Document:

OMEGA HEALTHCARE INVESTORS, INC.
                             ARTICLES SUPPLEMENTARY
                    FOR SERIES C CONVERTIBLE PREFERRED STOCK

                  OMEGA HEALTHCARE INVESTORS,  INC., a Maryland corporation (the
"Company"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:

                  FIRST:  Pursuant to authority  contained in the charter of the
Company (the  "Charter"),  2,000,000 shares of authorized but unissued shares of
the  Company's  Preferred  Stock  have  been  duly  classified  by the  Board of
Directors of the Company (the "Board") as authorized but unissued  shares of the
Company's Series C Preferred Stock.

                  SECOND:  A description of the Series C Preferred Stock is as
follows:

         1. Designation and Number. A series of Preferred Stock,  designated the
"Series C  Convertible  Preferred  Stock" (the "Series C Preferred  Stock"),  is
hereby  established.  The number of shares of the Series C Preferred Stock shall
be 2,000,000,  subject to increase  pursuant to Section 4(b) prior to payment by
the Company of any dividend in shares of Series C Preferred  Stock in accordance
with Section 4.

         2. Maturity. The Series C Preferred Stock has no stated maturity.

         3. Rank.  The Series C Preferred  Stock will,  with respect to dividend
rights and rights upon  liquidation,  dissolution  or winding up of the Company,
rank (i) senior to all classes or series of Common Stock of the Company,  and to
all  equity  securities  ranking  junior to the  Series C  Preferred  Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the  Company,  (ii) on a parity with the Series A Preferred  Stock,  Series B
Preferred Stock and all other equity  securities issued by the Company the terms
of which specifically  provide that such equity securities rank on a parity with
the Series C  Preferred  Stock with  respect to  dividend  rights or rights upon
liquidation,  dissolution or winding up of the Company,  and (iii) junior to all
existing and future  indebtedness of the Company.  The term "equity  securities"
does not  include  convertible  debt  securities,  which will rank senior to the
Series C Preferred Stock prior to conversion.

         4.  Dividends.  (a)  Except as set forth in  Section  4(b),  holders of
shares of the Series C Preferred  Stock are  entitled  to receive,  out of funds
legally  available  for  the  payment  of  dividends,   preferential  cumulative
dividends at the greater of (i) 10% per annum of the Liquidation  Preference per
share  (equivalent  to a fixed  annual  amount of $10.00 per share) and (ii) the
amount per share  declared or paid or set aside for payment  based on the number
of shares of Common Stock into which such shares of Series C Preferred Stock are
then  convertible in accordance  with Section 8  (disregarding  Section 8.17 for
such purpose).  Dividends on each share of the Series C Preferred Stock shall be
cumulative  commencing  from  the date of  issuance  of such  share of  Series C
Preferred  Stock and shall be payable in arrears for each period  ended July 31,
October 31, January 31 and April 30 (each a "Dividend  Period") on or before the
15th day of  August,  November,  February  and May of each  year,  or,  if not a
Business  Day,  the next  succeeding  Business  Day (each,  a "Dividend  Payment
Date").  The first  dividend will be paid on November 15, 2000,  with respect to
the period  commencing on the date of first issuance of Series C Preferred Stock
(the  "Issue  Date") and ending on October 31,  2000.  Any  dividend  payable on
shares of the Series C Preferred  Stock for any partial  period will be computed
based on the actual  number of days elapsed  (commencing  with and including the
date of issuance of such shares) and on the basis of a 360-day  year  consisting
of twelve 30-day months.  Dividends will be payable to holders of record as they
appear in the stock  records  of the  Company  at the close of  business  on the
applicable  record date,  which shall be the last day of the preceding  calendar
month  prior to the  applicable  Dividend  Payment  Date or on such  other  date
designated  by the Board that is not more than 30 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date").

                  (b) For any Dividend  Period ending prior to February 1, 2001,
dividends will be payable,  at the election of the Board, (i) by the issuance as
of the  relevant  Dividend  Payment  Date of  additional  shares of fully  paid,
nonassessable   Series  C  Preferred  Stock  having  an  aggregate   liquidation
preference equal to the amount of such accrued dividends or (ii) in cash. In the
event that  dividends  are  declared  and paid  pursuant to clause (i), (A) such
dividends  will be deemed paid in full and will not  accumulate and (B) prior to
paying any such  dividends,  the Board will take such action as is  necessary to
increase  the number of  authorized  shares of Series C  Preferred  Stock by the
number of shares to be issued  pursuant  to this  Section 4,  including  but not
limited to the filing of Articles  Supplementary  with the State  Department  of
Assessments  and  Taxation  of Maryland in  accordance  with  Article VII of the
Charter. The Company will deliver  certificates  representing shares of Series C
Preferred Stock issued pursuant to this Section 4(b) promptly after the relevant
Dividend  Payment Date.  For any Dividend  Period ending after February 1, 2001,
dividends will be payable in cash.

                  (c) No dividends  on shares of Series C Preferred  Stock shall
be declared by the Board or paid or set apart for payment by the Company at such
time as the terms and provisions of any agreement of the Company,  including any
agreement relating to its indebtedness,  prohibits such declaration,  payment or
setting apart for payment or provides that such declaration,  payment or setting
apart for payment would constitute a breach thereof or a default thereunder,  or
if such declaration or payment shall be restricted or prohibited by law.

                  (d) Notwithstanding  the foregoing,  dividends on the Series C
Preferred Stock will accrue whether or not the Company has earnings,  whether or
not there are funds  legally  available  for the payment of such  dividends  and
whether or not such dividends are declared.  Accrued but unpaid dividends on the
Series C  Preferred  Stock will not bear  interest  and  holders of the Series C
Preferred  Stock will not be  entitled  to any  distributions  in excess of full
cumulative  distributions  described  above.  Except  as set  forth  in the next
sentence,  no dividends will be declared or paid or set apart for payment on any
capital stock of the Company or any other series of Preferred Stock ranking,  as
to dividends,  on a parity with or junior to the Series C Preferred Stock (other
than a  dividend  in shares of the  Company's  Common  Stock or in shares of any
other  class of stock  ranking  junior  to the  Series C  Preferred  Stock as to
dividends and upon liquidation) for any period unless full cumulative  dividends
have been or  contemporaneously  are  declared  and paid or  declared  and a sum
sufficient for the payment thereof is set apart for such payment on the Series C
Preferred  Stock for all past  dividend  periods and the then  current  dividend
period.  When  dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series C Preferred Stock and the shares of
any other series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred  Stock,  all  dividends  declared upon the Series C Preferred
Stock  and any  other  series  of  Preferred  Stock  ranking  on a parity  as to
dividends  with the Series C Preferred  Stock shall be declared pro rata so that
the amount of dividends  declared per share of Series C Preferred Stock and such
other series of  Preferred  Stock shall in all cases bear to each other the same
ratio that accrued  dividends per share on the Series C Preferred Stock and such
other series of Preferred  Stock (which shall not include any accrual in respect
of unpaid  dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) bear to each other.

                  (e) Except as provided in the immediately preceding paragraph,
unless full  cumulative  dividends on the Series C Preferred  Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment  thereof is set apart for payment for all past dividend  periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series C Preferred  Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment  nor shall any other  distribution  be  declared or made upon the Common
Stock,  or any other  capital  stock of the  Company  ranking  junior to or on a
parity with the Series C Preferred  Stock as to dividends  or upon  liquidation,
nor shall any shares of Common  Stock,  or any other shares of capital  stock of
the Company  ranking junior to or on a parity with the Series C Preferred  Stock
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any  consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for other  capital stock of the Company  ranking  junior to the
Series C Preferred  Stock as to dividends and upon  liquidation or redemption or
for the  purpose of  preserving  the  Company's  qualification  as a real estate
investment trust under the Internal  Revenue Code of 1986, as amended).  Holders
of shares of the Series C Preferred Stock shall not be entitled to any dividend,
whether  payable  in cash,  property  or stock,  in  excess  of full  cumulative
dividends  on the Series C  Preferred  Stock as  provided  above.  Any  dividend
payment  made on shares of the Series C Preferred  Stock shall first be credited
against the earliest accrued but unpaid dividend due with respect to such shares
which remains payable.

         5.   Liquidation   Preference.   Upon  any  voluntary  or   involuntary
liquidation,  dissolution  or winding  up of the  affairs  of the  Company,  the
holders of shares of Series C Preferred Stock are entitled to be paid out of the
assets of the Company legally available for distribution to its shareholders the
Liquidation  Preference (as defined in Section 10(e)) before any distribution of
assets  is made to  holders  of  Common  Stock or any  other  class or series of
capital  stock of the Company that ranks junior to the Series C Preferred  Stock
as to liquidation  rights.  The Company will promptly  provide to the holders of
Series C Preferred  Stock written  notice of any event  triggering  the right to
receive such  Liquidation  Preference.  After  payment of the full amount of the
Liquidation Preference,  plus any accrued and unpaid dividends to which they are
entitled, the holders of Series C Preferred Stock will have no right or claim to
any of the remaining assets of the Company.  The  consolidation or merger of the
Company  with or into any  other  corporation,  trust or  entity or of any other
corporation  with or into the Company in a manner that  constitutes  a Change in
Control (as defined in Section 10(b)),  or the sale,  lease or conveyance of all
or substantially all of the property or business of the Company, shall be deemed
to constitute a liquidation, dissolution or winding up of the Company.

In determining  whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend,  redemption or other acquisition of shares of stock of
the Company or otherwise is permitted under the Maryland General Corporation Law
(the  "MGCL"),  no effect  shall be given to amounts that would be needed if the
Company  would be  dissolved  at the time of the  distribution,  to satisfy  the
preferential  rights  upon  distribution  of  holders  of shares of stock of the
Company  whose  preferential  rights  upon  distribution  are  superior to those
receiving the distribution.

         6. Redemption. The Series C Preferred Stock is not redeemable, subject,
however, to the provisions in Section 9 of these Articles Supplementary.

         7. Voting Rights.  (a) Holders of the Series C Preferred Stock will not
have  any  voting  rights,  except  as  set  forth  below.  Notwithstanding  the
provisions  of this  Section 7, no holder of Series C  Preferred  Stock shall be
entitled  to vote any shares of Series C  Preferred  Stock that would  result in
such  holder and any of its  affiliates  controlled  by it or any group (as such
term is used in Section  13(d)(3) of the Exchange Act) of which any of them is a
member voting in excess of 49.9% of the then-outstanding Voting Stock, except in
any  separate  class  vote  consisting  solely  of any  one or more  classes  of
Preferred Stock.

