SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)
Check the appropriate box:
(X) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Materials Pursuant to SECTION 240.14a-11(c) or
SECTION 240.14a-12
THE HILLHAVEN CORPORATION
(Name of Registrant as specified in its Charter)
NATIONAL MEDICAL ENTERPRISES, INC.
NME PROPERTIES CORP.
NME PROPERTY HOLDING CO., INC.
NME PROPERTIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)
(4) Proposed maximum aggregate value of transaction:
___________________
1 Set forth the amount on which the filing fee is
calculated and state how it was determined.
(X) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $125
(2) Form, Schedule or Registration Statement No.: Schedule
14A Preliminary Proxy Statement
(3) Filing Parties: National Medical Enterprises, Inc.,
NME Properties Corp., NME Property Holding Co., Inc.
and NME Properties, Inc.
(4) Date Filed: March 8, 1995
Preliminary Proxy Statement
1995 ANNUAL MEETING OF STOCKHOLDERS
OF
THE HILLHAVEN CORPORATION
PROXY STATEMENT
OF
NATIONAL MEDICAL ENTERPRISES, INC.
This Proxy Statement (the "Proxy Statement") and the
enclosed BLUE proxy card are furnished in connection with the
solicitation of proxies by National Medical Enterprises, Inc., a
Nevada corporation ("NME"), NME Properties Corp., a Tennessee
corporation and a wholly owned subsidiary of NME ("PropCorp"),
NME Property Holding Co., Inc., a Delaware corporation and a
wholly owned subsidiary of PropCorp ("Holding"), and NME
Properties, Inc., a Delaware corporation and a wholly owned
subsidiary of PropCorp and Holding ("PropInc"), for use at the
1995 Annual Meeting of Stockholders of The Hillhaven Corporation,
a Nevada corporation (the "Company" or "Hillhaven"), and at any
adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, you will be asked to consider and
vote upon a non-binding resolution (the "Resolution") urging the
Board of Directors of Hillhaven to take action to maximize the
value of all shareholders' investment in the Company through the
immediate sale or merger of the Company.
As of the date of this Proxy Statement, Hillhaven has not
announced the date, time or place of the Annual Meeting or set
the date as of which shareholders of record will be entitled to
vote at the Annual Meeting.
According to the Company's filings with the Securities and
Exchange Commission, as of March 6, 1995, there were 32,824,463
shares of common stock, par value $.75 per share, of the Company
(the "Common Stock") issued and outstanding, each of which is
entitled to one vote. As of such date, NME was the beneficial
owner of 8,878,147 shares of Common Stock, or approximately 27%
of the number of shares of Common Stock reported by the Company
to be outstanding. On February 28, 1995, as set forth below
under "Background," the Company announced an acquisition
transaction in which the Company will issue 5,000,000 new shares
of Common Stock, subject to a potential of up to 500,000
additional shares of Common Stock. Assuming the issuance of
5,500,000 new shares of Common Stock in such transaction, there
would be 38,324,463 shares of Common Stock outstanding, and NME
would be the beneficial owner of approximately 23.2% of the
shares of Common Stock then outstanding.
____________________
This Proxy Statement and the BLUE proxy card are first being
furnished to Hillhaven shareholders on or about March 22 , 1995.
The principal executive office of Hillhaven is located at 1148
Broadway Plaza, Tacoma, Washington 98402.
IMPORTANT
At the Annual Meeting, NME is seeking shareholder approval
of the Resolution.
NME URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED BLUE
PROXY CARD TO VOTE FOR THE APPROVAL OF THE RESOLUTION.
A VOTE FOR THE RESOLUTION WILL HELP ENABLE YOU -- AS THE
OWNERS OF HILLHAVEN -- TO SEND A MESSAGE TO THE HILLHAVEN BOARD
OF DIRECTORS THAT YOU ARE IN FAVOR OF MAXIMIZING THE VALUE OF
YOUR INVESTMENT IN HILLHAVEN THROUGH THE IMMEDIATE SALE OR
MERGER OF THE COMPANY.
NME URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY
HILLHAVEN. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR
PROXY BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER
DATED PROXY FOR THE ANNUAL MEETING TO NME, C/O MACKENZIE
PARTNERS, INC., 156 FIFTH AVENUE, NEW YORK, NEW YORK 10010, OR
TO THE SECRETARY OF HILLHAVEN, OR BY VOTING IN PERSON AT THE
ANNUAL MEETING. SEE "PROXY PROCEDURES" BELOW.
BY SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD,
SHAREHOLDERS WILL BE GIVING UP THEIR RIGHT TO VOTE FOR THE
ELECTION OF DIRECTORS AND ANY OTHER PROPOSALS TO BE BROUGHT
BEFORE THE ANNUAL MEETING.
PURPOSE OF THE SOLICITATION
NME, the largest shareholder of Hillhaven, announced in
December 1994 that it was reviewing its investment in Hillhaven.
After discussions with the management of Hillhaven and certain
third parties which expressed interest in Hillhaven and NME's
investment in it, as well as a review with NME's financial
advisor, NME determined that a business combination transaction
involving Hillhaven would provide all shareholders with the best
alternative to achieve maximum values, and so informed Hillhaven.
