As filed with the Securities and Exchange Commission on May 19, 1999
Registration No. 333-76957
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RARE MEDIUM GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 23-2368845
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 West 18th Street, 6th Floor
New York, New York 10011
(212) 634-6950
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(Address and telephone number of Principal Executive Offices)
Rare Medium Group, Inc. 1998 Long-Term Incentive Plan
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(Full title of the Plan)
Stock Option Agreement dated April 15, 1998 between
Registrant and Glenn S. Meyers
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(Full title of the Plan)
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street
Philadelphia PA 19103-7598
(215) 994-1046
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(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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PART I
RESALE PROSPECTUS
PROSPECTUS
2,150,000 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
2,150,000 shares of common stock of Rare Medium Group, Inc. by the holders of
stock options to purchase shares of common stock whose names are listed under
the heading "Selling Securityholders" beginning on Page 18. We will not receive
any portion of the proceeds from the resale of the shares acquired upon exercise
of the options by the selling securityholders.
Our common stock is listed on the Nasdaq National Market under the symbol
RRRR. On May 17, 1999, the closing sale price of the common stock, as reported
on the Nasdaq National Market, was $14-7/8 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 19, 1999.
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TABLE OF CONTENTS
RISK FACTORS...................................................................3
THE COMPANY...................................................................13
RECENT DEVELOPMENTS...........................................................13
SELLING SECURITYHOLDERS.......................................................18
PLAN OF DISTRIBUTION..........................................................19
USE OF PROCEEDS...............................................................20
LEGAL MATTERS.................................................................21
EXPERTS.......................................................................21
WHERE YOU CAN GET MORE INFORMATION............................................21
INCORPORATION OF DOCUMENTS BY REFERENCE.......................................22
FORWARD-LOOKING STATEMENTS....................................................23
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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 be Successful.
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, 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 $5,612,174 in 1997. You should evaluate
our chances of financial and operational success in view of the risks,
uncertainties, delays and difficulties associated with starting a new business
many of which may be beyond our control. There is no assurance that we will be
successful in meeting the challenges and addressing the risks that we face in a
new and rapidly expanding market such as Internet professional services and
other Internet related products and services. In addition, our business strategy
has been evolving and is expected to continue to evolve. There can be no
assurance that our strategy will be successful or that it will meet the demands
created by changing industry conditions and competition.
There Can Be No Assurance That We Will Achieve or Sustain Profitability.
Although we have experienced revenue growth ($5,829,819 in 1998 versus
$3,856,233 in 1997 on a pro-forma basis), 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) 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 and the
purchase and leasing of new computer and communications equipment. As a result
of these and other costs, we may continue to incur operating losses through 1999
and beyond, and there can be no assurance that we will achieve or sustain
profitability.
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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, 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 National Market. A hearing
with Nasdaq was held on February 4, 1999. We proposed a plan to
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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 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.
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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.
The Trading Price of Our Common Stock May Decline 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 success depends largely on the skills of our key management and
technical personnel, as well as key management and technical personnel of
companies acquired by us. Several 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 success also depends in large part on our ability to
identify, hire, train and retain Internet professionals who can provide the
technical, strategic, creative, marketing and audience development skills
required by clients. There is a shortage of qualified personnel and we
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compete with other companies for this limited pool. There is no assurance that
we will be able to attract, train, or retain qualified personnel.
Competition For Internet Professional Services is Intense with Low
Barriers to Entry.
The market for Internet professional services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change. While
relatively new, the market is already highly competitive and characterized by an
increasing number of entrants 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 within our
budget, on time and to our clients' satisfaction, we would be exposed to cost
overruns, potentially leading to losses on these engagements.
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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 success. 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 Success.
We believe that maintaining and strengthening the Rare Medium brand is an
important aspect of attracting and maintaining clients. The importance of brand
recognition will increase as competition in the market for Internet professional
services increases. Building a brand requires a successful marketing effort and
successful delivery of product to clients. A single engagement involving client
dissatisfaction could tarnish the perception of Rare Medium as a whole despite
any efforts to maintain and strengthen the Rare Medium brand name. There can be
no assurance that the strategy adopted and expenses incurred by 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: (i) gain early access to leading-edge
technology, (ii) cooperatively market products with the vendor, (iii) cross-sell
additional services, and (iv) gain enhanced access to vendor training and
support.
Our Business Depends on the Growing Demand for Internet Solutions.
Because we are in the business of providing Internet solutions, our future
success depends on the continued expansion of, and reliance of consumers and
businesses on, the Internet and related technical solutions. The Internet may
not be able to support an increased number of
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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 Success Depends on our Ability to Adapt to Technological Innovations.