                  (b) Each holder of shares of Series C Preferred Stock shall be
entitled to notice of any  stockholder  meeting in accordance with the bylaws of
the Company (the "Bylaws"),  shall be entitled to a number of votes equal to the
number of shares of Common  Stock into  which the  shares of Series C  Preferred
Stock held by such holder could then be converted  pursuant to Section 8 (giving
effect to the  limitations  on  conversion in Section  8.17),  shall have voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock,  and shall vote  together as a single class with holders of Common Stock,
except as expressly  required by law.  Fractional  votes shall not be permitted,
and any  fractional  voting  rights  resulting  from the right of any  holder of
Series C Preferred Stock to vote on an as converted basis (after aggregating the
shares into which all shares of Series C Preferred  Stock held such holder could
be converted)  shall be rounded to the nearest whole number (with one-half being
rounded upward).  The holders of Series C Preferred Stock shall have no separate
class or series  vote on any matter  except as  expressly  required by law or as
otherwise set forth in these Articles Supplementary.

                  (c)  Whenever  dividends  on any shares of Series C  Preferred
Stock  shall be in  arrears  for four or more  Dividend  Periods  (a  "Preferred
Dividend Default"), the number of directors then constituting the Board shall be
increased, if necessary, by such number that would, if such number were added to
the  number of  directors  already  designated  by the  holders  of the Series C
Preferred Stock (whether  pursuant to the Stockholders  Agreement or otherwise),
constitute  a majority  of the Board (if not  already  increased  by reason of a
similar   arrearage  with  respect  to  any  Parity  Preferred  (as  hereinafter
defined)).  The  holders  of such  shares of Series C  Preferred  Stock  (voting
separately  as a class with all other  series of  Preferred  Stock  ranking on a
parity with the Series C Preferred  Stock as to dividends  or upon  liquidation,
dissolution  or winding up ("Parity  Preferred")  upon which like voting  rights
have been conferred and are exercisable)  will be entitled to vote separately as
a class,  in order to fill the vacancies  thereby  created,  for the election of
such additional  number of directors of the Company  determined  pursuant to the
first sentence of this Section 7(c) (the "Additional Preferred Stock Directors")
at a  special  meeting  called by the  holders  of record of at least 20% of the
Series C Preferred  Stock or the holders of record of at least 20% of any series
of Parity  Preferred  so in arrears and entitled to vote (unless such request is
received  less than 90 days before the date fixed for the next annual or special
meeting of the shareholders) or at the next annual meeting of shareholders,  and
at each subsequent annual meeting until all dividends accumulated on such shares
of Series C Preferred Stock and Parity  Preferred for the past dividend  periods
and the dividend for the then current dividend period shall have been fully paid
or declared and a sum sufficient for the payment  thereof set aside. In any vote
to elect or remove additional  directors pursuant to this Section 7, each holder
of shares of Series C Preferred  Stock or Parity  Preferred  so entitled to vote
will be entitled  to one vote for each $1.00  amount of  Liquidation  Preference
attributable to the aggregate number of such shares held by such holder.  In the
event the directors of the Company are divided into  classes,  each such vacancy
shall be apportioned  among the classes of directors to prevent  stacking in any
one class and to ensure that the number of  directors  in each of the classes of
directors are as equal as possible. Each Additional Preferred Stock Director, as
a  qualification  for election as such (and  regardless of how  elected),  shall
submit to the Board a duly executed,  valid,  binding and enforceable  letter of
resignation  from the  Board,  to be  effective  upon the date  upon  which  all
dividends  accumulated  on such  shares of Series C  Preferred  Stock and Parity
Preferred  for the past  dividend  periods and the dividend for the then current
dividend  period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment,  whereupon the terms of office of all
persons  elected as Additional  Preferred  Stock Directors by the holders of the
Series C Preferred Stock and any Parity Preferred shall,  upon the effectiveness
of their respective letters of resignation,  forthwith terminate, and the number
of directors then constituting the Board shall be reduced accordingly.  A quorum
for any such  meeting  shall  exist if at least a  majority  of the  outstanding
shares of Series C  Preferred  Stock and shares of Parity  Preferred  upon which
like voting rights have been conferred and are  exercisable  are  represented in
person or by proxy at such meeting.  Such  Additional  Preferred Stock Directors
shall be  elected  upon the  affirmative  vote of a  plurality  of the shares of
Series C Preferred Stock and such Parity Preferred  present and voting in person
or by proxy at a duly called and held  meeting at which a quorum is present.  If
and  when all  accumulated  dividends  and the  dividend  for the  then  current
dividend  period on the Series C Preferred Stock shall have been paid in full or
declared and a sum  sufficient  for the payment  thereof in full shall have been
set aside,  the holders thereof shall be divested of the foregoing voting rights
(subject to revesting in the event of each and every Preferred Dividend Default)
and, if and when all accumulated dividends and the dividend for the then current
dividend period on all series of Parity  Preferred upon which like voting rights
have been conferred and are exercisable have been paid in full or declared and a
sum  sufficient for the payment  thereof in full shall have been set aside,  the
term of office of each  Additional  Preferred  Stock  Director so elected  shall
terminate.  Any Additional  Preferred  Stock Director may be removed at any time
with or without  cause by, and shall not be removed  otherwise  than by the vote
of, the holders of record of a majority of the outstanding  shares of the Series
C Preferred  Stock and Parity  Preferred upon which like voting rights have been
conferred  and  are  exercisable  (voting  together  as a  class).  So long as a
Preferred  Dividend  Default  shall  continue,  any  vacancy in the office of an
Additional  Preferred  Stock  Director  may be filled by written  consent of the
Additional  Preferred Stock Directors remaining in office, or if none remains in
office,  by a vote of the  holders  of record of a majority  of the  outstanding
shares of Series C Preferred  Stock and Parity  Preferred upon which like voting
rights have been conferred and are exercisable (voting together as a class). The
Additional  Preferred  Stock  Directors  shall each be  entitled to one vote per
director on any matter.

                  (d) So long as any shares of Series C Preferred  Stock  remain
outstanding,  the Company will not,  without the affirmative  vote or consent of
the holders of at least two-thirds of the shares of the Series C Preferred Stock
outstanding at the time, given in person or by proxy,  either in writing or at a
meeting  (voting  separately  as a class  together  with any  other  classes  of
Preferred Stock adversely  affected in the same manner),  amend, alter or repeal
the provisions of the Charter or the Articles Supplementary,  whether by merger,
consolidation  or otherwise  (an  "Event"),  so as to  materially  and adversely
affect  any  right,  preference,  privilege  or  voting  power  of the  Series C
Preferred  Stock or the  holders  thereof,  including  without  limitation,  the
creation  of any  series of  Preferred  Stock  ranking  senior  to the  Series C
Preferred  Stock with  respect to payment of dividends  or the  distribution  of
assets  upon  liquidation,  dissolution  or winding  up, but not  including  the
creation or issuance of Parity Preferred.

                  (e)   Except   as   expressly   stated   in   these   Articles
Supplementary,  the  Series C  Preferred  Stock  shall  not  have any  relative,
participating,  optional  or other  special  voting  rights  and  powers and the
consent  of the  holders  thereof  shall not be  required  for the taking of any
corporate  action,  including  but not limited  to, any merger or  consolidation
involving the Company or a sale of all or substantially all of the assets of the
Company,  irrespective of the effect that such merger, consolidation or sale may
have upon the rights, preferences or voting power of the holders of the Series C
Preferred Stock.

         8.  Conversion.  The holders of Series C Preferred Stock shall have the
following conversion rights with respect to such shares:

                  8.1  Optional  Conversion.   Subject  to  the  limitations  on
conversion in Section 8.17,  each share of Series C Preferred  Stock  (including
all  accrued  and  unpaid  dividends  thereon,  to the extent  declared)  may be
converted,  at any time at the option of the holder thereof, into fully paid and
nonassessable  shares of Common  Stock  (and any other  securities  or  property
expressly provided in this Section 8) as set forth in this Section 8.

                  8.2 Conversion Price. Subject to the limitations on conversion
in Section 8.17,  each share of Series C Preferred  Stock may be converted  into
such number of shares of Common  Stock as is equal to the  quotient  obtained by
dividing the  Original  Issue Price for such share by the  Conversion  Price (as
defined  below)  in  effect  at the time of  conversion.  The  Conversion  Price
initially  shall be equal  to $6.25  per  share  of  Common  Stock,  subject  to
adjustment from time to time as provided herein (the "Conversion Price").

                  8.3  Mechanics of  Conversion.  A holder of Series C Preferred
Stock who  desires to convert the same into Common  Stock  shall  surrender  the
certificate or  certificates  representing  such shares,  duly endorsed,  at the
office of the  Company or at the office of any  transfer  agent for the Series C
Preferred Stock or Common Stock, and shall give written notice to the Company at
such office that such holder  elects to convert the same and shall state therein
both the number of shares of Series C Preferred  Stock being  converted  and the
name or names in which the holder wishes the  certificate  or  certificates  for
Common Stock to be issued.  The Company shall, as soon as practicable after such
surrender,  issue and  deliver at such office to such  holder a  certificate  or
certificates  representing  the  number of shares of Common  Stock to which such
holder is entitled and a new certificate or certificates representing the number
of  shares  of  Series C  Preferred  Stock  represented  by the  certificate  or
certificates  surrendered  by the holder  minus the number of Series C Preferred
Stock so converted by the holder.  Such conversion  shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the certificate  representing the Series C Preferred Stock to be converted,  and
the Person  entitled to receive the Common Stock  issuable upon such  conversion
shall be treated for all  purposes as the record  holder of such Common Stock on
such date.  Any Series C Preferred  Stock  converted  into Common Stock shall be
retired and may not be reissued by the Company.

                  8.4  Adjustment  for Stock  Splits  and  Combinations.  If the
Company  at any  time or from  time to time  after  the  Issue  Date  effects  a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately  before that subdivision  shall be  proportionately  decreased,  and
conversely, if the Company at any time or from time to time after the Issue Date
combines  the  outstanding  Common  Stock into a smaller  number of shares,  the
Conversion  Price then in effect  immediately  before the  combination  shall be
proportionately  increased.  Any adjustment  under this Section 8.4 shall become
effective at the close of business on the date such  subdivision  or combination
becomes effective.