As set forth below under "Background," in February 1995
Hillhaven rejected a merger proposal from Horizon Healthcare
Corporation ("Horizon") that would provide $28 in value to
Hillhaven shareholders for each share of Common Stock
outstanding. A "Special Committee" of Hillhaven's Board of
Directors, which included all of the members of the Board,
including the members of Hillhaven's senior management who are
also directors, but which excluded two directors who are current
or former employees of NME, rejected Horizon's proposal, based in
part upon the advice of Hillhaven's investment banker that the
consideration to be received by Hillhaven's shareholders is
inadequate from a financial point of view. The Special Committee
concluded that it is in the best interests of Hillhaven, its
shareholders, employees and customers that Hillhaven remain
independent and continue to pursue its long-term business
strategy. The Special Committee rejected Horizon's proposal
without even discussing it with Horizon, even though Horizon had
indicated its willingness to be flexible with respect to the
terms of its proposal. On March 7, 1995, Horizon sent a letter
to Hillhaven indicating that it was prepared to increase its
offer to $31 in value per share of Common Stock. Horizon has
indicated that its $31 in value per share offer will expire on
March 21, 1995.
NME is in favor of ANY proposal that will maximize the value
of all shareholders' investment in Hillhaven, and believes that
Hillhaven should engage in a process to maximize the value of all
shareholders' investment in Hillhaven through the immediate sale
or merger of Hillhaven. Accordingly, the Resolution urges the
Board of Directors of Hillhaven to (i) instruct Hillhaven's
existing investment banking firm to solicit offers to acquire
Hillhaven by sale or merger, (ii) establish a committee of
directors who are not employees of Hillhaven to review and
negotiate any sale or merger proposal received and make a
recommendation to the Board of Directors with respect to such
proposal, and (iii) take all action necessary to effectuate such
sale or merger (such as redeeming Hillhaven's Shareholder Rights
Plan when appropriate and taking any necessary action under
Nevada takeover statutes with respect to any proposal that
maximizes values) and refrain from any action that would hinder
or impede the effectuation of such sale or merger (such as
initiating frivolous litigation).
By signing and returning the accompanying BLUE proxy card in
favor of the Resolution, you will be able to send a message to
the Hillhaven Board of Directors. Although Hillhaven has not yet
set the date for the Annual Meeting, NME may deliver signed BLUE
proxy cards to the Board of Directors of Hillhaven from time to
time in order that the Board might become fully aware of
shareholder sentiment with respect to the subject matter of the
Resolution.
Your proxy is being solicited solely by NME and its wholly
owned subsidiaries, PropCorp, Holding and PropInc, and not on
behalf of any other person. NME supports ANY sale or merger
proposal that maximizes the value of all shareholders' investment
in Hillhaven.
The $31 in value per share merger proposal from Horizon
represents approximately a 49% premium to the New York Stock
Exchange ("NYSE") closing price of the Common Stock of $20.75 on
December 20, 1994, the day before the public announcement that
Hillhaven and NME were in discussions with respect to the shares
of Common Stock held by NME. The NYSE closing price of the
Common Stock was $27.125 on March 17, 1995.
If, like us, you believe that the value of your investment
in Hillhaven can best be maximized through the immediate sale or
merger of Hillhaven, we urge you to vote the accompanying BLUE
proxy card FOR the Resolution.
THE RESOLUTION
At the Annual Meeting, NME intends to present the following
Resolution for approval by Hillhaven shareholders:
RESOLVED, that the shareholders of The Hillhaven
Corporation (the "Company"), believing that the value
of their investment in the Company can best be
maximized through the immediate sale or merger of the
Company, hereby urge the Board of Directors to proceed
promptly to effect such sale or merger by:
(1) instructing the Company's existing investment
banking firm to solicit offers to acquire the Company
by sale or merger;
(2) establishing a committee of directors who are
not officers of the Company to review and negotiate any
sale or merger proposal received by the Company and to
make a recommendation to the Board of Directors with
respect to such proposal; and
(3) taking all action necessary to effectuate
such sale or merger and refraining from taking any
action that would hinder or impede the effectuation of
such sale or merger.
The purpose of the Resolution is to give all Hillhaven
shareholders the opportunity to send a message to the Hillhaven
Board of Directors that they are in favor of maximizing the value
of their investment in Hillhaven through the immediate sale or
merger of Hillhaven. The refusal of the Board of Directors to
even sit down and discuss a bona fide offer from Horizon is not
in the interests of shareholders. IF YOU BELIEVE, AS DO WE, THAT
THE ACTIONS OF THE HILLHAVEN BOARD OF DIRECTORS ARE CONTRARY TO
THE BEST WAY TO ACHIEVE THE MAXIMUM VALUE OF YOUR INVESTMENT IN
HILLHAVEN, THEN SEND A MESSAGE TO THE BOARD AND VOTE FOR THE
RESOLUTION ON THE BLUE PROXY CARD.
Adoption of the Resolution, which will not be binding on the
Hillhaven Board of Directors, requires the affirmative vote of a
majority of the shares of Common Stock represented in person or
by proxy and entitled to vote on the matter, assuming the
presence of a quorum at the Annual Meeting. With respect to
abstentions, shares of Common Stock will be considered present at
the Annual Meeting for a vote on the Resolution, but since they
are not affirmative votes for the Resolution, they will have the
same effect as votes against the Resolution. With respect to
broker non-votes, shares of Common Stock will not be considered
present at the Annual Meeting for purposes of voting on the
Resolution. Consequently, broker non-votes will not be counted
with respect to the Resolution, but they will have the practical
effect of reducing the number of affirmative votes required to
achieve a majority with respect to the Resolution by reducing the
total number of shares of Common Stock from which the majority is
calculated.
