Document:

THIS  WARRANT  AND  THE  SECURITIES  ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR  ANY  STATE  SECURITIES  LAW,  AND  MAY  NOT  BE  SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED  OR  OTHERWISE  DISPOSED  OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT  UNDER  THE  SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE  BECOME  EFFECTIVE  WITH  REGARD  THERETO,  OR  (ii)  AN  EXEMPTION  FROM
REGISTRATION  UNDER  THE  SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE  IN  CONNECTION  WITH  SUCH  OFFER,  SALE  OR  TRANSFER.

AN  INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.  HOLDERS MUST
RELY  ON  THEIR  OWN  ANALYSIS  OF  THE  INVESTMENT  AND ASSESSMENT OF THE RISKS
INVOLVED.

Warrant  to  Purchase
2,700,000shares
---------

                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                                   E-REX, INC.

     THIS  CERTIFIES  that  Swartz  Private Equity, LLC or any subsequent holder
                            ---------------------------
hereof  pursuant  to Section 8 hereof ("Holder" or "Investor"), has the right to
purchase from E-REX, INC., a Nevada corporation (the "Company"), up to 2,700,000
                                                                       ---------
fully  paid  and  nonassessable  shares of the Company's common stock, $.001 par
value per share ("Common Stock"), subject to adjustment as provided herein, at a
price  equal  to  the  Exercise Price as defined in Section 3 below, at any time
beginning  on  the Date of Issuance (defined below) and ending at 5:00 p.m., New
York,  New York time the date that is seven (7) years after the Date of Issuance
(the  "Exercise  Period").

     Holder  agrees  with the Company that this Warrant to Purchase Common Stock
of the Company (this "Warrant") is issued and all rights hereunder shall be held
subject  to  all of the conditions, limitations and provisions set forth herein.

     1.     Date  of  Issuance  and  Term.
            ------------------------------

     This  Warrant  shall be deemed to be issued on September 22, 2000 ("Date of
Issuance").  The  term  of  this  Warrant  is  seven  (7) years from the Date of
Issuance.

     Of  this Warrant to purchase two million seven hundred thousand (2,700,000)
shares  of  Common  Stock  of the Company, the Warrant is exercisable as to nine
hundred  thousand  (900,000)  shares  of  Common  Stock of the Company after the
fifteen  (15)  business  day  document  review  period  (the  "Review  Period")
referenced  in  the  Equity Line Letter of Agreement dated on or about September
22,  2000,  between  Holder  and  Company (the "Letter of Agreement") has ended,
shall be further exercisable as to an additional nine hundred thousand (900,000)
shares  of  Common  Stock  of  the Company upon the execution by the Company and
Swartz Private Equity, LLC of an Investment Agreement, pursuant to the Letter of
Agreement  ("Investment  Agreement")  and shall be further exercisable as to the
remaining  nine hundred thousand (900,000) shares of Common Stock of the Company
upon  the  earlier  of  (i)  the date of effectiveness of Company's registration
statement  (the "Registration Statement") to be filed pursuant to the Investment
Agreement  and  related  documents,  or  (ii)  March  22,  2001.

     Anything  in  this  Warrant to the contrary notwithstanding, if the Company
delivers written notice to Swartz Private Equity, LLC prior to the expiration of
the  Review Period that the legal documents for the transaction are unacceptable
and  the  Company  wishes  to  terminate the transaction (a "Company Termination
Notice"),  Holder  shall  return this Warrant to the Company and all of Holder's
rights  under  this  Warrant  shall  be null and void and of no effect, provided
that,  if  the  Company has not delivered a Company Termination Notice to Swartz
Private  Equity, LLC, prior to the expiration of the Review Period, ownership of
this  Warrant  shall  irrevocably  vest  to  the Holder, regardless of whether a
Company  Termination  Notice  is  delivered  anytime  thereafter.

     Notwithstanding  anything to the contrary herein, the applicable portion of
this  Warrant  shall  not  be  exercisable during any time that, and only to the
extent  that,  the  number of shares of Common Stock to be issued to Holder upon
such  exercise, when added to the number of shares of Common Stock, if any, that
the Holder otherwise beneficially owns at the time of such exercise, would equal
or  exceed  4.99%  of  the number of shares of Common Stock then outstanding, as
determined  in  accordance  with  Section  13(d) of the Exchange Act (the "4.99%
Limitation").  The  4.99%  Limitation  shall  be  conclusively  satisfied if the
applicable  Exercise  Notice includes a signed representation by the Holder that
the  issuance  of  the shares in such Exercise Notice will not violate the 4.99%
Limitation,  and  the  Company  shall  not  be  entitled  to  require additional
documentation  of  such  satisfaction.

     2.     Exercise.
            --------

     (a)  Manner  of  Exercise.  During the Exercise Period, this Warrant may be
exercised  as to all or any lesser number of full shares of Common Stock covered
hereby  (the "Warrant Shares") upon surrender of this Warrant, with the Exercise
Form  attached  hereto  as  Exhibit  A  (the "Exercise Form") duly completed and
                            ----------
executed,  together  with  the  full  Exercise Price (as defined below) for each
share  of  Common  Stock as to which this Warrant is exercised, at the office of
the  Company,  Attention:  Carl  E.  Dilley, President & CEO, E-Rex, Inc., 11645
Biscayne  Boulevard,  Suite  210,  Miami,  FL  33160; Telephone: (305) 895-3350,
Facsimile:  (305) 895-1400, or at such other office or agency as the Company may
designate  in  writing,  by overnight mail, with an advance copy of the Exercise
Form sent to the Company and its Transfer Agent by facsimile (such surrender and
payment  of  the  Exercise  Price  hereinafter  called  the  "Exercise  of  this
Warrant").

     (b)  Date  of  Exercise.  The  "Date  of  Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company, provided that the original Warrant and
Exercise  Form  are  received  by the Company as soon as practicable thereafter.
Alternatively,  the  Date  of Exercise shall be defined as the date the original
Exercise  Form is received by the Company, if Holder has not sent advance notice
by  facsimile.

     (c)  Delivery  of  Shares of Common Stock Upon Exercise.  Upon any exercise
of  this  Warrant, the Company shall use its reasonable best efforts to deliver,
or  shall  cause  its  transfer  agent  to  deliver,  a  stock  certificate  or
certificates  representing  the number of shares of Common Stock into which this
Warrant  was  exercised,  within  five  (5)  trading  days  (the "Share Delivery
Deadline")  of  the  date  that  all  of the following have been received by the
Company:  (i)  the  original  completed  and  executed  Exercise  Form, (ii) the
original  Warrant and (iii) the Exercise Price (if applicable)(collectively, the
"Receipt Date").  Such stock certificates shall not contain a legend restricting
transfer  if  a  registration  statement  covering  the resale of such shares of
Common  Stock  has  been  filed  by  the  Company  and declared effective by the
Securities  and Exchange Commission, and is current and effective at the time of
such  exercise  or  if such shares of Common Stock, in the reasonable opinion of
the  Company  or  its  counsel,  may  be  resold  pursuant  to an exemption from
registration,  including but not limited to Rule 144 under the Securities Act of
1933.

     (d)  Buy-In  Cure.   If (i) the Company fails for any reason to deliver the
requisite  number  of  shares of Common Stock (unlegended, if so required by the
terms  of  this  Warrant)(the  "Warrant Shares") to a Holder upon an exercise of
this  Warrant  by  the Share Delivery Deadline, (ii) the Holder has sold some or
all  of  the  Warrant  Shares  (the "Sold Shares") which such Holder anticipated
receiving  upon  such  Exercise,  and  (iii) after the applicable Share Delivery
Deadline with respect to such Exercise, the broker that sold the Sold Shares for
Holder  purchases  (in an open market transaction or otherwise) shares of Common
Stock  to  make  delivery  upon  the  sale  by  a  Holder  of the Sold Shares (a
"Buy-In"),  the  Company  shall  pay  such  Holder  within two (2) business days
following receipt of written notice of a claim pursuant to this Section 2(d) (in
addition  to  any  other  remedies  available  to  Holder) the amount (a "Buy-In
Payment")  by  which (x) such Holder's total purchase price (including brokerage
commission,  if any) for the shares of Common Stock so purchased exceeds (y) the
net  proceeds  received  by  such  Holder from the sale of the Sold Shares.  For
example,  if  a  Holder purchases shares of Common Stock having a total purchase
price  of  $11,000 to cover a Buy-In with respect to shares of Common Stock sold
for  $10,000,  the Company will be required to pay such Holder $1,000.  A Holder
shall provide the Company written notification indicating any amounts payable to
Holder  pursuant  to  this  Section  2(d).

     (e)  [Intentionally  Left  Blank].

     (f)  Cancellation  of  Warrant.  This  Warrant  shall  be canceled upon the
Exercise  of this Warrant, and, as soon as practical after the Date of Exercise,
Holder  shall  be  entitled  to  receive  Common  Stock for the number of shares
purchased  upon  such  Exercise  of  this  Warrant,  and  if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms  identical  to  this Warrant) representing any unexercised portion of this
Warrant  in  addition  to  such  Common  Stock.

     (g)  Holder of Record.  Each person in whose name any Warrant for shares of
Common  Stock  is  issued shall, for all purposes, be deemed to be the Holder of
record  of  such shares on the Date of Exercise of this Warrant, irrespective of
the  date  of  delivery  of the Common Stock purchased upon the Exercise of this
Warrant.  Nothing  in  this Warrant shall be construed as conferring upon Holder
any  rights  as  a  stockholder  of  the  Company.

