or before March 22, 1999. No such nominations were received. ElderTrust's
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 Directors
ElderTrust reimburses the trustees for travel expenses incurred in
connection with attending meetings of the board of trustees and committee
meetings. Instead of trustees' fees, each of the non-employee trustees, other
than Mr. Walker, received a share bonus award of 2,500 common shares in 1998.
Each of the non-employee trustees, other than Mr. Walker, also received a
ten-year share option grant of 7,500 common shares. The option exercise prices
of the options granted to Messrs. Dauten, Moorhead and Weglicki equaled the
$18.00 initial public offering price of ElderTrust common shares. The option
exercise price of the option granted to Mr. Halpert, who joined the board of
trustees in April 1998, was $17.75, which equaled the fair market value of the
common shares on the date of grant. In connection with the initial public
offering, Mr. Walker was granted an option for 150,000 common shares at a per
share exercise price equal to the initial public offering price. All options
granted to the non-employee trustees vest over three years.
The vesting of options granted to non-employee trustees will accelerate
upon a change in control of ElderTrust. For this purpose, a change in control of
ElderTrust includes (A) a person becoming the beneficial owner of 50% or more of
the voting power of the outstanding securities of ElderTrust, (B) a change in a
majority of the board of trustees during any two-year period other than
resulting from mandatory retirement, death or disability of one or more
trustees, (C) a merger or consolidation of ElderTrust if shareholders of
ElderTrust own less than 80% of the equity of the surviving entity or its
parent, (D) the sale of all or substantially all of the assets of ElderTrust,
(E) any person
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commences a tender offer to acquire beneficial ownership of 50% or more of the
outstanding voting shares of ElderTrust unless the board of trustees determines
that such action does not constitute a change in control or (F) there is a
change of control of ElderTrust of a type required to be disclosed under the
federal proxy rules.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Other Compensation
The following table sets forth the cash and other compensation paid by
ElderTrust for 1998 to each of ElderTrust's executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation/Awards
---------------------- -------------------
Underlying Common All Other
Name and Principal Position(s) Share Compensation
Year Salary ($) Options (#) ($)
- ------------------------------- -------- ---------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Edward B. Romanov, Jr. 1998 $248,800 300,000(1) $ 37,600(2)
President and Chief 1997 164,000(3) - 2,137,500(4)
Executive Officer
D. Lee McCreary, Jr. 1998 $125,400 50,000(1) $ 27,500 (2)
Senior Vice President, 1997 70,000(3) - 216,000 (4)
Chief Financial
Officer, Treasurer and
Secretary
</TABLE>
- --------------
(1) Of the options granted to Mr. Romanov, options for 150,000 shares vested
immediately and options for the remaining 150,000 shares vest over three
years. The options granted to Mr. McCreary vest over five years. The
vesting of these options will accelerate upon any change in control of
ElderTrust, as described under "Compensation of Directors."
(2) Represents the amount of distributions and accrued earnings credited to the
executive officer's account for distribution equivalent rights awarded to
the executive officer in 1998. Mr. Romanov has distribution equivalent
rights for 37,500 common shares and Mr. McCreary has distribution
equivalent rights for 30,000 common shares.
(3) Represents the portion of the executive officer's salary allocable to
ElderTrust that was paid by Genesis in 1997. ElderTrust reimbursed Genesis
for these amounts using a portion of the net proceeds from ElderTrust's
initial public offering.
(4) Represents 118,750 and 12,000 units of limited partnership interest in
ElderTrust Operating Limited Partnership, through which ElderTrust conducts
all of its business (the "Operating Partnership"), issued to Messrs.
Romanov and McCreary, respectively, in July 1997 in connection with the
formation of the Operating Partnership. For purposes of the table, the
units are valued at the $18.00 per share initial public offering price of
ElderTrust common shares.
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Option Grants
The following table contains information with respect to share options
granted in 1998 to each of ElderTrust's executive officers. All options granted
to executive officers in 1998 were ten-year non-qualified options.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
% of Value at Assumed
Common Total Options Annual Rates of Share
Shares Granted to Exercise Price Appreciation for
Underlying Employees in or Base Option Term
Options Fiscal Price Expiration -------------------------
Name Granted Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Romanov, Jr. 300,000 84.2% $18.00 1/30/08 $3,396,000 $8,606,000
D. Lee McCreary, Jr. 25,000 7.0 18.00 1/30/08 283,000 717,000
25,000 7.0 15.125 7/17/08 238,000 603,000
</TABLE>
Option Exercises and Holdings
The following table sets forth information concerning the number of
securities underlying unexercised options at the 1998 year-end and the 1998
year-end value of all unexercised in-the-money options held by ElderTrust's
executive officers. No executive officer exercised any options in 1998.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Common Shares
Underlying Value of Unexercised
Unexercised Options(#) In-the-Money Options($)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward B. Romanov, Jr. 200,000 100,000 $ - $ -
D. Lee McCreary, Jr. 5,000 45,000 - -
</TABLE>
Employment Agreement
ElderTrust has entered into an employment agreement with Edward B.
