Registration No. 333-________
As Filed with the Securities and Exchange Commission on April 12, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
Registration Statement Under
The Securities Act of 1933
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RARE MEDIUM GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2368845
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
44 West 18th Street, 6th Floor, New York, NY 10011
(212) 634-6950
(Name and address, including zip code, and
telephone number, including area code, of
Registrant's principal executive offices)
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street, 38th Floor
Philadelphia, Pennsylvania 19103-7598
Telephone: (215) 994-1046 Telefax: (215) 994-1111
(Name and address, including zip code, and telephone number,
including area code, of
agent for service)
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Approximate date of commencement of proposed sale to public: From time
to time after this registration statement becomes effective. |_|
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis, pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------- ----------------------- --------------- ------------------- -----------------
Proposed Proposed
maximum maximum
offering aggregate
Title of each class of Amount to be price per offering Amount of
securities to be registered registered share (1) price (1) registration fee
- -------------------------------- ----------------------- --------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock, $.01 Par Value 2,500,000 shares(2) $5.25 $13,125,000.00 $3,649.00
- -------------------------------- ----------------------- --------------- ------------------- -----------------
Total 2,500,000 shares $3,649.00
================================ ======================= =============== =================== =================
</TABLE>
(1) Estimated solely for purpose of determining the registration fee pursuant
to Rule 457(c) under the Securities Act. The proposed maximum offering
price per share is based upon the average of the high and low prices of the
common stock on April 5, 1999, as reported on the Nasdaq National Market.
(notes continued on following page)
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(2) The Company is registering for resale by the selling securityholder, shares
that may be acquired by such selling securityholder upon conversion of
certain 8% Convertible Term Debentures of the Company and upon exercise of
certain Stock Purchase Warrants of the Company. Pursuant to Rule 416 of the
Securities Act of 1933, as amended, this registration statement also
registers such additional number of shares of Registrant's common stock as
may become issuable upon conversion of the Convertible Debentures or
exercise of the Stock Purchase Warrants as a result of stock splits, stock
dividends and similar transactions.
---------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The Information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. The prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated April 12, 1999
PROSPECTUS
2,500,000 Shares
RARE MEDIUM GROUP, INC.
COMMON STOCK
--------------------
This prospectus relates to the offer for sale from time to time of up
to 2,500,000 shares of common stock of Rare Medium Group, Inc. (the "Company")
by a holder of convertible debentures and warrants of the Company (the "Selling
Securityholder"). Although the Company will receive the benefit of satisfaction
of indebtedness if the convertible debentures are converted and exercise
proceeds if the warrants are exercised, the Company will not receive any portion
of the proceeds from the resale of the shares by the Selling Securityholder. For
more information on the convertible debentures and warrants please see "Recent
Developments - The Private Placement of Convertible Debentures and Warrants to
Capital Ventures International" and "Selling Securityholder" below.
Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
Prospectus also concerns such additional number of shares of common stock as may
become issuable upon conversion of the Convertible Debentures or CVI Warrants
(as defined herein) as a result of stock splits, stock dividends and similar
transactions. Currently, there are approximately 1.1 million shares of common
stock issueable upon conversion of the Convertible Debentures or the exercise
of the CVI Warrants. The remainder of such shares are subject to various
conditions, including the conversion rate or exercise price as of the date of
this prospectus. See "Recent Developments - The Private Placement of
Convertible Debentures and Warrants to Capital Ventures International" and
"Selling Securityholder" below.
The Company's common stock is listed on the Nasdaq National Market
under the symbol RRRR. On April 5, 1999, the closing sale price of the common
stock, as reported on the Nasdaq National Market, was $5 3/16 per share.
Investing in the Company's common stock involves a high degree of risk.
For a discussion of certain factors you should consider in connection with any
decision to purchase shares in this offering please see "Risk Factors" beginning
on page 4.
The Selling Securityholder may sell the shares of common stock
described in this prospectus in public or private transactions, on or off the
Nasdaq National Market, at prevailing market prices, or at privately negotiated
prices. The Selling Securityholder may sell shares directly to purchasers or
through brokers or dealers. Brokers or dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholder.
For more information on how the shares may be distributed please see "Plan of
Distribution" below.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April __, 1999.
<PAGE>
TABLE OF CONTENTS
WHERE YOU CAN GET MORE INFORMATION............................................3
INCORPORATION OF DOCUMENTS BY REFERENCE.......................................3
FORWARD-LOOKING STATEMENTS....................................................4
RISK FACTORS..................................................................4
THE COMPANY..................................................................13
RECENT DEVELOPMENTS..........................................................13
SELLING SECURITYHOLDER.......................................................15
PLAN OF DISTRIBUTION.........................................................17
USE OF PROCEEDS..............................................................19
LEGAL MATTERS................................................................19
EXPERTS......................................................................19
(2)
<PAGE>
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy these reports, proxy statements and other information at the SEC public
reference rooms in Washington DC, New York NY or Chicago IL. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
costs. Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference rooms. Our SEC filings are also available at
the SEC's Web site at "http://www.sec.gov." In addition, you can read and copy
our SEC filings at the office of the National Association of Securities Dealers,
Inc. at 1735 K Street, Washington DC 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information that we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. Specifically,
we incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 10-K for the year ended December 31, 1998;
o Current Reports on Form 8-K filed with the SEC on February 4, 1999, and
February 10, 1999;
o Definitive Proxy Statement for a Special Meeting of Stockholders held on
March 16, 1999, filed with the SEC on February 17, 1999; and
o The description of the common stock contained in ICC's Registration
Statement on Form 10 dated September 15, 1985 filed with the SEC under the
Securities Exchange Act of 1934 (Commission File No. 0-12865).
You may request a copy of these filings, at no cost, by writing,
telephoning or emailing us at the following address:
John S. Gross, Senior Vice President,
Chief Financial Officer,
Treasurer, and Assistant Secretary
Rare Medium Group, Inc.
