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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13D-1(A) AND
AMENDMENTS THERETO FILED PURSUANT TO 13D-2(A)
(AMENDMENT NO. _____)/1/
MARINER HEALTH GROUP, INC.
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(Name of Issuer)
Common Stock, $.01 Par Value Per Share
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(Title of Class of Securities)
68-45J-109
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(CUSIP Number)
Susan Thomas Whittle, Esq.
Senior Vice President, General Counsel and Secretary
Paragon Health Network, Inc.
One Ravinia Drive, Suite 1500, Atlanta, Georgia 30346
(770) 393-0199
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 13, 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 Rule 13d-1(e), 13d-1(f) or 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 Rule 13d-7(b) for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 13 Pages)
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/1/ 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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CUSIP NO. 68-45J-109 13D PAGE 2 OF 13 PAGES
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SCHEDULE 13D
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1 NAME OF REPORTING PERSON
Paragon Health Network, Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
74-2012902
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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*
OO
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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
State of Delaware
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7 SOLE VOTING POWER
SHARES 5,886,201 **
BENEFICIALLY -----------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH - 0 -
REPORTING -----------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 5,886,201 **
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,886,201 **
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [X]
EXCLUDES CERTAIN SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9% of the issuer's currently outstanding stock and 16.6%
after giving effect to the exercise of the option described
herein
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14 TYPE OF REPORTING PERSON *
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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** Acquisition of such shares is conditioned upon the occurrence of certain
events specified in a Company Stock Option Agreement dated as of April 13,
1998 and incorporated by reference as Exhibit 99.2 to this Schedule 13D.
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CUSIP NO. 68-45J-109 13D PAGE 3 OF 13 PAGES
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Neither the filing of this statement on Schedule 13D nor any of its
contents shall be deemed to constitute an admission by Paragon Health Network,
Inc. that it is the beneficial owner of any of the Common Stock referred to
herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Act"), or for any other purpose, and such beneficial ownership is
expressly disclaimed.
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the Common Stock (the "Mariner
Common Stock"), $.01 par value per share, of Mariner Health Group, Inc., a
Delaware corporation ("Mariner"). The principal executive offices of the Issuer
are located at 1881 Worcester Road, Framingham, Massachusetts 01701.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing this statement is Paragon Health Network,
Inc., a Delaware corporation ("Paragon").
(b) The address of the principal office and principal place of business of
Paragon is One Ravinia Drive, Suite 1500, Atlanta, Georgia 30346.
(c) The principal business of Paragon is providing post-acute healthcare
services, encompassing skilled nursing, sub-acute and medically complex care, as
well as a variety of related ancillary health services.
(d) Set forth in Schedule I is the (i) name, (ii) residence or business
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address, (iii) present principal occupation or employment, and (iv) name,
principal business and address of any corporation or other organization in which
such employment is conducted of each of Paragon's directors and executive
officers as of the date hereof. Each such person listed on Schedule I is a
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citizen of the United States. Apollo Management, L.P. is the beneficial owner of
17,777,778 shares of (or approximately 43% of the outstanding) common stock,
$.01 par value per share, of Paragon and currently has the right to nominate six
of the eleven directors of Paragon. For further information, see the statement
on Schedule 13D, as amended, filed by Apollo Management, L.P. and certain other
filing persons named therein. During the past five years, neither Paragon nor,
to Paragon's knowledge, any person named in Schedule I to this Schedule 13D, has
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been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, neither Paragon nor, to Paragon's
knowledge, any person named in Schedule I to this Schedule 13D, was a party to a
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civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person 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.
(f) See (d) above.
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CUSIP NO. 68-45J-109 13D PAGE 4 OF 13 PAGES
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ITEM 3. SOURCE AND AMOUNT OF FUNDS.
Pursuant to an Agreement and Plan of Merger dated as of April 13, 1998 (the
"Merger Agreement") among Paragon, Mariner and Paragon Acquisition Sub, Inc.