     3.     Payment  of  Warrant  Exercise  Price.
            -------------------------------------

     The  Exercise Price per share ("Exercise Price") shall initially equal (the
"Initial Exercise Price") the lowest Closing Price for the five (5) trading days
immediately preceding September 22, 2000, which is $0.50.  If the lowest Closing
                                                   -----
Price  of  the  Company's Common Stock for the five (5) trading days immediately
preceding  the  date,  if  any,  that  Swartz  Private  Equity,  LLC executes an
Investment  Agreement  pursuant  to the Letter of Agreement (the "Closing Market
Price")  is  less  than  the Initial Exercise Price, the Exercise Price shall be
reset  to  equal  the  Closing Market Price, or, if the Date of Exercise is more
than  six  (6)  months  after  the Date of Issuance, the Exercise Price shall be
reset  to equal the lesser of (i) the Exercise Price then in effect, or (ii) the
"Lowest  Reset  Price,"  as  that  term  is  defined  below.  The  Company shall
calculate  a  "Reset  Price"  on  each six-month anniversary date of the Date of
Issuance  which  shall  equal  the  lowest Closing Price of the Company's Common
Stock for the five (5) trading days ending on such six-month anniversary date of
the  Date  of  Issuance.  The  "Lowest Reset Price" shall equal the lowest Reset
Price  determined  on  any  six-month  anniversary  date of the Date of Issuance
preceding  the  Date  of  Exercise,  taking  into  account,  as appropriate, any
adjustments made pursuant to Section 5 hereof.  Notwithstanding the above if all
of  the  following are true on the date of an Exercise of this Warrant, then the
Exercise  Price with respect to that Exercise only shall be $.50 (subject to any
adjustments required under Section 5 of this Warrant), notwithstanding any price
resets  that  would  otherwise apply pursuant to this Section 3: (A) the Company
has  not  completed  a  reverse  stock  split anytime after the Date of Issuance
through and including the date of such Exercise, (B) the lowest Closing Price of
the  Company's  Common Stock for the five (5) trading days immediately preceding
the  date  of  such  Exercise  is  $3.00  or  greater.

     For  purposes hereof, the term "Closing Price" shall mean the closing price
on the Nasdaq Small Cap Market, the National Market System ("NMS"), the New York
Stock  Exchange,  or  the  O.T.C.  Bulletin Board, or if no longer traded on the
Nasdaq  Small Cap Market, the National Market System ("NMS"), the New York Stock
Exchange,  or  the  O.T.C.  Bulletin  Board, the "Closing Price" shall equal the
closing  price  on  the  principal  national  securities  exchange  or  the
over-the-counter  system  on  which  the  Common  Stock is so traded and, if not
available,  the  mean  of  the  high  and  low  prices on the principal national
securities  exchange  on  which  the  Common  Stock  is  so  traded.

     Payment  of the Exercise Price may be made by either of the following, or a
combination  thereof,  at  the  election  of  Holder:

     (i)     Cash  Exercise:  cash,  bank or cashiers check or wire transfer; or

     (ii)     Cashless  Exercise:  The  Holder, at its option, may exercise this
Warrant  in  a  cashless  exercise transaction under this subsection (ii) if and
only  if,  on  the  Date  of  Exercise,  there  is  not then in effect a current
registration  statement  that covers the resale of the shares of Common Stock to
be  issued  upon  exercise  of  this  Warrant  .  In  order to effect a Cashless
Exercise,  the Holder shall surrender this Warrant with the Exercise Form at the
principal  office  of  the Company together with notice of cashless election, in
which  event  the  Company shall issue Holder a number of shares of Common Stock
computed  using  the  following  formula:
                         X  =  Y  (A-B)/A

where:     X  =  the  number  of  shares of Common Stock to be issued to Holder.

           Y  =  the  number of shares of Common Stock for which this Warrant is
being exercised.

               A  =  the  Market  Price  of  one  (1) share of Common Stock (for
               purposes of this Section 3(ii), where the "Market Price" shall be
               defined  as the average Closing Price of the Common Stock for the
               five  (5)  trading  days  prior  to  the Date of Exercise of this
               Warrant  (the "Average Closing Price"), as reported by the O.T.C.
               Bulletin  Board,  National  Association  of  Securities  Dealers
               Automated Quotation System ("Nasdaq") Small Cap Market, or if the
               Common  Stock  is  not traded on the Nasdaq Small Cap Market, the
               Average  Closing  Price  in  any  other  over-the-counter market;
               provided,  however, that if the Common Stock is listed on a stock
               exchange,  the Market Price shall be the Average Closing Price on
               such  exchange for the five (5) trading days prior to the date of
               exercise  of  the Warrants. If the Common Stock is/was not traded
               during  the  five (5) trading days prior to the Date of Exercise,
               then  the closing price for the last publicly traded day shall be
               deemed  to  be  the closing price for any and all (if applicable)
               days  during  such  five  (5)  trading  day  period.

               B  =  the  Exercise  Price.

     Notwithstanding  the  above,  the  Holder shall not be entitled to exercise
this  Warrant  in  a  Cashless Exercise until after the date that is ninety (90)
days  after  the  Date  of  Issuance  and,  if  the  Company  has entered into a
Registration  Rights  Agreement  with  Swartz Private Equity, LLC in conjunction
with the Investment Agreement and the Company has filed a Registration Statement
pursuant  to  such  Registration Rights Agreement within ninety (90) days of the
date  of  such  Registration  Rights  Agreement,  then  the  Holder shall not be
entitled  to  exercise  this Warrant in a Cashless Exercise until after the date
that  is  six  (6)  months  after  the  Date  of  Issuance.

     For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended
that  the  Common  Stock  issuable  upon  exercise of this Warrant in a cashless
exercise  transaction  shall  be  deemed  to have been acquired at the time this
Warrant  was issued.  Moreover, it is intended, understood and acknowledged that
the  holding  period for the Common Stock issuable upon exercise of this Warrant
in a cashless exercise transaction shall be deemed to have commenced on the date
this Warrant was issued.  Notwithstanding the above, if a determination contrary
to  the  above  is  made as a matter of law by a court or governmental agency of
competent  jurisdiction, then such determination shall govern, and the Company's
acting  in  accordance with such  determination shall not give rise to a default
under  this  paragraph.

     4.     Transfer  and  Registration.
            ---------------------------

     (a)  Transfer  Rights.  Following  an  assignment  permitted  by  and  in
accordance  with  Section  8 of this Warrant, this Warrant may be transferred on
the  books  of  the Company, in whole or in part, in person or by attorney, upon
surrender  of  this Warrant properly completed and endorsed.  This Warrant shall
be  canceled  upon  such  surrender  and, as soon as practicable thereafter, the
person  to whom such transfer is made shall be entitled to receive a new Warrant
or  Warrants  as to the portion of this Warrant transferred, and Holder shall be
entitled  to  receive  a  new  Warrant  as  to  the  portion  hereof  retained.

     (b)  Registrable  Securities.  In addition to any other registration rights
of the Holder, if the Common Stock issuable upon exercise of this Warrant is not
registered  for  resale  at the time the Company proposes to register (including
for  this  purpose a registration effected by the Company for stockholders other
than  the  Holders)  any  of  its  Common  Stock  under  the  Act  (other than a
registration  relating  solely  for  the sale of securities to participants in a
Company  stock  plan  or a registration on Form S-4 promulgated under the Act or
any  successor  or  similar  form  registering  stock  issuable  upon  a
reclassification,  upon  a  business  combination  involving  an  exchange  of
securities  or  upon  an  exchange offer for securities of the issuer or another
entity)(a  "Piggyback  Registration  Statement"),  the Company shall cause to be
included in such Piggyback Registration Statement ("Piggyback Registration") all
of  the  Common  Stock  issuable upon the exercise of this Warrant ("Registrable
Securities")  to  the  extent  such  inclusion does not violate the registration
rights  of  any  other  securityholder  of the Company granted prior to the date
hereof.  Nothing herein shall prevent the Company from withdrawing or abandoning
the  Piggyback  Registration  Statement  prior  to  its  effectiveness.

     (c)     Limitation  on  Obligations  to  Register  under  a  Piggyback
Registration.    In  the  case  of  a  Piggyback  Registration  pursuant  to  an
underwritten  public  offering  by  the  Company,  if  the  managing underwriter
determines  and  advises  in  writing  that  the  inclusion  in the registration
statement  of all Registrable Securities proposed to be included would interfere
with the successful marketing of the securities proposed to be registered by the
Company,  then  the  Company  shall  not  be  required  to  register  all of the
Registrable  Securities  in  such underwritten public offering and the number of
such  Registrable  Securities  to  be  included  in  the  Piggyback Registration
Statement,  to  the  extent  such Registrable Securities may be included in such
Piggyback  Registration  Statement, shall be allocated among all Holders who had
requested Piggyback Registration pursuant to the terms hereof, in the proportion
that  the  number  of  Registrable  Securities  which  each such Holder seeks to
register  bears  to  the  total  number  of  Registrable Securities sought to be
included  by  all  Holders.  If  required by the managing underwriter of such an
underwritten  public  offering,  the  Holders  shall  enter  into  an agreement,
reasonably  acceptable  to  the  Company,  limiting  the  number  of Registrable
Securities  to  be  included  in  such  Piggyback Registration Statement and the
terms,  if  any,  regarding  the  future  sale  of  such Registrable Securities.

     5.     Anti-Dilution  Adjustments.
            --------------------------

     (a)    [Intentionally  Left  Blank].
     (b)    Recapitalization  or  Reclassification.

            (i)  Stock  Split. If  the  Company  shall  at  any  time  effect a
                 ------------
recapitalization,  reclassification  or  other  similar  transaction  of  such
character  that  the  shares  of  Common  Stock  shall be changed into or become
exchangeable  for  a  larger  number  of shares (a "Stock Split"), then upon the
                      ------
effective date thereof, the number of shares of Common Stock which Holder  shall
be  entitled to purchase upon Exercise of this Warrant  shall  be  increased  in
direct proportion to the increase in the  number  of  shares  of Common Stock by
reason  of  such  recapitalization, reclassification or similar transaction, and
the  Exercise  Price  shall  be  proportionally  decreased.