Romanov, Jr. dated January 30, 1998. The employment agreement provides that Mr.
Romanov will serve as ElderTrust's president and chief executive officer. The
initial term of Mr. Romanov's employment agreement is three years. Thereafter,
the term of his employment agreement will be automatically renewed for
successive two year terms, unless otherwise terminated. Mr. Romanov's annual
base salary is $250,000, subject to increase by the board of trustees. Mr.
Romanov also is entitled to receive annual bonuses as determined by the board of
trustees.
Mr. Romanov's employment may be terminated by ElderTrust (a) at any
time for cause by a two-thirds vote of the entire board of trustees or (b) upon
30 days' notice without
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cause by a majority vote of the entire board of trustees. Mr. Romanov may
terminate his employment on 30 days' notice if ElderTrust terminates the
automatic extension of the term of his employment agreement, if ElderTrust
significantly changes his duties or reduces his responsibilities or authority or
if ElderTrust transfers him to a location that involves a commuting distance of
more than 10 miles greater than his commute as of January 30, 1998. If
ElderTrust terminates Mr. Romanov's employment without cause, or Mr. Romanov
terminates his employment agreement as described in the preceding sentence, Mr.
Romanov would be entitled to a severance payment equal to two times his then
current annual base salary and bonus, plus 60% of his dividend equivalent
account, if his employment is terminated during the first three years and 100%
thereafter. The unvested portion of the 300,000 share options granted to him in
January 1998 also would vest.
If Mr. Romanov becomes disabled, he would continue to receive all of
his compensation and benefits for six months, less any amounts received under
any disability insurance provided by ElderTrust. If the disability continues for
six months and for periods aggregating nine months in any 24-month period,
ElderTrust may terminate Mr. Romanov's employment upon payment of any unpaid
portion of his salary, bonus and benefits up to the date of termination and the
continuation of any benefits to which he is entitled in accordance with the
applicable benefit plan. Upon Mr. Romanov's death, his heirs would be entitled
to receive the unpaid portion of his salary, bonus and accrued benefits through
the date of his death, the 300,000 share options granted to him in January 1998
would vest and, if his death occurred before the third anniversary of his
employment agreement, his heirs would be entitled to receive 60% of his
distribution equivalent account or 100% of such account if his death occurred
after three years.
Mr. Romanov's employment agreement also contains provisions which are
intended to limit him from competing with ElderTrust during the term of his
employment agreement and for a period of two years thereafter. In particular,
Mr. Romanov may not establish, engage, own, manage, operate, join or control, or
participate in the establishment, ownership, other than as the owner of less
than 1% of the stock of a corporation whose shares are publicly traded,
management, operation or control of, or be a director, trustee, officer,
employee, salesman, agent or representative of, or be a consultant to, any
person or entity in any business in competition with ElderTrust, at any location
within 100 miles of any office or facility owned, leased or operated by
ElderTrust.
Compensation Committee Interlocks and Insider Participation
The compensation committee is composed entirely of non-employee
trustees. During 1998, Messrs. Walker, Moorhead and Weglicki served on the
compensation committee. In addition to serving as the chairman of the board of
trustees of ElderTrust, Mr. Walker serves as chairman of the board and chief
executive officer of Genesis, ElderTrust's principal tenant.
Formation Transactions between ElderTrust and Genesis
Upon consummation of its initial public offering on January 30, 1998,
ElderTrust, through the Operating Partnership, paid approximately $80.7 million
in cash and assumed
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$31.4 million of indebtedness for thirteen properties or interests therein
acquired directly from wholly-owned subsidiaries of Genesis. Three of these
properties were acquired by Genesis on January 1, 1998 and were purchased by the
Operating Partnership at the same price paid by Genesis. During March 1998, the
Operating Partnership also acquired an additional property from a subsidiary of
Genesis for approximately $3.0 million in cash and the assumption of $2.7
million in indebtedness.
Eight of the initial properties were leased back to consolidated
subsidiaries of Genesis under percentage and minimum rent leases, each for an
initial ten-year period with two five-year renewals. Three of the initial
properties were leased under minimum rent leases for an initial twelve-year
period to a joint venture in which Genesis has a 50% interest. The remaining
three properties were leased to unrelated third parties under fixed rent leases.
Genesis subsidiaries also lease space under fixed rent leases in three medical
and other office buildings, as well as one additional assisted living facility,
that were acquired by the Operating Partnership in January 1998 from unrelated
third parties. The term of office leases are for up to five years, subject to
renewal. The assisted living facility is leased under a minimum rent lease with
an initial term of ten years, with two five-year renewals.
Aggregate lease payments under leases with Genesis or Genesis related
entities were $10.9 million in 1998. The Operating Partnership also received
$2.9 million for the first month's rent, security deposits and closing costs in
connection with these leased properties. As a result of the assumption of
indebtedness by the Operating Partnership on two of the properties acquired from
Genesis, Genesis was released from guarantees totaling approximately $3.2
million.