("Merger Sub"), and subject to the conditions set forth therein (including
approval by stockholders of Mariner and Paragon and state and Federal regulatory
approvals), Merger Sub will be merged with and into Mariner in accordance with
the Merger Agreement (the "Merger"). At the effective time of the Merger (the
"Effective Time"), Mariner shall become a wholly owned subsidiary of Paragon and
each share of Mariner Common Stock will be converted into the right to receive
one (1) share (the "Exchange Ratio") of Paragon Common Stock. The description of
the Merger and the Merger Agreement contained in this Schedule 13D are qualified
in their entirety by reference to the copy of the Merger Agreement included as
Exhibit 99.1 to this Schedule 13D and incorporated herein by reference.
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This statement on Schedule 13D relates to an option granted to Paragon by
Mariner to purchase shares of Mariner Common Stock upon the occurrence of
certain events as described in Item 4 below and a voting agreement between
Paragon and certain stockholders of Mariner whereby such stockholders have
agreed to vote their shares of Mariner Common Stock in favor of the Merger as
described in Item 4 below.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (b) As described more fully in Item 3 above, this statement on
Schedule 13D relates to the Merger of Merger Sub with and into Mariner, with
Mariner becoming a wholly owned subsidiary of Paragon. In addition, Paragon
will assume certain of Mariner's stock plans, stock option agreements and all
warrants outstanding as of the Effective Time. All stock options issued under
Mariner's 1992 Stock Option Plan and 1994 Stock Plan, whether or not vested,
will be cancelled in exchange for a cash payment.
The Merger Agreement contains customary representations and warranties on
the part of Paragon, Mariner and Merger Sub, and the consummation of the Merger
is subject to customary closing conditions, including, without limitation,
approval by the stockholders of Paragon and Mariner and various state and
Federal regulatory agencies. The Merger Agreement also contains covenants
regarding the activities of the parties pending consummation of the Merger.
Generally, each of the parties must conduct its business in the ordinary course
consistent with past practice. In certain circumstances, a cash termination fee
is required to be paid upon a termination of the Merger Agreement.
As an inducement to Paragon to enter into the Merger Agreement, Paragon and
Mariner entered into a Company Stock Option Agreement, dated as of April 13,
1998 (the "Company Stock Option Agreement"). The Company Stock Option Agreement
grants Paragon an irrevocable option (the "Option") to purchase, under certain
conditions, up to approximately 5,886,201 shares of Mariner at a purchase price
of $19.75 per share (the closing price of the common stock of Paragon on the
date immediately prior to the execution of the Merger Agreement multiplied by
the Exchange Ratio), subject to adjustment in the event of changes in Mariner's
capitalization. Paragon may exercise the Option, in whole or in part, at any
time and from time to time upon the occurrence of a "Purchase Event" occurring
within twelve (12) months following a "Trigger Event." A "Purchase Event" means
the consummation of any of the following: (i) any merger, consolidation, or
other business combination involving Mariner or its subsidiaries (other than
mergers, consolidations or transfers solely between and among Mariner and any
wholly-owned subsidiary), or (ii) any acquisition,
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CUSIP NO. 68-45J-109 13D PAGE 5 OF 13 PAGES
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sale, lease, exchange, mortgage, pledge, transfer or other disposition of, or
tender offer for, all or any substantial portion of the assets or capital stock
of Mariner or any of its material subsidiaries taken as a whole (each a "Company
Acquisition Transaction"). A "Trigger Event" occurs in the event that:
(i) prior to obtaining Mariner stockholder approval, the Board of
Directors of Mariner fails to make, withdraws or modifies in a manner
adverse to Paragon its favorable recommendation of the Merger or shall have
recommended or entered into a definitive agreement with respect to a
Company Acquisition Transaction with a party other than Paragon or any of
its affiliates and Paragon exercises its right to terminate the Merger
Agreement as a result thereof;
(ii) prior to the Effective Time, Mariner receives a written offer
with respect to a Company Acquisition Transaction with a party other than
Paragon or its affiliates or such other party has commenced a tender offer
which, in either case, the Board of Directors of Mariner determines in good
faith is more favorable to Paragon's stockholders than the transactions
contemplated by the Merger Agreement and Mariner exercises its right to
terminate the Merger Agreement as a result thereof;
(iii) the Merger Agreement is terminated as a result of the failure
of the Effective Time to have occurred on or before December 31, 1998, and
at such date any person has made, or publicly has stated an intention to
make, a proposal to effect a Company Acquisition Transaction; or
(iv) the Merger Agreement is terminated as a result of the failure to
obtain Mariner stockholder approval, and at the time of the Mariner
stockholder vote any person has made, or publicly has stated an intention
to make, a proposal to effect a Company Acquisition Transaction.
