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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
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Karrington Health, Inc.
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(Name of Issuer)
Common Shares, Without Par Value
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(Title of Class of Securities)
485762108
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(CUSIP Number)
Thomas B. Newell, Esq.
Executive Vice President and General Counsel
Sunrise Assisted Living, Inc.
9401 Lee Highway, Suite 300
Fairfax, VA 22031
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
October 18, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
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CUSIP No. 485762108 Page 2 of 9 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Sunrise Assisted Living, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF ---------------------------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 2,975,000
REPORTING ---------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
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10 SHARED DISPOSITIVE POWER
2,975,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,975,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
43.5%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 485762108 Page 3 of 9 Pages
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ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this Statement relates
is the common shares, without par value (the "Common Stock"), of Karrington
Health, Inc., an Ohio corporation ("Karrington"). Karrington's principal
executive offices are located at 919 Old Henderson Road, Columbus, Ohio 43220.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is filed by Sunrise Assisted Living, Inc., a
Delaware corporation ("Sunrise"), whose principal business address is 9401 Lee
Highway, Suite 300, Fairfax, VA 22031. Sunrise is a leading provider of
assisted living services for the elderly. During the past five years, Sunrise
has not been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors), nor has it been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Set forth on Annex A hereto are the names, principal
occupations and business addresses of the executive officers and directors of
Sunrise. Each executive officer and director of Sunrise is a citizen of the
United States. During the past five years, none of the executive officers or
directors has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or has been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Shareholder Agreements described in Item 4 of this
Statement were entered into by Sunrise and the Karrington affiliates listed in
Item 4 (each, a "Karrington Shareholder") as a condition to Sunrise entering
into the Merger Agreement described in Item 4. Except as set forth in the
preceding sentence, Sunrise has paid no consideration in connection with
entering into the Shareholder Agreements.
ITEM 4. PURPOSE OF TRANSACTION
On October 18, 1998, Sunrise, Buckeye Merger Corporation, an
Ohio corporation and a newly-formed wholly owned subsidiary of Sunrise ("Merger
Sub"), and Karrington entered into an Agreement of Merger (the "Merger
Agreement"), providing for the merger (the "Merger") of Merger Sub with and
into Karrington, with Karrington surviving the Merger and becoming a wholly
owned subsidiary of Sunrise. Pursuant to the Merger Agreement, at the
effective time of the Merger (the "Effective Time"), each share of Karrington
Common Stock outstanding immediately prior to the Effective Time will be
automatically converted, subject to certain exceptions, into the right to
receive (i) a number of shares of Sunrise common stock, par value $.01 per
share ("Sunrise Common Stock"), equal to the lesser of (A) 0.3939; or (B) the
number obtained by dividing $13.00 by the Average Trading Price of Sunrise
Common Stock (as defined in the Merger Agreement) but in no event less than
0.3333, plus (ii) the associated right to purchase shares of Series C Junior
Participating Preferred Stock of Sunrise under its Stockholder Rights
Agreement. Cash will be paid in lieu of fractional shares. The Merger is
subject to certain conditions, including receipt of required regulatory
approvals and approval of the Merger Agreement by the shareholders of
Karrington. At the Effective Time, in accordance with the Merger Agreement,
(i) the Articles of Incorporation and Code of Regulations of Merger Sub shall
be the Articles of Incorporation and Code of Regulations of Karrington, as the
surviving corporation in the Merger and (ii) the directors and executive
officers of Karrington, as the surviving corporation in the Merger, will
consist of: Paul J. Klaassen, Chairman and Chief Executive Officer; David W.
Faeder, President, Chief Financial Officer, Treasurer, and a director; Thomas
B. Newell, Executive Vice President, Secretary and a director; and Richard R.
Slager, Executive Vice President and a director. It is anticipated that,
following the consummation of the Merger, the Karrington Common Stock will be
delisted from the NASDAQ National Market System and the Karrington Common Stock
will be terminated from registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended.