                  8.5 Adjustment for Certain Dividends and Distributions. If the
Company at any time or from time to time after the Issue Date makes,  or fixes a
record  date for the  determination  of  holders  of Common  Stock  entitled  to
receive,  a dividend or other  distribution  payable in additional Common Stock,
then and in each  such  event  the  Conversion  Price  then in  effect  shall be
decreased  as of the time of such  issuance or, in the event such record date is
fixed,  as of the close of business  on such record  date,  by  multiplying  the
Conversion  Price then in effect by a fraction (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding  immediately prior
to the time of such  issuance or the close of business on such record date,  and
(2) the denominator of which shall be the total number of shares of Common Stock
issued and  outstanding  immediately  prior to the time of such  issuance or the
close of business on such record date plus the number of shares of Common  Stock
issuable in payment of such dividend or distribution; provided, however, that if
such  record  date is  fixed  and such  dividend  is not  fully  paid or if such
distribution is not fully made on the date fixed therefor,  the Conversion Price
shall be recomputed  accordingly as of the close of business on such record date
and thereafter the Conversion  Price shall be adjusted  pursuant to this Section
8.5 as of the time of actual payment of such dividends or distributions.

                  8.6 Adjustments for Other Dividends and Distributions.  In the
event the  Company at any time or from time to time after the Issue Date  makes,
or fixes a record date for the determination of holders of Common Stock entitled
to  receive,  a dividend  or other  distribution  payable in  securities  of the
Company  other than  Common  Stock or other  assets or  property  of the Company
(other than  ordinary  cash  dividends  and any special  dividends  necessary to
preserve the  Company's  qualification  as a REIT),  then and in each such event
provision  shall be made so that the holders of Series C  Preferred  Stock shall
receive upon conversion  thereof,  in addition to the number of shares of Common
Stock  receivable  thereupon,  the amount of  securities of the Company or other
assets or  property  of the  Company  which they would have  received  had their
Series C Preferred  Stock been  converted  into Common Stock on the date of such
event and had they thereafter,  during the period from the date of such event to
and including the conversion  date,  retained such securities or other assets or
property of the Company  receivable  by them as  aforesaid  during such  period,
subject  to all other  adjustments  called  for during  such  period  under this
Section 8 with  respect to the rights of the  holders of the Series C  Preferred
Stock.

                  8.7    Adjustment   for    Reclassification,    Exchange   and
Substitution. In the event that at any time or from time to time after the Issue
Date, the Common Stock or other  securities as provided herein issuable upon the
conversion  of the  Series C  Preferred  Stock  are  changed  into the same or a
different  number  of  shares  of any class or  classes  of  stock,  whether  by
recapitalization,  reclassification  or otherwise  (other than a subdivision  or
combination   of  shares  or  stock  dividend  or  a   reorganization,   merger,
consolidation or sale of assets, provided for elsewhere in this Section 8), then
and in any such event each  holder of Series C  Preferred  Stock  shall have the
right  thereafter  to convert  such Series C  Preferred  Stock into the kind and
amount  of  stock  and  other  securities  and  property  receivable  upon  such
recapitalization,  reclassification  or other change, by holders of Common Stock
or other  securities  as  provided  herein  into which  such  shares of Series C
Preferred   Stock  could  have  been   converted   immediately   prior  to  such
recapitalization,  reclassification or change, all subject to further adjustment
as provided herein.

                  8.8 Reorganizations,  Mergers,  Consolidations or Transfers of
Assets.  If at any time or from time to time  after the  Issue  Date  there is a
capital  reorganization  of the Common Stock or other  securities  issuable upon
conversion  of  Series  C  Preferred  Stock as  provided  herein  (other  than a
recapitalization,  subdivision,  combination,  reclassification  or  exchange of
shares provided for elsewhere in this Section 8) or a merger or consolidation or
statutory  binding share exchange of the Company with or into another Person, or
the transfer of all or substantially all of the Company's  properties and assets
to any other Person and such capital  reorganization,  merger,  consolidation or
transfer  does not  constitute  a Change  in  Control,  then,  as a part of such
capital reorganization,  merger, consolidation, exchange or transfer (subject to
the provisions of Section 9), provision shall be made so that the holders of the
Series C Preferred Stock shall thereafter be entitled to receive upon conversion
of Series C Preferred  Stock the number of shares of stock or other  securities,
cash or  property  to which a holder of the number of shares of Common  Stock or
other  securities  deliverable  upon  conversion of the Series C Preferred Stock
would have been entitled on such capital reorganization,  merger, consolidation,
exchange or transfer. In any such case,  appropriate adjustment shall be made in
the  application  of the provisions of this Section 8 with respect to the rights
of the holders of the Series C Preferred Stock after the capital reorganization,
merger,  consolidation,  exchange or transfer to the end that the  provisions of
this Section 8 (including  adjustment of the Conversion Price then in effect and
the number of shares receivable upon conversion of the Series C Preferred Stock)
shall be  applicable  after  that  event and be as nearly  equivalent  as may be
practicable.

                  8.9 Sale of Shares Below Fair Market Value. (a) If at any time
or from time to time after the Issue Date,  the Company  issues or sells,  or is
deemed by the  express  provisions  of this  Section 8.9 to have issued or sold,
Additional  Common Stock (as defined  below),  other than as a dividend or other
distribution  on any class of stock as  provided  in Section 8.5 above and other
than upon a subdivision  or  combination  of Common Stock as provided in Section
8.4 above,  for an Effective  Price (as defined below) less than the Fair Market
Value,  then and in each such case the then existing  Conversion  Price shall be
reduced,  as of the opening of business on the date of such issue or sale,  to a
price  determined by  multiplying  that  Conversion  Price by a fraction (i) the
numerator  of which  shall be equal to the sum of (A) the  number  of  shares of
Common Stock issued and outstanding at the close of business on the Business Day
immediately  preceding the date of such issue or sale,  (B) the number of shares
of Common Stock which the  aggregate  consideration  received (or by the express
provisions  hereof is deemed to have been received) by the Company for the total
number of shares of Additional  Common Stock so issued or sold would purchase at
such Fair Market Value,  (C) the number of shares of Common Stock into which all
outstanding Series C Preferred Stock are convertible at the close of business on
the Business Day  immediately  preceding the date of such issuance or sale,  and
(D) the number of shares of Common Stock  underlying all Convertible  Securities
(as  defined  below) at the close of business on the  Business  Day  immediately
preceding the date of such issuance or sale,  and (ii) the  denominator of which
shall be equal to the sum of (A) the number of shares of Common Stock issued and
outstanding  at the close of business on the date of such issuance or sale after
giving  effect to such  issuance or sale of  Additional  Common  Stock,  (B) the
number of shares of Common Stock into which all  outstanding  Series C Preferred
Stock are  convertible at the close of business on the Business Day  immediately
preceding  the date of such  issuance  or sale,  and (C) the number of shares of
Common Stock  underlying all Convertible  Securities at the close of business on
the Business Day immediately preceding the date of such issuance or sale.

                  (b) For the purpose of making any  adjustment  required  under
this Section 8.9, the consideration for any issuance or sale of securities shall
be deemed to be (A) to the extent it consists of cash, equal to the gross amount
paid in such issuance or sale,  (B) to the extent it consists of property  other
than  cash,  equal  to the  Fair  Market  Value  of  that  property,  and (C) if
Additional Common Stock,  Convertible Securities (as defined below) or rights or
options to purchase either Additional Common Stock or Convertible Securities are
issued or sold  together  with other stock,  securities or assets of the Company
for a  consideration  which covers both,  that portion of the  consideration  so
received  that is  determined in good faith by the Board to be allocable to such
Additional Common Stock, Convertible Securities or rights or options.

                  (c) For the  purpose  of the  adjustment  required  under this
Section  8.9,  if the  Company  issues or sells any  rights or  options  for the
purchase of, or stock or other  securities  convertible  into or exchangeable or
exercisable for,  Additional  Common Stock (such  convertible or exchangeable or
exercisable  stock or securities being  hereinafter  referred to as "Convertible
Securities") and if the Effective Price of such Additional  Common Stock is less
than the Fair Market  Value,  then in each case the  Company  shall be deemed to
have (i)  issued  at the time of the  issuance  of such  rights  or  options  or
Convertible  Securities the number of shares of Additional Common Stock issuable
upon  exercise,  conversion  or  exchange  thereof  irrespective  of whether the
holders  thereof  have the fully  vested  legal  right to  exercise,  convert or
exchange  the  Convertible  Securities  for  Additional  Common  Stock  and (ii)
received as  consideration  for the issuance of such Additional  Common Stock an
amount equal to the total amount of the  consideration,  if any, received by the
Company for the  issuance of such rights or options or  Convertible  Securities,
plus, in the case of such rights or options, the consideration,  if any, payable
to the Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the consideration, if any, payable to the Company (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities)  upon the  exercise,  conversion  or  exchange  thereof.  No further
adjustment  of the  Conversion  Price,  as  adjusted  upon the  issuance of such
rights,  options  or  Convertible  Securities,  shall be made as a result of the
actual issuance of Additional Common Stock on the exercise of any such rights or
options or the conversion or exchange of any such Convertible Securities. If any
such rights or options or the  conversion or exchange  privilege  represented by
any such Convertible Securities shall expire without having been exercised,  the
Conversion  Price as  adjusted  upon the  issuance  of such  rights,  options or
Convertible  Securities  shall be readjusted to the Conversion Price which would
have  been in effect  had an  adjustment  been  made on the basis  that the only
shares of Additional Common Stock so issued were the shares of Additional Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion  or exchange of such  Convertible  Securities,  and such
shares  of  Additional  Common  Stock,  if any,  were  issued  or  sold  for the
consideration  actually  received by the Company  upon such  exercise,  plus the
consideration,  if any, actually received by the Company for the granting of the
rights or options whether or not exercised,  plus the consideration received for
issuing or selling the Convertible  Securities  actually converted or exchanged,
plus the consideration,  if any, actually received by the Company (other than by
cancellation  of  liabilities  or  obligations  evidenced  by  such  Convertible
Securities) on the conversion or exchange of such Convertible Securities.