The Option may not be exercised if: (i) Paragon is in material breach of its
agreements or covenants contained in the Company Stock Option Agreement or the
Merger Agreement or (ii) a preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States is in effect.
The Option will terminate upon the earliest to occur of certain events,
including consummation of the Merger, as set forth in the Company Stock Option
Agreement. If the Option becomes exercisable, Mariner shall, at the request of
Paragon, file a registration statement under the Securities Act of 1933, as
amended, covering any shares issued and issuable pursuant to the Option and
Mariner shall use its best efforts to cause such registration statement to
become effective and remain current.
The description of the Option contained herein is qualified in its entirety
by reference to the copy of the Company Stock Option Agreement included as
Exhibit 99.2 to this Schedule 13D and incorporated herein by reference.
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Also as an inducement to Paragon to enter into the Merger Agreement,
certain stockholders of Mariner (collectively, the "Kellett Stockholders") have
entered into a Voting Agreement dated as of April 13, 1998 (the "Voting
Agreement") with Paragon. Pursuant to the
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CUSIP NO. 68-45J-109 13D PAGE 6 OF 13 PAGES
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Voting Agreement, the Kellett Stockholders have agreed to vote 6,052,771 shares
of Mariner Common Stock over which they have voting control at any meeting of
stockholders of Mariner called to vote upon the Merger and the Merger Agreement,
and any other matters related thereto, or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with respect to
the Merger, the Merger Agreement or the transactions contemplated thereby or
related thereto is sought, (i) in favor of the Merger and the Merger Agreement
and the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement, and (ii) in opposition of (A) any merger
agreement or merger, consolidation or other such combination or reorganization
of Mariner other than pursuant to the Merger Agreement or (B) any action or
agreement intended to impede, interfere or delay the Merger, the Merger
Agreement or any of the transactions contemplated thereby. The Voting Agreement
terminates upon the earlier of the Effective Time or the termination of the
Merger Agreement. The name of each Kellett Stockholder and, based on information
provided by the Kellett Stockholders to Paragon, the number of outstanding
shares of Mariner Common Stock beneficially owned or voted by such person as of
April 13, 1998 is set forth in Schedule II hereto, which is hereby incorporated
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herein by reference.
The description of the Voting Agreement contained herein is qualified in
its entirety by reference to the copy of the Voting Agreement included as
Exhibit 99.3 of this Schedule 13D and incorporated herein by reference.
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In connection with the execution and delivery of the Voting Agreement, the
Kellett Stockholders required that both Mariner and Paragon confirm that each
company would use its reasonable best efforts to resolve certain matters in a
manner favorable to Stiles A. Kellett, Jr. and Samuel B. Kellett, Jr. (the
"Kelletts"). These matters include, among other things, the termination and/or
amendment of certain agreements between Mariner and the Kelletts (or their
affiliates) arising out of Mariner's acquisition of Convalescent Services Inc.
("CSI"), the extension of the term of certain leases between the Kelletts (or
their affiliates) and Mariner, the modification of the collateral arrangements
relating thereto to reflect the consummation of the Merger, as well as the
resolution of a pending dispute between Mariner and the Kelletts.
(c) Not applicable.
(d) As of the Effective Time, the directors and officers of Merger Sub will
become the directors and officers of Mariner.
(e) Other than as a result of the Merger described in Item 3 above, not
applicable.
(f) Not applicable.
(g) At the Effective Time, the certificate of incorporation and bylaws of
Merger Sub will become the certificate of incorporation and bylaws,
respectively, of Mariner.
(h) - (i) In the event the Merger is consummated, the Mariner Common Stock
will be delisted from the Nasdaq National Market and will be converted into
shares of Paragon, which are traded on the New York Stock Exchange.
