Registration No. 333-76107
As filed with the Securities and Exchange Commission on May 28, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 2 to
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
(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. / /
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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 May 28, 1999
PROSPECTUS
1,588,462 Shares
RARE MEDIUM GROUP, INC.
COMMON STOCK
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This prospectus relates to the offer for sale from time to time of up to
1,588,462 shares of common stock of Rare Medium Group, Inc. by Capital Ventures
International, a selling securityholder of Rare Medium Group, Inc. We will not
receive any portion of the proceeds from the resale of the shares by Capital
Ventures International.
Our common stock is listed on the Nasdaq National Market under the symbol
RRRR. On May 24, 1999, the closing sale price of the common stock, as reported
on the Nasdaq National Market, was $13 - 1/8 per share.
Investing in our 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 3.
Neither the Securities and Exchange Commission 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 May __, 1999.
<PAGE>
TABLE OF CONTENTS
RISK FACTORS...................................................................3
THE COMPANY...................................................................13
RECENT DEVELOPMENTS...........................................................13
SELLING SECURITYHOLDER........................................................18
PLAN OF DISTRIBUTION..........................................................19
USE OF PROCEEDS...............................................................20
LEGAL MATTERS.................................................................20
EXPERTS.......................................................................21
WHERE YOU CAN GET MORE INFORMATION............................................21
INCORPORATION OF DOCUMENTS BY REFERENCE.......................................22
FORWARD-LOOKING STATEMENTS....................................................22
(2)
<PAGE>
RISK FACTORS
Investing in our 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, Which Makes it More
Difficult to Predict Whether or Not We Will Generate Revenues or Have
Successful Business Operations.
We acquired Rare Medium, Inc. on April 15, 1998. As a result of such
acquisition, we have changed our 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. On a pro-forma basis, as if the operations
of Rare Medium, Inc. were included from January 1, 1998, we had revenue in 1998
and 1997 of $5,829,819 and $3,856,233, respectively, and losses from operations
of $18,392,883 in 1998 and $5,613,174 in 1997. You should evaluate our chances
of generating revenues or having successful business operations 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, our
business strategy has been evolving and is expected to continue to evolve. There
can be no assurance that our strategy will generate revenues 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 ($5,829,819 in 1998 versus
$3,856,233 in 1997 on a pro-forma basis, as if the operations of Rare Medium,
Inc. were included from January 1, 1998, 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 (an $18,392,883 loss
from operations in 1998 and a $5,612,174 loss from operations in 1997 on a
pro-forma basis, as if the operations of Rare Medium, Inc. were included from
January 1, 1998, and we intend to continue to invest heavily in acquisitions,
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, the
purchase and leasing of new computer and communications equipment and the hiring
of additional employees. 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.
(3)
<PAGE>
Our Ability to Obtain Additional Financing in Order to Meet Our Future Capital
Needs is Uncertain.
We have entered into definitive agreements with Apollo Investment Fund IV,
L.P. and several other purchasers to raise $87.0 million in equity capital
through the issuance of $15 million of Series A Convertible Preferred Stock and
$72 million of Series B Preferred Stock, and we expect to close on the
transaction contemplated by such agreements on or before May 31, 1999, subject
to the satisfaction of closing conditions. The $72 million received as
consideration for the Series B Preferred Stock will be held in escrow following
closing pending receipt of stockholder approval of the conversion of the Series
B Preferred Stock into Series A Convertible Preferred Stock, as required by the
agreements with the purchasers and by the Nasdaq National Market listing rules.
If such stockholder approval is not obtained within 120 days after closing, the
purchasers will have the right to cause us to redeem the Series B Preferred
Stock and have the $72 million held in escrow returned to them. There can be no
assurance that the closing conditions will be satisfied or that such transaction
will be consummated or, if consummated, that we would obtain such stockholder
approval. If we fail to consummate such equity transaction, we will need to sell
additional equity or debt securities or seek credit facilities within twelve
months in order to fund our capital requirements and to satisfy our debt
obligations to several former stockholders of Rare Medium, Inc. in the years
2000 and 2001. In addition, if we fail to consummate such transaction or
consummate the transaction but fail to obtain stockholder approval of the
conversion of the Series B Preferred Stock into Series A Convertible Preferred
Stock or the authorization for a new class of non-voting common stock, we could
need to raise additional funds sooner in order to support 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. We have not entered into any other agreements to
raise additional funds and in the event we fail to consummate the transaction
contemplated by the agreements with Apollo Investment Fund IV, L.P. and the
other purchasers, we may not be able to borrow money or issue more shares of
common stock to meet our cash needs, or if we could complete another
transaction, it may not be on terms that are favorable or reasonable from our
prospective. Sales of additional equity or convertible debt securities,
including in the event the transaction with Apollo Investment Fund IV, L.P. and
the other purchasers is consummated, 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 future funding, if needed, will be available, or, if available,
will be under terms acceptable to us. See "Recent Developments - Agreement with
Apollo Investments Fund IV, L.P."