Our continued success depends, in part, on our ability to keep pace with
rapid technological change, new products and services embodying new processes
and technologies and industry standards and practices. Failure to respond to
these changes could render our existing service practices and methodologies
obsolete. There can be no assurance that we will respond quickly,
cost-effectively or sufficiently to these developments.
Potential Misappropriation of Intellectual Property and Proprietary Information.
We limit access to and distribution of our proprietary information, as well
as proprietary information licensed from third-parties. Our management cannot
ensure that these strategies will be adequate to deter misappropriation of our
proprietary information and material.
Despite efforts to protect our intellectual property, we also face the risk
of undetected misappropriation of our proprietary information or materials;
development of similar technologies by our competitors; unenforceability of the
non-competition agreements entered into by our key employees; and infringement
claims, even if not meritorious, against us. If any of these risks materialize,
we could be required to pay significant amounts to defend our rights or to 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 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.
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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 (i) variations in stock market conditions,
(ii) changes in financial estimates by securities analysts or by our failure to
meet estimates, (iii) variations in quarterly operating results, (iv) general
conditions effecting all participants in our industry, (v) announcements by us
or our competition, (vi) regulatory developments, and (vii) economic or other
external factors.
Our Business is Subject to General Economic Conditions.
Our revenues and results of operations will be subject to fluctuations
based upon the general economic conditions in the United States and, to a lesser
extent, abroad. If there is a general economic downturn or a recession in the
United States, we expect that business enterprises, including our customers and
potential customers, would substantially and immediately reduce their budgets or
delay implementation of Internet-based business solutions. A deterioration in
existing economic conditions could therefore materially and adversely affect our
business, results of operations and financial condition.
Governmental Regulation of the Internet Could Impact our Operations.
Currently, we are not subject to any direct governmental regulation other
than the securities laws and regulations applicable to all publicly owned
companies, and laws and regulations applicable to businesses generally. Few laws
or regulations are directly applicable to
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access to, or commerce on, the Internet. Due to the increasing popularity and
use of the Internet, it is likely that a number of laws and regulations may be
adopted at the local, state, national or international levels with respect to
the Internet. Any new legislation could inhibit the growth in use of the
Internet and decrease the acceptance of the Internet as a communications and
commercial medium, which could in turn decrease the demand for our services or
otherwise have a material adverse effect on our future operating performance.
We Do Not Intend to Pay Dividends in the Foreseeable Future.
We have not paid a cash dividend on our common stock and currently expect
to retain our future earnings, if any, for use in the operation and expansion of
our business. We do not anticipate paying any cash dividends in the foreseeable
future.
The Issuance of Preferred Stock or Additional Common Stock May Adversely
Impact Shareholders.
Our Board of Directors has the authority to issue up to 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.
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.
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Shares Eligible for Future Sale.
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 an 8% Convertible Debenture in the
principal amount of $3.5 million to Capital Ventures International, which
together with accrued interest, is currently convertible into common stock at a
conversion price equal to $5.27 per share. After July 27, 1999 such Convertible
Debenture will be convertible at a variable rate, but in no event less than
$2.49 per share. In addition, we issued a Warrant to purchase 404,625 shares of
Common Stock at an exercise price of $5.27 per share, subject to reset.
Currently, we have an agreement in principle with Capital Ventures International
to sell to it additional 8% 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 and,
immediately following such sale, to exchange such Convertible Debentures and
Warrants, together with the $3.5 million 8% Convertible Debentures and Warrants
originally sold to Capital Ventures International, for an aggregate of
approximately 1.6 million shares of common stock of Rare Medium Group, Inc. All
of the shares under the Convertible Debentures and Warrants have certain
registration rights. We have filed with the SEC a registration statement to
register 2,500,000 of such shares under the Securities Act of 1933 pursuant to
those registration rights. If the proposed exchange with Capital Ventures
International is consummated, such registration statement would be amended to
cover only those shares of common stock issued to Capital Ventures International
in exchange for its Convertible Debentures and Warrants. As of the date of this
prospectus, such registration statement has not been declared effective.
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.
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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 common stock of Rare Medium Group, Inc. in a private placement of
securities, and the balance in a secured promissory note dated April 15, 1998
(the "Rare Medium Note").
The Rare Medium Noteholders.
In connection with exchange agreements between Rare Medium Group, Inc. and
several of the holders of the Rare Medium Note, 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 the Rare Medium Note and accrued
and unpaid interest thereunder through December 31, 1998.
Pursuant to an exchange agreement between Rare Medium Group, Inc. and two
employees of the company 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 Rare Medium Note.
