Document:

Form of Incentive Stock Option Award for OHI 2004

 

INCENTIVE
STOCK OPTION AWARD

PURSUANT
TO THE OMEGA HEALTHCARE INVESTORS, INC.

2004
STOCK INCENTIVE PLAN

THIS
AWARD is made as of the Grant Date, by Omega Healthcare Investors, Inc. (the
“Company”) to ____________________________________ (the “Optionee”). Upon and
subject to the Terms and Conditions attached hereto and incorporated herein by
reference, the Company hereby awards as of the Grant Date to Optionee an
incentive stock option (the “Option”), as described below, to purchase the
Option Shares.

	
      A.
	
      Grant
      Date: _________________, ________.

	
      B.
	
      Type
      of Option: Incentive Stock Option.

	
      C.
	
      Plan
      (under which Option is granted): Omega Healthcare Investors, Inc. 2004
      Stock Incentive Plan.

	
      D.
	
      Option
      Shares: All or any part of __________ shares of the Company’s common stock
      (the “Common Stock”), subject to adjustment as provided in the attached
      Terms and Conditions.

	
      E.
	
      Exercise
      Price: $______ per share, subject to adjustment as provided in the
      attached Terms and Conditions. The Exercise Price is, in the judgment of
      the Committee, not less than 100% of the Fair Market Value of a share of
      Common Stock on the Grant Date or, in the case of an Over 10% Owner, not
      less than 110% of the Fair Market Value of a share of Common Stock on the
      Grant Date.

	F.  	
      Option
      Period: The Option may be exercised only during the Option Period which
      commences on the Grant Date and ends on the earliest of:
  

	 	
      (a) 
      
	
      the
      tenth (10th) anniversary of the Grant Date (unless the Optionee is an Over
      10% Owner, in which case, the fifth (5th)
      anniversary of the Grant Date); 

	 	
      (b) 
      
	
      three
      (3) months following the date the Optionee ceases to be an employee,
      director, or contractor of the Company or an Affiliate (as defined in the
      Plan) for any reason other than death, Disability (defined in the Plan) or
      termination by the Company with Cause; or

	 	
      (c) 
      
	
      twelve
      (12) months following the date the Optionee ceases to be an employee,
      director, or contractor of the Company or an Affiliate due to death or
      Disability. 

	 	
      (d) 
      
	
      the
      time the Optionee is given notice by the Company that it
      is terminating his employment for
Cause;

The
Option may only be exercised as to the vested Option Shares determined pursuant
to the Vesting Schedule. Note
that other restrictions to exercising the Option, as described in the attached
Terms and Conditions, may apply.

	
      G.
	
      Vesting
      Schedule: The Option shall become vested in accordance with the vesting
      schedule attached hereto as Exhibit 3. Any portion of the Option which is
      not vested at the time of Optionee’s termination of employment or services
      with the Company shall be forfeited to the Company.

IN
WITNESS WHEREOF, the Company has executed and sealed this Award as of the Grant
Date set forth above. 

OPTIONEE:      OMEGA
HEALTHCARE INVESTORS, INC.

   
By:       

Print
Name:               Title:
      

TERMS
AND CONDITIONS TO THE

INCENTIVE
STOCK OPTION AWARD

PURSUANT
TO THE

OMEGA
HEALTHCARE INVESTORS, INC. 2004 STOCK INCENTIVE PLAN

1. Exercise
of Option. Subject
to the provisions provided herein or in the Award made pursuant to the Omega
Healthcare Investors, Inc. 2004 Stock Incentive Plan;

(a) the
Option may be exercised with respect to all or any portion of the vested Option
Shares at any time during the Option Period by the delivery to the Company, at
its principal place of business, of (i) a written notice of exercise in
substantially the form attached hereto as Exhibit 1, which shall be actually
delivered to the Company at least ten (10) days prior to the date upon which
Optionee desires to exercise all or any portion of the Option (unless such prior
notice is waived by the Company) and (ii) payment to the Company of the Exercise
Price multiplied
by the
number of shares being purchased (the “Purchase Price”) in the manner
provided in Subsection (b). Upon acceptance of such notice and receipt of
payment in full of the Purchase Price and any tax withholding liability, to the
extent applicable, Company shall cause to be issued a certificate representing
the Option Shares purchased.

(b) The
Purchase Price shall be paid in full upon the exercise of an Option and no
Option Shares shall be issued or delivered until full payment therefor has been
made. Payment of the Purchase Price for all Option Shares purchased pursuant to
the exercise of an Option shall be made in cash, certified check, or,
alternatively, as follows:

(i) by
delivery to the Company of a number of shares of Common Stock which have been
owned by the Optionee for at least six (6) months prior to the date of the
Option’s exercise, having a Fair Market Value, as determined under the Plan, on
the date of exercise either equal to the Purchase Price or in combination with
cash to equal the Purchase Price; or

(ii) by
receipt of the Purchase Price in cash from a broker, dealer or other “creditor”
as defined by Regulation T issued by the Board of Governors of the Federal
Reserve System following delivery by the Optionee to the Committee (defined in
the Plan) of instructions in a form acceptable to the Committee regarding
delivery to such broker, dealer or other creditor of that number of Option
Shares with respect to which the Option is exercised.

(c) As a
condition to exercising the Option, the Optionee shall, if requested by the
Company, execute an employee-shareholder agreement in the form provided by the
Company.

2. Withholding. To the
extent the Option is deemed to be a Nonqualified Stock Option in accordance with
Section 17, the Optionee must satisfy his federal, state, and local, if any,
withholding taxes imposed by reason of the exercise of the Option either by
paying to the Company the full amount of the withholding obligation (i) in cash;
(ii) by tendering shares of Common Stock which have been owned by the Optionee
for at least six (6) months prior to the date of exercise having a Fair Market
Value equal to the withholding obligation (a “Withholding Election”); (iii) by
electing, irrevocably and in writing (also a “Withholding Election”), to have
the smallest number of whole shares of Common Stock withheld by the Company
which, when multiplied by the Fair Market Value of the Common Stock as of the
date the Option is exercised, is sufficient to satisfy the amount of withholding
tax; or (iv) by any combination of the above. Optionee may make a Withholding
Election only if the following conditions are met:

(a) the
Withholding Election is made on or prior to the date on which the amount of tax
required to be withheld is determined (the “Tax Date”) by executing and
delivering to the Company a properly completed Notice of Withholding Election in
substantially the form attached hereto as Exhibit 2; and

(b) any
Withholding Election will be irrevocable; however, the Committee (as defined in
the Plan) may, in its sole discretion, disapprove and give no effect to the
Withholding Election. 