            (ii)  Reverse Stock Split. If the Company  shall  at any time effect
                  ----------------------
a recapitalization,  reclassification  or  other  similar  transaction  of  such
character  that  the  shares  of  Common  Stock  shall be changed into or become
exchangeable for a smaller number of shares (a "Reverse Stock Split"), then upon
                   -------
the  effective  date  thereof, the number of shares of Common Stock which Holder
shall  be  entitled  to  purchase  upon  Exercise  of  this  Warrant  shall  be
proportionately  decreased  and  the  Exercise  Price  shall  be  proportionally
increased.  The Company shall give Holder the same notice it provides to holders
of  Common  Stock  of  any  transaction  described  in  this  Section  5(b).

     (c)     [Intentionally  Left  Blank].

     (d)     Notice  of  Consolidation  or  Merger  and  Warrant  Exchange.  The
Company  shall  not,  at  any  time  after  the  date  hereof,  effect a merger,
consolidation,  exchange  of  shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is  a  sale  of  all  or  substantially  all  the Company's assets (a "Corporate
Change"),  unless  the  resulting  successor or acquiring entity (the "Resulting
Entity")  assumes  by  written  instrument  the Company's obligations under this
Warrant,  including  but  not  limited to the Exercise Price reset provisions as
provided  herein  during  the term of the resultant warrants, and agrees in such
written  instrument  that this Warrant shall be exerciseable into such class and
type  of securities or other assets of the Resulting Entity as Holder would have
received  had  Holder exercised this Warrant immediately prior to such Corporate
Change,  and  the  Exercise  Price  of  this  Warrant  shall  be proportionately
increased  (if  this  Warrant shall be changed into or become exchangeable for a
warrant  to purchase a smaller number of shares of Common Stock of the Resulting
Entity)  or shall be proportionately decreased (if this Warrant shall be changed
or  become  exchangeable  for a warrant to purchase a larger number of shares of
Common  Stock  of the Resulting Entity); provided, however, that Company may not
affect  any  Corporate  Change unless it first shall have given thirty (30) days
notice  to  Holder  hereof  of  any  Corporate  Change.

     (e)     Exercise  Price  Adjusted.  As  used  in  this  Warrant,  the  term
"Exercise  Price" shall mean the purchase price per share specified in Section 3
of this Warrant, until the occurrence of an event stated in subsection (a), (b),
(c)  or  (d) of this Section 5, and thereafter shall mean said price as adjusted
from  time  to  time in accordance with the provisions of this Warrant.  No such
adjustment  under  this  Section  5  shall  be made unless such adjustment would
change  the Exercise Price at the time by $0.01 or more; provided, however, that
all  adjustments  not  so  made  shall  be  deferred and made when the aggregate
thereof  would  change  the  Exercise  Price  at  the  time  by  $0.01  or more.

     (f)     Adjustments: Additional Shares, Securities or Assets.  In the event
that  at any time, as a result of an adjustment made pursuant to this Section 5,
Holder  shall,  upon Exercise of this Warrant, become entitled to receive shares
and/or  other  securities  or  assets  (other  than Common Stock) then, wherever
appropriate,  all references herein to shares of Common Stock shall be deemed to
refer  to  and  include  such  shares  and/or  other  securities  or assets; and
thereafter  the number of such shares and/or other securities or assets shall be
subject  to  adjustment  from  time to time in a manner and upon terms as nearly
equivalent  as  practicable  to  the  provisions  of  this  Section  5.

     6.     Fractional  Interests.
            ---------------------

            No  fractional  shares or scrip representing fractional shares shall
be issuable upon the  Exercise of this Warrant, but on Exercise of this Warrant,
Holder  may  purchase  only  a  whole  number of shares of Common Stock.  If, on
Exercise  of  this  Warrant,  Holder  would be entitled to a fractional share of
Common  Stock  or  a  right  to acquire a fractional share of Common Stock, such
fractional  share  shall be disregarded and the number of shares of Common Stock
issuable  upon  exercise  shall  be  the  next  higher  number  of  shares.

     7.     Reservation  of  Shares.
            -----------------------

            The Company shall  at  all times reserve for issuance such number of
authorized  and unissued shares of Common Stock (or other securities substituted
therefor  as  herein  above provided) as shall be sufficient for the Exercise of
this  Warrant  and  payment  of  the  Exercise Price.  The Company covenants and
agrees  that  upon  the  Exercise  of  this  Warrant, all shares of Common Stock
issuable  upon  such  exercise  shall  be  duly  and validly issued, fully paid,
nonassessable  and  not subject to preemptive rights, rights of first refusal or
similar  rights  of  any  person  or  entity.

     8.     Restrictions  on  Transfer.
            --------------------------

            (a) Registration or Exemption Required. This Warrant has been issued
in  a transaction exempt from the registration requirements of the Act by virtue
of  Regulation D and exempt from state registration under applicable state laws.
The  Warrant and the Common Stock issuable upon the Exercise of this Warrant may
not  be  pledged,  transferred,  sold or assigned unless (i) done pursuant to an
effective  registration  statement  or a valid exemption from registration under
applicable securities laws, which is supported by an opinion from the Investor's
counsel  ("Investor's  Opinion")  to  the  effect  that such registration is not
required,  and  (ii) the transfer complies with any applicable state and federal
securities  laws  and  does  not  cause  the initial issuance of this Warrant to
violate  applicable  state  or  federal  securities  laws;  provided that, if no
registration  covering the resale of the Warrant Shares is effective at the time
the  Warrant  Shares are issued, the Holder consents to a legend being placed on
certificates  for  the  Warrant Shares stating that the securities have not been
registered  under  the  Securities  Act  and  referring  to such restrictions on
transferability  and  sale.

            (b)  Assignment. Subject to the restrictions set forth in subsection
(a)  above,  Holder  may  sell, transfer, assign, pledge or otherwise dispose of
this  Warrant,  in  whole  or  in part. Holder shall deliver a written notice to
Company,  substantially in the form of the Assignment attached hereto as Exhibit
                                                                         -------
B,  indicating  the  person or persons to whom the Warrant shall be assigned and
the  respective  number  of  warrants  to  be  assigned  to  each  assignee, the
Investor's  Opinion  (as  defined  above)  and  any  required  information  or
documentation  required to satisfy an exemption under applicable securities laws
(e.g.,  if  required, an investor questionnaire, etc.). The Company shall effect
any  valid assignment within ten (10) days, and shall deliver to the assignee(s)
designated  by  Holder  a  Warrant  or  Warrants of like tenor and terms for the
appropriate  number  of  shares,  within  a  commercially  reasonable time after
receipt  of  Holder's  notices.

     9.     Benefits  of  this  Warrant.
            ---------------------------

            Nothing in this Warrant shall be construed to confer upon any person
other  than the Company and Holder any legal or equitable right, remedy or claim
under  this Warrant and this Warrant shall be for the sole and exclusive benefit
of  the  Company  and  Holder.

     10.    Applicable  Law.
            ---------------

            This Warrant is issued under and shall for all purposes be governed
by and construed in accordance  with  the  laws of the state of Georgia, without
giving  effect  to  conflict  of  law  provisions  thereof.

     11.    Loss  of  Warrant.
            -----------------

            Upon  receipt  by  the  Company  of  evidence  of  the  loss, theft,
destruction  or  mutilation  of this Warrant, and (in the case of loss, theft or
destruction)  of  indemnity  or security reasonably satisfactory to the Company,
and  upon  surrender and cancellation of this Warrant, if mutilated, the Company
shall  execute  and  deliver  a  new  Warrant  of  like  tenor  and  date.

     12.    Notice  or  Demands.
            -------------------

Notices  or demands pursuant to this Warrant to be given or made by Holder to or
on  the  Company  shall  be  sufficiently  given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another  address  is  designated  in  writing by the Company, to the address set
forth  in  Section 2(a) above. Notices or demands pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if  sent  by  certified  or  registered  mail, return receipt requested, postage
prepaid,  and  addressed,  to  the  address of Holder set forth in the Company's
records,  until  another  address  is  designated  in  writing  by  Holder.

     IN  WITNESS  WHEREOF,  the  undersigned has executed this Warrant as of the
____  day  of  December,  2000.

                                       E-REX,  INC.

                                       /s/ Carl E. Dilley
                                  By:  ________________________________
                                       Carl  E.  Dilley,  President  &  CEO

<PAGE>

                                    EXHIBIT A

                            EXERCISE FORM FOR WARRANT

                                TO:   E-REX, INC.

     The  undersigned  hereby  irrevocably  exercises  the  right  to  purchase
____________ of the shares of Common Stock (the "Common Stock") of E-REX, INC. a
Nevada  corporation  (the  "Company"),  evidenced  by  the attached warrant (the
"Warrant"),  and  herewith  makes  payment of the exercise price with respect to
such  shares  in  full,  all in accordance with the conditions and provisions of
said  Warrant.

1.  The  undersigned agrees not to offer, sell, transfer or otherwise dispose of
any  of  the  Common  Stock  obtained  on  exercise  of  the  Warrant, except in
accordance  with  the  provisions  of  Section  8(a)  of  the  Warrant.

2.  The  undersigned  requests that stock certificates for such shares be issued
free  of  any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned  and  delivered  to  the undersigned at the address set forth below:

Dated:  _________

________________________________________________________________________
                                    Signature

_______________________________________________________________________
                                   Print Name

________________________________________________________________________
                                     Address

_______________________________________________________________________

NOTICE

The  signature  to  the  foregoing  Exercise Form must correspond to the name as
written  upon  the  face  of  the  attached Warrant in every particular, without
alteration  or  enlargement  or  any  change  whatsoever.
________________________________________________________________________

<PAGE>

                                    EXHIBIT B

                                   ASSIGNMENT

                    (To be executed by the registered holder
                        desiring to transfer the Warrant)

FOR  VALUE  RECEIVED,  Swartz  Private Equity, LLC (the "Warrant") hereby sells,
assigns  and  transfers  unto  the  person  or  persons below named the right to
purchase  _______  shares  of  the Common Stock of E-REX, INC., evidenced by the
attached  Warrant  and  does  hereby  irrevocably  constitute  and  appoint
_______________________  attorney  to  transfer the said Warrant on the books of
the  Company,  with  full  power  of  substitution  in  the  premises.