                  (d)  "Additional  Common  Stock"  shall mean all Common  Stock
issued  or  issuable  by the  Company  after  the  Issue  Date,  whether  or not
subsequently  reacquired or retired by the Company,  other than (i) Common Stock
issued or  issuable  upon  conversion  of, or as a  dividend  on,  any  Series C
Preferred Stock,  (ii) Common Stock issued or issuable  pursuant to any employee
benefit plan or similar plan or arrangement intended to provide compensation and
other benefits to officers, directors,  employees and consultants of the Company
provided that such plans and any grants or awards  thereunder have been approved
by the Board or a committee  thereof,  (iii) securities issued by the Company in
payment of a purchase  price to the seller or any Person who  beneficially  owns
equity  securities of such seller for any  acquisition  of assets or a business,
which acquisition is approved by the Board, or pursuant to the Additional Equity
Financing (as defined in the Investment  Agreement dated as of May 11, 2000 (the
"Investment  Agreement"),  by  and  between  Explorer  Holdings,  L.P.  and  the
Company),  and (iv)  securities  issued  pursuant  to the Rights  Offerings  (as
defined in Exhibit B to the  Investment  Agreement).  The  "Effective  Price" of
Additional Common Stock shall mean the quotient determined by dividing the total
number of shares of  Additional  Common Stock issued or sold,  or deemed to have
been issued or sold by the Company, by the aggregate  consideration received, or
deemed to have been received,  by the Company for such Additional  Common Stock.
The share numbers in this Section 8.9(d) shall be appropriately adjusted for any
stock dividends,  combinations,  splits,  reverse splits,  recapitalizations and
similar events affecting the securities of the Company.

                  8.10 Certificate of Adjustment.  In each case of an adjustment
or readjustment of the Conversion  Price or the number of shares of Common Stock
or other  securities  issuable upon conversion of the Series C Preferred  Stock,
the Company,  at its  expense,  shall cause the Chief  Financial  Officer of the
Company to compute  such  adjustment  or  readjustment  in  accordance  with the
provisions  hereof  and  prepare  a  certificate   showing  such  adjustment  or
readjustment,  and shall mail such  certificate,  by first class  mail,  postage
prepaid,  to each  registered  holder  of the  Series C  Preferred  Stock at the
holder's  address as shown in the Company's  books.  The  certificate  shall set
forth such  adjustment or  readjustment,  showing in detail the facts upon which
such  adjustment  or  readjustment  is based,  including a statement  of (1) the
consideration  received  or  deemed  to be  received  by  the  Company  for  any
Additional  Common  Stock  issued or sold or deemed to have been issued or sold,
(2) the Conversion  Price in effect  immediately  prior to the occurrence of the
event  giving rise to such  adjustment,  (3) the number of shares of  Additional
Common Stock,  and (4) the type and amount,  if any, of other  property which at
the time would be received upon conversion of the Series C Preferred Stock.

                  8.11 Notices of Record Date. In the event of (i) any taking by
the  Company  of a record  of the  holders  of any class of  securities  for the
purpose of  determining  the  holders  thereof  who are  entitled to receive any
dividend  or  other  distribution  or (ii)  any  capital  reorganization  of the
Company,  any  reclassification  or recapitalization of the capital stock of the
Company,  any  merger or  consolidation  of the  Company  with or into any other
entity, or any transfer of all or substantially all of the assets of the Company
to any other person or any voluntary or involuntary dissolution,  liquidation or
winding up of the  Company,  the  Company  shall mail to each holder of Series C
Preferred Stock at least ten days prior to the record date specified  therein, a
notice  specifying  (1) the date on which any such record is to be taken for the
purpose of such dividend or  distribution  and a description of such dividend or
distribution,  (2) the date on which any such reorganization,  reclassification,
transfer,  consolidation,  merger,  dissolution,  liquidation  or  winding up is
expected to become effective,  and (3) the date, if any, that is to be fixed, as
to when the  holders of record of Common  Stock (or other  securities)  shall be
entitled to exchange their Common Stock (or other  securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.

                  8.12 Fractional  Shares.  No fractional shares of Common Stock
shall be issued  upon  conversion  of Series C Preferred  Stock.  In lieu of any
fractional  share to which the holder would  otherwise be entitled,  the Company
shall pay cash equal to the  product  of such  fraction  multiplied  by the Fair
Market Value of one share of Common Stock on the date of conversion.

                  8.13  Reservation  of  Stock  Issuable  Upon  Conversion.  The
Company shall at all times reserve and keep  available out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of the
Series C Preferred  Stock,  such number of shares of its Common  Stock and other
securities,  if any, issuable upon conversion  thereof as expressly  provided in
Section 8 as shall from time to time be sufficient  to effect the  conversion of
all outstanding Series C Preferred Stock.

                  8.14 Notices. Any notice required or permitted by this Section
8 to be given to a holder of Series C Preferred Stock or to the Company shall be
in writing and be deemed  given upon the earlier of actual  receipt or five days
after the same has been  deposited in the United  States  mail,  by certified or
registered mail, return receipt requested, postage prepaid, and addressed (i) to
each holder of record at the address of such  holder  appearing  on the books of
the Company,  or (ii) to the Company at its registered  office,  or (iii) to the
Company or any holder,  at any other address specified in a written notice given
to the other for the giving of notice.

                  8.15  Payment of Taxes.  The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue and delivery of Common Stock upon conversion of Series
C Preferred Stock,  including without limitation any tax or other charge imposed
in connection  with the issue and delivery of Common Stock or other  securities,
if any, issuable upon conversion thereof as expressly provided in Section 8 in a
name other than that in which the Series C  Preferred  Stock so  converted  were
registered.

                  8.16 Cancellation of Shares.  Any shares of Series C Preferred
Stock which are  converted in  accordance  with Section 8 or which are redeemed,
repurchased or otherwise acquired by the Company, shall be canceled and added to
the authorized but undesignated  Preferred Stock of the Company but shall not be
reissued as Series C Preferred Stock.

                  8.17   Limitations   on   Conversions.   Notwithstanding   the
provisions  of this  Section 8, no holder of Series C  Preferred  Stock shall be
permitted  to convert a number of its shares of Series C  Preferred  Stock which
would  result in such  holder and its  Affiliates  or any group (as such term is
used in Section  13(d)(3) of the Exchange  Act) of which any of them is a member
having  beneficial  ownership,  after giving effect to such conversion,  of more
than 49.9% of the  then-outstanding  Voting Stock without the prior  approval of
the Board.

         9.  Restrictions  on Ownership and Transfer.  Once there is a completed
public offering of the Series C Preferred Stock, if the Board shall, at any time
and in good faith, be of the opinion that actual or constructive ownership of at
least 9.9% or more of the value of the outstanding  capital stock of the Company
has or may become  concentrated  in the hands of one owner (other than  Explorer
Holdings,  L.P. and its direct and indirect equity owners), the Board shall have
the power (i) by means deemed  equitable  by the Board,  and pursuant to written
notice,  to call for the purchase  from any  shareholder  of the  corporation  a
number of shares of Series C Preferred Stock  sufficient,  in the opinion of the
Board, to maintain or bring the direct or indirect  ownership of such beneficial
owner to no more than 9.9% of the value of the outstanding  capital stock of the
corporation,  and (ii) to  refuse  to  transfer  or  issue  shares  of  Series C
Preferred Stock to any person whose acquisition of such Series C Preferred Stock
would, in the opinion of the Board,  result in the direct or indirect  ownership
by that person of more than 9.9% of the value of the  outstanding  capital stock
of the Company.  The purchase  price for any shares of Series C Preferred  Stock
shall be equal to the fair market  value of the shares  reflected in the closing
sales price for the shares, if then listed on a national securities exchange, or
if the  shares  are not then  listed  on a  national  securities  exchange,  the
purchase  price shall be equal to the  Liquidation  Preference of such shares of
Series C Preferred  Stock.  Payment of the  purchase  price shall be made within
thirty days following the date set forth in the notice of call for purchase, and
shall be made in such manner as may be determined  by the Board.  From and after
the date fixed for purchase by the Board, as set forth in the notice, the holder
of any shares so called for purchase shall cease to be entitled to distributions
and other  benefits  with  respect to such shares,  excepting  only the right to
payment of the  purchase  price  fixed as  aforesaid.  Any  transfer of Series C
Preferred Stock that would create an actual or  constructive  owner of more than
9.9% of the value of the  outstanding  shares of capital  stock of this  Company
shall be deemed void ab initio and the intended transferee shall be deemed never
to have had an interest therein.  If the foregoing provision is determined to be
void or invalid by virtue of any legal  decision,  statute,  rule or regulation,
then the  transferee  of such Series C Preferred  Stock shall be deemed,  at the
option  of the  Company,  to have  acted as agent on behalf  of the  Company  in
acquiring such shares and to hold such shares on behalf of the Company.

Notwithstanding  anything  herein to the contrary,  the Company and its transfer
agent may refuse to  transfer  any shares of Series C Preferred  Stock,  passing
either by  voluntary  transfer,  by operation of law, or under the last will and
testament of any  shareholder if such transfer would or might, in the opinion of
the Board or counsel to the  Company,  disqualify  the  Company as a Real Estate
Investment Trust under the Internal Revenue Code. Nothing herein contained shall
limit  the  ability  of the  Company  to  impose  or to seek  judicial  or other
imposition  of  additional  restrictions  if deemed  necessary  or  advisable to
preserve the Company's tax status as a qualified Real Estate  Investment  Trust.
Nothing herein  contained shall preclude  settlement of any transaction  entered
into through the facilities of the New York Stock Exchange.

         10. Certain Defined Terms.  In addition to the terms defined  elsewhere
in these Articles  Supplementary  or the Charter,  the following terms will have
the following meanings when used herein with initial capital letters:

                  (a) "Business  Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in New York City, or any day on which banks in
New York City are authorized by law to close).

                  (b) "Change in Control"  means the  acquisition of the Company
by means of any  transaction  or  series  of  related  transactions  (including,
without limitation, any reorganization,  merger, consolidation or other business
combination  transaction),  unless  the  Company's  stockholders  of  record  as
constituted  immediately prior to such acquisition will,  immediately after such
acquisition (by virtue of securities  issued as consideration  for the Company's
acquisition  or  otherwise),  hold  at  least  50% of the  voting  power  of the
surviving or acquiring  entity in  approximately  the same relative  percentages
after such acquisition or sale as before such acquisition or sale.

                  (c) "Exchange Act" means the Securities  Exchange Act of 1934,
as amended.

