AMENDMENT AND WAIVER NO. 1 TO AGREEMENT AND PLAN OF MERGER

This Amendment and Waiver No. 1 (this “Amendment”) to that certain Agreement and
Plan of Merger (the “Merger Agreement”), dated as of April 6 , 2007, among DAVIS
ACQUISITION SUB LLC, a Delaware limited liability company (“NHC/OP Sub”),
NHC/OP, L.P., a Delaware limited partnership and the direct parent of NHC/OP Sub
(“NHC/OP”), NATIONAL HEALTHCARE CORPORATION, a Delaware corporation and the
ultimate parent of NHC/OP, (“Parent”), and NATIONAL HEALTH REALTY, INC., a
Maryland corporation (the “Company”).

RECITALS

WHEREAS, NHC/OP Sub, NHC/OP, Parent and Company are parties to the Merger
Agreement.

WHEREAS, NHC/OP Sub, NHC/OP, Parent and Company desire to amend the Merger
Agreement in the manner set forth below.

WHEREAS, NHC/OP Sub, NHC/OP and Parent desire to waive a breach of a
representation in the Merger Agreement.

AGREEMENTS

In consideration of the foregoing and the mutual covenants and agreements
contained herein and in the Merger Agreement, NHC/OP Sub, NHC/OP, Parent and
Company agree as follows:

I.

AMENDMENTS

A.

Section 3.01(d)(i) of the Merger Agreement is hereby amended by deleting the
words “by unanimous vote of all the directors” in the first sentence thereof and
replacing them with the words “by unanimous vote of all the directors present
and voting”.

B.

Section 5.04 of the Merger Agreement is hereby amended by adding the following
sentence to the end of such Section:

“Notwithstanding anything in this Agreement to the contrary, the parties agree
to use their commercially reasonable efforts to consummate and make effective
the Merger, and the other transactions contemplated by this Agreement and the
Voting Agreement, on June 29, 2007.”

C.

Section 7.01 of the Merger Agreement is hereby amended by deleting all
references in such Section to “June 30, 2007” and replacing such references with
“August 31, 2007”.

II.

WAIVER

A.

Each of NHC/OP Sub, NHC/OP and Parent hereby waive the breach at the time of
execution of the Merger Agreement of the representation contained in Section
3.01(d)(i) (as in effect prior to the effectiveness of this Amendment) that the
board of directors of the Company approved the matters set forth therein by the
unanimous vote of all directors.

III.

MISCELLANEOUS

A.

All remaining provisions of the Merger Agreement remain unchanged and in full
force and effect.

B.

This Amendment shall be governed by, and construed in accordance with, the laws
of the State of Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflict of laws thereof.

C.

This Amendment may be executed in one or more counterparts (including by
facsimile), all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

IN WITNESS WHEREOF, each of the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.

 

DAVIS ACQUISITION SUB LLC

 

 

 

By:  s/R. Michael Ussery

 

Name:

R. Michael Ussery

 

Title:

Vice President

 

 

 

NHC/OP, L.P.

 

By:  NHC-Delaware, Inc., Its General Partner

 

 

 

By:  s/R. Michael Ussery

 

Name:

R. Michael Ussery

 

Title:

Vice President

 

 

 

NATIONAL HEALTHCARE CORPORATION

 

 

 

By:  s/R. Michael Ussery

 

Name:

R. Michael Ussery

 

Title:

Senior Vice President, Operations

 

 

 

NATIONAL HEALTH REALTY, INC.

 

 

 

By:  s/Robert G. Adams

 

Name:

Robert G. Adams

 

Title:

President