NATIONAL HEALTHCARE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 26, 1999
To the Stockholders:
The Annual Meeting of the Stockholders (the "Meeting") of
National HealthCare Corporation (the "Company") will be held at
City Center, 14th Floor, 100 Vine Street, Murfreesboro, Tennessee
on Monday, April 26, 1999, at 5:00 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, 1999;
and
3. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The nominees for re-election as directors are Ernest G.
Burgess III and W. Andrew Adams. They currently serve as
directors of the Company.
The Board of Directors has fixed the close of business on
Friday, January 29, 1999, as the record date for the
determination of stockholders who are entitled to notice of and
to vote at the Annual Meeting of the Stockholders or any
adjournments thereof.
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 Messrs. Burgess and
Adams as directors and FOR ratification of the selection of
Arthur Andersen LLP as independent accountants for the year
ending December 31, 1999. 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.
Secretary
March 22, 1999
Murfreesboro, Tennessee
NATIONAL HEALTHCARE CORPORATION
100 Vine Street
Murfreesboro, Tennessee 37130
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF THE STOCKHOLDERS
April 26, 1999
The accompanying proxy is solicited by the Board of
Directors of National HealthCare Corporation (the "Company") to
be voted at the Annual Meeting of the Stockholders (the
"Meeting") to be held on Monday, April 26, 1999, commencing at
5:00 p.m. C.D.T. and at any adjournments 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 22, 1999, to all
stockholders of record on January 29, 1999.
A copy of the Annual Report of the Company for the year
ended December 31, 1998, including financial statements, is
enclosed herewith. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO
ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO
RICHARD F. LaROCHE, JR., SHAREHOLDER RELATIONS-SUITE 600, 100
VINE STREET, MURFREESBORO, TENNESSEE 37130.
A stockholder giving a proxy has the power to revoke it at
any time before it is exercised. A proxy may be revoked by
filing with the Secretary of the Company (i) an instrument
revoking the proxy or (ii) a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if the
person executing the proxy is present at the Meeting and elects
to vote in person. If the proxy is neither revoked nor
suspended, it will be voted by those therein named.
Votes Required
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 THEREOF
The Board of Directors has fixed the close of business on
January 29, 1999 as the record date. The outstanding voting
securities of the Company as of December 31, 1998, consisted of
11,316,898 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
adjournments thereof. 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, 1998 no
person was known to the Company to own beneficially more than 5%
of the outstanding Common Stock:
<TABLE>
<CAPTION>
Shares Percent of
Beneficially Outstanding
Owned at Shares on
Name and Address Dec. 31, 1998 Dec. 31, 1998
- - ---------------------------------------------------------------
<S> <C> <C>
National Health Corporation 1,238,924 10.9%
P. O. Box 1398
Murfreesboro, TN 37133
W. Andrew Adams 1,067,064 9.4%
100 Vine Street
Murfreesboro, TN 37130
1818 Fund II 700,155 6.2%
59 Wall Street
New York, NY 10005
Nicholas Fund, Inc. and 1,688,184 14.9%
Albert O. Nicholas
700 North Water Street
Milwaukee, WI 53202
</TABLE>
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the
directors have been divided into three groups. At the April 26,
1999 Meeting, two directors will be elected to hold office each
for a term of three years or until their successor shall have
been duly elected and qualified.
The nominees for election to the positions of director to be
voted upon at the Meeting are Ernest G. Burgess III and W. Andrew
Adams, currently directors of the Company. Unless authority to
vote for the election of directors has been specifically
withheld, the persons named in the accompanying proxy intend to
vote for the election of Mr. Burgess and Mr. Adams to hold office
as directors, each for terms of three years or until their
successor has been duly elected and qualified.
