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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)
PARAGON HEALTH NETWORK, INC.
(Name of Issuer)
Common Stock, $.01 Par Value Per Share
(Title of Class of Securities)
698940103
(CUSIP Number)
David N. Hansen, Mariner Health Group, Inc.
1881 Worcester Road, Framingham, MA 01701
(860) 701-2000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 13, 1998
(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 12 Pages)
- --------
(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. 698940103 13D PAGE 2 OF 12 PAGES
SCHEDULE 13D
1 NAME OF REPORTING PERSON
Mariner Health Group, Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
06-1251310
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
7 SOLE VOTING POWER
8,230,692 (acquisition of such shares is
conditioned upon the occurrence of certain
events specified in a Parent Stock Option
Agreement dated April 13, 1998 and
incorporated by reference as Exhibit 99.2
to this Schedule 13D)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY - 0 -
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 8,230,692 (acquisition of such shares is
conditioned upon the occurrence of certain
events specified in a Parent Stock Option
Agreement dated April 13, 1998 and
incorporated by reference as Exhibit 99.2 to
this Schedule 13D)
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,230,692
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [x]
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
14 TYPE OF REPORTING PERSON *
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 698940103 13D PAGE 3 OF 12 PAGES
Neither the filing of this statement on Schedule 13D nor any of its
contents shall be deemed to constitute an admission by Mariner Health Group,
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 "Issuer
Common Stock"), $.01 par value per share, of Paragon Health Network, Inc., a
Delaware corporation (the "Issuer"). The principal executive offices of the
Issuer are located at One Ravinia Drive, Suite 1500, Atlanta, GA 30346.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing this statement is Mariner Health
Group, Inc., a Delaware corporation ("Mariner").
(b) The address of the principal office and principal place of business
of Mariner is 1881 Worcester Road, Framingham, MA 01701.
(c) The principal business of Mariner is a provider of
outcomes-oriented, post-acute healthcare services.
(d) Set forth in Schedule I is the (a) name, (b) residence or business
address, (c) present principal occupation or employment, and (d) name, principal
business and address of any corporation or other organization in which such
employment is conducted of each of Mariner's directors and executive officers as
of the date hereof. Each such person listed on Schedule I is a citizen of the
United States. No corporation or other person controls Mariner. During the past
five years, neither Mariner nor, to Mariner's knowledge, any person named in
Schedule I to this Schedule 13D, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither Mariner nor, to Mariner's
knowledge, any person named in Schedule I to this Schedule 13D, was a party to a
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.
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 Mariner, the Issuer and Paragon Acquisition Sub,
Inc. ("Merger Sub"), and subject to the conditions set forth therein (including
approval by stockholders of Mariner and the Issuer 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
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CUSIP NO. 698940103 13D PAGE 4 OF 12 PAGES
Merger (the "Effective Time"), Mariner shall become a wholly owned
subsidiary of the Issuer and each share of Mariner Common Stock, $.01 par value
per share ("Mariner Common Stock"), will be converted into the right to receive
one (1) share (the "Exchange Ratio") of Issuer's common stock, $.01 par value
per share ("Issuer 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.
This statement on Schedule 13D relates to an option granted to Mariner by
the Issuer to purchase shares of Issuer Common Stock upon the occurrence of
certain events as described in Item 4 below and a voting agreement between
Mariner and certain stockholders of the Issuer whereby such stockholders have
agreed to vote their shares of issuer Common Stock in favor of the issuance of
Issuer Common Stock in connection with 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 the Issuer. In addition, the
Issuer will assume certain of Mariner's stock plans, stock option agreements and
all warrants outstanding as of the effective time of the Merger (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 Mariner, the Issuer and Merger Sub, and the consummation of the
Merger is subject to customary closing conditions, including, without
limitation, approval by the stockholders of Mariner and the Issuer 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.
The foregoing summary of the Merger is qualified in its entirety by
reference to the copy of the Merger Agreement included as Exhibit 99.1 to this
Schedule 13D and incorporated herein by reference.