Genesis has guaranteed the leases for ten properties which are leased
by wholly-owned subsidiaries of Genesis. In the event Genesis assigns one or
more of the leases to a non-wholly owned subsidiary or a third party, Genesis
will no longer guarantee the applicable lease. Any assignment would require the
consent of ElderTrust which may not be unreasonably withheld.
Upon consummation of ElderTrust's initial public offering, the
Operating Partnership also made payments to or purchased from subsidiaries of
Genesis their ownership interests in two term loans, two construction loans and
a first mortgage loan aggregating $9.7 million, $3.5 million and $800,000,
respectively. The term and construction loans have maturities of between two and
three years, subject to extension by the borrower for up to three successive
one-year terms, with a weighted average interest rate of 9.4%. The first
mortgage loan, which was not with Genesis, had an interest rate of 10.25% and
was repaid in December 1998. In 1998, the Operating Partnership recorded
interest income on term and construction loans of $935,000 from consolidated
subsidiaries of Genesis.
Additionally, upon consummation of ElderTrust's initial public offering
in January 1998 or shortly thereafter, the Operating Partnership paid
approximately $20.7 million in cash for three term loans and one construction
loan to entities in which Genesis has an ownership interest ranging from 44% to
49%. These loans have maturities of between two and three years, subject to
extension by the borrower for up to two to three successive one-
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year terms, with a weighted average interest rate of 10.3%. The Operating
Partnership recorded interest income on these loans of $2.2 million in 1998.
The Operating Partnership has agreed to purchase the facilities
underlying seven term and construction loans where Genesis or Genesis related
entities are the borrowers, upon the earlier of the maturity of the loan or at
such time as each applicable facility reaches average monthly occupancy of at
least 90% for three consecutive months. The purchase price for these facilities
is based upon each facility's net operating income at the acquisition date and a
formula agreed to on the original transaction commencement date.
Upon consummation of ElderTrust's initial public offering, the
Operating Partnership made construction loan commitments totaling $37.3 million
to Genesis or Genesis related entities. These construction loan commitments
expired during 1998.
As part of the formation transactions, ET Capital Corp. ("ET Capital"),
a noncontrolled subsidiary of the Operating Partnership, acquired from Genesis a
$7.5 million second mortgage note at par with AGE Institute of Florida. The
second mortgage note bears interest at 13% annually. The original maturity date
of this mortgage note was extended from November 1, 2007 to September 30, 2008
in connection with a subsequent $300,000 second mortgage note transaction. In
connection with the initial mortgage note transaction, Genesis also granted ET
Capital an option to purchase a separate $2.5 million working capital note at
par. This option subsequently was canceled in connection with a refinancing
transaction entered into by AGE Institute of Florida whereby the $45 million of
senior indebtedness owed to Genesis by the borrower was refinanced. As part of
the refinancing transaction, ET Capital entered into a $300,000 second mortgage
note with AGE Institute of Florida. In connection therewith, the two second
mortgage notes were restated and combined into one second mortgage note maturing
September 30, 2008, with payments of interest only at a fixed annual rate of 13%
due quarterly until the note is paid in full. Mr. Romanov owns all of the
outstanding voting stock of ET Capital, representing a 5% equity interest. The
Operating Partnership owns all of the non-voting stock of ET Capital,
representing a 95% equity interest. Messrs. Romanov, Walker and McCreary serve
as the directors of ET Capital. Mr. Romanov is president of ET Capital and Mr.
McCreary is vice president, secretary and treasurer of ET Capital.
The Operating Partnership paid Genesis approximately $3.0 million in
cash as reimbursement for expenses incurred by Genesis on behalf of ElderTrust
in connection with its formation. This amount included start-up and initial
public offering expenses.
In January 1998, ElderTrust and Genesis entered into a three year
agreement, subject to annual renewals thereafter, which provides Genesis with a
right of first refusal to lease or manage any assisted living, independent
living or skilled nursing facility financed or acquired by ElderTrust within
Genesis' markets unless the facility will be leased or managed by the seller or
an affiliate of the seller. The agreement also provides ElderTrust with the
following:
o a right of first refusal to purchase and leaseback any assisted
living, independent living or skilled nursing facilities which
Genesis determines to sell
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and leaseback as part of a sale/leaseback transaction or
transactions, excluding sale/leaseback transactions with commercial
banking institutions;
o a right to offer financing to Genesis and other developers of
assisted and independent living facilities which, once developed,
will be operated by Genesis; and
o a right to offer financing to Genesis with respect to any new
off-balance sheet financing of skilled nursing facilities currently
owned by Genesis.
ElderTrust believes that its agreement with Genesis will provide it with
opportunities to acquire and finance the development of additional assisted
living, independent living and skilled nursing facilities within the Genesis
ElderCare(TM) Networks.
