SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): December 15, 1997
THE RECOVERY NETWORK, INC.
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(Exact Name of Registrant as Specified in Charter)
Colorado 0-22913 39-1731029
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
1411 5th Street, Suite 200, Santa Monica, California 90401
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (310) 393-3979
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OF ASSETS.
(a) On December 15, 1997, The Recovery Network, Inc., a Colorado
corporation (the "Company"), acquired FMS Productions, Inc., a
California corporation ("FMS"), pursuant to the merger (the
"Merger") of FMS with and into Recovery Direct, Inc., a Colorado
corporation ("Recovery Direct"), a wholly-owned subsidiary of the
Company. The Merger was effected pursuant to an Agreement and Plan
of Merger (the "Agreement and Plan of Merger") dated as of December
10, 1997 among the Company, Recovery Direct, FMS and each of John
Frederick, P. Randall Frederick, Jan Smithers, Joe C. Wood, Jr.,
Sharon R. Irish and Charles S. Sapp.
As a result of the Merger, all of the issued and outstanding capital
stock of FMS, consisting of 133 shares of common stock, no par value
(the "FMS Stock"), were exchanged for an aggregate of 44,000 shares
of the Company's common stock, $.01 par value (the "Common Stock"),
allocated pro rata among the holders of FMS Stock (collectively, the
"Sellers").
Pursuant to the Agreement and Plan of Merger, (i) Recovery Direct
entered into employment agreements with each of John C. Frederick
and Joe C. Wood, and the Company guaranteed the payment of all sums
due to such employees under such agreements; (ii) the Company
entered into a registration rights agreement with each of the
Sellers (collectively, the Registration Rights Agreements")
entitling such Sellers to have their shares of Common Stock
registered under the Securities Act of 1933 (the "Act") in any
registration statement filed by the Company under the Act except for
a registration statement filed by the Company under the Act pursuant
to the sale by the holders of 400,000 shares of Common Stock sold by
the Company to such holders in March and April 1997; and (iii) FMS
was permitted to repay up to $40,000 of certain liabilities
personally guaranteed by one of the Sellers.
The Merger was structured as a reverse triangular merger intended to
qualify as a tax free reorganization. For accounting purposes, the
Merger will be accounted for using the purchase method.
The foregoing summary of the terms of the Merger Agreement, the
Merger and the Registration Rights Agreements does not purport to be
complete and is qualified in its entirety by reference to the full
text of the Merger Agreement and the Registration Rights Agreements,
copies of which are filed as Exhibit 2.1 and 4.1, respectively, and
incorporated herein by reference.
The terms of the Merger were determined in accordance with the
Merger Agreement and were established through arm's length
negotiations between the Company and FMS.
Prior to the Merger, the Company did not beneficially own, directly
or indirectly, any of the voting securities of FMS, apart from any
beneficial ownership interest it may have had as a result of
entering into the Merger Agreement. Prior to the Merger, the Company
was party to a licensing agreement with FMS, pursuant to which
payments were made for broadcast rights to certain films in the FMS
library.
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(b) Through its acquisition of FMS, the Company acquired a distributor
and producer of educational films and videos and a film library of
such films and videos that were produced both by FMS and by third
parties.
The Company intends to continue using property, plant and equipment
acquired pursuant to the Merger for the purposes previously noted.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
To be filed by amendment.
(b) Pro Forma Financial Information.
To be filed by amendment.
(c) Exhibits.
Exhibit
No. Description
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2.1 Agreement and Plan of Merger dated as of December 10,
1997 among the Company, Recovery Direct, FMS and each of
John Frederick, P. Randall Frederick, Jan Smithers, Joe
C. Wood, Jr., Sharon R. Irish and Charles S. Sapp.
4.1 Form of Registration Rights Agreement dated December 10,
1997 between the Company and each of the Sellers.
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SIGNATURES
Pursuant to the requirement of the securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 24, 1997 THE RECOVERY NETWORK, INC.
By: /s/ William D. Moses
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William D. Moses
President and Chief Executive
Officer
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EXHIBIT INDEX
Exhibit Page
No. Description No.
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2.1 Agreement and Plan of Merger dated as of December 10,
1997 between and among the Company, Recovery Direct, FMS
and each of John Frederick, P. Randall Frederick, Jan
Smithers, Joe C. Wood, Jr., Sharon R. Irish and Charles
S. Sapp
4.1 Form of Registration Rights Agreement dated December 10,
1997 between the Company and each of the Sellers.
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Plan of Merger") dated as of
December 9, 1997, is between and among THE RECOVERY NETWORK, INC., a Colorado
corporation ("Parent"), RECOVERY DIRECT, INC., a Colorado corporation
("Survivor"), FMS PRODUCTIONS, INC., a California corporation ("FMS"), and John
Frederick, P. Randall Frederick, Jan Smithers, Joe C. Wood, Jr., and Sharon R.