As an inducement to Mariner to enter into the Merger Agreement, Mariner
and the Issuer entered into a Parent Stock Option Agreement, dated as of April
13, 1998 (the "Parent Stock Option Agreement"). The Parent Stock Option
Agreement grants Mariner an irrevocable option (the "Option") to purchase, under
certain conditions, up to approximately 8,230,692 shares of the Issuer at a
purchase price of $19.75 per share, subject to adjustment in the event of
changes in the Issuer's capitalization. Mariner 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 the Issuer or
its subsidiaries (other than mergers, consolidations or transfers solely between
and among the Issuer and any wholly-owned subsidiary), or (ii) any acquisition,
sale, lease, exchange, mortgage,
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CUSIP NO. 698940103 13D PAGE 5 OF 12 PAGES
pledge, transfer or other disposition of, or tender offer for, all or any
substantial portion of the assets or capital stock of the Issuer or any of its
material subsidiaries taken as a whole (each an "Issuer Acquisition
Transaction"). A "Trigger Event" occurs in the event that:
(i) prior to obtaining Issuer stockholder approval, the Board
of Directors of Issuer fails to make, withdraws or modifies in a manner
adverse to Mariner its favorable recommendation of the Merger or shall
have recommended or entered into a definitive agreement with respect to
an Issuer Acquisition Transaction with a party other than Mariner or
any of its affiliates and Mariner exercises its right to terminate the
Merger Agreement;
(ii) prior to the Effective Time, Issuer receives a written
offer with respect to an Issuer Acquisition Transaction with a party
other than Mariner or its affiliates or such other party has commenced
a tender offer which, in either case, the Board of Directors of Issuer
determines in good faith is more favorable to Issuer's stockholders
than the transactions contemplated by the Merger Agreement and Issuer
exercises its right to terminate the Merger Agreement;
(iii) the Merger Agreement is terminated as a result of the
failure of the Effective Time to occur 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 an Issuer Acquisition
Transaction; or
(iv) the Merger Agreement is terminated as a result of the
failure of the Issuer to obtain stockholder approval and at such date
any person has made, or publicly has stated an intention to make, a
proposal to effect an Issuer Acquisition Transaction.
The option may not be exercised if: (i) Mariner is in material breach of its
agreements or covenants contained in the Parent 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 of certain events,
including consummation of the Merger, as set forth in the Parent Stock Option
Agreement. If the Option becomes exercisable, the Issuer shall, at the request
of Mariner, file a registration statement under the Securities Act of 1933, as
amended, covering any shares issued and issuable pursuant to the Option and the
Issuer shall use its best efforts to cause such registration statement to become
effective and remain current.
The foregoing summary of the Option is qualified in its entirety by
reference to the copy of the Parent Stock Option Agreement included as Exhibit
99.2 to this Schedule 13D and incorporated herein by reference.
Also as an inducement to Mariner to enter into the Merger Agreement,
certain stockholders of the Issuer (collectively, the "Voting Agreement
Stockholders") have entered into
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CUSIP NO. 698940103 13D PAGE 6 OF 12 PAGES
a Voting Agreement dated as of April 13, 1998 (the "Voting Agreement") with
Mariner. Pursuant to the Voting Agreement, the Voting Agreement Stockholders
have agreed to vote those 17,777,778 shares of Issuer Common Stock over which
they have voting control at any meeting of stockholders of Issuer called to vote
upon the transactions contemplated by the Merger Agreement, and any other
matters related thereto, including the issuance of shares of Issuer Common Stock
in connection with the Merger and pursuant to the Merger Agreement (the "Paragon
Share Issuance Proposal"), 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 and the Paragon Share Issuance Proposal is
sought (i) in favor of the Paragon Share Issuance Proposal 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 Issuer 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 Voting Agreement Stockholder and the number of outstanding shares
of Issuer 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 herein
by reference. Mariner did not pay any additional consideration to any Voting
Agreement Stockholder in connection with the execution and delivery of the
Voting Agreement.
The foregoing summary of the Voting Agreement is qualified in its
entirety by reference to the copy of the Voting Agreement included as Exhibit
99.4 of this Schedule 13D and incorporated herein by reference.
(c) Not applicable.
(d) In accordance with the Merger Agreement, immediately following the
Effective Time, the Issuer shall take, or cause to be taken, such action as may
be required in order to appoint or cause to be elected two persons who are
nominated by Mariner.
(e) Other than as a result of the Merger described in Item 3 above, not
applicable.
(f) Not applicable.
(g) The Issuer's Bylaws currently require the affirmative vote of
two-thirds of the entire board of directors to approve certain matters,
including mergers, consolidations, material acquisitions and dispositions of
assets, and approval under Section 203(a) of the Delaware General Corporation
Law. Pursuant to the Merger Agreement, the Issuer has agreed to amend its Bylaws
as of the Effective Time to provide that such super majority approval shall not
apply to any action taken or required to be taken by the board of directors in
connection with any merger, consolidation or tender offer involving a third
party in which the sole consideration is cash and following the consummation of
which, direct control of the Issuer will no longer reside in a fluid public
market. Furthermore, the Voting Agreement Stockholders have entered into an
amendment to an agreement by and between themselves and the Issuer providing,
inter alia for certain changes in the rights of the Voting Agreement
Stockholders to nominate certain individuals for election to the Issuer's Board
of Directors.
(h) - (i) Other than as a result of the Merger described in Item 3
above, not applicable.
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CUSIP NO. 698940103 13D PAGE 7 OF 12 PAGES
(j) Other than as described above, Mariner currently has no plan or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) If the Option becomes exercisable, Mariner will have the right
to acquire 8,230,692 shares of Issuer Common Stock. If acquired, Mariner 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
Issuer Common Stock as of April 13, 1998 and approximately 16.6% of the
outstanding Issuer Common Stock after giving effect to the exercise of the
Option.
