Real Estate

REPURCHASE AND CONVERSION AGREEMENT

by and between

OMEGA HEALTHCARE INVESTORS, INC.

and

EXPLORER HOLDINGS, L.P.

Dated as of February 5, 2004

REPURCHASE AND CONVERSION AGREEMENT

        THIS REPURCHASE AND CONVERSION AGREEMENT (this "Agreement"), is dated as of February 5, 2004, and is by and between Omega Healthcare Investors, Inc., a Maryland company (the "Company") and Explorer Holdings, L.P., a Delaware limited partnership ("Explorer"). The Company and Explorer are collectively referred to herein as the "Parties," and individually referred to herein as a "Party").

RECITALS

        A.    Explorer currently is the beneficial owner of 1,048,420 shares (the "Explorer Series C Shares") of the Company's Series C Convertible Preferred Stock, with a liquidation preference of $100.00 per share ("Series C Preferred Stock"), and 12,543,526 shares (the "Explorer Common Shares") of the Company's common stock, par value $.10 per share ("Company Common Stock");

        B.    The Company is currently contemplating an offering (the "Offering") of an additional series of preferred stock (the "New Preferred Stock"), which shall be conducted at the sole discretion of the Company.

        C.    Explorer is willing to grant to the Company the Repurchase Option (as defined below).

        D.    If the Company exercises the Repurchase Option, immediately following the exercise of the Repurchase Option, Explorer will convert any Explorer Series C Shares not repurchased by the Company into Company Common Stock (the "Converted Common Shares," and together with the Explorer Common Shares, the "Explorer Shares");

        E.    Each of the Parties hereto acknowledge that the benefits associated with the consummation of the Transactions contemplated by this Agreement are sufficient inducement to cause the Parties hereto to carry out the obligations and other conditions precedent contained herein.

        F.    Capitalized terms used herein that are not otherwise defined shall have the respective meanings set forth in Schedule 1.

AGREEMENT

        NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the Parties hereby agree as follows:

ARTICLE 1

OPTION TO REPURCHASE EXPLORER SERIES C SHARES

        1.1    Option to Repurchase of Explorer Shares.    Explorer does hereby grant to Omega the right to repurchase (the "Repurchase Option") up to 700,000 Explorer Series C Shares (the "Repurchased Explorer Shares") at a price of $145.92 per share (the "Share Repurchase Price"); provided, however, that it shall be a condition to the exercise by Omega of the Repurchase Option that the Share Repurchase Price multiplied by the number of Repurchased Explorer Shares is at least $100 million (the "Minimum Aggregate Repurchase Price"). The Repurchase Option may be exercised by the Company by delivering written notice of such exercise to Explorer setting forth the number of Repurchased Explorer Shares and the date, not more than 10 days after the date of such notice, on which the Closing hereunder will occur, which shall be the same date and at the same time and place as the closing of the Offering. Unless the Closing shall have previously occurred, this Repurchase Option shall expire at 5:00 p.m. eastern time on February 27, 2004 without any further action by the Parties. At the Closing, subject to the terms and conditions of this Agreement:

        (a)   Explorer will sell, assign, transfer, convey, and deliver to the Company all right, title, and interest of Explorer in and to the Repurchased Explorer Shares, free and clear of any Lien. Explorer shall designate at its option which of the Explorer Series C Shares are to be Repurchased Explorer Shares.

        (b)   The Company will purchase from Explorer all of its interest in and to the Repurchased Explorer Shares and shall pay to Explorer in consideration thereof an amount equal to the Share Repurchase Price multiplied by the total number of the Repurchased Explorer Shares (the "Aggregate Repurchase Price"); provided, however, that the Aggregate Repurchase Price shall equal or exceed the Minimum Aggregate Repurchase Price; and




        (c)   Explorer will convert the Explorer Series C Shares that are not repurchased pursuant to the exercise by the Company of the Repurchase Option into Converted Common Shares in accordance with the terms of the Explorer Series C Shares.




        (d)   The Company will pay to Explorer the amount set forth in Section 7.12 hereof.

        1.2    Exercise of Repurchase Option.    At the Closing, Explorer shall deliver executed stock powers, in a form reasonably satisfactory to the Company, together with those original certificates that immediately prior to the Closing represented one hundred percent (100%) of the Repurchased Explorer Shares, or a duly executed affidavit of lost certificate and indemnity for any stock certificate of the Company which has been lost, stolen, seized or destroyed (the "Company Certificates"), to the Company. Upon the surrender of the Company Certificates to the Company, the Company shall pay to Explorer, in cash or other immediately available funds by wire transfer to the accounts designated by Explorer, the Aggregate Purchase Price.

        1.3    Dividends.    Notwithstanding the repurchase or conversion of the Explorer Series C Shares, the Company will pay to Explorer the quarterly dividend of $2.72 per share of Series C Preferred Stock payable on February 16, 2004, to holders of record on February 2, 2004.

ARTICLE 2

CLOSING

        2.1    Closing Date.    The consummation of the Transactions contemplated by this Agreement (the "Closing") shall take place on the same date and at the same time and place as the closing of the Offering (the "Closing Date"), at the offices of Powell, Goldstein, Frazer & Murphy LLP, 191 Peachtree Street, NE, 16th Floor, Atlanta, Georgia 30303, or at such other time or place as the Parties may agree.

        2.2    Closing Deliveries.    At Closing, the Parties will deliver to each other the various certificates, instruments, and documents referred to in Sections 1.1 and 1.2 and Article 5 hereof, and will further execute, acknowledge (if appropriate), and deliver to each other Party such additional certificates, instruments and documents as their counsel reasonably may request to effect the Transactions contemplated by this Agreement.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

        3.1    Representations and Warranties of Explorer.    Explorer represents and warrants to the Company that the following statements are true, complete and correct as of the date of this Agreement and will be true, complete and correct effective as of the Closing Date, as follows:

        (a)    Existence; Good Standing; Corporate Authority.    Explorer is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware. Explorer is duly licensed or qualified to do business as a limited partnership and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing would not have an Explorer Material Adverse Effect. An "Explorer Material Adverse Effect" means any change, effect, event or condition that has had or could reasonably be expected to prevent or materially delay Explorer's ability to consummate the