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As a result of these transactions, there is a remaining principal balance
of $6,439,066 payable under the Rare Medium Note, which bears interest at the
prime rate, payable semi-annually, with principal due in two equal installments
on April 15, 2000 and April 15, 2001.
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. ("FAS")
for total consideration of $1,500,000, of which $1,125,000 was paid in cash and
$375,000 was paid by delivery of an unsecured promissory note issued by FAS. In
addition, the unaffiliated investment entity that purchased the FAS partnership
interests also assumed all liabilities of FAS which were known to two members of
management of FAS 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 FAS.
Subsequent to the sale of the partnership interests referred to above, FAS
redeemed the 10% limited partnership interest in FAS held by Engelhard
Corporation in exchange for the 20% limited partnership interest in Engelhard
Hexcore, L.P. held by FAS and $1 million in cash. As a result, Investment
Holding Co.'s interest in FAS 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, 8% Convertible Term Debentures
in the aggregate principal amount of $6,000,000 (the "Convertible Debentures")
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
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"Warrants"). The first tranche of the transaction 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 is four years.
The principal amount of the Convertible Debentures plus accrued interest thereon
at 8% per annum are convertible, at the option of the Selling Securityholders,
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 (i) $5.27, (ii) 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 (iii) 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 (the
"Floor Price"). In the event that the common stock trades below the Floor Price
for a certain period of time, we have 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 is 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.
The purchase of the remaining 8% Convertible Debentures in the principal
amount of $2.5 million and Warrants by Capital Ventures International is subject
to the timely satisfaction of conditions to the closing of the second tranche.
Currently, we have an agreement in principle with Capital Ventures International
to sell to it such Convertible Debentures at the same conversion rate and such
additional Warrants to purchase 289,017 shares at the same exercise price for
$2.5 million and, immediately following the sale, to exchange such Convertible
Debentures and Warrants, together with the $3.5 million Convertible Debentures
and Warrants originally sold to Capital Ventures International, for an aggregate
of approximately 1.6 million shares of common stock of Rare Medium Group, Inc.
Currently, we are negotiating a definitive agreement with respect to such second
tranche and the proposed exchange and no assurance can be given that such
transactions will be consummated.
Agreement with Apollo Investment Fund IV, L.P.
On May 7, 1999, we entered into definitive agreements with Apollo
Investment Fund IV, L.P., pursuant to which we have agreed to sell 150,000
shares of Series A Convertible Preferred Stock for $15 million and 720,000
shares of Series B Preferred Stock 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 17% 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
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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
conversion, the aggregate Series A Convertible Preferred Stock outstanding will
have full voting rights together with the common stockholders equal to
approximately 43% 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, a majority of the
holders of the Series B Preferred Stock 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. In lieu thereof, the holders of Series B Preferred Stock will
have other rights. 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 a strike 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, voting as a separate class,
will have the right to elect three of the members of our Board of Directors and
maintain at least 40% representation on the Board if the Board size is
increased. In addition, such holders will have the right to elect a majority of
the Board at any time upon the occurrence of certain events of non-compliance.
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 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.
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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 ("VOIP") 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 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.
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
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our 1998 Long-Term Incentive Plan, by a stockholder vote approving such actions
at a special meeting of stockholders.
By agreement dated May 7, 1999, we agreed to acquire 100% of the
outstanding stock of Struthers Martin, Inc. ("Struthers"), 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
at closing), we will issue 406,091 shares of common stock. The transaction will
be accounted for using the purchase method of accounting.
SELLING SECURITYHOLDERS
The shares of common stock offered by this prospectus represent those
shares of common stock which may be acquired upon the exercise of the stock
options granted to each of the executive officers of Rare Medium Group, Inc.
named as a selling securityholder in the table below. We are registering these
shares pursuant to "registration rights" granted to the selling securityholders
in accordance with the terms of their stock options, however, our registration
of these shares of common stock does not necessarily mean that the selling
securityholders will sell all or any of their shares.
The following table sets forth information regarding the beneficial
ownership of the common stock of Rare Medium Group, Inc. as of April 23, 1999,
by the selling securityholders.
The information provided in the table below with respect to the selling
securityholders has been obtained from the selling securityholders and our
records. Because the selling securityholders may sell all or some portion of the
shares of common stock beneficially owned by them, only an estimate (assuming
the selling securityholders sell all of their shares offered hereby) can be
given as to the number of shares of common stock that will be beneficially owned
by the selling securityholders after this offering. In addition, the selling
securityholders 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 them, all or a portion of the shares of common stock beneficially owned by
them in transactions exempt from the registration requirements of the Securities
Act of 1933.