Formation Transactions between ElderTrust and Mr. Walker
In connection with ElderTrust's initial public offering, Mr. Walker
received cash distributions totaling approximately $385,000 from entities in
which he held an interest which sold three of the initial properties to the
Operating Partnership. Mr. Walker also received a direct or indirect interest in
88,110 units of the Operating Partnership in exchange for his ownership
interests in five of the initial properties acquired by the Operating
Partnership. These units, together with Mr. Walker's interest in the units
distributed to MGI Limited Partnership, one of the organizational partners of
the Operating Partnership, had a total value of approximately $2.2 million based
on the $18.00 per share public offering price of ElderTrust common shares. The
total purchase price paid for the five properties in which Mr. Walker had an
interest included approximately $1.8 million in cash, $3.4 million in units of
the Operating Partnership based on the $18.00 per share public offering price of
ElderTrust common shares, and assumption of $19.6 million in indebtedness.
Additionally, the aggregate purchase price for three of these properties
included $1.9 million in cash paid directly to Mr. Walker by the Operating
Partnership as repayment of indebtedness owed by these entities to Mr.
Walker.
A total of 112,500 units of limited partnership interest in the
Operating Partnership held by Mr. Walker were exchanged for ElderTrust common
shares on a one-for-one basis at the closing of its initial public offering. The
112,500 units were issued to Mr. Walker as part of the recapitalization of the
Operating Partnership in respect of an organizational limited partner interest
in the Operating Partnership which he had purchased from Genesis.
Commencing in March 1999, Mr. Walker has registration rights with
respect to the common shares acquired by him at the time of ElderTrust's initial
public offering, as well as with respect to any common shares acquired by him
upon any redemption of units held by him.
The purchase prices for properties and other assets acquired from
Genesis and Mr. Walker, as well as the terms of the leases and term and
construction loans entered into by the Operating Partnership, were determined by
Genesis, Mr. Walker and Mr. Romanov. The purchase prices for properties were
determined primarily based on an evaluation of
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the current and anticipated cash flows and operating results of the facilities.
To determine the purchase price for each of the properties, the anticipated
annual cash flow for each facility less ongoing capital expenditures and a
management fee was divided by an agreed upon capitalization rate. Rental rates
under minimum rent leases and the interest rates on term and construction loans
were based upon an agreed upon yield. Rental rates under percentage rent leases
were determined on a comparable basis, adjusted for the risk associated with the
fact that there are no minimum rent provisions in those leases. No independent
valuations or appraisals of the initial properties or the other assets acquired
by ElderTrust in the formation transactions were obtained.
Other Transactions between ElderTrust and Genesis
ET Sub-Meridian Transaction
During September 1998, ElderTrust, through the Operating Partnership,
acquired a 99% limited partnership interest in ET Sub-Meridian Limited
Partnership, L.L.P. ("ET Sub-Meridian"). The Operating Partnership made a $2.0
million capital contribution in ET Sub-Meridian in exchange for its 99% limited
partnership interest. The 1% general partnership interest is owned by a limited
liability company of which Mr. Romanov is the sole member. ET Sub-Meridian
acquired the leasehold and purchase option rights to seven skilled nursing
facilities located in Maryland and New Jersey from a wholly-owned subsidiary of
Genesis for $35.5 million in cash and $8.5 million in the form of a five-year
promissory note for these rights. ElderTrust guaranteed the $8.5 million
promissory note of ET Sub-Meridian payable to the Genesis subsidiary that leases
the facilities. The purchase options are exercisable by ET Sub-Meridian in
September 2008 for a cash exercise price of $66.5 million. The Operating
Partnership made an $18.5 million subordinated demand loan bearing interest at
12% to ET Sub-Meridian in connection with this transaction. ET Sub-Meridian
subleased the facilities to the Genesis subsidiary for an initial ten-year
period with a ten-year renewal exercisable by that entity. Genesis has
guaranteed the subleases.
As part of the transaction, the Operating Partnership agreed to
indemnify the property owners for any loss of deferral of tax benefits prior to
August 31, 2008 due to a default under a sublease or if a cure to a default by
the Genesis subsidiary leasing the facilities resulted in a taxable event to the
owners. The Operating Partnership also agreed to indemnify Genesis against any
amounts expended by Genesis under a back-up indemnity provided by Genesis to the
current owners against any such loss of deferral to tax benefits or default
resulting in a taxable event to the owners.
The terms of this transaction were determined through negotiations
between ElderTrust, Genesis and the owners of the assisted living facilities.
National Development of New England Transaction
During December 1998, ElderTrust, through the Operating Partnership,
acquired interests in three assisted living facilities and one independent
living facility from an unrelated third party through four newly-created limited
liability companies. The Operating Partnership is the sole member of one of the
limited liability companies. In each
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of the remaining three limited liability companies, the Operating Partnership,
has a 99% member interest and a limited liability company of which Mr. Romanov
is the sole member has a 1% managing member interest. An unconsolidated entity
in which Genesis has a 99% ownership interest leases each of the facilities. As
part of this transaction, the Operating Partnership assigned its right to
acquire a fifth facility to this Genesis related entity and advanced Genesis
$300,000 to pay a management termination fee due to the prior manager of the
facilities. The advance does not bear interest and matures on June 30, 1999.