Delisting of Our 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 minimum $5.00 per share
closing bid price requirement for continued listing on the Nasdaq National
Market during 1998 and earlier this year, and since we did 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
(4)
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National Market. A hearing with Nasdaq was held on February 4, 1999. We proposed
a plan to Nasdaq which we believe should enable us to remain listed on the
Nasdaq National Market. On April 22, 1999, we were notified by Nasdaq that it
had determined to continue the listing of our common stock on the Nasdaq
National Market, provided that on or before June 30, 1999 we conduct our 1999
Annual Meeting of Stockholders and consummate the equity transaction
contemplated with Apollo Investment Fund IV, L.P. In the event we fail to meet
these requirements, and we are not otherwise in compliance with the Nasdaq
listing requirements, Nasdaq may consider us for continued listing on the Nasdaq
Small Cap Market or may determine to delist us. Further, if we consummate the
equity transaction contemplated by the agreements with Apollo Investment Fund
IV, L.P. and the other purchasers but fail to obtain stockholder approval of the
conversion of the Series B Preferred Stock issued in such transaction into
Series A Convertible Preferred Stock or authorization of a new class of
non-voting common stock as required by the agreements with such purchasers and
by the Nasdaq National Market listing rules, we may be delisted from the Nasdaq
National Market. 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 Small Cap Market. There can be no
assurance, however, that such an application would be approved. In the event we
were unable to list our common stock on the Nasdaq Small Cap Market or any other
exchange at such time, there would be no established trading market for our
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
our 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 compete for attractive acquisition
candidates or complete acquisitions at reasonable purchase prices, in a timely
manner or at all.
To the extent we have to use cash consideration for acquisitions in the
future, we 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, we may experience disputes with the sellers of
acquired businesses and may fail to retain key acquired personnel.
(5)
<PAGE>
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.
Possible Decline in the Trading Price of Our Common Stock if Operating Results
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 business operations depend largely on the skills of our key management
and technical personnel, as well as key management and technical personnel of
companies acquired by us. Almost all of our executive officers have recently
joined us 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 business operations also depend in large part on our
ability to identify, hire, train and retain
(6)
<PAGE>
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 Which May Affect Our Business Operations.
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 who 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.
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
some of our projects, resulting in lower gross margins on such 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
(7)
<PAGE>
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 the Need to Establish
Relationships with New Clients Creates an Uncertain Revenue Stream.
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 our business operations. 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
given 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, some 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 Business Operations.
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 us will result
in a stronger brand.
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 any of these or other strategic relationships would
deprive us of the opportunity to:
o gain early access to leading-edge technology,
o cooperatively market products with the vendor,
o cross-sell additional services, and
o gain enhanced access to vendor training and support.
(8)
<PAGE>
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 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 Business Operations Depend on our Ability to Adapt to Technological
Innovations.
Our business operations depend, 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.
There is a Potential For Misappropriation of Proprietary Information and
Intellectual Property.
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 us. If any of these risks materialize,
we could be required to pay significant amounts to defend our rights or pay
damages, and our managerial resources could be diverted.
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
(9)
<PAGE>
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, we do 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 the computer programs used by us 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, which
consists of analysis and testing, to assess the scope of our risks and bring our
applications into compliance. Based upon conclusions from the analysis and
findings to date, we believe most of our applications and those of our vendors,
customers and clients are Year 2000 compliant, and that expenditures to correct
any deficiencies not yet identified would not be significant. We are in the
testing stage of our audit. However, no assurance can be given that any or all
of our or third party systems 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 financial condition or results of operations.
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:
o variations in stock market conditions,
o changes in financial estimates by securities analysts or by our failure to
meet estimates,
o variations in quarterly operating results,
o general conditions effecting all participants in our industry,
o announcements by us or our competition,
o regulatory developments, and
o 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.
(10)
<PAGE>
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 has the authority to issue up to 10,000,000 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. We have agreed to issue
Series A Convertible Preferred Stock and Series B Preferred Stock to Apollo
Investment Fund IV, L.P. and several other purchasers as discussed under the
heading "Recent Developments - Agreement with Apollo Investment Fund IV, L.P."
appearing on page 15 of this prospectus. Similarly, our board may, under general
circumstances, issue additional shares of common stock without any further vote
or action by stockholders, 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.
(11)
<PAGE>
Anti-Takeover Provisions Could Make a Third-Party Acquisition of Us Difficult.
We are a Delaware corporation. The Delaware General Corporation Law
contains provisions which 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 Could Dilute the Outstanding Common Shares
and Thereby Cause Our Stock Price to Decline.
As of April 30, 1999, there were 35,965,923 shares of common stock
outstanding, of which approximately 9.0 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 April 30, 1999, there were outstanding options to purchase approximately
9.0 million shares of common stock, of which options to purchase approximately
3.2 million shares of common stock were currently exercisable. Approximately 3.7
million additional shares of common stock were reserved for issuance under our
stock option plans, including our 1998 Long-Term Incentive Plan. The shares
underlying outstanding options, including the shares offered by this prospectus,
and the remaining 3.5 million shares which are reserved for issuance under our
1998 Long-Term Incentive Plan are covered by effective registration statements.
As of April 30, 1999, we also had outstanding warrants to purchase approximately
315,000 shares of common stock (excluding the warrants issued to Capital
Ventures International discussed in the following paragraph), all of which were
currently exercisable. All of the underlying shares of common stock under the
warrants have customary piggyback registration rights. See "Recent Developments
Agreement with Apollo Investment Fund IV, L.P."
Effective January 28, 1999, we sold convertible debentures in the principal
amount of $3.5 million to Capital Ventures International which are convertible
into common stock at a conversion price equal to $5.27 per share. In addition,
we issued warrants to purchase 404,625 shares of common stock at an exercise
price of $5.27 per share to Capital Ventures International. Capital Ventures
International purchased additional convertible debentures in the principal
amount of $2.5 million at the same conversion rate, together with additional
warrants to purchase 289,017 shares of common stock at the same exercise price.
