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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ X ] 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:
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THE RECOVERY NETWORK, INC.
1411 Fifth Street, Suite 200
Santa Monica, California 90401
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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 certain Subscription Agreements 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,
/s/GREGORY L. RICHEY
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GREGORY L. RICHEY
Secretary
Santa Monica, California
August 12, 1998
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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.
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<PAGE>
THE RECOVERY NETWORK, INC.
1411 Fifth Street, Suite 200
Santa Monica, California 90401
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PROXY STATEMENT
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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 14, 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 5,977,920 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.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of August 12,
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.
<TABLE>
<CAPTION>
Number of shares Percentage
Name and address of beneficial owner(a) beneficially owned (b) of class
- --------------------------------------- ---------------------- --------
<S> <C> <C>
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%
Charlotte Schiff-Jones.............................. 0 *
Austost Anstalt Schaan (i).......................... 285,657(j) 4.8%
Balmore Funds S.A (k). ............................. 285,657(j) 4.8%
All directors and executive officers as 1,444,425(l) 22.1%
a group (8 persons)............................
</TABLE>
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* 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, which defines a
"change of control" to have occurred if individuals who are directors
at the beginning of a 24-month period fail to constitute at least
two-thirds of all directors of the Company during such period, in the
various stock option contracts issued to certain of the beneficial
owners, all stock options beneficially owned by such 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.
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<PAGE>
(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) The address of the beneficial owner is 7440 Fuerstentum, Lichenstein,
Landstrasse 163.
(j) 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.
(k) The address of the beneficial owner is P.O. Box 4603, Zurich,
Switzerland.
(l) Includes (i) options to purchase 439,001 shares of Common Stock and
(ii) warrants to purchase 118,750 shares of Common Stock.
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<PAGE>
Proposal 1
APPROVAL OF THE ISSUANCE OF ADDITIONAL SHARES OF THE COMPANY'S COMMON
STOCK PURSUANT TO CERTAIN SUBSCRIPTION AGREEMENTS
General
On June 29, 1998 (the "Subscription Date"), the Company entered into
Subscription Agreements (the "Agreements") with certain subscribers (the
"Subscribers") pursuant to which the Company is entitled to aggregate proceeds
of up to $5.5 million (the "Private Placement"). The Agreement, provide 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 Rights").
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 Subscribers are first
entitled to such additional shares on 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
Company may be required to issue Reset Shares 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.
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<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
Agreements 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 Company also has the right to "put" up to $3,000,000 the
Subscribers over a two year period (the "Put Shares") after delivery of a 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, where 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 Agreements, without shareholder approval, 995,907 shares
of Common Stock. Assuming that neither the Reset Rights nor the Put Rights are
exercised, the Company is required pursuant to the Agreements to issue 1,254,826
shares of Common Stock under the Private
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<PAGE>
Placement, including 100,000 shares issuable upon exercise of the Warrants. The
Company may be required to issue an indeterminate number of shares of Common
Stock if the Reset rights or the Put Rights are exercised.
Therefore, the Board of Directors seeks shareholder approval of the
proposed issuance of securities pursuant to the Agreements, 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 Agreements 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 Agreements 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. An additional indeterminate number of shares of common stock may be
issued upon exercise of the Reset Rights or the Put Rights.
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.
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<PAGE>
MISCELLANEOUS
Shareholder Proposals
If a shareholder intends to present a proposal at the Company's 1999
Annual Meeting of Shareholders and wants that proposal to be included in the
Company's Proxy Statement and form of proxy for that meeting, the proposal must
be received at the Company's principal executive offices not later than December
30, 1998. As to any proposal that a shareholder intends to present to
shareholders without including it in the Company's proxy statement for the
Company's 1999 Annual Meeting of Shareholders, the proxies named in Management's
proxy for that meeting will be entitled to exercise their discretionary
authority on that proposal unless the Company receives notice of the matter to
be proposed not later than March 15, 1999. Even if proper notice is received on
or prior to March 15, 1999, the proxies named in Management's proxy for that
meeting may nevertheless exercise their discretionary authority with respect to
such matter by advising shareholders of such proposal and how they intend to
exercise their discretion to vote on such matter, unless the shareholder making
the proposal solicits proxies with respect to the proposal to the degree
required by Rule 14a-4(c)(2) of the Securities Exchange Act of 1934, as amended.
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,
/s/ GREGORY L. RICHEY
GREGORY L. RICHEY
Secretary
August 12, 1998
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<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.
|_| 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 Proposal 1 and in
accordance with their discretion on such
other matters as may properly come
before the Meeting.
Dated ---------------------------- 1998
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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
