SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
The Recovery Network, Inc.
----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
__________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
__________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
__________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
__________________________________________________________________________
<PAGE>
(5) Total fee paid:
__________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
__________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________________________
(3) Filing Party:
__________________________________________________________________________
(4) Date Filed:
__________________________________________________________________________
<PAGE>
THE RECOVERY NETWORK, INC.
1411 FIFTH STREET, SUITE 200
SANTA MONICA, CALIFORNIA 90401
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
To the Shareholders of The Recovery Network, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of The Recovery Network, Inc. (the "Company") will be held at the
offices of the Company, 1411 Fifth Street, Suite 200, Santa Monica, California
90401, on Thursday, September 10, 1998 at 2:00 p.m., Pacific time, to consider
and act upon the following matters:
(1) To approve the issuance of additional shares of the Company's Common
Stock pursuant to a Subscription Agreement dated June 29, 1998
between the Company and the subscribers referred to therein; and
(2) To transact such other business as may properly come before the
Meeting, including any adjournments or postponements thereof.
Information regarding the matters to be acted upon at the Meeting is
contained in the accompanying Proxy Statement.
The close of business on July 29, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting or any adjournment or postponement thereof.
By Order of the Board of Directors,
GREGORY L. RICHEY
Secretary
Santa Monica, California
August __, 1998
- --------------------------------------------------------------------------------
It is important that your shares be represented at the Meeting. Each shareholder
is urged to sign, date and return the enclosed proxy card which is being
solicited on behalf of the Board of Directors. An envelope addressed to the
Company's transfer agent is enclosed for that purpose and needs no postage if
mailed in the United States.
- --------------------------------------------------------------------------------
<PAGE>
THE RECOVERY NETWORK, INC.
1411 FIFTH STREET, SUITE 200
SANTA MONICA, CALIFORNIA 90401
PROXY STATEMENT
This Proxy Statement is furnished to the holders of Common Stock,
par value $.01 per share ("Common Stock"), of The Recovery Network, Inc., a
Colorado corporation (the "Company") in connection with the solicitation by and
on behalf of its Board of Directors of proxies ("Proxy" or "Proxies") for use at
a Special Meeting of Shareholders (the "Meeting") to be held on Thursday,
September 10, 1998, at 2:00 p.m., Pacific time, at the offices of the Company,
1411 Fifth Street, Suite 200, Santa Monica, California 90401 and at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of a Special Meeting of Shareholders. The cost of preparing,
assembling and mailing the Notice of a Special Meeting of Shareholders, this
Proxy Statement and Proxies is to be borne by the Company. The Company will also
reimburse brokers who are holders of record of Common Stock for their expenses
in forwarding Proxies and Proxy soliciting material to the beneficial owners of
such shares. In addition to the use of the mails, Proxies may be solicited
without extra compensation by directors, officers and employees of the Company
by telephone, telecopy, telegraph or personal interview. The approximate mailing
date of this Proxy Statement is August __, 1998.
Unless otherwise specified, all Proxies, in proper form, received by
the time of the Meeting will be voted in favor of each of the proposals set
forth in the accompanying Notice of Special Meeting of Shareholders and
described below.
A Proxy may be revoked by a shareholder at any time before its
exercise by filing with Gregory L. Richey, the Secretary of the Company, at the
address set forth above, an instrument of revocation or a duly executed proxy
bearing a later date, or by attendance at the Meeting and electing to vote in
person. Attendance at the Meeting will not, in and of itself, constitute
revocation of a Proxy.
The close of business on July 29, 1998 has been fixed by the Board
of Directors as the record date ("Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting and any
adjournment thereof. As of the Record Date, there were ___________ shares of
Common Stock outstanding. Each share of Common Stock outstanding on the Record
Date will be entitled to one vote on all matters to come before the Meeting.
A majority of the shares entitled to vote, represented in person or
by proxy, is required to constitute a quorum for the transaction of business.