44 West 18th Street, 6th Floor
New York NY 10011
Telephone: (212) 634-6950
[email protected]
This prospectus is part of a Registration Statement we filed with the
SEC. You should rely only on the information provided in this prospectus or
incorporated by reference. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the
(3)
<PAGE>
front of the document. We are not making an offer of these securities in any
state where the offer is not permitted.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's capital
needs, business strategy, the listing of its common stock on the Nasdaq National
Market, Year 2000 compliance, expectations and intentions. The words "believe,"
"anticipate," "expect," "estimate," "intend," and similar expressions identify
forward-looking statements. Forward-looking statements necessarily involve risks
and uncertainties, and the Company's actual results could differ materially from
those anticipated in the forward-looking statements, including those set forth
below under "Risk Factors" and elsewhere in this prospectus. The factors set
forth below under "Risk Factors" and other cautionary statements made in this
prospectus should be read and understood as being applicable to all related
forward-looking statements wherever they appear in this prospectus.
RISK FACTORS
Investing in the Company's common stock is very risky. In deciding
whether to invest, you should carefully consider the following risk factors, in
addition to the other information in this prospectus and information
incorporated into this prospectus by reference. Any one of the following risks
could result in a material adverse effect on our business, results of operation,
financial condition and the market price of our common stock.
The Rare Medium Business Has a Limited Operating History.
The Company acquired Rare Medium, Inc. on April 15, 1998. As a result
of such acquisition, the Company has changed its overall operations to focus
solely on the business of providing Internet professional services and other
Internet related products and services. Moreover, Rare Medium, Inc. itself was
founded in September 1995. With a very limited operating history on which to
evaluate Rare Medium, Inc.'s business and prospects, it is more difficult for
you to predict whether or not we will be successful. You should evaluate our
chances of financial and operational success in view of the risks,
uncertainties, delays and difficulties associated with starting a new business
many of which may be beyond our control. There is no assurance that we will be
successful in meeting the challenges and addressing the risks that we face in a
new and rapidly expanding market such as Internet professional services and
other Internet related products and services. In addition, the Company's
business strategy has been evolving and is expected to continue to evolve. There
can be no assurance that the Company's strategy will be successful or that it
will meet the demands created by changing industry conditions and competition.
There Can Be No Assurance That We Will Achieve or Sustain Profitability.
Although we have experienced revenue growth, this growth may not be
sustainable or indicative of future operating results. In addition, we have
incurred substantial costs to expand and integrate our operations and we intend
to continue to invest
(4)
<PAGE>
heavily in acquisition, infrastructure and marketing. Our ongoing integration
costs will include the combination of the financial, information and
communications systems of the various companies that we have acquired and expect
to acquire. Our ongoing expansion costs will include the leasing of additional
office space and the purchase and leasing of new computer and communications
equipment. As a result of these and other costs, we may continue to incur
operating losses through 1999 or beyond, and there can be no assurance that we
will achieve or sustain profitability.
Our Ability to Obtain Additional Financing in Order to Meet Our Future Capital
Needs is Uncertain.
Although we believe that we have sufficient working capital to fund our
operations through December 31, 1999, we may need to sell additional equity or
debt securities or seek credit facilities within that period in order to fund
more rapid expansion, develop new or enhanced services and products, respond to
competitive pressures, acquire complementary businesses or technologies or take
advantage of unanticipated opportunities. In addition, we will need to sell
additional equity or debt securities or seek credit facilities to satisfy our
debt obligations to certain former stockholders of Rare Medium, Inc. We have not
entered into any agreements or commitments to sell additional equity or debt
securities or to obtain a credit facility for any of such purposes. We may not
be able to borrow money or issue more shares of common stock to meet our cash
needs. Even if we can complete such transactions, they may not be on terms that
are favorable or reasonable from our prospective. Sales of additional equity or
convertible debt securities would result in additional dilution to our
stockholders. Future liquidity and capital requirements will depend upon
numerous factors, including the success of our existing and new service
offerings and competing technological and market developments. There can be no
assurance that such funding will be available, or, if available, under terms
acceptable to us.
Delisting of the Company's Common Stock From Trading on the Nasdaq National
Market Would Reduce Marketability of Our Shares.
Since our common stock was trading at or below the per share price
required for continued listing on NASDAQ during recent months and the Company
does not have net tangible assets of at least $4 million, we received notice
from Nasdaq that we must take steps to come into compliance with the Nasdaq
National Market listing standards or our common stock will be delisted from the
Nasdaq National Market. A hearing with Nasdaq was held on February 4, 1999. We
have proposed a plan to Nasdaq which we believe should enable us to remain
listed on the Nasdaq National Market if accepted by Nasdaq. In the event we are
unable to maintain our listing on the Nasdaq National Market, we currently meet
the listing standards for, and would seek to apply for, listing on the Nasdaq
SmallCap Market. There can be no assurance, however, that such an application
would be approved. In the event we were unable to list the Company's common
stock on the Nasdaq SmallCap Market or any other exchange at such time, there
would be no established trading market for the Company's common stock except as
may be established in the National Association of Securities Dealers Inc.'s OTC
Bulletin Board Service or in the "pink sheets," which would have a material
adverse effect on the liquidity and market price of the Company's common stock.
Our Acquisition Strategy May Not Produce the Desired Results.
A key component of our growth strategy is to acquire Internet related
businesses, that complement or enhance our business, on acceptable terms. We
expect the competition for acquisition candidates to continue to increase. There
is no assurance that we will identify and
(5)
<PAGE>
compete for attractive acquisition candidates or complete acquisitions at
reasonable purchase prices, in a timely manner or at all.
To the extent the Company has to use cash consideration for
acquisitions in the future, the Company may need to obtain additional financing.
To the extent our management must devote significant time and attention to the
integration of technology, operations, businesses and personnel as a result of
these acquisitions, our ability to service current clients and win new clients
may suffer. In addition, our senior management faces the difficult and
potentially time consuming challenge of implementing uniform standards,
controls, procedures and policies throughout our current and future
acquisitions. We could also experience financial or other setbacks if any of the
acquired businesses experienced problems in the past of which our management is
not presently aware. For example, if an acquired business had dissatisfied
customers or had any performance problems, our reputation could suffer as a
result of our association with that business. In addition, the Company may
experience disputes with the sellers of acquired businesses and may fail to
retain key acquired personnel.
We May Face Difficulties Managing Our Growth Internally and as a Result of
Acquisitions.