Irish, each individuals residing in California, and Charles S. Sapp, an
individual residing in Arizona, who together own or on the Effective Date (as
defined in section 5) will own all of the outstanding capital stock of FMS
(collectively "FMS Shareholders"),
WITNESSETH:
WHEREAS, Parent is the holder of all of the capital stock of
Survivor; and
WHEREAS, Parent intends to issue to FMS Shareholders that number of
shares of the Common Stock, par value $0.01 per share, of Parent ("Parent Common
Stock") required to consummate the merger of FMS with and into Survivor as
contemplated by this Plan of Merger; and
WHEREAS, the boards of directors of Parent, Survivor and FMS have
determined that it is desirable to effect a plan of reorganization meeting the
requirements of Section 368(a)(1)(B) of the Internal Revenue Code of 1986
whereby (a) FMS will be merged into Survivor in accordance with the applicable
statutes of the State of Colorado and the State of California and the Articles
of Merger attached as Exhibit A ("Articles of Merger"), and (b) all shares of
the Common Stock, no par value, of FMS ("FMS Common Stock") outstanding or held
in treasury will be exchanged for shares of Parent Common Stock as contemplated
by this Plan of Merger;
NOW, THEREFORE, in consideration of the mutual promises herein made
and the mutual benefits to be derived from the merger, the parties agree as
follows:
1. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants as follows:
(a) Parent and Survivor are corporations duly organized,
validly existing, and in good standing under the laws of the State of Colorado
and have the power to own their properties and to carry on their businesses as
and where conducted.
(b) Parent and Survivor have complete and unrestricted
power to enter into and to consummate the transactions contemplated by this Plan
of Merger.
(c) When issued to FMS Shareholders in exchange for
shares of FMS Common Shares to consummate the transactions contemplated by this
Plan of Merger, the Parent Common Stock will on the Effective Date be duly
authorized, validly issued, fully paid, and nonassessable and will constitute
voting capital stock.
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(d) The execution of this Plan of Merger has been duly
authorized and approved by the board of directors of Parent and Survivor.
(e) Parent has provided to FMS and each of the FMS
Shareholders a true and correct copy of the Prospectus of Parent, and all
exhibits thereto, dated September 29, 1997 (the "Prospectus"), which Prospectus
has been filed with the Securities and Exchange Commission. The information
contained in the Prospectus was true and correct in all material respects as of
the date made. Since September 29, 1997, there have been no material changes to
the information set forth in the Prospectus.
2. REPRESENTATIONS AND WARRANTIES OF FMS AND FMS SHAREHOLDERS. FMS
and FMS Shareholders jointly and severally represent and warrant as follows:
(a) FMS is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California and has
the power to own its properties and to carry on its business as and where
conducted.
(b) FMS and FMS Shareholders have complete and
unrestricted power to enter into and to consummate the transactions contemplated
by this Plan of Merger.
(c) Exhibit B sets forth (i) the number of shares of FMS
Common Stock issued and outstanding and (ii) the identity of and the number of
shares owned by each holder of FMS Common Stock, in each case (A) as of October
31, 1997 and (B) as adjusted for proposed issuances of FMS Common Stock on or
before the Effective Date. The aggregate number of authorized shares of FMS
Common Stock is 2,500. No other class or series of capital stock is authorized.
Except as set forth in Exhibit B, no person or entity has any outstanding
options, warrants, calls or other securities or rights of any kind to acquire,
currently or upon the passage of time or the payment of money or the occurrence
of any other event, stock or other securities of FMS, nor any contingent or
other kind of commitment to issue any of the foregoing.
(d) Exhibit C sets forth (i) the audited balance sheets
of FMS as of April 30, 1993, 1994, 1995, 1996 and 1997, (ii) the unaudited
balance sheet of FMS as of September 30, 1997, (iii) the audited income
statements of FMS for the years ended April 30, 1993, 1994, 1995, 1996 and 1997,
and (iv) the unaudited income statement of FMS for the five months ended
September 30, 1997. Such financial statements fairly present the financial
condition of FMS as of and for the periods reflected therein. In addition,
Exhibit C sets forth accounts receivable, accounts payable (exclusive of film
royalty obligations), and other financial information, all of which is true and
correct in all material respects as of the date made. Attached as Exhibit D-1 is
certain Confidential Information (as defined in section 8(b)) consisting of the
items listed on the face page of Exhibit D-1, all of which is true and correct
in all material respects as of the date made, except a detailed budget and cash
flow forecast for the year ending April 30, 1998, which has been prepared in
good faith and on a reasonable basis.
(e) FMS has filed with the Internal Revenue Service all
tax returns and tax reports required to be filed by it. All taxes due to the
Internal Revenue Service or properly
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accruable have been paid or adequately taken into account in determining the net
shareholders' equity of FMS.
