Document:

COMPENSATION AGREEMENT

         This  Agreement  is made this 15th day of June,  2000,  by and  between
Omega Healthcare  Investors,  Inc., a Maryland corporation (the "Company"),  and
Susan A. Kovach (the "Officer" or "you") and describes certain  compensation and
benefits to which you will become  entitled  following the purchase on or before
August 31, 2000, by Explorer Holdings,  L.P. from the Company of preferred stock
for at least $100,000,000 (the "Transaction").

1.   Effectiveness.  The  effectiveness of this Agreement is contingent upon the
     completion   of  the   Transaction   and  the  approval  of  the  Company's
     shareholders  of the  "2000  Plan" (as  defined  in  paragraph  10) and the
     approval of the Compensation  Committee  contemplated by paragraphs 5 and 6
     below.  You must be employed on the date of the  Transaction to receive any
     of  the  compensation  or  benefits   described  in  this  Agreement.   The
     compensation  and benefits  pursuant to this Agreement,  including  without
     limitation the transaction bonus and severance pay provided herein,  are in
     part  consideration  for your  agreement to terminate the Change in Control
     Agreement  described in paragraph 9 hereof as of the date of the occurrence
     of the Transaction.

2.   Continued Services.  The compensation and benefits under this Agreement are
     to be  provided  to you,  in  part,  to  assure  your  continued  services.
     Accordingly,  you agree that you will work for the Company for at least six
     months after the  Transaction,  except if your  employment is terminated by
     the Company  without  Cause or you Quit with Good Reason,  or die or become
     disabled (within the meaning of any Company disability plan or policy).

3.   Transaction Bonus. You will receive a cash bonus of $40,000 upon completion
     of the Transaction.

4.   Annual Salary and Annual  Bonus.  As of the date of the  Transaction,  your
     annual  salary  will be  $155,000  with an  increase  to at least  $175,000
     effective  January 1, 2001.  Your  annual  salary  will be  reviewed by the
     Compensation  Committee for possible  adjustment as of January 1, 2002, and
     will be reviewed by the Compensation  Committee for possible  adjustment at
     least annually thereafter. You will have an annual bonus opportunity for up
     to 100% of annual  salary.  The bonus  criteria for 2000 will  generally be
     consistent  with past  practice  and will not be offset by the  Transaction
     Bonus.  The bonus criteria for 2001 and  thereafter  will be established by
     the  Compensation  Committee,  in  consultation  with you, within the first
     ninety (90) days of the fiscal year for which the bonus is earned.

5.   Stock  Option.  A  nonqualified  stock  option  will be granted to you,  in
     substantially   the  form  attached  hereto  as  an  Exhibit,   subject  to
     shareholder  approval of the 2000 Plan and Compensation  Committee approval
     of the option,  and  completion  of the  Transaction,  to purchase  227,500
     shares of common  stock of the  Company.  The option will vest as to 30% of
     the shares at December 31,  2001,  and as to 1/60th  (one-sixtieth)  of the
     shares  each  month  thereafter,  provided  that  (except  as  provided  in
     paragraph  10 below) no  further  vesting  will  occur  after the date your
     employment  is  terminated.  The exercise  price will be the greater of the
     opening  trading  price per share of the  Company's  common stock as of the
     date of closing of the Transaction or the dollar amount per share of common
     stock into which each share of the Series C preferred  stock  purchased  in
     the  Transaction  is  convertible  as of the  date  of the  closing  of the
     Transaction.  Notwithstanding  any other provision  hereof, in the event of
     any inconsistency  between the terms of this Agreement and the stock option
     agreement, the terms of the stock option agreement will govern. The Company
     will  register  the 2000 Plan with the SEC  pursuant to a Form S-8 or other
     registration  within  a  reasonable  period  (no  later  than  six  months)
     following the date of the Transaction.

6.   Dividend  Equivalent Rights.  Dividend equivalent rights will be granted to
     you, in substantially  the form attached hereto as an Exhibit,  at the same
     date as the stock  option in  paragraph  5 hereof is  granted  to you,  and
     subject to shareholder approval of the 2000 Plan and Compensation Committee
     approval of the dividend  equivalent rights, with respect to 227,500 shares
     of common stock of the  Company.  The  dividend  equivalent  rights will be
     subject to the same  vesting  schedule  as  applies to the stock  option in
     paragraph 5 hereof. The dividend equivalent right with respect to each such
     share will entitle you to accrue the dividends per share of common stock of
     the Company paid to common  shareholders  of the Company in accordance with
     the terms of the dividend  equivalent rights agreement,  provided that your
     dividend  equivalent  rights per share  will not exceed the  greater of the
     opening  trading  price  of the  Company's  common  stock as of the date of
     closing of the  Transaction  or the dollar amount per share of common stock
     into  which each share of the Series C  preferred  stock  purchased  in the
     Transaction   is  convertible  as  of  the  date  of  the  closing  of  the
     Transaction.  Your dividend  equivalent  rights will not accrue in, or with
     respect  to  dividends  paid in, a fiscal  quarter  of the  Company  if the
     Company does not achieve the "DER  Performance  Goal" in the preceding four
     fiscal quarters.  The DER Performance Goal means that funds from operations
     available  to holders of the  Company's  common stock and Class C preferred
     stock as a percentage of the Company's average common and Class C preferred
     equity   (calculated  in  a  manner  consistent  with  NAREIT   guidelines,
     historical practices in presenting reports to the Board of Directors and in
     establishing  budget  plans)  equals or exceeds  6%. The  accrued  dividend
     equivalent  rights  will be  payable  in cash  and  will be  terminated  in
     accordance  with the terms of the  dividend  equivalent  rights  agreement.
     Notwithstanding any other provision of this Agreement,  in the event of any
     inconsistency  between  the  terms  of  this  Agreement  and  the  dividend
     equivalent  rights agreement,  the terms of the dividend  equivalent rights
     agreement will govern.