Our recent growth has strained our managerial and operational
resources. A key part of our strategy is to grow, both by hiring more personnel
and through acquisitions, which will continue to strain our resources. To manage
future growth, our management must continue to improve our operational and
financial systems and expand, train, retain and manage our employee base. There
can be no assurance that we will be able to manage our growth effectively. If
our systems, procedures and controls are inadequate to support our operations,
our expansion would be halted and we could lose our opportunity to gain
significant market share.
Our Quarterly Results May Fluctuate.
Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, many of which are
outside of our control, including the timing of new projects; reductions,
cancellations or completions of major projects; the loss of significant clients;
the opening or closing of an office; our relative mix of business; changes in
pricing by us or our competitors; employee utilization rates; changes in
personnel; costs related to expansion of our business; increased competition;
and marketing budget decisions by our clients. As a result of these
fluctuations, we believe that period-to-period comparisons of our operating
results cannot be relied upon as indicators of future performance. A high
percentage of our expenses, including those related to employee compensation and
facilities, are fixed. If the number and size of our projects decreases in any
period, then our revenues and operating results may also decrease. In some
quarters our operating results may fall below the expectations of securities
analysts and investors due to any of the factors described above. In such event,
the trading price of the common stock would likely decline.
Loss of Key Management Personnel Could Adversely Affect Our Business.
Our success depends largely on the skills of certain key management and
technical personnel, as well as key management and technical personnel of
companies acquired
(6)
<PAGE>
by us. Several of our executive officers have recently joined the Company and
many of our key personnel have worked together for a relatively short period.
The loss of one or more of our key management and technical personnel may
materially and adversely affect our business, results of operations and
financial condition. Except for Glenn S. Meyers, we do not maintain key man
insurance for any of our employees. We cannot guarantee that we will be able to
replace any of such persons in the event their services become unavailable.
We Are Dependent on Our Ability to Recruit, Train and Retain Internet Solutions
Professionals Who Are In Short Supply.
We also believe continued hiring of new personnel will be required to
support our business. Our success also depends in large part on our ability to
identify, hire, train and retain Internet professionals who can provide the
technical, strategic, creative, marketing and audience development skills
required by clients. There is a shortage of qualified personnel and we compete
with other companies for this limited pool. There is no assurance that we will
be able to attract, train, or retain qualified personnel.
Competition For Internet Professional Services is Intense with Low Barriers to
Entry.
The market for Internet professional services is relatively new,
intensely competitive, rapidly evolving and subject to rapid technological
change. While relatively new, the market is already highly competitive and
characterized by an increasing number of entrants that have introduced or
developed products and services similar to those offered by us. We expect
competition not only to persist, but to increase. Increased competition may
result in price reductions, reduced margins and loss of market share. Our
competitors fall into several categories, including Internet service firms,
technology consulting firms, technology integrators, strategic consulting firms,
and in-house information technology, marketing and design departments of our
potential clients. Most of our current and potential competitors have longer
operating histories, larger installed customer bases, greater name recognition,
longer relationships with clients and significantly greater financial,
technical, marketing and public relations resources than we do. At any time our
current and potential competitors could increase their resource commitments to
our markets. The barriers to entry into our business are also relatively low. As
a result, we expect to face additional competition from new market entrants in
the future. The market for our services is rapidly evolving and is subject to
continuous technological change. As a result, our competitors may be better
positioned to address these developments or may react more favorably to these
changes. We compete on the basis of a number of factors, including the
attractiveness of the Internet professional services offered, the breadth and
quality of these services, creative design and systems engineering expertise,
pricing, technological innovation, and understanding clients' strategies and
needs. Many of these factors are beyond our control. Existing or future
competitors may develop or offer strategic Internet services that provide
significant technological, creative, performance, price or other advantages over
the services offered by us.
(7)
<PAGE>
Our Fixed-Price Contracts Involve Financial Risk.
Most of our contracts are currently on a fixed-price basis, rather than
a time and materials basis. Further, the average size of our contracts is
currently increasing, which results in a corresponding increase in our exposure
to the financial risks of fixed price contracts. We assume greater financial
risk on fixed-price contracts than on time and materials engagements. We have
only a limited history in estimating our costs for our engagements, particularly
for larger projects. We have had to commit unanticipated resources to complete
certain projects, resulting in lower gross margins on certain contracts. We may
experience similar situations in the future. In addition, we typically assume
the fixed-price contracts of the companies we acquire. If we fail to estimate
accurately the resources and time required for an engagement, to manage client
expectations effectively or to complete fixed-price engagements within our
budget, on time and to our clients' satisfaction, we would be exposed to cost
overruns, potentially leading to losses on these engagements.
In addition, we recognize revenues from fixed-fee contracts based on
our estimate of the percentage of each project completed in a reporting period.
To the extent our estimates are inaccurate, the revenues and operating profits,
if any, we report for periods during which we are working on a project may not
accurately reflect the final results of the project and we would be required to
make adjustments to such estimates in a subsequent period.
We Generally Do Not Have Long-Term Contracts and Need to Establish Relationships
with New Clients.
Our clients generally retain us on a project by project basis, rather
than under long-term contracts. As a result, a client may or may not engage us
for further services once a project is completed. Establishment and development
of relationships with additional companies and other corporate users of
information technology is an important component of profitability. The absence
of long-term contracts and the need for new clients create an uncertain revenue
stream. A client which accounts for a significant portion of our revenues in a
xgiven period may not generate a similar amount of revenues, if any, in
subsequent periods. There is no assurance that we will be able to add new major
clients or to secure new engagements with existing clients. In addition, certain
of our existing clients may unilaterally reduce the scope of, or terminate,
existing projects. There is no assurance that we will be able to maintain our
business relationship or avoid a material reduction in the use of our services
by any of our significant existing clients.
Developing and Strengthening Our Brand is Essential to Our Success.
We believe that maintaining and strengthening the Rare Medium brand is
an important aspect of attracting and maintaining clients. The importance of
brand recognition will increase as competition in the market for Internet
professional services increases. Building a brand requires a successful
marketing effort and successful delivery of product to clients. A single
engagement involving client dissatisfaction could tarnish the perception of Rare
Medium as a whole despite any efforts to maintain and strengthen the Rare Medium
brand name. There can be no assurance that the strategy adopted and expenses
incurred by the Company will result in a stronger brand.
(8)
<PAGE>
Our Success Depends Upon Key Strategic Relationships.