                  (d) "Fair Market Value" of any security or other asset means:

                           (i)  in the case of any security:

                                    (A) if the security is traded on a
         securities exchange, the weighted average trading volume of the per
         share  closing  prices of the security on such exchange over the five
         trading day period ending three trading days prior to the date on which
         such value is measured;

                                    (B) if    the    security    is    traded
         over-the-counter, the weighted average trading volume of the per share
         closing bid prices of the security over the five trading day period
         ending three trading days prior to the date on which such value is
         measured; or

                                    (C) if there is no  public  market  for such
         security that meets the criteria set forth in (A) or (B) above, the
         Fair Market Value shall be the per share fair market value of such
         security as of the date on which such value is measured, as determined
         in good faith by the Board.

                           (ii) In the case of assets other than securities, the
Fair Market Value shall be the fair market value of such assets, as determined
in good faith by the Board.

                  (e)  "Liquidation  Preference"  measured per share of Series C
Preferred  Stock as of any date in  question  (the  "Relevant  Date"),  means an
amount  equal to the  Original  Issue Price of such share plus any  declared but
unpaid  dividends,  but  without  interest,  at the rate set forth in  Section 4
hereof,  if any, for such share of Series C Preferred  Stock. In connection with
the determination of the Liquidation Preference of a share of Series C Preferred
Stock upon liquidation,  dissolution or winding up of the Company,  the Relevant
Date shall be the date of  distribution  of amounts  payable to  stockholders in
connection with any such liquidation, dissolution or winding up.

                  (f)  "Original  Issue  Price" means $100 per share of Series C
Preferred  Stock,  subject  to  appropriate  adjustment  to  reflect  any  stock
dividends,  combinations,  splits, reverse splits,  recapitalizations or similar
events affecting the Series C Preferred Stock after the Issue Date.

                  (g)  "Person"  means  any   individual,   firm,   corporation,
partnership,  limited liability company, or group (within the meaning of Section
13(d)(3) of the Exchange Act).

                  (h) "Stockholders  Agreement" means the Stockholders Agreement
by and between Explorer Holdings, L.P. and the Company, dated the Issue Date.

                  (i) "Voting  Stock"  means,  with respect to the Company,  the
shares of any class or kind ordinarily having the power to vote for the election
of  directors  or  other  members  of the  governing  body of the  Company.  For
avoidance  of  doubt,  (i)  Common  Stock  and  Series C  Preferred  Stock  both
constitute  Voting  Stock of the  Company and (ii) no class of  Preferred  Stock
shall be deemed to be Voting  Stock by virtue of the rights of such  holder upon
any Preferred Dividend Default.

         11. Effect of Mergers,  Consolidations  and Other Business  Combination
Transactions.  In the  event of any  merger,  consolidation  or  other  business
combination  transaction,  the limitations on conversion in Section 8.17 and the
limitations  on voting in Section  7(a) shall not  impair,  reduce or  otherwise
modify  the  rights of any holder of Series C  Preferred  Stock in such  merger,
consolidation or business combination transaction, such holder being entitled to
receive upon consummation of such merger,  consolidation or other transaction in
respect of all shares of Series C  Preferred  Stock then held the  consideration
that is  receivable  with  respect  to each  share of Series C  Preferred  Stock
without regard to any limitation otherwise imposed by Section 7(a) or 8.17.

                  THIRD: The classification of authorized but unissued shares as
set forth in these  Articles  Supplementary  does not  increase  the  authorized
capital of the Company or the aggregate par value thereof.

                  FOURTH:  These Articles Supplementary have been approved by
the Board in the manner and by the vote required by law.

                  FIFTH:   The   undersigned   Vice  President  of  the  Company
acknowledges these Articles Supplementary to be the corporate act of the Company
and,  as to all  matters  or facts  required  to be  verified  under  oath,  the
undersigned Vice President of the Company  acknowledges  that to the best of his
or her knowledge,  information  and belief,  these matters and facts are true in
all material  respects and that this  statement is made under the  penalties for
perjury.

<PAGE>

                  IN WITNESS  WHEREOF,  the  Company has caused  these  Articles
Supplementary  to be  executed  under  seal in its name and on its behalf by its
Vice President and attested to by its Secretary on this 13th day of July, 2000.

ATTEST                                          OMEGA HEALTHCARE INVESTORS, INC.

By:/s/ Susan Allene Kovach                     By: /s/ Laurence D. Rich
   -----------------------                         ------------------------
   Secretary                                             Vice PresidentSTOCKHOLDERS AGREEMENT

     STOCKHOLDERS  AGREEMENT  (this  "Agreement"),  dated as of July  14,  2000,
between Explorer Holdings, L.P., a Delaware limited partnership ("Purchaser" and
together with its Permitted Transferees,  the "Investor"),  and Omega Healthcare
Investors, Inc., a Maryland corporation (the "Company").

         A. The Company and Purchaser have entered into an Investment Agreement,
dated as of May 11, 2000 (the "Investment Agreement"),  pursuant to which, among
other things, on the terms and subject to the conditions thereof, Purchaser will
acquire shares of Series C Preferred  Stock,  par value $1.00 per share,  of the
Company (the "Series C Preferred"),  and shares of common stock, par value $0.10
per share, of the Company (the "Common Stock").

         B. The Company  and  Purchaser  desire to make  certain  provisions  in
respect of their relationship.

         NOW, THEREFORE,  in consideration of the foregoing,  the parties hereto
agree as follows:

                                 I. DEFINITIONS

     1.1 Definitions.  Capitalized terms used herein and not defined herein will
have the meaning set forth in the Investment Agreement. In addition to the terms
defined elsewhere herein,  the following terms have the following  meanings when
used herein with initial capital letters:

     (a)  "Affiliate"  of any Person means any other Person,  that,  directly or
indirectly through one or more intermediaries,  controls or is controlled by, or
is under  common  control  with,  such  Person;  and,  for the  purposes of this
definition only, "control"  (including the terms "controlling",  "controlled by"
and "under common control with") means the  possession,  direct or indirect,  of
the power to  direct  or cause the  direction  of the  management,  policies  or
activities of a Person whether through the ownership of securities,  by contract
or agency or otherwise.

     (b) "Assumption  Agreement"  means an agreement in writing in substantially
the form of Exhibit A hereto  pursuant to which the party  thereto  agrees to be
bound by the terms and provisions of this Agreement.

     (c) A Person will be deemed the  "beneficial  owner" of, and will be deemed
to "beneficially own", and will be deemed to have "beneficial ownership" of:

              (i) any  securities  that  such  Person  or any of  such  Person's
                  Affiliates is deemed to "beneficially  own" within the meaning
                  of Rule 13d-3 under the Exchange Act, as in effect on the date
                  of this Agreement; and

             (ii) any securities (the "underlying  securities") that such Person
                  or any of such  Person's  Affiliates  has the right to acquire
                  (whether such right is  exercisable  immediately or only after
                  the passage of time) pursuant to any agreement, arrangement or
                  understanding  (written  or  oral),  or upon the  exercise  of
                  conversion  rights,   exchange  rights,  rights,  warrants  or
                  options,  or otherwise (it being  understood  that such Person
                  will  also  be  deemed  to be  the  beneficial  owner  of  the
                  securities convertible into or exchangeable for the underlying
                  securities).

     (d) "Board" means the Board of Directors of the Company.

     (e) "Board Approval" means the approval of a majority of the members of the
Board  who  neither  (i) have  been  designated  for  election  to the  Board by
Purchaser pursuant to Article III hereof or the Articles  Supplementary  setting
forth the terms of the Series C Preferred nor (ii) are  Affiliates or associates
of the Investors.

     (f)  "Closing  Date"  means  the date on which  the  first  closing  of the
transactions contemplated by the Investment Agreement occurs.

     (g) "Exchange Act" means the  Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     (h) "Permitted  Acquisition" means (i) any acquisition of Voting Securities
pursuant to or as contemplated by the Investment  Agreement,  including  without
limitation  upon the  conversion of the Series C Preferred,  (ii) any additional
acquisition  of up to 5% of the  outstanding  Voting  Securities,  and (iii) any
other  acquisition of Voting Securities after Purchaser has received prior Board
Approval of such acquisition.

     (i) "Permitted  Transferees" means any Person to whom Voting Securities are
Transferred in a Transfer not in violation of this Agreement, which includes any
Person to whom a Permitted Transferee of any Investor (or a Permitted Transferee
of a Permitted  Transferee) so further  Transfers  Voting  Securities and who is
required to, and does, become bound by the terms of this Agreement.

     (j) "Person" means an individual, a corporation,  a partnership,  a limited
partnership,  a limited  liability  company,  an  association,  a trust or other
entity or organization,  including without  limitation a government or political
subdivision or an agency or instrumentality thereof.

     (k)  "Public  Offering"  means  the sale of  shares  of any class of Voting
Securities to the public pursuant to an effective  registration statement (other
than a  registration  statement  on Form S-4 or S-8 or any similar or  successor
form) filed under the Securities Act.

     (l)  "Registration   Rights   Agreement"  means  the  Registration   Rights
Agreement,  dated as of the date hereof,  between  Purchaser and the Company and
any other registration  rights agreement entered into in accordance with Article
V hereof.

     (m) "Securities Act" means the Securities Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.

     (n)  "Standstill  Period"  means the period  commencing on the date of this
Agreement and ending on the fifth anniversary thereof.

     (o) "Transfer" means a transfer, sale, assignment, pledge, hypothecation or
disposition.

     (p) "Voting  Securities" means the Common Stock, the Series C Preferred (on
an as-converted  basis),  all other  securities of the Company  entitled to vote
generally in the election of directors of the Company,  and all other securities
convertible  into,  exchangeable  for or  exercisable  for any  such  securities
(whether immediately or otherwise).

                                 II. STANDSTILL

     2.1   Additional   Ownership.   Except  in  connection   with  a  Permitted
Acquisition,  during the  Standstill  Period,  Purchaser  will not  purchase  or
otherwise acquire beneficial ownership of any Voting Security.

     2.2 Other Restrictions.  Without prior Board Approval,  except as otherwise
permitted hereunder, no Investor will do any of the following:

     (a) solicit  proxies from other  stockholders  of the Company in opposition
to, or prior to the issuance of, a recommendation of the Board for any matter to
be considered  at any meeting of holders of  securities  of the Company,  except
matters on which a class vote of Series C Preferred is required;

     (b) knowingly  form, join or participate in or encourage the formation of a
"group"  (within  the  meaning of Section  13(d)(3)  of the  Exchange  Act) with
respect to any securities of the Company,  other than a group consisting  solely
of Affiliates of Purchaser;

     (c) deposit any  securities  of the Company  into a voting trust or subject
any such  securities to any  arrangement or agreement with respect to the voting
thereof,  other  than any such  trust,  arrangement  or  agreement  (i) the only
parties to, or beneficiaries  of, which are Affiliates of an Investor;  and (ii)
the terms of which do not require or expressly  permit any party  thereto to act
in a manner inconsistent with this Agreement; or

     (d) tender any securities in any tender offer  involving the Company unless
such tender offer has received Board Approval.