7.   Restricted  Stock  Vesting.  This Agreement  confirms that your  restricted
     stock  grant for 18,708  shares that you  received as of February  10, 2000
     will be 25%  vested  as of  August  10,  2000 and will be 50%  vested as of
     February 10, 2001 as a result of the stock's  trading price reaching the $8
     level for the  required  period,  subject to your  satisfying  the  service
     requirements  (i.e.,  you  work  for  the  Company  at  least  through  the
     applicable  date,  a "Change of Control" as defined in the  Company's  1993
     Stock Option and Restricted Stock Plan, as amended,  occurs before then, or
     you become vested pursuant to paragraph 10 of this Agreement).

8.   Other  Incentive  Compensation.  You will be eligible to participate in all
     incentive compensation plans and programs that the Company offers to all or
     substantially all of its executive officers.

9.   Change in Control Agreement. You and the Company agree that: the occurrence
     of the Transaction  does not cause a "Change in Control" (as defined in the
     Change in Control  Agreement  dated  March 22,  2000,  between  you and the
     Company  (the  "Change in Control  Agreement"),  a "Change of Control"  (as
     defined in the Company's 1993 Stock Option and Restricted Stock Plan), or a
     change in control  under any other plan,  program,  or  arrangement  of the
     Company, to occur; such occurrence will not be deemed to result in a Change
     in  Control,  Change  of  Control,  or  change  in  control,  respectively,
     thereunder;  and you  will  not be  entitled  to any  payment  or  benefits
     thereunder.  You and the Company  agree that if you remain  employed by the
     Company  as of the  date  of the  occurrence  of the  Transaction,  and the
     approval of the Company's shareholders of the 2000 Plan and the approval of
     the  Compensation  Committee  contemplated  by paragraphs 5 and 6 above are
     obtained,  the Change in Control Agreement is terminated and is void and of
     no  further  force  and  effect  as  of  the  date  of  occurrence  of  the
     Transaction.

10.  Severance.  In the event  your  employment  is  terminated  by the  Company
     without  Cause,  or you Quit with Good Reason,  in either event within five
     years  after  the date of the  Transaction,  you will  receive,  in part as
     severance  pay  and in  part  for  the  consulting  services  described  in
     paragraph  11 hereof,  200% of an amount  equal to the sum of your  highest
     rate of annual base salary within the three years prior to your termination
     of  employment  plus the  average of your  annual  bonuses  paid or payable
     (determined without regard to any portion thereof that you may have elected
     to defer) in the three  fiscal  years  immediately  before the date of your
     termination  of  employment.  The amount of your annual  bonus for any such
     fiscal  year will not include any amount  attributable  to the  transaction
     bonus described in paragraph 3 hereof,  or the dividend  equivalent  rights
     described  in  paragraph 6 hereof,  or the portion of the Cash Value of the
     Restricted Stock Award with respect to the restricted stock award described
     in paragraph 7 hereof as to which the price hurdle for vesting has not been
     met, but will include the Cash Value of such  Restricted  Stock Award as to
     which the price  hurdle  for  vesting  has been met,  the Cash Value of the
     Restricted Stock Award with respect to any other restricted stock award you
     received  that was paid before  June 5, 2000 and during such year,  and the
     Cash  Value  of the  Restricted  Stock  Award  with  respect  to any  other
     restricted  stock award you  received  that was paid after June 4, 2000 and
     during such year to the extent that the Compensation  Committee  determines
     prior to your  receiving  such award that the award  directly  offsets your
     annual cash bonus that otherwise  would have been paid to you. A portion of
     your  severance  pay in an amount equal to your highest rate of annual base
     salary within the three years prior to your termination will be paid to you
     in  substantially  equal  installments  according to the  Company's  normal
     payroll cycle in the 12 months after your termination of employment and the
     balance  of your  severance  pay will be paid to you in a lump  sum  within
     fifteen days  following  your  execution of the general  release  described
     below.  In  addition,  all of your  deferred  compensation  units under the
     Company's   1993  Deferred   Compensation   Plan,  as  amended   ("Deferred
     Compensation  Units"),  unvested  restricted  stock grants  (other than any
     portion of the restricted stock grant described in paragraph 7 hereof as to
     which the price hurdle for vesting is not met),  stock options and dividend
     equivalent  rights under the  Company's  1993 Stock  Option and  Restricted
     Stock  Plan,  as amended  (the  "1993  Plan") or the  Company's  2000 Stock
     Incentive Plan (the "2000 Plan") (and unless prohibited by the terms of any
     other plan or agreement, unvested restricted stock grants and stock options
     under such plan or agreement)  will be fully vested in such event.  In such
     event,  your stock options will be  exercisable  for such period after your
     termination  of employment as may be  established  pursuant to the terms of
     the applicable stock option  agreement.  Your Deferred  Compensation  Units
     will be paid pursuant to the terms of the 1993 Deferred  Compensation Plan,
     as amended.