We have established key strategic relationships with Microsoft
Macromedia, IBM, Oracle, Vignette and Advanced Technology Group which can be
terminated on short notice. The loss of either of these or other strategic
relationships would deprive us of the opportunity to: (i) gain early access to
leading-edge technology, (ii) cooperatively market products with the vendor,
(iii) cross-sell additional services, and (iv) gain enhanced access to vendor
training and support.
Our Business Depends on the Growing Demand for Internet Solutions.
Because we are in the business of providing Internet solutions, our
future success depends on the continued expansion of, and reliance of consumers
and businesses on, the Internet and related technical solutions. The Internet
may not be able to support an increased number of users or an increase in the
volume of data transmitted over it. As a result, the performance or reliability
of the Internet may be adversely affected as use increases. The improvement of
the Internet in response to increased demands will require timely improvement of
the high speed modems and other communications equipment that form the Internet
infrastructure. The Internet has already experienced certain outages and delays
as a result of damage to portions of its infrastructure. The effectiveness of
the Internet may also decline due to delays in the development or adoption of
new technical standards and protocols designed to support increased levels of
activity. There can be no assurance that the infrastructure, products or
services necessary to maintain and expand the Internet will be developed.
Our Success Depends on our Ability to Adapt to Technological Innovations.
Our continued success depends, in part, on our ability to keep pace
with rapid technological change, new products and services embodying new
processes and technologies and industry standards and practices. Failure to
respond to these changes could render our existing service practices and
methodologies obsolete. There can be no assurance that we will respond quickly,
cost-effectively or sufficiently to these developments.
Protecting Intellectual Property and Proprietary Information.
We limit access to and distribution of our proprietary information, as
well as proprietary information licensed from third-parties. Our management
cannot ensure that these strategies will be adequate to deter misappropriation
of our proprietary information and material.
Despite efforts to protect our intellectual property, we also face the
risk of undetected misappropriation of our proprietary information or materials;
development of similar technologies by our competitors; unenforceability of the
non-competition agreements entered into by our key employees; and infringement
claims, even if not meritorious, against our Company. If any of these risks
materialize, we could be required to pay significant amounts to defend our
rights and our managerial resources could be diverted.
(9)
<PAGE>
We May be Subject to Legal Liability to Our Clients.
Many of our engagements involve the development and implementation of
Internet solutions that are important to our clients' businesses. Our failure or
inability to meet a client's expectations in the performance of services could
injure our business reputation or result in a claim for substantial damages
against us regardless of our responsibility for such failure. In addition, the
services we provide for our clients may include confidential or proprietary
client information. Although we have implemented policies to prevent such client
information from being disclosed to unauthorized parties or used
inappropriately, any such unauthorized disclosure or use could result in a claim
against us for substantial damages. Our contractual provisions attempting to
limit such damages may not be enforceable in all instances or may otherwise fail
to protect us from liability for damages. Moreover, the Company does not
currently have errors and omissions insurance.
Our Systems May Not Be Year 2000 Compliant.
The "Year 2000 Issue" refers to the problem of many computer programs
using the last two digits to represent a year rather than four digits (i.e.,
"99" for 1999). Some of our computer programs and those of our vendors, clients
and content partners may have date-sensitive software that may not operate
properly when dealing with years past 1999, which is when "00" will represent
the year 2000. To the extent that this situation exists, there is a potential
for computer system failure or miscalculations, which could cause a disruption
of operation of that program. The problem is not limited to computer software,
since some equipment may have date-sensitive processors that may not be able to
properly use dates after the year 1999.
We have appointed a Year 2000 Task Force to perform an audit to assess
the scope of our risks and bring our computer and our applications into
compliance. This Task Force is currently in the process of completing its
identification of applications that are not Year 2000 compliant. In addition, we
have been discussing with our vendors and content partners their progress in
identifying and addressing problems that their computer systems may face in
correctly processing date information related to the Year 2000. Moreover,
clients increasingly require that we warrant that the applications we create are
year 2000 compliant. Should they prove not to be, it could have a material
adverse effect on our business.
Based on this task force work to date, we believe that most of our
applications are Year 2000 compliant, and that expenditures to correct any
deficiencies not yet identified will not be significant. In addition, the
Company is in the process of developing a contingency plan to address any
significant deficiencies in the event that they are identified. There can be no
assurance, however, that any or all of the Company's or third party systems,
including those of our clients, are or will be Year 2000 compliant or that the
costs required to address the Year 2000 issue or the impact of a failure to
achieve substantial Year 2000 compliance will not have a material adverse effect
on our business.
(10)
<PAGE>
The Market Price of Our Common Shares May be Highly Volatile.
Stock prices of growth companies such as ours may fluctuate widely,
often for reasons that are unrelated to the actual operating performance of the
particular company. In addition, the market price of the common stock is subject
to significant fluctuation due to (i) variations in stock market conditions,
(ii) changes in financial estimates by securities analysts or by our failure to
meet estimates, (iii) variations in quarterly operating results, (iv) general
conditions effecting all participants in our industry, (v) announcements by us
or our competition, (vi) regulatory developments, and (vii) economic or other
external factors.
Our Business is Subject to General Economic Conditions.
Our revenues and results of operations will be subject to fluctuations
based upon the general economic conditions in the United States and, to a lesser
extent, abroad. If there is a general economic downturn or a recession in the
United States, we expect that business enterprises, including our customers and
potential customers, would substantially and immediately reduce their budgets or
delay implementation of Internet-based business solutions. A deterioration in
existing economic conditions could therefore materially and adversely affect our
business, results of operations and financial condition.
Governmental Regulation of the Internet Could Impact our Operations.
Currently, we are not subject to any direct governmental regulation
other than the securities laws and regulations applicable to all publicly owned
companies, and laws and regulations applicable to businesses generally. Few laws
or regulations are directly applicable to access to, or commerce on, the
Internet. Due to the increasing popularity and use of the Internet, it is likely
that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to the Internet. Any new
legislation could inhibit the growth in use of the Internet and decrease the
acceptance of the Internet as a communications and commercial medium, which
could in turn decrease the demand for our services or otherwise have a material
adverse effect on our future operating performance.
We Do Not Intend to Pay Dividends in the Foreseeable Future.
We have not paid a cash dividend on our common stock and currently
expect to retain our future earnings, if any, for use in the operation and
expansion of our business. We do not anticipate paying any cash dividends in the
foreseeable future.