<TABLE>
<CAPTION>
Number of Shares Number of Shares Percentage of Common
Name of Selling Beneficially Owned Number of Shares Beneficially Owned Stock Beneficially
Securityholders Prior to Offering (1) Being Offered(9) After Offering (2) Owned After Offering
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Glenn S. Meyers(3) 1,921,274(4) (5) 1,454,607 4.1%
John S. Gross (6) 50,000(7) (8) -0- -0-
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
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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 of the shares acquired upon exercise of the respective
stock options held by the selling securityholders covered by this prospectus are
sold in the offering.
(3) The current Chairman of the Board, President and Chief Executive
Officer of Rare Medium Group, Inc..
(4) Includes 1,454,607 shares of common stock and the currently exercisable
portion of Mr. Meyers' stock option referred to in Note 5 below.
(5) The shares being offered hereby represent 2,000,000 shares of common
stock which may be acquired upon exercise of the stock option granted to Glenn
S. Meyers pursuant to the terms of a Stock Option Agreement dated April 15, 1998
between Rare Medium Group, Inc. and Mr. Meyers, of which (i) the option to
purchase 466,667 shares of common stock at an exercise price of $2.375 per share
is fully vested and currently exercisable or will be exercisable within the next
60 days, and (ii) the option to purchase an additional 1,533,333 shares at an
exercise price of $2.375 will vest and be exercisable ratably on a monthly basis
through 4/15/03. The stock option was granted in connection with Mr. Meyers'
Employment Agreement with Rare Medium dated April 14, 1998. Mr. Meyers'
Employment Agreement provides him with a right to terminate his Employment
Agreement upon a breach of such agreement or upon the occurrence of events
constituting a "change in control" of Rare Medium Group, Inc., as defined
therein, upon which Mr. Meyers would be entitled to receive, among other things,
the cash value of all unexercised stock options (whether or not vested) or the
cashless exercise value thereof.
(6) The current Senior Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary of Rare Medium Group, Inc.
(7) Includes the currently exercisable portion of Mr. Gross' stock option
referred to in Note 8 below.
(8) The shares being offered hereby represent 150,000 shares of common
stock which may be acquired upon exercise of the stock option granted to John S.
Gross pursuant to the terms of a Stock Option Agreement dated September 18,
1998, between Rare Medium Group, Inc. and Mr. Gross, which option will vest and
become exercisable 1/3 on May 12, 1999, 1/3 on May 12, 2000, and 1/3 on May 12,
2001, contingent on continued employment. Mr. Gross' stock option was granted to
him under the Rare Medium Group, Inc. 1998 Long-Term Incentive Plan in
connection with his employment by the company. Upon the occurrence of an event
which constitutes a "change in control" of Rare Medium Group, Inc., as defined
in his Stock Option Agreement, Mr. Gross' stock option will become fully vested
and exercisable.
(9) Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
prospectus also concerns such additional number of shares of common stock as may
become issuable upon exercise of the stock options held by the selling
securityholders as a result of stock splits, stock dividends and similar
transactions.
PLAN OF DISTRIBUTION
The shares of common stock may be offered from time to time by the selling
securityholders or their donees, pledgees, transferees or other successors in
interest for resale by this prospectus in one or more transactions at fixed
prices, at market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The selling securityholders 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 Stock Market;
o in the over-the-counter market;
o in private transactions;
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o by pledge to secure debts and other obligations; or
o a combination of any of the above transactions or by any other legally
available means.
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling securityholders. Alternatively, the selling
securityholders may from time to time offer shares of common stock to or through
underwriters, broker/dealers or agents. The selling securityholders and any
underwriters, broker/dealers or agents that participate in the distribution of
the shares of common stock may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933. Any profits on the resale of shares of common
stock and any compensation received by any underwriter, broker/dealer or agent
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933.
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 than
pursuant to this prospectus. The selling securityholders may not sell all of the
shares. The selling securityholders may transfer, devise, or gift such shares by
other means not described in this prospectus.
To comply with the securities laws of various states and other
jurisdictions the common stock must be offered or sold only through registered
or licensed brokers or dealers. In addition, in various jurisdictions, the
common stock may not be offered or sold unless they have been registered or
qualified for sale or an exemption is available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in market-making
activities with respect to the common stock for nine business days prior to the
start of the distribution. In addition, the selling securityholders and any
other person participating in a distribution will be subject to the Securities
Exchange Act of 1934 which may limit the timing of purchases and sales of common
stock by the selling securityholders 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. The selling securityholders will pay all underwriting discounts and
selling commissions, if any.
USE OF PROCEEDS
We will not receive any portion of the proceeds from the resale of the
shares of common stock acquired upon exercise of the stock options by the
selling securityholders. The terms of the stock options permit the selling
securityholders to exercise their options on a cashless exercise basis.
