(LOGO)
NATIONAL HEALTH REALTY, INC.
NOTICE OF SECOND ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
To Our Stockholders:
We cordially invite you to attend the Second Annual Meeting of the
Stockholders (the "Meeting") of National Health Realty, Inc. (the "Company").
The Meeting will be held at City Center, 14th Floor, 100 Vine Street,
Murfreesboro, Tennessee on Wednesday, May 24, 2000, at 5:30 p.m. C.D.T., for
the following purposes:
1. To re-elect two directors;
2. To ratify the selection of Arthur Andersen LLP as independent
accountants for the year ending December 31, 2000; and
3. To transact such other business as may properly come before the
Meeting or any continuances of it.
The nominees for re-election as directors are Olin O. Williams and Robert
G. Adams. They currently serve as directors of the Company.
The Board of Directors has fixed the close of business on Friday, February
25, 2000, as the record date for the determination of stockholders who are
entitled to vote at the Meeting, including any continuances.
We encourage you to attend the Meeting. Whether you are able to attend or
not, we urge you to indicate your vote on the enclosed proxy card FOR the re-
election of Dr. Williams and Mr. Adams as directors and FOR ratification of
the selection of Arthur Andersen LLP as independent accountants for the year
ending December 31, 2000. Please sign, date, and return the proxy card
promptly in the enclosed envelope. If you attend the Meeting, you may vote in
person even if you have previously mailed a proxy card.
By Order of the Board of Directors
Richard F. LaRoche, Jr.
March 31, 2000 Secretary
Murfreesboro, Tennessee
<PAGE>
NATIONAL HEALTH REALTY, INC.
100 Vine Street
Murfreesboro, Tennessee 37130
================
PROXY STATEMENT
================
SECOND ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
The accompanying proxy is solicited by the Board of Directors of National
Health Realty, Inc., (the "Company") to be voted at the Annual Meeting of the
Stockholders (the "Meeting") to be held on Wednesday, May 24, 2000,
commencing at 5:30 p.m. C.D.T. and at any continuances of the Meeting. The
Meeting will be held at the City Center, 14th Floor, Murfreesboro, Tennessee.
It is anticipated that this proxy material will be mailed on or about March
31, 2000, to all stockholders of record on February 25, 2000.
A copy of the Annual Report of the Company for the year ended December 31,
1999, including financial statements, is also enclosed. ADDITIONALLY, AND
UPON YOUR WRITTEN REQUEST, WE WILL PROVIDE YOU A COPY OF OUR ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO RICHARD F.
LaROCHE, JR., SECRETARY, 100 VINE STREET, MURFREESBORO, TENNESSEE 37130.
THERE IS NO CHARGE FOR THIS REPORT.
You have the power and right to revoke the proxy at any time before it is
exercised. A proxy may be revoked by filing with the Secretary of the
Company (i) a written revocation or (ii) a proxy from you with a later date
than the prior proxy. Furthermore, if you attend the Meeting, you may elect to
vote in person, thereby canceling the proxy.
How We Count the Votes
* Shares of common stock represented in person or by proxy at the Meeting
(including shares which abstain or do not vote with respect to one or more of
the matters presented at the Meeting) will be tabulated by the Company's
Secretary who will determine whether or not a quorum is present.
* Abstentions will be counted as shares that are present and entitled to
vote for purposes of determining the number of shares that are present and
entitled to vote with respect to any particular matter, but will not be
counted as votes in favor of such matter. Accordingly, an abstention from
voting on Proposals I and II will have the same legal effect as a vote
"against" the matter even though the stockholder or interested parties
analyzing the results of the voting may interpret such vote differently.
* If a broker holding stock in "street name" indicates on the proxy that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter. Accordingly, a "broker non-vote"
may effect establishment of a quorum, but, once a quorum is established, will
have no effect on the voting on such matter.