3. Rights
as Shareholder. Until
the stock certificates reflecting the Option Shares accruing to the Optionee
upon exercise of the Option are issued to the Optionee, the Optionee shall have
no rights as a shareholder with respect to such Option Shares. The Company shall
make no adjustment for any dividends or distributions or other rights on or with
respect to Option Shares for which the record date is prior to the issuance of
that stock certificate, except as the Plan or this Award otherwise
provides.

4. Restriction
on Transfer of Option and Option Shares. The
Option evidenced hereby is nontransferable other than by will or the laws of
descent and distribution, and, shall be exercisable during the lifetime of the
Optionee only by the Optionee (or in the event of his disability, by his legal
representative) and after his death, only by legal representative of the
Optionee’s estate.

5. Changes
in Capitalization.

(a) The
number of Option Shares and the Exercise Price shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or combination of shares or the payment of a stock
dividend in shares of Common Stock to holders of outstanding shares of Common
Stock or any other increase or decrease in the number of shares of Common Stock
outstanding effected without receipt of consideration by the
Company.

(b) In the
event of a merger, consolidation, extraordinary dividend, spin-off, sale of
substantially all of the Company’s assets or other material change in the
corporate structure of the Company or a tender offer for shares of Common Stock,
the Committee may, in its sole discretion, adjust the number and class of
securities subject to the Option, with a corresponding adjustment in the
Exercise Price, substitute a new option to replace the Option, accelerate the
termination of the Option Period or terminate the Option in consideration of a
cash payment to the Optionee in an amount equal to the excess of the then Fair
Market Value of the Option Shares over the aggregate Exercise Price of the
Option Shares.

(c) The
existence of the Plan and this Award shall not affect in any way the right or
power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Common Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or
proceeding.

6. Special
Limitations on Exercise. Any
exercise of the Option is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by the Option upon any securities exchange
or under any state or federal law is necessary or desirable as a condition of or
in connection with the delivery of shares thereunder, the delivery of any or all
shares pursuant to the Option may be withheld unless and until such listing,
registration or qualification shall have been effected. The Optionee shall
deliver to the Company, prior to the exercise of the Option, such information,
representations and warranties as the Company may reasonably request in order
for the Company to be able to satisfy itself that the Option Shares being
acquired in accordance with the terms of an applicable exemption from the
securities registration requirements of applicable federal and state securities
laws.

7. Legend
on Stock Certificates.
Certificates
evidencing the Option Shares, to the extent appropriate at the time, shall have
noted conspicuously on the certificates a legend intended to give all persons
full notice of the existence of the conditions, restrictions, rights and
obligations set forth herein and in the Plan such as:

Transfer
Is Restricted

The
securities evidenced by this certificate may not be sold, transferred, assigned,
or hypothecated unless (1) there is an effective registration under such act
covering such securities, (2) the transfer is made in compliance with rule 144
promulgated under such act, or (3) the issuer receives an opinion of counsel,
reasonably satisfactory to the company, stating that such sale, transfer,
assignment or hypothecation is exempt from the registration requirements of such
act.

Optionee
agrees that the Company may also endorse any other legends it deems necessary
and advisable or as may be required by applicable federal or state securities
laws.

8. Governing
Laws. 
This Award shall be construed, administered and enforced according to the laws
of the State of Maryland; provided, however, no option may be exercised except,
in the reasonable judgment of the Board of Directors, in compliance with
exemptions under applicable state securities laws of the state in which the
Optionee resides, and/or any other applicable securities laws.

9. Successors. This
Award shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and permitted assigns of the parties.

10. Notice. 
Except as otherwise specified herein, all notices and other communications under
this Award shall be in writing and shall be deemed to have been given if
personally delivered or if sent by registered or certified United States mail,
return receipt requested, postage prepaid, addressed to the proposed recipient
at the last known address of the recipient. Any party may designate any other
address to which notices shall be sent by giving notice of the address to the
other parties in the same manner as provided herein.

11. Severability. In the
event that any one or more of the provisions or portion thereof contained in
this Award shall for any reason be held to be invalid, illegal or unenforceable
in any respect, the same shall not invalidate or otherwise affect any other
provisions of this Award, and this Award shall be construed as if the invalid,
illegal or unenforceable provision or portion thereof had never been contained
herein.

12. Entire
Agreement. Subject
to the terms and conditions of the Plan, this Award expresses the entire
understanding and agreement of the parties. This Award may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.

13. Violation. Any
transfer, pledge, sale, assignment, or hypothecation of the Option or any
portion thereof shall be a violation of the terms of this Award and shall be
void and without effect.

14. Headings.
Paragraph headings used herein are for convenience of reference only and shall
not be considered in construing this Award.

15. Specific
Performance. In the
event of any actual or threatened default in, or breach of, any of the terms,
conditions and provisions of this Award, the party or parties who are thereby
aggrieved shall have the right to specific performance and injunction in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative.

16. No
Right to Continued Employment. Neither
the establishment of the Plan nor the award of Option Shares hereunder shall be
construed as giving the Optionee the right to continued employment.

17. Qualified
Status of Option. The
aggregate fair market value (determined as of the date an Incentive Stock Option
is granted) of the shares of Common Stock with respect to which an Incentive
Stock Option first becomes exercisable for the first time by an individual
during any calendar year shall not exceed $100,000 (determined as of the date of
grant). The Exercise Price per share multiplied by the total number of Option
Shares represents the aggregate fair market value of the Option Shares. To the
extent the foregoing limitation is exceeded with respect to any portion of the
Option Shares, such portion of the Option shall be deemed a Nonqualified Stock
Option.