The Issuance of Preferred Stock or Additional Common Stock May Adversely Impact
Shareholders.
Our Board of Directors has the authority to issue up to 50,000 shares
of our preferred stock, $.01 par value per share, and to determine the terms,
including voting rights, of those shares without any further vote or action by
our stockholders. The voting and other rights of the holders of our common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. Similarly, our Board
(11)
<PAGE>
may issue additional shares of common stock without any further vote or action
by stockholders under certain circumstances, which would have the effect of
diluting common stockholders. An issuance could occur in the context of another
public or private offering of shares of common stock or preferred stock or in a
situation where the common stock or preferred stock is used to acquire the
assets or stock of another company. Our stockholders have approved an increase
in the authorized shares of common stock from 50,000,000 shares, to 200,000,000
shares at a special meeting of stockholders held on March 16, 1999. The issuance
of common stock or preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying, deferring or preventing a change in control.
Anti-Takeover Provisions Could Make a Third-Party Acquisition of Us Difficult.
The Company is a Delaware corporation. Certain provisions of the
Delaware General Corporation Law could have the effect of making it more
difficult for a third party to acquire control of us. In addition, our
stockholders have approved an amendment to our certificate of incorporation to
provide for a classified board, with each board member serving a staggered three
year term, at a special meeting of stockholders held on March 16, 1999. The
existence of a classified board of directors could make it more difficult for a
third-party to acquire control of us.
Shares Eligible for Future Sale.
As of January 28, 1999, there were 30,730,170 shares of common stock
outstanding, of which approximately 9.5 million shares constituted "restricted
securities," as that term is defined under Rule 144 promulgated under the
Securities Act of 1933. Such restricted shares may be sold by the holders of
such shares, subject to any applicable restrictions under Rule 144. In addition,
as of January 28, 1999, there were outstanding options to purchase approximately
7.8 million shares of common stock, of which options to purchase approximately
2.7 million shares of common stock were currently exercisable. Approximately 6.2
million additional shares of common stock were reserved for issuance under the
Company's stock option plans, including the Company's 1998 Long-Term Incentive
Plan. Approximately 3 million of the shares underlying outstanding options are
covered by effective registration statements and the balance of approximately
4.8 million shares underlying outstanding options have registration rights. The
Company will file a registration statement under the Securities Act of 1933 to
cover approximately 2.2 million shares underlying currently outstanding options
and the remaining 5.8 million shares which are reserved for issuance under the
Company's 1998 Long-Term Incentive Plan. As of January 28, 1999, the Company
also had outstanding warrants to purchase approximately one million shares of
common stock, all of which were currently exercisable. All of the underlying
shares of common stock under the warrants have certain registration rights.
Effective January 28, 1999, the Company sold an 8% Convertible
Debenture in the principal amount of $3.5 million to the Selling Securityholder,
which together with accrued interest, is currently convertible into common stock
at a conversion price equal to $5.27 per share. After July 27, 1999 such
Convertible Debenture will be convertible at a variable rate, but in no event
less than $2.49 per share. In addition, the Company issued a Warrant to purchase
(12)
<PAGE>
404,625 shares of Common Stock at an exercise price of $5.27 per share, subject
to reset in certain circumstances. The Company intends to sell an additional 8%
Convertible Debenture in the principal amount of $2.5 million at the same
conversion rate and an additional Warrant to purchase 289,017 shares to the
Selling Securityholder at the same exercise price upon satisfying certain
closing conditions. All of the shares under the Convertible Debentures and
Warrants have certain registration rights. The 2,500,000 shares offered by
this prospectus are being registered under the Securities Act of 1933 pursuant
to those registration rights.
Possible or actual sales made under Rule 144 or pursuant to
registration or other exemptions from registration under the Securities Act of
1933, of the aforementioned shares of common stock may have an adverse effect
upon the market price of the common stock.
THE COMPANY
Currently, the Company, through its wholly-owned subsidiaries, Rare
Medium, Inc., I/O 360, Inc. and DigitalFacades Corporation, provides Internet
professional services and other Internet related products and services primarily
to large and medium sized businesses, including Global 2000 clients. Such
services focus on helping clients develop Internet strategies, improve business
processes and develop interactive content using Internet-based technologies by
providing clients with Internet business strategy consulting, marketing,
creative design and development needs analysis, architecture planning, Internet,
Intranet and Extranet solutions, hosting and maintenance. Prior to April 15,
1998, the Company had been principally engaged in the design, development,
manufacture and marketing of desiccant-based climate control systems. Through a
series of transactions during 1998, the Company acquired Rare Medium, Inc. and
its other operating subsidiaries and divested itself of its desiccant-based air
conditioning systems operations. Providing Internet professional services and
other Internet related products and services is the Company's sole business.
The mailing address and telephone number of our principal executive
office is 44 West 18th Street, 6th Floor, New York NY 10011, (212) 634-6950.
RECENT DEVELOPMENTS
The Acquisition of Rare Medium, Inc.
On April 15, 1998, the Company acquired by merger all of the stock of
Rare Medium, Inc., a privately held New York corporation. Rare Medium, Inc. is
an Internet professional services company engaged in the design, delivery and
implementation of Internet solutions, with its principal offices located in New
York City. Total consideration for the purchase was approximately $46.2 million,
consisting of a combination of $10 million in cash, 4,269,300 shares of common
stock of the Company, and the balance in a secured promissory note dated April
15, 1998 (the "Rare Medium Note").
The Exchange with Rare Medium Noteholders.
In connection with certain Exchange Agreements between the Company and
certain of the holders of the Rare Medium Note, effective December 31, 1998 the
Company issued an aggregate of 2,951,814 shares of common stock of the Company
to such Noteholders in exchange for their beneficial interest in $11,773,881 of
the original principal amount of the Note and accrued and unpaid interest
thereunder through December 31, 1998. As a result, there is a remaining
principal amount of $10,426,119 payable under the Note, which bears interest at
the prime rate, payable semi-annually, with principal due in two equal
installments on April 15, 2000 and April 15, 2001.
(13)
<PAGE>
The Acquisition of I/O 360, Inc. and DigitalFacades Corporation.