     The payment of all of the  severance pay and vesting of all of the benefits
     provided  for in this  paragraph  10 are  expressly  contingent  upon  your
     executing  and  returning  to the  Company,  within  such  period as may be
     designated by the Company, a general release of all claims and covenant not
     to sue in favor of the  Company,  its  officers,  directors,  shareholders,
     affiliates,  successors and assigns and other related parties designated by
     the Company, in such form as may be provided to you by the Company and your
     not  revoking  such  release  within a seven  day  revocation  period to be
     provided for under the terms of such  release.  Such release will not apply
     to any of the payments or benefits to which you are entitled to  hereunder,
     under any  employee  benefit  plan  (within  the  meaning  of the  Employee
     Retirement  Income Security Act of 1974), or any rights to  indemnification
     that you may have as an officer or former officer of the Company.

11.  Consulting  Services.  In the event your employment is terminated by you or
     the Company in  circumstances  entitling  you to severance pay and benefits
     pursuant to paragraph 10 hereof, you agree to be available for consultation
     at times  mutually  convenient to you and the Company for a period of up to
     one year following the date your employment  terminates.  The consideration
     in  paragraph 10 hereof is in part  consideration  for services and in part
     severance pay.

12.  Gross-Up  Payment.  In the event a  severance  payment is made to you under
     paragraph 10 of this Agreement and it is determined that any payment (other
     than the  Gross-Up  Payments  provided for herein) or  distribution  by the
     Company or any of its  affiliates to or for your  benefit,  whether paid or
     payable  or  distributed  or  distributable  pursuant  to the terms of this
     Agreement  or  otherwise  pursuant to or by reason of any other  agreement,
     policy,  plan,  program or arrangement,  or the lapse or termination of any
     restriction on, or the vesting or exercisability of any of the foregoing (a
     "Payment"),  would be subject to the excise tax imposed by Section  4999 of
     the  Internal  Revenue  Code of  1986,  as  amended  (the  "Code")  (or any
     successor  provision thereto) by reason of being "contingent on a change in
     ownership or control" of the Company, within the meaning of Section 280G of
     the Code (or any successor provision thereto) or to any similar tax imposed
     by state or local law, or any  interest or  penalties  with respect to such
     excise  tax  (such  tax or  taxes,  together  with  any such  interest  and
     penalties,  are hereafter  collectively  referred to as the "Excise  Tax"),
     then you will be entitled to receive an  additional  payment or payments (a
     "Gross-Up  Payment")  in an amount such that,  after  payment by you of all
     taxes  (including  any interest or  penalties  imposed with respect to such
     taxes),  including any Excise Tax, imposed upon the Gross-Up  Payment,  you
     retain an amount of the  Gross-Up  Payment  equal to the Excise Tax imposed
     upon the Payments.  For purposes of calculating  the Gross-Up  Payment,  it
     will be assumed  that all  taxable  Payments  you  receive are taxed at the
     highest  marginal  federal income tax rate and the highest state income tax
     rate in which you reside,  but without  regard to any reduction in personal
     exemptions  or  deductions  associated  with  your  level  of  income.  All
     determinations  required  to be made under  this  paragraph  12,  including
     whether an excise  tax is payable by you and the amount of such  excise tax
     and any Gross-Up Payment,  will be made by a nationally  recognized firm of
     certified  public   accountants   selected  by  the  Company  in  its  sole
     discretion.

13.  Nonduplication.   This   Agreement  is  not   intended  to  duplicate   any
     compensation  or benefits to which you are  entitled  under any other plan,
     program, agreement or arrangement. Therefore, in the event you are entitled
     to any  similar  payments  under  the  terms of any  other  plan,  program,
     agreement,  or  arrangement  of  the  Company,  your  payments  under  this
     Agreement will be correspondingly reduced.

14.  No  Mitigation.  Except as provided in paragraph  13 hereof,  no amounts or
     benefits  payable  to you  hereunder  shall be  subject  to  mitigation  or
     reduction by income or benefits you receive from other sources.

15.  Nondisclosure  Of  Confidential  Information.  You agree  not to  disclose,
     directly or indirectly to any third person any (a) Confidential Information
     relating to Company's  business  during the term of your employment and for
     two years after termination or (b) Trade Secrets for so long as they may be
     protected by Michigan law.

16.  Return  of  Materials.  All Trade  Secrets  and  Confidential  Information,
     including documents or tangible or intangible materials, including computer
     data, provided to or obtained by you during the course of employment by the
     Company which contain Trade Secrets and Confidential  Information,  are the
     property  of the  Company  (collectively,  the  "Materials").  You will not
     remove from the  Company's  premises  or copy or  reproduce  any  Materials
     (except  as your  employment  by the  Company  shall  require),  and at the
     termination  of  your  employment,   regardless  of  the  reason  for  such
     termination,  you will leave with the Company, or immediately return to the
     Company,  all  Materials  or  copies  or  reproductions   thereof  in  your
     possession, custody or control.

17.  Not  an  Employment  Agreement.  This  Agreement  does  not  constitute  an
     employment agreement or an agreement to employ you for any definite period,
     and you will remain an employee at-will.