(f) Exhibit D sets forth a description of all material
assets, liabilities, contracts, obligations, employment agreements, and pending
(or to the best knowledge of FMS Shareholders, threatened) litigation by or
against FMS on the date hereof, including, without limitation, a listing of all
royalty obligations for the films listed on Exhibit D. FMS shall have terminated
all employment agreements between FMS and all third parties and FMS shall have
no obligations or liabilities of any kind in connection therewith. Exhibit E
accurately describes in all material respects the scope of the film licenses and
related rights, the markets cleared for exhibition, and the continuity of rights
with respect to all films owned or claimed to be owned by FMS. FMS has good and
marketable title to all assets purported to be owned by it, free and clear of
all liens, claims, encumbrances, preferential rights to purchase, or defects of
title of any kind, other than those described on Exhibits D, E and F. To the
best knowledge of FMS, FMS Shareholders and the board of directors of FMS, after
due inquiry, there are no claims against the licenses or related rights of FMS
except as otherwise set forth on Exhibit E hereto. The execution and delivery
of, and compliance with the terms and provisions of, this Plan of Merger on the
part of FMS and FMS Shareholders, will not conflict with or result in a breach
of any of the terms, conditions, or provisions of any judgment, order,
injunction, decree, or ruling of any court or governmental authority, domestic
or foreign, or of any material contract or instrument to which FMS or any FMS
Shareholder is a party, or by which it or any of them are or may be bound, or
constitutes a default thereunder, or results in the creation or imposition of
any lien, charge, or encumbrance of any nature upon, or gives to others any
interest or rights, including rights of termination or cancellation in, or with
respect to any of the properties, assets, contracts, or businesses of FMS, the
effect of which on the financial condition or business of FMS would be material
and adverse, except as otherwise set forth in Exhibits C, D or E or as this Plan
of Merger relates to all assignment clauses set forth in any document listed in
the Exhibits.
(g) The execution of this Plan of Merger has been duly
authorized and approved by the board of directors of FMS and each of the FMS
Shareholders in accordance with the laws of the State of California.
(h) The statements of FMS made in the documents
described in Exhibit D-1 were true and correct in all material respects on the
date made and are true and correct as of the date hereof.
(i) FMS has duly called a special meeting of its
shareholders for the purpose of approving and adopting this Plan of Merger and
filing the Articles of Merger. There were no dissenters to the approval and
adoption of this Plan of Merger and filing the Articles of Merger.
(j) The FMS Shareholders have provided Parent with all
material information that Parent has requested in order to decide whether to
enter into this Plan of Merger. Representatives of Parent have had the
opportunity to investigate FMS's business and to ask questions of its
management. Neither this Plan of Merger nor any other statements or certificates
made or delivered by FMS or the FMS Shareholders in connection herewith, when
taken as a
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whole, contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statement contained
therein not misleading.
3. COVENANTS. (a) As required under applicable law, Survivor shall
obtain all necessary consents from of Survivor's shareholders and directors on
or before December 12, 1997.
(b) Between the date of this Plan of Merger and the
Effective Date, FMS shall conduct its business as currently conducted, shall
keep its operations intact, shall maintain its assets in good operating
condition, shall operate in accordance with its budget and cash flow forecast
for the year ending April 30, 1998, shall not engage in any transaction outside
the ordinary course of its business, shall not incur any material liabilities or
obligations, and shall use its best efforts to maintain the goodwill of its
employees and other having business relationships with it.
(c) Between the date of this Plan of Merger and the
Effective Date, neither FMS nor any FMS Shareholder shall solicit or accept any
offer to purchase any shares of FMS Common Stock or any assets of FMS directly
or indirectly, shall not provide information with respect to its capital stock
or assets to any prospective purchaser, and shall cause the assets of FMS to
continue to be owned, directly or indirectly, by FMS.
(d) Between the date of this Plan of Merger and the
Effective Date, FMS shall not issue any shares of its capital stock (other than
the proposed issuances of FMS Common Stock disclosed on Exhibit B) or pay any
dividends in cash or stock or a combination thereof on any shares of its capital
stock.
(e) Between the date of this Plan of Merger and the
Effective Date, Parent and FMS shall mutually agree before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Plan of Merger.
4. TERMS OF MERGER. (a) The merger of FMS into Survivor shall be in
accordance with the Plan of Merger. The number of shares of Parent Common Stock
to be delivered to FMS Shareholders for exchange pursuant to the Plan of Merger
shall be 44,000. Such shares shall be apportioned among the FMS Shareholders as
set forth in Exhibit B.
(b) Parent shall issue and deliver to FMS Shareholders,
prior to the Effective Date, 44,000 shares of Parent Common Stock (and
certificates representing same) against the simultaneous delivery to Parent by
FMS Shareholders of (i) certificates representing all issued and outstanding
shares of FMS Common Stock, duly endorsed to Parent, and (ii) a certificate of
FMS reasonably acceptable to Parent confirming that the Plan of Merger has been
duly approved and adopted by the shareholders of FMS in accordance with
applicable laws and that all conditions precedent to the merger of FMS with and
into Survivor in accordance with the Plan of Merger have been fully satisfied,
except for the filing of the Articles of Merger with the Secretary of State of
the State of Colorado, and that the Plan of Merger has not been and will not be
terminated or abandoned.
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(c) The FMS Common Stock outstanding on the Effective
Date shall be surrendered and retired, and the certificates representing such
shares shall be canceled.