If a nominee becomes unavailable for any reason (which event
is not anticipated), 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 holders
of such proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
The following information relates to the nominees for
election as directors of the Company and the other persons whose
terms as directors continue after the Meeting, as well as
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Common Percent
Stock of
Expiration Beneficially Shares
of term as Owned at Outstanding
Name Age Position Director 12/31/98<F1> 12/31/98
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Andrew Adams 53 Director &
President 1999 1,067,064 9.4%
Robert G. Adams 52 Director &
Sr. V.P. 2000 440,592 3.9%
Ernest G. Burgess III 58 Director 1999 189,320 1.7%
Richard F. LaRoche, Jr. 53 Sr. V.P.
& Secretary 377,440 3.3%
Lawrence C. Tucker<F2> 56 Director 2001 700,155 6.2%
J. K. Twilla 72 Director 2001 83,392 *
Olin O. Williams 68 Director 2000 109,645 *
All Directors and Executive Officers
as a group (7 people) 2,967,608 26.2%
- - -----------------------
*Less than 1%
<FN>
<F1> Assumes exercise of stock options and convertible
subordinated debentures outstanding. See "Option Plans."
Included in the amounts above are 15,000 shares to Mr. Burgess,
10,000 shares to Mr. Tucker, 20,000 shares to Dr. Twilla, and
15,000 shares to Dr. Williams, of which all may be acquired upon
the exercise of stock options granted under the Company's 1994
Unit Option Plan and 1997 Stock Option Plan.
<F2> Mr. Tucker, as a general partner of the 1818 Fund II, is
attributed the ownership of the 1818 Fund II shares, but does not
claim beneficial ownership thereof. Otherwise, all shares are
owned beneficially with sole voting and investment power.
</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 currently serves on the Board of
the Bank of Murfreesboro, headquartered in Murfreesboro,
Tennessee. Both serve on the Board of Directors of National
Health Realty, Inc.
Ernest G. Burgess III is retired Senior Vice President of
NHC. He has a M.S. degree from the University of Tennessee and
serves on the Board of Directors of National Health Realty, Inc.
Robert G. Adams (Senior Vice President and Director) has
served both as an Administrator and a Regional Vice President,
holding the last position from 1977 to 1985. Mr. Adams has a
B.S. Degree from Middle Tennessee State University. He is Chief
Operating Officer of the Company and also serves on the Board of
National Health Realty, Inc.
W. Andrew Adams has been President since 1974 and served as
Vice President between 1972 and 1974. He currently serves on the
Multifacility Committee of the American Health Care Association.
Mr. Adams has a MBA degree from Middle Tennessee State
University. He 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 National
Health Realty, Inc., and serves on the Board of Directors of
SunTrust Bank, Nashville.
Richard F. LaRoche, Jr. (Senior Vice President) has been
Secretary of the Company since 1974 and General Counsel since
1971. He has a law degree from Vanderbilt University and an A.B.
degree from Dartmouth College. His responsibilities include
legal affairs, acquisitions, and finance. Mr. LaRoche also
serves as a director, Vice President and Secretary of National
Health Investors, Inc. and as Vice President and Secretary of
National Health Realty, Inc.
Mr. Tucker has been with Brown Brothers Harriman & Co. (BBH
& Co.), private bankers, for 32 years and became a General
Partner of the firm in January 1979. He currently serves as a
member of the Steering Committee of the firm's partnership. He
is responsible for the corporate finance activities of BBH & Co.,
including management of the 1818 Funds, private equity investing
partnerships with committed capital exceeding $1.5 billion. He
is a director of MCI WorldCom, Inc., Riverwood International
Corporation, VAALCO Energy Inc., and the MCI WorldCom Investment
Fund.
Board of Directors and Committees of the Board
The Board of Directors held 3 meetings during 1998. All
directors were present at the meetings of the Board and of
committees on which they served. The Board as a whole serves as
the Audit Committee, and the Compensation Committee is comprised
of non-employee directors (Mr. Burgess, Mr. Tucker, Drs. Twilla
and Williams).
The Audit Committee, which met one time in 1998, 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 $2,500 per meeting attended. The Company reimburses
all directors for travel expenses incurred in connection with
their duties as directors of the Company.