The terms of this transaction were determined based on negotiations
between ElderTrust, Genesis and the sellers.
Other
During 1998, the Operating Partnership incurred approximately $730,000
of expenses in connection with property due diligence for a proposed $250
million real estate mortgage investment conduit transaction that was to be
secured by skilled nursing facilities owned by Genesis. The Operating
Partnership was not able to complete the transaction because of adverse
conditions in the capital markets. Genesis reimbursed the Operating Partnership
for $165,000 of these expenses through December 31, 1998.
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Performance Graph
The following graph compares the cumulative total shareholder return on
ElderTrust's common shares since January 27, 1998, the date ElderTrust's common
shares began trading on the New York Stock Exchange, with the cumulative total
shareholder return from January 27, 1998 through December 31, 1998 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's common shares and in each of the indices and assumes reinvestment
of distributions.
- -------------
GRAPH OMITTED
- -------------
NAREIT NAREIT
Equity REIT Index Health Care
(all REITs) Equity REIT Index ElderTrust
----------------- ----------------- ----------
January 27, 1998 $100 $100 $100
December 31, 1998 85 83 69
Report on Executive Compensation
The compensation committee of the board of trustees is comprised of
Messrs. Walker, Moorhead and Weglicki, none of whom was an officer or employee
of ElderTrust during the fiscal year. The compensation committee makes
compensation decisions for ElderTrust's executive officers. The share option
committee is comprised of Messrs. Moorhead and Weglicki. The share option
committee administers the 1998 share option and incentive plan.
ElderTrust's compensation policies and practices with respect to
executive officers are designed and implemented to motivate and retain senior
executives. Total
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compensation is currently divided into two primary components: base salary and
share options and distribution equivalent rights.
ElderTrust uses the 1998 share option and incentive plan as a long-term
incentive plan for executive officers and key employees. The objectives of the
1998 share option and incentive plan 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 significant long-term equity interest in ElderTrust.
Mr. Romanov entered into an employment agreement with ElderTrust at the
time of completion of its initial public offering. Under his employment
agreement, he serves as president and chief executive officer of ElderTrust. His
base salary for 1998 was $250,000 and he was granted options for 300,000 common
shares and distribution equivalent rights for 37,500 shares upon completion of
the initial public offering. The per share option exercise price of the options
granted to Mr. Romanov was the initial public offering price of $18.00 per
share. Mr. Romanov's base salary for 1998 and initial share option and
distribution equivalent right awards were determined before ElderTrust's initial
public offering and before the formation of the compensation and share option
committees. Accordingly, neither the compensation committee nor the share option
committee took any action with respect to these determinations.
Similarly, Mr. McCreary's base salary for 1998 of $120,000 and initial
grant of options for 25,000 shares and initial distribution equivalent right
award for 20,000 shares were determined before ElderTrust's initial public
offering and before the formation of the compensation and share option
committees. Accordingly, neither the compensation committee nor the share option
committee took any action with respect to these determinations. In July 1998,
Mr. McCreary's base salary was increased to $130,000 per year, effective June 2,
1998, and he was granted an additional option for 25,000 common shares and was
awarded distribution equivalent rights for an additional 10,000 common shares.
The per share option exercise price of the option equaled the fair market value
of ElderTrust common shares on the date of grant. The option and distribution
equivalent rights were approved by the share option committee, based on the
recommendation of Mr. Romanov.
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. The compensation committee
intends to evaluate to what extent Section 162(m) applies to its compensation
decisions.
Respectfully submitted,
Compensation Committee Share Option Committee
Michael R. Walker Rodman W. Moorhead, III
Rodman W. Moorhead, III Timothy T. Weglicki
Timothy T. Weglicki
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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
ElderTrust's outstanding equity securities to file with the SEC initial reports
of ownership of ElderTrust's equity securities and to file subsequent reports
when there are changes in such ownership. Based on a review of reports submitted
to ElderTrust for 1998, ElderTrust believes that all Section 16(a) filing
requirements for that year applicable to such persons were complied with on a
timely basis, except that Mr. Walker was late filing one Form 4 to report three
purchases of stock and Mr. Romanov was late filing two Form 4s to report three
purchases of stock.
Certain Relationships and Related Transactions
In January 1998, ElderTrust issued and sold to Mr. Romanov 200,000
common shares in a private placement at $18.00 per share, which equaled the
initial public offering price of ElderTrust common shares. Mr. Romanov paid for
such shares with a 10-year recourse promissory note, with interest only payable
until maturity at an annual rate of 7%.
Mr. Romanov owns all of the outstanding voting stock of ET Capital,
representing a 5% equity interest. The Operating Partnership owns all of the
non-voting stock of ET Capital, representing a 95% equity interest. Messrs.