The Resolution is not binding on the Hillhaven Board of
Directors and, even if approved, will not have any effect unless
the Board of Directors acts upon it. The Board of Directors is
not required to effectuate the Resolution, even if approved by
shareholders. If the Board of Directors proposes a sale or
merger transaction, Hillhaven shareholders will have the
opportunity to vote on such transaction in certain circumstances.
The accompanying BLUE proxy card will be voted in accordance
with your instructions on such card at the Annual Meeting. You
may vote FOR the Resolution or vote against, or abstain from
voting on, the Resolution by marking the proper box on the BLUE
proxy card for the meeting. IF NO MARKING IS MADE, YOU WILL BE
DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES REPRESENTED
BY THE BLUE PROXY CARD FOR THE RESOLUTION.
NME STRONGLY RECOMMENDS A VOTE FOR THE RESOLUTION.
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
NME anticipates that at the Annual Meeting shareholders will
be asked to (i) elect two Class 3 directors, who will serve until
the 1998 Annual Meeting, and (ii) ratify the selection of the
Company's independent auditors. NME is not making any
recommendation on these matters and is not soliciting your proxy
on these matters.
Except as set forth above, NME is not aware of any other
proposals to be brought before the Annual Meeting. Should other
proposals be brought before the Annual Meeting, the persons named
on the BLUE proxy card will abstain from voting on such proposals
unless such proposals adversely affect the interests of NME as
determined by NME in its sole discretion, in which event such
persons will vote on such proposals at their sole discretion.
Such discretionary authority does not extend to any matter that
NME knows, a reasonable time before the date of the Annual
Meeting, is to be presented at the Annual Meeting.
PROXY PROCEDURES
IN ORDER FOR YOUR VIEWS ON THE ABOVE-DESCRIBED PROPOSAL TO
BE REPRESENTED AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THE ACCOMPANYING BLUE PROXY CARD AND RETURN SUCH CARD TO NME, C/O
MACKENZIE PARTNERS, INC. IN THE ENCLOSED ENVELOPE IN TIME TO BE
VOTED AT THE ANNUAL MEETING. Execution of the BLUE proxy card
will not affect your right to attend the Annual Meeting and to
vote in person. Any proxy may be revoked at any time prior to
the Annual Meeting by delivering a written notice of revocation
or a later dated proxy for the Annual Meeting to NME, c/o
MacKenzie Partners, Inc. or to the Secretary of Hillhaven, or by
voting in person at the Annual Meeting. ONLY YOUR LATEST DATED
PROXY FOR THE ANNUAL MEETING WILL COUNT.
Only holders of record as of the close of business on the
record date will be entitled to vote at the Annual Meeting. If
you are a shareholder of record on the record date, you will
retain your voting rights for the Annual Meeting even if you sell
such shares after the record date. ACCORDINGLY, IT IS IMPORTANT
THAT YOU VOTE THE SHARES HELD BY YOU ON THE RECORD DATE, OR GRANT
A PROXY TO VOTE SUCH SHARES ON THE BLUE PROXY CARD EVEN IF YOU
SELL SUCH SHARES AFTER THE RECORD DATE.
If any of your shares are held in the name of a brokerage
firm, bank, bank nominee or other institution on the record date,
only it can vote such shares and only upon receipt of your
specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute
the BLUE proxy card.
BACKGROUND
On December 19, 1994, the Executive Committee of the Board
of Directors of NME determined to review NME's investment in
Hillhaven in light of NME's determination to focus its operations
on its general hospital operations and the development of
integrated healthcare delivery systems. In the course of
reviewing its alternatives with respect to its investment in
Hillhaven, NME had discussions with Hillhaven and third parties
concerning possible courses of action.
On January 12, 1995, Jeffrey Barbakow, Chairman of the Board
of NME, informed Bruce Busby, Chairman of the Board of Hillhaven,
that Horizon had expressed an interest in making a business
combination proposal involving Hillhaven. Mr. Barbakow suggested
that Horizon's chairman, Neal Elliott, speak directly to Mr.
Busby. NME understands that Mr. Busby spoke to Mr. Elliott,
assured Mr. Elliott that he would review any Horizon proposal
with his directors, but asked Mr. Elliott not to put anything in
writing.
On January 12 , 1995, a special meeting of Hillhaven's Board
of Directors was called for January 16, 1995, even though the
directors already had a regularly scheduled meeting set for later
that week. At the January 16 meeting, the Board of Directors
took action to implement the funding of a purported grantor trust
of Hillhaven established to fund certain employee benefit plans
of Hillhaven. To fund the trust, Hillhaven issued 4,200,000
shares of Common Stock. The funding of the trust placed
immediate voting rights to approximately 15% (on an undiluted
basis) of Hillhaven's voting stock in the hands of employees,
including members of senior management, even though such
employees have not yet earned all of those shares under the terms
of Hillhaven's various employee benefit plans. In addition, at
the January 16 meeting the Board of Directors amended Hillhaven's
Shareholder Rights Plan.
On January 25, 1995, after entering into the letter
agreement with NME described below, Horizon submitted a written
business combination proposal to Hillhaven (the "Transaction").
In the Transaction, shareholders of Hillhaven would receive $28
in value of shares of common stock of a newly formed holding
company ("Newco") for each outstanding share of Common Stock and
shareholders of Horizon would receive one share of Newco common
stock for each outstanding share of Horizon common stock. In
addition, as part of the Transaction, each outstanding share of
Hillhaven's Series C and Series D preferred stock would be
redeemed at $1,000 per share in cash, plus any accrued and unpaid
dividends, whether or not declared, to the date of redemption.