5. EFFECTIVE DATE AND CLOSING. Provided all required shareholder
approvals have been obtained in accordance with applicable laws, Survivor and
FMS shall effect the merger provided for in the Plan of Merger, and the
transactions contemplated herein shall be consummated, by executing and filing
the Articles of Merger in the manner provided for by the corporation law of the
State of Colorado within ten days after all conditions precedent set forth in
sections 6 or 7 have occurred or been waived by the relevant effective date
("Effective Date").
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SURVIVOR. Every
obligation of Parent to be performed on or prior to the Effective Date,
including, without limitation, consummation of the Merger, shall be subject to
the satisfaction on or before the Effective Date of the following conditions:
(a) The representations and warranties made by FMS and
FMS Shareholders in this Plan of Merger or given on their behalf hereunder shall
be true on and as of the date hereof and on and as of the Effective Date as
though such representations and warranties had been made or given on and as of
the Effective Date.
(b) FMS and FMS Shareholders shall have performed and
complied with all of their obligations under this Plan of Merger which are to be
performed or complied with by it or them, as applicable, prior to or on the
Effective Date.
(c) No suit, action, or other proceedings shall be
threatened or pending before any court or governmental agency which is likely to
result in the restraint, prohibition, or obtaining of material damages or other
relief in connection with this Plan of Merger or the consummation of the
transactions contemplated herein, or which asserts any material claim against
FMS, Parent or Survivor.
(d) Parent shall have received appropriate investment
representations from each FMS Shareholder substantially in the form set forth in
the attached Exhibit I.
(e) FMS shall have obtained all permits or approvals
required under the laws
of any state or by any regulatory body in order for the films listed on Exhibit
E to be cleared for use for the respective periods of time described in Exhibit
E (on terms no less favorable than those accorded FMS immediately prior to the
Effective Date) in all forms of media consistent with Parent's line of business,
including without limitation exhibition on broadcast and cable television, use
on Internet or similar interactive media and CD-ROM, and tape sales.
(f) FMS shall be operating (and the results of its
operations shall be) in compliance with the budget and cash flow forecast for
the year ending April 30, 1998.
(g) With Parent's assistance, FMS shall have completed a
post-merger business plan with respect to its business which is satisfactory to
Parent.
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(h) Survivor shall have entered into employment
agreements with each of John Frederick and Joe C. Wood, Jr., on the terms and
substantially in the form of Exhibit G-1 and G- 2, respectively.
(i) Parent and each of the FMS Shareholders shall have
entered into registration rights agreements with respect to the Parent Common
Stock received by each of them pursuant to this Plan of Merger, in each case on
the terms and substantially in the form of Exhibit H hereto.
(j) FMS shall make provision for certain liabilities of
FMS as to which one or more FMS Shareholder has personal liability; provided
that the total amount of such liabilities shall not exceed $40,000.00.
(k) FMS shall provide an opinion of counsel
substantially in the form of Exhibit J-1 attached hereto.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF FMS AND FMS SHAREHOLDERS.
Every obligation of FMS and FMS Shareholders to be performed on or prior to the
Effective Date shall be subject to the satisfaction on or before the Effective
Date of the following conditions:
(a) Parent and Survivor shall have performed and
complied with all of their obligations under this Plan of Merger which are to be
performed or complied with by it prior to or on the Effective Date.
(b) No suit, action, or other proceedings shall be
threatened or pending before any court or governmental agency which is likely to
result in the restraint, prohibition, or obtaining of material damages or other
relief in connection with this Plan of Merger or the consummation of the
transactions contemplated herein, or which asserts any material claim against
Survivor.
(c) FMS Shareholders shall have no personal liability
for any continuing obligations of Survivor or FMS.
(d) Survivor shall have entered into employment
agreements with each of John Frederick and Joe C. Wood, Jr., on the terms and
substantially in the form of Exhibit G-1 and G- 2, respectively.
(e) Parent and each of the FMS Shareholders shall have
entered into registration rights agreements with respect to the Parent Common
Stock received by each of them pursuant to this Plan of Merger, in each case on
the terms and substantially in the form of Exhibit H hereto.
(f) Parent shall have executed guarantees substantially
in the form of Exhibits F-1 and F-2 attached hereto.
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(g) Parent or Survivor shall provide an opinion of
counsel substantially in the form of Exhibit J-2 attached hereto.
(h) FMS shall have obtained the written consent of all
FMS shareholders whose consents are required to complete the Closing and to
consummate the transactions contemplated hereby.
8. CONFIDENTIALITY. Prior to the Effective Date, the provisions of
this Section 8 shall be applicable. Following the Effective Date, this Section 8
shall terminate and have no further force and effect.