* A majority of the issued and outstanding shares of common stock entitled to
vote constitutes a quorum at the Meeting. The affirmative vote of the holders
of a majority of the votes cast at the Meeting is required for the election
of directors, while the ratification of the appointment of the Company's
independent accountants requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of common stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Board of Directors has declared the close of business on February 25,
2000 as the record date. The outstanding voting securities of the Company
as of December 31, 1999, consisted of 9,588,823 shares of common stock,
par value $.01 per share ("Common Stock"). Stockholders of record as of the
record date are entitled to notice of and to vote at the Meeting or any
continuances. Each holder of the shares of Common Stock is entitled to one
vote per share on all matters properly brought before the Meeting.
Stockholders are not permitted to cumulate votes for the purpose of electing
directors or otherwise.
The following information is based upon filings made by the entities
identified below with the Securities and Exchange Commission. Except as set
forth below, on December 31, 1999 no person was known to us to own
beneficially more than 5% of the outstanding Common Stock:
Shares Beneficially Percent of Outstanding
Owned on 12/31/99 Shares on 12/31/99
- - ------------------------------------------------------------------------------
National Health Corporation 1,271,147 (1) 13.2%
P. O. Box 1398
Murfreesboro, TN 37133
W. Andrew Adams 1,116,180 (1) 11.6%
100 Vine Street
Murfreesboro, TN 37130
The Nicholas Fund, Inc. 1,153,428 (2) 12.0%
and Albert O. Nicholas
700 North Water Street
Milwaukee, WI 53202
T. Rowe Price Assoc., Inc. 1,152,500 (3) 12.0%
and T. Rowe Price Small-Cap
V. Fund
P. O. Box 17218
Baltimore, MA 21297-7218
Robert G. Adams 515,309 5.4%
City Center, 100 Vine Street
Murfreesboro, TN 37130
- - ----------------------
(1) Included as shares beneficially owned are units of limited partnership
interest in NHR/OP, L.P., the Company's operating subsidiary. Although these
units cannot vote, they may be exchanged for shares of the Company's common
stock. This exchange has income tax consequences to the holder, but not the
Company.
(2) These securities are owned by an individual investor and by various mutual
funds. For purposes of the reporting requirements of the Securities Exchange
Act of 1934, The Nicholas Fund is deemed to be a beneficial owner of such
securities; however, The Nicholas Fund expressly disclaims that it is, in fact,
the beneficial owner of such securities.
(3) These securities are owned by various individual and institutional
investors [including T. Rowe Price Associates, Inc. (which owns 602,500
shares, representing 6.28% of the shares outstanding) and T. Rowe Price
Small-Cap Value Fund, Inc. (which owns 550,000 shares, representing 5.7% of
the shares outstanding)], which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such
securities.
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to our Articles of Incorporation, the directors have been divided
into three groups. Each group is elected for a three-year term and only one
group is up for election each year. At the May 24, 2000 Meeting two
directors will be elected to hold office, each for a term of three years or
until his successor has been duly elected and qualified.
The nominees for election at the Meeting are Olin O. Williams and Robert G.
Adams, both current directors of the Company. Unless authority to vote for
the election of directors has been specifically withheld, your proxy holder
intends to vote for the election of Dr. Williams and Mr. Adams to hold offices
as directors.
If a nominee becomes unavailable for any reason (which event is not antici-
pated), the shares represented by the enclosed proxy may (unless such proxy
contains instructions to the contrary) be voted for such other person as may
be determined by the proxy holder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
The following is information about the nominees, other board members and
executive officers:
<TABLE>
<CAPTION>
Common
Stock Percent of
Expiration Beneficially Shares
of Term Owned at Outstanding
Name Age Position as Director 12/31/99 (F1) 12/31/99
- - -----------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Olin O. Williams 69 Director 2000 117,645 1.2%
Robert G. Adams 53 Director & 2000 515,309 5.4%
Sr. V.P.
J. K. Twilla 73 Director 2001 83,392 *
Ernest G. 59 Director 2002 189,320 2.0%
Burgess, III
W. Andrew Adams 54 Director & 2002 1,116,180 11.6%
President
Richard F. 54 Sr. V.P. & 410,341 4.3%
LaRoche, Jr. Secretary
All Directors & Exec. 2,432,187 25.4%
Officers as a group (6
people)
*Less than 1%
<FN>
<F1> Except as otherwise noted, all shares are owned beneficially with sole
voting and investment power. Included in the amounts above are 10,000 shares
each optioned to Mr. Burgess, Dr. Williams and Dr. Twilla, as well as the
options to Messrs. Adams and LaRoche shown on Table A.