In light of Hillhaven's actions and in order to provide the
opportunity contained in the Transaction to Hillhaven and all of
its shareholders, NME entered into a letter agreement with
Horizon dated January 25, 1995 (the "Letter Agreement"). If
prior to consummating a Transaction, but within 12 months of the
date of the Letter Agreement, there is a merger, consolidation or
other transaction with any party other than Horizon (an "Other
Transaction") in which NME receives consideration for any of its
shares of Common Stock equal to or greater than $27.50 per share,
then Horizon shall be entitled to receive (and NME shall cause
Horizon to receive) upon consummation of an Other Transaction an
amount equal to the greater of (i) $5,000,000 or (ii) 50% of the
consideration received by NME in excess of $29 per share of
Common Stock. Horizon agreed in the Letter Agreement to actively
pursue the Transaction in good faith. The Letter Agreement also
provides that nothing therein shall be construed to impose any
requirement or restriction on NME with respect to its right to
acquire or dispose of any shares of Common Stock from or to any
party, or to vote any shares of Common Stock, and all decisions
with respect thereto shall be made by NME in its sole discretion.
At a meeting held on February 5, 1995, a "Special Committee"
of the Board of Directors of Hillhaven, which included all of the
members of the Board, including the members of Hillhaven's senior
management who are also directors, but which excluded two
directors who are current or former employees of NME, was formed.
At the February 5 meeting, the Special Committee rejected
Horizon's proposal, based in part upon the advice of Hillhaven's
investment banker that the consideration to be received by
Hillhaven's shareholders is inadequate from a financial point of
view. The Special Committee concluded that it is in the best
interests of Hillhaven, its shareholders, employees and customers
that Hillhaven remain independent and continue to pursue its
long-term business strategy. On February 6, 1995, Hillhaven sued
Horizon, seeking a declaratory judgment that, among other things,
the business combination proposed by Horizon is prohibited under
certain provisions of Nevada law. For additional information
about this action, see the discussion under "Certain Litigation"
below.
On February 15, 1995, NME filed suit against Hillhaven and
certain of its directors seeking declaratory and injunctive
relief and damages. For additional information about this
action, see the discussion under "Certain Litigation" below.
On February 28, 1995, Hillhaven announced that it had agreed
to acquire Nationwide Care, Inc. and certain related entities in
exchange for the issuance of 5,000,000 new shares of Common
Stock, subject to a potential adjustment of up to 500,000
additional shares of Common Stock if Hillhaven's average share
price prior to closing is below $24.
On March 7, 1995, PropCorp delivered a notice to Hillhaven
of its intention to present the Resolution for shareholder
approval at the Annual Meeting.
On March 7, 1995, Horizon sent a letter to Hillhaven
indicating that it was prepared to increase its offer to $31 in
value per share of Common Stock. As part of the merger, each
outstanding share of Hillhaven's Series C and Series D preferred
stock would be redeemed at $900 per share in cash, plus any
accrued and unpaid dividends, whether or not declared, to the
date of redemption. Horizon has indicated that its $31 in value
per share offer will expire on March 21, 1995. Horizon stated
that it is prepared to meet with Horizon and its advisors to
discuss the merger agreement and the strategic, operational and
other benefits that could be realized through the combination of
Hillhaven and Horizon.
On March 17, 1995, Horizon said in a press release that
it had sent Hillhaven information to provide further details of
its proposal. Horizon also said that it had sent Hillhaven's
investment bankers a financial analysis of the combined
companies.
Also on March 17, 1995, Guy Wyser-Pratte, president of
Wyser-Pratt & Co. and a Hillhaven shareholder, announced that he
will propose a nominee for election to Hillhaven's Board of
Directors at the Annual Meeting.
CERTAIN LITIGATION
The Nevada Litigation. On January 31, 1995, a purported class of
Hillhaven shareholders filed a complaint seeking declaratory and
injunctive relief against Hillhaven and its individuals directors
in the Nevada District Court for the County of Clark (the "First
Nevada State Court Action") styled, Robert Grayson and Frederick
Rand v. Bruce L. Busby, Christopher J. Marker, Maris Andersons,
Walter F. Beran, Peter de Wetter, Dinah Nemeroff, Jack O. Vance,
and Hillhaven Corporation. The Nevada State Court Action
alleges, among other things, that the Hillhaven Board of
Directors has breached its fiduciary duties to Hillhaven's
shareholders: (1) by amending its Shareholder Rights Plan in the
face of Horizon's offer to form a business combination with
Hillhaven; and (2) by failing to negotiate the possible
acquisition of Hillhaven.
On February 23, 1995, the Service Employees
International Union, a union allegedly representing 2,000
Hillhaven employees at approximately 40 Hillhaven nursing homes,
and Joann Sforza, an individual allegedly employed by Hillhaven,
moved to file a complaint in intervention in the First Nevada
State Court Action. On February 27, 1995, Hillhaven, Bruce L.
Busby and Christopher J. Marker filed their answers to the First
Nevada State Court Action.
On February 23, 1995, a second purported class of
Hillhaven shareholders filed a "First Amended Class Action
Complaint For Declaratory And Injunctive Relief" against
Hillhaven in the Nevada District Court for the County of Clark,
styled Anne Ross v. The Hillhaven Corporation, Bruce L. Busby,
Christopher J. Marker, Walter F. Beran, Dinah Nemeroff and Jack
O. Vance, (the "Second Nevada State Court Action"). This action
reiterates and updates many of the claims made in the First
Nevada State Court Action.