18. Definitions. As used
in these Terms and conditions and this Award, 

(a) “Cause” shall
have the meaning set forth in the employment agreement then in effect between
the Optionee and the Company, or, if there is none, then Cause shall mean the
occurrence of any of the following events:

(i) willful
refusal by the Optionee to follow a lawful direction his supervisor;

(ii) willful
misconduct by the Optionee or reckless disregard of his or her duties or of the
interest or property of the Company; 

(iii)  intentional
disclosure by the Optionee to an unauthorized person of Confidential Information
or Trade Secrets;

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

	(v)  	
      commission
      of the Optionee of a felony. 

(b) “Change
in Control” means
any one of the following events which occurs following the Grant
Date:

(i) the
acquisition, directly or indirectly, by any “person” or “persons” (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than the Company or any employee benefits plan of the Company or
an Affiliate, or any corporation pursuant to a reorganization, merger or
consolidation, of equity securities of the Company, resulting in such person or
persons holding equity securities of the Company that in the aggregate represent
thirty percent (30%) or more of the combined ordinary voting power of the
Company’s then outstanding equity securities; 

(ii) individuals
who as of the date hereof, constitute the Board of Directors (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors;

(iii) a
reorganization, merger or consolidation, with respect to which persons who were
the holders of equity securities of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
equity securities of the surviving entity representing more than fifty percent
(50%) of the combined ordinary voting power of the then outstanding voting
securities of the surviving entity; or

(iv) a sale,
or one or more sales occurring in a twelve-month period, of all or substantially
all of the assets of the Company to any third party.

Notwithstanding
the foregoing, no Change in Control shall be deemed to have occurred for
purposes of this Award by reason of any actions or events in which the Optionee
participates in a capacity other than in his capacity as an officer, employee,
or director of the Company or an Affiliate. 

(c) “Confidential
Information” means
data and information relating to the business of the Company (which does not
rise to the level of a Trade Secret) which is or has been disclosed to the
Optionee or of which the Optionee became aware of as a consequence of or through
the Optionee’s 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 the
Optionee without authorization) or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means.

(d) “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.

(e) Other
capitalized terms that are not defined herein have the meaning set forth in the
Plan, except where the context does not reasonably permit. 

 

EXHIBIT
1

NOTICE
OF EXERCISE OF

STOCK
OPTION TO PURCHASE

COMMON
STOCK OF

OMEGA
HEALTHCARE INVESTORS, INC.

Name:
      

Address:
     

Date:
      

Omega
Healthcare Investors, Inc.

Suite
100

9690
Deerco Road

Timonium,
Maryland 21093

Re: Exercise
of Incentive Stock Option

Dear Sir
or Madam:

Subject
to acceptance hereof in writing by Omega Healthcare Investors, Inc. (the
“Company”) pursuant to the provisions of the Omega Healthcare Investors, Inc.
2004 Stock Incentive Plan, I hereby give at least ten days but not more than
thirty days prior notice of my election to exercise options granted to me to
purchase ______________ shares of Common Stock of the Company under the
Incentive Stock Option Award (the “Award”) pursuant to the Omega Healthcare
Investors, Inc. 2004 Stock Incentive Plan dated as of ____________, ______. The
purchase shall take place as of ____________, _____ (the “Exercise
Date”).

On or
before the Exercise Date, I will pay the applicable purchase price as
follows:

	 	
      [
      ]
	
      by
      delivery of cash or a certified check for $___________ for the full
      purchase price payable to the order of the
Company.

	 	
      [
      ]
	
      by
      delivery of a certified check for $___________ representing a portion of
      the purchase price with the balance to consist of shares of Common Stock
      that I have owned for at least six months and that are represented by a
      stock certificate I will surrender to the Company with my endorsement. If
      the number of shares of Common Stock represented by such stock certificate
      exceed the number to be applied against the purchase price, I understand
      that a new stock certificate will be issued to me reflecting the excess
      number of shares.

	 	
      [
      ]
	
      by
      delivery of a stock certificate representing shares of Common Stock that I
      have owned for at least six months which I will surrender to the Company
      with my endorsement as payment of the purchase price. If the number of
      shares of Common Stock represented by such certificate exceed the number
      to be applied against the purchase price, I understand that a new
      certificate will be issued to me reflecting the excess number of
      shares.

	 	
      [
      ]
	
      by
      delivery of the purchase price by ________________, a broker, dealer or
      other “creditor” as defined by Regulation T issued by the Board of
      Governors of the Federal Reserve System. I hereby authorize the Company to
      issue a stock certificate in the number of shares indicated above in the
      name of said broker, dealer or other creditor or its nominee pursuant to
      instructions received by the Company and to deliver said stock certificate
      directly to that broker, dealer or other creditor (or to such other party
      specified in the instructions received by the Company from the broker,
      dealer or other creditor) upon receipt of the purchase
    price.

As soon
as the stock certificate is registered in my name, please deliver it to me at
the above address.

If the
Common Stock being acquired is not registered for issuance to and resale by the
Optionee pursuant to an effective registration statement on Form S-8 (or
successor form) filed under the Securities Act of 1933, as amended (the “1933
Act”), I hereby represent, warrant, covenant, and agree with the Company as
follows:

The
shares of the Common Stock being acquired by me will be acquired for my own
account without the participation of any other person, with the intent of
holding the Common Stock for investment and without the intent of participating,
directly or indirectly, in a distribution of the Common Stock and not with a
view to, or for resale in connection with any distribution of the Common Stock,
nor am I aware of the existence of any distribution of the Common Stock;

I am not
acquiring the Common Stock based upon any representation, oral or written, by

any
person with respect to the future value of, or income from, the Common Stock but
rather upon an independent examination and judgment as to the prospects of the
Company;

The
Common Stock was not offered to me by means of any publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to other
persons by such means;

