UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 18, 1998
KARRINGTON HEALTH, INC.
(Exact name of registrant as specified in its charter)
OHIO 0-28656 31-1461482
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
919 OLD HENDERSON ROAD
COLUMBUS, OHIO 43220
(Address of principal executive offices) (Zip Code)
(614) 451-5151
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS
The accompanying text reflects consistent reporting with Sunrise Assisted
Living, Inc. and describes a Merger Agreement dated October 18, 1998 whereby
Karrington Health, Inc. will be acquired subject to certain events.
PROPOSED ACQUISITION OF KARRINGTON HEALTH, INC. On October 19, 1998,
Sunrise Assisted Living, Inc. (the "Acquiror") announced that it had entered
into an Agreement of Merger, dated as of October 18, 1998 (the "Merger
Agreement"), with Karrington Health, Inc., an Ohio corporation ("Karrington"),
and Buckeye Merger Corporation, an Ohio corporation and a newly-formed wholly
owned subsidiary of the Acquiror ("Merger Sub"), which provides for the merger
(the "Merger") of Merger Sub with and into Karrington with Karrington continuing
as the surviving corporation. Pursuant to the Merger Agreement, at the
effective time of the Merger (the "Effective Time"), each share of Common Stock,
without par value, of Karrington (the "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
Acquiror 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 Acquiror 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 Acquiror 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. The proposed acquisition of Karrington by Acquiror is expected to
be accounted for using the "purchase method" of accounting.
Concurrently with the execution and delivery of the Merger Agreement, the
Acquiror and Karrington entered into an Option Agreement (the "Option
Agreement"), pursuant to which Karrington granted to Acquiror 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
Acquiror, 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 the Acquiror 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, Acquiror has the right to
require Karrington to pay the Acquiror 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.
As of October 18, 1998, certain affiliates of Karrington (each, a
"Karrington Shareholder"), 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 the
Acquiror, pursuant to which each Karrington Shareholder appointed Acquiror as
such Karrington Shareholder's lawful proxy and attorney-in-fact to vote such
Karrington Shareholder's
2
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).
Pursuant to the Merger Agreement, Acquiror 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.
Copies of the Merger Agreement, the Option Agreement and the form of the
Shareholder Agreement are filed as exhibits hereto. The foregoing descriptions
are qualified in their entirety by reference to such exhibits.
PROPOSED ACQUISITION OF MEDITRUST INTERESTS BY SUNRISE ASSISTED LIVING INC.
Acquiror also announced on October 19, 1998 that it had 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) None required.
(c) Exhibits.
Exhibit Number Description
2.1 Agreement of Merger, dated as of October 18, 1998, among the
Acquiror, Merger Sub and Karrington.
99.1 Option Agreement dated October 18, 1998 between the Acquiror
and Karrington.
99.2 Form of Shareholder Agreement with Karrington affiliates.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KARRINGTON HEALTH, INC.
(Registrant)
Date: October 30, 1998 By: /s/ Mark N. Mace
------------------------------------
Mark N. Mace
Senior Vice President, Finance
and Chief Accounting Officer
4
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
2.1 Agreement of Merger, dated as of October 18, 1998, among the
Acquiror, Merger Sub and Karrington.
99.1 Option Agreement dated October 18, 1998 between the Acquiror
and Karrington.
99.2 Form of Shareholder Agreement with Karrington affiliates.
5