18.  Assignment.  The rights and obligations of the Company under this Agreement
     shall inure to the benefit of the Company's  successors  and assigns.  This
     Agreement  may be  assigned by the  Company to any legal  successor  to the
     Company or to an entity which  purchases  all or  substantially  all of the
     assets of the Company.  In the event the Company  assigns this Agreement as
     permitted by this  Agreement and you remain  employed by the assignee,  the
     "Company" as defined  herein will refer to the assignee and you will not be
     deemed  to  have  terminated   employment  hereunder  until  you  terminate
     employment from the assignee.

19.  Attorneys'  Fees. If you prevail in such dispute,  the Company will pay and
     be  financially   responsible  for  all  costs,   expenses  and  reasonable
     attorneys' fees incurred by you (or your estate in the event of your death)
     in  connection  with  any  dispute  associated  with  the   interpretation,
     enforcement or defense of your rights under this Agreement by litigation or
     otherwise.

20.  Withholding  of Taxes.  The Company may withhold  from any amounts  payable
     under this Agreement all federal, state, city or other taxes as the Company
     is required to withhold  pursuant to any law or  government  regulation  or
     ruling.

21.  Entire Agreement.  This Agreement contains the entire  understanding of the
     parties with respect to the subject matter hereof.

22.  Severability.  In the  event  that  one or more of the  provisions  of this
     Agreement  shall be or become  invalid,  illegal  or  unenforceable  in any
     respect,  the  validity,  legality  and  enforceability  of  the  remaining
     provisions contained herein shall not be affected thereby.

23.  Governing  Law.  To the full  extent  controllable  by  stipulation  of the
     parties,  this Agreement  shall be interpreted  and enforced under Michigan
     law.

24.  Amendment.  This Agreement may not be modified,  amended,  supplemented  or
     terminated except by a written agreement between the Company and you.

25.  Definitions. The capitalized terms used in this Agreement have the meanings
     set forth below.

         "Cause" means

          (i)  willful  refusal to follow a lawful written order of the Board of
               Directors of the Company;

          (ii) willful misconduct or reckless disregard of your duties or of the
               interest or property of the Company;

          (iii)intentional  disclosure to an unauthorized person of Confidential
               Information or Trade Secrets,  which causes  material harm to the
               Company;

          (iv) any act of fraud,  misappropriation,  dishonesty or act involving
               moral turpitude; or

          (v)  conviction of a felony.

         "Quit  With Good  Reason"  means you  resign  within  ninety  (90) days
         following the  occurrence  of any of the following  events which occurs
         without your written consent:

          (i)  the failure of the Board of  Directors  of the Company to reelect
               you to your then existing office;

          (ii) a substantial  diminution in your title,  position,  authority or
               responsibility  or  assignment  to you of  substantial  duties or
               substantial work  responsibilities  which are  inconsistent  with
               your title, position, authority or responsibility;

          (iii)any reduction in your base salary,  annual bonus opportunity or a
               material reduction in employee benefits; or

          (iv) the relocation of the Company's headquarters or the primary place
               at which you perform  your  duties to a location  more than fifty
               (50) miles from the  location at which you  previously  performed
               your duties;

         provided, however, that you must give the Company written notice within
         thirty (30) days  following the occurrence of the event and the Company
         will have fifteen (15) days to cure the same.  If you fail to give such
         notice or if the Company  provides such cure,  you will not be entitled
         to terminate your employment due to a Quit with Good Reason.

         Each separate  event meeting the above  requirements  will allow you to
         terminate  your  employment  due to a Quit  With Good  Reason  and your
         failure to do so within  ninety (90) days from the  occurrence  of such
         event in any  given  case  will act as a waiver  with  respect  to your
         rights to terminate your employment due to a Quit with Good Reason with
         respect to the occurrence of that specific event,  but will not prevent
         you from  terminating your employment due to a Quit With Good Reason if
         a later event occurs which entitles you to do so, subject to the notice
         and cure provisions.

         "Cash Value of the Restricted  Stock Award" means the trading price per
         share of the  class of stock  subject  to the  restricted  stock  award
         determined as of the grant date,  multiplied by the number of shares of
         restricted stock subject to that grant.

         "Confidential  Information" means data and information  relating to the
         business of the  Company  (which does not rise to the status of a Trade
         Secret)  which is or has  been  disclosed  to you or of  which  the you
         became aware as a consequence  of or through your  relationship  to the
         Company and which has value to the Company and is not  generally  known
         to its competitors. Confidential Information shall not include any data
         or information that has been voluntarily disclosed to the public by the
         Company  (except  where  such  public  disclosure  has been made by you
         without  authorization)  or that has been  independently  developed and
         disclosed by others, or that otherwise enters the public domain through
         lawful means.

         "Trade Secrets" means Company  information  including,  but not limited
         to, technical or nontechnical data, formulas,  patterns,  compilations,
         programs, devices, methods, techniques,  drawings, processes, financial
         data,  financial  plans,  product plans or lists of actual or potential
         customers or suppliers  which:  (i) derives  economic value,  actual or
         potential,  from not being  generally  known to, and not being  readily
         ascertainable by proper means by, other persons who can obtain economic
         value from its  disclosure  or use;  and (ii) is the subject of efforts
         that are reasonable under the circumstances to maintain its secrecy.

         Agreed to as of the date first set forth above.

                                    By:  /s/ Essel W. Bailey, Jr.
                                         ------------------------
                                           Essel W. Bailey, Jr.
                                           President and Chief Executive Officer
                                           Omega Healthcare Investors, Inc.