Accordingly, we will not receive cash proceeds from the exercise of the
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stock options, unless a selling securityholder elects not to exercise his
cashless exercise rights pursuant to the terms of his option.
LEGAL MATTERS
The validity of the shares will be passed upon for us by Mesirov Gelman
Jaffe Cramer & Jamieson, LLP, Philadelphia, Pennsylvania 19103-7598.
EXPERTS
The consolidated balance sheet as of December 31, 1998 and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows and financial statement 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 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 authority of said firm as experts in accounting and auditing.
The balance sheets as of December 31, 1996 and 1997 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 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. PricewaterhouseCoopers,
LLP's report is given on the authority of said firm 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
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statements and other information with the SEC. You may read and copy these
reports, proxy statements and other information at the SEC public reference
rooms in Washington DC, New York NY or Chicago IL. You can request copies of
these documents by writing to the SEC and paying a fee for the copying costs.
Please call the SEC at 1-800-SEC-0330 for more information about the operation
of the public reference rooms. Our SEC filings are also available at the SEC's
Web site at "http://www.sec.gov." In addition, you can read and copy our SEC
filings at the office of the National Association of Securities Dealers, Inc. at
1735 K Street, Washington DC 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. Specifically,
we incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 10-K for the year ended December 31, 1998, as
amended on Form 10-K/A and on Form 10-K/A-2;
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,
February 10, 1999, and April 29, 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 our 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 e-mailing 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
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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 our 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 our actual results could differ materially from those
anticipated in the forward-looking statements, including those set forth below
under "Risk Factors" and elsewhere in this prospectus. The factors set forth
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.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The documents listed below are incorporated by reference in this Registration
Statement and all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be part hereof from the date of
filing of such documents.
(a) The Company's Annual Report on Form 10-K, as amended on Form 10-K/A,
for the year ended December 31, 1998.
(b) All other reports filed by the Company with the Commission pursuant to
Sections 13(a) or 15(d) of the Exchange Act since December 31, 1998,
including the following:
(i) Current Report on Form 8-K dated December 31, 1998 in connection
with the Rare Medium, Inc. Noteholder Exchange;
(ii) Current Report Form 8-K dated January 28, 1999 in connection with
the private placement of the Company's convertible debentures with
warrants; and
(iii) Definitive Proxy Statement dated February 17, 1999 in connection
with the Company's Special Meeting of Stockholders held on March 16,
1999.
(c) The description of the Common Stock of the Company is incorporated by
reference to the Company's Registration Statement on Form 10 filed with the
Commission on September 16, 1985 (Commission File No. 0-13865).
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
II-1
<PAGE>
Item 6. Indemnification of Directors and Officers
The Company's Certificate of Incorporation contains a provision which limits the
personal liability of directors to the Company or the stockholders for monetary
damages for breach of fiduciary duty. The Certificate of Incorporation provides
that a director of the Company shall not be personally liable for a breach of
fiduciary duty as a director except for liabilities (i) for any breach of the
director's duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for an
unlawful dividend payment or an unlawful repurchase or redemption of stock, or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company's Certificate of Incorporation also provides that the Company will
indemnify and pay legal expenses and damages incurred by officers and directors
in any legal action arising from their actions as agents of the Company as long
as the officer or director had acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, or with
respect to any criminal action, had no reasonable cause to believe his conduct
was unlawful.
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 7. Exemption From Registration Claimed
Not applicable.
Item 8. Exhibits and Financial Statement Schedules
(a) Exhibits Required by Item 601 of Regulation S-K
The following table sets forth those exhibits filed pursuant to Item 601 of
Regulation S-K:
Exhibit Description
------- -----------
4(a) Articles of Incorporation and Bylaws.(1)
4(b) Amendment to Articles of Incorporation changing name to
ICC Technologies, Inc.(2)
4(c) Amendment to Articles of Incorporation changing name to
Rare Medium Group, Inc.(3)
4(d) Rare Medium Group, Inc. 1998 Long-Term Incentive Plan.(4)
4(e) Form of Stock Option Agreement dated April 15, 1998 by and
between ICC Technologies, Inc. and Glenn S. Meyers.(4)
4(f) Form of Stock Option granted September 18, 1998 by
ICC Technologies, Inc. to John S. Gross
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP(4)
23(a) Consent of KPMG, LLP
23(b) Consent of PricewaterhouseCoopers LLP
23(c) Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP.
See Exhibit 5.(4)
24 Power of Attorney (set forth on signature page hereto)(4)
- ----------
(1) Incorporated by reference from the Company's Form 10 filed on September 16,
1985 (Commission File No. 0-13865).