On August 14, 1998, the Company acquired by merger all of the stock of
I/O 360, Inc., a privately held New York corporation, and DigitalFacades
Corporation, a privately held California corporation. I/O 360 and DigitalFacades
are Internet professional services companies engaged in the design, delivery and
implementation of Internet web site applications and strategies. In
consideration of the purchase of I/O 360, the Company issued 786,559 shares of
common stock of the Company valued at $3.0 million (based on the average closing
price per share of Company common stock for the 15 trading days during the
period from August 3, 1998 through August 21, 1998, inclusive, as reported in
The Wall Street Journal). In consideration for the purchase of DigitalFacades,
the Company issued 719,144 shares of common stock of the Company valued at $3.0
million (based on the average closing price per share of Company common stock
for the 20 trading days prior to August 13, 1998, as reported in The Wall Street
Journal).
Currently, the Company is integrating the operations of Rare Medium,
I/O 360 and DigitalFacades under the Rare Medium brand name while achieving
economies of marketing, purchasing, and operations, and while simultaneously
leveraging relationships with various clients that existed prior to the mergers.
To that end, the operations of Rare Medium and I/O 360 have largely been
physically integrated due to I/O 360's move to a location in New York City
adjacent to Rare Medium, and the Los Angeles operations of Rare Medium and
DigitalFacades have been consolidated into one location.
The Sale of a Majority of its Partnership Interests in Fresh Air Solutions, L.P.
On October 14, 1998, the Company, through its wholly-owned subsidiary,
ICC Desiccant Technologies, Inc., completed the sale of a majority of its
partnership interests in Fresh Air Solutions, L.P. ("FAS") for total
consideration of $1,500,000, of which $1,125,000 was paid in cash and $375,000
was paid by delivery of an unsecured promissory note issued by FAS. In addition,
the unaffiliated investment entity that purchased the partnership interests
assumed the liabilites of FAS as general partner, with certain exceptions. As a
result of the sale of partnership interests, ICC Desiccant Technologies, Inc.
retained, as its sole asset, a 32.4% passive investment limited partnership
interest in FAS.
Subsequent to the sale of the partnership interests referred to above,
FAS redeemed the 10% limited partnership interest in FAS held by Engelhard
Corporation in exchange for the 20% limited partnership interest in Engelhard
Hexcore, L.P. held by FAS and $1 million in cash. As a result, ICC Desiccant
Technologies, Inc.'s interest in FAS has been increased to a 36% limited
partnership interest. The remaining 64% partnership interest in FAS is owned by
the investment entity that purchased the FAS partnership interests from the
Company.
The Private Placement of Convertible Debentures and Warrants to Capital Ventures
International.
Effective as of January 28, 1999, pursuant to the terms of a Securities
Purchase Agreement the Company agreed to sell to Capital Ventures International
in a private placement its 8% Convertible Term Debentures in the aggregate
principal amount of $6,000,000, issuable in two tranches ($3,500,000 on January
28, 1999 and the remaining $2,500,000 upon satisfaction of certain closing
conditions) (the "Convertible Debentures") and Stock Purchase Warrants (the
(14)
<PAGE>
"CVI Warrants") to purchase an aggregate of up to 693,642 shares of the
Company's common stock, issuable in two tranches (404,625 on January 28, 1999
and the remaining 289,017 upon the satisfaction of certain closing conditions).
The term of the Convertible Debentures is four years and, until July 28, 1999,
they are convertible into common stock at a conversion price of $5.27 per share.
After July 28, 1999 (or earlier, in certain instances) the Convertible
Debentures are convertible into common stock at a variable rate, but no event
less than $2.49 per share. The 8% yield is payable in shares of common stock.
Accordingly, the maximum number of shares of common stock that could be acquired
through the conversion of the Convertible Debentures is 3,180,723 shares,
assuming the Company satisfies the conditions to the investor's purchase of the
$2,500,000 Convertible Debenture pursuant to the second tranche. The exercise
price of the CVI Warrants is $5.27 per share, subject to adjustment in certain
events. The term of the CVI Warrants is five years and they contain antidilution
and net exercise provisions.
SELLING SECURITYHOLDER
The shares of common stock offered by this prospectus represent those
shares of common stock which may be acquired upon conversion of the Convertible
Debentures and the exercise of the CVI Warrants, issued to Capital Ventures
International in a private placement of securities pursuant to the Securities
Purchase Agreement, dated as of January 28, 1999, between the Company and the
Selling Securityholder pursuant to "registration rights" granted to the Selling
Securityholder in connection with the acquisition of the Convertible Debentures
and CVI Warrants. Our registration of the shares of common stock does not
necessarily mean that the Selling Securityholder will sell all or any of the
shares.
The following table sets forth certain information regarding the
beneficial ownership of the common stock as of April 5, 1999, by the Selling
Securityholder.
The information provided in the table below with respect to the Selling
Securityholder has been obtained from the Selling Securityholder and records of
the Company. The Selling Securityholder does not have, nor within the past three
years has had, any position, office or other material relationship with the
Company. Because the Selling Securityholder may sell all or some portion of the
shares of common stock beneficially owned by it, only an estimate (assuming the
Selling Securityholder sells all of its shares offered hereby) can be given as
to the number of shares of common stock that will be beneficially owned by the
Selling Securityholder after this offering. In addition, the Selling
Securityholder may have sold, transferred or otherwise disposed of, or may sell,
transfer or otherwise dispose of, at any time since the date on which we
obtained the information regarding the shares of common stock beneficially owned
by it, all or a portion of the shares of common stock beneficially owned by it
in transactions exempt from the registration requirements of the Securities Act
of 1933.
(15)
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares Percentage of Common
Name of Selling Beneficially Owned Number of Shares Beneficially Owned Stock Beneficially
Securityholders Prior to Offering (1) Being Offered After Offering (2) Owned After Offering
- --------------- --------------------- ---------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Capital Ventures International 3,874,365(3) 2,500,000 1,374,365 3.8%
- --------------- --------------------- ---------------- ------------------ --------------------
</TABLE>
(16)
<PAGE>
(1) Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities Exchange Act of 1934.
Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of shares and
percent owned by such person or group.
(2) Assumes that all shares covered by this prospectus are sold in the
offering.