I am able
to bear the economic risks of the investment in the Common Stock, including the
risk of a complete loss of my investment therein;

I
understand and agree that the Common Stock will be issued and sold to me without
registration under any state law relating to the registration of securities for
sale, and will be issued and sold in reliance on the exemptions from
registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof
and the rules and regulations promulgated thereunder;

The
Common Stock cannot be offered for sale, sold or transferred by me other than
pursuant to: (A) an effective registration under the 1933 Act or in a
transaction otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Company of compliance with the applicable securities laws of
other jurisdictions. The Company shall be entitled to rely upon an opinion of
counsel satisfactory to it with respect to compliance with the above
laws;

The
Company will be under no obligation to register the Common Stock or to comply
with any exemption available for sale of the Common Stock without registration
or filing, and the information or conditions necessary to permit routine sales
of securities of the Company under Rule 144 under the 1933 Act may not now be
available and no assurance has been given that it or they will become available.
The Company is under no obligation to act in any manner so as to make Rule 144
available with respect to the Common Stock;

I have
and have had complete access to and the opportunity to review and make copies of
all material documents related to the business of the Company, including, but
not limited to, contracts, financial statements, tax returns, leases, deeds and
other books and records. I have examined such of these documents as I wished and
am familiar with the business and affairs of the Company. I realize that the
purchase of the Common Stock is a speculative investment and that any possible
profit therefrom is uncertain;

I have
had the opportunity to ask questions of and receive answers from the Company and
any person acting on its behalf and to obtain all material information
reasonably available with respect to the Company and its affairs. I have
received all information and data with respect to the Company which I have
requested and which I have deemed relevant in connection with the evaluation of
the merits and risks of my investment in the Company;

I have
such knowledge and experience in financial and business matters that I am
capable of evaluating the merits and risks of the purchase of the Common Stock
hereunder and I am able to bear the economic risk of such purchase;
and

The
agreements, representations, warranties and covenants made by me herein extend
to and apply to all of the Common Stock of the Company issued to me pursuant to
this Award. Acceptance by me of the certificate representing such Common Stock
shall constitute a confirmation by me that all such agreements, representations,
warranties and covenants made herein shall be true and correct at that
time.

I
understand that the certificates representing the shares being purchased by me
in accordance with this notice shall bear a legend referring to the foregoing
covenants, representations and warranties and restrictions on transfer, and I
agree that a legend to that effect may be placed on any certificate which may be
issued to me as a substitute for the certificates being acquired by me in
accordance with this notice.

Very
truly yours,

_________________________   

AGREED TO
AND ACCEPTED:

OMEGA
HEALTHCARE INVESTORS, INC.

By:     

Title:     

Number of
Shares Exercised:    

Number of
Shares Remaining:      Date:___________  

::ODMA\PCDOCS\ATL\791797\1

Exhibit 1
- Page 

EXHIBIT
2

NOTICE
OF WITHHOLDING ELECTION

OMEGA
HEALTHCARE INVESTORS, INC. 2004 STOCK INCENTIVE PLAN

Name:
      

Address:      

                        Date:
      

Omega
Healthcare Investors, Inc.

Suite
100

9690
Deerco Road

Timonium,
Maryland 21093

Re: Withholding
Election

This
election relates to the Option identified in Paragraph 3 below. I hereby
certify that:

	
      (1)
	
      My
      correct name and social security number and my current address are set
      forth at the end of this document.

(2)        
 I am
(check one, whichever is applicable).

	 	
      [
      ]
	
      the
      original recipient of the Option.

	 	
      [
      ]
	
      the
      legal representative of the estate of the original recipient of the
      Option.

	 	
      [
      ]
	
      the
      legal guardian of the original recipient of the
Option.

	
      (3)
	
      The
      Option to which this election relates was issued under the Omega
      Healthcare Investors, Inc. 2004 Stock Incentive Plan (the “Plan”) in the
      name of _________________________ for the purchase of a total of _________
      shares of Common Stock of the Company. This election relates to
      _______________ shares of Common Stock issuable upon exercise of the
      Option, provided that the numbers set forth above shall be deemed changed
      as appropriate to reflect the applicable Plan
  provisions.

	
      (4)
	
      In
      connection with any exercise of the Option with respect to the Common
      Stock, I hereby elect: 

	 	
      [  ]
	
      to
      have certain of the shares issuable pursuant to the exercise withheld by
      the Company for the purpose of having the value of the shares applied to
      pay federal, state, and local, if any, taxes arising from the
      exercise.

	 	
      [  ]
	
      to
      tender shares held by me for a period of at least six (6) months prior to
      the exercise of the Option for the purpose of having the value of the
      shares applied to pay such taxes.

	
      
	
      The
      shares to be withheld or tendered, as applicable, shall have, as of the
      Tax Date applicable to the exercise, a Fair Market Value equal to the
      minimum statutory tax withholding requirement under federal, state, and
      local law in connection with the exercise.

	
      (5)
	
      This
      Withholding Election is made no later than the Tax Date and is otherwise
      timely made pursuant to the Plan.

	
      (6)
	
      I
      understand that this Withholding Election may not be revised, amended or
      revoked by me.

	
      (7)
	
      The
      Plan has been made available to me by the Company. I have read and
      understand the Plan and I have no reason to believe that any of the
      conditions to the making of this Withholding Election have not been
      met.

	
      (8)
	
      Capitalized
      terms used in this Notice of Withholding Election without definition shall
      have the meanings given to them in the
Plan.

Dated:
            

                                 
Signature

Social
Security Number                            Name
(Printed)

                                                         
Street Address

                                                                         
City, State, Zip Code

 

Exhibit 2
- Page 

EXHIBIT
3

VESTING
SCHEDULE 

OMEGA
HEALTHCARE INVESTORS, INC.2004 STOCK INCENTIVE PLAN

Vesting
Schedule

 

	
      A.
	
      The
      Option Shares shall become vested Option Shares following completion of
      the years of service as an employee of the Company or an Affiliate as
      indicated in the schedule below.