Dated:                              ______________________________
                                   Signature

Fill  in  assignee's  ("Assignee")  name  and  address  for  new registration of
Warrant:

 ___________________________________
          Name

___________________________________
          Address

___________________________________
Please  print  name  and  address  of  assignee
(including  zip  code  number)

_______________________________________________________________________

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement  or  any  change  whatsoever.
________________________________________________________________________

Assignee  hereby  accepts  the  rights  and agrees to be bound by limitations on
registration  of  the  Warrant  Shares  set  forth  in  the  Registration Rights
Agreement,  if  any,  executed  by  and  between  the Company and Swartz Private
Equity,  LLC,  a  true  and  correct  copy  of  which  is  attached  hereto  and
incorporated  herein  by  references  for  all  purposes,  if then in existence.Exhibit 10.1

                              EMPLOYMENT AGREEMENT
                              --------------------

     THIS  AGREEMENT (the  "Agreement")  to be effective as of 30th day of July,
2001 (the  "Effective  Date"),  between Omega  Healthcare  Investors,  Inc. (the
"Company"), R. Lee Crabill, Jr. (the "Executive").

                                  INTRODUCTION
                                  ------------

     The  Company  and  the  Executive  desire  to  enter  into  this  Agreement
confirming the terms of the Executive's employment.

         NOW, THEREFORE, the parties agree as follows:

1.       Terms and Conditions of Employment.
         -----------------------------------

         (a) Employment. During the Term, Company will employ the Executive, and
the Executive will serve as the Senior Vice President of Operations of the
Company on a full-time basis and will have such responsibilities and authority
as may from time to time be assigned to the Executive by the Chief Executive
Officer of the Company. The Executive will report to the Chief Executive Officer
of the Company. The Executive's primary office will be at the Company's
headquarters in such geographic location within the United States as may be
determined by the Company. Executive will relocate his primary residence to the
Baltimore, Maryland area by no later than January 1, 2002.

         (b) Exclusivity. Throughout the Executive's employment hereunder, the
Executive shall devote substantially all of the Executive's time, energy and
skill during regular business hours to the performance of the duties of the
Executive's employment, shall faithfully and industriously perform such duties,
and shall diligently follow and implement all management policies and decisions
of the Company; provided, however, that this provision is not intended to
prevent the Executive from managing his investments, so long as he gives his
duties to the Company first priority and such investment activities do not
interfere with his performance of duties for the Company. Notwithstanding the
foregoing, other than with regard to the Executive's duties to the Company, the
Executive will not accept any other employment during the Term, perform any
consulting services during the Term, or serve on the board of directors or
governing body of any other business, except with the prior written consent of
the Board of Directors. Further, the Executive has disclosed on Exhibit A
hereto, all of his healthcare related investments, and agrees during the Term
not to make any investments during the term hereof except as a passive investor.

2.       Compensation.
         -------------

         (a) Base Salary. Beginning on the date of this Agreement, the Company
shall pay the Executive base salary of $215,000 per annum, which base salary
will be subject to review effective as of January 1, 2003, and at least annually
thereafter, by the Company for possible increases. The base salary shall be
payable in equal installments, no less frequently than bi-monthly, in accordance
with the Company's regular payroll practices.

         (b) Bonus. The Executive shall be eligible for an annual bonus of up to
50% of the Executive's annual base salary ("Bonus"), which Bonus, if any, shall
be payable as soon as feasible following the year the Bonus is earned. The Bonus
criteria shall be determined in the discretion of the Compensation Committee of
the Board of Directors of the Company and shall consist of such objective,
subjective and personal performance goals as the Compensation Committee shall
determine appropriate. The Compensation Committee will prorate the Bonus for the
year ending December 31, 2001, for the partial year the Executive works in 2001.
The Bonus for any calendar year will be earned and accrued for that year only if
the Executive remains employed by the Company through the last day of the year.

         (c) Stock Option. As of the Effective Date, the Company shall grant the
Executive stock options to purchase 175,000 shares of the common stock of the
Company at an exercise price per share equal to the weighted average trading
price of the Company's common stock as of the trading day immediately preceding
the Effective Date. A portion of the options will be designated as an "incentive
stock option" (within the meaning of Section 422 of the Internal Revenue Code)
as of the date of grant as to the maximum number of shares permitted under
Section 422(d) of the Internal Revenue Code, based on the assumption, solely for
purposes of determining such maximum number, that the Executive remains employed
with the Company for four years from the date of grant and vests accordingly
pursuant to the vesting schedule set forth in the form of incentive stock option
agreement attached hereto as an Exhibit. The balance will be designated as a
nonqualified stock option as of the date of grant. [Assuming an exercise price
of $3.00 per share (approximate current trading price) and continuous employment
through the ISO Vesting Schedule (defined below), under those assumptions, the
portion of the options designated as incentive stock options as of the date of
grant would be for 133,333 shares (i.e. 33,333 shares (or $100,000/$3.00) first
vesting and exercisable in each of 2002, 2003, 2004, and 2005.) The "ISO Vesting
Schedule shall mean (1) the portion of the option for a number of shares equal
to $100,000 divided by the exercise price per share vesting on December 31,
2002, (2) the portion of the option for 50% of the shares minus the number of
shares in clause (1), vesting after 2 years, and (3) the portion of the option
for 25% of the shares vesting ratably each month in 2004, and (4) the portion of
the option for the remaining 25% of the shares vesting ratably each month over
the first six months in 2005.] Such stock options shall be subject to the terms
of the stock option award agreements (attached hereto as Exhibits) and the terms
of the applicable stock option plan maintained by the Company.

         (d) Expenses. The Executive shall be entitled to be reimbursed in
accordance with Company policy for reasonable and necessary expenses incurred by
the Executive in connection with the performance of the Executive's duties of
employment hereunder; provided, however, the Executive shall, as a condition of
such reimbursement, submit verification of the nature and amount of such
expenses in accordance with the reasonable reimbursement policies from time to
time adopted by the Company. Until January 1, 2002, or the date the Executive
relocates his primary residence to the Baltimore, Maryland area, if earlier, the
Company will reimburse the Executive for his reasonable travel expenses between
the Baltimore area and the Executive's existing primary residence. The Company
will reimburse the Executive for certain expenses in connection with the
relocation, by January 1, 2002, of his primary residence from Augusta, Georgia
to the Baltimore, Maryland area in accordance with the policy attached hereto as
Exhibit B.

         (e) Vacation. The Executive shall be entitled to vacation in accordance
with the terms of Company policy.

         (f) Benefits. In addition to the benefits payable to the Executive
specifically described herein, the Executive shall be entitled to such benefits
as generally may be made available to all other Executives of the Company from
time to time; provided, however, that nothing contained herein shall require the
establishment or continuation of any particular plan or program.

         (g) Withholding.  All payments  pursuant to this Agreement shall be
reduced for any applicable  state,  local, or federal tax withholding
obligations.

3.       Term, Termination and Termination Payments.
         -------------------------------------------

         (a) Term.  The term of this  Agreement shall begin as of the  Effective
Date.  It shall  continue  through  the fourth anniversary of the Effective Date
(the "Term").

         (b) Termination. This Agreement and the employment of the Executive by
the Company hereunder may only be terminated: (i) by expiration of the Term;
(ii) by mutual agreement of the parties; (ii) by the Company without Cause;
(iii) by the Executive for Good Reason; (iv) by the Company or the Executive due
to the Disability of the Executive; (v) by the Company for Cause; or (vi) by the
Executive for any reason in his sole discretion, upon at least sixty (60) days
prior written notice to the Company. This Agreement shall also terminate
immediately upon the death of the Executive. Notice of termination by any party
shall be given prior to termination in writing and shall specify the basis for
termination and the effective date of termination. Notice of termination for
Cause by the Company or Good Reason by the Executive shall specify the basis for
termination for Cause or Good Reason, as applicable. The Executive shall not be
entitled to any payments or benefits after the effective date of the termination
of this Agreement, except for base salary pursuant to Section 2(a) accrued up to
the effective date of termination, any unpaid earned and accrued Bonus, if any,
pursuant to Section 2(b), as provided under the terms of the stock option
referred to in Section 2(c), and expenses required to be reimbursed pursuant to
Section 2(d). The expiration of the Term shall not be deemed to result in
termination without Cause by the Company or termination for Good Reason by the
Executive.

         (c) Termination by the Company without Cause or by the Executive for
Good Reason. In the event the employment of the Executive is terminated by the
Company without Cause or by the Executive for Good Reason, the Company will
continue to pay the Executive the sum of (i) his base salary pursuant to Section
2(a) hereof for a period of the shorter of twelve months following the date of
termination or the then remaining Term, in either case on the same schedule as
if the Executive had continued to perform services for such period and (ii) an
amount equal to the Bonus actually paid to Executive during the prior year, paid
in twelve monthly equal installments. In the event a termination occurs under
this Section 3(c) prior to December 31, 2002, Executive's stock options will
vest pro-rata based on the number of months of Executive's employment with the
Company. As a condition to the payment of any severance pay hereunder, the
Executive shall be required to execute and not revoke within the revocation
period provided therein, the Release.

         (d) Survival. The covenants in Sections 4, 5, and 6 hereof shall
survive the  termination  of this  Agreement and shall not be extinguished
thereby.

4.       Ownership and Protection of Proprietary Information.
         ----------------------------------------------------

         (a) Confidentiality. All Confidential Information and Trade Secrets and
all physical embodiments thereof received or developed by the Executive while
employed by the Company are confidential to and are and will remain the sole and
exclusive property of the Company. Except to the extent necessary to perform the
duties assigned by the Company hereunder, the Executive will hold such
Confidential Information and Trade Secrets in trust and strictest confidence,
and will not use, reproduce, distribute, disclose or otherwise disseminate the
Confidential Information and Trade Secrets or any physical embodiments thereof
and may in no event take any action causing or fail to take the action necessary
in order to prevent, any Confidential Information and Trade Secrets disclosed to
or developed by the Executive to lose its character or cease to qualify as
Confidential Information or Trade Secrets.