(2) Incorporated by reference from the Company's 8-K filed on June 12, 1990
(Commission File No. 0-13865).
(3) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended December 31, 1998, filed on March 31, 1999.
(4) Previously filed.
II-2
<PAGE>
Item 9. 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, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of 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)(l)(i) and (a)(l)(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.
II-3
<PAGE>
(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 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the 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.
(c) 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 6 of this Registration Statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-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 of the
requirements for filing on Form S-8 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 19th day of May, 1999.
RARE MEDIUM GROUP, INC.
By: /s/ Glenn S. Meyers
------------------------------------------
Glenn S. Meyers, Chairman of the Board and
President (Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8 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 May 19, 1999
- ------------------------ President (Chief Executive Officer)
Glenn S. Meyers
</TABLE>
(signatures continued on next page)
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John S. Gross Senior Vice President, Chief May 19, 1999
- ------------------------ Financial Officer, Treasurer and
John S. Gross Assistant Secretary (Principal
Financial and Accounting Officer)
/s/ Glenn S. Meyers Director May 19, 1999
- ------------------------
Glenn S. Meyers,
as attorney-in-fact for
Jeffrey M. Killeen
/s/ Glenn S. Meyers Director May 19, 1999
- ------------------------
Glenn S. Meyers,
as attorney-in-fact for
Richard T. Liebhaber
/s/ Glenn S. Meyers Director May 19, 1999
- ------------------------
Glenn S. Meyers,
as attorney-in-fact for
Steven Winograd
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
4(a) Articles of Incorporation and Bylaws.(1)
4(b) Amendment to Articles of Incorporation changing name to
ICC Technologies, Inc.(2)
4(c) Amendment to Articles of Incorporation changing name to
Rare Medium Group, Inc.(3)
4(d) Rare Medium Group, Inc. 1998 Long-Term Incentive Plan.(4)
4(e) Form of Stock Option Agreement dated April 15, 1998 by and
between ICC Technologies, Inc. and Glenn S. Meyers.(4)
4(f) Form of Stock Option granted September 18, 1998 by
ICC Technologies, Inc. to John S. Gross
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson, LLP(4)
23(a) Consent of KPMG, LLP
23(b) Consent of PricewaterhouseCoopers LLP
23(c) Consent of Mesirov Gelman Jaffe Cramer & Jamieson, LLP.
See Exhibit 5.(4)
24 Power of Attorney (set forth on signature page hereto)(4)
- ----------
(1) Incorporated by reference from the Company's Form 10 filed on September 16,
1985 (Commission File No. 0-13865).
(2) Incorporated by reference from the Company's 8-K filed on June 12, 1990
(Commission File No. 0-13865).
(3) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended December 31, 1998, filed on March 31, 1999.
(4) Previously filed.
ICC TECHNOLOGIES, INC.
STOCK OPTION
This STOCK OPTION (the "Option") is granted as of the 18th day of
September, 1998, by ICC TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), to JOHN S. GROSS ("Grantee").
BACKGROUND
A. Grantee is an employee of the Company.
B. In consideration of services to be performed, Company desires to afford
Grantee an opportunity to purchase shares of its common stock in accordance with
Company's 1998 Long Term Incentive Plan (the "Plan") as hereinafter provided.
C. Any capitalized terms not otherwise defined herein shall have the
meaning accorded them under the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties, hereto,
intending to be legally bound, agree as follows:
1. Grant of Option. Company hereby irrevocably grants to Grantee the
right and option (the "Option") to purchase all or any part of an aggregate of
One Hundred Fifty Thousand (150,000) shares of the common stock of Company
("Common Stock"), par value $.01 per share (the "Option Shares") which option
shall constitute an "incentive stock option" under the Plan, at those purchase
prices listed in Paragraphs 4 and 5 hereof (the "Option Prices"), during the
period and subject to the conditions hereinafter set forth.
2. Option Period. The Option may be exercised in accordance with the
provisions of Paragraphs 4 and 5 hereof during the Option Period, which shall
begin on the date hereof and shall end on the Option Expiration Date defined in
Paragraph 3 hereof. All rights to exercise the Option shall terminate on the
Option Expiration Date.
3. Option Expiration Date. The Option Expiration Date shall be September
18, 2003.
4. Exercise of Option.
(a) Except as provided in subparagraph 4(b), this Option shall be
exercisable at the rate of up to 33-1/3% of the total number of shares for which
this Option is granted, commencing on May 12, 1999, and at the rate of up to
33-1/3% of such total on May 12, 2000 and May 1, 2001, respectively, at an
exercise price of $2.375 per Option Share, provided that any portion of this
Option which is exercisable in any year, but not exercised, may be carried
forward and exercised in any future year during the term hereof.
