Exhibit 10.7

****OPTION AGREEMENT**     This Option Agreement (the “**Agreement**”) is executed as of this 7th day of July, 2003 by and between OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (“**Lessor**”), and AHC PROPERTIES, INC., a Delaware corporation (“**Lessee**”).     The circumstances underlying the execution of this Agreement are as follows:RECITALS:A.        As of June 14, 1999, Lessor and Lessee entered into a Master Lease pursuant to which Lessor leased to Lessee certain facilities, including the facilities identified on Exhibit A of this Agreement (the facilities set forth on Exhibit A are herein referred to as “**Omega Facilities**”.)  The Omega Facilities are more particularly defined and described below.B.        The Master Lease was amended by the Forbearance Agreement and Amendment to Master Leases dated as of January 31, 2002, among the Omega Entities and the Alterra Entities, and by a Second Amendment to Master Leases dated of even date herewith (as amended through and including the date of this Agreement, the “**Master Lease**”).C.        In accordance with a Settlement Agreement executed among Lessor, Lessee and certain related parties dated as of June 4, 2003, Lessor has agreed to grant Lessee an option to purchase the Omega Facilities upon the terms and conditions set forth herein.     NOW, THEREFORE, the parties agree as follows:     1.        Defined Terms.  All capitalized terms used in this Agreement and not otherwise defined herein shall have the meaning ascribed to such terms in the Master Lease.  “**Omega Facilities**” means that part of the Leased Property, as that term is defined in the Master Lease, that is located at, and used solely in connection with, the facilities identified on Exhibit A.  “Omega Facilities” specifically excludes:(a)     any of the Land, Leased Improvements, Related Rights or Lessor's Personal Property that is located at, or used in connection with, any facilities not identified on Exhibit A; (b)      all tradenames and trademarks related to the corporate name of Lessor and related tradenames and trademarks;(c)     cash, general intangibles (other than (i) permits, licenses, approvals and authorizations issued, granted or given for the benefit of the Omega Facilities by or under the authority of any federal, state or local governmental or quasi-governmental agency, authority, official or tribunal that may be assigned without cost or consent and (ii) rights to payments, reimbursements, or refunds from the United States, any State, any insurer, municipality, public utility or other agency, individual or entity, including without limitation, real estate and personal property tax refunds, payments, reimbursements and deposits with respect to the Omega Facilities, each to the extent that such rights to payments, reimbursements, refunds or deposits relate to expenses paid or services rendered by Lessee or Manager during the Term), accounts, accounts receivable, deposits (including, without limitation, bank and demand deposit accounts), insurance policies, and contract rights of the Lessor, other than any accounts, accounts receivable, deposits, policies or rights relating to expenses paid or services rendered by Lessee or Manager during the Term;**