                                    By:  /s/ Susan A. Kovach
                                         -------------------------
                                           Susan A. KovachCOMPENSATION AGREEMENT

         This  Agreement  is made this 15th day of June,  2000,  by and  between
Omega Healthcare  Investors,  Inc., a Maryland corporation (the "Company"),  and
Laurence D. Rich (the "Officer" or "you") and describes certain compensation and
benefits to which you will become  entitled  following the purchase on or before
August 31, 2000, by Explorer Holdings,  L.P. from the Company of preferred stock
for at least $100,000,000 (the "Transaction").

     1.   Effectiveness.  The effectiveness of this Agreement is contingent upon
          the  completion of the  Transaction  and the approval of the Company's
          shareholders  of the "2000 Plan" (as defined in paragraph  10) and the
          approval of the  Compensation  Committee  contemplated by paragraphs 5
          and 6 below.  You must be employed on the date of the  Transaction  to
          receive  any  of  the  compensation  or  benefits  described  in  this
          Agreement.  The compensation and benefits  pursuant to this Agreement,
          including  without  limitation the transaction bonus and severance pay
          provided  herein,  are in part  consideration  for your  agreement  to
          terminate  the Change in Control  Agreement  described  in paragraph 9
          hereof as of the date of the occurrence of the Transaction.

     2.   Continued Services. The compensation and benefits under this Agreement
          are to be provided to you, in part, to assure your continued services.
          Accordingly, you agree that you will work for the Company for at least
          six  months  after  the  Transaction,  except  if your  employment  is
          terminated by the Company  without Cause or you Quit with Good Reason,
          or  die  or  become  disabled  (within  the  meaning  of  any  Company
          disability plan or policy).

     3.   Transaction  Bonus.  You will  receive a cash  bonus of  $40,000  upon
          completion of the Transaction.

     4.   Annual  Salary and Annual  Bonus.  As of the date of the  Transaction,
          your  annual  salary  will be  $155,000  with an  increase to at least
          $175,000  effective  January  1,  2001.  Your  annual  salary  will be
          reviewed by the Compensation  Committee for possible  adjustment as of
          January 1, 2002,  and will be reviewed by the  Compensation  Committee
          for possible adjustment at least annually thereafter. You will have an
          annual bonus  opportunity  for up to 100% of annual salary.  The bonus
          criteria for 2000 will generally be consistent  with past practice and
          will not be offset by the  Transaction  Bonus.  The bonus criteria for
          2001 and thereafter will be established by the Compensation Committee,
          in  consultation  with you,  within the first  ninety (90) days of the
          fiscal year for which the bonus is earned.

     5.   Stock Option.  A nonqualified  stock option will be granted to you, in
          substantially  the form  attached  hereto as an  Exhibit,  subject  to
          shareholder  approval  of the  2000  Plan and  Compensation  Committee
          approval of the option, and completion of the Transaction, to purchase
          227,500 shares of common stock of the Company. The option will vest as
          to  30%  of  the  shares  at  December  31,  2001,  and  as to  1/60th
          (one-sixtieth)  of the shares  each month  thereafter,  provided  that
          (except as provided in  paragraph  10 below) no further  vesting  will
          occur after the date your employment is terminated. The exercise price
          will be the  greater  of the  opening  trading  price per share of the
          Company's common stock as of the date of closing of the Transaction or
          the dollar  amount per share of common  stock into which each share of
          the  Series  C  preferred   stock  purchased  in  the  Transaction  is
          convertible  as of  the  date  of  the  closing  of  the  Transaction.
          Notwithstanding  any  other  provision  hereof,  in the  event  of any
          inconsistency between the terms of this Agreement and the stock option
          agreement,  the terms of the stock option  agreement will govern.  The
          Company  will  register  the 2000 Plan with the SEC pursuant to a Form
          S-8 or other  registration  within a reasonable  period (no later than
          six months) following the date of the Transaction.

     6.   Dividend Equivalent Rights. Dividend equivalent rights will be granted
          to you, in  substantially  the form attached hereto as an Exhibit,  at
          the same date as the stock  option in paragraph 5 hereof is granted to
          you,  and  subject  to  shareholder  approval  of the  2000  Plan  and
          Compensation  Committee  approval of the dividend  equivalent  rights,
          with respect to 227,500  shares of common  stock of the  Company.  The
          dividend  equivalent  rights  will  be  subject  to the  same  vesting
          schedule as applies to the stock  option in  paragraph  5 hereof.  The
          dividend equivalent right with respect to each such share will entitle
          you to accrue the  dividends  per share of common stock of the Company
          paid to common  shareholders  of the  Company in  accordance  with the
          terms of the dividend equivalent rights agreement,  provided that your
          dividend  equivalent  rights per share will not exceed the  greater of
          the opening trading price of the Company's common stock as of the date
          of closing of the Transaction or the dollar amount per share of common
          stock into which each share of the Series C preferred  stock purchased
          in the Transaction is convertible as of the date of the closing of the
          Transaction.  Your dividend  equivalent  rights will not accrue in, or
          with respect to dividends  paid in, a fiscal quarter of the Company if
          the  Company  does  not  achieve  the  "DER  Performance  Goal" in the
          preceding four fiscal  quarters.  The DER Performance  Goal means that
          funds from  operations  available to holders of the  Company's  common
          stock and Class C preferred  stock as a  percentage  of the  Company's
          average  common and Class C preferred  equity  (calculated in a manner
          consistent with NAREIT guidelines,  historical practices in presenting
          reports to the Board of Directors  and in  establishing  budget plans)
          equals or exceeds 6%. The accrued dividend  equivalent  rights will be
          payable in cash and will be terminated in accordance with the terms of
          the dividend  equivalent rights agreement.  Notwithstanding  any other
          provision of this Agreement, in the event of any inconsistency between
          the  terms  of this  Agreement  and  the  dividend  equivalent  rights
          agreement,  the terms of the dividend equivalent rights agreement will
          govern.