Proxies submitted which contain abstentions or broker nonvotes will be deemed
present at the Meeting for determining the presence of a quorum but are not
counted in the tabulation of the votes cast on the Proposal. Thus, an abstention
from voting or a Proxy in which no direction is specified will have the same
effect as a vote "against" the matter, even though the shareholder may interpret
such action differently.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of July 15,
1998, relating to the beneficial ownership of shares of Common Stock by: (i)
each person or entity who is known by the Company to own beneficially five
percent or more of the outstanding Common Stock, (ii) each of the Company's
directors and (iii) all directors and executive officers of the Company as a
group.
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(A) BENEFICIALLY OWNED(b) OF CLASS
- --------------------------------------- --------------------- --------
William D. Moses............................ 766,681(c) 12.4%
George H. Henry(d).......................... 344,183(e) 5.7
Donald J. Masters........................... 164,342(f) 2.7
Nimrod J. Kovacs(g)......................... 65,623(h) 1.0
Mark S. Gold, M.D........................... 12,915(i) *
Austost Anstalt Schaan (j).................. 285,657(k) 4.8%
Balmore Funds S.A (l). ..................... 285,657(k) 4.8%
All directors and executive officers as
a group (7 persons).................... 1,431,829(m) 21.9%
- ---------------------
* Less than 1%.
(a) Unless otherwise indicated, the address for each named individual or group
is in care of The Recovery Network, Inc., 1411 5th Street, Suite 200,
Santa Monica, California 90401.
(b) Each beneficial owner's percentage ownership is determined by assuming
that options, warrants or convertible securities that are held by such
person (but not those held by any other person) and which are exercisable
within 60 days of July 15, 1998 have been exercised and converted.
Pursuant to a "change of control" provision in the various stock option
contracts issued to the beneficial owners, all stock options beneficially
owned by each person are currently exercisable. Assumes a base of
5,977,920 shares of Common Stock before any consideration is given to
outstanding options, warrants or convertible securities.
(c) Includes (i) options to purchase 137,915 shares of Common Stock and (ii)
warrants to purchase 43,750 shares of Common Stock.
(d) The address of the beneficial owner is 6860 Sunrise Court, Coral Gables,
Florida 33133.
(e) Includes (i) options to purchase 47,915 shares of Common Stock and (ii)
warrants to purchase 62,500 shares of Common Stock.
(f) Includes (i) options to purchase 88,745 shares of Common Stock, (ii)
37,212 shares of Common Stock held jointly by Mr. Masters and his spouse,
(iii) 14,259 shares of Common Stock held in the name of trusts for the
benefit of the children of Mr. Masters and his spouse (Mr. Masters
disclaims beneficial ownership of the shares of Common Stock held in
trust) and (iv) warrants to purchase 6,250 shares of Common Stock held
jointly by Mr. Masters and his spouse.
(g) The address of the beneficial owner is 50 Falcon Hills Drive, Highland
Ranch, Colorado 80126.
(h) Includes (i) options to purchase 47,915 shares of Common Stock, and (ii)
warrants to purchase 6,250 shares of Common Stock held by Kovacs
Communication, Inc., of which Mr. Kovacs is a controlling shareholder.
(i) Includes options to purchase 12,915 shares of Common Stock.
-2-
<PAGE>
(j) The address of the beneficial owner is 7440 Fuerstentum, Lichenstein,
Landstrasse 163.
(k) Does not include 77,676 shares of Common Stock (30,000 of which are
issuable upon exercise of warrants) issuable only upon the filing of a
registration statement by the Company covering such securities and the
obtainment of shareholder approval contemplated herein.
(l) The address of the beneficial owner is P.O. Box 4603, Zurich, Switzerland.
(m) Includes (i) options to purchase 439,001 shares of Common Stock and (ii)
warrants to purchase 118,750 shares of Common Stock.