Thereafter, Capital Ventures International converted all of such convertible
debentures and exercised all of such warrants in exchange for 1,588,462 shares
of our common stock.
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.
(12)
<PAGE>
THE COMPANY
Currently, through our wholly-owned subsidiary, Rare Medium, Inc. and our
other subsidiaries, we provide Internet professional services and other Internet
related products and services primarily to large and medium sized businesses,
including Fortune 500 companies. 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. In addition, prior to April 15, 1998, we had been principally
engaged in the design, development, manufacture and marketing of desiccant-based
climate control systems. Through a series of transactions during 1998, we
acquired Rare Medium, Inc. and our other operating subsidiaries and divested
ourself of our desiccant-based air conditioning systems operations. Providing
Internet professional services and other Internet related products and services
is our 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, we 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 web site applications and strategies, 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 our common stock in a private placement of securities, and the balance
in a secured promissory note dated April 15, 1998.
The Rare Medium Noteholders.
In connection with exchange agreements between us and several of the
holders of the secured promissory note described above, effective December 31,
1998, in a private placement of securities we issued an aggregate of 2,951,814
shares of common stock to such note holders in exchange for their beneficial
interest in $11,773,881 of the original principal amount of such note and
accrued and unpaid interest thereunder through December 31, 1998.
Pursuant to an exchange agreement between us and two of our employees
effective April 5, 1999, we (a) amended such employee's employment agreements
and (b) issued an aggregate of 963,052 shares of common stock to such employees
in exchange for their beneficial interest in $3,987,031 of the original
principal amount of the note. We will record an expense in the amount of
approximately $1 million related to this transaction, which is the value of the
shares issued as of April 5, 1999 in excess of the amount of debt converted to
shares.
As a result of these transactions, there is a remaining principal balance
of $6,439,066 payable under the note, which bears interest at the prime rate,
payable
(13)
<PAGE>
semi-annually, with principal due in two equal installments on April 15, 2000
and April 15, 2001.
The Acquisition of I/O 360, Inc. and DigitalFacades Corporation.
On August 14, 1998, we 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, we issued 786,559 shares of common
stock in a private placement of securities valued at $3.0 million (based on the
average closing price per share of our 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, we issued 719,144 shares of common stock valued at $3.0 million
(based on the average closing price per share of our common stock for the 20
trading days prior to August 13, 1998, as reported in The Wall Street Journal).
The Sale of a Majority of its Partnership Interests in Fresh Air Solutions, L.P.
On October 14, 1998, through our wholly-owned subsidiary, ICC Desiccant
Technologies, Inc. (now known as Investment Holding Co.), we completed the sale
of a majority of our partnership interests in Fresh Air Solutions, L.P. 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 Fresh
Air Solutions, L.P. In addition, the unaffiliated investment entity that
purchased the Fresh Air Solutions, L.P. partnership interests also assumed all
liabilities of Fresh Air Solutions, L.P. which were known to two members of
management of Fresh Air Solutions, L.P. or which otherwise arose on or after
November 18, 1997, regardless of whether they were known to such management. As
a result of the sale of partnership interests, Investment Holding Co. retained,
as its sole asset, a 32.4% passive investment limited partnership interest in
Fresh Air Solutions, L.P.
Subsequent to the sale of the partnership interests referred to above,
Fresh Air Solutions, L.P. redeemed the 10% limited partnership interest in Fresh
Air Solutions, L.P. held by Engelhard Corporation in exchange for the 20%
limited partnership interest in Engelhard Hexcore, L.P. held by Fresh Air
Solutions, L.P. and $1 million in cash. As a result, Investment Holding Co.'s
interest in Fresh Air Solutions, L.P. has been increased to a 36% limited
partnership interest.
The Private Placement of Convertible Debentures and Warrants to Capital Ventures
International.
Pursuant to the terms of a securities purchase agreement, dated as of
January 28, 1999, Capital Ventures International agreed to purchase from us in a
private placement of securities, in two tranches, convertible debentures in the
aggregate principal amount of $6,000,000 and five year warrants to purchase an
aggregate of 693,642 shares of common stock at an exercise price of $5.27 per
share, subject to reset. The first tranche of the transaction
(14)
<PAGE>
closed January 28, 1999, at which time Capital Ventures International purchased
convertible debentures in the aggregate principal amount of $3,500,000 and
warrants to purchase 404,625 shares of common stock. The term of the convertible
debentures was four years. The principal amount of the convertible debentures
plus accrued interest thereon at 8% per annum were convertible, at the option of
the purchaser, into shares of common stock at conversion price equal to $5.27
per share until July 27, 1999 (unless certain events occur earlier) and,
thereafter, at a per share price equal to the lowest of:
o $5.27,
o 105% of the average closing bid price of the common stock for the lowest
two trading days during the 15 trading days ending on July 27, 1999, and
o 92% of the average closing bid price of the common stock for the lowest two
trading days during the 15 trading days ending on the trading day
immediately preceding the applicable conversion date, but in no event less
than $2.49 per share, subject to adjustment. In the event that the common
stock trades below $2.49 for a certain period of time, we had the right to
prepay the convertible debentures at an amount equal to 120% of principal
plus accrued interest. Except under limited circumstances, Capital Ventures
International was not entitled to convert the convertible debentures or
exercise the warrants to the extent that the shares to be received by
Capital Ventures International upon such conversion or exercise would cause
Capital Ventures International to beneficially own more than 4.9% of the
outstanding common stock.