Percentage
of Option Shares              Years of
Service 

Which
are Vested Shares           After
the Grant Date

33
1/3%               1

66
2/3%               2

100%        3

	
      B.
	
      For
      purposes of this Schedule 1, the Optionee shall receive credit for service
      for each year determined based on each annual anniversary of the Grant
      Date, during which the Optionee continually remains employed by the
      Company or an Affiliate. 

 

	
      C.
	
      Notwithstanding
      the foregoing Vesting Schedule, the Option will become fully vested upon
      the occurrence of a Change in Control.Form of Non-qualified Stock Award for the OHI 2004

 

DRAFT
7/28/04

NON-QUALIFIED
STOCK OPTION AWARD

PURSUANT
TO THE OMEGA HEALTHCARE INVESTORS, INC.

2004
STOCK INCENTIVE PLAN

THIS
AWARD is made as of the Grant Date, by OMEGA HEALTHCARE INVESTORS, INC. (the
“Company”) to _______________________ (the “Optionee”).

Upon and
subject to the Terms and Conditions attached hereto and incorporated herein by
reference, the Company hereby awards as of the Grant Date to Optionee a
non-qualified stock option (the “Option”), as described below, to purchase the
Option Shares.

A. Grant
Date: ____________________.

B. Type of
Option: Non-Qualified Stock Option.

	 	
      C.
	
      Plan
      under which granted: Omega Healthcare Investors, Inc. 2004 Stock Incentive
      Plan.

	 	
      D.
	
      Option
      Shares: All or any part of _____ shares of the Company’s common stock (the
      “Common Stock”), subject to adjustment as provided in the attached Terms
      and Conditions.

E. Exercise
Price: $  per
share, subject to adjustment as provided in the attached Terms and Conditions.

	 	
      F.
	
      Option
      Period: The Option may be exercised only during the Option Period which
      commences on the Grant Date and ends, subject to earlier termination as
      provided in the attached Terms and Conditions, on the earliest of the
      following: 

(a) the tenth
(10th) anniversary of the Grant Date; 

 

	 	
      (b)
	
      three
      (3) months following the date the Optionee ceases to be an employee of the
      Company for any reason other than death, Disability or termination of the
      Optionee’s employment by the Company for Cause;

 

	 	
      (c)
	
      twelve
      (12) months following the date the Optionee ceases to be an employee of
      the Company due to death or Disability; or

 

	 	
      (d)
	
      the
      time the Optionee is given notice by the Company that it
      is terminating his employment for Cause;

 

provided,
however, that the Option may only be exercised as to the vested Option Shares
determined pursuant to the Vesting Schedule. Note
that other restrictions to exercising the Option, as described in the attached
Terms and Conditions, may apply.

 

	 	
      G.
	
      Vesting
      Schedule: The Option Shares shall vest in accordance with the Vesting
      Schedule attached hereto as Schedule 1.

IN
WITNESS WHEREOF, the Company and Optionee have executed and sealed this Award as
of the Grant Date set forth above. 

OMEGA
HEALTHCARE INVESTORS, INC.

By:     

Title:     

OPTIONEE

 

 

TERMS
AND CONDITIONS TO THE

NON-QUALIFIED
STOCK OPTION AWARD

PURSUANT
TO THE

OMEGA
HEALTHCARE INVESTORS, INC. 2004 STOCK INCENTIVE PLAN

1. Exercise
of Option. Subject
to the provisions provided herein or in the Award made pursuant to the Omega
Healthcare Investors, Inc. 2004 Stock Incentive Plan:

(a) The
Option may be exercised with respect to all or any portion of the vested Option
Shares at any time during the Option Period by the delivery to the Company, at
its principal place of business, of (i) a written notice of exercise in
substantially the form attached hereto as Exhibit 1, which shall be actually
delivered to the Company no earlier than thirty (30) days and no later than ten
(10) days prior to the date upon which Optionee desires to exercise all or any
portion of the Option and (ii) payment to the Company of the Exercise Price
multiplied
by the
number of shares being purchased (the “Purchase Price”) in the manner
provided in Subsection (b). 

(b) The
Purchase Price shall be paid in full upon the exercise of an Option and no
Option Shares shall be issued or delivered until full payment therefor has been
made. Payment of the Purchase Price for all Option Shares purchased pursuant to
the exercise of an Option shall be made in cash, certified check, or,
alternatively, as follows:

(i) by
delivery to the Company of a number of shares of Common Stock which have been
owned by the Optionee for at least six (6) months prior to the date of the
Option’s exercise, having a Fair Market Value, as determined under the Plan, on
the date of exercise either equal to the Purchase Price or in combination with
cash to equal the Purchase Price; or

(ii) by
receipt of the Purchase Price in cash from a broker, dealer or other “creditor”
as defined by Regulation T issued by the Board of Governors of the Federal
Reserve System following delivery by the Optionee to the Committee (defined in
the Plan) of instructions in a form acceptable to the Committee regarding
delivery to such broker, dealer or other creditor of that number of Option
Shares with respect to which the Option is exercised.

Upon
acceptance of such notice and receipt of payment in full of the Purchase Price
and any tax withholding liability, the Company shall cause to be issued a
certificate representing the Option Shares purchased.

2. Withholding. The
Optionee must satisfy federal, state and local, if any, withholding taxes
imposed by reason of the exercise of the Option either by paying to the Company
the full amount of the withholding obligation (i) in cash; (ii) by tendering
shares of Common Stock which have been owned by the Optionee for at least six
(6) months prior to the date of exercise having a “Fair Market Value” (as
defined in the Plan) equal to the withholding obligation; (iii) by electing,
irrevocably and in writing (the “Withholding Election”), to have the smallest
number of whole shares of Common Stock which, when multiplied by the Fair Market
Value of the Common Stock as of the date the Option is exercised, is sufficient
to satisfy the amount of withholding tax; or (iv) by any combination of the
above. Optionee may make a Withholding Election only if the following conditions
are met:

(a) the
Withholding Election is made on or prior to the date on which the amount of tax
required to be withheld is determined (the “Tax Date”) by executing and
delivering to the Company a properly completed Notice of Withholding Election in
substantially the form attached hereto as Exhibit 2; and

(b) any
Withholding Election will be irrevocable; however, the Committee may, in its
sole discretion, disapprove and give no effect to the Withholding Election.