(a) Each party acknowledges that, through the
transactions contemplated in this Agreement, it will have access to confidential
and proprietary information and trade secrets relating to each other party's
business, all of which will be made accessible to the other party only in strict
confidence. Each party acknowledges that unauthorized disclosure of such
information will damage the respective other party's business, that the
respective other party's business is substantially dependent upon such
information, that such information in the form utilized by the respective other
party is unique and known only to the respective other party and certain
managers, key employees, and contractors of the respective other party, and that
title, ownership, possession, and control of such information shall at all times
remain vested in the respective other party. Accordingly, each party considers
the restrictions on disclosure contained in this section 8 to be in all respects
reasonable and necessary.
(b) No party shall at any time or in any manner use,
copy, disclose, divulge, transmit, convey, transfer, or otherwise communicate,
directly or indirectly, without the respective other party's prior written
consent, to any person or entity any information regarding the following or like
aspects of the respective other party's business, all of which is confidential
and proprietary information or trade secrets or both:
(i) all trade secrets and intellectual
property of the respective other party, including
without limitation film development or experimental
work, work in progress, and customer information;
(ii) the manner of operation, organization,
and management of the respective other party's business,
including without limitation marketing, distribution,
and other business information;
(iii) financial information or documents and
nonpublic policies, procedures, and other printed or
written material generated in connection with the
respective other party's business, business plans, and
strategies; and
(iv) the identities of customers,
contractors, and vendors utilized in the respective
other party's business and details of the respective
other party's relationship with such customers,
contractors, and vendors, the nature of fees and charges
made to the respective other party's customers,
nonpublic forms, contracts, and other documents used
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in the respective other party's business, the nature and
content of computer software used in the respective
other party's business, whether proprietary to such
party or used by such party under license from a third
party, and information concerning prospects, customers,
employees, products, services, equipment, systems, and
prospective and executed contracts and other business
arrangements (collectively, "Confidential Information");
provided that Confidential Information shall not include
information in the public domain.
Any questions as to what comprises Confidential Information shall be decided in
the sole discretion of the respective other party.
(c) Without limiting the generality of the foregoing,
all documents or other repositories of information (electronic, digital, or
otherwise) containing, alluding to, or relating to Confidential Information
prepared by or provided to a party or which come into a party's possession in
connection with the transactions contemplated by this Agreement are and shall
remain the property of the respective other party. No party shall copy or use
any such documents or other repositories of information (electronic, digital, or
otherwise) or Confidential Information for any purpose, nor shall it market or
in any way provide or make available to any third party any Confidential
Information, except pursuant to prior written authorization from the respective
other party. Upon the request of the other respective party or the termination
of this Agreement for any reason, whether or not such termination shall be
alleged or later found to be unlawful, wrongful, or in breach of contract, each
party shall deliver to Company (and shall not keep in its possession or deliver
to anyone else) any and all papers, drawings, notes, memoranda, designs,
devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items belonging to
the respective other party. This Agreement shall not bar a party from complying
with any subpoena or court order, as long as the party gives the other
respective party prompt written notice of its receipt thereof.
(d) Each party acknowledges that the other parties have
received and in the future will receive from third parties confidential or
proprietary information and that the party must maintain the confidentiality of
such information and use it only for proper purposes. No party shall use or
disclose any such information except as permitted by the other respective party
or the third party to whom the information belongs. In addition, no party shall
improperly use or disclose any confidential or proprietary information or trade
secrets of his former or current employers, principal, partners, joint
venturers, clients, customers, or suppliers, or the vendors or suppliers of such
third parties, and shall not bring onto another party's premises any unpublished
document or any property belonging to any such third party without its verbal
consent. No party shall violate any nondisclosure or proprietary agreements in
effect between any other party and any such person or entity.
(e) Each party acknowledge that, upon a breach of this
section 8, the other parties will suffer immediate and irreparable harm and
damage for which money damages alone cannot fully compensate. Each party
therefore agrees that, upon such breach or threat thereof, Company shall be
entitled to a temporary restraining order, preliminary injunction, permanent
injunction, and all other injunctive relief, without posting any bond or other
security, to bar
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another party from violating this Agreement. Nothing in this section shall be
construed as an election of remedies or waiver of any right available to a party
under this Agreement or by law, including without limitation the right to seek
damages from another party for breach of this Agreement.
9. TERMINATION AND AMENDMENT. (a) Notwithstanding anything herein to
the contrary, this Plan of Merger and the Articles of Merger may be terminated
and the transactions provided for thereby may be abandoned at any time before or
after approval thereof by the shareholders of Parent and FMS, and
notwithstanding approval by the other shareholders, no later than the Effective
Date (i) by mutual consent of the boards of directors of Parent and FMS, (ii) by
the board of directors of Parent if any of the conditions precedent set forth in
section 6 have not been met or waived in writing by Parent on or before December
30, 1997, or (iii) by the board of directors of FMS if any of the conditions set
forth in section 7 have not been met or waived in writing by FMS on or before
December 30, 1997.
(b) Parent and FMS, by mutual consent of their boards of
directors, may amend, modify, or supplement this Plan of Merger, before or after
approval thereof by their respective shareholders, in such manner as may be
agreed upon in writing, provided that no such amendment, modification, or
supplement shall be made or become effective materially adversely affects the
rights of the shareholders.