The Company's executive officers were compensated per the
following Table I.
<TABLE>
TABLE I
NATIONAL HEALTHCARE CORPORATION
SUMMARY COMPENSATION TABLE
1996 - 1998
<CAPTION>
Long Term
Annual Compensation <F1> Compen-
sation
- - --------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)(g) (i)
Other (h)
annual <F4> All Other
Name and compen- Compen-
Principal Salary Bonus sation sation
Position Year ($) ($)<F2> ($)<F3> ($)
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Andrew 1998 109,478 <F5> 4,714 -0- -0-
Adams, Pres. 1997 126,806 1,786,842 26,115 -0- -0-
& CEO 1996 129,757 1,850,026 8,147 -0-
- - --------------------------------------------------------------------------
Robert G. 1998 140,779 <F5> 9,889 -0- -0-
Adams, Sr. 1997 140,553 882,626 3,817 -0- -0-
V.P. & COO 1996 140,279 1,238,857 8,269 -0- -0-
- - --------------------------------------------------------------------------
Richard F. 1998 126,588 <F5> 18,034 -0- -0-
LaRoche, Jr., 1997 135,159 1,086,355 14,904 -0- -0-
Sr. V.P. & 1996 135,784 1,012,096 18,823 -0- -0-
Secretary
- - --------------------------------------------------------------------------
<FN>
<F1> Compensation deferred at the election of an executive has
been included in columns (c) and (d).
<F2> These officers may also receive bonuses from National Health
Investors, Inc. and National Health Realty, Inc., which are
disclosed in those companies' Form 10-K and/or proxy statement.
<F3> Includes (a) life insurance benefit, (b) 401(k) matching
contribution, (c) non-qualified deferred compensation matching
contribution, and (d) ESOP contribution.
<F4> These officers received stock options from National Health
Investors, Inc. in 1993, 1995, and 1997, which are disclosed in
that company's Form 10-K. No other Restricted Stock Awards,
Options/SARs, or LTIP payouts were given in 1996, 1997, or 1998.
<F5> Not yet declared or paid.
</TABLE>
Director and Officer Options
The 1994 Unit Option Plan provided for an automatic grant to
each non-NHC affiliated director of an option to purchase 5,000
Units of Limited Partnership on the date of the Annual
Unitholder's Meeting at the then fair market value. The 1997
Stock Option Plan increased that number to 10,000 shares per
Annual Meeting of the Shareholders. All options which have been
granted to employees have been exercised under the 1994 Unit
Option Plan, but of the 1,000,000 shares available under the 1997
Plan, 936,802 are available for grant.
Both plans permit options to be exercised for cash or by
surrender of shares of Common Stock of the Company (or Units of
Limited Partnership Interest) valued at the then fair market
value. Unless otherwise specifically provided in the option
agreement, no option or SAR 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 recapitalizations. 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 plans, the
three (now four) non-employee (or outside) directors have each
received options to purchase shares at $25.75 per share in 1994,
$24.88 in 1995, $38.63 in 1996, $30.75 in 1997, and $39.88 in
1998. The outside directors have exercised all of the 1994
grants, all but 5,000 of the 1995 grants, all of the 1996 grants,
none of the 1997 grants, and none of the 1998 grants.
Tables A and B set forth information regarding options which
are outstanding, granted or exercised under the 1994 Unit Option
Plan and the 1997 Stock Option Plan as of December 31, 1998, for
the Company's three executive officers. Table C sets forth
information regarding options outstanding and exercised during
1998 for the executive officers, all outside directors and all
other NHC employees as a group. The Company has not granted any
SARs.
<TABLE>
TABLE A
Option/SAR Grants in Last Fiscal Year [12-31-98]
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreci-
Individual Grants ation for Option Term
- - ----------------------------------------------------------------------------
Percent of
Total
Number of Options/
Securities SARs
Underlying Granted
Option/ to Exercise
SARs Employees of Base
Granted in Fiscal Price Expira-
(#) Year ($/Sh) tion Date 5%($) 10%($)
- - -----------------------------------------------------------------------------
<S> <C> <C>
W. Andrew Adams -0- -0-
Robert G. Adams -0- -0-
Richard F. LaRoche, -0- -0-
Jr.