On or about March 7, 1995, the plaintiffs in the First
Nevada State Court Action and the Second Nevada State Court
Action filed a motion to dismiss without prejudice in light of
the complaint filed by the plaintiffs in California on March 2,
1995 (see "The California Litigation"). On March 15, 1995, the
First Nevada Action and the Second Nevada Action were
consolidated. The motion to dismiss both cases is scheduled to
be heard on April 3, 1995.
On February 6, 1995, Hillhaven filed a complaint
against Horizon in the United States District Court for the
District of Nevada styled The Hillhaven Corporation v. Horizon
Healthcare Corporation, (the "Nevada District Court Action").
The Nevada District Court Action seeks a declaratory judgment
that, among other things, the business combination that Horizon
has proposed with Hillhaven is prohibited under the provisions of
the Nevada Revised Statutes regarding Combinations With
Interested Shareholders (NRS SECTIONSECTION 78.411 through 78.444).
On February 27, 1995, Horizon answered this complaint
and counterclaimed against Hillhaven for declaratory relief,
injunctive relief and damages, alleging, among other things, that
the Hillhaven Board of Directors has breached its fiduciary
duties to Hillhaven's shareholders by: (1) taking improper
entrenching actions to defeat the Horizon offer; (2) manipulating
Hillhaven corporate machinery through entrenchment tactics
designed to grant Hillhaven's management additional share voting
power; and (3) breaching its duty of candor by disseminating a
press release which contained false and misleading statements and
material omissions concerning the Horizon offer and the process
instituted by Hillhaven to review the Horizon offer.
The California Litigation. On February 15, 1995, NME filed a
complaint seeking declaratory and injunctive relief in the
California Superior Court for the County of Los Angeles styled
National Medical Enterprises, Inc. v. The Hillhaven Corporation,
Bruce L. Busby, Christopher J. Marker and Does 1-25 (the
"California Action"). The California Action alleges, among other
things, that the named defendants have breached their fiduciary
duties to NME and its fellow Hillhaven shareholders and
interfered with NME's prospective economic advantage by
undertaking a series of acts designed to: (1) entrench
themselves; (2) dilute NME's equity interest in Hillhaven; and
(3) deprive all of Hillhaven's shareholders the opportunity to
consider the friendly acquisition proposal made by Horizon to
Hillhaven. Hillhaven's response to the California Action is due
March 20, 1995. On February 24, 1995, Hillhaven moved to stay
the California Action. The Court has set a hearing for March 24 ,
1995 on the motion.
On March 7, 1995, the Service Employees International
Union and Joann Sforza moved to file a complaint in intervention
in the California Action.
On or about March 2, 1995, a purported class action
styled, Anne Ross, Robert Grayson, Frederick Rand and Victoria
Shaev v. The Hillhaven Corporation, Bruce Busby, Christopher
Marker, Walter Beran, Dinah Nemeroff, Jack Vance and Donald
Burns, was filed in the California Superior Court for the County
of Los Angeles. This action reiterates the claims made in the
First Nevada State Court Action and the Second Nevada State Court
Action. On or about March 9, 1995, this action was removed to
the United States District Court for the Central District of
California .
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone
or facsimile and in person. Solicitations may be made by
directors, officers, investor relations personnel and other
employees of NME, none of whom will receive additional
compensation for such solicitations. NME may request banks,
brokerage houses and other custodians, nominees and fiduciaries
to forward all of its solicitation materials to the beneficial
owners of the shares of Common Stock they hold of record. NME
will reimburse these record holders for customary clerical and
mailing expenses incurred by them in forwarding these materials
to their customers.
NME has retained MacKenzie Partners, Inc. ("MacKenzie") for
solicitation and advisory services in connection with these
solicitations, for which MacKenzie has received $15,000 and is to
receive an additional $35,000 after completion of the
solicitations of proxies for the Annual Meeting, together with
reimbursement for its reasonable out-of-pocket expenses. NME has
also agreed to indemnify MacKenzie against certain liabilities
and expenses, including liabilities and expenses under the
Federal securities laws. MacKenzie will solicit proxies for the
Annual Meeting from individuals, brokers, banks, bank nominees
and other institutional holders. It is anticipated that
MacKenzie will employ approximately 35 persons to solicit
shareholders for the Annual Meeting.
NME has engaged Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") to act as its financial advisor for a period
of 24 months for an initial retainer of $250,000 pursuant to an
engagement letter dated July 28, 1993, as amended. No specific
arrangements have been made between DLJ and NME with respect to
fees in connection with the solicitation of proxies from
shareholders of Hillhaven and related matters. DLJ and NME
anticipate, however, that any compensation will be usual and
customary for similar transactions in which DLJ or other
investment banks of national standing are involved. NME has
agreed in the engagement letter that DLJ will be reimbursed from
time to time for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of counsel) incurred by DLJ and
NME will indemnify DLJ and certain related persons against
certain liabilities and expenses in connection with its
engagement, including certain liabilities under the Federal
securities laws. In connection with DLJ's engagement as
financial advisor, NME anticipates that certain employees of DLJ
may communicate in person, by telephone or otherwise with
institutions, brokers or other persons who are shareholders of
Hillhaven for the purpose of assisting in the solicitation of
proxies for the Annual Meeting. DLJ has rendered various
investment banking and other advisory services to NME and its
affiliates in the past and is expected to continue to render such
services, for which it has received and will continue to receive
customary compensation.