-3-
<PAGE>
PROPOSAL 1
TO APPROVE THE ISSUANCE OF ADDITIONAL SHARES OF THE COMPANY'S COMMON
STOCK PURSUANT TO A SUBSCRIPTION AGREEMENT
GENERAL
On June 29, 1998 (the "Subscription Date"), the Company entered into
a Subscription Agreement (the "Agreement") with certain subscribers (the
"Subscribers") with aggregate proceeds of up to $5.5 million (the "Private
Placement"). The Private Placement provides for the issuance by the Company of
(i) 1,111,110 shares (the "Shares") of Common Stock for $2,500,000, together
with warrants to purchase 100,000 shares of Common Stock (the "Warrants") and
(ii) up to $3 million of additional shares of Common Stock pursuant to certain
put rights (the "Put").
The Company has also issued to certain placement agents an aggregate
of 43,716 shares of Common Stock (the "Placement Shares"), of which 13,115
shares were delivered to an escrow agent and will be released upon the
satisfaction by the Company of certain conditions, including the filing by the
Company of a registration statement with respect to the Shares, the shares of
Common Stock issuable upon exercise of the Warrants and the Placement Shares
(collectively, the "Securities") and the approval contemplated herein.
The Company intents to use the proceeds from the sale of the
securities for working capital, general corporate purposes and for the expenses
of the Private Placement.
COMMON STOCK AND WARRANTS
The Shares were sold at an initial price of $2.25 per share (the
"Closing Price"), which was 75% of the average of the closing bid prices of the
Common Stock for the five day trading period immediately preceding the
Subscription Date. Of the 1,111,110 shares purchased, 777,776 shares have been
issued and delivered to the Subscribers and 174,415 shares were issued to the
Subscribers but delivered to an escrow agent (the "Escrowed Shares"). The
remaining 158,919 shares have not been issued by the Company as such issuance is
conditioned upon the approval contemplated herein. See "Reason for Shareholder
Approval". Of the $2,500,000 purchase price of the Common Stock and the
Warrants, $1,750,000 was delivered to the Company and $750,000 was delivered to
the escrow agent (the "Escrowed Funds"). Delivery of the Escrowed Shares to the
Subscribers and the Escrowed Funds to the Company is conditioned upon the filing
by the Company of a registration statement with respect to the Securities and
the approval contemplated herein.
The Subscribers received certain reset rights (the "Reset Rights"),
which may require the Company to issue additional shares of Common Stock to the
Subscribers in the future (the "Reset Shares"). Pursuant to the Reset Rights,
the Subscribers will be entitled to additional shares of Common Stock, without
the payment of additional consideration, to account for a decrease in the market
value of the Common Stock after the Subscription Date. The initial repricing
date is the date on which a registration statement covering the Securities has
been declared effective by the Securities and Exchange Commission (the
"Commission") or, at the Subscriber's election, on the 180th day after the
Subscription Date if such registration statement has not been declared effective
by the Commission on such date ("Trigger Date"). The Closing Price will be
subject to subsequent repricing on the 30th, 60th, 90th, 120th, 150th, 180th,
210th, 240th, and 270th days following the Trigger Date (the Trigger Date and
each of such other dates, a "Repricing Date"). If the closing bid price on any
Repricing Date is lower than the Closing Price, then, at each Subscriber's
election, not less than 10% and not more than 25% of the initial purchase price
(the "Designated Portion"), shall be subject to the Reset Rights. To account for
any deficiency between the closing bid price on any Repricing Date and the
Closing Price, the Company will issue additional shares to the Subscribers (the
"Repricing Shares") equal to the number of additional shares that could be
purchased for the Designated Portion on such date.
-4-
<PAGE>
In light of the rules of the National Association of Securities
Dealers, the Company will not be able to issue 20% or more of the outstanding
shares of Common Stock unless this proposal is approved by the shareholders of
the Company. See "Reason for Shareholder Approval". If shareholder approval of
the proposed issuance is not obtained, the Company is obligated under the
Agreement to pay to the Subscribers, for each additional share the Subscribers
are otherwise entitled under the Reset Rights, the average closing bid price for
the Common Stock for the five trading days immediately preceding, but not
including, a Repricing Date.