Romanov, Walker and McCreary serve as the directors of ET Capital. Mr. Romanov
is president of ET Capital and Mr. McCreary is vice president, secretary and
treasurer of ET Capital. During 1998, the Operating Partnership made equity
contributions and advances to ET Capital totaling $2.7 million and $9.7 million,
respectively. The advances are payable on demand and bear interest at a weighted
average interest rate of 12%. Mr. Romanov acquired his interest in ET Capital
for $141,000. The Operating Partnership has the right to purchase Mr. Romanov's
interest in ET Capital at its fair market value upon any termination of his
employment as an officer of ElderTrust.
Mr. Romanov, through a limited liability company of which he is the
sole member, owns a 1% general partner interest in ET Sub-Meridian. He also
indirectly owns the 1% managing member interests in three of the limited
liability companies formed to acquire properties from National Development of
New England, an unrelated third party. Mr. Romanov contributed $28,600 in the
aggregate for his interests in these four companies. The Operating Partnership
has an option to acquire Mr. Romanov's interest in one of the limited liability
companies for an exercise price of $3,200, which expires November 30, 1999. The
Operating Partnership also has the right to acquire Mr. Romanov's interests in
these entities at fair market value upon any termination of his employment as an
officer of ElderTrust.
A total of 112,500 units of limited partnership interest in the
Operating Partnership held by Mr. Romanov were exchanged for ElderTrust common
shares on a one-for-one basis at the closing of its initial public offering. The
112,500 units were issued to Mr. Romanov as part of the recapitalization of the
Operating Partnership in respect of an organizational
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limited partner interest in the Operating Partnership which he had purchased
from Genesis.
Commencing in March 1999, Mr. Romanov has registration rights with
respect to the common shares acquired by him at the time of ElderTrust's initial
public offering, as well as with respect to any common shares acquired by him
upon any redemption of units held by him.
Mr. Dauten received an indirect interest in 18,924 units of limited
partnership interest in the Operating Partnership for his ownership interest in
certain of the initial properties acquired by the Operating Partnership at the
time of completion of ElderTrust's initial public offering.
For a description of other transactions involving ElderTrust and its
trustees, see "Compensation Committee Interlocks and Insider Participation."
APPROVAL OF
1999 SHARE OPTION AND INCENTIVE PLAN
(Proposal 2)
On April 15, 1999, the board of trustees approved the 1999 share option
and incentive plan, subject to approval of the plan by shareholders at the
annual meeting. A total of 350,000 common shares are reserved for issuance under
the plan, representing 4.9% of the currently outstanding common shares. All
trustees, officers and employees of ElderTrust and its subsidiaries (13 persons)
are eligible to participate in the 1999 share option and incentive plan.
The principal provisions of the 1999 share option and incentive plan
are summarized below. This summary is not complete and is qualified in its
entirety by the terms of the 1999 share option and incentive plan, a copy of
which is attached to this proxy statement as Exhibit A.
Description of 1999 Share Option and Incentive Plan
Share Options. The 1999 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 share option 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 in the case of Incentive Options, and may
not be less than par value in the case of Non-Qualified Options.
The term of each option will be fixed by the share option committee and
may not exceed ten years from the date of grant in the case of an Incentive
Option. The share option committee will determine at what time or times each
option may be exercised and, subject to the provisions of the 1999 share option
and incentive plan, the period of time, if any, after retirement, death,
disability or termination of employment during which options
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may be exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the share option 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 share option committee or, if the share option 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.
At the discretion of the share option committee, options granted under
the 1999 share option and incentive plan may include a "re-load" feature
pursuant to which a plan participant exercising an option by the delivery of
common shares would automatically be granted an additional option (with an
exercise price equal to the fair market value of the common shares on the date
the additional option is granted) to purchase that number of common shares equal
to the number delivered to exercise the original option.
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 1999 share option and incentive plan, options
for no more than 250,000 common shares may be granted to any individual during
any one calendar year.
Restricted Shares. The share option committee may also award common
shares to participants, subject to such conditions and restrictions as the share
option 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 share option committee.
Deferred Common Shares. The share option 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 share option 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 share option committee,
the deferred common share units may be credited with distribution equivalent
rights.
Unrestricted Common Shares. The share option committee may also grant
shares (at no cost or for a purchase price determined by the share option
committee) which are free from any restrictions under the 1999 share option and
incentive plan. Unrestricted
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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.
Performance Share Awards. The share option 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 share option committee shall determine.
Distribution Equivalent Rights. The share option 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 1999 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 Dividends, Mergers and Similar Events. The share
option 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 and outstanding
awards to reflect common share dividends, splits and similar events. In the
event of a merger, liquidation, sale of ElderTrust or similar event, the share
option 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 share option 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 1999 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 1999 share option and incentive plan and the share option
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 holder's consent.
Federal Income Tax Consequences of the 1999 Share Option and Incentive
Plan
The grant of an option will not be a taxable event for the plan
participant or ElderTrust.