3. Rights
as Shareholder. Until
the stock certificates reflecting the Option Shares accruing to the Optionee
upon exercise of the Option are issued to the Optionee, the Optionee shall have
no rights as a shareholder with respect to such Option Shares. The Company shall
make no adjustment for any dividends or distributions or other rights on or with
respect to Option Shares for which the record date is prior to the issuance of
that stock certificate, except as the Plan or this Award otherwise
provides.

4. Restriction
on Transfer of Option and Option Shares. Unless
otherwise permitted by the “Committee” (as defined in the Plan), the Option
evidenced hereby is nontransferable other than by will or the laws of descent
and distribution, and, shall be exercisable during the lifetime of the Optionee
only by the Optionee (or in the event of his Disability, by his legal
representative) and after his death, only by the legal representative of the
Optionee’s estate or, if no legal representative is appointed, the successor in
interest determined under the Optionee’s will.

5. Changes
in Capitalization.

(a) The
number of Option Shares and the Exercise Price shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or combination of shares or the payment of a stock
dividend in shares of Common Stock to holders of outstanding shares of Common
Stock or any other increase or decrease in the number of shares of Common Stock
outstanding effected without receipt of consideration by the
Company.

(b) In the
event of a merger, consolidation, extraordinary dividend, spin-off, sale of
substantially all of the Company’s assets or other material change in the
corporate structure of the Company or a tender offer for shares of Common Stock,
in each case that does not result in a Change in Control, the Committee may, in
its sole discretion, adjust the number and class of securities subject to the
Option, with a corresponding adjustment in the Exercise Price, substitute a new
option to replace the Option, accelerate the termination of the Option Period or
terminate the Option in consideration of a cash payment to the Optionee in an
amount equal to the excess of the then Fair Market Value of the Option Shares
over the aggregate Exercise Price of the Option Shares.

(c) The
existence of the Plan and this Award shall not affect in any way the right or
power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Common Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or
proceeding.

6. Special
Limitations on Exercise. Any
exercise of the Option is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by the Option upon any securities exchange
or under any state or federal law is necessary or desirable as a condition of or
in connection with the delivery of shares thereunder, the delivery of any or all
shares pursuant to the Option may be withheld unless and until such listing,
registration or qualification shall have been effected. The Optionee shall
deliver to the Company, prior to the exercise of the Option, such information,
representations and warranties as the Company may reasonably request in order
for the Company to be able to satisfy itself that the Option Shares being
acquired in accordance with the terms of an applicable exemption from the
securities registration requirements of applicable federal and state securities
laws.

7. Legend
on Stock Certificates.
Certificates
evidencing the Option Shares, to the extent appropriate at the time, shall have
noted conspicuously on the certificates a legend intended to give all persons
full notice of the existence of the conditions, restrictions, rights and
obligations set forth herein and in the Plan such as:

TRANSFER
IS RESTRICTED

The
securities evidenced by this certificate may not be sold, transferred, assigned,
or hypothecated unless (1) there is an effective registration under such act
covering such securities, (2) the transfer is made in compliance with rule 144
promulgated under such act, or (3) the issuer receives an opinion of counsel,
reasonably satisfactory to the company, stating that such sale, transfer,
assignment or hypothecation is exempt from the registration requirements of such
act.

Optionee
agrees that the Company may also endorse any other legends it deems necessary
and advisable or as may be required by applicable federal or state securities
laws.

8. Governing
Laws. This
Award shall be construed, administered and enforced according to the laws of the
State of Maryland; provided, however, no option may be exercised except, in the
reasonable judgment of the Board of Directors, in compliance with exemptions
under applicable state securities laws of the state in which the Optionee
resides, and/or any other applicable securities laws.

9. Successors. This
Award shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and permitted assigns of the parties.

10. Notice. Except
as otherwise specified herein, all notices and other communications under this
Award shall be in writing and shall be deemed to have been given if personally
delivered or if sent by registered or certified United States mail, return
receipt requested, postage prepaid, addressed to the proposed recipient at the
last known address of the recipient. Any party may designate any other address
to which notices shall be sent by giving notice of the address to the other
parties in the same manner as provided herein.

11. Severability. In the
event that any one or more of the provisions or portion thereof contained in
this Award shall for any reason be held to be invalid, illegal or unenforceable
in any respect, the same shall not invalidate or otherwise affect any other
provisions of this Award, and this Award shall be construed as if the invalid,
illegal or unenforceable provision or portion thereof had never been contained
herein.

12. Entire
Agreement. Subject
to the terms and conditions of the Plan, this Award expresses the entire
understanding and agreement of the parties. This Award may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.

13. Violation. Any
transfer, pledge, sale, assignment, or hypothecation of the Option or any
portion thereof shall be a violation of the terms of this Award and shall be
void and without effect.

14. Headings.
Paragraph headings used herein are for convenience of reference only and shall
not be considered in construing this Award.

15. Specific
Performance. In the
event of any actual or threatened default in, or breach of, any of the terms,
conditions and provisions of this Award, the party or parties who are thereby
aggrieved shall have the right to specific performance and injunction in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative.

16. No
Right to Continued Employment. Neither
the establishment of the Plan nor the award of Option Shares hereunder shall be
construed as giving the Optionee the right to continued employment.

	17.  	
      Definitions.
      As
      used in these Terms and Conditions and this Award,

(a)  “Cause”
shall
have the meaning set forth in the employment agreement then in effect between
the Optionee and the Company, or, if there is none, then Cause shall mean the
occurrence of any of the following events:

(i) willful
refusal by the Optionee to follow a lawful direction of a superior officer of
the Company or the Board of Directors of the Company, provided the direction is
not materially inconsistent with the duties or work responsibilities of the
Optionee’s job position; 

(ii) willful
misconduct by the Optionee or reckless disregard of his or her duties or of the
interest or property of the Company; 

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

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

	(v)  	
      conviction
      of the Optionee of a felony. 