Pursuant to the terms of the securities purchase agreement, Capital
Ventures International purchased the remaining convertible debentures in the
principal amount of $2.5 million and the remaining 289,017 warrants. Thereafter,
Capital Ventures International converted all $6,000,000 convertible debentures
and exercised all 693,642 warrants for 1,588,462 shares of our common stock.
Such shares represent approximately 4.4% of our outstanding common stock.
Agreement with Apollo Investment Fund IV, L.P.
On May 7, 1999, we entered into definitive agreements, as amended and
restated, with Apollo Investment Fund IV, L.P., pursuant to which we have agreed
to sell 150,000 shares of Series A Convertible Preferred Stock with attached
warrant for $15 million and 720,000 shares of Series B Preferred Stock with
attached warrant for $72 million to Apollo Investment Fund IV, L.P. and several
other purchasers. We anticipate that closing will occur on or before May 31,
1999, subject to the satisfaction of closing conditions. The Series A
Convertible Preferred Stock acquired at closing will have full voting rights
together with the common stockholders equal to approximately 5.6% of our
outstanding common stock. The Series B Preferred Stock will have no voting
rights, subject to our obtaining stockholder approval of the conversion of the
Series B Preferred Stock into Series A Convertible Preferred Stock within a
certain period, as discussed below. In order to comply with the Nasdaq National
Market listing requirements, which in certain cases require stockholder approval
of issuances of common stock or securities convertible into or exercisable for
common stock in an amount equal to 20% or more of the common stock or voting
power of an issuer outstanding before the issuance, the agreements with the
purchasers require us to obtain stockholder approval of the conversion of the
non-voting Series B Preferred Stock into Series A Convertible Preferred Stock.
Upon such
(15)
<PAGE>
conversion, the aggregate Series A Convertible Preferred Stock outstanding will
have full voting rights together with the common stockholders equal to
approximately 25.7% of our outstanding common stock. The $72 million received as
consideration for the Series B Preferred Stock will be held in escrow following
closing pending receipt of stockholder approval of the conversion of the Series
B Preferred Stock into Series A Convertible Preferred Stock. Upon obtaining such
approval, the Series B Preferred Stock will automatically convert into Series A
Convertible Preferred Stock without any further action. If such stockholder
approval is not obtained within 120 days after closing, each share of Series B
Preferred Stock will be convertible into non-voting common stock, at the option
of the holder thereof, unless the holder of a majority of the then outstanding
shares of Series B Preferred Stock determines to delay or restrict such
convertibility. Stockholder approval is also required for the creation of a
class of non-voting common stock. If such stockholder approvals are not
obtained, the Series B Preferred Stock can be returned to us for the purchase
price thereof, plus a redemption premium of 10%, and the conversion price of the
detachable warrants will be reset. There can be no assurance that the closing
conditions will be satisfied or that the transaction contemplated by such
definitive agreements will be consummated or, if consummated, that we would
obtain such stockholder approval.
Each share of Series A Convertible Preferred Stock will be convertible into
a number of shares of common stock determined by dividing the liquidation
preference of $100 per share, plus accrued and unpaid dividends, by the
conversion price of $7.00. Each share of Series A Convertible Preferred Stock
and Series B Preferred Stock will be entitled to preferred dividends, a
liquidation preference, and will be issued with detachable warrants to purchase
13.5 shares of common stock at a variable strike price based on the then current
market price of the common stock. At closing, the purchasers will also be issued
warrants to purchase an aggregate of approximately 12 million shares of common
stock at an exercise price of $7.00 per share. For as long as Apollo Investment
Fund IV, L.P. owns at least 25% of the securities acquired at closing, the
holders of the Series A Convertible Preferred Stock and Series B Preferred
Stock, voting as a separate class, will have the right to elect one of the
members of our Board of Directors and maintain at least 25% representation on
the Board if the Board size is increased.
We have retained Bear Stearns & Co. Inc. as our financial advisor in
connection with the transaction contemplated with Apollo Investment Fund IV,
L.P.
Nasdaq National Market Listing
On April 22, 1999, we were notified by Nasdaq that it had determined to
continue the listing of our common stock on the Nasdaq National Market provided
that on or before June 30, 1999, we conduct our 1999 annual meeting of
stockholders and consummate the equity transaction contemplated by the Apollo
Investment Fund IV, L.P. In the event we fail to meet these requirements, and we
are not otherwise in compliance with the Nasdaq listing requirements, Nasdaq may
consider us for continued listing on the Nasdaq Small Cap Market or may
determine to delist us.
(16)
<PAGE>
Other Developments
On February 25, 1999, we acquired the assets of Interface Alternatives,
Inc. through a newly-formed subsidiary, iface.com, which is in the business of
providing software and solutions for voice-over-internet protocol for voice,
video and fax communications via the Internet. We own 80% of the stock of
iface.com and previous management of Interface Alternatives, Inc. owns the
remaining 20%. As consideration for the assets of Interface Alternatives, Inc.,
which are currently estimated at $350,000, iface.com assumed the liabilities of
Interface Alternatives, Inc., which are currently estimated at $250,000. In
addition, we provided cash at closing to iface.com in the amount of $250,000 and
a one-year line of credit in the amount of $250,000. The acquisition will be
accounted for under the purchase method of accounting.
