Related Party Transactions and Outside Related Director Information

National Health Investors, Inc. (NHI)

3/20/2006 Proxy Information

Through an entity solely owned by Mr. Adams, he provides all operating services and personnel to National HealthCare Corporation.

Services of Advisor. On November 1, 2004, NHI entered into an Advisory Agreement with Management Advisory Source, LLC ("Management Source") under which Management Source provided management and advisory services to NHI during the term of the Advisory Agreement. Management Source is wholly owned by Mr. W. Andrew Adams. Under the Advisory Agreement, Management Source is to use its best efforts (a) to present to NHI a continuing and suitable investment program consistent with NHI's investment policies adopted by the Board of Directors from time to time; (b) to manage NHI's day-to-day affairs and operations; and (c) to provide administrative services and facilities appropriate for such management. In performing its obligations under the Advisory Agreement, Management Source is subject to the supervision of and policies established by NHI's Board of Directors.

The Advisory Agreement is for a stated term which expires December 31, 2007. The Agreement is thereafter on a year to year term. During the initial term and all renewals, it is terminable at any time on 90 days notice. NHI can terminate the Advisory Agreement for cause at any time. For its services under the Advisory Agreement, the Investment Advisor is entitled to annual compensation in a base amount of $2,000,000, payable in monthly installments of $166,666, plus an incentive fee based on cash flow performance. The annual compensation expensed under the Advisory Agreement in 2005 was approximately $3,600,000 and in 2004 was approximately $2,300,000.

Until November 1, 2004, NHC served as the Advisor and, other than the directors who are not employees of NHC, NHI did not have any officers or employees who were not also employees of NHC. All of their fees, salaries and employment costs were paid by the Investment Advisor, but a portion of their bonus, if any, could be allocated for their duties to us.

The Advisory Agreement with NHC was substantially similar to the current agreement with Management Source in compensation and responsibilities.

Commencing November 1, 2004, Management Source contracted directly with NHC to assist it in providing certain defined services which Management Source is required to provide to NHI under its Advisory Agreement. NHI is not a party to this subcontract.

Sale of Health Care Facilities. In 2004, the Board approved the sale of nine health care facilities, which were acquired by NHI in foreclosure, located in Kansas and Missouri to SeniorTrust of Florida, Inc. ("SeniorTrust"), a nonprofit corporation, for approximately $33 million, financed by NHI. The properties were sold as of January 1, 2005. Director Robert T. Webb is on the board of directors of SeniorTrust; however, based upon the opinion of outside legal counsel, this transaction is not prohibited by existing law or regulation. Furthermore, no payments were made to NHI by SeniorTrust during 2005.

Pinnacle Financial Partners. NHI has entered into an agreement with Pinnacle Financial Partners ("Pinnacle") for a repurchase transaction, secured by government securities owned by Pinnacle and held by SunTrust Bank. Mr. McCabe is Chairman of Pinnacle; however, based upon the opinion of outside legal counsel, this transaction is not prohibited by existing law or regulation. The Board has determined that Mr. McCabe is independent because the amounts paid by Pinnacle to NHI are immaterial and do not meet the threshold amounts set forth in New York Stock Exchange Rule 303A.02(b)(v).

3/28/2005 Proxy Information

Mr. Adams is the brother of Robert G. Adams, Vice President of NHI.

During 2004, independent directors and directors not holding managerial positions with NHC, the Company's Investment Advisor through October 31, 2004, received compensation for their Board service in the amount of $2,500 per meeting attended, plus options to purchase 15,000 shares of Company stock based on the closing price of NHI the day of its Annual Shareholders Meeting. This automatic grant of options to non-employee directors has previously been approved by our shareholders. Additionally, the Company reimburses all directors for travel expenses incurred in connection with their duties as directors of the Company.

The Company's executive officers (and all are listed) were also employees of NHC during 2004. Effective on November 1, 2004, Mr. W. Andrew Adams resigned his employment position with NHC, although he remains Chairman of the Board. Executive compensation was determined solely by NHC, which allocated a portion of their annual compensation to the Company. As described below in this proxy, on November 1, 2004, the Advisory Agreement with NHC was terminated and a New Advisory Agreement entered into with HealthCare Advisors, LLC, a company owned by W. Andrew Adams. Payment of the allocated amount by the Company was credited against the Advisory Fee earned by NHC. The Company's executive officers were compensated for their services through October 2004 per the following Table I. The 2004 allocation has not yet been made or paid. The Company paid no other perquisites or bonuses to its executive officers.