</TABLE>
Drs. J. K. Twilla and Olin O. Williams have been physicians in private
practice in Tennessee for more than 25 years each and are now retired. Dr.
Williams is now serving on the Board of the Bank of Murfreesboro, head-
quartered in Murfreesboro, Tennessee. Both serve on the Board of National
HealthCare Corporation (NHC).
Robert G. Adams is Senior Vice President, a director of the Company and also
serves as Senior Vice President and director for NHC. Mr. Adams has a B.S.
Degree from Middle Tennessee State University and is the Chief Operating
Officer for NHC.
Ernest G. Burgess, III is a retired Senior Vice President of NHC. He has an
M.S. degree from the University of Tennessee. He also serves on the Board of
National HealthCare Corporation.
W. Andrew Adams is the President, a director of the Company and has been the
Chief Executive Officer of NHC since 1981 and on its Board since 1974. Mr.
Adams currently serves on the Multi-facility Committee of the American Health
Care Association. He has an MBA degree from Middle Tennessee State University.
Mr.Adams serves on the Board of Trust of David Lipscomb University, Nashville,
Tennessee, is President and on the Board of Directors of National Health
Investors, Inc. and serves on the Board of Directors of SunTrust Bank,
Nashville.
Richard F. LaRoche, Jr. is Senior Vice President and Secretary of the
Company and has also served in those positions for NHC since 1974 and as
General Counsel since 1971. Mr. LaRoche has a law degree from Vanderbilt
University and an A.B. degree from Dartmouth College. His responsibilities
include legal affairs, acquisitions, and finance. He also serves as a
director, Vice President and Secretary of National Health Investors, Inc.
Board of Directors and Committees of the Board
The Board of Directors held 3 meetings during 1999. All directors were
present at the meetings of the Board and committees on which they served.
The Board as a whole serves as the Audit Committee; however, the Compensation
Committee did not meet in 1999 since it currently has no responsibilities.
The Company contracts with NHC to act as its Investment Advisor, one
responsibility of which is to employ and compensate all officers and employees.
The Audit Committee, which met one time in 1999, selects the Company's
independent accountants, fixes the compensation to be paid to such
accountants, reports to the Board with respect to the scope of audit
procedures, and determines compliance as to the Company's policies and
procedures.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN TRANSACTIONS
Cash Compensation
Directors not affiliated with NHC, the Company's Investment Advisor,
receive compensation for their Board service in the amount of $2,500 per
meeting attended. The Company reimburses all directors for travel expenses
incurred in connection with their duties as directors of the Company.
The Company's executive officers (W. Andrew Adams, Robert Adams and Mr.
LaRoche) are also employees of NHC. Their compensation is determined solely
by NHC, which allocates a portion of their annual performance bonus to the
Company. Payment of the allocated amount by the Company is credited against the
Advisory Fee paid NHC. W. Andrew Adams, Robert Adams, and Mr. LaRoche each
received $100,000 for allocated bonuses in 1998. Neither Messrs. Adams nor
Mr. LaRoche have yet been allocated any performance bonus for 1999. The
Company paid no other perquisites or bonuses to its executive officers.
Because NHC sets the salaries of the Company's three executive officers, the
Company's Compensation Committee did not issue a Compensation Committee
Report for this proxy statement.
Director and Officer Options
The 1997 Stock Option Plan provides for an automatic grant to each non-
employee director of an option to purchase 5,000 shares of Common Stock on
the date of the Annual Stockholder's Meeting at the then fair market value.
The plan permits options to be exercised for cash or by surrender of shares
of Common Stock of the Company valued at the then fair market value. Unless
otherwise specifically provided in the option agreement, no option shall be
transferable, other than by will, family gift, or the laws of descent and
distribution. All shares which may be issued under either plan and the
exercise prices for outstanding options are subject to adjustment in the
event that the number of outstanding shares of Common Stock will be changed
by reason of stock splits, stock dividends, reclassifications or recapitali-
zations. In addition, upon a merger or consolidation involving the Company,
participants are entitled to shares in the surviving corporation.