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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"). 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.
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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 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 participant's
basis in the additional shares will be equal to the amount included in the plan
participant's 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 participant's 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
22
<PAGE>
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.
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 participant's 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 1999 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 participant's 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 1999 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.
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<PAGE>
Upon a plan participant's 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.
Reasons for Obtaining Shareholder Approval
The board of trustees has adopted the 1999 share option and incentive
plan, subject to shareholder approval of the plan at the annual meeting.
ElderTrust is submitting the 1999 share option and incentive plan for
shareholder approval at the annual meeting because shareholder approval is
required to (a) qualify the 1999 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 1999 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
24
<PAGE>
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 $9.38 per common share on April 15, 1999,
the aggregate market value of the 350,000 common shares reserved for issuance
under the 1999 share option and incentive plan is $3.3 million. In addition to
the 1999 share option and incentive plan, ElderTrust maintains the 1998 share
option and incentive plan. Under that plan, the maximum number of shares
available for issuance is 9.9% of the total number of common shares and units of
limited partnership interest of the Operating Partnership (other than units
owned by ElderTrust) outstanding from time to time (currently, 779,340 common
shares). To date, ElderTrust has granted share options of 536,500 and made share
awards of 10,000 for a total of 546,500 shares under the 1998 share option and
incentive plan. Consequently, 232,840 common shares remain available for grant
under the 1998 share option and incentive plan.
Required Vote
The affirmative vote, either in person or by proxy, of a majority of
the common shares cast on the proposal is required to approve the 1999 share
option and incentive plan; provided that the total vote cast on the proposal
represents over 50% in interest of all common shares entitled to vote on the
proposal. The board of trustees believes that the 1999 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 1999 share option and
incentive plan.
INDEPENDENT PUBLIC ACCOUNTANTS
The board of trustees has appointed KPMG LLP to act as the Company's
independent public accountants for 1999. 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.
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 Operating
Partnership presented for redemption and upon exercise of options exercisable
within 60 days, for (A) each trustee and executive officer of ElderTrust, (B)
each person believed by management to beneficially own more than five percent of
the outstanding common shares and (C) trustees and executive officers of
ElderTrust as a group. The information is as of February 28, 1999.
25
<PAGE>
Except as indicated below, the indicated person or entity has sole voting and
investment power.
<TABLE>
<CAPTION>
Units of
Limited
Partnership Percent
Number of of the Common of All
Common Operating Share Common
Name of Beneficial Owner Shares Partnership Options Total Shares
------------------------ --------- -------------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Kent P. Dauten (1) 102,500 - 2,500 105,000 1.5%
Stuart D. Halpert (1)(2) 5,500 - 2,500 8,000 *
Rodman W. Moorhead, III (1) 27,500 - 2,500 30,000 *
Edward B. Romanov, Jr. (1) 370,600 118,750 200,000 689,350 9.2
Michael R. Walker (1) 150,500 318,975 50,000 519,475 6.9
Timothy T. Weglicki (1) 7,500 - 2,500 10,000 *
D. Lee McCreary, Jr. (1) 28,458 12,000 5,000 45,458 *
All trustees and executive
officers as a group (7 persons) 692,558 449,725 265,000 1,407,283 17.8
Neuberger Berman, LLC and
Neuberger Berman
Management, Inc. (3) 432,625 - - 432,625 6.0
</TABLE>
- -------------------------
* Less than one percent
(1) Address c/o ElderTrust, 101 East State Street, Suite 100, Kennett Square,
Pennsylvania 19348.
(2) Mr. Halpert's term of office as trustee expires at ElderTrust's 1999 annual
meeting of shareholders.
(3) The Schedule 13G dated February 10, 1999 of the reporting persons states
that the reporting persons have sole power to vote 74,375 shares, shared
power to vote 335,000 shares and shared power to dispose of 432,075 shares.
The address of the reporting persons is 605 Third Avenue, New York,
New York 10158.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2000 annual
meeting must be received by ElderTrust no later than December 21, 1999 pursuant
to the proxy soliciting rules of the SEC in order to be considered for inclusion
in ElderTrust's proxy statement and form of proxy relating to the 2000 annual
meeting. Nothing in this paragraph shall be deemed to require ElderTrust to
include in its proxy statement and proxy relating to the 2000 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 ElderTrust's bylaws, any shareholder who intends to present
a proposal for action at the 2000 annual meeting also must delivered notice to
the principal executive offices of ElderTrust not later than the close of
business on February 17, 2000 nor earlier than the close of business on January
17, 2000; however, if the date of the 2000 annual meeting is advanced by more
than 30 days or delayed by more than 60 days from May 20, 2000, notice by the
shareholder to be timely must be delivered not earlier than the close of
business on the 90th day prior to the 2000 annual meeting and not later than the
26
<PAGE>
close of business on the later of the 60th day prior to the 2000 annual meeting
or the tenth day following the day on which public announcement of the date of
the 2000 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.