         (b) Return of Company Property. Upon request by the Company, and in any
event upon termination of this Agreement for any reason, as a prior condition to
receiving any final compensation hereunder (including any payments pursuant to
Section 3 hereof), the Executive will promptly deliver to the Company all
property belonging to the Company, including, without limitation, all
Confidential Information and Trade Secrets (and all embodiments thereof) then in
the Executive's custody, control or possession.

         (c) Survival. The covenants of confidentiality set forth herein will
apply on and after the date hereof to any Confidential Information and Trade
Secrets disclosed by the Company or developed by the Executive prior to or after
the date hereof. The covenants restricting the use of Confidential Information
will continue and be maintained by the Executive for a period of two years
following the termination of this Agreement. The covenants restricting the use
of Trade Secrets will continue and be maintained by the Executive following
termination of this Agreement for so long as permitted by the governing law.

5.       Non-Competition and Non-Solicitation Provisions.
         ------------------------------------------------

         (a) The Executive agrees that during the Applicable Period, the
Executive will not (except on behalf of or with the prior written consent of the
Company, which consent may be withheld in Company's sole discretion), within the
Area either directly or indirectly, on his own behalf, or in the service of or
on behalf of others, engage in or provide managerial services or management
consulting services to, any Competing Business. The Executive acknowledges and
agrees that the Business of the Company is conducted in the Area.

         (b) The Executive agrees that during the Applicable Period, he will
not, either directly or indirectly, on his own behalf or in the service of or on
behalf of others solicit, divert or appropriate, or attempt to solicit, divert
or appropriate, to a Competing Business, any individual or entity which is an
actual or, to his knowledge, actively sought prospective client or customer of
the Company or any of its Affiliates (determined as of date of termination of
employment) with whom he had material contact while he was an Executive of the
Company.

         (c) The Executive agrees that during the Applicable Period, he will
not, either directly or indirectly, on his own behalf or in the service of or on
behalf of others, solicit, divert or hire, or attempt to solicit, divert or
hire, or encourage to go to work for anyone other than the Company or its
Affiliates, any person that is a management level or key employee of the Company
or an Affiliate.

         (d) The Executive agrees that during the Applicable Period, he will not
take any action that is adverse to the interests of the Company or any of its
Affiliates or make any statement (written or oral) that could reasonably be
perceived as disparaging to the Company or any person or entity that he
reasonably should know is an Affiliate of the Company or any statement (written
or oral) that is damaging to the commercial interests of the Company or any
person or entity that he reasonably should know is an Affiliate of the Company.

         (e) In the event that this Section 5 is determined by a court which has
jurisdiction to be unenforceable in part or in whole, it shall be deemed to be
revised to the minimum extent necessary to be enforceable to the maximum extent
permitted by law.

6.       Agreements with Former Employer or Business/Noninterference with Duties
         -----------------------------------------------------------------------
         /No Litigation.
         ---------------

         The Executive hereby represents, warrants, and covenants that he is not
and shall not be, during the period of time which begins as of the Effective
Date and extends through the Term, subject to any employment or consulting
agreement or other document, with another employer or with any business as to
which the Executive's employment by the Company and provision of services in the
capacity contemplated herein would be a breach. The Executive hereby represents,
warrants, and covenants that he is not and shall not be subject to any agreement
which prohibits the Executive during the period of time which begins as of the
Effective Date and extends through the Term from any of the following: (i)
providing services for the Company in the capacity contemplated by this
Agreement; (ii) competing with, or in any way participating in a business which
includes the Company's business; (iii) soliciting personnel of such former
employer or other business to leave such former employer's employment or to
leave such other business; or (iv) soliciting customers of such former employer
or other business on behalf of another business. Further, the Executive is not
aware of the existence of any circumstances that could materially interfere with
his duties under this Agreement, and the Executive represents and warrants that
there is no pending or threatened litigation against him.

7.       Remedies and Enforceability.
         ----------------------------

         The Executive agrees that the covenants, agreements, and
representations contained in Sections 4, 5, and 6 hereof are of the essence of
this Agreement; that each of such covenants are reasonable and necessary to
protect and preserve the interests and properties of the Company; that
irreparable loss and damage will be suffered by the Company should the Executive
breach any of such covenants and agreements; that each of such covenants and
agreements is separate, distinct and severable not only from the other of such
covenants and agreements but also from the other and remaining provisions of
this Agreement; that the unenforceability of any such covenant or agreement
shall not affect the validity or enforceability of any other such covenant or
agreements or any other provision or provisions of this Agreement; and that, in
addition to other remedies available to it, including, without limitation,
termination of the Executive's employment for cause, the Company shall be
entitled to seek both temporary and permanent injunctions to prevent a breach or
contemplated breach by the Executive of any of such covenants or agreements.

8.       Notice.
         -------

         All notices, requests, demands and other communications required
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or if mailed, by United States certified or registered mail, prepaid
to the party to which the same is directed at the following addresses (or at
such other addresses as shall be given in writing by the parties to one
another):

         If to the Company:                     Omega Healthcare Investors, Inc.
                                                900 Victors Way
                                                Suite 350
                                                Ann Arbor, MI  48108
                                                Attn:    Chairman

         If to the Executive:                   R. Lee Crabill, Jr.
                                                900 Victors Way
                                                Suite 350
                                                Ann Arbor, MI  48108

Notices delivered in person shall be effective on the date of delivery. Notices
delivered by mail as aforesaid shall be effective upon the third calendar day
subsequent to the postmark date thereof.

9.       Miscellaneous.
         --------------

         (a) 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's business or to an entity that purchases all or substantially all of
the assets of the Company, but not otherwise without the prior written consent
of the Executive. In the event the Company assigns this Agreement as permitted
by this Agreement and the Executive remains employed by the assignee, the
"Company" as defined herein will refer to the assignee and the Executive will
not be deemed to have terminated his employment hereunder until the Executive
terminates his employment with the assignee. The Executive may not assign this
Agreement.

         (b) Waiver. The waiver of any breach of this Agreement by any party
shall not be effective unless in writing, and no such waiver shall constitute
the waiver of the same or another breach on a subsequent occasion.

         (c) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Maryland. The parties agree
that any appropriate state or federal court located in Ann Arbor, Michigan shall
have jurisdiction of any case or controversy arising under or in connection with
this Agreement and shall be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
Notwithstanding the foregoing, if requested by the Company, in connection with
any relocation of the Company's headquarters to another state, the Executive
will enter into an amendment to this Agreement to make it governed by such
state's laws and subject to the jurisdiction of the appropriate state or federal
courts located in such state.

         (d) Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto relating to the subject matter hereof and supersedes all oral
agreements, and to the extent inconsistent with the terms hereof, all other
written agreements.

         (e) Amendment.  This Agreement may not be modified,  amended,
supplemented or terminated except by a written instrument  executed
by the parties hereto.

         (f) Severability. Each of the covenants and agreements hereinabove
contained shall be deemed separate, severable and independent covenants, and in
the event that any covenant shall be declared invalid by any court of competent
jurisdiction, such invalidity shall not in any manner affect or impair the
validity or enforceability of any other part or provision of such covenant or of
any other covenant contained herein.

         (g) Captions and Section  Headings.  Except as set forth in Section 10
hereof,  captions and section headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it.

10.      Definitions
         -----------

         (a) "Affiliate" means any person, firm, corporation, partnership,
association or entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by or is under common control with the
Company.

         (b) "Applicable Period" means the period commencing as of the date of
this Agreement and ending twelve months after the termination of the Executive's
employment with the Company or any of its Affiliates.

         (c) "Area" means Alabama, Arizona, Arkansas, California, Colorado,
Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Massachusetts, Michigan, Missouri, Nevada, New Hampshire, North Carolina, Ohio,
Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Washington, and West Virginia,
and such other states where the Company or its subsidiaries may materially do
business during the Term.

         (d) "Business of the Company" means any business with the primary
purpose of leasing assets to healthcare operators, or financing the ownership or
operation of, senior housing, long-term care facilities, assisted living
facilities, retirement housing facilities, or other healthcare related real
estate, and ancillary financing businesses relating to any of the foregoing.

         (e) "Cause" the occurrence of any of the following events:

                  (i) willful refusal by the Executive to follow a lawful
         direction of the CEO and/or the Board of Directors of the Company,
         provided the direction is not materially inconsistent with the duties
         or responsibilities of the Executive's position as Senior Vice
         President of Operations of the Company, which refusal continues after
         the CEO and/or the Board of Directors has again given the direction;

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

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

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

                  (v)  commission by the Executive of a felony; or

                  (vi) a material breach of this Agreement by the Executive,
         provided that the nature of such breach shall be set forth with
         reasonable particularity in a written notice to the Executive who shall
         have ten (10) days following delivery of such notice to cure such
         alleged breach, provided that such breach is, in the reasonable
         discretion of the Board of Directors, susceptible to a cure.

         (f) "Competing Business" means any person, firm, corporation, joint
venture, or other business that is engaged in the Business of the Company.

         (g) "Confidential Information" means data and information relating to
the Business of the Company or an Affiliate (which does not rise to the status
of a Trade Secret) which is or has been disclosed to the Executive or of which
the Executive became aware as a consequence of or through his relationship to
the Company or an Affiliate and which has value to the Company or an Affiliate
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 or an Affiliate (except where such public disclosure has
been made by the Executive without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means without breach of any obligations of confidentiality owed
to the Company or any of its Affiliates.

         (h) "Disability" means the inability of the Executive to perform the
material duties of his position as Chief Executive Officer hereunder due to a
physical, mental, or emotional impairment, for a ninety (90) consecutive day
period or for aggregate of one hundred eighty (180) days during any three
hundred sixty-five (365) day period.

         (i) "Good Reason" means the occurrence of all of the events listed in
either (i) or (ii) below:

                  (i)      (A) the Company materially breaches this Agreement;

                           (B) the Executive gives written notice to the Company
                  of the facts and circumstances constituting the breach of the
                  Agreement within ten (10) days following the occurrence of the
                  breach;

                           (C) the Company  fails to remedy the breach  within
                  ten (10) days  following  the  Executive's  written  notice of
                  the breach; and

                           (D) the Executive terminates his employment and this
                  Agreement within ten (10) days following the Company's failure
                  to remedy the breach.