Pursuant to the automatic grant provisions of the plan, the three non-
employee directors have each received options to purchase shares at $18.875
on January 5, 1998 and $11.50 on April 26, 1999. The outside directors have
not exercised any of the 1998 or 1999 grants. There are currently 79,802
shares available to grant under the 1997 Plan.
Table A and B below set forth information regarding options which are
outstanding, granted or exercised under the 1997 Stock Option Plan as of
December 31, 1999, for the Company's three executive officers. Table C sets
forth information regarding options outstanding and exercised during 1999 for
the executive officers, all directors and all other NHC employees as a group.
The Company has not granted any SARs. The only options granted to the
executive officers are dated October 13, 1999.
<TABLE>
TABLE A
Option/SAR Grants in Last Fiscal Year [12-31-99]
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
Percent of
Number of Total
Securities Options/
underlying SARs
options/ Granted to Exercise of
SARs Granted Employees in Base Price Expiration
(#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Andrew Adams 44,000 12.0% 8.375 10/13/05 101,810 224,973
Robert G. Adams 32,000 8.7% 8.375 10/13/05 73,920 163,617
Richard F. LaRoche, Jr. 32,000 8.7% 8.375 10/13/05 73,920 163,617
</TABLE>
TABLE B
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
Value at Fiscal at Fiscal
Shares Acquired Realized Year-End # Year-End ($)
Name on Exercise (#) ($) Exercisable Exercisable
- - -----------------------------------------------------------------------------
W. Andrew Adams -0- - 44,000 -0-
Robert G. Adams -0- - 32,000 -0-
Richard F. LaRoche, Jr. -0- - 32,000 -0-
TABLE C
Shares
Under Options
Option: Expiration Exercised Remaining Exercise
Name of Participant 1999 Date 1999 Options Price
- - -------------------------------------------------------------------------------
W. Andrew Adams 44,000 10/13/05 -0- 44,000 $ 8.375
Richard F. LaRoche, Jr. 32,000 10/13/05 -0- 32,000 8.375
Robert G. Adams 32,000 10/13/05 -0- 32,000 8.375
All Executive 108,000 10/13/05 -0- 108,000 8.375
Officers (3 persons)
All Non-Employee 15,000 1/5/03 -0- 15,000 18.875
Directors (3 persons) 15,000 4/26/04 -0- 15,000 11.50
All Other NHC 259,000 10/13/05 -0- 259,000 8.375
Employees (26 persons)
The Company's grant or issuance of an incentive stock option under the 1997
Option Plan has no federal income tax consequences to either the Company or the
optionee. Nor do any federal income tax consequences occur to either the
Company or the optionee upon the optionee's exercise of his or her incentive
stock option and purchase of Common Stock up to $100,000 per year, except that
the difference between the fair market value of the stock purchased, pursuant
to the exercise of the option and the amounts paid upon the option's exercise
(the "Spread"), would be included in the optionee's alternative minimum taxable
income for alternative minimum tax purposes. For options purchased in excess
of the $100,000 limit, or for options granted to non-employee directors, or
which are not held for the time discussed in the next paragraph, the Spread
is taxable as ordinary income to the optionee and deductible by the Company at
the time of exercise.
After exercising the option, if the optionee holds the stock purchased for
the requisite period under the Internal Revenue Code, then upon
the optionee's disposition of the stock he or she will recognize capital gain
(or loss) for federal income tax purposes on the amount of the Spread. The
Company would not be entitled to a deduction upon such a disposition. To be
entitled to such capital gains treatment, the optionee must not dispose of
the underlying stock within two (2) years after the date the option is granted
or one (1) year after the option is exercised.
If the optionee disposes of the stock prior to such time, then the
optionee will recognize ordinary income in an amount equal to the lesser of
(i) the difference between the sales proceeds and the optionee's cost, or
(ii) the difference between the fair market value of the stock on the date of
exercise and the optionee's cost. The balance of the gain on a premature
disposition of the stock, if any, will be capital gain for federal income tax
purposes. Such a premature disposition will entitle the Company to a deduction
equal to the amount of ordinary income recognized by the optionee.