(3) Includes an estimate of the number of shares that may be acquired upon
conversion of the 8% Convertible Debentures. The exact number of shares
that may be acquired upon conversion of the Convertible Debentures, if
converted, will be determined pursuant to an adjustable floating rate
conversion price, subject to a fixed rate floor conversion price. Also
includes an estimate of the number of shares that may be acquired upon
exercise of the CVI Warrants. The holder of the Convertible Debentures and
CVI Warrants is not entitled to convert or exercise such securities to the
extent that the shares to be received by such holder upon such conversion
or exercise would cause such holder to beneficially own more than 4.9% of
the outstanding shares of common stock of the Company. Therefore, the
number of shares set forth herein and which such holder may sell pursuant
to this Prospectus may exceed the number of shares such holder would
otherwise beneficially own as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended. See "Recent Developments - The
Private Placement of Convertible Debentures and Warrants to Capital
Ventures International."
PLAN OF DISTRIBUTION
The shares of common stock may be offered from time to time by the
Selling Securityholder or its donees, pledgees, transferees or other successors
in interest for resale by this prospectus in one or more transactions at fixed
prices, at market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The Selling Securityholder may offer
its shares of common stock in one or more of the following transactions:
o in brokerage transactions;
o on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Stock Market;
o in the over-the-counter market;
o in private transactions;
o for settlement of short sales, or through long sales, options or
transactions involving cross or block trades;
o by pledge to secure debts and other obligations; or
(17)
<PAGE>
o a combination of any of the above transactions or by any other legally
available means.
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold
from time to time directly by the Selling Securityholder. Alternatively, the
Selling Securityholder may from time to time offer shares of common stock to or
through underwriters, broker/dealers or agents. The Selling Securityholder and
any underwriters, broker/dealers or agents that participate in the distribution
of the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933. Any profits on the resale of shares of
common stock and any compensation received by any underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
In addition, the Selling Securityholder or its successors in interest
may enter into hedging transactions with broker-dealers who may engage in short
sales of shares of common stock in the course of hedging the position they
assumed with the Selling Securityholder. The Selling Securityholder or its
successors in interest may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the shares of
common stock, registered hereby, which shares of common stock may be resold
thereafter pursuant to this prospectus.
In accordance with the terms of purchase of the Convertible Debenture
and CVI Warrants by Capital Ventures International, the maximum number of shares
of common stock upon conversion of the Convertible Debentures or exercise of the
CVI Warrants which Capital Ventures International may sell on a given day is
limited to the greater of 20% of the volume on that given day, or 20% of the
trailing 30 day average volume immediately prior to that day.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather
that pursuant to this prospectus. The Selling Securityholder may not sell all
of the shares. The Selling Securityholder may transfer, devise, or gift such
shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the common stock may not be
offered or sold unless they have been registered or qualified for sale or an
exemption is available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in market-making
activities with respect to the common stock for nine business days prior to the
start of the distribution. In addition, the Selling Securityholder and any
other person participating in a distribution will be subject to the Securities
Exchange Act of 1934 which may limit the timing of purchases and sales of common
stock by the Selling Securityholder or any other such person. These factors may
affect the marketability of the common stock and the ability of brokers or
dealers to engage in market-making activities.
(18)
<PAGE>
All expenses of this registration will be paid by the Company. These
expenses include the SEC's filing fees and fees under the state securities or
"blue sky" laws. The Selling Securityholder will pay all underwriting discounts
and selling commissions, if any.
In accordance with the terms of a Registration Rights Agreement, dated
as of January 28, 1999, between the Company and the Selling Securityholder, the
Company has agreed to indemnify the Selling Securityholder for any claims
arising out of any material misstatement or omission of material fact in this
prospectus and the registration statement in which it is included and any claims
arising out of any violation of the securities laws by the Company. Conversely,
the Selling Securityholder has agreed to indemnify the Company for any claims
arising out of any action taken in reliance upon and in conformity with written
information furnished to the Company by the Selling Securityholder expressly for
use in connection with this prospectus and the registration statement of which
it is a part.
USE OF PROCEEDS
While the Company will receive the satisfaction of indebtedness
represented by that portion of the Convertible Debentures converted into shares
of common stock, if converted by the Selling Securityholder, as well as proceeds
from the exercise of the CVI Warrants, if exercised by the Selling
Securityholder, the Company will not receive any of the proceeds from the sale
of the shares by the Selling Securityholder.
LEGAL MATTERS
The validity of the shares will be passed upon for the Company by
Mesirov Gelman Jaffe Cramer & Jamieson, LLP, Philadelphia, Pennsylvania
19103-7598.
EXPERTS
The consolidated balance sheet as of December 31, 1998 and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the year then ended incorporated in this prospectus by
reference to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1998, have been incorporated in reliance on the report of KPMG LLP,
independent accountants, which includes an explanatory paragraph that states
that the Company has suffered net losses and losses from continuing operations,
has a working capital deficiency, and has incurred accumulated losses through
December 31, 1998. These factors raise substantial doubt about the Company's
ability to continue as a going concern. KPMG LLP's report is given on the firm's
authority as experts in accounting and auditing.
The consolidated balance sheet as of December 31, 1997 and the
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows of the Company for each of the two years in the period
ended December 31, 1997 incorporated in this prospectus by reference to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1998,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, which report includes an explanatory paragraph
which refers to conditions that raise substantial doubt about the Company's
ability to continue as a going concern. PricewaterhouseCoopers LLP's report is
given on the firm's authority as experts in accounting and auditing.
The balance sheets as of December 31, 1997 and 1998 and the statements
of operations, changes in partners' capital and cash flows for each of the three
years in the period ended December 31, 1997, of Engelhard/ICC, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, which report
includes an explanatory paragraph which refers to conditions that raise
substantial doubt about Engelhard/ICC's ability to continue as a going concern.
PricewaterhouseCoopers, LLP's report is given on the firm's authority as experts
in accounting and auditing.
(19)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses in connection with the issuance and distribution of the
securities being registered are set forth in the following table (all amounts
except the registration fee and the listing fee are estimated):
SEC Registration Fee $ 3,649
Nasdaq National Market Listing Fees 17,500
Legal Fees and Expenses 25,000
Accountants' Fees and Expenses 5,000
Miscellaneous Costs 5,000
------------------- ---------
Total $ 56,149
===== =========
All expenses in connection with the issuance and distribution of the
securities being offered shall be borne by the Company.