     2.3 Voting Cap.  Without prior Board Approval,  the Purchaser will not vote
any Voting  Securities,  whether at a meeting of  stockholders  or pursuant to a
written consent of  stockholders,  to the extent the aggregate  amount of Voting
Securities  beneficially  owned by Purchaser and its Affiliates exceeds 49.9% of
the outstanding Voting Securities.

                    III. BOARD REPRESENTATION; CONSULTATION

     3.1 Nomination and Voting for Purchaser Designees and Independent Director.
(a)  Effective as of the Closing Date,  Purchaser  will be entitled to designate
from  time to time  such  number  of  directors  to the  Board  (the  "Purchaser
Designees")   based  on  the  percentage  of  the  Company's  total  issued  and
outstanding Voting Securities beneficially owned by Purchaser that were acquired
by Purchaser  pursuant to the  Investment  Agreement,  as set forth in the table
below:

                   Percentage of Voting
                  Securities Beneficially
                    Owned by Purchaser             Number of Purchaser Designees
                    ------------------             -----------------------------

                      Less than 5.0%                             0
                       5.00% - 16.67%                            1
                      16.67% - 27.78%                            2
                      27.78% - 38.89%                            3
                    Greater than 38.89%                          4

For as  long as  Purchaser  beneficially  owns  at  least  25% of the  Series  C
Preferred  issued on the date hereof (or the Common Stock issued upon conversion
of the Series C  Preferred)  the Company  shall use its best efforts to cause an
Independent  Director selected in accordance with Section 4.10 of the Investment
Agreement  to serve on the  Company  Board.  The  Company,  at each  meeting  of
stockholders  of the Company at which directors are elected or pursuant to which
such action is to be taken by written  consent,  will  nominate  for election as
directors  of the Company the  Purchaser  Designees  Purchaser  is  permitted to
designate  pursuant to this Section  3.1(a).  Ninety  calendar days prior to any
such meeting or action by written  consent,  Purchaser  will provide the Company
with the information  required pursuant to Regulation 14A under the Exchange Act
with respect to each Purchaser  Designee.  The Company will solicit proxies from
its stockholders for such nominees,  vote all proxies in favor of such nominees,
except  for  such  proxies  that  specifically  indicate  to the  contrary,  and
otherwise use its best efforts to cause such nominees to be elected to the Board
as herein contemplated.

     (b) Notwithstanding  anything in this Section 3.1 to the contrary,  (i) for
so long as the Purchaser and its Affiliates beneficially own at least 50% of the
Series C Preferred  issued on the date of this  Agreement  (or the Common  Stock
issued  upon  conversion  of the Series C  Preferred),  the  Purchaser  shall be
entitled to designate at least two  Purchaser  Designees and (ii) for so long as
the Purchaser and its Affiliates  beneficially  own at least 25% of the Series C
Preferred  issued on the date of this Agreement (or the Common Stock issued upon
conversion  of the Series C  Preferred),  the  Purchaser  shall be  entitled  to
designate at least one Purchaser Designee.

     (c) The  Company  will take all actions as may be  necessary  to obtain the
approval of at least two thirds of the  Incumbent  Directors  (as defined in the
Company Change of Control Agreements) to the election,  reelection or nomination
of any Purchaser Designee or the Independent Director to the Company Board.

     (d) The Purchaser  Designees will be apportioned among the three classes of
directors as equal as possible;  provided,  however,  that in the event that the
number of  Purchaser  Designees  determined  pursuant  to Section  3.1(a) is not
evenly divisible by three, such additional Purchaser Designee or Designees shall
be  nominated  to the class or classes of  directors  with the  longest  term of
office.  Each  Purchaser  Designee will serve until his successor is elected and
qualified  or  until  his  earlier  resignation,  retirement,  disqualification,
removal from office, or death.

     (e) If any  Purchaser  Designee  ceases to be a director of the Company for
any reason,  the Company will  promptly  upon the request of  Purchaser  cause a
person  designated  by  Purchaser  to replace  such  director if Purchaser is so
entitled.

     (f) Purchaser  agrees to cause a Purchaser  Designee to promptly  resign in
the event Purchaser's  beneficial  ownership of Voting Securities  declines such
that Purchaser would no longer have the right to designate such person.

     (g) The Company  covenants  that (i) the total number of seats on the Board
(including any vacant seats) will in no event exceed nine and (ii) the directors
that are not Purchaser Designees will be reasonably acceptable to both Purchaser
and a majority of the current directors.

     (h) At all times after the date  hereof,  the Company will take such action
to ensure that the Purchaser  Designees are represented on each committee of the
Board in  proportion to their  representation  on the entire Board and that each
committee will consist of at least three members; provided, however, that for so
long as the  provisions  of  Article  II are in  effect,  in no event  shall the
Purchaser Designees constitute a majority of any such committee.

     3.2  Voting  for  Company  Nominees.  Each  Investor  shall vote all Voting
Securities that it beneficially owns for the election of directors  nominated by
the  Nominating  Committee  of the Board at each  stockholder  meeting  at which
directors are elected, or shall execute written consents for such purpose at the
request of the Company;  provided that no Investor  shall be required to perform
its  obligations  under this  Section  3.2 during any period in which any of the
Purchaser Designees or the Independent  Director required to be nominated to the
Board is not so elected to the Board.

     3.3 Other  Voting  Rights.  Purchaser  and the  Company  agree  that  under
applicable  law,  including  without  limitation  Section 2-419 of the MGCL, and
pursuant to the Company's constituent  documents,  neither the Purchaser nor the
Purchaser Designees would be precluded,  and the Company agrees that it will not
assert that the Purchaser or any of the Purchaser  Designees is precluded,  from
voting with respect to any acquisition or investment by the Company by virtue of
such  acquisition  or investment  being funded in whole or in part with proceeds
from the Additional  Equity Financing or any other  transaction  contemplated by
the Transaction Documents following appropriate disclosure to the then directors
of any circumstances that could provide the basis for an assertion of a conflict
of interest.

     3.4 Access.  The Company will, and will cause its  subsidiaries and each of
the Company's and its  subsidiaries'  officers,  directors,  employees,  agents,
representatives,  accountants and counsel to: (a) afford the officers, employees
and   authorized   agents,   accountants,   counsel,   financing   sources   and
representatives of Purchaser reasonable access, during normal business hours, to
the offices,  properties, other facilities, books and records of the Company and
each subsidiary and to those officers, directors, employees, agents, accountants
and  counsel  of the  Company  and of each  subsidiary  who have  any  knowledge
relating  to the  Company or any  subsidiary  and (b)  furnish to the  officers,
employees and authorized  agents,  accountants,  counsel,  financing sources and
representatives of Purchaser,  such additional  financial and operating data and
other information  regarding the assets,  properties and goodwill of the Company
and its  subsidiaries  (or legible copies thereof) as Purchaser may from time to
time reasonably  request (other than information and material from the Company's
counsel which is subject to the attorney/client privilege, which information and
material shall be made available to the Purchaser Designees in their capacity as
members of the Board).

                           IV. TRANSFER OF SECURITIES

     4.1  Transferability.  (a) Each Investor agrees that such Investor will not
Transfer  any  Voting  Securities  beneficially  owned by it,  except  in strict
compliance with the terms of this Article IV.

     (b) Any  Investor  may  Transfer  all or any part of the Voting  Securities
beneficially  owned by it at any time,  without  compliance with Section 4.2, to
any Affiliate of such  Investor;  provided  that,  prior to such  Transfer,  (i)
notice of such  Transfer is given to the Company and (ii) the  Affiliate to whom
such  Voting  Securities  are  to  be  Transferred  enters  into  an  Assumption
Agreement.

     (c) From and after the first  anniversary of the Closing Date, any Investor
may Transfer all or any part of the Voting Securities  beneficially owned by it,
without  compliance  with  Section  4.2,  pursuant  to a Public  Offering  or in
open-market sales in accordance with Rule 144 under the Securities Act.

     (d) Subject to compliance with the requirements of Section 4.2 hereof, from
and after July 1, 2001,  any Investor may Transfer all or any part of the Voting
Securities beneficially owned by it, following compliance with Section 4.2, to a
"qualified institutional buyer" (as defined in Rule 144A of the Securities Act);
provided,  that with respect to any such Transfer  involving 9.9% or more of the
outstanding  Voting  Securities,  such  Transfer  shall  be  conditioned  on the
Transferee  agreeing  (i) to be bound by the  provisions  of  Article II of this
Agreement for a period ending on the fifth  anniversary  of the Closing Date and
(ii) not to acquire more than 2% of the outstanding Voting Securities during any
twelve-month period.

     (e) In the event of any  purported  Transfer by any  Investor of any Voting
Security not made in compliance  with this Section 4.1, such purported  Transfer
will be void and of no  effect  and the  Company  will not give  effect  to such
Transfer.  The Company  shall be entitled to treat the prior owner as the holder
of any such securities not Transferred in accordance with this Agreement.

     (f) Each certificate  representing Voting Securities issued to any Investor
will bear a legend on the face thereof  substantially  to the  following  effect
(with such additions thereto or changes therein as the Company may be advised by
counsel are required by law (the "Legend")):

                  "THE  SHARES  OF STOCK  REPRESENTED  BY THIS  CERTIFICATE  ARE
         SUBJECT TO A  STOCKHOLDERS  AGREEMENT  BETWEEN THE COMPANY AND EXPLORER
         HOLDINGS,  L.P.,  A COPY OF WHICH IS ON FILE WITH THE  SECRETARY OF THE
         COMPANY. NO TRANSFER, SALE, ASSIGNMENT,  PLEDGE, HYPOTHECATION OR OTHER
         DISPOSITION OF THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  MAY BE
         MADE EXCEPT IN  ACCORDANCE  WITH THE  PROVISIONS  OF SUCH  STOCKHOLDERS
         AGREEMENT."