Section 16(a) Disclosure Compliance
Section 16(a) of the Securities and Exchange Act of 1934 as amended
requires officers, directors, and persons who own more than 10% of the
Company's equity securities to file statements of changes in beneficial
ownership (Form 4 or 5) with the Securities and Exchange Commission (the SEC)
and the American Stock Exchange. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with
copies of all such forms they file.
To the Company's knowledge, based solely on the review of the copies of
such forms received by it, the Company believes that during 1999 all filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with and filed.
Investment Advisor
The Company has entered into an Advisory, Administrative Services and
Facilities Agreement (the "Advisory Agreement") with NHC as Advisor under
which NHC will provide management and advisory services during the term of
the Advisory Agreement.
Under the terms of the Advisory Agreement, NHC, as Advisor, agrees to use
its best efforts:
a) To present to the Company a continuing and suitable investment
program consistent with the investment policy of the Company as adopted by
the directors from time to time;
b) To manage the day-to-day affairs and operations of the Company,
including the employment of and compensation to all personnel; and
c) To provide administrative services and facilities appropriate for such
management.
In performing its obligations under the Advisory Agreement, the Advisor is
subject to the supervision of and policies established by the Company's Board
of Directors.
The Advisory Agreement is in effect through December 31, 2003 and
thereafter continues on a year to year term, but can be terminated by either
party without cause on 90 days notice on or after January 1, 2000.
For its services under the Advisory Agreement, the Advisor is entitled to
the greater of i) two percent (2%) of the Company's consolidated gross
revenues calculated according to generally accepted accounting principles, or
ii) the actual expenses incurred by the Advisor as outlined in the Advisory,
Administrative Services and Facilities Agreement. The Advisor's compensation
is payable in monthly installments on the last day of each month, adjusted
annually upon completion of audit. $506,000 was earned in 1999 and all
payments are current. Salaries or bonuses paid by the Company to its
executive officers are credited against these installments.
Comparison of Cumulative Total Return
Since the Company's creation on December 31, 1997, the Company's
cumulative total return as compared with the S & P 500 Index and all other
publicly traded real estate investment companies (NAREIT Hybrid) is as
shown in the graph on the last page of this proxy statement.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF AND
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as its independent auditors
for fiscal year ending December 31, 2000. Although a stockholder vote is not
required, the Board would like the approval of stockholders for this
appointment. Arthur Andersen LLP audited the Company's financial statements
for theyear ended December 31, 1999.
If the stockholders do not ratify the selection of Arthur Andersen LLP,
the selection of independent accountants will be reconsidered by the Board of
Directors, although the Board of Directors would not be required to select
different independent accountants for the Company. The Board of Directors
retains the power to select another firm as independent accountants for the
Company to replace the firm whose selection was ratified by the Company's
stockholders in the event the Board of Directors determines that the best
interest of the Company warrants a change of its independent accountants.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire
to do so. They will also be available to respond to appropriate questions
from stockholders at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL II.
STOCKHOLDER PROPOSALS
October 1, 2000 is the date by which proposals of stockholders intended to
be presented at the 2001 Annual Meeting of Stockholders must be received by
the Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mail, proxies may be solicited by directors and
officers of the Company personally and by telephone, telegraph, or facsimile
transmission.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Meeting, but if other matters properly come before the Meeting, it is
intended that the persons named in the proxy will vote on such matters in
accordance with their best judgment.
s/Richard F. LaRoche, Jr.
-----------------------------------
Richard F. LaRoche, Jr., Secretary
March 31, 2000
Murfreesboro, Tennessee
National Health Realty, Inc. ("NHR")
Comparison of Cumulative Total Return
1997 1998 1999
- - --------------------------------------------------------
NHR 100 76.7 62.3
S&P 500 100 128.6 155.6
NAREIT-Hybrid 100 66.0 42.3
*Assumes $100 inv. 12/31/97 in NHR, S & P 500 and NAREIT-Hybrid.