In lieu of delivering additional shares pursuant to the Reset
Rights, the Company has received certain repurchase rights. The repurchase
rights provide that the Company may, in the event the average closing bid price
for the Common Stock on the NASDAQ SmallCap Market for the five trading days
immediately preceding, but not including, a Repricing Date is less than $2.50
per share (the "Redemption Price"), deliver a sum of money determined by
multiplying the number of additional shares otherwise deliverable by the
Redemption Price.
PUT
The Put provides for a maximum funding of $3,000,000, which may be
called upon at the election of the Company and is subject to various conditions.
The Put contemplates the issuance of Common Stock required to be purchased from
time to time by the Subscribers over a two year period (the "Put Shares") upon
notice (a "Put Notice") from the Company, at a price equal to 88% of the average
closing bid prices of the Company's Common Stock over the five-day trading
period beginning two trading days prior to the date the Put Notice is given and
ending two trading days after the Put Notice is given. The obligation of the
Subscribers to purchase Common Stock under a Put is subject to various
conditions, including conditions relating to market price, trading volume and
timing. The number of shares of Common Stock that the Company may issue at any
one time pursuant to the Put is limited, depending upon the average closing bid
price for the Common Stock immediately preceding the date of the Put Notice.
RIGHT OF FIRST REFUSAL
If the Company seeks to sell shares of its Common Stock to
prospective investors at any time after the Subscription Date until the later of
90 days after the effective date of a registration statement covering the
Securities or 270 days after the Subscription Date, the Company must give the
Subscribers (i) prior written notice of such sale and (ii) an opportunity to
purchase an amount of Common Stock to maintain their respective proportionate
interests in the Company (the "Right of First Refusal"). The Right of First
Refusal must be on the same terms and conditions offered to the prospective
investors.
REASON FOR SHAREHOLDER APPROVAL
Under the rules of the National Association of Securities Dealers,
issuers whose securities are listed on the NASDAQ SmallCap Market, the exchange
on which the Company's Common Stock is listed, are required to obtain
shareholder approval, prior to the issuance of securities, in the following
limited circumstances, in connection with a transaction other than a public
offering involving: (i) the sale or issuance by the issuer of common stock (or
securities convertible into or exercisable for common stock) at a price less
than the greater of book or market value which together with sales by officers,
directors or substantial shareholders of the Company equals 20 percent or more
of common stock or 20 percent or more of the voting power outstanding before the
issuance; or (ii) the sale or issuance by the Company of common stock (or
securities convertible into or exercisable to purchase common stock) equal to 20
percent or more of the common stock or 20 percent or more of the voting power
outstanding before the issuance for less than the greater of book or market
value of the stock.
As of June 23, 1998, there were 4,982,017 shares of Common Stock
outstanding. Based on such amount of shares outstanding, the Company was able to
issue pursuant to the Agreement, without shareholder approval,
-5-
<PAGE>
995,907 shares of Common Stock. Assuming that neither the Reset Rights nor the
Put is exercised, the Company is required pursuant to the Agreement to issue
1,254,826 shares of Common Stock under the Private Placement, including 100,000
shares issuable upon exercise of the Warrants.
Therefore, the Board of Directors seeks shareholder approval of the
proposed issuance of securities pursuant to the Agreement, including the
Securities, the Reset Shares and the Put Shares. The issuance involves the
Company issuing 20% or more of the shares of Common Stock outstanding.
Shareholders are being asked to approve only the proposed issuance and are not
being asked to approve any other aspect of the Private Placement.