10. MISCELLANEOUS. All representations and warranties contained in
sections 1 and 2 shall terminate six months after the Effective Date. This Plan
of Merger shall be governed by and construed in accordance with the laws of the
State of Colorado. Each party will pay its own fees and expenses incurred in
connection with the transactions contemplated by this Plan of Merger. The
headings to the sections of this Plan of Merger are inserted for convenience
only. This Plan of Merger may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument. This Plan of Merger and all related documents, may
be executed by facimile followed by delivery of originally signed documents.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Merger to be executed as of the date first above written.
THE RECOVERY NETWORK, INC.
By: /s/ William D. Moses
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William D. Moses
President and Chief Executive
Officer
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RECOVERY DIRECT, INC.
By: /s/ Greg Richey
----------------------------
Greg Richey
President
FMS PRODUCTIONS, INC.
By: /s/ Joe C. Wood, Jr.
----------------------------
Joe C. Wood, Jr.
President and Chief Executive
Officer
/s/ John Frederick
----------------------------
John Frederick
/s/ P. Randall Frederick
----------------------------
P. Randall Frederick
/s/ Jan Smithers
----------------------------
Jan Smithers
/s/ Joe C. Wood, Jr.
----------------------------
Joe C. Wood, Jr.
/s/ Sharon R. Irish
----------------------------
Sharon R. Irish
/s/ Charles S. Sapp
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Charles S. Sapp
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EXHIBITS:
Exhibit A--Articles of Merger
Exhibit B--FMS Common Stock Ownership
Exhibit C--FMS Financial Information
Exhibit D--FMS Assets, Liabilities, Contracts, and Obligations
Exhibit D-1--Confidential Information
Exhibit E--Film Rights
Exhibit F-1--Wood Guarantees
Exhibit F-2--Frederick Guarantees
Exhibit G-1--John Frederick Employment Agreement
Exhibit G-2--Joe C. Wood, Jr. Employment Agreement
Exhibit H--Form of Registration Rights Agreements
Exhibit I--Form of Investment Letter
Exhibit J-1--Form of Opinion of FMS
Exhibit J-2--Form of Opinion of Parent or Survivor
11
Execution Version
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") dated December ___,
1997 by and between THE RECOVERY NETWORK, INC., a Colorado corporation ("RNET"),
and ___________________________, an individual residing in ___________________
("Shareholder"),
WITNESSETH:
WHEREAS, Shareholder is the holder of ____ shares of the Common
Stock, par value $0.01 per share, of RNET ("Common Stock"); and
WHEREAS, the shares of Common Stock held by Shareholder ("Shares")
constitute "restricted securities" as defined in Rule 144; and
WHEREAS, Shareholder and any Transferees will be obligated to hold
the Shares indefinitely, absent registration or the applicability of an
exemption from registration under the Securities Act; and
WHEREAS, the parties desire to provide certain registration rights
with respect to the Shares in order to enhance the transferability thereof;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange
Act of 1934 or any similar federal statute and the rules and regulations
thereunder, in effect at the time.
(c) "Prospectus" shall mean the prospectus relating to
the Shares included in any Registration Statement at the time it becomes
effective and, in the event of any amendment or supplement to such prospectus
after the effective date of such Registration Statement, shall also mean (from
and after the effectiveness of such amendment or the filing with the Commission
of such supplement) such prospectus as so amended or supplemented.
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(d) "Register," "registered," and "registration" shall
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such Registration Statement by the Commission.
(e) "Registrable Securities" shall mean all Common
shares of RNET which were
delivered pursuant to Section 4(a) of the Agreement and Plan of Merger dated
December __, 1997, and attached hereto as Exhibit A.
(f) "Registration Statement" shall mean the registration
statement filed by RNET in accordance herewith, including exhibits and financial
statements thereto, in the form in which it shall become effective and, in the
event of any amendment thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such amendment)
such registration statement as so amended.
(g) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such rule may be amended from time to
time, or any successor to such rule that may be promulgated by the Commission.
(h) "Securities Act" shall mean the Securities Act of
1933 or any similar federal
statute and the rules and regulations thereunder, in effect at the time.
(i) "Transferee" shall mean any valid transferee of the
Shares who acquires registration rights pursuant to Section 5.
2. RIGHT TO REGISTRATION. (a) On or after the date hereof,
Shareholder shall have the right, exercisable upon written notice to RNET, to
have the Shares included in any Registration Statement, containing therein a
Prospectus, filed from time to time by RNET (other than a registration statement
with respect to the resale of Financing Shares (as such term is defined in the
Company's Prospectus dated September 29, 1997)), on such form as may then be
required or available for use by RNET under the Securities Act to permit the
public offering of shares of the Common Stock. Such request shall specify the
number of Shares proposed to be subject to such Registration Statement. RNET
shall use its best efforts, including the filing of any amendments or
supplements thereto, to have any such Registration Statement declared effective
under the Securities Act as soon as practicable after the filing date thereof.