     7.   Restricted Stock Vesting. This Agreement confirms that your restricted
          stock  grant for 17,269  shares that you  received as of February  10,
          2000 will be 25% vested as of August  10,  2000 and will be 50% vested
          as of  February  10,  2001 as a result of the  stock's  trading  price
          reaching  the $8  level  for  the  required  period,  subject  to your
          satisfying the service requirements (i.e., you work for the Company at
          least through the applicable date, a "Change of Control" as defined in
          the Company's 1993 Stock Option and Restricted Stock Plan, as amended,
          occurs before then,  or you become vested  pursuant to paragraph 10 of
          this Agreement).

     8.   Other Incentive  Compensation.  You will be eligible to participate in
          all incentive  compensation plans and programs that the Company offers
          to all or substantially all of its executive officers.

     9.   Change in Control  Agreement.  You and the  Company  agree  that:  the
          occurrence of the Transaction does not cause a "Change in Control" (as
          defined in the  Change in  Control  Agreement  dated  March 22,  2000,
          between you and the Company  (the  "Change in Control  Agreement"),  a
          "Change of Control" (as defined in the Company's 1993 Stock Option and
          Restricted  Stock Plan),  or a change in control under any other plan,
          program, or arrangement of the Company, to occur; such occurrence will
          not be deemed to result in a Change in Control,  Change of Control, or
          change  in  control,  respectively,  thereunder;  and you  will not be
          entitled to any payment or  benefits  thereunder.  You and the Company
          agree that if you remain employed by the Company as of the date of the
          occurrence  of the  Transaction,  and the  approval  of the  Company's
          shareholders  of the 2000 Plan and the  approval  of the  Compensation
          Committee  contemplated by paragraphs 5 and 6 above are obtained,  the
          Change  in  Control  Agreement  is  terminated  and is void  and of no
          further  force  and  effect  as of  the  date  of  occurrence  of  the
          Transaction.

     10.  Severance.  In the event your  employment is terminated by the Company
          without  Cause,  or you Quit with Good Reason,  in either event within
          five years after the date of the  Transaction,  you will  receive,  in
          part  as  severance  pay  and in  part  for  the  consulting  services
          described in  paragraph 11 hereof,  200% of an amount equal to the sum
          of your  highest  rate of annual  base  salary  within the three years
          prior to your  termination  of  employment  plus the  average  of your
          annual  bonuses  paid or  payable  (determined  without  regard to any
          portion  thereof  that you may have  elected  to  defer)  in the three
          fiscal  years  immediately  before  the  date of your  termination  of
          employment.  The amount of your annual  bonus for any such fiscal year
          will not  include any amount  attributable  to the  transaction  bonus
          described in paragraph 3 hereof,  or the  dividend  equivalent  rights
          described in  paragraph 6 hereof,  or the portion of the Cash Value of
          the Restricted  Stock Award with respect to the restricted stock award
          described  in  paragraph  7 hereof as to which the  price  hurdle  for
          vesting  has not been met,  but will  include  the Cash  Value of such
          Restricted  Stock  Award as to which the price  hurdle for vesting has
          been met, the Cash Value of the Restricted Stock Award with respect to
          any other  restricted  stock award you  received  that was paid before
          June 5,  2000  and  during  such  year,  and  the  Cash  Value  of the
          Restricted  Stock  Award with  respect to any other  restricted  stock
          award you  received  that was paid after June 4, 2000 and during  such
          year to the extent that the Compensation Committee determines prior to
          your receiving such award that the award directly  offsets your annual
          cash  bonus that  otherwise  would have been paid to you. A portion of
          your  severance  pay in an amount equal to your highest rate of annual
          base salary within the three years prior to your  termination  will be
          paid  to you in  substantially  equal  installments  according  to the
          Company's normal payroll cycle in the 12 months after your termination
          of  employment  and the balance of your  severance pay will be paid to
          you in a lump sum within  fifteen days following your execution of the
          general release  described  below.  In addition,  all of your deferred
          compensation  units under the  Company's  1993  Deferred  Compensation
          Plan, as amended ("Deferred Compensation Units"),  unvested restricted
          stock  grants  (other than any portion of the  restricted  stock grant
          described  in  paragraph  7 hereof as to which the  price  hurdle  for
          vesting is not met),  stock  options and  dividend  equivalent  rights
          under the Company's  1993 Stock Option and  Restricted  Stock Plan, as
          amended (the "1993 Plan") or the Company's  2000 Stock  Incentive Plan
          (the "2000  Plan")  (and unless  prohibited  by the terms of any other
          plan or agreement,  unvested restricted stock grants and stock options
          under such plan or agreement)  will be fully vested in such event.  In
          such event,  your stock  options will be  exercisable  for such period
          after your termination of employment as may be established pursuant to
          the terms of the  applicable  stock option  agreement.  Your  Deferred
          Compensation  Units  will be paid  pursuant  to the  terms of the 1993
          Deferred Compensation Plan, as amended.