On February 25, 1999 we signed a definitive agreement to acquire 100% of
the outstanding stock of Internet Games Corporation, a privately held Delaware
corporation. liveuniverse.com, as the business is now known, is a community and
entertainment network which seeks to provide web masters and home page builders
with major portal services such as chat rooms, message boards, greeting cards,
guest books, traffic counters and mailing lists. As consideration for the
acquisition, we issued 150,000 shares of common stock. The transaction has
closed subsequent to March 31, 1999, and will be accounted for using the
purchase method of accounting.
On February 26, 1999, we signed a definitive agreement to acquire 100% of
the outstanding stock of FS3 Interactive, Inc. FS3 creates Internet-based
business solutions, including web marketing, design, programming, and E-commerce
enabling solutions. As consideration for the purchase, we paid approximately
$3.5 million by issuing 768,975 shares of common stock, which was determined
based upon an agreed-upon formula equal to two times FS3's trailing twelve-month
revenues divided by an agreed-upon share valuation. The transaction has been
closed.
On March 5, 1999, we signed a definitive agreement to acquire 100% of the
outstanding stock of Big Hand, Inc. and its subsidiary CircumStance Inc. Big
Hand creates Internet-based solutions, including web marketing, design,
programming and E-commerce enabling solutions. As consideration for the
purchase, we paid approximately $6.6 million by issuing 1,460,683 shares of
common stock, which was determined based upon and agreed-upon formula equal to
two times trailing twelve-month revenues of Big Hand and CircumStance divided by
an agreed-upon share valuation. The transaction has been closed.
On March 16, 1999, we officially changed our name from ICC Technologies,
Inc. to Rare Medium Group, Inc., increased our number of authorized shares of
common stock from 50,000,000 to 200,000,000, adopted staggered terms for our
directors, and received approval for our 1998 Long-Term Incentive Plan, by a
stockholder vote approving such actions at a special meeting of stockholders.
On March 19, 1999, we signed a definitive agreement to acquire 100% of the
outstanding stock of Hype! Inc., a Canadian corporation. Hype! is an Internet
marketing and communications company. As consideration for the purchase, we
issued 270,729 shares of common stock. The transaction has been closed.
(17)
<PAGE>
By agreement dated May 7, 1999, we agreed to acquire 100% of the
outstanding stock of Struthers Martin, Inc., a privately held Georgia
corporation. Struthers is a leader in Internet and network integration services
and enterprise management, and has completed work for such organizations as
IBM's Interactive Media Division, Bally Total Fitness, and Lucent Technologies.
As consideration for the $6 million purchase price (which does not include the
minimum $1.8 million of cash which must remain in Struthers Martin, Inc. at
closing), we will issue 406,091 shares of common stock. The transaction will be
accounted for using the purchase method of accounting.
SELLING SECURITYHOLDER
The shares of common stock offered by this prospectus represent a good
faith estimate of the maximum number of shares of common stock which were
acquired upon the consumation of the agreement pursuant to which Capital
Ventures International agreed to convert all $6,000,000 of such convertible
debentures and exercise all 693,642 of the warrants that were issued to Capital
Ventures International in a private placement of securities, for 1,588,462
shares of our common stock. Such shares represent approximately 4.4% of our
outstanding common stock. Our registration of the shares of common stock does
not necessarily mean that Capital Ventures International 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 May 21, 1999, by Capital Ventures
International.
The information provided in the table below with respect to Capital
Ventures International has been obtained from such stockholder and our records.
Except as otherwise disclosed below, Capital Ventures International has not, or
within the past three years has not had, any position, office or other material
relationship with the us. Because Capital Ventures International may sell all or
some portion of the shares of common stock beneficially owned by it, only an
estimate (assuming Capital Ventures International 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 it after this offering. In addition, Capital
Ventures International 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.
(18)
<PAGE>
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Number of Shares Number of Shares Percentage of Common
Beneficially Owned Being Offered Beneficially Owned Stock Beneficially
Prior to Offering (1) After Offering (2) Owned After Offering
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Ventures International 1,688,462 1,588,462 100,000 *
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1% of the outstanding shares of common stock.
(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.
PLAN OF DISTRIBUTION
The shares of common stock may be offered from time to time by Capital
Ventures International 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. Capital Ventures International may
offer their 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 Market;
o in the over-the-counter market;
o in private transactions;
o through 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
o a combination of any of the above transactions or by 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 Capital Ventures International. Alternatively, Capital
Ventures International may from time to time offer shares of common stock to or
through underwriters, broker/dealers or agents. Capital Ventures International
and any underwriters, broker/dealers or agents that participate in the
distribution of the shares of common stock may be deemed to be "underwriters"
(19)
<PAGE>
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, Capital Ventures International 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 Capital Ventures International. Capital Ventures International or
their 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, which shares of common stock may be resold thereafter
pursuant to this prospectus.
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. Capital Ventures International may choose not to
sell all of the shares. Capital Ventures International may transfer, devise, or
gift such shares by other means not described in this prospectus.
To comply with the securities laws of various states the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in various states, 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, Capital Ventures International 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 Capital Ventures International 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.
All expenses of this registration will be paid by us. These expenses
include the SEC's filing fees and fees under the state securities or "blue sky"
laws. Capital Ventures International will pay all underwriting discounts and
selling commissions, if any.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by
Capital Ventures International.