                  "THE SHARES OF STOCK  REPRESENTED BY THIS CERTIFICATE HAVE NOT
         BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF  1933  AND  MAY NOT BE
         TRANSFERRED OR OTHERWISE  DISPOSED OF UNLESS THEY HAVE BEEN  REGISTERED
         UNDER  THAT  ACT OR ANY  OTHER  APPLICABLE  LAW  OR AN  EXEMPTION  FROM
         REGISTRATION IS AVAILABLE."

The  Legend  will be  removed  by the  Company  by the  delivery  of  substitute
certificates  without  such Legend in the event of (i) a Transfer  permitted  by
Section  4.1 to any  Person  who is not  required  to enter  into an  Assumption
Agreement  as a  condition  to such  Transfer  or (ii) the  termination  of this
Article IV pursuant to the terms of this Agreement,  provided, however, that the
second  paragraph  of such  Legend  will only be removed if at such time a legal
opinion from counsel to the  Transferee  shall have been  obtained to the effect
that such legend is no longer  required  for purposes of  applicable  securities
laws. In connection with the foregoing,  the Company agrees that, if the Company
is required to file reports  under the  Exchange  Act, for so long as and to the
extent necessary to permit any Investor to sell any Voting  Securities  pursuant
to Rule 144, the Company will use its  reasonable  efforts to file,  on a timely
basis,  all reports  required to be filed with the SEC by it pursuant to Section
13 of the  Exchange  Act,  furnish  to the  Investors  upon  request  a  written
statement  as  to  whether  the  Company  has  complied   with  such   reporting
requirements during the 12 months preceding any proposed sale under Rule 144 and
otherwise use its reasonable efforts to permit such sales pursuant to Rule 144.

     4.2 Right of First Offer.  (a) Prior to any  Investor  effecting a Transfer
described in Section 4.1(d) (a "Third-Party Sale"), such Investor (the "Offering
Stockholder")  will deliver to the Company a written Notice (an "Offer  Notice")
specifying  the  amount  of  consideration  (the  "Offer  Price")  and the other
material  terms  pertaining  to such  Third  Party  Sale for which the  Offering
Stockholder  proposes to sell the  Securities to be offered in such  Third-Party
Sale (the  "Offered  Stock")  and,  to the  extent  known or  contemplated,  the
proposed purchaser of the Offered Stock.

     (b) If the Company  delivers to the Offering  Stockholder a written  notice
(an "Acceptance  Notice") within 20 calendar days of receipt of the Offer Notice
(such 20 calendar  day period being  referred to herein as the "ROFO  Acceptance
Period")  stating  that the  Company or its  designee  (the "ROFO  Purchaser")is
willing to  purchase  all of the  Offered  Stock for the Offer  Price and on the
other terms set forth in the Offer Notice,  the Offering  Stockholder  will sell
all of the Offered  Stock to the ROFO  Purchaser,  and the Company will purchase
such Offered  Stock from the  Offering  Stockholder,  on the proposed  terms and
subject to the conditions set forth below.

     (c) The  consummation  of any  purchase  of the  Offered  Stock by the ROFO
Purchaser  pursuant to this Section 4.2 (the "ROFO  Closing") will occur no more
than 45 calendar days following the delivery of the  Acceptance  Notice (such 45
calendar day period being  referred to herein as the "ROFO  Closing  Period") at
10:00 a.m.  (Eastern Time) at the Company's offices or at such other time of day
and place as may be mutually  agreed upon by the  Offering  Stockholder  and the
ROFO Purchaser.  At the ROFO Closing, (i) the ROFO Purchaser will deliver to the
Offering  Stockholder by wire transfer to an account  designated by the Offering
Stockholder an amount in immediately  available  funds equal to the Offer Price,
(ii) the Offering  Stockholder will deliver one or more certificates  evidencing
the  Offered  Stock,  together  with such other  duly  executed  instruments  or
documents (executed by the Offering  Stockholder) as may be reasonably requested
by the ROFO Purchaser to acquire the Offered Stock free and clear of any and all
claims,  liens, pledges,  charges,  encumbrances,  security interests,  options,
trusts, commitments and other restrictions of any kind whatsoever (collectively,
"Encumbrances"),  except for Encumbrances created by this Agreement,  or federal
or state  securities laws  ("Permitted  Encumbrances"),  and (iii) in connection
with  foregoing  the  Offering  Stockholder  will  represent  and warrant to the
Company that, upon the ROFO Closing,  the Offering  Stockholder  will convey and
the Company will acquire the entire record and beneficial ownership of, and good
and  valid  title  to,  the  Offered  Stock,  free  and  clear  of any  and  all
Encumbrances, except for Permitted Encumbrances.

     (d) If no Acceptance  Notice relating to the proposed  Third-Party  Sale is
delivered  to the  Offering  Stockholder  prior  to the  expiration  of the ROFO
Acceptance  Period,  or an  Acceptance  Notice is so  delivered  to the Offering
Stockholder  but the ROFO Closing fails to occur prior to the  expiration of the
ROFO Closing Period (unless the ROFO Purchaser was ready, willing and able prior
to the expiration of the ROFO Closing Period to consummate the  transactions  to
be  consummated  by the  ROFO  Purchaser  at the  ROFO  Closing),  the  Offering
Stockholder  may, during the 360 calendar day period  immediately  following the
expiration of the ROFO Acceptance Period (in the event that no Acceptance Notice
was timely delivered to the Offering Stockholder) or the 360 calendar day period
immediately  following the  expiration of the ROFO Closing  Period (in the event
that an Acceptance  Notice was timely delivered to the Offering  Stockholder but
the ROFO Closing  failed  timely to occur other than as a result of a failure by
the Offering Stockholder to perform its obligations under Section 4.2(c) hereof)
at a gross  price at least  equal to the Offer  Price and on such other terms no
more  favorable  to the  Transferee  than  those set forth in the Offer  Notice,
consummate the Third-Party  Sale in accordance  with Section  4.1(d).  After the
applicable  360-day period, any Transfer pursuant to Section 4.1(d) shall not be
made unless the Investor again complies with the provisions of this Section 4.2.

     (e) For purposes of this Section 4.2, the value of any consideration  other
than cash that is  payable  or  receivable  in the Third  Party  Sale will be as
determined by the Board in good faith or, if the Offering  Stockholder gives the
Company  written  notice of its  disagreement  with such  valuation  within  ten
Business Days after receipt of written notice of such value,  such value will be
determined in accordance  with the appraisal  procedures set forth on Exhibit B.
The various time periods  described above relating to any actions  regarding the
exercise  of a right of first  offer will be  extended  for the  duration of any
period in which the value of any  non-cash  consideration  is subject to dispute
pursuant to Section 4.2(e).

                             V. REGISTRATION RIGHTS

         Upon consummation of any Transfer of Securities constituting 5% or more
of the Voting Securities to one Transferee (or one Transferee  together with its
Affiliates)  (other than a Transfer in a Public Offering or pursuant to Rule 144
under the Securities Act) that is permitted by this  Agreement,  the Company and
the  Transferee  thereof  will  enter  into  a  registration   rights  agreement
substantially  in the  form of the  Registration  Rights  Agreement,  with  such
modifications  thereto  as  are  acceptable  to  such  Transferee  that  do  not
materially increase the Company's obligations  thereunder (excluding the effects
of multiple parties).

                                VI. TERMINATION

     6.1  Termination.  The  provisions of this Agreement  specified  below will
terminate,  and be of no further  force or effect  (other  than with  respect to
prior breaches),  as follows:  (a) Articles II and IV will terminate (but in the
case of  subparagraph  (ii) through (iv), only as to the Investor that has given
the notice  contemplated  thereby),  upon the earliest to occur of the following
dates or events:

              (i) five years after the date of this Agreement;

             (ii) notice  that  an  Investor  has  determined  to terminate this
                  Agreement  at  any  time following   the  consummation  of  a
                  transaction  that  has  Board  Approval  that  provides for or
                  involves  (A) the merger of the Company with or into any other
                  entity, (B) the sale of all or substantially all of the assets
                  of the Company,  (C) a tender offer for at least a majority of
                  the Common Stock, (D) the reorganization or liquidation of the
                  Company, or  (E) any  similar  transaction  or  event  that is
                  subject  to  approval  by the stockholders of the Company as a
                  result  of  which,  in  the case of any merger, consolidation,
                  reorganization,  recapitalization,  tender  offer  or  similar
                  transaction  or  event,  the Stockholders of the Company shall
                  not  hold  at  least  a  majority  of  the  outstanding Voting
                  Securities following the closing of such transaction;

            (iii) notice that an  Investor  has  determined  to  terminate  this
                  Agreement following the failure by the Board or the Company to
                  observe any of the provisions of this  Agreement  hereof which
                  breach  has  continued  for at least 20  calendar  days  after
                  notice  thereof to the Company  from  Purchaser,  which notice
                  shall  specify with  particularity  the basis for such alleged
                  failure or breach; or

             (iv) notice  that  an  Investor  has  determined  to terminate this
                  Agreement following either (A) the failure of the stockholders
                  of  the  Company  to  elect any director designated under this
                  Agreement  by   Purchaser,    (B)  the  removal  of  any  such
                  recommended director from the Board and the failure to replace
                  such removed director with a designee designated by Purchaser,
                 (C) the failure of the Board to replace any director designated
                  by  an Investor with a person designated by Purchaser, or  (D)
                  the  failure of the Board to effect without unreasonable delay
                  and maintain the committee appointments required under Section
                  3.1(g)  which  failure  shall  (a) not be due to any Purchaser
                  Designee  failing  to  qualify  to  serve as a director of the
                  Company  due  to  existence  of  any  applicable  law, rule or
                  regulation  imposing  or  creating  standards  or  eligibility
                  criteria for individuals serving as directors of organizations
                  such  as  the  Company  and (b) have continued for at least 30
                  calendar days following  notice thereof to the Company,  which
                  notice  shall specify with particularity  the  basis  for such
                  alleged failure;

     (b) Article III will terminate on the tenth anniversary of the date of this
Agreement; and

     (c)  Any  portion  or all of this  Agreement  will  terminate  and be of no
further force and effect upon a written agreement of the parties to that effect.

                               VII. MISCELLANEOUS

     7.1 Specific Performance.  The parties agree that any breach by any of them
of any provision of this Agreement would  irreparably  injure the Company or the
Investor,  as the case may be, and that  money  damages  would be an  inadequate
remedy therefor.  Accordingly,  the parties agree that the other parties will be
entitled to one or more  injunctions  enjoining  any such  breach and  requiring
specific  performance  of this  Agreement and consent to the entry  thereof,  in
addition to any other remedy to which such other  parties are entitled at law or
in equity,  provided,  however, that in the event the Company is legally excused
from and does not in fact comply with its  obligations  under  Section  3.1, the
obligations of the Investors under Articles II and IV will immediately terminate
without further action.