<PAGE>
(b) Notwithstanding the foregoing, subject to the terms of any
employment agreement between the Company and the Grantee, Grantee may purchase
all or any portion of the unexercised balance of this Option upon the effective
date of a change in the control of the Company, including, without limitation, a
(i) merger or consolidation of the Company into or with any other corporation
when the Company is not the surviving entity of such merger or consolidation,
(ii) the acquisition, directly or indirectly by any entity or "group" (as
defined in Section 13(d) of the Securities and Exchange Act of 1934, as
amended), of stock or options, or any combination thereof, (a) constituting a
majority of the then outstanding common stock of the Company or (b) possessing a
majority of the then outstanding voting power of the Company, (iii) any similar
purchase or other acquisition of a majority of the total equity interest of the
Company, (iv) the acquisition of all, or substantially all of, the assets of the
Company, or (v) the formation of a joint venture or partnership with the Company
for the purpose of effecting a transfer of control of, or a material interest
in, the Company (such merger, consolidation, sale or other transaction being
hereinafter referred to as a "Transaction"). There shall be excluded from the
foregoing any Transaction as a result of which (a) the holders of Common Stock
prior to the Transaction retain or acquire securities constituting a majority of
the outstanding voting common stock of the acquiring or surviving corporation or
other entity and (b) no single person owns more than half of the outstanding
voting common stock of the acquiring or surviving corporation or other entity.
For purposes of this Paragraph 4, voting common stock of the acquiring or
surviving corporation or other entity that is issuable upon conversion of
convertible securities or upon exercise of warrants or options shall be
considered outstanding, and all securities that vote in the election of
directors (other than solely as the result of a default in the making of any
dividend or other payment) shall be deemed to constitute that number of shares
of voting common stock which is equivalent to the number of such votes that may
be cast by the holders of such securities.
5. Manner of Exercise. Exercise of the Option shall be by written notice to
Company pursuant to Paragraph 12 hereof. The notice shall be accompanied by
payment in full in cash, stock of the Company, or a combination thereof, in the
amount of the Option Price. Upon receipt of such notice and payment, Company
shall deliver a certificate or certificates representing the Option Shares
purchased. The certificate or certificates representing the Option Shares shall
be registered in the name of the Grantee, or if the Grantee so requests, shall
be issued in or transferred into the name of the Grantee and another person
jointly with the right of survivorship. The certificate or certificates shall be
delivered to or upon the written order of the Grantee. No Grantee or his legal
representative, legatees or distributees, as the case may be, shall be or shall
be deemed to be a holder of any shares subject to this Option unless and until
certificates for such shares are issued to him or them upon the exercise of this
Option. The Option Shares that shall be purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable.
6. Rights in Event of Death or Termination of Employment.
(a) If Grantee dies without having fully exercised the Option, the
executors, administrators, legatees or distributees of Grantee's estate shall
have the right, for a period of one year after the date of Grantee's death, to
exercise the unexercised and unexpired portion, if any,
2
<PAGE>
of the Option, in whole or in part, to the same extent that Grantee could have
exercised the Option at the expiration of such one-year period had the Grantee
lived.
(b) If Grantee shall have ceased for any reason, other than death, to be
an employee of the Company, Grantee shall have the right for a period of thirty
(30) days thereafter, but not later than the Expiration Date, to exercise in
whole or in part the unexercised and exercisable portion, if any, of the Option
on the date of such cessation, as determined in accordance with Paragraph 4
hereof.
7. Transferability of Option. The Option is not transferable by Grantee
other than by will or by the laws of descent and distribution in the event of
the Grantee's death, in which event the Option may be exercised by the heirs or
legal representatives of the Grantee as provided in Paragraph 6 hereof. The
Option may be exercised during the lifetime of the Grantee only by the Grantee.
Any attempt at assignment, transfer, pledge or disposition of the Option
contrary to the provisions hereof or the levy of any execution, attachment or
similar process upon the Option shall be null and void and without effect. Any
exercise of the Option by a person other than the Grantee shall be accompanied
by appropriate proofs of the right of such person to exercise the Option.