By Order of the Board of Trustees
/s/ D. Lee McCreary, Jr.
-------------------------------------
D. Lee McCreary, Jr.
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Kennett Square, Pennsylvania
April 19, 1999
27
<PAGE>
Exhibit A
---------
ELDERTRUST
1999 SHARE OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the ElderTrust 1999 Share Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Non-Employee Trustees and other key persons of
ElderTrust (the "Company"), and the employees and other key persons of
ElderTrust Operating Limited Partnership (the "Operating Partnership") and the
Company's 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 Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's 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.
"Distribution Equivalent Right" means Awards granted pursuant
to Section 10.
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"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.
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
A-2
<PAGE>
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 who, in the sole discretion of
the Board, may be the same trustees who serve on the Compensation Committee, or
may appoint the Compensation Committee to serve as the Committee. The Board, in
its sole discretion, may provide that the role of the Committee shall be limited
to making recommendations to the Board concerning any determinations to be made
and actions to be taken by the Board pursuant to or with respect to the Plan, or
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;
(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
A-3
<PAGE>
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 Administrator's 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 350,000 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 up to such maximum number pursuant to any type
or types of Award; provided, however, that, Shares Options with respect to no
more than 250,000 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.
(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
A-4
<PAGE>
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 and key persons of the
Company, the Operating Partnership and the Company's other Subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
Company, the Operating Partnership and the Company's other Subsidiaries as are
selected from time to time by the Administrator in its sole discretion.
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.
A-5
<PAGE>
No Incentive Share Option shall be granted under the Plan
after April 15, 2009.
(a) Share Options Granted to Employees and Key Persons and
Non-Employee Trustees. The Administrator in its discretion may grant Share
Options to eligible employees and key persons 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
participant's 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 in the case of
Incentive Share Options, or par value in the case of
Non-Qualified Share Options. 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 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-6
<PAGE>
(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; 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.
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.
(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) Reload Options. At the discretion of the Administrator and
subject to such restrictions, terms and conditions as the Administrator may
establish, Options granted under the Plan may include a "reload" feature
pursuant to which a participant exercising a Share Option by the delivery of a
number of Shares in accordance with Section 5(a)(iv)(B) hereof would
automatically be granted an additional Share Option (with an exercise price
equal to the Fair Market Value of the Shares on the date the additional Share
Option is granted and with such other terms as the Administrator may provide) to
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purchase that number of Shares equal to the number delivered to exercise the
original Share Option with an Option term equal to the remainder of the original
Option term unless the Administrator otherwise determines in the Option Award
agreement for the original grant.
(c) 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 participant's 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.
(d) 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 participant's rights in all Share
Options shall automatically terminate upon the participant's 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.
(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
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herein or in the Restricted Share Award agreement. If a participant's 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 participant's 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 Company's 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
participant's rights in any shares of Restricted Shares that have not vested
shall automatically terminate upon the participant's termination of employment
(or other business relationship) with the Company and its Subsidiaries and such
shares shall be subject to the Company's 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 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
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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 participant's right in all
Deferred Share Awards that have not vested shall automatically terminate upon
the participant's 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.
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 participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment
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(or cessation of business relationship) with the Company and its Subsidiaries
for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the
participant's 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 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 participant's rights in all
Distribution Equivalent Rights or interest equivalents shall automatically
terminate upon the participant's 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
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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 Company's 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.
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 employee's
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 holder's written consent. The Administrator may provide substitute Awards at
the same or reduced exercise or purchase price or with no exercise or purchase
price in a manner not inconsistent with the terms of the Plan, but such price,
if any, must satisfy the requirements which would apply to the substitute or
amended Award if it were then initially granted under this Plan, but no such
action shall adversely affect rights under any outstanding Award without the
holder's written consent. Nothing in this Section 13 shall limit the Board's
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 Company's
obligations to deliver Shares or make payments with respect to
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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:
(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
Company's 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.
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(b) Delivery of Share Certificates. Share certificates to be
delivered to participants under this Plan shall be deemed delivered for all
purposes 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 participant's last known address on file with the Company.
(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
101 East State Street, Suite 100, Kennett Square, PA 19348
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of ElderTrust hereby appoints
Edward B. Romanov, Jr. 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 1999 annual meeting of
shareholders to be held on May 20, 1999 at 10 a.m., local time, at 101 East
State Street, Kennett Square, PA 19348, and at any adjournments, upon the
following matters:
(Continued and to be signed and dated on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED SHAREHOLDER, UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1, PROPOSAL 2
AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF
TRUSTEES AS TO OTHER MATTERS.
1. To elect Kent P. Dauten as a trustee for a three-year term.
FOR WITHHOLD AUTHORITY
nominee listed above to vote for the nominee listed above
/ / / /
2. To approve the 1999 share option and incentive plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. As determined by a majority of ElderTrust's 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.
Date:
--------------------------------------
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(Please date and sign here exactly as name
appears at left. 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.)
(Continued from reverse side)