NME has been informed that DLJ is acting as financial
advisor to Horizon in connection with its merger proposal to
Hillhaven. NME understands that DLJ has established a screening
process in connection with its engagement as financial advisor to
each of NME and Horizon in regard to Hillhaven. NME has not been
informed of the terms of DLJ's engagement as financial advisor to
Horizon.
The entire expense of soliciting proxies for the Annual
Meeting is being borne by NME. NME will not seek reimbursement
for such expenses from Hillhaven. Costs incidental to these
solicitations of proxies include expenditures for printing,
postage, legal and related expenses and are expected to be
approximately $250,000. Total costs incurred to date in
furtherance of or in connection with these solicitations of
proxies are approximately $50,000.
CERTAIN INFORMATION ABOUT HILLHAVEN
Hillhaven is a Nevada corporation with its principal
executive offices at 1148 Broadway Plaza, Tacoma, Washington
98402. The telephone number of Hillhaven is (206) 572-4901.
Hillhaven is subject to the informational requirements of
the Securities Exchange Act of 1943, as amended, and, in
accordance therewith, files reports and other information with
the Securities and Exchange Commission ("SEC"). Reports, proxy
statements and other information filed by Hillhaven may be
inspected and copied at the public reference facilities
maintained by the SEC in Washington, D.C. at 450 Fifth Street,
N.W., Room 1024, and at the following Regional Offices of the
SEC: New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048; and Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section
of the SEC at prescribed rates. Requests should be directed to
the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be inspected at
the library of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
A shareholder proposal to be presented at the 1996 annual
meeting of shareholders of Hillhaven must be received at
Hillhaven's principal executive offices not less than 120
calendar days in advance of the date Hillhaven's proxy statement
is released to shareholders in connection with the Annual
Meeting.
INFORMATION ABOUT NME,
PROPCORP, HOLDING AND PROPINC
The principal business of NME is the operation of domestic
and international general hospitals. The principal business of
PropCorp is its investments in the healthcare industry. NME owns
all of the outstanding stock of PropCorp. The principal
business of Holding is its investments in the healthcare
industry. PropCorp owns all of the outstanding stock of Holding.
The principal business of PropInc is its investments in the
healthcare industry. PropCorp and Holding own all of the
outstanding stock of PropInc. The principal address of each of
NME, PropCorp, Holding and PropInc (the "NME Entities") is 2700
Colorado Avenue, Santa Monica, California 90404. Certain
information about the directors and executive officers of the NME
Entities and certain employees and other representatives of the
NME Entities who may also assist MacKenzie in soliciting proxies
is set forth in the attached Schedule I. Schedule II sets forth
certain information relating to securities owned by the NME
Entities and their directors and executive officers, such
employees and other representatives. Schedule III sets forth
certain information, as made available in public documents,
regarding shares of Common Stock held by Hillhaven's management.
PLEASE INDICATE YOUR SUPPORT FOR THE RESOLUTION BY
COMPLETING, SIGNING AND DATING THE ENCLOSED BLUE PROXY CARD AND
RETURNING PROMPTLY TO NME, C/O MACKENZIE, IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS NECESSARY IF THE ENVELOPE IS MAILED IN
THE UNITED STATES.
NATIONAL MEDICAL ENTERPRISES, INC.
NME PROPERTIES CORP.
NME PROPERTY HOLDING CO., INC.
NME PROPERTIES, INC.
March , 1995
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF
NME, PROPCORP, HOLDING AND PROPINC
AND CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES OF
NME, PROPCORP, HOLDING AND PROPINC
The following table sets forth the name and the present
principal occupation or employment, and the name,
principal business and address of any corporation or
other organization in which such employment is carried
on, of the persons who may be deemed to be participants
on behalf of National Medical Enterprises, Inc. ("NME"),
NME Properties Corp. ("PropCorp"), NME Property Holding
Co., Inc. ("Holding"), and NME Properties, Inc.
("PropInc"), including the executive officers and
directors thereof, and certain employees and other
representatives of NME, PropCorp, Holding and PropInc who
may also solicit proxies from Hillhaven shareholders.
Unless otherwise indicated, the principal business
address of each director, executive officer, employee or
representative is 2700 Colorado Avenue, Santa Monica,
California 90404. Directors are indicated with a single
asterisk.
DIRECTORS AND EXECUTIVE OFFICERS OF
NATIONAL MEDICAL ENTERPRISES, INC.
Name and Principal Present Office or Other
Business Address Principal Occupation or Employment
Jeffrey C. Barbakow* Chairman of the Board and Chief
Executive Officer
Michael H. Focht, Sr.* President and Chief Operating Officer
Maris Andersons Executive Vice President and Treasurer
Scott M. Brown Senior Vice President, General Counsel
and Secretary
Raymond L. Mathiasen Senior Vice President and Chief Financial
Officer
Barry P. Schochet Executive Vice President and President -
Hospital Division
Bernice B. Bratter* Executive Director, Senior Health and Peer
2125 Arizona Counseling
Santa Monica, California 90404
Maurice J. DeWald* Chairman and Chief Executive Officer,
19100 Von Karman Avenue, Verity Financial Group, Inc.
Suite 350
Irvine, California 92715
Peter de Wetter* Executive Vice President until his
retirement in May 1989
Edward Egbert, M.D.* Physician in private practice until his
retirement in January 1994
Raymond A. Hay* Chairman and Chief Executive Officer,
5956 Sherry Lane, Suite 902 Aberdeen Associates
Dallas, Texas 75225
Lester B. Korn* Chairman and Chief Executive Officer,
1800 Century Park East, Korn Tuttle Capital Group
Suite 1100
Los Angeles, California 90067
James P. Livingston* Private Investor; Executive Vice President
until his retirement in June 1986
Richard S. Schweiker* President, American Council of Life
Insurance until his retirement in December
1994
DIRECTORS AND EXECUTIVE OFFICERS OF
NME PROPERTIES CORP.