(b) “Change
in Control” means
any one of the following events which occurs following the Grant
Date:

(i) the
acquisition, directly or indirectly, by any “person” or “persons” (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than the Company or any employee benefits plan of the Company or
an Affiliate, or any corporation pursuant to a reorganization, merger or
consolidation, of equity securities of the Company, resulting in such person or
persons holding equity securities of the Company that in the aggregate represent
thirty percent (30%) or more of the combined ordinary voting power of the
Company’s then outstanding equity securities; 

(ii) individuals
who as of the date hereof, constitute the Board of Directors (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors;

(iii) a
reorganization, merger or consolidation, with respect to which persons who were
the holders of equity securities of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
equity securities of the surviving entity representing more than fifty percent
(50%) of the combined ordinary voting power of the then outstanding voting
securities of the surviving entity; or

(iv) a sale,
or one or more sales occurring in a twelve-month period, of all or substantially
all of the assets of the Company to any third party.

Notwithstanding
the foregoing, no Change in Control shall be deemed to have occurred for
purposes of this Award by reason of any actions or events in which the Optionee
participates in a capacity other than in his capacity as an officer, employee,
or director of the Company or an Affiliate. 

(c) “Confidential
Information” means
data and information relating to the business of the Company (which does not
rise to the level of a Trade Secret) which is or has been disclosed to the
Optionee or of which the Optionee became aware of as a consequence of or through
the Optionee’s 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 the
Optionee without authorization) or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means.

(d) “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.

(e) Other
capitalized terms that are not defined herein have the meaning set forth in the
Plan, except where the context does not reasonably permit. 

 

 

EXHIBIT
1

NOTICE
OF EXERCISE OF

STOCK
OPTION TO PURCHASE

COMMON
STOCK OF

OMEGA
HEALTHCARE INVESTORS, INC.

Name
     

Address     

                
    Date      

 

 

Omega
Healthcare Investors, Inc.

9690
Deereco Road

Suite
100

Timonium,
Maryland 21093

Re: Exercise
of Non-Qualified Stock Option

Gentlemen:

Subject
to acceptance hereof in writing by Omega Healthcare Investors, Inc. (the
“Company”) pursuant to the provisions of the Omega Healthcare Investors, Inc.
2004 Stock Option and Equity Incentive Plan, I hereby give at least ten days but
not more than thirty days prior notice of my election to exercise options
granted to me to purchase ______________ shares of Common Stock of the Company
under the Non-Qualified Stock Option Award (the “Award”) pursuant to the Omega
Healthcare Investors, Inc. 2004 Stock Option and Equity Incentive Plan dated as
of _____________. The purchase shall take place as of __________ (the “Exercise
Date”).

On or
before the Exercise Date, I will pay the applicable purchase price as
follows:

	
      
	
      [
      ]
	
      by
      delivery of cash or a certified check for $___________ for the full
      purchase price payable to the order of Omega Healthcare Investors,
      Inc.

	
      
	
      [
      ]
	
      by
      delivery of a certified check for $___________ representing a portion of
      the purchase price with the balance to consist of shares of Common Stock
      that I have owned for at least six months and that are represented by a
      stock certificate I will surrender to the Company with my endorsement. If
      the number of shares of Common Stock represented by such stock certificate
      exceed the number to be applied against the purchase price, I understand
      that a new stock certificate will be issued to me reflecting the excess
      number of shares.

	
      
	
      [
      ]
	
      by
      delivery of a stock certificate representing shares of Common Stock that I
      have owned for at least six months which I will surrender to the Company
      with my endorsement as payment of the purchase price. If the number of
      shares of Common Stock represented by such certificate exceed the number
      to be applied against the purchase price, I understand that a new
      certificate will be issued to me reflecting the excess number of
      shares.

	
      
	
      [
      ]
	
      by
      delivery of the purchase price by ________________, a broker, dealer or
      other “creditor” as defined by Regulation T issued by the Board of
      Governors of the Federal Reserve System. I hereby authorize the Company to
      issue a stock certificate in number of shares indicated above in the name
      of said broker, dealer or other creditor or its nominee pursuant to
      instructions received by the Company and to deliver said stock certificate
      directly to that broker, dealer or other creditor (or to such other party
      specified in the instructions received by the Company from the broker,
      dealer or other creditor) upon receipt of the purchase
    price.

The
required federal, state and local income tax withholding obligations, if any, on
the exercise of the Award shall also be paid in cash or by certified check on or
before the Exercise Date, or will be satisfied in the manner provided in the
Withholding Election previously tendered or to be tendered to the Company no
later than the indicated date of purchase.

As soon
as the stock certificate is registered in my name, please deliver it to me at
the above address.

If the
Common Stock being acquired is not registered for issuance to and resale by the
Optionee pursuant to an effective registration statement on Form S-8 (or
successor form) filed under the Securities Act of 1933, as amended (the “1933
Act”), I hereby represent, warrant, covenant, and agree with the Company as
follows:

The
shares of the Common Stock being acquired by me will be acquired for my own
account without the participation of any other person, with the intent of
holding the Common Stock for investment and without the intent of participating,
directly or indirectly, in a distribution of the Common Stock and not with a
view to, or for resale in connection with, any distribution of the Common Stock,
nor am I aware of the existence of any distribution of the Common Stock;

I am not
acquiring the Common Stock based upon any representation, oral or written, by
any person with respect to the future value of, or income from, the Common Stock
but rather upon an independent examination and judgment as to the prospects of
the Company;

The
Common Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to other
persons by such means;

I am able
to bear the economic risks of the investment in the Common Stock, including the
risk of a complete loss of my investment therein;

I
understand and agree that the Common Stock will be issued and sold to me without
registration under any state law relating to the registration of securities for
sale, and will be issued and sold in reliance on the exemptions from
registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof
and the rules and regulations promulgated thereunder;