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.
(20)
<PAGE>
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 and financial statements schedule for the year then ended
incorporated in this prospectus by reference to the Annual Report on Form 10-K
of Rare Medium Group, Inc. for the year ended December 31, 1998 as amended on
Form 10-K/A and on Form 10-K/A-2, have been so incorporated in reliance on the
report of KPMG LLP, independent accountants, which includes an explanatory
paragraph that states that Rare Medium Group, Inc. 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 Rare Medium Group Inc.'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 Rare Medium Group, Inc. 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 Rare Medium Group, Inc. for the year ended December 31,
1998, as amended on Form 10-K/A and on Form 10-K/A-2, 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 Rare Medium Group, Inc.'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 by reference to the Annual Report on Form 10-K of
Rare Medium Group, Inc. for the year ended December 31, 1998, as amended on Form
10-K/A and Form 10-K/A-2, have been incorporated herein in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants.
PricewaterhouseCoopers LLP's report is given on the firm's authority as experts
in accounting and auditing.
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.
(21)
<PAGE>
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 Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
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 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
(22)
<PAGE>
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.
(23)
<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 Capital Ventures
International 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.
<PAGE>
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.
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
Exhibit No.
- -----------
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 were 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.
4.2 Form of Agreement dated May 28, 1999 between the Company and
Capital Ventures International.
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).
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-2
<PAGE>
(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;
(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
II-3
<PAGE>
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-4
<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 Amendment to
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 May 28, 1999.
RARE MEDIUM GROUP, INC.
By: /s/ Glenn S. Meyers
-------------------------------------
Glenn S. Meyers
Chairman of the Board, President
(Chief Executive Officer)
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 May 28, 1999
- ----------------------------------- Executive Officer)
Glenn S. Meyers
/s/ John S. Gross* Senior Vice President, Chief Financial May 28, 1999
- ----------------------------------- Officer, Treasurer and Assistant Secretary
John S. Gross (Principal Financial and Accounting
Officer)
(signatures continued on next page)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jeffrey M. Killeen* Director May 28, 1999
- -----------------------------------
Jeffrey M. Killeen
/s/ Richard T. Liebhaber* Director May 28, 1999
- -----------------------------------
Richard T. Liebhaber
/s/ Steven Winograd* Director May 28, 1999
- -----------------------------------
Steven Winograd
</TABLE>
*By Glenn S. Meyers, Attorney-in-Fact.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <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 were 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.
4.2 Form of Agreement dated May 28, 1999 between the Company and
Capital Ventures International.
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 of the Registration
Statement).
</TABLE>
AGREEMENT
AGREEMENT (this "Agreement") dated as of May 28, 1999, between
Rare Medium Group, Inc., a Delaware corporation (the "Company") and Capital
Ventures International ("CVI").
RECITALS
A. Pursuant to a Securities Purchase Agreement dated as of January 28, 1999
(the "SPA"), CVI purchased from the Company $3,500,000 principal amount of 8%
Convertible Debentures (the "Initial Debentures"), and a Stock Purchase
Warrant (the "Initial Warrant") to acquire 404,625 shares of the Company's
common stock, par value $0.01 per share (the "Common Stock").
B. The SPA gives CVI the right to acquire, and CVI desires to acquire, an
additional $2,500,000 principal amount of 8% Convertible Debentures (the
"Additional Debentures") and additional Warrants (the "Additional Warrants") to
acquire 289,017 shares of Common Stock. The Initial Debentures and the
Additional Debentures are referred to herein collectively as the "Debentures";
and the Initial Warrants and the Additional Warrants are referred to herein
collectively as the "Warrants" and the Debentures and Warrants are referred to
herein collectively as the "CVI Securities."
C. The Company has entered into a Securities Purchase Agreement dated as of
May 7, 1999, as amended and restated, with Apollo Investment Fund IV, L.P. and
certain other parties (the "Apollo Agreement"), which will provide the Company
with $87,000,000 of capital.
D. The parties hereto desire to enter into a transaction pursuant to which
the Debentures and Warrants (following the acquisition by CVI of the Additional
Debentures and the Additional Warrants) will be converted and exercised,
respectively, into shares of Common Stock as specified herein.
E. The Common Stock to be issued to CVI upon conversion and exercise of
the CVI Securities will be registered for resale under the Securities Act of
1933, as amended (the "Securities Act") pursuant to a Registration Statement on
Form S-3, and otherwise have the rights set forth in the Registration Rights
Agreement, dated as of January 28, 1999 between the Company and CVI, as amended
through the date hereof (as so amended, the "Registration Rights Agreement").
NOW THEREFORE, the parties hereto, intending to be bound, hereby agree as
follows:
<PAGE>
SECTION 1. Conversion and Exercise; Closing
(a) Subject to the terms and conditions set forth below, CVI agrees to
deliver the CVI Securities to the Company free of any lien or encumbrance,
created by CVI, and the Company agrees to accept such delivery and, in
consideration thereof, issue to CVI 1,588,462 fully-paid and non-assessable
shares of Common Stock (the "CVI Shares"). The conversion, exercise, delivery
and cancellation of the CVI Securities in consideration of the issuance of the
CVI Shares is referred to herein as the "Transaction."