As described in Item 4 above, Mariner is a party to the Voting
Agreement pursuant to which holders of 17,777,778 (representing approximately
44% of the outstanding Issuer Common Stock) shares of Issuer Common Stock have
agreed to vote their shares in favor of the Paragon Share Issuance Proposal.
Mariner does not hold a proxy or general voting discretion with respect to the
shares held by the Voting Agreement Stockholders. Mariner expressly disclaims
beneficial ownership of the Issuer Common Stock held by the Voting Agreement
Stockholders and subject to the Voting Agreement, and nothing herein shall be
deemed an admission by Mariner as to the beneficial ownership of such Issuer
Common Stock.
To Mariner's knowledge, no shares of Issuer Common Stock are
beneficially owned by any of the persons named in Schedule I.
(c) Neither Mariner, nor, to Mariner's knowledge, any person named in
Schedule I, has effected any transaction in the Issuer 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
Other than as described herein, to Mariner'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 the Issuer, 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.
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CUSIP NO. 698940103 13D PAGE 8 OF 12 PAGES
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Agreement and Plan of Merger dated as of April 13,
1998, by and among Paragon Health Network, Inc.
and Mariner Health Group, Inc. (Incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated April 23, 1998).
99.2 Parent Stock Option Agreement dated as of April
13, 1998, by and between Paragon Health Network,
Inc., and Mariner Health Group, Inc.
(Incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated April
23, 1998).
99.3 Parent Voting Agreement dated as of April 13, 1998,
by and among Mariner Health Group, Inc., and certain
stockholders of Paragon Health Network, Inc.
(Incorporated by reference to Exhibit 99.3 to the
Company's Current Report on Form 8-K dated April 23,
1998).
</TABLE>
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CUSIP NO. 698940103 13D PAGE 9 OF 12 PAGES
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 __, 1998 MARINER HEALTH GROUP, INC.
----------------------------------------
By: Arthur W. Stratton, Jr., M.D.
Title: Chairman, Chief Executive Officer
and President
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CUSIP NO. 698940103 13D PAGE 10 OF 12 PAGES
SCHEDULE I
<TABLE>
<CAPTION>
Name and Residence or Business Name and Address of any Corporation
Address if different from that Principal Occupation or Other Organization in
listed in Column Three or Employment Which Employment is Conducted
---------------------- ------------- -----------------------------
<S> <C> <C>
Dr. Arthur W. Stratton, Jr. Chairman, Chief Executive Officer and Mariner Health Group, Inc.
President 1881 Worcester Road
Framingham, MA 01701
David N. Hansen Executive Vice President, Chief Mariner Health Group, Inc.
Financial Officer and Treasurer 1881 Worcester Road
Framingham, MA 01701
Paul J. Diaz Executive Vice President and Chief Mariner Health Group, Inc.
Operating Officer 1881 Worcester Road
Framingham, MA 01701
David C. Fries Chief Executive Officer Productivity Solutions, Inc.
8400 Baymeadows Way, Suite 12
Jacksonville, FL 32256
Christopher Grant, Jr. General Partner Salix Ventures, L.P.
30 Burton Hills Blvd., Suite 370
Nashville, TN 37215
Samuel B. Kellett President Samuel B. Kellett Investments
1935 Garraux Road, N.W.
Atlanta, GA 30327
Stiles A. Kellett, Jr. Chairman Kellett Investment Corp.
200 Galleria Parkway
Suite 1800
Atlanta, GA 30339
John F. Robenalt Chief Executive Officer, Chief Just Like Home, Inc.
Operating Officer and President Wildewood Professional Park
3647 Cortez Road West
Bradenton, FL 34210-3106
</TABLE>
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CUSIP NO. 698940103 13D PAGE 11 OF 12 PAGES
SCHEDULE II
<TABLE>
<CAPTION>
Number of Shares of Issuer
Common Stock
Individual Beneficially Owned
- ---------- ------------------
<S> <C>
Apollo Investment Fund III, L.P. 13,100,370
Apollo UK Partners III, L.P. 481,188
Apollo Overseas Partners III, L.P. 786,033
Apollo Management, L.P. 3,410,187(1)
</TABLE>
(1) Represents shares that Apollo Management, L.P. has the right to vote
pursuant to a Proxy and Voting Agreement dated as of November 4, 1997.
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CUSIP NO. 698940103 13D PAGE 12 OF 12 PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Agreement and Plan of Merger dated as of April 13,
1998, by and among Paragon Health Network, Inc.
and Mariner Health Group, Inc. (Incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated April 23, 1998).
99.2 Parent Stock Option Agreement dated as of April
13, 1998, by and between Paragon Health Network,
Inc., and Mariner Health Group, Inc.
(Incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated April
23, 1998).
99.3 Parent Voting Agreement dated as of April 13, 1998,
by and among Mariner Health Group, Inc., and certain
stockholders of Paragon Health Network, Inc.
(Incorporated by reference to Exhibit 99.3 to the
Company's Current Report on Form 8-K dated April 23,
1998).
</TABLE>