RNET shall also use its best efforts to keep any such Registration Statement and
the accompanying Prospectus effective and current under the Securities Act at
its expense for period of 90 days after its effective date. Notwithstanding the
foregoing, the obligation of RNET under this Section 2(a) is subject to (i) the
right of RNET or the managing underwriter, if any, to limit the number of Shares
to be included in any registration hereunder if RNET or such underwriter
determines in good faith that the offering of the requested number of Shares
will adversely affect the market for the Common Stock and (ii) the provisions of
Section 3. During the term of this Agreement, RNET shall not grant registration
rights to any person that would allow such person to have "piggy-back"
registration rights unless such rights specifically provide for Shareholder's
shares of Common Stock to be included, at Shareholder's election, in the same
registration statement as such person's shares and for any limitations to be
imposed against such person's shares prior to limitations being imposed on
Shareholders' shares.
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<PAGE>
(b) In connection with any Registration Statement or
similar document filed pursuant to this Section 2, RNET shall take all
reasonable steps to cause the shares of Common Stock covered by such
Registration Statement to be eligible for public offering and sale by the
effective date of such Registration Statement under the securities or blue sky
laws of such states as may be appropriate; provided that in no event shall RNET
be obligated to qualify to do business in any state where it is not so qualified
at the time of filing such documents or to take any action which would subject
it to unlimited service of process or to general taxation in any state where it
is not so subject at such time. RNET shall use its best efforts to keep such
blue sky and state filings current for the length of time it must keep the
Registration Statement, the Prospectus, or any amendment thereto effective
pursuant to this Section 2.
(c) In connection with any filing pursuant to this
Section 2, RNET shall bear all of the expenses and professional fees (other than
fees of separate counsel of Shareholder and Transferees, underwriting discounts,
commissions, and transfer taxes) which arise in connection with such filings,
including without limitation fees under the blue sky laws, the Securities Act,
and the Exchange Act, and all expenses incurred in making such filings and
keeping the filings effective and current, as required by this Agreement or by
applicable law, and shall also provide to Shareholder and Transferees (if they
are engaged in the distribution) a reasonable number of printed copies of the
Prospectus in preliminary and final form. RNET consents to the use of the
Prospectus in connection with the sale of the Shares pursuant to the Securities
Act and the rules and regulations promulgated thereunder.
(d) Shareholder and each Transferee participating in a
registration hereunder shall furnish to RNET in writing promptly upon the
request of RNET all additional information regarding Shareholder or such
Transferee, as the case may be, the Shares proposed to be included in the
registration, and such other information as shall be required in the opinion of
RNET in connection with the proposed registration by the applicable federal
securities laws and the securities laws of states in which the Shares are
contemplated to be distributed. All information furnished by Shareholder or any
Transferee shall be signed by Shareholder or such Transferee, as the case may
be, and shall be stated to be specifically for use in connection with the
registration.
(e) Notwithstanding anything to the contrary, RNET may,
at any time upon notice to Shareholder and each Transferee participating in a
registration, terminate the effectiveness of any Registration Statement or, upon
notice to Shareholder or any such Transferee, withdraw from the Registration
Statement the Shares of Shareholder or such Transferee if, in the opinion of
counsel for RNET, there shall have arisen any legal impediment to the offer of
the Shares made by the Prospectus or if any legal action or administrative
proceeding shall have been instituted or threatened or any other claim shall
have been made relating to the offer made by the Prospectus or against any of
the parties involved in such offer; provided that RNET shall use its best
efforts to resolve such matter as promptly as practicable, and, promptly after
such matters shall be resolved to the satisfaction of counsel for RNET, shall
cause the registration pursuant to this Agreement of Shares formerly covered by
the Registration Statement that were removed from registration by such action of
RNET.
(f) Neither Shareholder nor any Transferee shall have
any right to take any action to restrain, enjoin, or otherwise delay any
registration as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
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<PAGE>
3. LIMITATIONS ON RESALE. (a) Subject to Section 3(c), if RNET in
good faith determines that resales of the Shares (i) may adversely affect the
market price of any security with respect to which RNET is contemplating a
public or private offering; (ii) may adversely affect the negotiation of any
contemplated acquisition, merger, consolidation, reorganization, or other
business combination or the making of arrangements preparatory to an exchange or
tender offer, stock split, redemption, or other significant corporate
transaction; or (iii) may require RNET to disclose material developments
affecting RNET and its business that may adversely affect the market price of
any security of RNET or the terms upon which RNET may consummate any transaction
specified in clause (ii) above and that RNET would otherwise not be required by
law to disclose at such time; RNET may, by notice to Shareholder and
Transferees, limit resales of the Shares from time to time pursuant to any
Registration Statement filed pursuant to this Agreement for one or more periods
of up to 20 consecutive trading days specified in such notice by requiring
Shareholder and Transferees to abstain from selling any Shares pursuant to the
Registration Statement. The notice by RNET pursuant to this Section 3(a) shall
be effective immediately upon receipt with respect only to resales not then
completed or contractually committed to by Shareholder or any Transferee, and
Shareholder or any Transferee receiving such notice shall immediately limit
resales of the Shares as specified in the notice.