(b) The closing (the "Closing") of the transactions constituting the
Transaction shall take place at the offices of Sidley & Austin, 875 Third
Avenue, New York, New York 10022 on the date (the "Closing Date") of, and
simultaneously with, the closing of the purchase and sale under the Apollo
Agreement. The Company shall provide CVI not less than three (3) days prior
written notice of the Closing Date.
(c) At the Closing, CVI shall convert, exercise and deliver the CVI
Securities, which shall thereupon be cancelled by the Company, against the
issuance by the Company of the CVI Shares in such denominations as CVI shall
specify in writing not more than two (2) days prior to the Closing. Upon the
foregoing deliveries, all remaining rights and obligations of the parties under
the SPA, the Debentures and the Warrants shall be terminated and of no further
force and effect.
SECTION 2. Closing Conditions
2.1. Conditions to Obligations of Both Parties
The obligation of each of the parties to consummate the Transaction
pursuant to Section 1 is subject to the satisfaction of each of the following
conditions:
(a) The closing of the purchase and sale under the Apollo Agreement shall
occur simultaneously with the Closing hereunder.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered or promulgated by any court or
governmental authority of competent jurisdiction or any self-regulatory
organization having authority over matters contemplated hereby which prohibits
the consummation of any of the transactions contemplated by this Agreement.
2.2. Conditions to Obligations of CVI
The obligation of CVI to consummate the Transaction pursuant to Section 1
is subject to the satisfaction of each of the following conditions:
(a) the Company's representations and warranties set forth in Section 3(a)
shall be true and correct in all material respects as of the date hereof and as
of the Closing Date;
2
<PAGE>
(b) the Company shall have performed its obligations set forth in Section
4(a) hereof on or prior to the Closing Date;
(c) the CVI Shares shall have been duly authorized and, when issued in
the Transaction, shall be validly issued, fully-paid and non-assessable, and
shall be authorized for trading on the NASDAQ National Market, and
(d) the Registration Rights Agreement shall have been amended, if
necessary, to cover the CVI Shares.
2.3. Conditions to Obligations of the Company
The obligation of the Company to consummate the Transaction pursuant to
Section 1 is subject to the satisfaction of each of the following conditions:
(a) CVI's representations and warranties set forth in Section 3(b) shall be
true and correct in all material respects as of the date hereof and as of the
Closing Date; and
(b) CVI shall have performed each of its obligations set forth in Section
4(b) hereof on or prior to the Closing Date.
SECTION 3. Representations and Warranties
(a) The Company represents and warrants to CVI that:
(i) the Company is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(ii) the Company has all corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by the Company of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery hereof by CVI)
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);
(iii) the execution and delivery by the Company of this Agreement, the
consummation of the transactions contemplated hereby, and compliance by the
Company with the provisions hereof will not conflict with, constitute a default
under or violate (x) any of the
3
<PAGE>
terms, conditions or provisions of its certificate of incorporation or by-laws,
(y) any of the terms, conditions or provisions of any document, agreement or
other instrument to which the Company is a party or by which its property is
bound, or (z) any judgment, writ, injunction, decree, order or ruling of any
court or governmental authority binding on it or its property;
(iv) no consent, approval, waiver, license or authorization or other
action by, or filing with, any court or governmental agency, commission,
authority or other person or entity is required in connection with the
execution and delivery by the Company of this Agreement, the consummation by
the Company of the transactions contemplated hereby and compliance by the
Company with any of the provisions hereof;
(v) the CVI Shares have been duly authorized and, when issued in
the Transaction in consideration of the conversion, exercise, delivery and
cancellation of the CVI Securities, will be validly issued, fully-paid and
non-assessable shares of Common Stock free of any liens or encumbrances created
by the Company, and will be authorized for trading on the NASDAQ National
Market; and
(vi) The Company has amended its Registration Statement on Form S-3
filed with the Securities and Exchange Commission pursuant to the Registration
Rights Agreement to cover resales of the CVI Shares.
(b) CVI represents and warrants to the Company that:
(i) CVI is validly existing and in good standing under the laws of its
jurisdiction of formation;
(ii) CVI has all requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement by CVI, and the consummation by CVI of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate or partnership action on the part of CVI. This Agreement has been duly
and validly executed and delivered by CVI and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes a legal, valid and
binding obligation of CVI enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity);
(iii) the execution and delivery by CVI of this Agreement, the
consummation of the transactions contemplated hereby, and compliance by CVI with
the provisions hereof will not conflict with, constitute a default under or
violate (x) any of the terms, conditions or provisions of its constituent
documents, (y) any of the terms, conditions or provisions of any document,
agreement or other instrument to which CVI is a party or by which its property
is bound, or (z) any judgment, writ, injunction, decree, order or ruling of any
court or governmental authority binding on it or its property;
(iv) no consent, approval, waiver, license or authorization or other
action by, or filing with, any court or governmental agency, commission,
authority or other person or entity is required in connection with the execution
and delivery by CVI of this Agreement, or the consummation
4
<PAGE>
by CVI of the transactions contemplated hereby and compliance by CVI with any of
the provisions hereof;
(v) as of the date hereof, CVI has, with respect to $3,500,000
principal amount of the Initial Debentures and the Initial Warrants (exercisable
with respect to 404,625 shares of Common Stock), and as of the Closing Date, CVI
will have with respect to both the foregoing and $2,500,000 principal amount of
Additional Debentures and the Additional Warrants (exercisable with respect to
289,017 shares of Common Stock) title, free and clear of all claims, liens,
charges, encumbrances, options and security interests created by CVI; and
(vi) as of the date hereof and the Closing Date, each of the
statements set forth in Section 2 of the SPA is true and correct with respect to
the CVI Shares.