Name and Principal Present Office or Other
Business Address Principal Occupation or Employment
Raymond L. Mathiasen President; Senior Vice President and Chief
Financial Officer, NME
Maris Andersons Senior Vice President and Treasurer;
Executive Vice President and
Treasurer, NME
Scott M. Brown* Vice President and Secretary; Senior
Vice President, General Counsel and
Secretary, NME
DIRECTORS AND EXECUTIVE OFFICERS OF
NME PROPERTY HOLDING CO., INC.
Name and Principal Present Office or Other
Business Address Principal Occupation or Employment
Raymond L. Mathiasen President; Senior Vice President and Chief
Financial Officer, NME
Maris Andersons Senior Vice President and Treasurer;
Executive Vice President and
Treasurer, NME
Scott M. Brown* Vice President and Secretary; Senior
Vice President, General Counsel and
Secretary, NME
DIRECTORS AND EXECUTIVE OFFICERS OF
NME PROPERTIES, INC.
Name and Principal Present Office or Other
Business Address Principal Occupation or Employment
Raymond L. Mathiasen President; Senior Vice President and Chief
Financial Officer, NME
Maris Andersons Senior Vice President and Treasurer;
Executive Vice President and
Treasurer, NME
Scott M. Brown* Vice President and Secretary; Senior
Vice President, General Counsel and
Secretary, NME
CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES OF
NME, PROPCORP, HOLDING AND PROPINC
WHO MAY ALSO SOLICIT PROXIES
Name and Principal Present Office or Other
Business Address Principal Occupation or Employment
Christi R. Sulzbach Senior Vice President, Public Affairs, NME
Diana L. Takvam Vice President, Communications, NME
Paul J. Russell Vice President, Investor Relations, NME
David L. Dennis Managing Director, DLJ
Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ")
2121 Avenue of the Stars
Los Angeles, California 90067
Lawrence N. Lavine Managing Director, DLJ
Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Michael J. McCartney Associate, DLJ
Donaldson, Lufkin & Jenrette
Securities Corporation
2121 Avenue of the Stars
Los Angeles, California 90067
SCHEDULE II
SHARES HELD BY NME, PROPCORP, HOLDING AND PROPINC, THEIR
DIRECTORS AND EXECUTIVE OFFICERS, CERTAIN EMPLOYEES AND OTHER
REPRESENTATIVES OF NME, PROPCORP, HOLDING AND PROPINC
The following entities own the shares of Common
Stock indicated below:
Percent of
Shares of Outstanding Shares
Name Common Stock Common Stock1
PropInc 2,877,947 8.8
Holding2 2,877,947 8.8
PropCorp2,3 8,878,147 27.0
NME4 8,878,147 27.0
PropCorp may be deemed to be the beneficial owner of
the 35,000 shares of Series C Preferred Stock of
Hillhaven and the 63,402 shares of Series D Preferred
Stock of Hillhaven owned by it. PropCorp owns all of the
outstanding shares of the Series C and Series D Preferred
Stock of Hillhaven.
_______________________
1 Based upon 32,824,463 shares of Common Stock outstanding.
2 PropCorp and Holding, as the sole stockholders of
PropInc, may be deemed, for the purposes of Rule 13d-3
under the Securities Act of 1934, as amended (the "Act"),
to beneficially own indirectly the 2,877,947 shares of
Common Stock owned by PropInc.
3 PropCorp may be deemed to be the beneficial owner of the
6,000,200 shares of Common Stock owned by it. PropCorp
also may be deemed, for purposes of Rule 13d-3 under the
Act, to beneficially own indirectly the 2,877,947 shares
of Common Stock owned by PropInc, for an aggregate of
8,878,147 shares of Common Stock.
4 NME, as the sole stockholder of PropCorp, may be deemed,
for purposes of Rule 13d-3 under the Act, to beneficially
own indirectly the 2,877,947 shares of Common Stock owned
by PropInc and the 6,000,200 shares of Common Stock
owned by PropCorp, for an aggregate of 8,878,147 shares
of Common Stock.
The following directors or executive officers,
employees or other representatives of NME, PropCorp,
Holding and PropInc named in Schedule I own the
securities of Hillhaven indicated below:
Options
Shares of to Purchase Percent of
Name Common Stock Common Stock Common Stock1
Jeffrey C., Barbakow2 1,960 0 *3
Michael H. Focht, Sr. 0 0 *
Maris Andersons 8,700 2,000 *
Barry P. Schochet 0 0 *
Raymond L. Mathiasen 10,500 0 *
Scott M. Brown 0 0 *
Bernice B. Bratter 0 0 *
Maurice J. DeWald 0 0 *
Peter de Wetter 5,000 10,000 *
Edward Egbert 3,000 0 *
Raymond A. Hay 40 0 *
Lester B. Korn 6,000 8,000 *
James P. Livingston 10,000 0 *
Richard S. Schweiker 60 0 *
Christi R. Sulzbach 0 0 *
Paul J. Russell 2,400 0 *
Diana N. Takvam 0 0 *
David L. Dennis 2,000 0 *
Lawrence N. Lavine 0 0 *
Michael J. McCartney 0 0 *
Directors and executive
officers as a group 45,260 20,000 *
__________________
1 Assumes exercise of all options. Based upon 32,824,463
shares of Common Stock outstanding.