     7.2 Notices. All notices, requests and other communications to either party
hereunder will be in writing (including telecopy or similar writing) and will be
given:

                  If to the Company, to:

                           Omega Healthcare Investors, Inc.
                           900 Victors Way, Suite 350
                           Ann Arbor, Michigan 48108
                           Attention:  Susan Allene Kovach
                           Fax: (734) 887-0322

                  with a copy to:

                           Powell, Goldstein,  Frazer & Murphy LLP
                           191 Peachtree Street, N.E.
                           Suite 1600
                           Atlanta, Georgia 30303
                           Attention:  Rick Miller or
                           Eliot Robinson
                           Fax: (404) 572-6999

                  If to Purchaser, to:

                           Explorer Holdings, L.P.
                           c/o The Hampstead Group, L.L.C.
                           4200 Texas Commerce Tower West
                           2200 Ross Avenue
                           Dallas, Texas 75801
                           Attention:  William T. Cavanaugh
                           Fax: (214) 220-4949

                  with a copy to:

                           Jones, Day, Reavis & Pogue
                           599 Lexington Avenue
                           New York, New York  10022
                           Attention:  Thomas W. Bark
                           Fax:  (212) 755-7306

or such other address or telecopier  number as such party may hereafter  specify
by  notice  to the other  party  hereto.  Each  such  notice,  request  or other
communication  shall be effective  only when  actually  delivered at the address
specified in this Section 7.2, if delivered  prior to 5:00 (local time) and such
day is a  Business  Day,  and  if  not,  then  such  notice,  request  or  other
communication shall not be effective until the next succeeding Business Day.

     7.3  Amendments:  No Waivers.  (a) Any  provision of this  Agreement may be
amended or waived if, and only if,  such  amendment  or waiver is in writing and
signed,  in the case of an amendment,  by the Company and  Purchaser  (who shall
have the authority to bind all  Investors),  or in the case of a waiver,  by the
party against whom the waiver is to be effective.

     (b) No failure  or delay by any party in  exercising  any  right,  power or
privilege  hereunder  will  operate as a waiver  thereof nor shall any single or
partial  exercise  thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.

     7.4  Successors  and Assigns.  The  provisions  of this  Agreement  will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided,  however, that none of the parties may assign,
delegate or otherwise  transfer any of their  rights or  obligations  under this
Agreement without the written consent of the other parties hereto.  Neither this
Agreement nor any  provision  hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.

     7.5 Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts,  each of which will be an original,  with the same effect as if
the signatures thereto and hereto were upon the same instrument.  This Agreement
will become  effective  when each party hereto shall have received a counterpart
hereof signed by the other party hereto.

     7.6  Entire  Agreement.  This  Agreement,  the  Investment  Agreement,  the
Registration  Rights Agreement and the documents  contemplated  thereby (and all
schedules  and  exhibits  thereto)  constitute  the entire  agreement  among the
parties  with  respect to the  subject  matter  hereof and  supersede  all prior
agreements,  understandings and negotiations, both written and oral, between the
parties with respect thereto.

     7.7 Governing Law. This Agreement shall be construed in accordance with and
governed  by the laws of the State of  Delaware,  without  giving  effect to the
principles of conflict of laws thereof.

     7.8  Calculation of Beneficial  Ownership.  Any provision in this Agreement
that refers to a percentage of Voting  Securities  shall be calculated  based on
the  aggregate  number of issued and  outstanding  shares of Common Stock at the
time of such  calculation  (including any shares of Common Stock that would then
be issuable  upon the  conversion  of the Series C Preferred or any  outstanding
convertible security), but shall not include any shares of Common Stock issuable
upon any options,  warrants or other  securities that are exercisable for Common
Stock.

     7.9  Severability.  In the  event  that  any one or more of the  provisions
contained  herein,  or the  application  thereof in any  circumstances,  is held
invalid,  illegal or unenforceable in any respect for any reason,  the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

     7.10  Jurisdiction;  Consent to Service of Process.  (a) Each party  hereby
irrevocably and  unconditionally  submits,  for itself and its property,  to the
exclusive  jurisdiction  of the  Delaware  state  court  located in  Wilmington,
Delaware  or the  United  States  District  for the  District  of  Delaware  (as
applicable, a "Delaware Court"), and any appellate court from any such court, in
any suit, action or proceeding arising out of or relating to this Agreement,  or
for  recognition or  enforcement  of any judgment  resulting from any such suit,
action or  proceeding,  and each party hereby  irrevocably  and  unconditionally
agrees that all claims in respect of any such suit,  action or proceeding may be
heard and determined in the Delaware Court.

     (b) It will be a condition  precedent  to each  party's  right to bring any
such suit,  action or proceeding  that such suit,  action or proceeding,  in the
first  instance,  be brought in the Delaware Court (unless such suit,  action or
proceeding is brought solely to obtain discovery or to enforce a judgment),  and
if each such court refuses to accept  jurisdiction  with respect  thereto,  such
suit, action or proceeding may be brought in any other court with jurisdiction.

     (c) No party may move to (i) transfer any such suit,  action or  proceeding
from the Delaware Court to another jurisdiction, (ii) consolidate any such suit,
action or  proceeding  brought  in the  Delaware  Court  with a suit,  action or
proceeding in another  jurisdiction,  or (iii) dismiss any such suit,  action or
proceeding brought in the Delaware Court for the purpose of bringing the same in
another jurisdiction.

     (d) Each  party  hereby  irrevocably  and  unconditionally  waives,  to the
fullest extent it may legally and  effectively do so, (i) any objection which it
may now or  hereafter  have to the  laying  of  venue  of any  suit,  action  or
proceeding  arising out of or relating to this Agreement in the Delaware  Court,
(ii) the  defense  of an  inconvenient  forum to the  maintenance  of such suit,
action or  proceeding  in any such  court,  and (iii) the right to object,  with
respect  to such  suit,  action or  proceeding,  that such  court  does not have
jurisdiction  over such  party.  Each party  irrevocably  consents to service of
process in any manner permitted by law.

     7.11 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO  IRREVOCABLY  WAIVES
ANY  AND  ALL  RIGHT  TO  TRIAL  BY JURY IN ANY  ACTION,  PROCEEDING,  CLAIM  OR
COUNTERCLAIM,  WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY,  ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT.

     7.12 No Strict  Construction.  The parties hereto have participated jointly
in the negotiation and drafting of this Agreement.  In the event an ambiguity or
question of intent or interpretation  arises,  this Agreement shall be construed
as if drafted  jointly by the parties  hereto,  and no  presumption or burden of
proof shall arise favoring or disfavoring  any party by virtue of the authorship
of any of the provisions of this Agreement.

                            [Signature page follows]

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly  executed by their  respective  authorized  officers as of the day and year
first above written.

                                       EXPLORER HOLDINGS, L.P.

                                    By:    EXPLORER HOLDINGS GENPAR, L.L.C.,
                                           its General Partner

                                    By:    /s/ William T. Cavanaugh, Jr.
                                           -----------------------------
                                           Name:  William T. Cavanaugh, Jr.
                                           Title: Vice President

                                        OMEGA HEALTHCARE INVESTORS, INC.

                                    By:   /s/ Susan Allene Kovach
                                          -------------------------
                                          Name:  Susan Allene Kovach
                                          Title: Vice President

<PAGE>

                                    EXHIBIT A

                          Form of Assumption Agreement

     The undersigned hereby agrees, effective as of the date hereof, to become a
party to, and be bound by the provisions of, that certain Stockholders Agreement
(the  "Agreement")  dated as of ________,  2000 by and between Omega Healthcare,
Inc. and the Explorer Holdings, L.P. and for all purposes of the Agreement,  the
undersigned  shall be  included  within the term  "Investor"  (as defined in the
Agreement). The address and facsimile number to which notices may be sent to the
undersigned is as follows:

----------------------------
Facsimile No._______________

                                     [Name]

                                          By:  _____________________________
                                                Name:
                                                Title:

<PAGE>

                                    EXHIBIT B

                              Appraisal Procedures

         If the ROFO Purchaser gives the Offering  Stockholder written notice of
its  disagreement as to the valuation of any non-cash  consideration  payable or
receivable  in a Third  Party  Sale  in  accordance  with  Section  4.2(e)  (the
"Agreement  Deadline"),  then  appraisals  hereunder  shall be undertaken by two
Appraisers  (as  defined  below),  one  selected by the ROFO  Purchaser  and one
selected by the Offering Stockholder,  which appointment shall be made within 15
calendar  days  after the  Agreement  Deadline.  Such  Appraisers  shall have 30
calendar days following the appointment of the last Appraiser to be appointed to
agree  upon the  value of the  consideration  other  than  cash  proposed  to be
received in the Third Party Sale pursuant to Section 4.2 of this  Agreement (the
"Consideration Value"). In the event that such Appraisers cannot so agree within
such period of time, (x) if such Appraisers' valuations do not vary by more than
20%, then the Consideration Value shall be the average of the two valuations and
(y) if such  Appraisers'  valuations  differ by more than 20%,  such  Appraisers
shall mutually agree on a third Appraiser who shall calculate the  Consideration
Value independently.  In the event that the two original Appraisers cannot agree
upon a third  Appraiser  within 30 calendar days following the end of the 30-day
period  referred  to above,  then the third  Appraiser  shall be  determined  by
lottery from a group of two  Appraisers,  one of whom will be  designated by the
ROFO  Purchaser and one of whom will be designated by the Offering  Stockholder.
The third  Appraiser  shall make its  determination  as to  Consideration  Value
within 30 calendar days of its appointment. The third Appraiser's valuation will
be the  Consideration  Value for all purposes  hereof and will not be subject to
appeal or challenge by either the ROFO Purchaser or the Offering Stockholder.

         For  purposes  of  this  Exhibit  B,  "Appraiser"  means  a  nationally
recognized  investment  banking firm that (a) does not have a direct or indirect
material financial  interest in the ROFO Purchaser or the Offering  Stockholder,
(b) has not  received in excess of $250,000 in fees or other  compensation  from
the  ROFO  Purchaser,  the  Offering  Stockholder  or  any of  their  respective
subsidiaries in the preceding 360 days, and (c) is otherwise qualified to render
an appraisal of the Consideration Value.

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