(j) Other than as described above, Paragon currently has no plans or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D prior to the Effective Time.
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CUSIP NO. 68-45J-109 13D PAGE 7 OF 13 PAGES
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) If the Option becomes exercisable, Paragon will have the right to
acquire 5,886,201 shares of Mariner Common Stock. If acquired, Paragon would
have sole voting and dispositive power over such shares, and such shares would
constitute approximately 19.9% of the issued and outstanding shares of the
Mariner Common Stock as of April 13, 1998 and approximately 16.6% of the
outstanding Mariner Common Stock after giving effect to the exercise of the
Option.
As described in Item 4 above, Paragon is a party to the Voting Agreement
pursuant to which holders of 6,052,771 (representing approximately 20.5% of the
outstanding Mariner Common Stock) shares of Mariner Common Stock have agreed to
vote their shares in favor of the Merger, the Merger Agreement, and the
transactions contemplated thereby and against any competing transaction. Paragon
does not hold a proxy or general voting discretion with respect to the shares
held by the Kellett Stockholders. Paragon expressly disclaims beneficial
ownership of the Mariner Common Stock held by the Kellett Stockholders and
subject to the Voting Agreement, and nothing herein shall be deemed an admission
by Paragon as to the beneficial ownership of such Mariner Common Stock.
To Paragon's knowledge, no shares of Mariner Common Stock are beneficially
owned by any of the persons named in Schedule I.
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(c) Neither Paragon, nor, to Paragon's knowledge, any person named in
Schedule I, has effected any transaction in Mariner Common Stock during the past
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60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
Other than as described herein, to Paragon's knowledge, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any person with
respect to any securities of Mariner, including but not limited to transfer or
voting of any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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CUSIP NO. 68-45J-109 13D PAGE 8 OF 13 PAGES
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit No. Description
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99.1 Agreement and Plan of Merger dated as of April 13, 1998, by and
among Paragon, Mariner and Merger Sub (Incorporated by reference
to Exhibit 2.1 to Paragon's Current Report on Form 8-K dated
April 23, 1998).
99.2 Company Stock Option Agreement dated as of April 13, 1998, by
and between Paragon and Mariner (Incorporated by reference to
Exhibit 99.2 to Paragon's Current Report on Form 8-K dated April
23, 1998).
99.3 Company Voting Agreement dated as of April 13, 1998, by and
among Paragon and certain stockholders of Mariner (Incorporated
by reference to Exhibit 99.4 to Paragon's Current Report on Form
8-K dated April 23, 1998).
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CUSIP NO. 68-45J-109 13D PAGE 9 OF 13 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.
Date: April 24, 1998 PARAGON HEALTH NETWORK, INC.
By: /s/ Stefano M. Miele
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Name: Stefano M. Miele
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Title: Vice President and Associate
General Counsel
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CUSIP NO. 68-45J-109 13D PAGE 10 OF 13 PAGES
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SCHEDULE I
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<TABLE>
<CAPTION>
NAME OF PARAGON PRINCIPAL OCCUPATION NAME AND
DIRECTOR OR EXECUTIVE OFFICER OR EMPLOYMENT BUSINESS ADDRESS
- ----------------------------- ------------------------------ ---------------------------------
<S> <C> <C>
Keith B. Pitts Chairman of the Board, Paragon Health Network, Inc.
President, Chief Executive One Ravinia Drive, Suite 1550
Officer and Director of Atlanta, Georgia 30346
Paragon
Leroy D. Williams President Post-Acute AmerraHealth Services
Division of Paragon 15415 Katy Freeway, Suite 800
Houston, Texas 77094
Dennis G. Johnston President Hospital Services Cornerstone Health Management
Division of Paragon 5080 Spectrum Drive, Suite 920-W
Dallas, Texas 75248
William R. Korslin President Pharmaceutical American Pharmaceutical Services
Services Division of Paragon 1771 West Diehl Road, Suite 210
Naperville, Illinois 60563
David L. Ward President Rehabilitation American Rehability Services
Services Division of Paragon 111 Westwood Place, Suite 210
Brentwood, Tennessee 37027
Charles B. Carden Executive Vice President and Paragon Health Network, Inc.