2 Mr. Barbakow holds 960 shares of Hillhaven stock directly, and
1,000 shares as the custodian for his children.
3 Less than one percent.
In the ordinary course of its business, DLJ
engages in securities trading and brokerage activities
and may trade or otherwise effect transactions in debt or
equity securities of Hillhaven for its own account and
the accounts of its customers and, accordingly, may at
any time hold a long or short position in such
securities. As of March 17, 1995, DLJ held a net long
position of less than 1% of the shares of Common Stock
outstanding.
SCHEDULE III
SHARES HELD BY HILLHAVEN'S MANAGEMENT
Based upon Hillhaven's Proxy Statement dated
August 24, 1994, as of August 8, 1994, the directors and
executive officers of Hillhaven beneficially owned
(within the meaning of the rules under Section 13(d) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), 1,359,755 shares of Hillhaven common
stock (or approximately 4.90% of the shares reported as
outstanding on such date).
In addition, Hillhaven has issued 4,200,000
shares of Common Stock to a grantor trust established to
fund certain employee benefit plans of Hillhaven. NME
understands that Hillhaven employees, including members
of Hillhaven's senior management, are beneficiaries of,
and have certain voting and tender rights with respect to
certain shares held by, such grantor trust. However,
Hillhaven has not disclosed the number of shares which
are held by such trust on behalf of members of Hillhaven
senior management.
To the knowledge of NME, PropCorp, Holding and
PropInc, based on a review of documents on file as of
March 6, 1995 with the Securities and Exchange Commission
under the Exchange Act, NME, Wachovia Corporation and
Wellington Management Company each beneficially owns 5%
or more of the outstanding shares of Common Stock.
Although NME, PropCorp, Holding and PropInc do
not have any information that would indicate that any
information contained in this Proxy Statement that has
been taken from the Hillhaven Proxy Statement dated
August 24, 1994 or any other document on file with the
Securities and Exchange Commission is inaccurate or
incomplete, NME, PropCorp, Holding and PropInc take no
responsibility for the accuracy or completeness of such
information.
I M P O R T A N T
Your proxy is important. No matter how many shares
of Common Stock you own, please give NME your proxy FOR
the Resolution by:
SIGNING the enclosed BLUE proxy card,
DATING the enclosed BLUE proxy card and
MAILING the enclosed BLUE proxy card TODAY in the
envelope provided (no postage is required if mailed
in the United States).
If you have already submitted a proxy to Hillhaven
for the Annual Meeting, you may change your vote to a
vote FOR the Resolution by signing, dating and returning
the enclosed BLUE proxy card for the meeting, which must
be dated after any proxy you may have submitted to
Hillhaven. Only your latest dated proxy for the Annual
Meeting will count at such meeting.
If you have any questions, or require any additional
information concerning this Proxy Statement, please
contact MacKenzie Partners, Inc. at the addresses set
forth below. IF ANY OF YOUR SHARES OF COMMON STOCK ARE
HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK NOMINEE
OR OTHER INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND
ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS.
ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR
YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE BLUE
PROXY CARD.
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
Preliminary Proxy Material
THE HILLHAVEN CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF
NATIONAL MEDICAL ENTERPRISES, INC.
The undersigned hereby appoints Jeffrey C. Barbakow and
Scott M. Brown , or any one of them, each with full power of
substitution, as the lawful proxies of the undersigned and hereby
authorizes such persons to represent and to vote as designated
below all shares of common stock of The Hillhaven Corporation
which the undersigned would be entitled to vote if personally
present at the 1995 Annual Meeting of Stockholders, and at any
adjournments or postponements thereof on the item set forth below
and on such other business as may properly come before the
meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS GIVEN WHEN THE
DULY AUTHORIZED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED
"FOR" IN ITEM 1. THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT PROPERLY COME
BEFORE THE MEETING.
NATIONAL MEDICAL ENTERPRISES, INC. UNANIMOUSLY RECOMMENDS A
VOTE "FOR" IN ITEM 1.
Item 1. Proposal to adopt a resolution supporting the
immediate sale or merger of The Hillhaven
Corporation to maximize the value of all
shareholders' investment therein
( ) FOR ( ) AGAINST ( ) ABSTAIN
(To be signed on the reverse side)
The undersigned hereby acknowledges receipt of the Proxy
Statement of National Medical Enterprises, Inc. The undersigned
hereby revokes any proxies heretofore given by the undersigned.
BY SIGNING, DATING AND RETURNING THIS PROXY CARD, SHAREHOLDERS
WILL BE GIVING UP THEIR RIGHT TO VOTE FOR THE ELECTION OF
DIRECTORS AND ANY OTHER PROPOSAL TO BE BROUGHT BEFORE THE ANNUAL
MEETING.
THIS PROXY SHALL CONTINUE IN FORCE UNTIL AUGUST 31, 1996.
Dated: ____________________, 1995
_____________________________________
Signature of Stockholder
_____________________________________
Signature of Stockholder
(if held jointly)
Please mark, date and sign as your
name appears to the left and return
in the enclosed envelope. If
acting as an executor,
administrator, trustee, guardian,
etc., you should so indicate when
signing. If a corporation, please
sign the full corporate name, by
duly authorized officer.
IMPORTANT
PLEASE SIGN, DATE AND RETURN THIS PROXY
IN THE REPLY ENVELOPE PROVIDED