         The  payment  of all of the  severance  pay and  vesting  of all of the
         benefits  provided for in this  paragraph 10 are  expressly  contingent
         upon your executing and returning to the Company, within such period as
         may be designated by the Company,  a general  release of all claims and
         covenant not to sue in favor of the Company,  its officers,  directors,
         shareholders,  affiliates,  successors  and assigns  and other  related
         parties  designated by the Company,  in such form as may be provided to
         you by the Company and your not revoking  such  release  within a seven
         day  revocation  period  to be  provided  for  under  the terms of such
         release. Such release will not apply to any of the payments or benefits
         to which you are entitled to hereunder, under any employee benefit plan
         (within the meaning of the Employee  Retirement  Income Security Act of
         1974), or any rights to indemnification that you may have as an officer
         or former officer of the Company.

     11.  Consulting Services. In the event your employment is terminated by you
          or the Company in  circumstances  entitling  you to severance  pay and
          benefits  pursuant to paragraph  10 hereof,  you agree to be available
          for  consultation at times mutually  convenient to you and the Company
          for a period  of up to one year  following  the date  your  employment
          terminates.  The  consideration  in  paragraph  10  hereof  is in part
          consideration for services and in part severance pay.

     12.  Gross-Up  Payment.  In the event a  severance  payment  is made to you
          under  paragraph 10 of this  Agreement and it is  determined  that any
          payment  (other than the  Gross-Up  Payments  provided  for herein) or
          distribution  by the Company or any of its  affiliates  to or for your
          benefit,  whether  paid or payable  or  distributed  or  distributable
          pursuant to the terms of this Agreement or otherwise pursuant to or by
          reason of any other agreement,  policy,  plan, program or arrangement,
          or the lapse or termination of any  restriction  on, or the vesting or
          exercisability of any of the foregoing (a "Payment"), would be subject
          to the excise tax imposed by Section 4999 of the Internal Revenue Code
          of 1986, as amended (the "Code") (or any successor  provision thereto)
          by reason of being "contingent on a change in ownership or control" of
          the  Company,  within the meaning of Section  280G of the Code (or any
          successor provision thereto) or to any similar tax imposed by state or
          local law, or any  interest or  penalties  with respect to such excise
          tax (such tax or taxes, together with any such interest and penalties,
          are hereafter  collectively referred to as the "Excise Tax"), then you
          will be  entitled  to receive an  additional  payment or  payments  (a
          "Gross-Up  Payment") in an amount such that,  after  payment by you of
          all taxes (including any interest or penalties imposed with respect to
          such  taxes),  including  any Excise Tax,  imposed  upon the  Gross-Up
          Payment,  you retain an amount of the  Gross-Up  Payment  equal to the
          Excise Tax imposed upon the Payments.  For purposes of calculating the
          Gross-Up  Payment,  it will be assumed  that all taxable  Payments you
          receive are taxed at the highest  marginal federal income tax rate and
          the highest  state  income tax rate in which you  reside,  but without
          regard  to  any   reduction  in  personal   exemptions  or  deductions
          associated with your level of income. All  determinations  required to
          be made under this  paragraph 12,  including  whether an excise tax is
          payable  by you and the  amount of such  excise  tax and any  Gross-Up
          Payment,  will be made by a  nationally  recognized  firm of certified
          public accountants selected by the Company in its sole discretion.

     13.  Nonduplication.  This  Agreement  is not  intended  to  duplicate  any
          compensation  or  benefits to which you are  entitled  under any other
          plan, program,  agreement or arrangement.  Therefore, in the event you
          are  entitled  to any  similar  payments  under the terms of any other
          plan, program, agreement, or arrangement of the Company, your payments
          under this Agreement will be correspondingly reduced.

     14.  No Mitigation.  Except as provided in paragraph 13 hereof,  no amounts
          or benefits payable to you hereunder shall be subject to mitigation or
          reduction by income or benefits you receive from other sources.

     15.  Nondisclosure Of Confidential Information.  You agree not to disclose,
          directly  or  indirectly  to any  third  person  any (a)  Confidential
          Information  relating to  Company's  business  during the term of your
          employment  and for two years after  termination  or (b) Trade Secrets
          for so long as they may be protected by Michigan law.

     16.  Return of Materials.  All Trade Secrets and Confidential  Information,
          including  documents or tangible or  intangible  materials,  including
          computer  data,  provided  to or  obtained by you during the course of
          employment by the Company which contain Trade Secrets and Confidential
          Information,  are  the  property  of the  Company  (collectively,  the
          "Materials").  You will not remove from the Company's premises or copy
          or reproduce any Materials  (except as your  employment by the Company
          shall require), and at the termination of your employment,  regardless
          of the reason for such  termination,  you will leave with the Company,
          or  immediately  return to the  Company,  all  Materials  or copies or
          reproductions thereof in your possession, custody or control.

     17.  Not an Employment  Agreement.  This  Agreement  does not constitute an
          employment  agreement  or an  agreement to employ you for any definite
          period, and you will remain an employee at-will.

     18.  Assignment.  The  rights and  obligations  of the  Company  under this
          Agreement  shall inure to the benefit of the Company's  successors and
          assigns.  This  Agreement  may be assigned by the Company to any legal
          successor  to the  Company  or to an  entity  which  purchases  all or
          substantially  all of the  assets  of the  Company.  In the  event the
          Company  assigns this Agreement as permitted by this Agreement and you
          remain employed by the assignee,  the "Company" as defined herein will
          refer to the  assignee  and you will not be deemed to have  terminated
          employment hereunder until you terminate employment from the assignee.