The
Common Stock cannot be offered for sale, sold or transferred by me other than
pursuant to: (A) an effective registration under the 1933 Act or in a
transaction otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Company of compliance with the applicable securities laws of
other jurisdictions. The Company shall be entitled to rely upon an opinion of
counsel satisfactory to it with respect to compliance with the above
laws;

The
Company will be under no obligation to register the Common Stock or to comply
with any exemption available for sale of the Common Stock without registration
or filing, and the information or conditions necessary to permit routine sales
of securities of the Company under Rule 144 under the 1933 Act are not now
available and no assurance has been given that it or they will become available.
The Company is under no obligation to act in any manner so as to make Rule 144
available with respect to the Common Stock;

I have
and have had complete access to and the opportunity to review and make copies of
all material documents related to the business of the Company, including, but
not limited to, contracts, financial statements, tax returns, leases, deeds and
other books and records. I have examined such of these documents as I wished and
am familiar with the business and affairs of the Company. I realize that the
purchase of the Common Stock is a speculative investment and that any possible
profit therefrom is uncertain;

I have
had the opportunity to ask questions of and receive answers from the Company and
any person acting on its behalf and to obtain all material information
reasonably available with respect to the Company and its affairs. I have
received all information and data with respect to the Company which I have
requested and which I have deemed relevant in connection with the evaluation of
the merits and risks of my investment in the Company;

I have
such knowledge and experience in financial and business matters that I am
capable of evaluating the merits and risks of the purchase of the Common Stock
hereunder and I am able to bear the economic risk of such purchase;
and

The
agreements, representations, warranties and covenants made by me herein extend
to and apply to all of the Common Stock of the Company issued to me pursuant to
this Award. Acceptance by me of the certificate representing such Common Stock
shall constitute a confirmation by me that all such agreements, representations,
warranties and covenants made herein shall be true and correct at that
time.

I
understand that the certificates representing the shares being purchased by me
in accordance with this notice shall bear a legend referring to the foregoing
covenants, representations and warranties and restrictions on transfer, and I
agree that a legend to that effect may be placed on any certificate which may be
issued to me as a substitute for the certificates being acquired by me in
accordance with this notice.

Very
truly yours,

AGREED TO
AND ACCEPTED

OMEGA
HEALTHCARE INVESTORS, INC. 

By:     

Title:     

Number of
Shares

Exercised:    

Number of
Shares

Remaining:     Date:    

 

Exhibit 1
- Page of
4

EXHIBIT
2

NOTICE
OF WITHHOLDING ELECTION

OMEGA
HEALTHCARE INVESTORS, INC.

TO:   Omega
Healthcare Investors, Inc.

FROM:       

RE:  Withholding
Election

This
election relates to the Option identified in Paragraph 3 below. I hereby
certify that:

(1) My
correct name and social security number and my current address are set forth at
the end of this document.

(2) I am
(check one, whichever is applicable).

	 	
      [
      ]
	
      the
      original recipient of the Option.

	 	
      [
      ]
	
      the
      legal representative of the estate of the original recipient of the
      Option.

	 	
      [
      ]
	
      a
      legatee of the original recipient of the
Option.

	 	
      [
      ]
	
      the
      legal guardian of the original recipient of the
Option.

(3) The
Option to which this election relates was issued under the Omega Healthcare
Investors, Inc. 2004 Stock Incentive Plan (the “Plan”) in the name of
_________________________ for the purchase of a total of _______________ shares
of Common Stock of the Company. This election relates to _______________ shares
of Common Stock issuable upon exercise of the Option, provided that the numbers
set forth above shall be deemed changed as appropriate to reflect the applicable
Plan provisions.

(4) In
connection with any exercise of the Option with respect to the Common Stock, I
hereby elect: 

	 	
      [  ]
	
      to
      have certain of the shares issuable pursuant to the exercise withheld by
      the Company for the purpose of having the value of the shares applied to
      pay federal, state, and local, if any, taxes arising from the
      exercise.

	 	
      [  ]
	
      to
      tender shares held by me for a period of at least six (6) months prior to
      the exercise of the option for the purpose of having the value of the
      shares applied to pay such taxes.

The
shares to be withheld or tendered, as applicable, shall have, as of the Tax Date
applicable to the exercise, a Fair Market Value equal to the minimum statutory
tax withholding requirement under federal, state, and local law in connection
with the exercise.

(5) This
Withholding Election is made no later than the Tax Date and is otherwise timely
made pursuant to the Plan.

(6) I
understand that this Withholding Election may not be revised, amended or revoked
by me.

(7) I further
understand that the Company shall withhold from the shares a whole number of
shares having the value specified in Paragraph 4 above, as
applicable.

(8) The Plan
has been made available to me by the Company. I have read and understand the
Plan and I have no reason to believe that any of the conditions to the making of
this Withholding Election have not been met.

(9) Capitalized
terms used in this Notice of Withholding Election without definition shall have
the meanings given to them in the Plan.

Dated:
            

                Signature

Social
Security Number  Name
(Printed)

                                               
Street Address

                                               
City, State, Zip Code

 

Exhibit 2
- Page of
2

SCHEDULE
1

NON-QUALIFIED
STOCK OPTION AWARD

ISSUED
PURSUANT TO THE 

OMEGA
HEALTHCARE INVESTORS, INC.

2004
STOCK INCENTIVE PLAN

Vesting
Schedule

	
      A.
	
      The
      Option Shares shall become vested Option Shares following completion of
      the years of service as an employee of the Company or an Affiliate as
      indicated in the schedule below.

Percentage
of Option Shares   Years of
Service 

Which
are Vested Shares   After
the Grant Date

33
1/3%     1

66
2/3%     2

100%      3

	
      B.
	
      For
      purposes of this Schedule 1, the Optionee shall receive credit for service
      for each year determined based on each annual anniversary of the Grant
      Date, during which the Optionee continually remains employed by the
      Company or an Affiliate. 

	
      C.
	
      Notwithstanding
      the foregoing Vesting Schedule, the Option will become fully vested upon
      the occurrence of a Change in Control.

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