SECTION 4. Other Agreements
(a) CVI agrees to exercise its right to acquire the Additional Debentures
and the Additional Warrants for $2,500,000, pursuant to the SPA, on or prior to
the Closing Date; and will not sell, assign, pledge, encumber, transfer or
otherwise dispose of any of the CVI Securities prior to the earlier of
termination of this Agreement or the Apollo Agreement.
(b) Each party hereto agrees to use reasonable efforts to obtain all
consents and approvals, and to do all other things, necessary to effect the
transactions contemplated by this Agreement on or prior to the Closing Date. The
parties agree to take such further action and to deliver or cause to be
delivered to each other at the Closing and at such other times thereafter such
additional agreements or instruments as either of them may reasonably request
for the purpose of carrying out this Agreement and the agreements and
transactions contemplated hereby.
(c) CVI agrees, in connection with any proxy solicited by the Company, to
vote the CVI Shares in the manner recommended by the Board of Directors of the
Company.
SECTION 5. Miscellaneous
5.1. Termination
This Agreement may be terminated and the Transaction may be abandoned at
any time prior to the Closing Date (provided that any such termination shall not
relieve any party from liability for a breach of any provision hereof prior to
such termination):
5
<PAGE>
(a) by the mutual written consent of the parties;
(b) by either party if the closing under the Apollo Agreement shall not
have occurred on or prior to June 30, 1999;
(c) by CVI if any representation, warranty, covenant or agreement of the
Company contained in this Agreement shall have been breached in any material
respect, or if any of the conditions set forth in Section 2.1 or 2.2 shall not
have been satisfied (or waived in writing by CVI) on or prior to the Closing
Date; and
(d) by the Company if any representation, warranty, covenant or agreement
of CVI contained in this Agreement shall have been breached in any material
respect, or if any of the conditions set forth in Section 2.1 or 2.3 shall not
have been satisfied (or waived in writing by the Company) on or prior to the
Closing Date.
5.2. Amendment and Waiver
This Agreement shall be binding upon and shall inure to the benefit of any
and all successors and assigns of the parties hereto. This Agreement may not be
assigned by any party by operation of law or otherwise, without the express
prior written consent of each of the other parties, which consent may be granted
or withheld in each such party's sole discretion.
5.3. Amendment and Waiver
This Agreement may be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may be given, provided that
the same are in writing and signed by the parties hereto.
5.4. Counterparts
This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same.
5.5. Headings
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.
5.6. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITH
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
6
<PAGE>
5.7. Entire Agreement
This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
5.8. Notices
Any notice to be delivered hereunder shall be in writing and shall be sent
by facsimile or prepaid overnight courier to the respective party at its
address set forth on the signature page hereof.
5.9. Severability
If any term, Provision, covenant Or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.10. Specific Performance
The parties agree that the CVI Securities and the CVI Shares are unique
and each party will be irreparably harmed in the event this Agreement is not
specifically enforced. The parties further agree that it is impossible to
measure solely in monetary damages the damages that will accrue by reason of a
refusal by a party to perform its obligations under this Agreement. Therefore,
in the event that a party shall institute any action to enforce the provisions
of this Agreement, each party hereby agrees that the instituting party does not
have an adequate remedy at law and that injunctive or other equitable relief
will not constitute any hardship upon
7
<PAGE>
the other party. Nothing in this Section 5.10 shall be construed as prohibiting
the parties from pursuing any other remedies for a breach or threatened breach
of this Agreement by the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
RARE MEDIUM GROUP, INC.
-------------------------------------------
By: Glenn S. Meyers
Title: Chairman, CEO and President
Address: 44 West 18th Street, 6th Floor
New York, New York 10011
Facsimile: (212) 271-9445
Telephone: (212) 271-9444
CAPITAL VENTURES INTERNATIONAL
By: Heights Management, Inc.,
its authorized agent
------------------------------------------
By:
Title
Address: Heights Capital Management Inc.
425 California Street, Suite 1100
San Francisco, California 94101
Facsimile: (415) 403-6525
Attention: Andrew Frost or
Michael Spolan
Telephone:
8
Exhibit 5
May 28, 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 May 28, 1999, of
1,588,462 shares of the Company's Common Stock, par value $.01 per share (the
"Shares"), to be issued pursuant to the agreement relating to the conversion of
the Convertible Debentures and exercise of the 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 Warrants, and the conversion and exercise thereof, respectively,
pursuant to the conversion and exercise agreement, as we deemed appropriate
for purposes of rendering this opinion.
Based upon the foregoing, it is our opinion that the Shares, when issued
and paid for upon due conversion of the Convertible Debentures and due exercise
of the Warrants in accordance with the terms of the Convertible Debentures or
Warrants and the conversion and exercise agreement, 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 Amendment No. 2
to the 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 and Form 10-K/A-2. 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 that might result from the outcome of
that uncertainty.
KPMG LLP
New York, New York
May 25, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this Amendment No. 2
to the Registration Statement of Rare Medium Group, Inc. (formerly ICC
Technologies, Inc.) (the Company) on 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 and Form 10K/A-2. 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 on Form 10-K/A and Form 10-K/A-2.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
May 25, 1999