Item 15. Indemnification of Directors and Officers
The Company's Certificate of Incorporation contains a provision which
limits the personal liability of directors to the Company or the stockholders
for monetary damages for breach of fiduciary duty. The Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for a breach of fiduciary duty as a director except for liabilities:
(i) for any breach of the director's duty of loyalty,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) for an unlawful dividend payment or an unlawful repurchase or
redemption of stock, or
(iv) for any transaction from which the director derived an improper
personal benefit.
The Company's Certificate of Incorporation also provides that the
Company will indemnify and pay legal expenses and damages incurred by officers
and directors in any legal action arising from their actions as agents of the
Company as long as the officer or director had acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful.
<PAGE>
Nothing in these provisions eliminates a director's fiduciary duty to
act with care, nor do they preclude a stockholder from pursuing injunctive or
other equitable remedies.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
4.1. Form of Securities Purchase Agreement dated as of January 28, 1999
between the Company and Capital Ventures International and the form of
8% Convertible Term Debenture dated January 28, 1999 issued to Capital
Ventures International and form of Stock Purchase Warrant, dated
January 28, 1999 issued to Capital Ventures International, and
Form of Registration Rights Agreement dated as of January 28, 1999
were all filed as part of Exhibit 10.1 to the Company's Form 8-K
filed with the Commission on February 4, 1999 and are
incorporated herein by reference.
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP.
23 Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP is included in
their opinion filed as Exhibit 5 hereto.
23.1 Consent of KPMG LLP, Independent Accountants.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24 Power of attorney (set forth on the signature page hereto).
</TABLE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement:
Provided, However, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions discussed in Item 15 of this registration statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed in its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on April 7, 1999.
RARE MEDIUM GROUP, INC.
By: /s/ Glenn S. Meyers
----------------------------------
Glenn S. Meyers
Chairman of the Board, President
(Chief Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints Glenn S. Meyers and John S.
Gross, and each of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Glenn S. Meyers Chairman of the Board and President (Chief April 7, 1999
- ------------------------------- Executive Officer)
Glenn S. Meyers
/s/ John S. Gross Senior Vice President, Chief Financial April 7, 1999
- -------------------------------- Officer, Treasurer and Assistant Secretary
John S. Gross (Principal Financial and Accounting
Officer)
/s/ Jeffrey M. Killeen Director April 7, 1999
- ---------------------------------
Jeffrey M. Killeen
</TABLE>
(signatures continued on next page)
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard T. Liebhaber Director April 7, 1999
- -------------------------------
Richard T. Liebhaber
/s/ Steven Winograd Director April 7, 1999
- --------------------------------
Steven Winograd
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C>
4.1. Form of Securities Purchase Agreement dated as of January 28, 1999
between the Company and Capital Ventures International and the form of
8% Convertible Term Debenture dated January 28, 1999 issued to Capital
Ventures International and form of Stock Purchase Warrant, dated
January 28, 1999 issued to Capital Ventures International, and Form of
Registration Rights Agreement dated as of January 28, 1999 were all
filed as part of Exhibit 10.1 to the Company's Form 8-K filed with the
Commission on February 4, 1999 and are incorporated herein by
reference.
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP.
23 Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP is included in
their opinion filed as Exhibit 5 hereto.
23.1 Consent of KPMG LLP, Independent Accountants.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24 Power of attorney (set forth on the signature page hereto).
</TABLE>
Exhibit 5
April 12, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Rare Medium Group, Inc.
Registration Statement on Form S-3
----------------------------------
Dear Sir/Madam:
As counsel to Rare Medium Group, Inc., a Delaware corporation (the
"Company"), we are familiar with the corporate proceedings relating to the
proposed registration on Form S-3 (the "Registration Statement"), which is to be
filed with the Securities and Exchange Commission on or about April 12, 1999, of
2,500,000 shares of the Company's Common Stock, par value $.01 per share (the
"Shares"), to be issued upon the conversion of the Convertible Debentures or
exercise of the CVI Warrants (as defined in the Registration Statement).
We have examined the Company's Certificate of Incorporation, as amended,
the Company's By-Laws, as amended, and related minutes of action taken by the
Board of Directors of the Company, and such other documents and corporate
records relating to the Company and the issuance and sale of the Convertible
Debentures and CVI Warrants as we deemed appropriate for purposes of rendering
this opinion.
Based upon the foregoing, it is our opinion that when the Shares, when
issued and paid for upon due conversion of the Convertible Debentures or due
exercise of the CVI Warrants in accordance with the terms of the Convertible
Debentures or CVI Warrants, as the case may be, will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 of the
Registration Statement and to the references made to this firm under the heading
"Legal Matters" in the prospectus comprising a part of the Registration
Statement.
Very truly yours,
/s/ Mesirov Gelman Jaffe Cramer & Jamieson, LLP
-----------------------------------------------
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in this registration
statement of Rare Medium Group, Inc. (the "Company") on Form S-3 of our reports
dated March 29, 1999, relating to the consolidated balance sheet as of December
31, 1998 and the related consolidated statements of operations, stockholders'
equity (deficit), cash flows and financial statement schedule for the year then
ended which reports are included in the Company's annual report on Form 10-K,
as amended on Form 10-K/A. Our report, dated March 29, 1999, contains an
explanatory paragraph that states that the Company has suffered net losses and
losses from continuing operations, has a working capital deficiency, and has
incurred accumulated losses through December 31, 1998. These factors raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments thatmight result from the outcome of that uncertainty.
KPMG LLP
New York, New York
April 12, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this Registration
Statement of Rare Medium Group, Inc. (formerly ICC Technologies, Inc.) (the
Company) of Form S-3 of our report, which includes an explanatory paragraph
which refers to conditions that raise substantial doubt about the Company's
ability to continue as a going concern, dated March 20, 1998, on our audits of
the consolidated financial statements of the Company as of December 31, 1997 and
for the years ended December 31, 1997 and 1996, which report is included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, as
amended on Form 10-K/A. We also consent to the incorporation by reference in the
Registration Statement (set forth above) of the Company of our report, dated
March 20, 1998, on our audits of the financial statements of Engelhard/ICC as of
December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and
1995, which report is also included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, as amended.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
April 12, 1999