If shareholder approval of the proposed issuance is not obtained,
the Company is obligated under the Agreement to pay to the Subscribers, for each
additional share the Subscribers are otherwise entitled under the Reset Rights,
the average closing bid price for the Common Stock for the five trading days
immediately preceding, but not including, a Repricing Date. In addition, if
shareholder approval of the proposed issuance is not obtained, the Company is
obligated under the Agreement to pay monthly as liquidated damages to the
Subscribers 3% of the initial purchase price of the Common Stock owned by the
Subscribers. Finally, if shareholder approval of the proposed issuance is not
obtained, the Escrowed Funds will not be released to the Company but instead
will be returned to the Subscribers.
If shareholder approval of the proposed issuance is obtained,
158,919 shares of Common Stock will be issued to the Subscribers and delivered
to the escrow agent. Those shares along with the shares already held by the
escrow agent will be released to the Subscribers and the Escrowed Funds released
to the Company upon the filing of a registration statement by the Company
covering the Securities.
VOTE REQUIRED
A vote of the holders of a majority of the voting power of the
issued and outstanding Common Stock of the Company, present in person or
represented by proxy at the Meeting and entitled to vote at the Meeting, is
required to approve the issuance of securities pursuant to the Private
Placement. Proxies submitted which contain abstentions or broker nonvotes will
be deemed present at the Meeting for determining the presence of a quorum but
are not counted in the tabulation of the votes cast on the Proposal. Thus, an
abstention from voting or a Proxy in which no direction is specified will have
the same effect as a vote "against" the matter, even though the shareholder may
interpret such action differently.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
-6-
<PAGE>
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company not later than October
15, 1998 for inclusion in the Company's proxy statement and form of proxy for
that meeting.
OTHER MATTERS
Management does not intend to bring before the Meeting for action
any matters other than those specifically referred to above and is not aware of
any other matters which are proposed to be presented by others. If any other
matters or motions should properly come before the Meeting, the persons named in
the Proxy intend to vote thereon in accordance with their judgment on such
matters or motions, including any matters or motions dealing with the conduct of
the Meeting.
PROXIES
All shareholders are urged to fill in their choices with respect to
the matters to be voted on, sign and promptly return the enclosed form of Proxy.
By Order of the Board of Directors,
GREGORY L. RICHEY
Secretary
August __, 1998
-7-
<PAGE>
PROXY CARD
PROXY PROXY
THE RECOVERY NETWORK, INC.
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock of THE RECOVERY NETWORK,
INC., revoking all proxies heretofore given, hereby constitutes and appoints
William D. Moses and Gregory L. Richey, and each of them, Proxies, with full
power of substitution, for the undersigned and in the name, place and stead of
the undersigned, to vote all of the undersigned's shares of said stock,
according to the number of votes and with all the powers the undersigned would
possess if personally present, at the Special Meeting of Shareholders of THE
RECOVERY NETWORK, INC., to be held at 1411 Fifth Street, Suite 200, Santa
Monica, California 90401, on Thursday, September 10, 1998 at 2:00 p.m., Pacific
time, and at any adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made below and in the discretion of the Proxies on any other
matter that may come before the meeting. Where no choice is specified, this
Proxy will be voted FOR Proposal 1 set forth below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1
PLEASE MARK, DATE AND SIGN THIS PROXY ON THIS AND THE REVERSE SIDE
<PAGE>
1. Proposal to approve the issuance of additional shares of the Company's
Common Stock pursuant to a Subscription Agreement.
|_| FOR |_| AGAINST |_| ABSTAIN
2. The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the Meeting.
The shares represented by this proxy will
be voted in the manner directed. In the
absence of any direction, the shares will be
voted FOR Proposals 1 and in accordance with
their discretion on such other matters as
may properly come before the Meeting.
Dated ______________________________, 1998
____________________________________________
____________________________________________
Signature(s)
(Signature(s) should conform to names as
registered. For jointly owned shares, each
owner should sign. When signing as attorney,
executor, administrator, trustee, guardian
or officer of a corporation, please give
full title).
PLEASE MARK AND SIGN ABOVE AND
RETURN PROMPTLY