     19.  Attorneys' Fees. If you prevail in such dispute,  the Company will pay
          and be financially  responsible for all costs, expenses and reasonable
          attorneys'  fees  incurred by you (or your estate in the event of your
          death)  in   connection   with  any   dispute   associated   with  the
          interpretation,  enforcement  or  defense  of your  rights  under this
          Agreement by litigation or otherwise.

     20.  Withholding  of Taxes.  The  Company  may  withhold  from any  amounts
          payable under this Agreement all federal,  state,  city or other taxes
          as the  Company  is  required  to  withhold  pursuant  to  any  law or
          government regulation or ruling.

     21.  Entire Agreement.  This Agreement contains the entire understanding of
          the parties with respect to the subject matter hereof.

     22.  Severability.  In the event that one or more of the provisions of this
          Agreement shall be or become invalid,  illegal or unenforceable in any
          respect,  the validity,  legality and  enforceability of the remaining
          provisions contained herein shall not be affected thereby.

     23.  Governing Law. To the full extent  controllable  by stipulation of the
          parties,  this  Agreement  shall be  interpreted  and  enforced  under
          Michigan law.

     24.  Amendment. This Agreement may not be modified,  amended,  supplemented
          or terminated  except by a written  agreement  between the Company and
          you.

     25.  Definitions.  The  capitalized  terms used in this  Agreement have the
          meanings set forth below.

         "Cause" means

               (i)  willful  refusal  to  follow a lawful  written  order of the
                    Board of Directors of the Company;

               (ii) willful  misconduct or reckless  disregard of your duties or
                    of the interest or property of the Company;

               (iii) intentional  disclosure  to  an   unauthorized   person  of
                    Confidential  Information  or Trade  Secrets,  which  causes
                    material harm to the Company;

               (iv) any  act  of  fraud,  misappropriation,  dishonesty  or  act
                    involving moral turpitude; or

               (v)  conviction of a felony.

         "Quit  With Good  Reason"  means you  resign  within  ninety  (90) days
         following the  occurrence  of any of the following  events which occurs
         without your written consent:

               (i)  the  failure  of the Board of  Directors  of the  Company to
                    reelect you to your then existing office;

               (ii) a substantial diminution in your title, position,  authority
                    or responsibility or assignment to you of substantial duties
                    or substantial work responsibilities  which are inconsistent
                    with your title, position, authority or responsibility;

               (iii) any reduction in your base salary, annual bonus opportunity
                    or a material reduction in employee benefits; or

               (iv) the relocation of the Company's  headquarters or the primary
                    place at which you perform  your  duties to a location  more
                    than  fifty  (50)  miles  from the  location  at  which  you
                    previously performed your duties;

         provided, however, that you must give the Company written notice within
         thirty (30) days  following the occurrence of the event and the Company
         will have fifteen (15) days to cure the same.  If you fail to give such
         notice or if the Company  provides such cure,  you will not be entitled
         to terminate your employment due to a Quit with Good Reason.

         Each separate  event meeting the above  requirements  will allow you to
         terminate  your  employment  due to a Quit  With Good  Reason  and your
         failure to do so within  ninety (90) days from the  occurrence  of such
         event in any  given  case  will act as a waiver  with  respect  to your
         rights to terminate your employment due to a Quit with Good Reason with
         respect to the occurrence of that specific event,  but will not prevent
         you from  terminating your employment due to a Quit With Good Reason if
         a later event occurs which entitles you to do so, subject to the notice
         and cure provisions.

         "Cash Value of the Restricted  Stock Award" means the trading price per
         share of the  class of stock  subject  to the  restricted  stock  award
         determined as of the grant date,  multiplied by the number of shares of
         restricted stock subject to that grant.

         "Confidential  Information" means data and information  relating to the
         business of the  Company  (which does not rise to the status of a Trade
         Secret)  which is or has  been  disclosed  to you or of  which  the you
         became aware as a consequence  of or through your  relationship  to the
         Company and which has value to the Company and is not  generally  known
         to its competitors. Confidential Information shall not include any data
         or information that has been voluntarily disclosed to the public by the
         Company  (except  where  such  public  disclosure  has been made by you
         without  authorization)  or that has been  independently  developed and
         disclosed by others, or that otherwise enters the public domain through
         lawful means.

         "Trade Secrets" means Company  information  including,  but not limited
         to, technical or nontechnical data, formulas,  patterns,  compilations,
         programs, devices, methods, techniques,  drawings, processes, financial
         data,  financial  plans,  product plans or lists of actual or potential
         customers or suppliers  which:  (i) derives  economic value,  actual or
         potential,  from not being  generally  known to, and not being  readily
         ascertainable by proper means by, other persons who can obtain economic
         value from its  disclosure  or use;  and (ii) is the subject of efforts
         that are reasonable under the circumstances to maintain its secrecy.

         Agreed to as of the date first set forth above.

                                   By:  /s/ Essel W. Bailey, Jr.
                                        --------------------------
                                         Essel W. Bailey, Jr.
                                         President and Chief Executive Officer
                                         Omega Healthcare Investors, Inc.

                                   By:  /s/ Laurence D. Rich
                                        --------------------------
                                        Laurence D. Rich

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