Chief Financial Officer of One Ravinia Drive, Suite 1500
Paragon Atlanta, Georgia 30346
R. Jeffrey Taylor Senior Vice President - Paragon Health Network, Inc.
Development of Paragon 5120 Goldleaf Circle, Suite 400
Los Angeles, California 90056
Susan Thomas Whittle Senior Vice President, Paragon Health Network, Inc.
General Counsel and Secretary One Ravinia Drive, Suite 1500
of Paragon Atlanta, Georgia 30346
Ann Weiser Senior Vice President, Chief Paragon Health Network, Inc.
Human Resources Officer One Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
Donald C. Beaver Private investments; Beaver Sport Properties
previously Vice Chairman of 1355 Fourth Street Drive, N.W.
Living Centers of America, Hickory, North Carolina 28601
Inc., the predecessor to
Paragon
Laurence M. Berg Principal, Apollo Advisors, Apollo Advisors, L.P.
L.P. 1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
</TABLE>
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CUSIP NO. 68-45J-109 13D PAGE 11 OF 13 PAGES
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<TABLE>
<CAPTION>
NAME OF PARAGON PRINCIPAL OCCUPATION NAME AND
DIRECTOR OR EXECUTIVE OFFICER OR EMPLOYMENT BUSINESS ADDRESS
- ----------------------------- ------------------------------ ---------------------------------
<S> <C> <C>
Gene E. Burleson Private investments; 320 Argonne Drive
previously Atlanta, Georgia 30305
Chairman of the Board of
GranCare, Inc.
Peter P. Copses Principal, Apollo Advisors, Apollo Advisors, L.P.
L.P. 1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Jay M. Gellert President and Chief Operating Foundation Health Systems, Inc.
Officer, Foundation Health 21600 Oxnard Street
Systems, Inc. Woodland Hills, California 91367
Joel S. Kanter Chief Executive Officer, Windy City, Inc.
Walnut 8000 Towers Crescent Drive
Financial Services, Inc. Suite 1070
Vienna, Virginia 22182
John H. Kissick Principal, Apollo Advisors, Apollo Advisors, L.P.
L.P. 1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Baltej S. Maini, M.D. President and Chief Executive The Fallon Clinic, Inc.
Officer of the Fallon Clinic, 100 Central Street
Inc. Worcester, Massachusetts 01608
William G. Petty, Jr. Principal, Beecken, Petty Beecken, Petty & Co. L.L.C.
& Company, L.L.C. 901 Warrenville Road #205
Lisle, Illinois 60532
Robert L. Rosen Managing General Partner, RLR Partners, L.P.
RLR Partners, L.P. 825 Third Avenue
40th Floor
New York, New York 10022
</TABLE>
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CUSIP NO. 68-45J-109 13D PAGE 12 OF 13 PAGES
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SCHEDULE II
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Number of Shares of
Mariner Common Stock
Individual Beneficially Owned
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Stiles A. Kellett, Jr. 2,181,183
Kellett Partners, L.P. 862,760
Samuel B. Kellett 2,154,696
William R. Bassett, TR 427,066
Charlotte R. Kellett IRR
Trust dated 11/1/91
William R. Bassett, TR 427,066
Samuel B. Kellett, Jr.
IRR Trust dated 11/1/91
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CUSIP NO. 68-45J-109 13D PAGE 13 OF 13 PAGES
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Agreement and Plan of Merger dated as of April 13, 1998, by and
among Paragon, Mariner and Merger Sub (Incorporated by reference
to Exhibit 2.1 to Paragon's Current Report on Form 8-K dated
April 23, 1998).
99.2 Company Stock Option Agreement dated as of April 13, 1998, by
and between Paragon and Mariner (Incorporated by reference to
Exhibit 99.2 to Paragon's Current Report on Form 8-K dated April
23, 1998).
99.3 Company Voting Agreement dated as of April 13, 1998, by and
among Paragon and certain stockholders of Mariner (Incorporated
by reference to Exhibit 99.4 to Paragon's Current Report on Form
8-K dated April 23, 1998).