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CUSIP No. 485762108 Page 4 of 9 Pages
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As of October 18, 1998, Karrington Shareholders who
collectively own 2,975,000, or approximately 43.5%, of the outstanding shares
of Karrington Common Stock also entered into Shareholder Agreements (each, a
"Karrington Shareholder Agreement") with Sunrise, pursuant to which, among
other things, each Karrington Shareholder appointed Sunrise as such Karrington
Shareholder's lawful proxy and attorney-in-fact to vote such Karrington
Shareholder's Karrington Common Stock in favor of the approval of the Merger as
set forth in the Merger Agreement and against any "Third Party Transaction" (as
such term is defined in the Merger Agreement). The Karrington Shareholders who
executed and delivered Shareholder Agreements are: JMAC, Inc. (2,250,000
shares); Richard R. Slager (525,000 shares) and Kristine W. Slager (200,000
shares).
Concurrently with the execution and delivery of the Merger
Agreement, Sunrise and Karrington also entered into an Option Agreement (the
"Option Agreement"), pursuant to which Karrington granted to Sunrise the option
to acquire 676,903 shares of Karrington Common Stock (subject to adjustment
upon the happening of certain events), representing approximately 9.9% of the
outstanding Karrington Common Stock, at an exercise price of $9.00 per share
(the "Karrington Stock Option"). The Karrington Stock Option is exercisable
by Sunrise, in whole or in part, at any time or from time to time prior to the
termination of the Karrington Stock Option if during the term of the Karrington
Stock Option a proposal for a "Third Party Transaction" (as defined in the
Merger Agreement) is announced or received by Karrington. Notwithstanding the
foregoing, the Karrington Stock Option may not be exercised in whole or in part
with respect to that number of shares of Karrington Common Stock that would
result in Sunrise realizing upon exercise thereof, taking into account all
prior exercises of the Karrington Stock Option, an Aggregate Spread Value (as
defined in the Option Agreement) in excess of $5.0 million. Under certain
circumstances specified in the Option Agreement, Sunrise has the right to
require Karrington to pay Sunrise the Put Price (as defined in the Option
Agreement) of the Karrington Stock Option. Notwithstanding the foregoing, in
no event shall the aggregate Put Price, together with the Aggregate Spread
Value of any shares of Karrington Common Stock obtained upon exercise of the
Karrington Stock Option, exceed $5.0 million.
Pursuant to the Merger Agreement, Sunrise also agreed to make
available promptly to Karrington a fully secured line of credit in the
principal amount of up to $10 million, subject to good faith negotiation,
execution and delivery of mutually acceptable loan documentation.
On October 16, 1998, Sunrise entered into an agreement with
Meditrust Corporation to acquire four separate first trust mortgages secured by
Karrington properties and six assisted living properties currently leased to
Karrington (the "Meditrust Interests") for approximately $63.7 million.
Closing of the acquisition of the Meditrust Interests is scheduled to occur by
December 2, 1998, subject to the satisfaction of certain conditions, such as
examination of titles and completion of transfer documents.
Copies of the Merger Agreement, the form of the Shareholder
Agreement and the Option Agreement are incorporated by reference as Exhibits
to this Statement. The foregoing descriptions are qualified in their entirety
by reference to such Exhibits.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) - (c) By reason of the Shareholder Agreements, Sunrise
may be deemed to be the beneficial owner of, in
the aggregate, 2,975,000 shares of Karrington
Common Stock (the "Shares") and may be deemed to
have shared power to vote or direct the vote of
the Shares or shared power to dispose or direct
the disposition of the Shares. The Shares
represent approximately 43.5% of the outstanding
shares of Karrington Common Stock, based upon the
6,837,400 shares of Karrington Common Stock issued
and outstanding as of October 16, 1998. Except as
described in this Schedule 13D, neither Sunrise
nor, to the best knowledge of Sunrise, any of the
persons listed in Item 2 above beneficially owns
any shares of Karrington Common Stock. Except as
described in this Schedule 13D, neither Sunrise
nor, to the best of its knowledge, any of
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CUSIP No. 485762108 Page 5 of 9 Pages
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the persons listed in Item 2 above has effected
any transactions in Karrington Common Stock during
the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
As described in Item 4, Sunrise presently anticipates that it
will acquire the entire equity interest in Karrington pursuant to the Merger
Agreement. In addition, each outstanding stock option under the Karrington
stock option plan will be assumed by Sunrise in the manner provided in the
Merger Agreement.