(b) If, after giving notice pursuant to Section 3(a),
RNET determines that the contemplated offering of securities, acquisition,
merger, consolidation, reorganization, share exchange, or other business
combination will not occur or will be delayed or determines that resales of the
Shares will not adversely affect such an offering or transaction or require
affirmative disclosure adverse to RNET's interests, RNET shall promptly notify
Shareholder and Transferees that the prior notice and the limitations contained
in such notice are rescinded.
(c) RNET shall be entitled to restrict resales of the
Shares for an aggregate maximum of 60 trading days pursuant to Section 3(a). The
time period for effectiveness of any Registration Statement filed under Section
2 shall be extended automatically by one day for each day of any interruption or
limitation pursuant to this Section 3.
4. INDEMNIFICATION. (a) RNET shall indemnify and hold harmless
Shareholder and each Transferee participating in a registration pursuant to this
Agreement, each of its officers and directors, if applicable, and each person
controlling Shareholder or such Transferee, as the case may be, within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all expenses, claims, losses, damages, and liabilities (or action
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, the Prospectus, or other document incident thereto, or
any amendment or supplement thereof, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by RNET of any rule or
regulation promulgated under the Securities Act applicable to RNET and relating
to action or inaction required of RNET in connection with the Registration
Statement or the Prospectus, and shall reimburse Shareholder and such Transferee
and each other person indemnified pursuant to this Section 4(a) for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing, or defending any such claim, loss, damage, liability, or action;
provided, however, that RNET shall not be liable in any such
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<PAGE>
case to the extent that any such claim, loss, damage, liability, or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to RNET by an instrument duly executed by or on behalf of
Shareholder or such Transferee and stated to be specifically for use in the
Registration Statement or the Prospectus.
(b) Shareholder and each Transferee, by participating in
a registration pursuant to this Agreement, thereby agree to indemnify and hold
harmless RNET, its officers and directors, each underwriter, if any, of RNET's
securities covered by a Registration Statement, each person who controls any of
them within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act, and their respective successors, against all claims, losses,
damages, and liabilities to third parties (or actions in respect thereof)
arising out of or based on any violation of the Securities Act or of applicable
state securities laws or arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any Registration
Statement or Prospectus or other document incident thereto, or filed with the
Commission or any securities exchange, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse RNET and each other
person indemnified pursuant to this Section 4(b) for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) was made in reliance upon and in conformity with
written information furnished to RNET by an instrument duly executed by or on
behalf of Shareholder or such Transferee and stated to be specifically for use
in the Registration Statement or in the Prospectus.
(c) Each party entitled to indemnification under this
Section 4 ("Indemnified Party") shall give notice to the party required to
provide indemnification ("Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided in this Section 4 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
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<PAGE>
connection with the statements or omissions which resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in any underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in such underwriting
agreement shall be controlling.
5. TRANSFER OF REGISTRATION RIGHTS. The registration rights set
forth herein shall be transferable, upon ten days' written notice to RNET, to
any person validly acquiring the Shares; provided that if notice of the transfer
of such registration rights to any such person is given to RNET after the
thirtieth day following notice to Shareholder and such Transferees pursuant to
Section 2(a), Shareholder transferring such rights shall pay all costs and
expenses reasonably incurred by RNET in including such Transferee in the
requested registration, including reasonable counsel fees of RNET; and provided
further that any such Transferee shall be subject to all of the terms and
conditions of this Agreement.
6. MISCELLANEOUS. (a) This Agreement shall be binding upon and inure
to the benefit of the respective heirs, personal representatives, successors,
and assigns of the parties hereto.
(b) No modification, amendment, or waiver of this Agreement or any
provision hereof shall be effective unless in writing and executed by
Shareholder and RNET. Any modification, amendment, or waiver of this Agreement
or any provision hereof adopted in accordance with this Section 6 shall bind all
Transferees.
(c) All amendments and waivers under this Agreement and all notices,
consents, demands, requests, approvals, and other communications that are
required or may be given hereunder shall, unless otherwise provided herein, be
in writing and shall be deemed to have been given when hand delivered or two
days after being mailed, by certified mail, return receipt requested, to the
intended recipient as follows, or to such other address as the party may provide
in accordance with this Section 6:
If to RNET:
THE RECOVERY NETWORK, INC.
506 Santa Monica Boulevard, Suite 400
Santa Monica, CA 90401
Attn: Greg Richey
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<PAGE>
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, CO 80203
Attn: Garth B. Jensen
If to Shareholder:
At the address set forth on the signature page
(d) Shareholder hereby acknowledges that (i) RNET may not file any
registration statement prior to the first year anniversary of RNET's initial
public offering without the prior written consent of Whale Securities Co., L.P.
and (ii) RNET has informed Shareholder that it currently does not intent to seek
to file any registration statement on its behalf prior to such date.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
THE RECOVERY NETWORK, INC.
By: _______________________________
SHAREHOLDER
By: _______________________________
Address:___________________________
___________________________
___________________________
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