                  (ii)     (A) the Company relocates the Executive's primary
                  place of employment to a new location (other than a location
                  in the Ann Arbor, Michigan area, or the Baltimore, Maryland
                  area), that is more than fifty (50) miles from its current
                  location, without the Executive's consent; and

                           (B) the Executive provides the Company with written
                  notice of intent to terminate employment for a reason
                  specified by the Executive pursuant to Section 10(ii)(A) above
                  at least thirty days prior to the effective date of
                  termination of employment(such termination to occur only
                  during the period of January 1 through January 31 of the year
                  following the calendar year in which the relocation occurred);
                  and the Executive does in fact terminate employment during the
                  period of January 1 through January 31 of the year following
                  the calendar year in which the relocation occurred.

         (j) "Release" means a comprehensive release, covenant not to sue, and
non-disparagement agreement from the Executive in favor of the Company, its
executives, officers, directors, Affiliates, and all related parties, in such
form as the Company may provide to the Executive in its sole discretion.

         (k)  "Term" has the meaning as set forth in Section 3(a) hereof.

         (l) "Trade Secrets" means information including, but not limited to,
technical or nontechnical data, formulae, 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.

                         [SIGNATURES ON FOLLOWING PAGE]

<PAGE>

         IN WITNESS WHEREOF, the Company and the Executive have each executed
and delivered this Agreement as of the date first shown above.

                                                COMPANY:

                                                OMEGA HEALTHCARE INVESTORS, INC.

                                                By:/s/ C. TAYLOR PICKETT
                                                   ------------------------
                                                       C. Taylor Pickett, CEO

                                                THE EXECUTIVE:

                                                /s/  R. LEE CRABILL, JR.
                                                --------------------------

<PAGE>

                                    EXHIBIT A

------------------------------------------------------------ -------------------
Investment                                                   Ownership
------------------------------------------------------------ -------------------
------------------------------------------------------------ -------------------

------------------------------------------------------------ -------------------

<PAGE>
                                   Exhibit B

        Policy Governing Reimbursement of Moving and Relocation Expenses

Conditions

If the Executive's employment with the Company is terminated for any reason
whatsoever before the expiration of the Term (except by the Company without
Cause or by the Executive for Good Reason), the Executive will refund to the
Company the gross amount of moving and relocation reimbursements, i.e., actual
payments received by Executive and any payments to third parties on the
Executive's behalf, plus income tax gross-up, plus all taxes deducted that
relate to those payments. The amount to be repaid will be prorated on a monthly
basis such that for each full month during which the Executive remains in the
employ of the Company, the amount to be repaid will be reduced by
one-forty-eighth (1/48) of the gross reimbursement.

Expenses Incurred and Supported

Each expenditure to be reimbursed must be reasonable and necessary.
Reimbursement is limited to the following expense categories, the parameters of
which are discussed in more detail below:

o    House hunting
o    Temporary quarters
o    Home sale
o    Purchase of home
o    Travel (actual move to new job location)
o    Transportation and storage (household and personal goods)
o    Do-it-yourself moves
o    Income tax gross-up

House Hunting

House hunting expenses apply to the Executive, spouse, and dependent children
who live with the Executive. They may be incurred while traveling between the
new job location and old residence for the purpose of looking for new living
accommodations at the new job location. The Executive may claim these expenses
only if the travel is primarily to look for a place to live. A total of ten (10)
days of expenses for house hunting may be claimed. These reimbursable expenses
are:

o    A maximum of two round trips for the Executive, two round trips for the
     spouse and one round trip for children in accompaniment of Executive or
     spouse.
o    The cost of ground transportation, including parking fees and tolls, plus
     actual expenses, such as gas and oil (but not depreciation) for the use of
     car. Accurate records of each expense must be kept and the original
     receipts attached to travel voucher. In lieu of actual costs, reimbursement
     can be paid at 30 cents per mile. An automobile may be rented while
     visiting the new job location for the purpose of house hunting if a
     personal vehicle is not available.
o    Airfare not to exceed the cost of air coach transportation. Every
     reasonable effort should be made to book flights in advance to obtain
     discounted travel.
o    Lodging for the Executive, wife, and children. A night of combined lodging
     for the Executive and spouse or Executive, spouse, and children counts as
     one night.
o    The cost of meals for the Executive, wife, and children.

Other expenses, including the following expenses, are not reimbursable:

o    Entertainment, laundry, and other personal expenses.

Temporary Quarters

If the Executive cannot move immediately into a new residence, reasonable
expenses at the new location are reimbursable. The following expenses are
covered:

o   Lodging or rent until no later than January 1, 2002.

o   Reasonable residential parking fees during the first thirty (30) days of
    temporary quarters.

o   The cost of meals for the first seven (7) days of residence in temporary
    quarters for the Executive, wife, and children.

Other expenses, including the following expenses, are not reimbursable:

o   Transportation, entertainment, living and other personal expenses of the
    Executive and family.

Home Sale

The following expenses related to the sale, by January 1, 2003, of a principal
residence due to moving and relocating are reimbursable:

o   Mortgage interest incurred by the Executive on the principal residence being
    sold for a period beginning after the Executive and his family have
    relocated their principal residence to Baltimore, Maryland area, the old
    principal residence is listed for sale, and the Executive has purchased a
    new principal residence in the Baltimore, Maryland area, and ending on the
    earlier of the date of sale of the old principal residence or six months
    after the beginning of the period.
o   Actual expense of real estate commissions paid by the Executive to a third
    party seller's agent who is independent of the Executive.
o   Attorney's fees
o   Title fees
o   Escrow fees
o   Pest inspection
o   State transfer taxes

Other expenses, including the following expenses, are not reimbursable:

o   Sales commissions and similar expenses if the Executive or a family member
    acts as a selling agent
o   Buyer's closing costs
o   Advertising and "fix-up" costs
o   Loss sustained on sale of residence
o   Real estate and capital gains taxes
o   Payment and repayment of interest
o   Mortgage penalties and buyers closing costs
o   Points or loan payment charges

Purchase of Home

Certain expenses related to the purchase, by January 1, 2002, of a home,
incurred by an Executive relocating to the new job location, will be
reimbursable. To qualify for reimbursement of these expenses, the home must be a
replacement of a prior primary residence that the individual was required to
sell, must be the initial home purchased by the individual on relocation, and
must be a single-family residence. Reimbursement will not be approved for the
purchase of a second residence, investment property, business property, or
resort/vacation property at the new job location. Specific expenses will be
reimbursed with the submission of supporting documentation that is signed by the
buyer and seller. These reimbursable expenses are as follows:

o   Loan origination fee (not to exceed 1% of principal amount of mortgage loan)
o   Survey fee
o   Appraisal fee
o   Credit report
o   Home inspection fee, limited to one inspection
o   Title search
o   Recording fee
o   Title insurance
o   Attorney fee
o   Notary fees

Other expenses, including the following expenses, are not reimbursable:

o   Mortgage loan differential
o   Points and discount fees, and similar items
o   Utility deposits and/or connection fees
o   Real estate taxes, prepaid or otherwise
o   Capital gains taxes
o   Realtor fees related to purchasing
o   Remodeling or decoration expenses
o   Repair and maintenance costs
o   Homeowner insurance
o   Private mortgage insurance
o   Permit fees such as building, sewer and zoning
o   Deposit for rent
o   Homeowners Warranty Fees

Travel

When the Executive and family are traveling from the old residence to the new
home, expenses for transportation, in-transit meals and lodging are
reimbursable. Expenses are also reimbursable for the day of arrival at the new
home. The following are allowed:

o   Transportation expenses include parking and tolls, plus actual expenses,
    such as gas and oil (but not depreciation) for the use of personal car.
    Accurate records must be kept of each expense and original receipts
    attached to the travel voucher. In lieu of actual costs, payment can be
    made at 30 cents per mile.
o   A single one-way trip not to exceed the cost of air-coach transportation
    for the Executive, wife and children may be incurred in place of automobile
    transportation.
o   If the Executive must vacate the old residence due to furniture being
    moved, one day's meals and lodging at the former location are reimbursable.

Other expenses, including the following, are not reimbursable:

o   Travel reimbursement does not include automobile rental, except for house
    hunting purposes.

Transportation and Storage of Household Goods and Personal Effects

Reasonable costs for storing and transporting personal goods by common carrier
from the old residence to the new residence are reimbursable. The Executive is
required to obtain three (3) bids for common carrier transportation. The lowest
of the three (3) bids should be used for the moving of personal effects from the
former residence. Copies of the three (3) bids should be provided to the Company
prior to a formal commitment to utilize the common carrier. (Executives who
receive common carrier services cannot also be reimbursed for "Do-it-yourself"
moves as described in the next sub-paragraph.) The Company assumes no liability
for any property damage resulting from the relocation.

o   The actual costs paid for carrier transportation of the Executive's
    household goods and personal effects from the former residence to the new
    residence.

o   A maximum of thirty (30) days temporary (in-transit) storage of household
    goods if the Executive cannot move immediately into the new residence.

Do-It Yourself Moves

If the Executive chooses to move himself/herself from the old residence to the
new residence, the amount of the actual costs allowed will be included in the
limitation. (If the Executive requests reimbursement for rental vehicle
transportation, he cannot also request payment for common carrier expenses.)
Actual costs are reimbursable, within the total limitation, with appropriate
documentation.

The following are allowed:

o   Rental of moving van, truck, trailer, hand truck, or other appropriate
    moving equipment, vehicles and supplies with rental Company receipt. Only
    one truck trip is reimbursable.
o   Gas used by a rental truck during the move is reimbursable with proper
    receipts.
o   Rental of bicycle racks, trailer hitches, etc.
o   The purchase of moving supplies,  such as packing paper, boxes or cartons
    with appropriate  receipts.  The amount of such purchases must not exceed
    $500.
o   Labor used during the move. Reimbursement is limited to a reasonable hourly
    wage with the maximum total being $500. A receipt from the individual
    employed with amount paid and signature must be attached to the
    reimbursement voucher.
o   Tolls paid during the move are reimbursable provided the name of the
    facility (road, bridge, and tunnel) is provided.