8. Option Shares to be Purchased for Investment. Unless Company has
notified Grantee pursuant to Paragraph 12 hereof that a registration statement
covering the Option Shares has become effective under the Securities Act of 1933
(the "Act"), it shall be a condition to the exercise of the Option that the
Option Shares acquired upon such exercise be acquired for investment and not
with a view to distribution. If requested by the Company upon advice of its
counsel that the same is necessary or desirable, the Grantee shall, at the time
of purchase of the Option Shares, deliver to the Company Grantee's written
representation that Grantee (a) is purchasing the Option Shares for his own
account for investment, and not with a view to public distribution or with any
present intention of reselling any of the Option Shares (other than a
distribution or resale which, in the opinion of counsel satisfactory to the
Company, may be made without violating the registration provisions of the Act);
(b) has been advised and understands that (i) the Option Shares have not been
registered under the Act and are subject to restrictions on transfer and (ii)
the Company is under no obligation to register the Option Shares under the Act
or to take any action which would make available to the Grantee any exemption
from such registration; and (c) has been advised and understands that such
Option Shares may not be transferred without compliance with all applicable
federal and state securities laws.
9. Changes in Capital Structure. The number of Option Shares covered by
this Option and the Option Price shall be equitably adjusted in the event (the
"Event") of (i) the payment of any dividend payable in, or the making of any
distribution of, Common Stock to holders of record of Common Stock, which
increases the outstanding Common Stock by more than 25%; (ii) any stock split,
combination of shares, recapitalization or other similar change; (iii) the
merger or consolidation of the Company into or with any other corporation; or
(iv) the reorganization, dissolution, liquidation or winding up of the Company,
and the Grantee shall be entitled, upon the exercise of the Option, to entitle
the Grantee to receive such new, additional or other shares of stock of any
class, or other property (including cash), as Grantee would have been
3
<PAGE>
entitled to receive as a matter of law in connection with such Event had Grantee
held the Option Shares on the record date set for such Event. The Company shall
have the authority to determine the adjustments to be made under this Paragraph
9 and any such determination shall be final, binding and conclusive.
10. Legal Requirements. If the listing, registration or qualification of
the Option Shares upon any securities exchange or under any federal or state
law, or the consent or approval of any governmental regulatory body is necessary
as a condition of or in connection with the purchase of the Option Shares, the
Company shall not be obligated to issue or deliver the certificates representing
the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained. This Option does not hereby impose on the Company a duty
to so list, register, qualify, or effect or obtain consent or approval. If
registration is considered unnecessary by the Company or its counsel, the
Company may cause a legend to be placed on the certificates for the Option
Shares being issued calling attention to the fact that they have been acquired
for investment and have not been registered, such legend to read as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS THERE IS A
REGISTRATION STATEMENT IN EFFECT COVERING SUCH SECURITIES OR THERE IS AVAILABLE
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS."
11. No Obligation to Exercise Option. The Grantee shall be under no
obligation to exercise the Option.
12. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below:
If to Company: ICC Technologies, Inc.
44 West 18th Street, 6th Floor
New York, NY 10011
If to Grantee: John S. Gross
16 Holly Lane
Rye Brook, NY 10573
13. Administration. This Option has been granted pursuant to the 1998 Long
Term Incentive Plan adopted by the Board of Directors of the Company and to be
approved by the Shareholders of the Company, and is subject to the terms and
provisions thereof. In the event the Plan has not been approved by the
Shareholders within twelve months of its adoption by the
4
<PAGE>
Board of Directors, this Option shall be deemed to be an Option having been
granted by the Board not under any plan and the Company shall, in its sole
discretion, use its reasonable efforts to file and cause to be effective a
Registration Statement on Form S-3, if available, under the Securities Act of
1933, covering the shares subject to this Option. By acceptance hereof the
Grantee acknowledges receipt of a copy of the Plan. All questions of
interpretation and application of the Plan and this Option shall be determined
by the Company, and such determination shall be final, binding and conclusive.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
15. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware without regard to conflicts of laws
principles.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Amendment. This Agreement may not be amended except by an instrument in
writing signed by the parties.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
ICC TECHNOLOGIES, INC.
By:
-------------------------------
Glenn S. Meyers, President
By:
-------------------------------
John S. Gross, Grantee
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference herein and to the reference to
our firm under the heading "Experts" in this registration statement of Rare
Medium Group, Inc. (the "Company") on Form S-8 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 on 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 18, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Rare Medium Group, Inc. (the "Company") on Form S-8 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, relating to the consolidated financial statements of the
Company as of December 31, 1997 and for the years ended December 31, 1997 and
1996, which appears in the Company's Annual Report on Form 10-K, as amended on
Form 10-K/A and on Form 10-K/A-2, for the year ended December 31, 1998. We also
consent to the incorporation by reference of our report, dated March 20, 1998,
relating to 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 also
appears in such Annual Report on Form 10-K, as amended on Form 10-K/A and on
Form 10-K/A-2, for the year ended December 31, 1998.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
May 18, 1999