</TABLE>
<TABLE>
TABLE B
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-
Options/ Money
SARs at Options/
Fiscal Year- SARs at
Shares Value End Fiscal Year-
Acquired on Realized (#) End ($)
Name Exercise (#) ($) Exercisable Exercisable
- - -------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Andrew
Adams -0- -0- -0- -0-
Robert G.
Adams -0- -0- -0- -0-
Richard F.
LaRoche, Jr. -0- -0- -0- -0-
</TABLE>
<TABLE>
TABLE C
<CAPTION>
Shares Expira-
Under tion Options Remaining Exercise
Name of Participant Option: Date Exercised: Options Price
1998 1998
- - -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Andrew Adams -0- -0- -0-
Richard F. LaRoche, -0- -0- -0-
Jr.
Robert G. Adams -0- -0- -0-
All Executive
Officers(3 persons) -0- -0- -0-
All Directors 5,000 3/15/2000 -0- 5,000 $24.88
(4 persons) 15,000 3/19/2002 -0- 15,000 $30.75
40,000 1/4/2003 -0- 40,000 $39.88
All Other NHC
Employees -0- -0- -0-
</TABLE>
The Company's grant or issuance of an incentive stock option
under both the 1994 Unit Option Plan and the 1997 Stock Option
Plan have 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 Key NHC Employee
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-NHC
affiliated directors, or which are not held for the time
discussed in the next paragraph, the Spread is taxable as
ordinary income to the Key Employee and deductible by the Company
at the time of exercise.
If the optionee holds the stock purchased upon the exercise
of the option 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, and (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.
The 1994 Plan also provided that the Company could finance
the exercise of any Options by the acceptance of the
Optionholder's full recourse Promissory Note bearing interest at
a fixed rate equal to 2.5% below New York Prime on the date of
the note, with interest payable quarterly and principal due and
payable in 60 months. The notes are secured by Shares having a
fair market value of 200% of the amount of the principal of the
note as established on the date of the loan. Additionally, the
notes required the pledge of additional Shares or for reduction
in the principal of the note at any time that the value of the
collateral drops below 150% of the base amount of the outstanding
balance of the note. The below table indicates the current amount
of loans outstanding by directors of NHC individually and by all
designated NHC employees collectively as of December 31, 1998.
Current Maximum
Loan Loan
Outstanding Outstanding
- - -------------------------------------------------------
W. Andrew Adams $ 1,641,920 $ 4,101,131
Robert G. Adams 1,206,950 2,426,309
Richard F. LaRoche, Jr. 1,181,200 2,418,076
Ernest G. Burgess III 802,030 1,309,368
J. K. Twilla -0- 169,750
Lawrence C. Tucker -0- -0-
Olin O. Williams 369,000 679,462
Balance NHC Employees 11,621,452 23,194,625
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 (Forms 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 1998 all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were
complied with and were timely filed.
Comparison of Cumulative Total Return
The Company's cumulative total return as compared with the S
& P 500 Index and HealthCare-Misc. Index is 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, 1999.
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 the
year ended December 31, 1998.
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, 1999 is the date by which proposals of
stockholders intended to be presented at the 2000 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 do 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 22, 1999
Murfreesboro, Tennessee
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN*
<CAPTION>
1993 1994 1995 1996 1997 1998
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NHC 100 107.8 172.6 203.7 274.9 137.7
S & P 500 100 101.3 139.2 171.2 228.3 293.6
HealthCare 100 85.7 135.4 130.9 150.5 196.4
-Misc.
*Assumes $100 inv. 12/31/93 in NHC, S & P 500, and HealthCare-Misc.
</TABLE>