Other expenses, including the following, are not reimbursable:

o   Purchase of a vehicle or equipment for moving.
o   Labor provided by the Executive or immediate family member(s).

Income Tax Gross-Up

For the expense reimbursement in this Exhibit B which the Company reports as
taxable wages to the Executive and for which the Executive is not entitled to an
income tax deduction or other allowance of any nature which has the effect of
offsetting the Executive's taxable income, the Company will pay to the Executive
before the end of the calendar year in which the expenses are reimbursed by the
Company an income tax gross-up amount. The income tax gross-up amount will be
that dollar amount that the Company determines will put the Executive in the
same after-tax position (taking into account solely federal and state income
taxes) as if such reimbursements had not been taxable income to him. As a
condition to receiving the income tax gross-up, the Executive must provide
substantiated written documentation to the Company before such year-end showing
his estimated federal gross income before the gross-up, estimated federal
adjusted gross income before the gross-up, estimated federal taxable income
before the gross-up, and estimated marginal federal and state income tax rates
applicable to the taxable reimbursements under this Exhibit B and the income tax
gross-up. Immediately following the filing of the Executive's federal and state
income tax returns for the calendar year in which the income tax gross-up was
paid, the Executive will provide a copy of such returns to the Company. In the
event that the Company determines that the amount of the income tax gross-up
paid to the Executive was different than the actual amount required to put the
Executive in the intended after-tax position, then the income tax gross-up shall
then be adjusted by an appropriate amount by the Company paying the shortfall to
the Executive or the Executive repaying the excess to the Company, as
applicable.

Miscellaneous Expenses

Other  miscellaneous  and  incidental  expenses  associated  with  relocating
an  Executive's  household  are  not reimbursable.  These include, but are not
limited to:

o   Baby-sitting
o   Disconnecting and connecting appliances and utilities
o   Care of pets
o   Removing and installing antennas
o   Carpet and draperies
o   General cleaning

Reimbursement Rules and Guidelines

Payments will be made in accordance to IRS rules. Some of the reimbursable
expenses are not included in the Executive's taxable income and some are
included in the Executive's taxable income. At the date this policy was
prepared, IRS regulations provide that moving expenses, which are excluded from
taxable income, are the reasonable cost of:

o    Moving  household  goods and  personal  effects  from the  former
     residence  to the new  residence  (this includes common carrier), and
o    Traveling (including lodging but not meals during the period of travel)
     from the former residence to the new place of residence.

This does not, however, constitute tax advice from the Company. Any expense
reimbursements which the Company determines to constitute as taxable income to
the Executive will be paid through the payroll system with the appropriate taxes
withheld. In this case, the cash payment to the Executive will be net of tax
withholding and the Executive will have to report the reimbursement to the IRS
as taxable income and pay income taxes on the full amount of the taxable
reimbursement, including the amount withheld for taxes.

Executive Responsibilities

Unless otherwise specified, all expenses submitted for reimbursement must be
actual, reasonable, necessary, and within the Company's guidelines as stated
above and below. The Executive is responsible for:

o   Obtaining and submitting estimates from three companies and choosing the
    common carrier providing the lowest estimate.
o   Obtaining and submitting original receipts and other documents that are
    necessary to support all claims for reimbursement.
o   Submitting claims within thirty (30) days after each expense is incurred.

Expense Reporting

Common Carrier Payments

The Company may pay third-party commercial moving companies directly. The
Accounting office must receive the invoice signed by the Executive and the
required three estimates before payment can be processed. The Executive is
required to list this invoice on his/her travel reimbursement expense report as
a Company paid item.

Payment

Accounting reviews all requests for completeness of documentation and then makes
payment as follows:

o   Payments for non-taxable expenses are paid directly to the
    Executive through the accounts payable process.
o   Payments for taxable expenses are paid through the payroll process with
    applicable taxes withheld.
o   Payments to third-parties are paid through the Accounts Payable process with
    Payroll notified so the appropriate notation can be made on the Form W-2 at
    year-end.
<PAGE>

                                                                         EXHIBIT
                                                                         -------

                          INCENTIVE STOCK OPTION AWARD
                PURSUANT TO THE OMEGA HEALTHCARE INVESTORS, INC.
                            2000 STOCK INCENTIVE PLAN

     THIS AWARD is made as of the Grant  Date,  by OMEGA  HEALTHCARE  INVESTORS,
INC. (the "Company") to R. Lee Crabill, Jr. (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: July 30, 2001.

B. Type of Option: Incentive Stock Option.

C. Plan (under which Option is granted):  Omega Healthcare Investors,  Inc. 2000
Stock Incentive Plan.

D. Option  Shares:  All or any part of 133,333  shares of the  Company's  common
stock (the "Stock"), subject to adjustment as provided in the attached Terms and
Conditions.

E.  Exercise  Price:  $3.00 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 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, generally, on the earliest of:

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

     (ii)  ninety  (90) days  following  the date the  Optionee  ceases to be an
     employee of the Company or director of or  consultant  to the Company or an
     "Affiliate"  (as  defined  in the Plan) for any reason  other  than  death,
     "Disability"  (as  defined in the Plan) or  termination  of the  Optionee's
     service by the Company or an Affiliate with Cause;

     (iii)  the  first  anniversary  of the date the  Optionee  ceases  to be an
     employee or director of or consultant to the Company or an Affiliate due to
     death or Disability; or

     (iv) ten (10)  days  after  the date the  Optionee  is given  notice by the
     Company or an Affiliate that it is terminating his service 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 shall become  vested in  accordance  with the
vesting schedule attached hereto as Schedule 1.

                            [Signature Page Follows]

<PAGE>

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

                                             OMEGA HEALTHCARE INVESTORS, INC.

                                      By:   /s/ C. TAYLOR PICKETT
                                          --------------------------------------
                                            C. Taylor Pickett, President and CEO

                                             OPTIONEE

                                              /S/ R. LEE CRABILL
                                             ----------------------------------
                                             R. Lee Crabill, Jr.

<PAGE>

                           TERMS AND CONDITIONS TO THE
                          INCENTIVE STOCK OPTION AWARD
                                 PURSUANT TO THE
                        OMEGA HEALTHCARE INVESTORS, INC.
                            2000 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. 2000 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) and no later  than 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).

          (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 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, to the extent applicable, Company shall
cause to be issued a certificate representing the Option Shares purchased.

     2.  Withholding.  To the extent the Option is deemed to be a  Non-Qualified
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 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  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 Stock
withheld by the Company which,  when  multiplied by the Fair Market Value of the
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 or by a person who acquired the right to exercise such option
by bequest or inheritance or by reason of the death of the decedent,

     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 Stock  resulting  from a  subdivision  or  combination  of
     shares or the payment of a stock  dividend in shares of Stock to holders of
     outstanding shares of Stock or any other increase or decrease in the number
     of shares of 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 capital  structure of the Company or a tender offer
     for  shares  of  Stock,   or  a  Change  in  Control   (each  a  "Corporate
     Transaction"),   the  Committee   shall  take  such  action  to  make  such
     adjustments in the Option or the terms of this Award as the  Committee,  in
     its sole  discretion,  determines in good faith is necessary to reflect the
     terms of such Corporate Transaction so as to preserve the economic value of
     the Option  determined as of the date of the Corporate  Transaction  or the
     Committee  action,  as the  case  may be,  including,  without  limitation,
     adjusting the number and class of securities subject to the Option,  with a
     corresponding  adjustment  made in the Exercise  Price;  substituting a new
     option to replace the Option; or accelerating the termination of the Option
     Period;  or, terminating the Option in consideration of payment to Optionee
     of the excess of the then Fair Market  Value of the Option  Shares over the
     aggregate  Exercise  Price of the Option Shares.  In  determining  economic
     value,  the Committee need not take into account the  possibility of future
     appreciation.  Any  determination  made by the  Committee  pursuant to this
     Section 5(b) will be final and binding on the Optionee. Any action taken by
     the Committee need not treat all optionees equally.

          (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 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 in this Award
and in the Plan such as:

                             TRANSFER IS RESTRICTED
                             ----------------------

     THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED,  AND 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 Michigan;  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 Stock with
respect to which an Incentive  Stock Option first  becomes  exercisable  for the
first time by an  individual  during any  calendar  year (under all plans of the
individual's  employer  corporation and its parent and subsidiary  corporations)
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 Non-Qualified Stock Option.

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

          (a) "Cause" has the definition  set forth in the Employment  Agreement
     between the Company and the Employee dated July 30, 2001, as amended.

          (b) Other undefined and  capitalized  terms shall have the meaning set
     forth in the Omega  Healthcare  Investors,  Inc. 2000 Stock Incentive Plan,
     where the context reasonably permits.

<PAGE>

                                    EXHIBIT 1

                              NOTICE OF EXERCISE OF
                            STOCK OPTION TO PURCHASE
                                 COMMON STOCK OF
                        OMEGA HEALTHCARE INVESTORS, INC.