Other than the Merger Agreement, the Shareholder Agreements
and the Option Agreement described in Item 4 and incorporated by reference as
Exhibits to this Statement, to the best knowledge of Sunrise, there are no
contracts, understandings or relationships (legal or otherwise) between the
persons listed in Item 2 of this Statement and any person with respect to
Karrington Common Stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(1) Agreement of Merger dated as of October 18, 1998,
among Sunrise, Merger Sub and Karrington
(Incorporated by reference to Exhibit 2.1 of
Sunrise's Current Report on Form 8-K (filed on
October 28, 1998)).
(2) Option Agreement dated October 18, 1998 between
Sunrise and Karrington (Incorporated by reference to
Exhibit 99.1 of Sunrise's Current Report on Form 8-K
filed on October 28, 1998)).
(3) Form of Shareholder Agreement with Karrington
affiliates (Incorporated by Reference to Exhibit 99.2
of Sunrise's Current Report on Form 8-K (filed on
October 28, 1998)).
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CUSIP No. 485762108 Page 6 of 9 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
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SUNRISE ASSISTED LIVING, INC.
Date: October 28, 1998 By: /s/ DAVID W. FAEDER
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David W. Faeder
President and Chief Financial Officer
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CUSIP No. 485762108 Page 7 of 9 Pages
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ANNEX A TO SCHEDULE 13D OF
SUNRISE ASSISTED LIVING, INC.
DATED OCTOBER 28, 1998
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EXECUTIVE OFFICERS OF SUNRISE:
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Name Position With Sunrise
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Paul J. Klaassen (1) Chairman of the Board and
Chief Executive Officer
Teresa M. Klaassen (1) Executive Vice President and
Secretary
David W. Faeder (1) President and Chief Financial
Officer
Thomas B. Newell (1) Executive Vice President and
General Counsel of Sunrise and President
of Sunrise Development, Inc.
Brian C. Swinton (1) Executive Vice President,
Sales and Marketing
Tiffany Tomasso (1) Executive Vice President,
Operations
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(1) The business address of these executive officers is Sunrise Assisted
Living, Inc., 9401 Lee Highway, Suite 300, Fairfax, Virginia 22031.
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DIRECTORS OF SUNRISE:
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Name Principal Occupation, Address of Employer and
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Business Address of Director
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Ronald V. Aprahamian (1) Sunrise Consultant
David G. Bradley (2) Chairman and owner of The Advisory Board
Company, a 750-person think tank and for-profit
membership association
Thomas J. Donohue (3) President and Chief Executive Officer of the
U.S. Chamber of Commerce
Richard A. Doppelt (4) Director of Allstate Private Equity, a division
of Allstate Insurance Company
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CUSIP No. 485762108 Page 8 of 9 Pages
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Paul J. Klaassen (1) Chairman of the Board and Chief Executive
Officer
Teresa M. Klaassen (1) Executive Vice President and Secretary
David W. Faeder (1) President and Chief Financial Officer
Scott F. Meadow (5) Vice President of The Sprout Group, the venture
capital division of DLJ Capital Corporation
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(1) The business address of the director is Sunrise Assisted Living, Inc.,
9401 Lee Highway, Suite 300, Fairfax, Virginia 22031.
(2) The business address of the director is The Advisory Board Company,
The Watergate, 600 New Hampshire Avenue, N.W., Washington, D.C. 20037.
(3) The business address of the director is U.S. Chamber of Commerce, 1615
H Street, N.W., Washington, D.C. 20062.
(4) The business address of the director is Allstate Private Equity, 3075
Sanders Road, Suite G50, Northbrook, Illinois 60062.
(5) The business address of the director is The Sprout Group, 277 Park
Avenue, New York, New York 10172.
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CUSIP No. 485762108 Page 9 of 9 Pages
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EXHIBIT INDEX
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Exhibit No. Description
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(1) Agreement of Merger dated as of October 18, 1998, among Sunrise, Merger Sub and Karrington (Incorporated
by reference to Exhibit 2.1 of Sunrise's Current Report on Form 8-K (filed on October 28, 1998)).
(2) Option Agreement dated October 18, 1998 between Sunrise and Karrington (Incorporated by reference to
Exhibit 99.1 of Sunrise's Current Report on Form 8-K (filed on October 28, 1998)).
(3) Form of Shareholder Agreement with Karrington affiliates (Incorporated by reference to Exhibit 99.1 of
Sunrise's Current Report on Form 8-K (filed on October 28, 1998)).
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