                                    Name:
                                          --------------------------------------
                                    Address:
                                            ------------------------------------
                                    Date:
                                           -------------------------------------

Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan  48108

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.  2000 Stock  Incentive  Plan,  I hereby give at least ten (10) days but not
more than  thirty (30) days prior  notice of my  election  to  exercise  options
granted to me to purchase  ______________  shares of Stock of the Company  under
the Incentive Stock Option Award (the "Award")  pursuant to the Omega Healthcare
Investors, Inc. 2000 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 Stock that I have owned for at least
                  six (6) months and that are represented by a stock certificate
                  I will surrender to the Company with my endorsement. If the
                  number of shares of 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
                  Stock that I have owned for at least six (6) months which I
                  will surrender to the Company with my endorsement as payment
                  of the purchase price. If the number of shares of 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 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 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 Stock for  investment  and  without  the  intent of  participating,
directly or indirectly,  in a distribution  of the Stock and not with a view to,
or for resale in connection with any  distribution of the Stock,  nor am I aware
of the existence of any distribution of the Stock;

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

     The  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  Stock,
including the risk of a complete loss of my investment therein;

     I understand and agree that the 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 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 Stock or to comply
with any  exemption  available  for sale of the 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 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 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 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 Stock of the  Company  issued to me
pursuant to this Award.  Acceptance by me of the certificate  representing  such
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,  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:___________
                            ---------------

<PAGE>

                                    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. 2000 Stock Incentive Plan (the "Plan") in
         the name of _________________________ for the purchase of a total of
         _________ shares of Stock of the Company. This election relates to
         _______________ shares of 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
         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

<PAGE>

                                   SCHEDULE 1

                         VESTING SCHEDULE FOR INCENTIVE
                    STOCK OPTION AWARD ISSUED PURSUANT TO THE
                        Omega Healthcare Investors, Inc.
                        2000 INCENTIVE STOCK OPTION PLAN

Vesting Schedule

The Option shall become vested as to 33,333 Option Shares (i.e., a number of
Option Shares equal to $100,000 divided by the Exercise Price per share) on each
of December 31, 2002, August 1, 2003, August 1, 2004 and August 1, 2005, in each
case provided the Optionee continues to be employed by the Company through the
applicable date.

Notwithstanding the foregoing, in the event of the Optionee's termination of
employment (i) by the Optionee for "Good Reason" (as defined in the Employment
Agreement between the Company and the Employee dated July 30, 2001 (the
"Employment Agreement")) within one year following a Change in Control or (ii)
by the Company without "Cause" (as defined in the Employment Agreement), 100% of
the Option Shares shall become vested. The vesting provided for in this
paragraph is expressly contingent upon the Employee executing and not revoking
the release, covenant not to sue, and non-disparagement agreement referred to in
Section 3(c) of the Employment Agreement.

"Change in Control" means the occurrence of any of the following events:

(i)      any "Person" (as defined in Section 3(a)(9) of the Securities Exchange
         Act of 1934 (the "Exchange Act") as modified and used in Sections 13(d)
         and 14(d) of the Exchange Act), other than Explorer Holdings, L.P. or
         Hampstead Investment Partners III, L.P. or either of their successors
         or affiliates, is or becomes the "beneficial owner" (as defined in Rule
         13d-3 of the Exchange Act), directly or indirectly, of equity
         securities of the Company representing more than fifty percent (50%) of
         the voting power or value of the Company's then outstanding voting
         equity securities and controls the right to elect a majority of the
         Board of Directors of the Company;

(ii)     The consummation of a merger, consolidation, share exchange or other
         reorganization in which the shareholders of the Company immediately
         prior to the transaction do not own equity securities of the surviving
         entity representing at least fifty percent (50%) of the combined voting
         power or value of the surviving entity's then outstanding voting
         securities immediately after the transaction and do not control the
         right to elect a majority of the Board of Directors of the Company;

(iii)    The sale or transfer of all or substantially all of the value of the
         assets of the Company, in a single transaction, in a series of related
         transactions, or in a series of transactions over any one year period;
         or

(iv)     A dissolution or liquidation of the Company.

Except as otherwise expressly provided above, the Optionee shall continue to
vest in the Option Shares only for those periods during which the Optionee
continues to be an employee of the Company or an Affiliate and any portion of
the Option Shares in which the Optionee is not vested as of his termination of
employment shall be forfeited.
<PAGE>

                                                                         EXHIBIT
                                                                         -------

                        NON-QUALIFIED STOCK OPTION AWARD
                PURSUANT TO THE OMEGA HEALTHCARE INVESTORS, INC.
                            2000 STOCK INCENTIVE PLAN

     THIS AWARD is made as of the Grant  Date,  by OMEGA  HEALTHCARE  INVESTORS,
INC. (the "Company") to R. Lee Crabill, Jr. (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: July 30, 2001

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

C. Plan  under  which  granted:  Omega  Healthcare  Investors,  Inc.  2000 Stock
Incentive Plan (the "Plan").

D. Option Shares: All or any part of 41,667 shares of the Company's common stock
(the "Common  Stock"),  subject to adjustment as provided in the attached  Terms
and Conditions.

E.  Exercise  Price:  $3.00 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:

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

     (ii)  ninety  (90) days  following  the date the  Optionee  ceases to be an
     employee or director of or consultant to the Company or an "Affiliate"  (as
     defined  in the  Plan) for any  reason  other  than  death,  Disability  or
     termination  of the  Optionee's  service by the Company or an Affiliate for
     Cause;

     (iii)  the  first  anniversary  of the date the  Optionee  ceases  to be an
     employee or director of or consultant to the Company or an Affiliate due to
     death or Disability; or

     (iv) ten (10)  days  after  the date the  Optionee  is given  notice by the
     Company or an Affiliate that it is terminating his service 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.

                            [Signature Page Follows]

<PAGE>

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

                                              OMEGA HEALTHCARE INVESTORS, INC.

                                         By:
                                              --------------------------------
                                              Taylor Pickett, President and CEO

                                               OPTIONEE

                                               ---------------------------------
                                               R. Lee Crabill, Jr.

<PAGE>

                          TERMS AND CONDITIONS TO THE
                        NON-QUALIFIED STOCK OPTION AWARD
                                PURSUANT TO THE
                        OMEGA HEALTHCARE INVESTORS, INC.
                           2000 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. 2000 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  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 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 capital structure of the Company,  or a tender offer
     for shares of Common  Stock,  or a Change in Control  (each,  a  "Corporate
     Transaction")  ,  the  Committee  shall  take  such  action  to  make  such
     adjustments in the Option or the terms of this Award as the  Committee,  in
     its sole  discretion,  determines in good faith is necessary to reflect the
     terms of such Corporate Transaction so as to preserve the economic value of
     the  Option  determined  as of the  date of the  Corporate  Transaction  or
     Committee  action,  as the  case  may be,  including,  without  limitation,
     adjusting the number and class of securities subject to the Option,  with a
     corresponding  adjustment in the Exercise Price,  substituting a new option
     to replace the Option, accelerating the termination of the Option Period or
     terminating 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.  In
     determining  economic  value,  the Committee need not take into account the
     possibility of future appreciation. Any determination made by the Committee
     pursuant to this  Section  5(b) will be final and binding on the  Optionee.
     Any action taken by the Committee need not treat all optionees equally.

          (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 HAVE NOT BEEN REGISTERED
          UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  AND 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 Michigan; 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" has the definition  set forth in the Employment  Agreement
     between the Company and the Employee dated July 30, 2001, as amended.

          (b) Other undefined and  capitalized  terms shall have the meaning set
     forth in the Omega  Healthcare  Investors,  Inc. 2000 Stock Incentive Plan,
     where the context reasonably permits.

<PAGE>

                                    EXHIBIT 1

                              NOTICE OF EXERCISE OF
                            STOCK OPTION TO PURCHASE
                                 COMMON STOCK OF
                        OMEGA HEALTHCARE INVESTORS, INC.

                                      Name
                                           -------------------------------------
                                      Address
                                           -------------------------------------
                                      Date
                                           -------------------------------------
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan  48108

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.  2000 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. 2000 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:
          ---------------------------                     ----------------------

<PAGE>

                                    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. 2000 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

<PAGE>

                                   SCHEDULE 1
                        NON-QUALIFIED STOCK OPTION AWARD
                             ISSUED PURSUANT TO THE
                        OMEGA HEALTHCARE INVESTORS, INC.
                            2000 STOCK INCENTIVE PLAN

Vesting Schedule

The Option shall become vested as to 50% of the Option Shares after the Optionee
has performed two years of service, and the remaining unvested 50% of the Option
Shares shall become ratably vested (month by month) over the twenty-four (24)
months of Optionee's service following the second anniversary of the Grant Date,
so that once the Optionee has performed four years of service, the Option will
be vested as to 100% of the Option Shares.

Notwithstanding the foregoing, in the event of the Optionee's termination of
employment (i) by the Optionee for "Good Reason" (as defined in the Employment
Agreement between the Company and the Employee dated July 30, 2001 (the
"Employment Agreement")) within one year following a Change in Control or (ii)
by the Company without "Cause" (as defined in the Employment Agreement), 100% of
the Option Shares shall become vested. The vesting provided for in this
paragraph is expressly contingent upon the Employee executing and not revoking
the Release, as provided in Section 3(c) of the Employment Agreement.

Change in Control means the occurrence of any of the following events:

(i)      any "Person" (as defined in Section 3(a)(9) of the Securities Exchange
         Act of 1934 (the "Exchange Act") as modified and used in Sections 13(d)
         and 14(d) of the Exchange Act), other than Explorer Holdings, L.P. or
         Hampstead Investment Partners III, L.P. or either of their successors
         or affiliates, is or becomes the "beneficial owner" (as defined in Rule
         13d-3 of the Exchange Act), directly or indirectly, of equity
         securities of the Company representing more than fifty percent (50%) of
         the voting power or value of the Company's then outstanding voting
         equity securities and elects a majority of the Board of Directors of
         the Company;

(ii)     The consummation of a merger, consolidation, share exchange or other
         reorganization in which the shareholders of the Company immediately
         prior to the transaction do not own equity securities of the surviving
         entity representing at least fifty percent (50%) of the combined voting
         power or value of the surviving entity's then outstanding voting
         securities immediately after the transaction and has not elected a
         majority of the Board of Directors of the Company;

(iii)    The sale or transfer of all or substantially all of the value of the
         assets of the Company, in a single transaction, in a series of related
         transactions, or in a series of transactions over any one year period;
         or

(iv)     A dissolution or liquidation of the Company.

Except as otherwise expressly provided above, the Optionee shall continue to
vest in the Option Shares only for those periods during which the Optionee
continues to be an employee of the Company or an Affiliate and any portion of
the Option Shares in which the Optionee is not vested as of his termination of
employment shall be forfeited.

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